Developing collective economy and cooperatives: an inevitable need for Viet Nam

Former Deputy Editor-in-Chief of Communist Review - UNDP Viet Nam
Thursday, November 24, 2022 08:10

Communist Review - After over 20 years of implementing Resolution No. 13-NQ/TW, approved on March 18, 2002, of the 9th Party Central Committee “On continuing to innovate, develop and increase the efficiency of the collective economy”, the collective economic sector and cooperatives of Viet Nam have changed rapidly. The Party and State have always maintained that the development of the collective economy and cooperatives is an objective, strategic, and long-term inevitability. This is also the need, opportunity and challenge on the development path of the collective economy and cooperatives in Viet Nam.

Politburo Member, Prime Minister Pham Minh Chinh visiting the agricultural production area in Hat Lot commune, Mai Son district, Son La province _Photo: VNA

The collective economy, to which cooperatives are central, involves economic establishments in which members contribute capital, assets, means of production voluntarily; conduct production and business jointly; perform management collectively according to the principles of democracy and equality; ensure distribution in alignment with contributed capital, labor or engagement service levels; when the participants terminates their membership voluntarily, the collective economic establishments will return the contributed capital, properties and means of production.

The collective economy exists in various forms, with the most common being cooperative groups, cooperatives, federations of cooperatives...; in which cooperatives are considered as the core type of the collective economy. This is a fairly common type of collective economy, operating in various fields of social life and present in economies with different growth levels around the world. It holds profoundly social and humane values. Not only considering economic benefits as the main goal, but collective economy also attaches immense importance to the social interests of its members; appreciate mutually complementary and supportive cooperation among members; contributing to hunger eradication and poverty alleviation, enriching its members and developing the community.

The collective economy and cooperatives have always been the issues the Party and State of Viet Nam express major concern about in the process of national construction and development. The collective economy and cooperatives, with the pivot being cooperatives and agricultural cooperative groups, associated with the material production industry, feeds the country and generates significant export turnover. With nearly 63 million people, accounting for 65.4% of the total population in rural areas and 40% of the labor force in the agricultural sector, farmers are the core members of the collective economy and cooperatives, playing an important role in economic growth, maintaining political stability, security – national defense and new rural construction and sustainable poverty reduction.

After the 20-year implementation of Resolution No. 13-NQ/TW, dated March 18, 2002, of the 5th Plenum of the 9th Party Central Committee, “on continuously innovating, developing and raising the efficiency of the collective economic” and the 2-year implementation of Conclusion No. 70-KL/TW, dated March 9, 2020, of the 12th Politburo, “On continuing to carry out the Resolution of the 5th Plenum of the 9th Party Central Committee on progressively reforming, developing and boosting the efficiency of the collective economy”, it can be concluded that there must be urgent, fundamental, and comprehensive measures to bolster the collective economy and cooperatives in the process of national industrialization and modernization.

Practice and experience in Viet Nam as well as in the world confirm that the collective economy and cooperatives have remained an effective operation model which is appropriate in increasingly fierce competition conditions. More importantly, through cooperatives, farmer households and small businesses can cooperate with each other, helping build up their strength to deal with difficulties in their pursuit of prosperity and happiness on the global scale.

In Viet Nam, the collective economy featuring numerous diverse forms of cooperation, with the nucleus being cooperatives, based on members’ and collective ownership, linking workers, household producers, small and medium-sized enterprises of all economic sectors, continuously takes a significant role in the process of creating and building a socialist-oriented market economy and carrying out industrialization, modernization.

Therefore, the collective economy, to which cooperatives are pivotal, is an indispensable economic component in the socialist-oriented market economy in Viet Nam.

1- Reality and urgent issues in the development of the collective economy and cooperatives in Viet Nam

