UK Consumer Co-operation - Recession and Rebirth

Dear Co-operative Colleagues:

Let me wish you all a Wonderful and Very Successful New Year 2010.

I have recently read a paper by Dr. Rita Rhodes of UK, which was posted on the site by Dr. Edgar Parnell. Dr. Rhodes is an active member of the Global Research Committee. She has several papers to her credit. She has also written a Book "International Co-operative Alliance in War and Peace 1910-1950".

The paper can be found at http://www.co-oppundit.org/

Please read the paper and send your views and comments to:

Dr. Rita Rhodes at rmrhodes@globalnet.co.uk
or
Dr. Edgar Parnell at: edgar.parnell@o2.co.uk

Happy Reading

P. Nair
Secretary, ICA Committee on Co-operative Research for Asia-Pacific

Meeting of the Steering Committee of ICA Co-operative Research Committee

Dear Co-operative Colleagues,

As you are aware, we will be holding a Regional Research Conference in conjunction with ICA Regional Assembly in Beijing, early September, 2010.

The Chairperson of the Research Committee through the Blog Site has already requested members of the committee to come out with possible themes for the Conference.

The theme of the last ICA General Assembly held during November, 2009 at Geneva was "Global Crisis – Co-operative Opportunity". Hence it would be ideal if the themes suggested by the members could relate to this theme.

In order to decide on the theme and sub-themes, I would request the Steering Committee members to suggest a suitable date and time, preferably in December, 2009, for us to meet, discuss and finalise.

Looking forward to receiving your views, either through the Blog, or through e-mail nair@icaroap.coop or on phone -011-9810507944

With co-operative greetings,
Sincerely
P. Nair
Secretry, ICA Committee on Co-operative Research for Asia and Pacific

Hello !! Dear Researchers and Friends

Dear Friends,

Greetings from IFFCO !!

We had successfully completed the first Regional Seminar and first Meeting of the ICA Cooperative Research Committee for Asia & Pacific in the month of October,2009. I take this opportunity to congratulate you all for your active participation and making this event a success.

As I had mentioned during the meeting that this first Meeting is only a curtain raiser and a pointer to the researchers for the events they wish to undertake. Accordingly, now I am inviting your comments and suggestions for taking up future activities in this Region by the Research Committee of Asia & Pacific.

As you may be aware that the next Regional Assembly of Asia & Pacific is scheduled to be held in the beginning of September, 2010 at Beijing, China. The Vice Chair of the Committee Mr. Akira Kurimoto, who because of his pre-engagement could not come to FMDI, Gurgaon to participate in the concluded meeting, had sizeable contribution in shaping up the constitution of this Research Committee and it is his desire (which we also aspire) that this Committee should meaningfully contribute to active research helpful to guide the governance and activities of cooperative societies in this Region. Mr. Kurimoto in his mail to me has made his intentions known that this time it should be a qualitative Research Conference and Committee Meeting at Beijing, China in coming September 2010. Friends, this is a good opportunity for the researchers to present their papers at Beijing. I, therefore, invite all of you to post your views and possible topics/themes which could be suggested for the ensuing Research Conference. For the sake of brevity, I would suggest that you may kindly not suggest more than three topics/themes. After knowing the views, I, in consultation with Mr. Kurimoto and Steering Committee, will arrive at a consensus to decide the topic/theme for the Research Conference to be held at Beijing.

There has been some delay in communication to all of you which had occurred as I was travelling to different places. The Geneva ICA General Assembly has been a roaring success. The main theme was Climate Change and Alternate Source of Energy. Prof. Jeremy Rifkin excelled and regaled every one with his spell bound lecture. The ICA Global Board has been reconstituted in which the Chairman of IFFCO was re-elected as Director securing second-highest votes. From our Region Asia & Pacific this time we have 6 Directors out of 23 Directors on the ICA Global Board. All the six Directors are committed for the betterment of the cause of cooperation globally and specifically for this Region. The details of various events concluded in ICA General Assembly at Geneva, are posted on the ICA Website: http://www.ica.coop/. You may like to read more about it.

