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Critical Study on Cooperative Legislation and Policy Reforms

This study appraises the implementation of recommendations from the 6th Ministerial Conference and examines the impact of reforms on cooperatives. The report is based on field visits and input from cooperatives and governments. It highlights the challenges and limitations faced in implementing legislation and policies. The study also emphasizes the need for a coordinated approach for cooperative development and involvement of international organizations in advocating for cooperatives.

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Critical Study on Cooperative Legislation and Policy Reforms

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  1. 3rd CRITICAL STUDY ON COOPERATIVE LEGISLATION AND POLICY REFORMS By P.V.Prabhu Sponsored by: International Cooperative Alliance – Regional Office for Asia and the Pacific (ICA-ROAP), New Delhi, INDIA

  2. INTRODUCTION OBJECTIVES: • Appraisal of action by ICA members/ Govts. in implementing/Adopting recommendations of 6th Ministerial Conference. • Impact of Reforms process on Cooperatives. • Actual results thereof.

  3. STUDY METHODOLOGY REPORT BASED ON: • Field visits in Kuwait, Malaysia, Bangladesh, Japan and China • Inputs / information secured during discussions • Response to the structured Questionnaire from cooperatives and governments in the region.

  4. LIMITATIONS CONSTRAINTS: • Time : Brief visits covering only major sectors. • Non-availability of complete picture on Legislation / Policy • Absence of National Apex of Cooperatives • Different Ministries / Departments responsible for sectoral cooperatives.

  5. ENVIRONMENT - ECONOMY CHANGES SINCE LAST STUDY • Stabilisation of economy affected by East-Asian Crisis. • Effect of Terrorist Attacks in USA (2001) on global economy. • Impact of SARS scare - on economy in certain sectors. • Recession in developed countries and its global impact on economy • Signs of revival of economy from recession.

  6. ENVIRONMENT - POLICY ADVOCACY APART FROM ICA-ROAP ADVOCACY ILO RESOLUTION 193(2002) which comprises of: • Legislative Reforms • Policy Reforms • Govt. support Services • Operations – Business Aspects • Management – HRD • International Cooperation.

  7. MULTIPLICITY OF REGULATORY AUTHORITIES (Govt.) • Govt. structure responsible for cooperatives differs from country to country. • Different Ministries/Depts. responsible for different sectoral cooperatives. • Sector Specific Policies of Govt. Continued…

  8. MULTIPLICITY OF REGULATORY AUTHORITIES (Govt.) – contd… • No Single Ministry responsible for Cooperatives at the Central level. Conducive Law and favourable policy to be viewed from above diversity. Need for a national coordinated approach for Cooperative Development at Govt. level for avoidance of duality or multiplicity of control.

  9. INSTITUTIONALISING INFORMAL COORDINATING MECHANISM(COOP.) • Absence of national apex of cooperatives • Sectoral federations/unions at apex level. Resulting in • Weakening the cooperative advocacy • Absence of spokesmanship at the national level • Multiplicity in representing at international level. • Need to institutionalise informal coordinating mechanism at the national level to fill the gap.

  10. DISPARITY IN REFORMS PROCESS • Cooperatives under the purview of state / provisional Govts. • Differences in legislations / policies. • Disparity in autonomy and growth of cooperatives. • Ineffectiveness of Central Policy on Cooperatives – Policy not mandatory. Need for pro-active role of National Govt. for coop. advocacy and balanced growth of cooperatives in the country.

  11. INVOLVEMENT OF INTERNATIONAL ORGANISATIONS Resolution of 6th Ministerial Conference for information and advocacy dialogue with multilateral international organisations. • Absence of favourable policy on cooperatives with the exception of UN and specialised organisations like ILO and FAO. • International agencies work generally with Govt. and Governmental organisations. • Absence of policy for involvement of cooperatives in programmes of socio-economic development (World Bank, IMF, ADB, etc.) despite inherent strength & vitality.

  12. INVOLVEMENT OF INTERNATIONAL ORGANISATIONS (Cont’d) SUGGESTIONS: • ICA to involve other international cooperative organisations like IRU/WOCCU and also UN specialised agencies (ILO/FAO) • Framing a draft approach for such a dialogue: • Areas for involvement of cooperatives. • Objectives of dialogue • Results to be achieved, etc.

  13. STATUS OF IMPLEMENTATION(6th CONFERENCE) • Legislative Reforms • Policy Reforms • Country-wise review reported separately in the Report. Generally reforms process has been rather slow & most Govts. have yet to initiate action. • Overall reforms in the economy at the exclusion of cooperatives • Cooperatives lost the competitive edge in their business functions due to – • Delays in reforms • Continued regulated and controlled regime • Political interest due to democratic system of cooperative management.

  14. WEAKNESSES OF COOPERATIVES Arising out of : • Indifferent attitude of Govt. towards coops as compared to private sector • Constrained level-playing field • Over-dependence on govt. for support • Lack of initiative to empower the cooperatives by the Govt.