According to the data from the Viet Nam Cooperative Alliance, in the 2016-2020 period, the collective economy and cooperatives continued to grow in both quantity and quality. 10,749 new cooperatives were established nationwide, averaging 2,150 cooperatives per year (increasing by 2.6 times compared to the 2011-2015 period), of which 7,632 were agricultural cooperatives, accounting for 71 %, and 3,117 non-agricultural ones, taking up 29%; 81 new cooperative federations and 15,849 cooperative groups were founded, which were comprised of 9,984 agricultural cooperative groups and 5,865 non-agricultural cooperative ones. At the end of 2020, the entire country had 26,040 cooperatives (growing by 5,625 ones in comparison with 2015, rising by 3.6% per year on average), which included, in terms of fields of operation, 16,953 agricultural cooperatives, 1,188 people’s credit funds, 2,079 commercial and service cooperatives, 1,496 transport ones, 2,474 industrial and handicraft ones, 1,026 construction ones, 521 environmental ones, 303 other ones. Remarkably, the whole country had 1,700 cooperatives applying high technology in production, 3,219 production cooperatives associated with the value chain, increasing by 6.8 times compared to 2015. The number of medium-sized and large cooperatives and cooperative federations kept going up; By the end of 2020, there were over 500 cooperatives and federations of cooperatives with more than 300 members and a total capital of at least 5 billion VND (4 times higher than that in the 2011-2015 period). Overall, the number of cooperatives that applied high technology to production and business, linked to the value chain of national, regional, and local key products, was on the increase; Production linkages among cooperatives, cooperative groups and enterprises were constantly expanded and developed.

The implementation of the Law on Cooperatives in 2012 exerted a great impact on the collective economic development. Accordingly, since the law was enacted, the regulations on administrative procedures have been gradually improved. Cooperatives have enhanced the quality of members, attracted a large number of households and individuals to join cooperatives step by step. Currently, the turnover of cooperatives is estimated to reach 74,669 billion VND (growing by 16,173 billion VND compared to 2013), each cooperative averaging around 8 billion VND.

Overall, developing the collective economy and cooperatives is the general trend of commodity production. This is an economic sector with a great role and comprehensive significance in terms of economy, politics, culture and society of the nation. The collective economy and cooperatives are an integral part of our economy, and assume a vital role in and contributes greatly to the national socio-economic development. Especially, since the first cooperative law was promulgated (March 1996) and officially took effect on January 1, 1997, followed by the ones in 2003 and 2012, a more favorable legal corridor for the development of the collective and cooperative economic sector has been created.  

Cooperatives have been gradually converted, re-registered at the competent state agencies and adapted well to the fluctuations of the market mechanism; production relations and productive forces in cooperatives are strengthened; the autonomy of cooperatives is promoted, members join cooperatives voluntarily, plenty of cooperatives have formulated appropriate operation plans, mobilized the participation as well as contributions of members. A new model of cooperatives, which stimulates production and business and are associated with the value chain, has been formed, contributing to ensuring social security, stabilizing the grassroots politics and fostering the national socio-economic development positively.

The collective economic sector and cooperatives have gradually grown out of their protracted weakness and have made positive progress in both quantity and quality; multiple types of cooperatives and effective collective economic models have emerged. Partnership models have been built and developed in order to promote members’ knowledge, experience and resources to boost community strength, adapt to the market competition conditions, and overcome the limitations of individual and smallholder production.

This sector has contributed to economic growth, stabilizing prices and curbing inflation, increasing export turnovers, and restructuring the economy, especially the agricultural and rural one; creating jobs, eliminating hunger, reducing poverty, ensuring social security, strengthening the political system at the grassroots level; building new countryside, alleviating poverty sustainably, especially in ethnic minority and mountainous areas; stimulating sustainable economic growth; thereby, affirming the position and role of the collective economic sector and cooperatives in the national economy, raising the awareness of the society and the political system about new-type cooperatives.

At the same time, this model, together with the state economy, is gradually becoming the driving force for sustainable socio-economic growth as well as the foundation of the national economy; contributing directly about 4.8%, indirectly over 30% of GDP of the country on the basis of added value of the household economy; attracting more than 3 million workers, creating more than 40,000 new jobs every year. Production and business are linked with the value chain and the application of high technology, meeting hygiene standards and food safety, signing long-term product consumption contracts, raising members’ income by 36%; accumulated about 18,600 billion dong worth of profits for reinvestment and production expansion; is an important “nucleus” contributing to sustainable socio-economic progress, building new rural areas, creating jobs, eradicating hunger and reducing poverty, and ensuring social security.

The cooperative alliance system has been performing increasingly significant roles in connecting, guiding, representing cooperatives and their members as well as protecting their legitimate rights and interests, acting as a bridge to put forward guidelines, policies and legal frameworks to the Party and the State to spur the development of the collective economy and cooperatives.

