«DEVELOPMENT STRATEGY OF THE AGRICULTURAL COOPERATIVES IN THE MEKONG DELTA, VIETNAM: SIGNIFICATION OF DIVERSIFICATION INTO BUSUNESS AND ACTITITIES ...»
Services in stage 1 are suitable with current status of most ACs in the Mekong Delta such as few number of members, low educational degree of board management, low capital The irrigation service is still main service of many ACs in Mekong Delta.
Most of ACs have to invest more dikes and pump stations for this service.
Building dike system is the most necessary for irrigation service and it is very difficult to do it. ACs need to collaborate with commune authorities for developing proposal and occupy government subsidy loan. There are many national programs that ACs can get a subsidy loan for building dike such as the new rural development, the resettlement zone flood area and the large scale farm size81 Machinery utilization services need to purchase a machine, it cost high investment and few subsidy programs from government, ACs have to prepare their own budget. I recommend that ACs only purchase machines with subsidy from government. Otherwise, ACs should collaborate and negotiate with private farmers service machine in other provinces.
ACs contract with private farmers, who have machine, provide service in AC's area. Reason is that the Mekong Delta has different crop calendars in agricultural production because flood season come different time to each provinces. Flood comes and goes one month earlier some upper Mekong provinces as An Giang, Dong Thap, Long An and Kien Giang compared with lower Mekong provinces as Can Tho, Ben Tre, Tra Vinh, Vinh Long, Soc Trang, Bac Lieu and Ca Mau. Therefore, the crop calendar is also one month earlier in upper Mekong Delta Large scale farm size: An area where all farmers cultivate rice at same varieties and sign contract 81
province because of different to crop calendars.
Service substitution a lack of agricultural labors and demand labor for taking care in agriculture. For example, sowing seed, praying pesticide, fertilizer, harvest (rice, vegetable, fruit, fish….). ACs can organize service as case study in Phu Thanh and 3A Canal where organize many landless farmers for offering many activities to members and non-members. ACs can offer these services anytime and ACs do not need to investment capital or tool.
Agricultural extension, farm technique
ACs offer these services in stage 2 when ACs have provide these services in stage 1 and status of agricultural cooperative on members, capital, revenue, managements skill have improved. Services in stage 2 are high requirement from ACs on investment, capital, management skill, business management skills and competitive ability skills. In addition, profit margin of these service is narrowing because these services are strong competitive with private supplier.
The input supply (Fertilizer, pesticide, feed, medicine…) service is very high demand from members and non-members (table 20). However, ACs offer these services when ACs have strong business capital and good business management skill because these service need to invest high capital but margin profit is small.
when JA start to offer market business for member and recently all marketing and market business contributed less than 30% profit of JA82. In addition, most of agricultural cooperatives in Thailand lose profit on marketing and market business activities if ACs do not get subsidy from government.83 However, if ACs offer these services, members will get more profits through these activities and ACs’ trademark will increase in future.
Requirement of ACs for offering these services in stage 2 follow a strong business management skills of board management members, many members in one agricultural cooperative, members follow ACs’ business activities, and strong of business capital.
6.9.2 Long term strategy Services in stage 3 and stage 4 have not been suitable with current status of Mekong Delta’s ACs and some following years later. Therefore, services in stages 3 and 4 should apply in long term development strategy of ACs. These services will be offer after 2019 or when ACs organizations develop as a strong economic business organization. Then, ACs should start to offer these social business activities.
6.10 Other strategies development of ACs in Mekong Delta.
6.10.1 Organization single or primary AC and multi-purpose AC models.
Agricultural Development in Japan, 2006, JA Zenchu,p4.
82 Suwanna, Agricultural Cooperatives in Thailand, 2006, p7.
agricultural cooperative offer only one business and activity, 42.8% ACs in Long An offer only one service and 57.2% ACs offer from two services84. Reports from Mekong Delta Cooperative Alliances show that average 38.7% ACs on the Mekong Delta offer only one service. In addition, multi-purpose ACS seem to be very new with many governor and farmers in Mekong Delta. Most of people want to open new agricultural cooperative with only one activity such as the fruit AC, the cow raising AC, the organ fruit ACs… these ACs should be a business activities in some ACs.
Therefore, I suggest that we should organize single purpose and multi-purpose ACs. The Cooperative Law revised version in 2012 allows to organize a multi-purpose agricultural cooperatives.
Single-purpose agricultural cooperative is an agricultural cooperative that it offers only one business or activity. This model applies for new opening agricultural cooperative or agricultural cooperative products a special product.
Then, ACs will transfer to multi-purpose agricultural cooperative when agricultural cooperative develop on number of cooperative scale size, member, share capital, business capital, management skills and property.
Multi-purpose agricultural cooperative offer many business and activities as shown in Table 31 and Table 32. In addition, multipurpose agricultural cooperative doesn’t offer business and activities within a hamlet and a commune.
ACs offer services cover through other hamlets, communes, districts and Long An Cooperative Alliance, survey status on cooperative in 2010 84
6.10.2 Organize Regular member and associate member The Cooperative Law revised version in 2012 does not state about regular member and associate members but the Cooperative Law also does not forbid two kinds of members. However, recently macro policies allows “ use service member”, a person invest money to ACs for doing one services in agricultural cooperative or use services of agricultural cooperative. He or she receive dividend on only the investment service and cannot attend to general meeting of ACs. Therefore, I suggest that ACs organize with regular member (xã viên chính thức) and Associate member (xã viên liên kết) Regular members is a member as same as I our definition in chapter one85.
In addition, regular member is farmer who has farmland in ACs and regular members attend general meeting and select board management as stated in the cooperative law.