This is the time to make up for the lost time in communication. Therefore, I request all of you to promptly respond and send your suggestions as early as possible.

With cooperative greetings,


Gopal N. Saxena

Chairperson,

ICA- AP Research Committee

GOVERNANCE IN COOPERATIVES - Dr.G.N.Saxena

GOVERNANCE

The United Nations Development Programme (UNDP) defines governance “ as the exercise of economic, political, and administrative authority to manage a country’s affairs at all levels.

The Organisation for Economic Cooperation and Development (OECD) describes “Governance” as : “ the use of political authority and exercise of control in a society in relation to the management of its resources for social and economic development.”

Governance is understood as the structures and processes by which cooperation in organizations is directed and controlled for the purpose of producing beneficial outcomes for its stakeholders and to promote greater openness and democracy as well as longer-term thinking and commitment.

COOPERATIVE GOVERNANCE

Co-operative governance is the set of relationships between the co-operative’s members, the board as representatives of members that advise management for the members and the management that has the care and control of the co-operatives for the members and how a business can be best governed in the interests of its owners.

Co-operative governance provides the structure through which the objectives of the cooperative are set and the means of attaining those objectives and the monitoring of performance.

It requires that managers and stakeholders adopt a thinking which mediates between hierarchy and autonomy thereby effectively combining the strengths of each principle.

In a cooperative society, it is very essential that the critical balance between the needs of the members expressed through the democratically elected leadership are implemented by the professional executives to the entire satisfaction of the members of the cooperative society.

This tight rope balance can function pragmatically only when the enlightened democratic leadership assumes the role of monitoring and supervising the implementation of economic and social needs expressed by the members without interfering with the implementation process by the professional team.

The system of governance in cooperatives is relatively a complex system compared to private enterprises, because ensuring retention of control by members, to a great extent, depends on the awareness, understanding and knowledge of the elected representative about the cooperative philosophy, responsibility and their own role in the management. In order to insulate itself from the outside interference such as political and government, the prevailing legislation made for the cooperatives will also play a great role.

INSTRUMENTS OF GOVERNANCE IN COOPERATIVES

Typical organisational structure [governance frame] of a co-operative in Asia. This structure is the product of the byelaws.

PARAMETERS OF COOPERATIVE GOVERNANCE

Good governance in a cooperative society will largely depend upon the following factors:
§ Autonomy & Democratic Leadership
§ Awareness to Elected Representatives
§ Cooperative Law
§ Role of Government
§ Federal Structure
§ Value-based Professional Management; and
§ Social Audit

AUTONOMY & DEMOCRATIC LEADERSHIP

In order that the cooperatives remain member driven, the autonomy of the Board is important.

As it has been rightly said that :-

“ OBVIOUSLY NOT ALL WELL GOVERNED COMPANIES DO WELL IN THE MARKET PLACE. NOR DO THE BADLY GOVERNED ONES ALWAYS SINK. BUT EVEN THE BEST PERFORMERS RISK STUMBLING SOME DAY IF THEY LACK STRONG AND INDEPENDENT BOARDS OF DIRECTORS.”

AWARENESS TO ELECTED REPRESENTATIVES

Cooperative so far have evolved out of the weaker sections unfortunately their representatives are scantly aware about responsibilities and role they are supposed to play. Their knowledge about the business dimensions, vision, business acumen and sharpness to take control of the business initiatives is far from desirable.

In case a healthy environment for good governance, if it is to be set up, there is an absolute need to make them aware about the existing laws for cooperatives, awareness about their role and fraternising them with the existing business environment.

It has also been observed at most times that the professionals also exploit this inherent weakness and take away the control and initiatives from the elected representatives. In this situation the organisation shirks from catering to the felt needs of the members and, thus, actually functions as a private business enterprise.

