ILC89 - Report V (1): Promotion of cooperatives

In March 1999, at its 274th Session, the Governing Body decided to include in the agenda of the 89th Session (2001) of the International Labour Conference the question of the promotion of cooperatives, with a view to adopting a revised standard in the year 2002.

The last comprehensive discussion on cooperatives in the ILO took place in 1966 at the 50th Session of the International Labour Conference, when it adopted the Cooperatives (Developing Countries) Recommendation, 1966 (No. 127). The ILO held a Meeting of Experts on Cooperatives in 1993 whose agenda included an item concerning an assessment of the impact of Recommendation No. 127. This meeting was followed by the Meeting of Experts on Cooperative Law in 1995, at which this was further discussed.

A number of international labour standards make direct or indirect reference to cooperatives, but the only comprehensive international standard on cooperatives is Recommendation No. 127. Also of relevance are the Rural Workers' Organisations Convention, 1975 (No. 141), and Recommendation (No. 149), the Employment Policy (Supplementary Provisions) Recommendation, 1984 (No. 169), and the Indigenous and Tribal Peoples Convention, 1989 (No. 169). These standards give examples of how specific groups may organize, including in the form of a cooperative, and to what ends cooperatives may be used by their members, or they emphasize that groups living according to cultural traits which are not the ones of the majority of society should be protected in their way of organizing self-help associations, including cooperatives.

Reasons for the revision

Since the time of the adoption of Recommendation No. 127, political, economic and social changes have affected the situation of cooperatives throughout the world. While cooperatives have a new role to play both in industrialized countries and in the former communist countries, the focus of Recommendation No. 127 is limited to developing countries. The Governing Body felt that new universal standards in this area could help enable cooperatives to develop more fully their self-help potential, placing them in a better position to meet a number of current socio-economic problems, such as unemployment and social exclusion.

As far as developing countries are concerned, Recommendation No. 127 mirrored the development concerns of the 1960s, especially in the approach to the role of governments and cooperatives in the development process. Today, development is not conceived as a process of imitation of industrialized countries, nor are cooperatives seen as tools in the hands of governments. In accordance with universally recognized cooperative principles, they are perceived as a means for their members to achieve their common economic and social goals.

In former communist countries cooperatives were an integral part of the political system, a means of centralizing land use, employing agricultural labour and distributing consumer goods. The current privatization of the former communist economies reaches beyond the land reform referred to in Recommendation No. 127; it involves the privatization of manufacturing facilities and service infrastructures. Some communist-type cooperatives have been transformed into genuine cooperatives, while others have been bought out by individuals or by former members jointly. Since cooperatives have assumed an increasingly important role as a result of liberalization and the privatization of trade and services, the ILO is receiving an increasing number of requests from both developing and transition countries for technical assistance in cooperative organization, training and policy and legislative reform.

In industrialized countries it is the changing structure of cooperative enterprises and new forms of cooperatives that have contributed to the call for the application of new standards. The traditional structure of cooperatives in many of these countries is currently evolving to cope more effectively with competitive pressure from other forms of business organizations. On the other hand, the cooperative model of joint ownership and management is increasingly being used by employees to buy out their own enterprises in the transport, service and manufacturing sectors, as a means of protecting and generating jobs in an era of continued downsizing resulting from globalization and technological change.

In many countries, political, economic and social changes in general have put pressure on governments to limit their involvement in economic and social affairs. The core idea of structural adjustment programmes is a shift from public to private initiative, financing, management and responsibility. Subsequent monetary and fiscal stabilization programmes, institution building, privatization and liberalization require civil society to take a more active role in economic, social and political affairs. The State's role is increasingly limited to that of providing the political, legal and administrative framework for the development of private organizations, including cooperatives, which in turn strengthen democracy. The existing ILO standard does not take account of these developments.

In 1995 the Centennial Congress of the International Cooperative Alliance, the highest organization of the international cooperative movement, adopted a Statement on the Cooperative Identity including a revised set of principles. These principles are: voluntary and open membership; democratic member control; member economic participation; autonomy and independence; education, training and information; cooperation among cooperatives; and concern for community. The new principles, while building on and refining the previously accepted principles, firmly positioned cooperatives as jointly owned, democratically controlled enterprises based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. The existing ILO standard, while sharing the same fundamental philosophical tenets, overemphasizes the role of government in cooperative development and weakens the autonomous character of cooperative identity and entrepreneurship. Furthermore, Recommendation No. 127 underemphasizes the business orientation of cooperative enterprises.