Associate member is a person who does not want to be a regular member, but he or she wants to invest money to ACs for doing one or many service or using ACs services. Associate members can be farmers who have no farmland in ACs, residences in a city or other provinces. Associate members only receive dividend at service that she or he invested money or use service. She or he does not allow attend the general meeting and vote board management of ACs.
A member of ACs is farmer who buys at least one share in the AC and receives dividends 85 (share profits) from the cooperative at the end of year.
Definition of cooperative Union: Cooperative union is a collective economic organization, co-ownership with legal entity and is established voluntarily by at least 04 cooperatives and mutually cooperate and assist in the production, sales to meet the common needs of member cooperative, on the basis of self-control, self-responsibility, equality and democracy in the management of the unions of cooperatives 86. Therefore, the agricultural cooperatives Union can be set up by at least 04 agricultural cooperatives and mutually cooperate and assist in the production, sales to meet the common needs of member cooperative, on the basis of self-control, self-responsibility, equality and democracy in the management of the unions of cooperatives. This model will increase capacity of small ACs in the Mekong Delta.
6.11 Improve legal framework and macro policies 6.11.1 Subsidizing farmer through ACs Mekong Delta contributes 90% the national quantity rice export and 65% of farmers cultivate rice. State government has set goal that farmers have earned at least 30% profit on rice production and government have subsidized programs for farmers earn 30% profit. For example, Government give subsidy loan at 0% interest rate to Vietnam Food Company for buy all rice product during main harvest season, giving loan to fertilizer and pesticide companies for investing new technology and other program. As the result, government subsidies program have quite affected to farmers profits.
The Cooperative Law 2012, Article 3 86
Government gives subsidies loan at 0% interest rate during two last months in the crop season. Government subsidy program directly contributes to farmers profit and it encourages many farmers enrolment into ACs. It solves one of problem low ratio of farmer’s enrolment into AC.
6.11.2 Improving other legal frameworks.
Many polies need to be clear on finance resources and implementation gudance Lack of guidane policies on the 2012 Cooperative Law. The Law has applied in July 2013 but it can not be apply because lack of guidance docuements from state government.
Raising awareness of cooperatives and promoting comprehensive and right understanding of new cooperative model and its nature. Improving staff to propagandize Cooperative law and support the establishment and development of cooperatives.
The State assists agricultural co-operatives in building necessary infrastructure for production, such as in-field lanes, irrigation canals, roads, electricity system, etc, which will have huge impact on the whole community in the area when all or majority of the people here are co-operative members.
The State assists co-operatives in the following issues: human resource training, marketing, trade promotion, technology transfer, etc..
The State opend budget supplemented to ACs developemnt on renewing, developing products; innovating technology; developing markets and expanding
The State restructures ministry management of ACs. It should be belong to Ministry of Agricultural and Rural Development. Also, State allows Vietnam Cooperative Alliance as a representative of ACs and VCA has right work as an economics organization of members. VCA should has a permission to do marketing, trade for members.
Connecting the State’s assisting programs with farmers, agriculture, rural areas through ACs.
Strategy development of ACs in the Mekong Delta includes 1) four strategies consist of offering diversification number of business and activities to members and non-members; taking government programs development high investment cost services such as irrigation, combine harvest machine and some non-agriculture services; Developing capacity and status of ACs by increase number members of one agricultural cooperatives and expanding scale of services to both members and non-members;
merging or re-organizing together with other small ACs in same commune for increasing of capital, members, property, assets and competitive among ACs in same communes. 2) Five stages/steps development of business and activities include stage 1 offers agricultural services related urgent need and problems of members and non-members in farming production; stage 2 offers service for reducing production cost and increasing quality products; stage 3 offers non-agricultural services and trade services; stage 4 offers services for increasing health and life condition and stage 5 offers service for being quality life, happy life and long life to members and non-members. 3) These strategies and stages should implement in short term
organize single-purpose and multi-purpose ACs model, allow regular member and associate member and develop agricultural cooperative Union and regional agricultural cooperatives union.
Vietnam’s Agricultural cooperative (AC), in general, and the Mekong Delta’s (MD) Agricultural Cooperative, in particular has developed since 1954 with many stages of rises and falls. During 1954-1975, ACs developed only in northern Vietnam, and none existed in southern Vietnam. Then, government expanded AC from North to South Vietnam during 1975-1995. During 1954-1995, ACs were formed with collection land, capital assets and property of individual farmers and equally distribution, which Vietnamese called the old AC model. The period 1986-1995, most of ACs in Vietnam largely collapsed after Vietnam change into renovation “DOI MOi” on economy policy in 1986.
In 1996, the government introduced the new AC model following the International Cooperative Alliance model and enacted the first Cooperative Law.
Then, Cooperative law has revised in 2003 and 2012. In addition, the government promulgated many resolutions, decrees and circulars to promote the new AC. ACs entered another development period, improving business activities, members, capital and property.
However, these ACs have not been contributing significantly to the national economy. The contribution of the collective economy to gross domestic product (GDP) has decreased continuously since 1996. For example, in 1996 the contribution of collective economy to GDP was 10.0%, 8.6% in 2000 and only 5.2% in 2010. In 2010, the contribution to GDP from the state owner economic sector was 33.7%, 30.8% from the individual economic sector, 18.7% from the Foreign Direct Investment (FDI) economic sector and 11.5% from the private economic
tends to decrease. It was 4.0% in 2005, compared with 3.0% in 2008 and only 3.0% in 2010. Therefore, ACs have uncounted opportunities as well as challenges on development and it seems that ACs have faced more challenges than opportunities.