However, the collective economy and cooperatives have revealed a number of limitations, shortcomings and challenges for development:

Although the number of cooperatives increases, the figure for members tends to decrease; the connection of interests between members and cooperatives is rather tenuous, and lacks sustainability... The linkage and cooperation among collective economic establishments, cooperatives and other economic models remain feeble. The cooperative development is not uniform across regions, between agricultural and non-agricultural sectors. Several cooperatives have not complied with the provisions of the law, shown signs of formality, and drifted away from the essence of principles and values. Most collective economic organizations and cooperatives are small-scale, competitively weak, and poor at mobilizing resources from the market to invest in production and business. The internal capacity, including the financial one of cooperatives, is still limited. Cooperatives rely mainly on their own capital, and are not able to access loans from credit institutions.

The growth rate remains low compared to other economic sectors, the contribution rate to GDP does not satisfy the expectations.

The state management of the collective economy and cooperatives is still defective; the coordination among state management agencies, socio-political organizations, mass associations in the development of collective economy and cooperatives is still not close and effective.

Members’ trust in the operation and development of cooperatives is rather fragile. Cooperatives often face challenges in finding markets for products. There are many weaknesses in business administration as well as difficulties in accessing sources of financial support. The majority of cooperative management members are old, rendering them almost unable to keep pace with information technology in the context of the accelerating development of the Fourth Industrial Revolution. In addition, the management skills of the management boards of Viet Nam’s cooperatives are rather poor.

The enforcement of the Law on Cooperatives in 2012 has disclosed quite a few problems that need resolving. For example, the Law regulates the organizational structure of the cooperatives, in which management board members can also act as directors; members may not transact with cooperatives and each member contributes less than 20% of the legal capital. Business cooperatives belong to a collective (level-1 model). It can be said that this has narrowed the scope of operation, limited the advantages of members when they want to join many cooperatives, and cooperatives have been restricted within their individual and independent operational scope, leaving them few opportunities to expand linkages and operations in accordance with their functions and tasks.

2- Further developing the collective economy and cooperatives in Viet Nam in the upcoming period.

The development of the collective economy and cooperatives is the general trend of commodity production, an objective requirement in the reality of social life. Pursuant to the Resolution of the 5th Plenum of the 9th Party Central Committee and the conclusions of the Politburo, and the Law on Cooperatives has specified that the state economy, coupled with the collective one, has become a solid foundation of the national economy. The 10-year socio-economic development strategy for the 2021 – 2030 period ratified at the 13th National Party Congress has stipulated: “Innovating, enhancing the operational efficiency of collective economic establishments, cooperatives, associated with promoting the role of mastery, raising the interests of members, increasing the capacity to mobilize resources”.

The new context is creating numerous opportunities, and at the same time, posing a fairly large number of challenges in the development of the collective economic sector and cooperatives. In order to accomplish the goals set out in the Strategy for collective and cooperative economic development in the 2021 - 2030 period, in the coming time, the following groups of measures must be taken:

Firstly, the vision

Having identified the collective economy, the core of which are cooperatives, as one of the critical economic components in the socialist-oriented market economy in our country, the Prime Minister has approved the Strategy for collective and cooperative economic development for the period 2021 - 2030. This is considered the first development strategy of the collective economic sector and cooperatives, in which the goal is to develop the dynamic, efficient and sustainable collective economy, which is really an essential part of the economy, with various models of linkages  and cooperation on the basis of respecting the nature, values ​​and principles of the collective economy, aiming to attract farmers, individual economic households, individuals and a host of organizations to participate in the collective economy and cooperatives; to constantly raise the income and quality of life of their members, contributing to the realization of social progress and justice, and promoting rapid and sustainable national growth; to develop the collective economy speedily and sustainably, ensuring the principles of voluntariness that is derived from the needs and interests of people and organizations involved with various forms of linkages and cooperation, maximizing regional advantages; to develop the collective economy in harmony with the cultural and social background, in parallel with environmental protection and adaptation to climate change; in line with the conditions, characteristics and socio-economic development objectives of each locality and the whole country.

The general orientation of the Strategy is to encourage collective economic growth across sectors, occupations, fields, regions of the country, prioritise building cooperative models associated with the value chain, with national, local, and OCOP main products, as well as increase the number of members. Cooperatives focus on developing and providing services to serve their members, forming the value chain from production to processing and consumption, ensuring the legitimate interests of members. By 2030, the whole country will have established about 140 thousand cooperative groups, with 2 million members, 45 thousand cooperatives with 8 million members, 340 federations of cooperatives with 1,700 member cooperatives.

