«DEVELOPMENT STRATEGY OF THE AGRICULTURAL COOPERATIVES IN THE MEKONG DELTA, VIETNAM: SIGNIFICATION OF DIVERSIFICATION INTO BUSUNESS AND ACTITITIES ...»
As the result, only 0.3% of ACs (2008) and 2.2% of ACs (2011)43 have obtained such loans without a mortgage.
Decision 88/2005 NĐ-CP about promotions polices for development cooperative, decision states that government assists 20 million VND for entry ACs, MARD, survey on status of ACs in Vietnam 2012, P3 42 MARD, survey on status of ACs in Vietnam 2012, P4 43
enrollment to ACs and other expense during mobilization and campaign. However, this money only pay to ACs when ACs has been opened and finished all other registrations document, it takes from three to six months. This policy is good but hard for agricultural cooperatives because they founding members need a lot of money during time mobilization farmers enrollment to ACs and new agricultural cooperatives needs to spend for many items. According to my opposition, government should give to agricultural cooperatives when they start to mobilize farmers to agricultural cooperative.
Further, many instructions for implementing polices are not suitable to rural reality and no longer conform to Vietnamese economic development. For example, decision 88 encourages and promotes the development of ACs, but few ACs can obtain a loan at 0% interest from the government to purchase a combine harvester machine because the decision requires ACs to submit a purchase receipt to the government before the government decides to grant them a loan. The decision also requires the AC to purchase a domestically manufactured combine harvester, but domestic combine harvesters have low quality compared to a second-hand Kubota harvester made in Japan.
Category name and registration name of cooperative in Vietnam is unclear and it need to improve in the near future. Name of cooperative and ACs have to follow the Article 22 on the cooperative law on “Name and logo of cooperatives” and decree 87/2005/NĐ-CP on “register business permission in cooperative”. The Article 22 is very general such as cooperatives and unions of cooperatives shall make a decision on their names and logos but not contrary to the provisions of law.
and may include numbers, symbols, and begin with the word "Cooperative" or "Cooperatives Union". On the other hand, Decree 87 guides that name of cooperatives can use by their main business actives. Therefore, many “new name of cooperative” has appeared such as fruit cooperative, banana cooperative, mango cooperative, chicken raising cooperative, duck raising cooperative etc. According to my opinion, these cooperatives are agricultural cooperatives because fruit, banana, mango, chicken is a business activities of ACs. If we do not change on Article 22 on the cooperative law and decree 87, it will be hard categorized name of cooperative in the near future.
Old ACs’ historic problems have had bad effects on transformed ACs and the negative image of farmers for newly established ACs. For example, transformed ACs have many debts and common assets. Capital assets seem to be sizeable on the balance sheet but have low real value, and old ACs as original of transformed AC had a larger number of members (Table 2), but they were false members because they had bought no shares and received no dividends from ACs.
Many members used AC services but paid no service fee because they thought ACs were a government organization like an old AC.
Macro environment has been cchallenges from management structure. Vietnam has three government agencies to manage cooperatives, but they remain unsynchronized and disconnected and have no responsibility for leadership to control ACs. The Department of Cooperative Development belongs to the MPI, which is the policy maker for all cooperatives nationwide, but it has no agency office at the provincial level for managing ACs. The VCA has an agency office in
association and only advises on policy making. The Department of Cooperatives and Rural Development belongs to the MARD, it has an office in each province, which makes and manages polices only for ACs. Thus, the VCA, which understands cooperatives ACs well, is merely an advisory group. MPI and MARD, which understand cooperative and ACs less than ACs but these are policies maker and there are low collaboration among VAC, MPI and MARD. For example, Table 6 show annually reports on number of ACs in Vietnam are difference between VCA and MARD offices.
Table 6: Difference Number of ACs Report by VCA and MARD
22.214.171.124 Challenges from the micro environment The proportion of farmer enrolment in ACs remains low. As Figure 9 illustrates, only 28.5% farmers join into ACs in Vietnam in 2010. The government sets goal that 30% of farmers join into ACs in 2015 as a “real members of ACs”.
Members of ACs in the Red River Delta (North of Vietnam) consisted 68.3% farmers in region, it is three time higher than that of ration in the Mekong Delta (South of Vietnam). According to article 13 of Cooperative law about condition being member of cooperative, many members of ACs in Red Delta River are “not real members” because they are not buy share from ACs and they get no
North, members do not contribute capital or submit application form; it is unclear about assets contributed before cooperatives are transformed.
There are no operation plans. No democratic discussions are held so that members cannot talk about general issues. Many cooperatives are not able to persuade their members about socio-economic benefits that cooperatives can bring about for them. Many of them cannot attract more members. Otherwise, several ACs in the South are actually enterprises. Because, they have strong capital and they have only 5 or 6 members, which does not satisfy the minimum number of member requirement set out by the Cooperative Law, and they do not allow new members into ACs.
companies in rural area. Cooperative groups are simple, low operation cost and free business tax in providing services for agriculture. The agribusiness companies are strong in terms of capital, good staff and high completive capacity.
126.96.36.199 Challenges from the internal environment ACs have offered simple services related agriculture and few related non-agriculture. According to Nghiem, the popular services offer by ACs until 2005 including irrigation, electricity supply, plant protection, input supply, extension (new crop, varieties, new technology). In whole country, the proportion of agricultural cooperatives offers irrigation services reach 80.2%, marketing service 2.0%, electricity service 41.5%, extension service 45.3% and other service as
cooperatives such as: farm product processing and marketing, internal credit, clean water supply and waste collection. The ratio that the numbers of
agricultural cooperatives have organized new business services is as following:
8% for marketing, 8.4% for internal credit44.