Essential expected role of the elected leadership in setting up a good governance, therefore, would be to take care of the members’ needs, transparency and right of information to members, develop consensus in decision making (democratic decision where the dissent is not to be over-looked) and above all, to ward off the interference by the non stake holders like government and politicians.

COOPERATIVE LAW

In most countries the ‘cooperatives’ were recognised as an important economic tool, therefore, were, in most cases, formed at the ‘encouragement’ from the Government. States assumed for themselves the responsibility to develop cooperatives.

The Governments in various countries are thinking to give greater autonomy to cooperatives and amending the erstwhile cooperative laws. In India the Government of India recently in the year 2002 had enacted the Multi-state Cooperatives Societies Act 2002 with a view to provide more autonomy in the functioning of National Level Cooperative Societies.

ROLE OF THE GOVERNMENT

In most countries, the role of the Registrar of Cooperative Societies has no longer remained of a “friend, philosopher and guide” of the Cooperative Movement, but his office is now, in most cases, being used as a ‘single’ key option to exercise control.

Government should recognise the Cooperative Movement as a distinct & major stakeholder in both national and international affairs

Governments should recognise that the Cooperative Movement is highly democratic, locally autonomous but internationally integrated, and a form of orgnisation of associations and enterprises whereby citizens themselves rely on self-help and their own responsibility to meet goals and objectives.

Governments seek to support the Cooperative Movement and to wor closely with it to develop an effective partnership to achieve their respective goals.

Government to take into account the special character of cooperatives and the Cooperative Movement, which differs significantly from that of associations and enterprises not organised according to cooperative values and principles.

Governance, and for that matter, good governance, is not the game of singles. In this case, the governments and the Cooperative Movement have to join forces to bring about positive changes in favour of the ultimate basic members.

FEDERAL STRUCTURE

In order to effectively serve its members and to also strengthen and propagate the Cooperative Movement, it is desirable that the cooperatives not only have a well-knit and widely spread structure at different levels through multi-tiered structure, the federation aspect of cooperatives has also been expressed in the 6th ICA Principle of Cooperation "Cooperation among Cooperatives". The 6th ICA Cooperative Principle states:
"Cooperative serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures."

It may, however, be ensured that these upper tiers do not grow at the cost of primaries. The upper federal tiers of cooperatives should be made to play more positive role in promoting the interests of primaries rather than acting as their competitors. The various tiers should function through ‘inter-dependence’ so that the need for each tier remains in prominence.

VALUE BASED PROFESSIONAL MANAGEMENT

It is the collective responsibility of the Board of Directors to protect the interests of the members and carry out the business of the cooperative society according to expressed needs by the members,the role of “professionals” in setting up good governance cannot be ignored.

The professionals who are associated actively in the jobs of the cooperatives should be necessarily inducted into understanding cooperative philosophy, cooperative way of functioning and, above all, respecting the democratically expressed needs of the members.

The concept of value-based management emanates out of the thinking that there should be only one unified board in a cooperative society to build a collective competency by bringing in professional managers as a united team on the Board to achieve the objects of the cooperative society.

The team of professional managers on the board, such as functional directors, allows them to comprehend the thinking of the elected leaders in totality and thus are able to serve their members without compromising their professional management capabilities.

This concept will have ample scope to allow policy formation to be driven by both member-lead philosophy and business results.

SOCIAL AUDIT

To judge the effectivity of a cooperative society to the purposes it has been formed besides the financial and management audit, the society should also conduct social audit so that it may receive a positive feedback about the reach of the services it is rendering to its members.

ROLE OF COOPERATIVES IN THE PROCESS OF ECONOMIC CRISIS RECOVERY - Dr. G.N.Saxena

GLOBAL ECONOMIC CRISIS

It started off as a sub-prime housing mortgage crisis in the United States where the Banks lent mortage loan to the people without assessing their assets value and credibility. The Banks converts those mortgage loans into Bonds & “securities” and attracted Global Investors into a trap for investments which appeared an easy and steady source of income.

