February 22, 2012
By Andrea Booth
BOGOR, Indonesia (22 February, 2012)_A recent report by the Center for International Forestry Research (CIFOR) urges farmers in Lao People’s Democratic Republic to form cooperatives to help meet market demands as the country transitions from practicing subsistence to commercial agriculture.
“Farmers’ cooperatives are the missing link to enable family-based farming enterprises, which are active but not well organized, to respond to increasing market demand for quality products,” said Jean-Christophe Castella, a scientist with CIFOR and France’s Institute of Research for Development (IRD) and lead author of Managing the transition from farmers’ groups to agricultural cooperatives in Lao PDR.
2012 has been declared as the UN International Year of the Cooperatives which serve as “a reminder to the international community that it is possible to pursue both economic viability and social responsibility”, declared United Nations Secretary-General Ban Ki-moon.
Laos formed its first agricultural cooperative in 1975 with the advent of the Lao People’s Democratic Republic, by pooling together farmers’ resources under a collective led by the state. The number of state-led cooperatives tripled between 1978 and 1985, with the aim of achieving food sufficiency nationwide. However, the cooperatives became too big to maintain efficiency resulting in a “top-down” approach, poor managerial skills of staff and loss of interest for cooperative members.
By the end of the 1980s, state cooperatives were dismantled and replaced with farmers’ groups, which lacked legal structures. The donor community began pushing the government to provide the emerging market chains with better support to farmers’ associations and cooperatives. This came to fruition with the March 2010 Decree on Cooperatives and, according to another recent CIFOR study, the government is now treating cooperatives as a priority: with the Ministry of Agriculture and Forestry committing to a 2010-2020 strategy to accelerate the development of farmers’ organizations.
Laos’ economy is increasing dramatically with a GDP of 8.3 percent in 2011 and while the agricultural sector constitutes 27.8 percent of this, it is one of the poorest nations in Southeast Asia. Currently, the informal agricultural sector focuses on producing goods for the market but are not organized enough to deal with large companies or with foreign investors. According to the study, well-managed cooperatives would benefit farmers by acting as intermediaries between them and larger agribusinesses to maximize market opportunities.
The study says cooperatives would provide a framework to collectively pool resources, stimulate competition and bridge the gap between farmers and the government to avoid marginalization in the rapidly changing economy. It advises on measures to implement throughout the development process to mitigate challenges such as skills gaps.
Castella says there are three other central elements to building and sustaining cooperatives.
First is the proper and rigorous management of savings/credit schemes, and more generally, financial capital. “Credit access and mobilization of capital is key to business development and is the initial incentive for people to work together to make profits,” Castella said.
Second is ensuring strong cohesion within farmers’ cooperatives through fair leadership and a regulatory system including social control and sanctions.
Third is striking a balance between internal cohesion and external relations. Castella said careful planning was integral to enable cooperatives to both foster their members and respond to new business opportunities.
Farmers’ skills also need to be improved. “Nowadays, the biggest challenge in creating cooperatives is building people’s capacity. People don’t know what to do and how to do it,” Castella said.
“It has been difficult for farmers to respond efficiently to market demands regarding product types, quality and quantity. It is essential to build the capacity of all stakeholders, including government officials,” he said.
Farmers have been reluctant to join cooperatives after their experience of dysfunctional state-led ones in the past.
“People are still traumatized by the former state-cooperatives, which may be a reason why they have been reluctant so far to form organized cooperatives again, despite the new form of governance that is being proposed to them,” Castella said.
However, farmers may not receive adequate organizational support without new forms of cooperatives. They have to learn their own pathway towards an innovative model of farmers’ organizations. “It is important to build upon existing experiences – both successes and failures – in designing support policies,” Castella said.
This can be achieved through training and documenting the process of creating cooperatives and implementing institutions, such as a cooperative resource centre, for people to share experiences and build knowledge.
Photo Credit: Scott Foy