In the Mekong Delta region, most of ACs offer services related on agriculture such as: land preparation, irrigation including pump water into rice field and get out water from rice field, technology, input supply (fertilizer, pesticide, seed), harvest and few ACs provide service on credit, marketing, buy and sell, fresh water supply and non -agricultural services.
Nguyen Van Nghiem, MARD, 2006, agricultural cooperatives in Vietnam,p6.
lowest compared with other types cooperative in Vietnam. AC staff member educational level and management skill has improved but they still have poor management skills because they are farmers and their knowledge are very low.
For example, only 9.2% of the staff members held university education in 2011, 32.6% held college education and 23.7% held vocational education. Conversely, 34.5% of the staff members were not trained with any degree.
Figure 10: Educational Level of AC's Management in Vietnam(2011) AC financial and technical capacities are generally low. ACs have a small operational scale and so have insufficient cash flow and low flexibility for seasonal needs. Further, ACs have little access to official capital funding. For example, ACs have the lowest effective investment ratio (profit/capital) among all types of cooperatives; it is also lower than that of the effective bank investment ratio. For example, ACs’ effective investment ratio in 2010 was 1.9% compared with 3% for the trade and services cooperatives and 17.3% for the aquaculture cooperative; it
ACs have small share capital, but it is difficult to raise capital because many members in transformed cooperative have not invested money to share capital and 43% AC members are poor and landless farmers. Further, few ACs obtain long-term loans from banks because of the aforementioned unclear credit policy.
Most ACs are organised within a hamlet and a commune, and the ties among ACs are weak; therefore, the model of an AC union has not achieved good results. VCA reported in 2012 that 39% of ACs in Vietnam have the scale ‘within a hamlet’, 49% ‘within a commune’ and 12% ‘between communes’.
ACs have limited of capital assets, ACs’ national average share capital in 2010 was VND 1,452 mil, as Table 2 reports. However, it does not represent the reality of AC financial health. For example, the capital of a transformed AC in North Vietnam has over VND 1,452 mil, but this is the ‘on paper’ amount of capital in balance sheet accounting, while the real value of capital is smaller because 85.1% of AC capital assets were bought before 1996, and it has been evaluated without depreciation. Conversely, the share capital of a newly established AC in South Vietnam (Mekong Delta) in 2010 was only VND 310 mil, but that was accurate valuation.
Other challenges base on characteristic of ACs between North and South of Vietnam. For example, property asset of transformed cooperative (most of in North) is from 300 million VND to 500 million VND in one AC but available as current asset is less than 20% of using value. On the contrast, property asset of MPI, report implementation of the 2003 Cooperative Law, p5.
2.5 Summary The first Cooperative Law in 1996 and many polies related on cooperatives and ACs have uncounted opportunities as well as challenges on development of cooperatives and ACs in Vietnam.
The analysis results by BEA method shows that ACs development in Vietnam have been affected by the macro, micro and internal environments.
However, the macro environment is the most important factor because it affects
internal environment causes many opportunities as well as challenges to ACs.
I found out that ACs development in Vietnam has been affected by the macro, micro and internal environments. However, the macro environment is the most and internal environment is the second important factors because it affects both opportunities and challenges in AC development as ACs cannot adapt directly to the macro environment although they can adapt to the micro and internal environments.
3.1 Introduction In 1996, the government introduced the new AC model following the International Cooperative Alliance (ICA) model and enacted the First Cooperative Law. In addition, the government promulgated many resolutions, decrees and circulars to promote the new AC. AC entered another development period, improving business activities, members, capital and property. However, cooperatives and ACs in Vietnam still have encountered many opportunities and challenges after the cooperative Law has effected and other policies related on AC have enacted.
As the result, Vietnam’s Cooperative, in general, and Agricultural cooperatives (AC), in particular, have not been contributing significantly to the national economy and themselves. According to Vietnamese government, the collective economy as the core cooperative (including cooperative, ACs and farmer collaboration groups) plays an important role in the national economy. It is one of the Country’s five economic sectors, it has created jobs for rural areas and it has contributed to reduction of poverty in Vietnam According to the secondary data and report from the General Statistic Office of Vietnam, I find out problem statements of agricultural cooperatives in the Mekong Delta, south of Vietnam that agricultural cooperative is lowest development index compared with 8 economic regions in Vietnam but some
- Describe current situation of agricultural cooperatives in the Mekong Delta, Vietnam
- Analyze current situation of agricultural cooperatives in the Mekong Delta, Vietnam.
3.3 Research Methodology This chapter used the qualitative and quantitative methodologies for collecting and analyzing data. The data is information concerning cooperatives, including agricultural cooperatives in the Mekong Delta. I used the qualitative methodology for collecting data at the PCAs in 12 provinces and one city in the Mekong Delta, South of Vietnam. PCA is the local government office in each province where the provincial government manages all activities of cooperatives in the province. PCA issues annual report called “Summary Report of Cooperative Activities in the Year and Orientation Activities for the Next Year”. It also issued five-year reports in two periods 2000-2005 and 2006-2010. Thirteen reports were collected from each province including 11 annual reports and two five-year reports.
However, I could not find enough data demonstration that farmers gain social-economic advantages from provincial reports although all reports said farmers gain social-economic advantages though cooperative’s services. Therefore,
social-economic advantages for farmers. I selected 123 rice farmers by random sampling and surveyed using a questionnaire in seven ACs in An Giang.
Sixty-two of those interviewed were members of AC and other 61 were non-members of AC. I collected information related to economic and social contribution of ACs to their productions and community.
3.4 Research Results 3.4.1 Current status of agricultural cooperatives in the Mekong Delta Business activities (services) of ACs in MD are simple and small-scale.