  15. LEGISLATIVE REFORM INITIATES • Enabling legislation continues to be contentious issue in developing countries. • Cooperatives established on govt. initiatives and with govt. support. • Implementation of govt-sponsored socio-economic programmes. • Govt. exercised control and interfered with management functions. A change is seen in some countries with reforms in legislation. • Less of control and more autonomy to coops. • Withdrawal of govt. support and assistance.

  16. TRAINING / EDUCATION - FUNDING • Funds mostly contributed by cooperatives from profits. • Limited support (financial) of Govt. • Funds administered by govt. for training and coop. development. • Inadequate involvement of coop. in management of fund. SUGGESTIONS: Need to transfer Fund Management to Coops (Apex Fed./Union) OR Active involvement of cooperatives in administering the Fund for judicious utilisation.

  17. SCOPE FOR FURTHER REFORMS IN LEGISLATION • For autonomy, independence, self-management & self-reliance. • To be free from govt. clutches There is a constant & growing need to revise / update reforms periodically

  18. STATUS OF LEGISLATIVE REFORMS CHINA • Process is on at provincial level for coop. law. BANGLADESH • Existing legislation has several restrictive provisions, despite being liberal, needs changes for coop. autonomy. MALAYSIA • Law is liberal and favourable. • Reforms need be carried out in consultation with coops. JAPAN • Frequent changes in sectoral laws • Reforms found necessary in law and regulations governing consumer coops. KUWAIT • Law is liberal for growth of consumer coops. • Other cooperatives have no presence. • Changes in legislation initiated by coops.

  19. POLICY REFORMS INITIATIVES • Policy environment for cooperative development is changing but slowly. • Favourable impact of ICA advocacy initiatives. • Govts. realise the importance of coops. in a liberalised economy – for socio-economic development. • Liberalisation, Privatisation & Globalisation (LPG) of Economy and WTO agreements have impacted cooperatives adversely. • All sections of people have not benefited from the liberalised policies. • Disparity in income level has grown • Cooperatives therefore are found more relevant for organising economic activities to gain from collective endeavour. • This has lead Govts. to change policies in the context of impact of overall economic reforms.

  20. PREVAILING POLICIES GOVTS. ARE NOT DEVOID OF POLICIES FOR COOPERATIVES. • In China Govt. policy for Agriculture / Farmers encompasses policy for Supply / Marketing Coops. • In Japansectoral policies and sectoral laws promote development of cooperatives. • In Malaysia, a Comprehensive Policy approved for Cooperatives is to be adopted soon. • In BangladeshGovt. claims to have drawn a policy but cooperatives are not aware. Dairy cooperatives are being developed because of Govt. policy to support this sector. • In KuwaitGovt. policy for consumer cooperatives is responsible for development of this sector. These Policies however fall short of a Comprehensive National Policy on Cooperative Development. Hence needs to be pursued.

  21. DYNAMICS OF REFORMS PROCESS REFORMS PROCESS ON COOP. DEVELOPMENT IS CLOSELY LINKED WITH OVERALL REFORMS PROCESS IN THE ECONOMY AND POLICY CHANGES OF GOVTS. • The process of change has got to be dynamic • So also the legislative and policy reforms for coops. • These cannot be static • Hence need for changes consistent with on-going economic reforms. • Periodical assessment and relook necessary for changes in legislation and policy.

  22. DISPARITY IN COOPERATIVE DEVELOPMENT STUDIES SHOW WIDE DISPARITY IN COOPERATIVE DEVELOPMENT • Regional disparity within a country • Disparity in sectoral growth • In China reliance on cooperatives for growth of Agriculture & Rural economy - other sectors are neglected • In contrast, agriculture is not important in Kuwait, but food security and distribution through cooperatives is the priority. • In Japan, cooperatives have a balanced growth and more so in Agriculture and Consumer Trade.

  23. DISPARITY IN COOPERATIVE DEVELOPMENT (Cont’d…) • In Bangladesh, agriculture is important and hence farmers cooperatives and dairy cooperatives are encouraged & supported by Govt. • In Malaysia, it is banking and credit cooperatives in agricultural sector which are strong. • Sectoral growth is country-specific and directly related Govt. policy • Resultis lop-sided development of cooperatives. A balanced policy be pursued for overall development of coops in all major sectors. • ICA-ROAP can play a facilitating role for sharing experience of successful sector – specific growth models of Asia-Pacific Region.

  24. SUPPORTIVE MEASURES • Govts. are slowly withdrawing from promoting and supporting cooperatives • Govt. sponsored cooperatives with equity and subsidies have suffered when support services are withdrawn • Govt. expects cooperatives to develop on their own strength like other private sector enterprises. Dis-engagement of Govt. from cooperatives would mean autonomy and independence so essential to make cooperatives member-driven.

