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«DEVELOPMENT STRATEGY OF THE AGRICULTURAL COOPERATIVES IN THE MEKONG DELTA, VIETNAM: SIGNIFICATION OF DIVERSIFICATION INTO BUSUNESS AND ACTITITIES ...»

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ACs offer almost input services related land reparation, seed, irrigation, harvest and farming technology. Service scale of services is lower than service need from farmers. For example, field survey in 2012 shows that 68.7% AC's Mekong Delta offers irrigation services both members and non-members in 2010. Also, 41.4% of AC's Mekong Delta provided more than 3 services in 2005 compared with 57.1% in 2010, while 86.1% of agricultural cooperatives provided only one service in 2000.

Among the national 100 best ACs in 2011 were selected by Prime Minister Officer, seven out of them are in the Mekong Delta and these ACs have provided from six to nine services to farmers, most of ACs offered services related on agriculture at the beginning, then, these ACs provided service related non-agricultural and social services such as fresh water, health care, health insurance, trader, free ambulance and other society activities.

In general, the scope of business activities of agricultural cooperatives expanded in response to their members’ needs. Before 2005, agricultural

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water in-out rice field), land preparation, fertilizer and pesticide supply, post-harvest control and seed provision. From 2005 to present, agricultural cooperatives have expanded non-agriculture services such as internal loan credit, fresh water and electricity supply and marketing.

Table 8: Business and Activities offer by ACs in the Mekong Delta (2010)

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Agricultural cooperatives in the Mekong Delta have increased very fast in terms of numbers, membership, staff and amount of share capital and revenue since 2000. Table 9 shows the situation of ACs in the Mekong Delta from 2000 to 2010 in term of number of ACs, total members in ACs, total staff and regular labors, total capital and revenue.

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The operational quality of agricultural cooperatives in the Mekong Delta has improved. The quality of the agricultural cooperative is ranked into four

levels on the assessment scale by Circular No.1/200546 from state government:

excellent, good, average and weak. However, all office reports rank only good, average and weak agricultural cooperatives. As shown figure 11, the percentage of good agricultural cooperatives in the Mekong Delta increased, while the percentage of weak agricultural cooperatives decreased from 2000-2010.

The Circular No.1/2006 on ranking cooperative. The cooperative is ranked by the 4 levels of 46 the scale consist of excellent, good, average and weak agricultural cooperative. There are six criterions in the scale consist of (i) the level of democracy and the participation of members on the development and implementation of cooperative’s regulation; (ii) the level of completion of the production and service targets; (iii) the level of services to members; (iv) the level of reliability of the members on cooperatives; (v)the level of welfare from cooperatives for members; (vi)the level of solidarity and collaboration among members and community building 82 Year 58 25.6 16 2010

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Figure 11: Classify & Ranking of AC in Mekong Delta 3.4.2 Problems and challenges of agricultural cooperatives in the Mekong Delta Agricultural cooperatives in the Mekong Delta have had some problems and faced several challenges, such as low educational level of board management members, few farmers in the agricultural cooperative, limited share capital, low ratio increasing of members and difficulties arising from the 2003 Cooperative Law which has not been updated to keep pace with the development of the national economy.

The low educational level of the management board is the first problem of agricultural cooperatives. Figure 12 shows that 89.8% directors of ACs in the Mekong Delta has not graduated from high school, 47.9% of ACs’ directors have not finished primary school compared with that of 41.9% has not finished secondary school. They were selected for being director of agricultural cooperatives because they are native farmer in area and good on farming working, they have no skills and experience on management and business management. As

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Figure 12: Educational level of ACs' Director in MD & VN (2004) ACs have not only director low educational degree, ACs have but also low educational of all board management including director, vice directors, accountant and auditors. In Figure 13, educational level of the management board members rose from 2000 to 2010, but was still low compared with the average ratio in the country and compared with average ratio in other economic sectors. For example, only 6.6% of the management board members held university education in 2010.

Conversely, 69.0% of the management board members were not trained with any degree.47 Untrained educational degree: board managements in agricultural cooperatives have not 47 been trained in any degree, some of them fished high school education, most of them finished secondary school education and event some of them just finished primary school education.

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Figure 13: Educational Degree of AC Management Member in Mekong Delta Low ratio of farmer’s enrollment in agricultural cooperative is the second problem. According to the Cooperative Law, when farmers want to become members of an agricultural cooperative, they have to agree with an agricultural

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Table 10 shows that the average number of members in an agricultural cooperative in the Mekong Delta has been consistently lower than the rest the country. The average number of members in an agricultural cooperative in the Mekong Delta has decreased from 114 members in one agricultural cooperative in 2005, was 109 members in 2005 and was 102 persons in 2010, while the national average was 774 members in 2010. Table 13 also shows that numbers of ACs have increased from 2000 to 2010 and an average member of one AC has decreased in

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In other words, agricultural cooperatives in the Mekong Delta is increasing the rate of number of agricultural cooperatives to be higher than the average number of members as shown in Figure 14, It means that the average number of members per one agricultural cooperative is becoming smaller and smaller.

40 %

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20 15.6 8.2 10

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Figure 14: Ratio increase between No. Agricultural Cooperative & Member of AC This trend is opposite to status of agricultural cooperatives in some other countries such as the United State of America, Japan, Philippines, Malaysia and Thailand, where numbers of agricultural cooperatives tend to decreased, but members of agricultural cooperatives increased from 2000 to 2010.

