Do Cooperatives Need a Separate Ministry?

By Balu Aiyer

(Regional Director Asia and Pacific at International Co-operative Alliance)

I recently received a query from a member country about where to locate cooperatives in their ministry. The question was as follows, “In a move to make the cooperative sector more effective and efficient, the government is deciding whether to transfer the cooperative department from ministry of community development to ministry of economy, completely or partially. Partially means, transfer of consumer cooperatives only and keeping other ‘types’ of cooperatives in the same ministry.  What is the best suitable option? Should the transfer be, completely if any or partial transfer will also be okay and workable? Which ministry suits better for cooperative department, Community Development agency (social affairs agency) or Economic affairs agency? Or having separate department or even a ministry to handle all the cooperative affairs under one roof is more appropriate and successful?

My response was as follows:

I am glad to hear about the intent of the government to make the co-operative sector more effective and efficient; and its efforts to see how best to locate cooperatives within the overall government structure. This is a very important decision which will have far reaching consequences and needs considered thought and action.

I reached out to my colleagues who have more knowledge and experience in the area to get their advice. The opinion largely seems; it is not a question of straightforward structuring or transferring from one ministry to the other. The reality is that cooperatives are different, and as you point out, “different types of cooperatives have certain jurisdiction and work requirements with the other ministries and departments.”

Some of the things to keep in view:

The growth of cooperatives mirrors the actual needs of the country. The early co-operatives were an important socio-economic mechanism where the combined capital and capabilities from individuals of similar interest from diverse backgrounds helped individuals to uplift their living standards.

Given the unique nature of co-operatives, they need to be distinctively acknowledged by the government in as much as co-operatives have a potential important role in transformation of socio-economic life of people in urban and rural communities.

Co-operative sector, as enterprises, deserve equal treatment with other economic sectors, in as much as co-operatives have their distinctive structure that are member-driven, hence a unique sector that is well integrated in communities and built from the ground up.

Co-operatives are prevalent in all sectors of the economy (agriculture, banking, consumer, housing, insurance, services,..)

The role of co-operatives should be considered not just in current terms but also in emerging areas where they can play an important role.

Any restructuring should take into account the following:

Respect the values and principles that make cooperatives unique and differentiates from the public and private sector. The open and voluntary membership nature of co-operatives, democratic control by members, equal voting rights, autonomous nature of co-operatives, and community to the community needs to be promoted.

Awareness and promotion of the co-operative form of business across government ministries/ departments and the public at large. The market has largely failed to benefit the majority. According to a recent Oxfam report, the wealth of the poorest half of the world’s population has fallen by a trillion dollars since 2010, a drop of 38 percent while the wealth of the richest 62 has increased by more than half a trillion dollars to $1.76tr. The world is failing to tackle poverty, and the economy is rapidly changing to leave the majority of people behind. The cooperative model offers a viable alternative and there is need to spread awareness within government department and ministries and the public large. The need to educate schools and universities on alternative models has never been more urgent and important.

Cooperatives exist across all sectors of the economy. Rather than treat each sector in silo; there is need to develop cross- sector engagement to ensure the ecosystem is built. For example, building direct link between producer and consumer cooperatives to reduce intermediaries and ensure the producers get an assured market and the consumer a fair price. The Japanese cooperatives have a cradle to grave approach where, the needs of farmers are looked into their entire life. Health and aging; youth and skill;

Ensure there is adequate resources in terms of staff and budget and oversight.

Cooperatives – social and/or economic enterprises

According to the International Cooperative Alliance, a co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.[1] An enterprise according to the dictionary is, a unit of economic organization or activity; especially: a business organization.[2]

The economic and social (including cultural) nature of cooperatives makes it difficult to categorize purely either as an economic or social organization. The European Union look at cooperatives as players both in Civil Society and the Private Sector.

The Communication from the European Commission, “The roots of democracy and sustainable development: Europe’s engagement with Civil Society in External Relations,” states, “The EU values CSOs’ diversity and specificities; it engages with accountable and transparent CSOs which share its commitment to social progress and to the fundamental values of peace, freedom, equal rights and human dignity. They include membership-based, cause-based and service-oriented CSOs. Among them, community-based organizations, non-governmental organizations, faith-based organizations, foundations, research institutions, Gender and LGBT organizations,  co-operatives, professional and business associations, and the not-for-profit media.[3]

The Communication from the Commission, “A Stronger Role of the Private Sector in Achieving Inclusive and Sustainable Growth in Developing Countries” states, “Private sector activity can take many forms and will impact on economic development in various ways. The private sector is highly diverse, ranging from enterprising individuals to large multinational corporations and financial institutions; from enterprises creating shareholder value to people-centered social businesses, co-operatives and workers and employer’s organizations. They may operate at a local, national, regional or international level, in rural or urban areas, in the formal or informal sector and in very different country contexts. Each of these private sector actors requires different conditions and incentives to contribute to development, entailing differentiated approaches to their support and engagement for development.[4]