  25. SUPPORTIVE MEASURES (Cont’d…) Govt. supports cooperatives in all countries in one form or the other besides legislation and policy –particularly in areas of - • Training and Education • Infrastructure Development • Support to members of Cooperatives - particularly farmers • Taxation, stamp duty, Registration fees, etc. Govts. should continue to support in the above major areas because cooperatives are essential partners in the socio-economic development of the country.

  26. MAJOR AREAS OF CONCERN For realising the objective of Cooperative Development on a sustainable basis, major areas of concern identified are: • Slackness in implementation of policy in the absence of effective mechanism for review and monitoring at the level of government. • Absence of professional management in cooperatives. • Ineffective man-power planning and development strategy and inadequacy of training infrastructure. • Absence of business planning and development. • Implementation of government sponsored programmes at the cost of autonomy and viability.

  27. MAJOR AREAS OF CONCERN(Cont’d…) • Government exercising control and interfering in the management even when support is intended for members benefit. • Disadvantages arising from non-adherence of principle of ‘COOPERATION among COOPERATIVES’ and due to poor networking between cooperatives at different tiers of structure. • Inadequacy of funds and problems of capitalisation. • Absence of action plan and strategy for revitalization/ restructuring of weak/ sick cooperatives which are potentially viable.

  28. MAJOR AREAS OF CONCERN(Cont’d…) • Adverse impact of duality/ multiplicity of government control. • Absence of institution protection mechanism/ arrangements for strategic repositioning/ restructuring as also for protection against risks and uncertainties. • Slow process of technology application and upgradation so essential for building up competitive strength and operational efficiency. Tackling the problems and areas of weakness through joint endeavor of the coops. & Govts. • Certain legislative changes & Policy reforms also necessary.

  29. RECOMMENDATIONS & SUGGESTIONS Recommendations / suggestions based on analysis for consideration of – • Cooperatives • Governments • ICA-ROAP • To pursue ICA-ROAP advocacy for legislative and policy reforms in a time bound manner facilitated by ILO Resolution – 193. • To overcome the problem of multiplicity of regulatory authorities, need to evolve a national coordinated approach at Govt. level with clear demarcation of regulatory functions.

  30. RECOMMENDATIONS & SUGGESTIONS (Cont’d..) • Institutionalise informal coordinating mechanism at Apex level for Coop. advocacy, leadership, spokesmanship and promotional / developmental role at national / international level. • National Govts. should play a pro-active role for coop. advocacy and balanced growth of coops. in countries where coops. come under control of provincial / state govts. • Legislative and policy reforms should be a continues process even where reforms have taken place.

  31. RECOMMENDATIONS & SUGGESTIONS (Cont’d..) • Strategies for developing new generation coops. and coops. in other sectors of the economy. Sector-specific growth models of countries worth emulating facilitated by ICA-ROAP. • Disengagement of Govt. from cooperatives for coop. autonomy – not discontinuance of support to coops. in matters of training, education, infrastructure & taxation. • Govt. to ensure harmony in evolving enabling legislation and policy reforms and avoid contradictions and inconsistencies.

  32. RECOMMENDATIONS & SUGGESTIONS (Cont’d..) • Cooperative Education / Development Fund created from contributions of cooperatives should be managed by cooperatives, preferably by National Apex Coop. Fed. / Union. • ICA-ROAP to address to the problem of capitalisation in coops. – a major concern to several coops – Needs innovation. • Prompt attention for solving / resolving problems / areas of concern identified. Some problems have bearing on legislation and Govt. policies. • In advocacy, ICA-ROAP to emphasise on need to evolve appropriate follow-up measures and more effective implementation of policies by Govt.

  33. RECOMMENDATIONS & SUGGESTIONS (Cont’d..) • ICA should hasten process of information and policy dialogue with multilateral international organisations in coordination with other international coop. organisations. Also to evolve an appropriate approach for dialogue on the lines suggested in the Report. • ICA-ROAP to review policy and work-programme on: • Periodicity of regional consultations and ministerial conferences. • Follow-up measures and dialogue at country level during the intervening period.

  34. RECOMMENDATIONS & SUGGESTIONS (Cont’d..) • Enabling legislation and policy reforms alone will not result in development of cooperatives Other factors like professional management, efficiency of services and competitive strength should equally receive attention by coops. and the Govt. through joint endeavour. Need to re-focus attention on these aspects for realising the objective of overall development of cooperatives, besides pursuing legislative and policy reforms.

  35. RESOLUTIONS OF 6TH COOPERATIVE MINISTERS’ CONFERENCE Status on implementation of Resolutions of 6th Ministerial Conference is given in the Report. • There were in all 5 Resolutions. Inability to present the position of implementation status due to time constraint.

  36. Sincere thanks to • ICA-ROAP • for the opportunity given • THANK YOU ALL VERY MUCH • FOR PATIENT HEARING • P.V.PRABHU

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