The case for agriculture cooperatives

Farmers cooperatives significantly contributed to Vietnam's transformation from a net rice importer in 1989 to the fifth largest rice exporter in the global market. Photo: Reuters

It was an excellent sunny but cool day in October 2014. We were taken to visit paddy fields near the capital Hanoi, Vietnam. The temperature was pleasant, about 24-25 degree Celsius. October is considered one of the best months to visit Vietnam. It is usually dry with cooler temperatures and is a transitional month from the rainy to the dry season in this Southeast Asian country. 

The Vietnam National Farmers Union (VNFU) invited representatives from about 14 countries in Asia Pacific regions, and I was one of them. We were visiting the paddy fields. It was a vast area. Nothing was visible except green paddy plants. During our visit to the paddy fields, we were amazed to see a house-like structure in the middle of the field. 

It was the field office of the local farmers cooperative. It served as a place for the farmers to take a break and relax while working in the fields, equipped with facilities such as electricity, water, sanitation and more. 

This was our first introduction to Vietnam's remarkable farmers cooperatives (or agriculture cooperatives). Farmer cooperatives are an association which helps producer-members market and process their crops and livestock, and secure needed production supplies and services.

And we soon learned that there was more to come. 

Later, we were taken to a community centre to interact with the local farmers. The centre was massive. To our surprise, the farmers cooperatives also owned it. It was awe-inspiring to see how the farmers cooperatives in Vietnam had built and managed such facilities to support and empower the local farmers.

Farmers cooperatives significantly contributed to Vietnam's transformation from a net rice importer in 1989 to the fifth largest rice exporter in the global market. Of course, the country's shift to a market-oriented economy resulted from the Doi Moi (socialist-oriented market economy) or renovation policy in 1986, which played a vital role in this transformation. 

For agriculture, promoting farmers cooperatives was one of the renovations. The passing of the 2012 Cooperative Law paved the way for establishing the new-type cooperative model, which has been tremendously successful. With the government's renewed emphasis on Cooperatives, the future looks bright for Vietnam's agricultural sector.

Government efforts to promote farmers cooperatives are yet to end. News published in January 2023 talks about a plan of the Ministry of Agriculture and Rural Development in Vietnam to establish 1,600 new Cooperatives in 2023, aiming to bring the total to 22,500. 

Another news published in April 2023 says the plan is to get 31,000 Cooperatives. 

The measures set to boost cooperative growth include forming cooperative units and farms linked to enterprises for production, processing, and sales, promoting the role of related associations, developing concentrated production areas, and overhauling cooperative operations. 

Vietnam has 94 unions of agricultural cooperatives and nearly 21,000 cooperatives, with close to 2,300 establishing enterprises and 1,200 participating in the One Commune One Product (OCOP) programme. The cooperatives own around 40% of OCOP products nationwide.

For the time, we were also introduced to the idea of OCOP, One Commune One Product. It is a national programme in Vietnam that aims to promote the development of unique local products and services in each commune or district of the country. 

The programme was launched in 2006. Under the programme, each commune or district is encouraged to identify and develop its unique product or service based on local resources, skills, and traditions. These products can be agricultural, handicraft, or tourism-related and must meet certain quality, safety, and marketability criteria. 

Once a product is identified and developed, it is given an OCOP label or certificate, which certifies its quality, origin, and authenticity. The label also helps promote the product domestically and internationally and facilitates its marketing and distribution. 

The OCOP programme has been widely recognised as a successful model for rural development in Vietnam. It promotes local economic growth, preserves traditional culture and skills, and enhances the competitiveness of rural areas in the global market. It has also contributed to poverty reduction and the improvement of the living standards of rural communities.

Many researches and studies highlighted the success of the agriculture cooperatives in Vietnam in terms of increasing rice production and ensuring benefits for the farmers.  The Mekong River Delta contributes 55.7% of the national rice output and 90% of the total export volume. 

Research with data from the 233 rice farmers in the central Mekong River Delta's province of Hau Giang reveals that cooperative membership has a positive and statistically significant impact on rice farmers' Return of Production Cost, suggesting that agricultural cooperatives could help increase the profitability of rice farms.

Vietnam and Bangladesh share some similarities 

Both countries have significant agricultural sectors, and about half of the total workforce in both is involved in agriculture. Rice is a staple crop in both countries, with Vietnam being the world's fifth-largest producer of rice and Bangladesh being the third. 

Bangladesh lags behind Vietnam in terms of agriculture cooperatives or organisations. While there are successful farmers' cooperatives in Bangladesh, there is still a long way to go. Achieving a nationwide farmers' cooperative movement like Vietnam overnight in Bangladesh is difficult. However, a good starting point would be to promote small-sized farmers' organisations. 

Generally, we see marginal farmers in Bangladesh facing three types of problems from cultivation to marketing such as 1) lack of adequate capital during cultivation, resulting in taking loans from moneylenders at high-interest rates or selling the crop in advance, 2) not receiving the right price for the product, and 3) not receiving any profit made by the middlemen. 

An agricultural cooperative can solve all three of these problems. 

However, such cooperatives should be formed with farmers who produce similar crops. Cooperative management training should be provided to all members before the programme begins. Some farmers should be brought into management positions. Since the cooperative will be formed entirely of marginal farmers, one-time financial assistance will be given to the cooperative initially, which can be withdrawn again in the long run.

Once the cooperative is formed, the entire process for ensuring an effective solution to the above three problems will be as follows: all member farmers will be provided with interest-free capital according to the amount of land for cultivation from the cooperative. All members will sell their produce to the cooperative at a price close to the consumer-level price. 

The loan amount will be deducted from the sale proceeds. The cooperative will sell the crops collected from the members in the city market or directly to the consumer under its management. 25% of the income will be kept for running the organisation, and the rest of the profit will be shared among the members.

With this simple management, farmers will receive capital for cultivation and sell their products at a fair price. Moreover, the profit from selling their crop at the consumer level or in the market will also return to them. 

Managing such agricultural cooperatives is not difficult or impossible. I have a direct relationship with one such agricultural cooperative in Dinajpur and I closely monitor its activities.

The organisation, Dighan Samavaya Samiti, was given a one-time financial grant from an NGO named COAST Foundation. It also provides training and interest-free loans to its members for rice cultivation. 

The cooperative buys rice from its members at the highest market price, distributing the profits among the members. The organisation has set up sales centres to sell rice. It aims to sell rice using online platforms now. This is just one example. A thorough search for successful agricultural cooperatives will lead to more. 

We need government initiatives to establish agriculture cooperatives countrywide. The budget for 2023-24 presents an opportunity to prioritise the development of farmers' organisations and agriculture cooperatives in Bangladesh, thereby enhancing the country's food security. 

The government can allocate funds to establish new cooperatives and train farmers on cooperative management while facilitating access to financial services and markets. We can start from the district level – one district, one such cooperative. Later we can aim for the upazila level and then the local level.  

It is also recommended to implement policies that promote the formation of cooperative units and farms with links to enterprises, which can create value chains and increase productivity. 

By investing in agriculture cooperatives, Bangladesh can achieve more competitive and sustainable agricultural production while reducing poverty in rural areas. This approach can lead to a new era of agricultural revolution in the country, ensuring a more secure food future for Bangladesh.

Md Mujibul Haque Munir. Sketch: TBS

Md Mujibul Haque Munir is the Joint Director of the COAST Foundation and a member of the Steering Committee of the UN Global Farmers Forum.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.