ILO's role in cooperative development

The ILO recognizes the importance of cooperatives in article 12 of its Constitution, which provides for consultation with cooperators — besides employers and workers — through their recognized international organizations. At the Third Session of the Governing Body in March 1920 a cooperative technical service was set up as part of the organization of the ILO. Thus the cooperative service is one of the oldest and most firmly established in the ILO. In accordance with these provisions the ILO has promoted the development of cooperatives, mainly through technical assistance and information, and has advised governments, and workers' and employers' organizations, on their role in this area. Today, the ILO has the largest programme of technical cooperation within the United Nations system for this purpose.

The report

This report is divided into three chapters and includes a questionnaire.

Chapter I analyses the changing environment of cooperatives in developing, transition and industrialized countries and identifies the main changes that have taken place in the demographic, economic, social, political, ecological and technological fields and their impact on cooperative enterprises. This chapter also discusses the potential of cooperatives in relation to the economic and social services they provide. The broader role of cooperatives in the areas of decentralization, democratization and the economic and social empowerment of women are also described.

Chapter II focuses on the prerequisites for success in the promotion of cooperatives based on positive and negative experiences since Recommendation No. 127 was adopted. Special emphasis is given to the changing role of government, cooperative policy and legislation, cooperative support services such as human resource development, management consultancy and auditing, the role of the social partners, horizontal and vertical integration between cooperatives and, not least, the role of international cooperation.

Chapter III contains some concluding remarks.

Chapter I

Cooperatives towards the twenty-first century

1. The changing environment in which cooperatives operate

1.1. Developments over the past 30 years which may warrant reconsidering
the contents and structure of Recommendation No. 127

Changes of environment in which cooperatives operate

The political and economic order which prevailed when Recommendation No. 127 was written was relatively straightforward, with donors of development aid concentrated in the rich, industrialized countries and recipients of development aid in the South — alongside the power relationship between the communist countries of Eastern Europe and the Western industrialized countries; however, this has given way to a complex network of regional blocs at various stages of political and social development. As we enter the twenty-first century, we are confronted with dramatic changes which are reshaping the development environment and must find a response to many issues: the longer term implications of the East Asia crisis; the experience of sub-Saharan Africa and the transition economies with structural reform; the fragmentation of authority in many nation States; global and regional environmental pressures; the growing scarcity of basic resources; and a massive increase in the world's population.

The most important changes that have occurred — and are still occurring — on a world scale are of a political, demographic, social, economic, ecological and technological nature; this report briefly touches upon these changes to highlight their impact on cooperative development.

Political change

The most prominent and far-reaching change in the political arena has been the decay of dogmatic socialism as a form of government, accompanied by the restructuring, privatization or winding up of large numbers of public institutions, state enterprises and collectives in many countries, which have brought about widespread upheavals and poverty. Structural adjustment programmes in many developing and some industrialized countries have also caused hardship, especially to the lower income strata of the population. These programmes advocate liberalization in economic affairs, thus providing a golden opportunity for the rich and educated — and sometimes also unscrupulous and powerful — to profit at the expense of the weaker sections of society: a classic scenario for the development of cooperatives.

During the past two decades, political liberalization has affected cooperatives and their apex organizations in several ways: first, the era of compulsory membership in cooperatives and apex cooperatives has come to an end. This has resulted in a considerable decline in membership — and an ensuing loss of membership contributions. Second, cooperative service monopolies have collapsed due to cuts in government subsidies. This loss of confidence that was built upon the continued support of the State has affected the level and quality of production, resulting in many cooperative members being underemployed or unemployed. Due to new and more liberal cooperative policies, newly emerging democratic cooperatives have started to take part in building a more pluralistic society.

After unsuccessful and costly experiments with collectives and land reform cooperatives (e.g. ujamaa in the United Republic of Tanzania, fokonolona in Madagascar, peasant associations in Ethiopia, samahang nayons in the Philippines and collectives in the former communist countries in Eastern and Central Europe and in the former Soviet Union), the usefulness and practicability of collectives and the role of cooperatives in land reform programmes are now being reconsidered.

Artificially created, state-controlled cooperatives, which depend on government subsidies and foreign aid may lack the vitality and flexibility needed to adjust to new circumstances and tend to collapse or be discontinued when external assistance dries up. However, cooperatives established without government support may actually benefit from the withdrawal of public agencies from certain functions by, for example, taking over the functions of defunct marketing boards.

There have also been very significant changes in the perception of the role of the State in many industrialized countries. In most of these countries the State has withdrawn from direct involvement in industry or trade and rather provides the framework within which economic activity can grow and prosper so as to bring wealth and prosperity to citizens. Cooperatives are increasingly expected to take their place alongside other forms of enterprise in a competitive market-place.