The United Nations 2030 Agenda that includes 17 Sustainable Development Goals approved by all governments in September 2015 recognizes the diversity of business models, including co-operatives: “We acknowledge the role of the diverse private sector, ranging from micro-enterprises to co-operatives to multinationals, and that of civil society organizations and philanthropic organizations in the implementation of the new Agenda.”[5]

The National Cooperative Policy of Malaysia seeks to enable the co-operative movement to play an active role in national development together with the public and private sectors. The co-operative sector is seen as an effective contributor to National Development and has been tasked with increasing its contribution to the National Product from 5% in 2013 to 10% in 2020.

The Constitution of Nepal which was approved in 2015 recognizes co-operatives as the third pillar of the economy; the public and private sector being the other two. The co-operative sector is seen as being important to raise the economic status of the impoverished communities and for the economic progress of the country. Co-operatives were moved from the Ministry of Agriculture to the Ministry of Co-operatives and Poverty Alleviation. What remains to be seen here is the allocation of resources – budgetary support and staff at the center and provinces

Canada is a recent example of a country looking at the current and future state of co-operatives and making recommendations to change ministry. The 2012 Status of Co-operatives in Canada, chaired by Mr. Blake Richards, M.P., made the following observation and recommendation. “Canada’s co-operatives are found in many services sub-sectors such as financial services, retail, housing, daycare, recreational facilities, electricity and water supply. Despite this diversity of business activities, the federal government provides oversight of co-operatives through its Co-operatives Secretariat, which has been organized within Agriculture Canada since it was established in 1987.

The Cooperative Development Authority (CDA) in the Philippines is the sole government agency mandated to register all types of cooperatives. It was created in order to fulfill provisions of Section 15, Article XII of the Philippine Constitution “to have an agency that would promote the viability and growth of cooperatives as instrument of equity, social justice and sustainable economic development.” The CDA while an autonomous authority to develop cooperatives is still integrated with the co-operative movement.

Feedback from the field

It is not advisable to separate under competent ministry. In Japan there exist more than 10 co-operative laws under the jurisdiction of 4 ministries while in South Korea 9 co-operative laws are regulated by 9 ministries. Such divide resulted in no uniform co-operative policy of the government and very weak identity among co-operatives due to path dependent evolution and diverse political orientation/organizational culture. The separation of consumer sector will bring about such divide of co-operative sector.

India is a federal country with one Central Government and 31 State Governments. At the Central level, there is one Regulatory Authority, the Central Registrar under the Department of Cooperation, Ministry of Agriculture and Farmers Welfare. The Registrar is responsible for registration, regulation, monitoring and enforcement w.r.t. Multi State Cooperative Societies spread over the entire country. But, the Administrative Departments are different for the respective sectoral cooperatives. For example, Fertilizer Ministry is the administrative ministry for fertilizer cooperatives; Consumer Affairs Ministry is the administrative ministry for consumer cooperatives; Housing Ministry is administrative ministry for housing cooperative and so on and so forth. Each State has its own Cooperative Societies Act for the regulation of cooperatives.

It can be suggested that a new agency/authority concerned only with cooperatives be formed. This agency/ authority can work under the joint control of the Ministry of Social Affairs (MSA) and Ministry of Economic affairs (MEA) for a period of 5 years (extendable up to 10 years), to help it mature into a separate department under the MEA.  While being jointly held, the MSA can liaise with other concerned departments (e.g. environment, agriculture etc.) directly and the MEA can play the role of the State executive to ensure regulation and governance of all cooperatives. There is a high possibility that the dual role of the cooperative model can be made more visible by this kind of a joint facilitation, will continue in the interest of cooperative development even after the formation of a separate cooperative department under the MEA.

In conclusion

A separate ministry for cooperatives; if not, bring all cooperatives under one umbrella

Respect the values and principles that make cooperatives unique and differentiates from the public and private sector

Awareness and promotion of the co-operative form of business across government ministries/ departments and the public at large.

Promote cross sector engagement of cooperatives

Ensure there is adequate resources in terms of staff and budget and oversight

Happy to receive your comments!

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Comment ( 1 )

  1. sankaralingam

    Yes. Apt. Separate Ministry will integrate and harness the potential to a higher plane. Functional growth will be steady and free from cross purpose impediments. Cooperative as a economic and social philosophy now in a subdued nature will find its true potential and rally behind one leadership. All sectors in the cooperative domain including Agriculture will receive attention. Suitable Budgetary allocation and attention possible. Indian coops can boast a strong and united force in international arena. Separate Ministry is a good idea. Sankaralingam, Chennai

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