Credit rating agencies erred in estimating the risk associated with mortgage - based “securities” and rating them as the safest investment product. Investment in these “toxic-assets” cascaded into a Global Banking Crisis and then later compounded into a full blown Global Economic Crisis.

CAUSE OF ECONOMIC CRISIS

§ Imperfect understanding of the implications of the mortgage based securities by the investors.

§ Failures in Regulation, Supervision, and Monitoring of the Financial Sector by the Regulating Authority (US Federal Reserve). There was a mismatch between Securities offered as Financial Innovation and the ability of the Regulators to properly scrutinize and monitor the associated risks.

§ Excessive leverage on the part of banks and the Financial Institutions. (More Debt than Equity & holding more Non Performing Assets)

§ Excessively loose and open monetary policy (Low Interest Rates on Loan).

§ Lack of transparency on the part of Banks and other Financial Institutions in sharing with the investors the market risks associated with the mortgage based securities.

§ Unsound Risk Management Practices of the Investor Companies.

§ Short term greed of the Corporates.

ECONOMIC CRISIS IN DEVELOPING COUNTRIES

Globalisation helped in forwarding the crisis to the developing countries through multiple transmitting mechanisms:

§ Trade - Volume of Exports of Goods and Services is contracting in open economies.

§ Financial Flow - No Fund lending for new project.

§ Foreign Direct Investment - Sharp fall in Foreign Investment into Emerging Markets (Developing Countries)

§ Remittances - Income transfers from workers employed abroad back to their households have decreased.

§ Less Employment Opportunities Abroad.

IMPACTS OF ECONOMIC CRISIS

§ Hundreds of thousands of businesses have collapsed or are in a state of near collapse.

Lehman Brothers, Bear Stearns, Goldman Sachs, Morgan Stanley, Merrill Lynch, AIG Insurance Company, General Motors etc.

§ The estimated market loss due to this Global Melt Down is USD 50 Trillion.

§ Global Credit Crunch.

§ Rapid increases in Unemployment, Job Losses, Salary Cuts, Poverty and Hunger.

§ Reduced Public Confidence in Financial Institutions.

§ Unprecedented Rise in Essential Commodity Prices.

§ Deceleration of Growth, or Severe Economic Contraction. Reduction in Country GDP.

§ Downslide of Stock Markets across the world.

§ Slowdown in Real Estate.

THIS ITSELF PROVES THAT SURVIVAL IS IN TOGETHERNESS.

COOPERATIVES – AMIDST ECONOMIC CRISIS

Late Mr. Ivano Barberini, President of ICA termed this economic crisis as the moral crisis of capitalism & termed Cooperatives as the antidote to Economic Recession. Even in this age of Global Economic Crisis the Cooperatives stood strong and positioned themselves as a rock of stability. No Cooperatives report to have applied for Government aid so far. Bankruptcies of Cooperatives due to the crisis have not been reported, nor have Employee Layoffs been reported.

Japanese Cooperatives are a classic example; NORINCHUKIN Bank in Japan incurred losses to the tune of US $ 8 Billion. But reposing their faith in the NORINCHUKIN Bank came forward and funded further capital in Bank. This is a unique example of Cooperative functioning where in the members own the responsibility of their decisions.

RABO Bank, originally a Federation of Credit Unions, though has recorded reduced profits is trying to aggressively reposition it in the market by using captive slogans of Cooperative advantages.

Cooperative Enterprises around the world are showing resilience to the crisis. Financial Cooperatives remain financially sound; Consumer Cooperatives are reporting increased turnover; Producer Cooperatives showing increased production and Worker Cooperatives are seeing growth.

The Global Economic Crisis poses an opportunity for Cooperatives to show their presence to the world and prove that they are the best alternative business model.

WHY COOPERATIVES SURVIVED?

Ivano Barberini – Cooperatives are borne out of the need of the members & their members take responsibility of their decisions. Cooperatives are the top survivors of Global Economic Crisis.

