Kevin C. Chua, Ph.D. Center for Economic Research, Shandong University kchua@sdu

1. Cooperatives: engaging the community to address the challenges brought by the middle income statusjourney to and from the middle income status – the challenges for public sector managersApril 24, 2014 | shanghai, P. R. of China Kevin C. Chua, Ph.D. Center for Economic Research, Shandong University kchua@sdu.edu.cn

2. Presentation Outline • The cooperative option to development • Partners in promoting inclusive growth • Delivering public goods and services in areas the government and private sector cannot adequately provide • Linking the informal to the formal economy • Supporting an enabling environment for the growth of the cooperative sector

3. The Cooperative Option to Development • Facts and Figures on Cooperatives • Cooperatives are autonomous associations of persons united voluntarily to meet their common economic, social and cultural needs and aspirations, through a jointly owned and democratically controlled enterprise. • A billion members in 96 countries • More than 100 million people employed (20% more than multi-national enterprises) • Livelihood of nearly 3 billion people made more secure

4. Significant memberships in the Asia-Pacific region • India: 242 million • China:160 million • Indonesia: 80 million • Philippines: 12.6 million • Viet Nam: 7.5 million • Malaysia: 6.7 million • Singapore: 1.4 million. • In Japan and Korea, more than 90 percent of farmers are co-operators.

6. Prof. ElinorOstrom on Collective Action • Design principles for successful cooperatives: • Presence of clear boundary rules • Use of governing rules to match local needs and conditions • Member participation in making and modifying the rules • Development of an internal monitoring system • Use of graduated sanctions to punish offenders • Accessible means for dispute resolution • Minimal recognition of the right to organize by a national or local government • For large organization, the presence of governance activities organized in multiple layers of nested enterprises

7. There is a role for governments. • But too much interference do more harm than good. • Users of common-pool resources manage local resources more sustainably with own basic rules than with externally imposed rules. • Imposing a single set of rules on all governance units in a region is a threat to sustained collective action

8. Partners in Promoting Inclusive Growth • Delivering public goods and services in areas where the government and the private sector do not adequately provide. • Success stories: • Rural Electrification of the United States in the 1930s • Denmark’s recent emergence as a leader in renewal energy • White Revolution in India starting in the 1970s • The Amul Model

9. The Amul Model or the Anand Pattern of Dairy Development Source: GCMMF website

10. Cooperatives make good development partners: • Community engagement and community-based local solutions • Long term investment view in the community • Network of cooperation in the national, regional and village levels

11. People-centered, not profit-centered, enterprises • Example: Spain’s workers cooperatives network, Mondragon • Consumer cooperatives in Sri Lanka, Indonesia, Thailand and Malaysia supplied rural areas even with not very profitable operations. • Help fill some of the gaps in public sector management • Implementation and monitoring of national development plan • Established cooperative network in many countries in the Asia-Pacific region • Feedbacks on the ground to serve as input to the evaluation of national development plan

12. Linking the informal to the formal economy • Members access formal financial services through savings and credit cooperatives (SACCOs) and credit unions (CUs). • Roughly 45% of the branches of financial cooperatives are located in rural areas (only 26% with commercial banks). • Worldwide, 53,000 credit cooperatives serve over 857 million people; of which, 78 million are making less than US$2 a day. • Example: SaranaBinaInsani (SBI) Credit Union in Jakarta

13. Agricultural cooperatives integrate farmers in the supply chain and provide ready market. • About 50 percent of global agricultural output is marketed through cooperatives. • Farmers are introduced to fair trade initiatives. • Federations enter into formal credit arrangements on behalf of members. • Example: Da Zhang Shan Organic Farmers Association (大鄣山有机茶农协会)in China’s Jiangxi province

14. Choice avenue to pass new knowledge or technologies from research institutions and universities to local farmers Explaining how tensiometers work during a meeting with a local Cooperative Society of farmers in India. Photo courtesy of the Earth Institute, Columbia University

15. Supporting an Enabling Environment for Cooperative Growth • Nature of cooperative give rise to unique challenges. • Difficulty increasing capital base • Unsustained membership interests • Ownership too diverse • Lack of professional management • Other challenges • Poor leadership, lack of clear vision and goal • Corruption • Capital shortage and barriers to credit • Intense market competition • State interference or the absence of cooperative laws

16. Some general points that the government can consider in supporting the sector: • Balance between self-organization and regulation • Consistency across laws and policies • Public education and leadership development • Capacity development and support services • Financial support for fixed capital and asset-building purposes

17. Thank you for listening!