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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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Only three persons are needed to harvest hectare rice compared to 28 persons by the traditional method. A machine can harvest a hectare of rice in only two hours compared to eight hours by hand. The post-harvest loss of machine-harvested rice is 6.5% compared to the 15.3% by the traditional method. Hence, as Table 27 demonstrates, both members and non-members obtain many advantages from the combine harvester service, but members gain greater advantage because the service capacity is so limited that the cooperatives give them priority to use the service over non-members.

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5.5.2.3 Provision service for good quality seed In this provision service, cooperatives sell high quality seed to members and non-members. The cooperative can plant a registered seed in its area, harvest certified seed and sell it to members and non-members71.

Members and non-members obtain many advantages through this AC service.

For example, both can buy good seed at a cooperative for a lower price than that of the seed companies. Further, their crops are generally sold at a higher price because the use good quality seed. The cooperative could provide high quality seed services at a low price because the cooperative also obtained government subsidy Three seed levels: Registered seed is created by scientists, certified seed is harvested from 71

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seed centre.

5.5.2.4 Credit for Member Service Credit service is an activity whereby cooperatives provide low interest loans only to members. Phu Thanh and 3A Canal use their capital for loans to members during the mid and end of the crop season when most farmers run out of cash. Phu Thanh charges interest rate at average 1.2% per month compared with 0% in 3A Canal. The loan interest rate per month is average 1.4% lower than commercial banks and is average 3.5% lower than black market loan.

However, cooperatives provide loans to few members because the ACs’ amount of credit capacity is so limited. Phu Thanh started its credit service in 2009 and loaned in 2010 a total of VND 96 mil. to 12 members at 2% interest per month, a total of VND 146 mil. to 20 members at 1.4% interest per month in 2011 and VND 152 mil. to 38 members at 1.4% interest per month in 2012. In contrast, 3A Canal started its credit service in 2004 with a total amount of VND 150 mil.

equally contributed by 477 members, and it loans money to members at 0% interest.

5.5.3 Each cooperative’s individual successful services 5.5.3.1 Services offered by only Phu Thanh Phu Thanh provides other services to members and non-members, such as providing fertilizer and pesticide, a rice drying service and preparation of water flowing canals into rice field.

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three hours for a city hospital ambulance to arrive. The cooperative transports residents of Phu Thanh and other three communes that contribute to the free ambulance car budget. The AC and local governments purchased an ambulance to transport patients from the community to the city hospital at no charge. The cooperative provides this non-profit activity as a benefit for all residents of the surrounding area.

5.5.3.2 Services offered by only 3A Canal 3A Canal provides eight services for members 72. The AC’s services increase member profits and benefits. The cooperative manages the crop calendar, provides transportation service and transfers extension information. It also constructs rural infrastructures, provides health services for members and offers services for improving members’ living conditions such as health insurance and cable for internet and television. For example, the cooperative organizes agricultural training courses for its members, so that members enhance their knowledge about using fertilizers, pesticides, farming tools and improving their living conditions. Figure 23 and 2473 demonstrate that farmers who attended training on pesticide control spent less money on pesticides than did farmers who did not attend. In addition, 3A Canal is the first cooperative in the MD to have doctors conduct health examinations for members twice a year and to subscribe to health insurance for all members.

The farmers in hamlets, 100% are members of the 3A Canal cooperative.

72 Tran Minh Hai and Yutaka, Iwamoto, ‘AC’s contribution to farming practices in An Giang 73

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and activities to members and non-members. Therefore, these ACs have increased total revenue and profits and reduced total production costs to members and non-members.

5.6 Factors affecting AC success 5.6.1 Factors affecting the success of both Phu Thanh and 3A Canal First, AC management staffs have authority to operate diversified business and activities (services) for members and non-members. As of 2010, Phu Thanh and 3A Canal provided, respectively, seven and eight business or activities, compared with an average of three business or activities for ACs in the MD. In addition, AC services related not only to agricultural activity but also to non-agricultural issues, including several non-profit services that benefits members and non-members alike, such as Phu Thanh’s free ambulance service and 3A Canal’s credit service, health examinations and health insurance.

Second, AC business and activities have solved the majority of the most difficult problems of members and non-members and increased profits for both in the cooperative area. For example, the irrigation service not only provides the cheapest service to members and non-members but also increases their yield from two to three crops per year and protects residents inside the dike from flooding.





The combine harvester service is necessary and useful for members and non-members because it is convenient and cheap.

Third, because ACs can obtain government subsidies for services, their services are not only convenient for members and non-members but also have the

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combine harvesters and high quality seed. For example, cooperatives received government loans for building dike systems, purchasing combine harvester machines and buying high quality seed at the government seed centre.

Fourth, AC re-organisation for greater and sustainable development is a successful factor of Phu Thanh and 3A Canal. Phu Thanh merged with two other ACs in 2005 and has innovated since the re-organization of the number of members, share capital, business capital and service areas (Table 28 in next page). By contrast, in 1998, 3A Canal transformed to a newly established AC but could not become successful because of limited human resources and its financial report’s lacked transparency. Finally, 3A Canal re-organized in 2002, changing management members, providing new business activities on the basis of members’ needs and implementing many activities to increase the members’ profits and improving their living conditions.