Cooperative Principles and Values that we practice, and our ethical practices – like Good Governance, Democracy, Transparency & Accountability saved us from the crisis. They keep the wealth generated by local businesses in the local community with meagre outside exposures. They have depth of Loan given- Loan attached with the holding. More traditional values helped Cooperatives to suffer less.

Cooperative model is a better model of business. It is
§ Not linked to Stock Markets.
§ Relies on Member funds for its operation.
§ Controlled by Local people for Local people
§ Know individual need & repayment capacity hence loans are not unfettered.
§ Hardly any exposure on mortgage-securities.
§ Not motivated by profiting and capitalistic gains.

Cooperatives work within a long-term time frame. They do benefit from long-term perspective in their investment strategies. They are modest and realistic in planning the Growth of the Business with manageable control on costs and aspirations giving them a greater power of flexibility. Cooperatives are organizations with human face and soul. They are in position to retain their workforce and continue to provide services to members at reasonable cost & affordable prices.

COOPERATIVE SECTOR IN INDIA

Indian cooperative sector has once again proved that the efficiency of cooperatives can successfully counter the recessionary trends of the economy thereby ensuring consistent livelihood to the farmer producer and offering value for money products to its consumers.

Cooperative sector in India which is largest in the world is associated with over 0.6 million cooperative societies with 250 million members. They have been playing distinct and significant role in the socio-economic development of our country. There is almost no sector left untouched by the cooperative movement and everywhere they are successful.

Cooperatives have covered 100% of villages and 67% of rural households. They have been operating in various areas of the economy such as credit, production, processing, marketing, input distribution, housing, dairying and textiles. The cooperative credit system has the largest network in the world and cooperatives have advanced more credit in the Indian agriculture sector than commercial banks. They are providing 43% of total rural credit. Over 40% of the total fertiliser distribution in the country is handled by the cooperatives and over 30% of total fertiliser production is also contributed by cooperatives and out of this 25% is contributed by IFFCO alone. Dairy cooperatives operating under the leadership of the national dairy development board has now become the largest producer of milk in the world. In the production of sugar the cooperative share of the market is over 58% and in the marketing and distribution of cotton they have share of around 60%.Cooperatives process, market & distribute 50% of edible oils. Cooperative sector in India generated around 1.20 million direct employment and self employment for 15.50 million people.

IFFCO, one of the premier cooperative society of India engaged in production & marketing of fertilisers has achieved the highest ever sales turnover of Rs. 32, 933 Crore (USD 7160 Million) as compared to Rs.12, 163 Crore (USD 2650 million) in the previous year.

During the current year, IFFCO produced the highest ever 7.2 Million Mt of fertilisers and marketed 11.3 Million Mt of fertiliser becoming the largest marketer of fertiliser in the world. Every fourth bag of Urea and every third bag of NPK sold in India is of IFFCO.

Gujarat Cooperative Milk Marketing Federation Limited (AMUL), the largest Dairy Cooperative of the country has also posted turnover of Rs. 6700 Crores (USD 1490 Million) during the current year.

EXPECTED ROLE OF COOPERATIVES

§ Cooperatives should refocus on their business and increase their capital base to cope with any such crisis in the future. They should continue their trade with increased efficiency with more focus on the risk averse poor people.

§ “Distrust is the biggest challenge for Economic Recovery”. Now the people are disenchanted with “CORPORATES”. Cooperatives can help in the restoration of people confidence.

§ Cooperatives can help in creating more employment opportunities (both locally & globally) and other income support measures.

§ Cooperatives should broadbase their income portfolios by integrating value additive features in the operations and services offered to its members and customers.

§ Continue investing & patronizing local economy and strengthen global connectivity with intra trade network of Coops.

§ Members to patronize Cooperatives & Coops to serve members better than before and create an umbrella model from Local to Global.

§ Expand business and diversify itself into related sectors.

§ Make member business more productive.

§ Cooperation among cooperatives through technical assistance, product development and fair trade.