Demographic change

The world is witnessing two vastly different demographic trends. In the industrialized countries, birth rates are falling and life expectancy is steadily increasing. Consequently, in the future, a declining number of active citizens will have to provide social security for a growing number of senior citizens who may continue to live for 20-30 years after retirement. In Germany, within the next 30 years, taxpayers and those paying insurance contributions will be largely outnumbered by senior citizens claiming social security payments. In the developing countries the reverse trend holds true. In Africa and many countries of Asia (with the exception of China) and Latin America, the birth rate is still at high levels, with the majority of the population being below the age of 20. Over the next 30 to 50 years, 90 per cent of the global population growth will occur in the developing countries and among the lower income groups. Furthermore, medical progress will help to reduce mortality rates and extend life expectancy.

It is estimated that, over the next 50 years, the world population will increase by 93 to 95 million per year, reaching 10 billion in the year 2050 (as opposed to 5.5 billion in 1992). A growing population will mean growing pressure on the ecological system, thus increasing the need for food, shelter and jobs. It will also create further problems: land scarcity; conflicts over the use of land; and soaring levels of urbanization, with rapidly growing slums and squatter settlements around cities such as Lagos, Nairobi, Lusaka, Manila, Bangkok and Rio de Janeiro.

In industrialized countries, these demographic changes prompt cooperatives to diversify their services and certain groups to establish specialized cooperatives. From the 1980s onwards, new types of cooperatives started to emerge to take care of elderly people and to provide basic services, such as health care, housing, funeral and other social support services. Alongside this trend, vulnerable groups, such as unemployed youth, started to take an interest in establishing or joining workers' cooperatives or community-based service cooperatives. In many European countries, the 1970s and 1980s were therefore considered to be the decades which witnessed the rebirth of workers' cooperatives. In the developing countries, in order to stop mass migration to urban areas, rural cooperatives have started to take part in local development initiatives aimed at creating employment in rural areas, such as rural infrastructure, reafforestation, land improvement and environmental protection.

Social change

A decay of value systems may be observed throughout the world, which is reinforced by the demographic changes pointed out earlier in the text. Family structures, which for time immemorial have been reliable and effective systems of social security, are disintegrating. In many industrialized countries, large, multi-generation families are the exception rather than the rule. Instead, nuclear families with one or two children are the norm, but these are already being replaced by single households. Under such conditions, the question of caring for the aged has to be thoroughly reconsidered.

The World Summit for Social Development held in 1995 in Copenhagen reported that the global wealth of nations had multiplied sevenfold in the last 50 years; however, at the same time, within many societies, both in developed and developing countries, the gap between the rich and poor had increased. Despite the fact that democratic pluralism, democratic institutions and fundamental civil liberties have expanded, far too many people, particularly women and children, are vulnerable to stress and deprivation. Poverty, unemployment and social disintegration often result in isolation, marginalization and violence.

While these problems affect all countries, there is a general consensus that the situation of most developing countries — particularly of Africa — is critical and requires special attention and action and that these countries, which are undergoing fundamental political, economic and social transition (including countries in the process of consolidating peace and democracy), require the support of the international community.

According to the Programme of Action of the Social Summit, the goals and objectives of social development require continuous efforts to reduce and eliminate major sources of social distress and instability for the family and for society. Particular focus should be placed on, and priority attention given to, the fight against the worldwide conditions that pose severe threats to the health, safety, peace, security and well-being of people. Among these conditions are: chronic hunger; malnutrition; illicit drug problems; organized crime; corruption; foreign occupation; armed conflicts; illicit arms trafficking, terrorism; intolerance and incitement to racial, ethnic, religious and other hatreds; xenophobia; and endemic, communicable and chronic diseases. To this end, coordination and cooperation at a national level and especially at the regional and international levels should be further strengthened.

During the process of structural adjustment it has become obvious that independent, self-reliant service cooperatives and credit unions can make important contributions to human resources development by helping their members enhance their general education and professional skills. They can also help to alleviate the negative effects of adjustment affecting the weaker groups of the population.

Self-help organizations formed spontaneously to solve the immediate problems of their members, including pre-cooperatives and informal groups, are more viable than imported structures which are not fully compatible with local standards of behaviour and do not necessarily serve the economic needs of the target group.

However, despite all the precautions taken, genuine, cost-effective and well-performing cooperative societies can easily be undermined when they are used as institutional structures for the delivery of project-provided goods and services to target groups, as pointed out in a report of the Economic and Social Council of the United Nations (ECOSOC).

Economic change

The most far-reaching economic change during the past few years has been the experience of many former communist States which have undergone a transition from a centrally planned economy to a market economy. In all countries, there is a growing disparity between the rich and the poor. Even in the rich industrialized countries, an uneven distribution of wealth and growing poverty has reached a degree that would have been unimaginable a few decades ago. The number of unemployed and homeless people is growing steadily.

The increase in unemployment and underemployment, coupled with the limited absorption capacity of modern informal sector enterprises, make private initiative, entrepreneurship and self-employment a vital alternative for the creation of jobs.