Limited capital (including share capital, business capital and property)48is another challenge of ACs in the Mekong Delta. Figure 15 shows average capital of When farmers want to join an agricultural cooperative, they are required to buy at least 48 one share count as share capital. There are many kind of capital in ACs. The investment from members calls share capital, cash and investment of ACs on business services calls business capital, property of ACs were bought from share capital and business capital. Total value of share capital, business capital and property call agricultural cooperatives’ capital or total capital 86 agriculture-forest-aquaculture cooperative in 2006 in the Mekong Delta. Average capital of these cooperatives is small and different from province.49 Figure 15: Average Capital of One AC by province in MD (2006)50

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According to the survey, the average capital of agricultural cooperatives in the Mekong Delta in 2010 is only 0.31 billion VND (It is amount 124 man ¥). The average amount capital of the agricultural cooperative in the Mekong Delta is lower than average amount capital of other type cooperatives in the Mekong Delta (it is amount 1.61 billion VND)51, it is lower average 1,452 million VND (2010) capital of agricultural cooperatives in Vietnam, it also is very lower than amount Average share capital of agricultural cooperative is 361 million VND in 2006, while field 49 survey shows that average share capital of agricultural cooperative is 310 million in 2005.

Because report of General Statistic office include all ACs, aquaculture cooperative and two forest cooperative in Hau Giang province. While, the field survey only calculate agricultural cooperative.

50 General statistic office, 2007, average share capital of agricultural cooperative, aquaculture; cooperative and forest agricultural.

51 Field survey, 2012

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56/200952 from the state government and it can’t compare with amount share capital of Japan agricultural cooperative (JA), the average capital of a JA in 2000 is 166 billion VND53. As the result of small capital, agricultural cooperatives in the Mekong Delta are difficulty development activities and are weak competitiveness with other cooperatives and enterprises. Figure 16 shows average share capital of ACs in the Mekong Delta in 2006, average capital of one AC in the Mekong Delta is small amount and far difference amount from provinces. The largest share capital of agricultural cooperative is 391 million VND in one AC in Tien Giang province. On the contrast, the smallest share capital of agricultural cooperative is 33 million VND in one agricultural cooperative in Vinh Long province. An Giang is the most development of ACs in the Mekong Delta but average share capital is still lower than that of average nation.

.

Decision 56/2009/NĐ-CP issued 2009 by the state government about assistant for 52 devilment the medium and small enterprise、minimum capital of small and medum enterprise is 20 million VND.

53 Naoto, Imagawa, 2000. The average share capital of a JA in Japan in 2000 is 666.839.000

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Figure 16: Average Share Capital of one AC (2006) As the result, the Mekong Delta’s agricultural cooperatives have faced some challenges from macro environment similar to Vietnam’s ACs.

3.4.3 Economic effects from agricultural cooperatives in the Mekong Delta Agricultural cooperatives promote development in production utilizing local resources (land, raw materials, capital, labor, etc.). They also contribute to economic restructuring, reducing poverty, and improving living standards for household members. They can set the stage for a new business style, producing according to market demand in the Mekong Delta. The survey shows that total revenue of agricultural cooperatives in the Mekong Delta have increased from 153 billion VND in 2000 to 268 billion VND in 2005 and 556 billion VND in 2010. The survey also shows that 73.2% agricultural cooperatives in the Mekong Delta have invested construction dike system for irrigation service, 41.7% have built interior fields, 86.4% have contributed to build inter-village roads and inter-commune roads and 66.3% of agricultural cooperatives have helped poor

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is that members and non-members reduce production cost through using ACs’ services. Also, members and farmers gain many advantages though cooperative’s activities such as: saving cost, reducing labors, increasing crops, using good services, gaining farm experience and other benefits. For example, Table 11 shows that farmers in An Giang, Dong Thap and Kien Giang provinces save 49.6% harvest cost when he or she uses combine harvester service from cooperative, farmers also reduce 75.0% harvest time and 89.3% labors.

Table 11: Advantages of Combine Harvester Compared Traditional Harvest Rice54

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Besides, farmers also gain advantages from irrigation (pump water) service of cooperative such as: saving around 9.6% irrigation cost compared with self-farmers do, increasing crop from 2 crops to 3 crops a year, protecting rice field from flood effect, using a dike system as a rural road…result from case study in An Giang gives more evidences that farmers gain many advantages though cooperative’s activities.

Although reports from PCAs do not the mention the exact amount of other economic contribution from the agricultural cooperatives, reports present data on Data were collected at 9 ACs in three provinces, result was average cost between group A, 54

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example, reports state that 100% of agricultural cooperatives have contributed to the development of rural areas, 77.0% of agricultural cooperatives have helped build large farm programs, which it is one of the state government national programs producing large quantity and high quality rice and 69.1% of agricultural cooperatives have contributed to social and economic development in their province.

3.4.4 Social effects from agricultural cooperatives in the Mekong Delta ACs have created many jobs for farmers in rural areas. Table 12 shows that ACs in the Mekong Delta used 21,634 labors in 2000, increased 41,913 labors in 2005 and reached to 63,015 labors in 2010. An agricultural cooperative created job for 74 farmers in 2010, it is good contribution to rural society in the Mekong Delta, many farmers can get a job in their communities, and they do not migrant to cities for looking for a job.

Table 12: Full-time and Part-time Labors in ACs

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communities such as: building house for poor people, helping single-elderly people, helping poor students, building rural bridges, driving patients to the hospital and so on. All cooperatives in the Mekong Delta, including agricultural cooperatives have donated to social and charitable activities amounting to 11,957 billion VND (equivalent to 4.782 million yen) between 2005-2010. It means that each AC contributed average 2.8 million Vietnam annually from 2005 to 2010 for social activities.

The survey shows that 87.3% agricultural cooperatives have helped and supported members in case of illness, bad luck incidents and accidents.



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