Fifth, business achievement is a success factors. Table 28 reports that Phu Thanh and 3A Canal produced greater business achievement than those of the MD in 2010. This achievement led two ACs in success or the members do not follow the cooperative staffs.

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Finally, basic support from local governments, including hamlet and commune governments, during the establishment and re-organization periods is another success factor. For example, Phu Thanh could not built the dike boundary area of 1,529 ha of farmland related 1,679 households and 6,716 residents without the commune government’s support in negotiating with farmers and obtaining a 0% interest loan from the state government.

5.6.2 Factors affecting Phu Thanh’s success only Good educational level of management staff is a success factor. In fact, Phu Thanh’s management staffs have the highest education level among An Giang province ACs. As of 2011, in Phu Thanh, 60% of management staff held university degrees, 20% held college degrees and 20% held vocational degrees, compared to the 7% holding university degrees, 16% holding college degrees, 8% holding vocational degrees and 69% being untrained and completing less than a high school education average in the MD in 2010.

All Phu Thanh staffs are local person living in Phu Thanh commune. All

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time for studying higher education by “cooperative training fund” Phu Thanh’s staff members have developed many proposals for obtaining government subsidy programmes and outside assistance programmes for AC development. For example, Phu Thanh wrote proposals to receive a government subsidy for building two electric pump stations, 24 sewing machines from a company and other proposals, such as for opening an auction market for sticky rice, raise cattle and vegetables and training the cooperative’s younger members of management.

In addition, stronger business achievement is a factor in Phu Thanh’s success. For example, the cooperative has sufficient budget to buy a combine harvester and invest in electric pump stations. Table 29 reports that Phu Thanh exhibited stronger business achievement after merging with other cooperatives in 2005.

Table 29: Phu Thanh AC at Establishment, Merged and Current

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Canal hamlet were enrolled in the cooperative, compared to the 21.9% in the MD and 28.5% in Vietnam.

The cooperative has offered many business and activities to reduce production costs and improve members’ living conditions. For example, it has built a primary school and provided a health worker, street lights, a loudspeaker system and a bridge. 3A Canal is the first hamlet in Kien Giang province where 100% of the rural roads are paved with cement from house to house and from house to fields. These were built into the AC budget.

3A Canal’s accountant is a head of 3A Canal hamlet, selected by vote of all residents in 3A hamlet and was trained by government program. In addition, 3A Canal has “financial transparency committee advice and check”. The committee also was voted by members including eleven persons representative for eleven areas in 3A hamlet. In addition, 3A Canal weekly reports all financial activities on hamlet radio system and provides documents of finance to eleven areas in 3A hamlet.

The farmers’ trust in cooperative management members and the transparency of financial management is also a success factor for 3A Canal.

Farmers believe in and contribute to the construction budget; the cooperative manages the budget, performs the building and discloses all activities to farmers.

3A Canal is consist of one out of six hamlets in Tan Hiep A commune. Tan Hiep A commune has 74

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5.7 Summary Phu Thanh and 3A Canal are two of the few successful ACs in the MD. These cooperatives have succeeded because their business and activities to members and non-members are diversified, beneficial, convenient and based on the needs of members and non-members, reduce production cost and increase revenue and profit and the AC has developed its internal resources for sustainable development. Many reasons explain Phu Thanh and 3A Canal ACs’ success factors. (i) ACs have offered its members and non-members seven services in Phu Thanh and eight services in 3A Canal respectively. (ii) ACs provides both agricultural businesses such as irrigation, combine harvester, input supply and non-agricultural activities ssuch as free ambulance car, health care, and primary school for kids and rural construction. These business and activities meet

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to reducing production cost and increasing revenue and profit for members and non-members. (iv) ACs have built sustainable development because ACs have increased fast in number of members, capital and revenue as for Phu Thanh and increased in number non-agricultural service improving farmer life and rural development as for 3A Canal. (v) Other reasons related on basic support from local governments, including hamlet and commune authorities,

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on the model of multiple purpose cooperative have been developing. Many agricultural cooperatives recognize that it is difficult to exist and develop if only relying on some traditional agricultural services. Among the nation 100 best ACs, some cooperatives have opened new services such as: handicraft, internal

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non-agricultural services. Most of successful agricultural cooperatives have offered diversification of business and activities. The key motive of this innovations are (i) to offer diversification business and activities, (ii) to reduce production cost, as a result it will bring about reduction of service fees (iii) to increase management skills for cooperative staff. Many cooperatives use part of profit of non-agricultural services to compensate for expenditures of agricultural services. Some services such as: irrigation, plant protection, seed, veterinary are cheap service fee and even are free of charge in some several services.

6.2 Research Methodology 6.2.1 Design research method.

I decide to use SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis method for developing strategy development of ACs in the Mekong Delta, Vietnam. I used to argue between SWOT and BEA75 methods. But

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analyze detail factors between external environments and internal environment impact to ACs. It is different from BEA method that we analyze in general impact from macro, micro and internal environments to ACs.

In addition, SWOT analysis is a structured planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a organization for building strategies on marketing, business, and development of an organization.

6.2.2 What is SWOT and how does it apply?



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