To achieve that goal, it is necessary to review, research and perfect mechanisms and policies on the development of the collective economy and cooperatives in order for swift and sustainable collective economic growth, ensuring the principle of voluntariness emerging from the needs and interests of people and member establishments with various forms of affiliation and cooperation, making the most of the advantages of regions, to scrutinize and finalize legal documents, promptly disentangle bottlenecks, creating auspicious conditions for the collective economy and cooperatives to grow sustainably in conformity to the actual situation of Viet Nam in each period, to formulate policies to stimulate the development of cooperative models in mountainous provinces where ethnic minorities dwell, to research and propose solutions to improving blemished regulations in the 2012 Law on Cooperatives in the direction of simplifying administrative procedures as regards the establishment, registration and dissolution of cooperatives...

In the immediate future, between 2020 and 2025, 300 - 500 cooperative models will be annually established, applying high technology and associating production with the national, regional and local leading products and the value chain; the rate of cooperatives operating effectively in the agricultural sector will reach 70%, and in the non-agricultural field 80%; the proportion of contribution of localities to the GRDP and the GDP of the entire country will be more than 5%;... By the end of 2025, 10,000 new collective economic organizations will have been founded, including cooperatives and federations of cooperatives, cooperative groups; attracting around 8 million members joining collective economic organizations, in which 3,000 models of collective economic organizations will have been set up, utilizing high technology, with products attached to the value chain and steady progress.

Secondly, investment and development resources.

It is essential to effectively allocate state budgets for the Cooperative Development Support Fund; to research and renew the model of the Cooperative Development Support Fund of the Viet Nam Cooperative Alliance to enhance the ability to mobilize resources from the market. Localities consider additional funding for the local Cooperative Development Support Fund, assisting cooperatives in borrowing capital for production and business expansion as prescribed; to mobilize all resources for cooperative development, give precedence over allocating resources to support, motivate and create conditions for cooperatives to participate in production linkages along the value chain and embrace high technology in production; tighten affiliation between enterprises and cooperatives under contracts.

Prioritizing investment in post-harvest processing and preservation of agricultural products to enhance the product quality. Building several breakthroughs, pilot models to replicate. Bolstering support for constructing models of cooperatives and cooperative groups forming links in the production, processing and consumption of agricultural, forestry and fishery products along the value chain and adopting high technology in centralized commodity production areas and communes with key OCOP products possessing competitive edges. Production cooperation and linkages along the value chain in the agricultural sector and the application of high technology in production are a crucial solution put forward in the project on restructuring the agricultural sector towards increased added value and sustainable growth. The cooperative economic model and cooperatives are deservedly an appropriate choice for households and individuals to carry out production linkages, associated with product consumption along the value chain, added value and sustainable growth.

Thirdly, systematic organization and operating mechanisms.

Innovating production and business methods, improving the competitiveness and operational efficiency of the collective economy and cooperatives. Promoting the role of autonomy, self-responsibility, protecting the interests of members in cooperatives; exhorting cooperatives to attract new members; paying attention to developing both agricultural and non-agricultural cooperatives; removing hindrances in order to increase the capability of cooperatives for mobilizing and accessing resources. Continuously focusing on executing tasks well and imposing effective measures to develop agricultural cooperatives in compliance with the renovation and development plan concerning forms of agricultural cooperative economic organizations. Facilitating the establishment of new agricultural cooperatives, paying heed to developing cooperatives for production and consumption of local chief products to form production and consumption linkages. Accelerating the growth of high-tech agricultural cooperatives. Continuously diversifying types and forms of cooperation in industries, fields, economic sectors and regions, especially the agricultural sector, farmers and rural areas, in line with the conditions of each locale. At the same time, creating effective mechanisms to step up production associated with the value chain; consolidating and reorganizing the operations of existing cooperatives, federations of cooperatives and cooperative groups; closely coordinating with state management agencies in disbanding irreversibly defunct and ailing cooperatives for a long time. Promoting the expansion of the scale, the number of members, proportion of capital contribution of members, undivided joint assets.

Bringing into play the role of autonomy, self-responsibility, protecting the interests of members in cooperatives; attaching immense importance to developing both agricultural and non-agricultural cooperatives; eliminating barriers and regulations to improve the ability of cooperatives to mobilize and access resources. Making it possible for cooperatives to participate in the implementation of socio-economic development programs and projects in their localities. Building cooperative models and reviewing efficient ones, linking production and consumption of products to the value chain and the OCOP program, as well as the ones at the provincial, regional, regional and national level according to goods industry.