Cooperatives should ensure that:

§ Any future financial rescue packages for crisis recovery implemented at global or national levels should also take cooperative network into accord and be unbiased against cooperatives relative to the corporate sector.

§ Future regulations or legislation that resulted from this crisis should favour, not hamper, cooperatives for building a safer & stable financial system.

§ Should be visible and showcase their achievements aggressively.

§ Should demand a rightful place in economic system, as they deserve.

“BAD COMPANIES ARE DESTROYED BY CRISIS. GOOD COMPANIES SURVIVE THEM. GREAT COMPANIES ARE IMPROVED BY THEM.” - Andy Grove (Former CEO of Intel Corporation)

“COOPRATIVES ARE GREAT ORGANIZATIONS AND THEY HAVE BETTER CHANCES OF SURVIVAL AND THUS HAVE THE POTENTIAL TO HELP THE WORLD TO COME OUT OF THIS ECONOMIC CRISIS.” - Ivano Barberini.

EXCERPTS FROM 15TH UN INTERNATIONAL DAY OF COOPERATIVES MESSAGE, JULY 04 2009

“The Cooperative Movement will need to work with policy-makers to ensure that they recognise the particular nature of cooperatives. They should not be over-regulated, and their essentially risk-averse nature should be understood. A consistent and well-articulated policy response is crucial to ensure that they are not disadvantaged by changes in the regulatory environment. Only with appropriate policies will cooperatives continue to be able to drive global recovery…. Cooperatives are demonstrating that they not only drive economic development but also economic and political democracy and social responsibility”.

SEMINAR ON COOPERATIVES A BETTER BUSINESS MODEL:EMERGING OPPORTUNITIES

International Cooperative Alliance - Asia Pacific, the highest cooperative body at Asia Pacific region in collaboration with IFFCO organized a seminar on “COOPERATIVES - A BETTER BUSINESS MODEL –EMERGING TRENDS” from October 23 -24, 2009. The Chief Guest, Mr Shil Kwan Lee, Regional Director, ICA Asia Pacific on this occasion said the cooperatives have by and large remained unaffected by the global economic crisis, which otherwise has severely affected the investor owned corporate structures. He further said that AMUL, IFFCO, NCCF, Cooperative Banks and state level cooperatives have continued to achieve high level of business turnover and profits. The cooperative business model being members owned, member controlled and service oriented in nature certainly deserved to be a preferred form of economic models in the context of moral crisis of capitalism. He informed the delegates from five countries about the decision of UN to declare year 2012 as year for cooperatives.

Dr.G.N.Saxena, The Chairman of Research Committee of the ICA Asia Pacific and Director, IFFCO urged the cooperative fraternity to give priority to cooperative research and studies in the region, so that the cooperatives could add on to their strength and become more competitive in the era of globalization. ICA Research Committee will look into the problem areas, issues and suggest feasible solutions to overcome these challenges.

Mr. JNL Srivastava, Ex Secretary, Agriculture, Govt. of India delivered his key note speech on the theme of the seminar and dwelled upon the values that cooperatives adhere to in terms of developing human capital that remains one of the biggest challenge before societies at large.

Mr.Rajiv I.D. Mehta, Dy. Regional Director, ICA, Asia Pacific presented the recommendations of eight Ministers’ Conferences on Cooperative Policy & Legislation and laid emphasis on the need of an enabling policy environment to make cooperative legislation more effective, clear, simple and crisp.

The deliberations at the seminar resulted in following strategic aspects:

• Cooperatives need to showcase their strength by sharing success stories of successful cooperatives to gain confidence of the stakeholders and policy makers.
• ICA and National Cooperative Federations should institute an Award for the best ten research papers on cooperatives in different sectors.
• Community Media to be more pronounced and directional.
• Cooperatives need to communicate more effectively with the primary members by using latest communication modes like SMS, voice messages for illiterate and visually impaired.
• The students in school and colleges must be given hands on experience on cooperatives as it would help build the social capital of the country.
• The meeting of the Research Committee should be held every year to learn from the research studies.