Study on Generating Employment through Micro and Small Enterprise and Cooperative Development in Lao PDR
3. Cooperatives Enterprises

COOPERATIVE ENTERPRISES

The development of modern cooperatives in Laos is in its early stages. Their legal status is not defined, nor are there any empirical studies on Lao cooperatives, so there is very limited data available. It is important however to direct stakeholder attention to the potential of this form of business activity.

3.1 Current International Status of Cooperatives

For many years cooperatives were recognized worldwide as an important means of promoting economic and social development and entitled to a special place in national legal systems and policy, and in the agendas of international development agencies.

The negative side of this was a tendency towards state control and business inefficiency. This caused cooperatives to lose credibility particularly as the market economy approach was being embraced worldwide. More recently however their role has been re-appraised, in particular by the ILO. There has been a return to the original concept of a cooperative as a self-help group building economic capital out of the strengths of its social capital. Business efficiency is also demanded by the globalized market place, something made even more necessary by the removal of the state subsidies of earlier years. Besides operating as commercial entities, cooperatives are designed to meet the wider social and cultural needs of their members and of their communities. [Refer ILO Promotion of Cooperatives Recommendation 2002].

The International Cooperative Principles, which reflect international best practice, define membership as voluntary and open to all who are eligible, thus differentiating them from State-run compulsory "cooperatives". They have a role in fostering economic fairness by facilitating access to both markets and services for groups of people who would be denied access if they operated on their own. They have considerable potential for countries such as Laos, which prize social cohesion over individual advancement. While needing to be free from State control, they however do require a favourable regulatory and financing framework that only the State can facilitate.

3.2 Definitions

There are a number of possible definitions:

1. The ILO has adopted the definition of the International Cooperative Alliance (ICA), the body representing cooperatives globally as "an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise".
    
2. Individual countries tend to define a cooperative, usually in their relevant legislation, in ways that reflect the national contribution they see the cooperative model of organization making. In Vietnam, for example, a cooperative is defined as: "A self-controlled economic entity established by working persons who have common needs and interests, and who contribute voluntary capital or labour in accordance with the provisions of the law to promote the strength of the collective and of each member…for the purpose of assisting one another to more effectively carry out manufacturing, business, and service activities, …and for improving living standards and contributing to the socio-economic development of the country." (COOPREFORM-Database of Cooperative Law-Vietnam-Employment Sector. Page 1, Retrieved November 20, 2001 from the World Wide Web: http://www.ilo.org/public/english/employment/ent/coop/laws/viet.htm)

3.3 Current Status of Cooperatives in Laos

In Laos cooperatives have no formal legal status, and the term has tended to be used in relation to the 'People's cooperative economy' where it is considered "a form of production based on the voluntary work of people who want to co-operate and invest in order to conduct and expand their businesses and protect their common interest." (Vientiane Times, Party Congress Special: Report to the Seventh Party Congress, Vol. 8, No. 21, p. 11, March 16-19, 2001.)

The cooperatives that did exist in Laos were an integral part of the previous communist political system in Laos and suffered from the defects of a State controlled business system. They were seen as a means of centralizing land use, employing agricultural labour, and distributing consumer goods. (International Labour Conference 89^th session 2001, Report V (1), "Promotion of Cooperatives".) In common with other former communist countries these Lao cooperatives did not survive the major economic reforms of the last decade that have established the market-oriented economy.

At present, active cooperatives in Laos tend to be credit cooperatives or small income-generating groups. The two main credit cooperatives are the Credit Cooperative for Promotion of Small Producers (CCSP) and the Sihom Credit Union. The Phonetong Cooperative operates in Huaphan province and consists of a group of handicraft producers. Other self-help groups involved in small income generation are known to exist but there is no data available about them.

Because they are not legally recognized they have no specific supervisory or regulatory body. Large cooperatives are registered with the relevant sectoral Ministry, with the Ministry of Commerce, or with the Customs Department.

The CCSP is a private cooperative that operates under the same regulations and rules as the Bank of Lao PDR and the Bank's officials inspect the cooperative every month. While the CCSP is registered with the Bank of Lao PDR, it obtains its operating permit from the Ministry of Commerce and reports to the Customs Department on tax issues. The reason CCSP was set up was explained by its Administrator, Dr. Sisaliao Svengsuksa:

CSSP also promotes job creation, especially for women. It has nine branches in seven provinces and will only lend to its members, usually small producers and farmers form themselves into new small cooperatives as Dr. Sisaliao Svengsuksa explained.

A number of so-called "cooperative programmes" also exist usually in the development projects of international agencies and NGOs. They promote group-based income-generating activities, such as weaving, producing quilts and raising livestock, and provide forms of microfinance for rural villagers. b

3.4 Future of Cooperatives in Laos

The credit cooperatives examined for this report appeared to play a considerable role in fostering employment within their own organizations and through their networks. A more comprehensive review of the potential for cooperatives is needed.

Laos is a Buddhist nation and it has a strong commitment to group harmony over individual competition. This may explain the perception of congruence between Lao culture and a socialist form of government during earlier decades. This congruence between cultural values and economic organization could perhaps also take the form of cooperative models of business.

Sound research and consultation should be undertaken however to establish which economic activities could be carried out by cooperative enterprises. It would be useful for an early pilot project to be established.

A consultative process is also recommended to develop appropriate cooperative legislation and policy, consistent with international best practice but building on and identifying with Lao cultural values and aspirations.

3. Cooperatives Enterprises
tudy on Generating Employment through Micro and Small Enterprise and Cooperative Development in Lao PDR

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