Constructing and reassessing models of cooperatives operating effectively, connecting production and consumption of products to the value chain in order to protect the environment, generate jobs and improve the lives and incomes of members. Encouraging collective economic organizations and cooperatives to proactively participate in the Fourth Industrial Revolution, implementing step-by-step digital transformation to meet market requirements; focusing on raising the quality of services and products to create a reputable trademark in the market... In particular, developing the collective economy in accordance with objective laws, hinging mainly on science - technology, innovation and digital transformation, development trends and the Fourth Industrial Revolution. Strengthening affiliation between cooperatives, establishing associations and federations of cooperatives. Developing the collective economy that links production and business with the product value chain, making practical contributions to economic, cultural and social growth, environmental protection, and building friendly and civilized communities, especially in rural areas.

Fourthly, human resource development and management.

It is necessary to clearly identify the development of the collective economy and cooperatives as the content of agricultural restructuring and new rural construction. Cooperatives are the cooperation among farming households to develop the collective economy. They do not negate the role of household economy, yet expedite its growth, which is embedded in the content of agricultural restructuring and new rural construction. Accordingly, strengthening cooperative administrative capacity towards publicity and transparency through preferential and supportive state policies; increasing the managerial, economic, commercial, and technological competence of members and participants in the collective economy and cooperatives.

Simultaneously, strengthening professional training and fostering knowledge for cadres, staff and workers in cooperatives, especially cooperative management personnel on the premise of innovating operation methods. Coordinating and cooperating in training with schools affiliated to the Vietnam Cooperative Alliance to train and nurture cooperative managers and provide vocational training for members in congruence with the new situation. Progressively implementing the policy of deploying young cadres graduating from universities and colleges to agricultural cooperatives to work for a definite time in different locales; organizing training and experiential study tours for cooperative cadres and state management officials on cooperatives. Renovating and improving the quality of human resources and operational capacity to participate in the effective implementation of programs, projects, public services and a number of other tasks assigned by the Government, ministries, branches and localities in consonance with the law and the actual situation.

Fifthly, dissemination and consultation.

Intensifying dissemination to raise awareness about the collective economy and cooperatives. Doing this well entails carrying out dissemination work regarding the position, role and importance of cooperatives in the new context; clearly identifying the development of the collective economy and cooperatives as an inexorable trend and considering this an important and regular political task of ministries, branches and localities. Reinforcing the leadership and direction of the Party Committees at all levels; boosting the effectiveness and efficiency of state management over the cooperative economy. Continuing to promote dissemination work about the Party’s viewpoints and guidelines, and the State policies and laws on the collective economy.

The Cooperative Alliance at all levels proactively researches and coordinates with ministries, branches and localities to propose and effectively enforce the Party’s guidelines, state policies and laws on developing the collective economy and cooperatives; promotes dissemination, training and service provision; provides consultancy and support for the reorganization and establishment of cooperatives, forms many production cooperatives associated with the value chain, especially the one of agricultural products. With the motto “Cooperation - Innovation - Development – Efficiency” and the objective of the rapid efficient sustainable development of the collective economy and cooperatives, the cooperative alliance at all levels, with the pivotal role in developing the collective economy and cooperatives, is an organization representing and protecting the legitimate rights and interests of its members.

Sixthly, international cooperation and global integration.

More than ever does reality require the collective economic sector and cooperatives to change their own way of operation to match requirements and take advantage of development opportunities in all fields of the economy. International economic integration means both opportunities and challenges, mandating the collective economic sector and cooperatives to become dynamic, creative, grasp information, access advanced science and technology, and apply them to production, in line with the reality of Viet Nam. Therefore, constantly promoting forms of international cooperation in bolstering the collective economy and cooperatives to learn from management experience, sustainable cooperative development models of other nations. Proactively acquiring valuable experience from countries and territories with strong cooperative movements. In particular, paying attention to the acquisition of technical assistance in founding and increasing the capacity of cooperatives, and to support collective economic organizations.

The Vietnam Cooperative Alliance proactively acquires experience and popularises the flexible and effective application of successful domestic and international models. Facilitating cooperation with international organizations such as: International Cooperative Alliance, cooperative organizations of countries, organizations representing and aiding cooperatives in other nations to take advantage of support related to finance, technique, equipment, machinery, linkage and market expansion.../.

This article was published in the Communist Review No. 990 (May 2022)