The trend to have less but better paid jobs and to transfer jobs to countries with lower labour costs, thereby increasing the number of unemployed people living on social benefits, cannot continue much longer without causing serious social unrest. The political and economic actors will therefore have to seek solutions for a more equitable distribution of work and wealth.

In the developing countries, mass poverty, high unemployment, inflation, unfavourable terms of trade for export crops and the burden of foreign debts paint a bleak picture. Structural adjustment programmes sought to accelerate economic growth and increase production and exports at almost any cost; yet their total disregard for social policy was such that new programmes addressing the social dimension of adjustment had to be designed. Reducing investment in areas such as education and health in countries which urgently need improved economic and social conditions is not compatible with the requirements of long-term sustainable development.

The ILO estimates that, out of a world labour force of 3 billion people, 25 to 30 per cent are underemployed and about 140 million workers are fully unemployed. In short, the employment situation in the world remains largely grim and there is a pressing need for all countries to find new ways to overcome barriers to employment.

With these persistently high levels of unemployment and underemployment there is mounting concern over the social exclusion that follows from limited employment opportunities. At special risk of exclusion in the current economic environment are: unemployed youth, the long-term unemployed, older displaced workers, less skilled workers with disabilities and ethnic minority groups — with women facing even higher barriers to employment across all these categories. Of special social concern is the severity of youth unemployment worldwide; the ILO estimates that there are about 60 million young people between the ages of 15 and 24 who are in search of work but cannot find it.

Rapid technological change now requires individuals to learn and relearn skills throughout their working lives; training systems must adapt accordingly. While there has been a significant shift towards service sector activities in almost all economies, training systems, which have traditionally been geared to meeting the needs of the manufacturing sector, have been slow to adjust, and the introduction of comparable training for service sector activities has also been slow. Another important structural shift has been the increasing role of small and micro-enterprises, including cooperatives, in providing job opportunities and employment growth.

In most industrialized countries cooperatives have developed over the past 100 years into powerful economic structures organized in integrated systems at the local, regional, national and international levels.

In the industrialized countries the importance of cooperatives in the market economy is fully recognized. The State influences the development of cooperatives mainly by providing suitable framework conditions for social, economic and political development, ensuring respect of the law and the availability of a social security network.

Many of the long-established cooperative enterprises (agricultural supply and marketing societies, credit societies, consumer, retail trader and craftsmen cooperatives, cooperatives of the liberal professions and housing cooperatives) have grown into large-scale, professionally run and solidly financed enterprises in full competition with other commercial firms. Many of these large cooperative enterprises work almost like companies, offering their services not only to their members but to the general public, reducing members' rights and obligations to a minimum and the relations of their members with their cooperative to that of mere customers. The long-term result of this trend is that cooperatives lose their membership base and either wind up as, or turn into, investor-owned businesses.

On the other hand, successful large cooperatives have shown that it is possible to maintain a strong membership base and the active participation of members in the management and control of their cooperatives (even with groups of tens of thousands of members), provided that there is a clear-cut policy for maintaining a strong cooperative profile and that adequate measures are taken to implement such a policy.

There are basically two forms of cooperation, although many different types of cooperatives are used to achieve the objectives set by their members: socio-economic cooperation and business cooperation — and both have the potential to serve the cause of sustainable development. The main features of each form of cooperation are resumed here below:

Socio-economic cooperation occurs between individuals who seek to provide a service for themselves. This form of cooperation normally offers life-quality enhancing benefits that can especially serve the disadvantaged and usually succeeds in promoting social cohesion and strengthening the bargaining power of the relatively economically weaker sections of society. Socio-economic cooperation is most valuable when focused on addressing some of the most fundamental symptoms of underdevelopment — for example on breaking the stranglehold of anti-developmental forces such as rural élites, moneylenders and middlemen. It is often most effective in terms of delivering essential community and social services no longer provided by the State, including health care, education, agricultural extension services and public utilities. However, it must be borne in mind that in order to work in poorer communities, high levels of solidarity are required and strong local leadership is critical.
Business cooperation takes place between business persons (entrepreneurs) and small or medium-sized enterprises (SMEs). It is most common between farmers operating above the subsistence level. Business cooperation is used to build the capacity of SMEs (including individually or family-owned farm enterprises), helping them to compete, sustain profitability and maintain their independence. The success of SMEs frequently depends upon their ability to work in cooperation with similar enterprises. In order to survive the intense competitiveness of a global market-place it is essential that SMEs work together through institutions able both to address local and export markets and to provide the strength to meet the challenge of multinational competitors — often even in their home markets. This is particularly important in the sphere of primary agricultural produce and agro-industrial products — but it can also be significant in terms of creating and/or maintaining local employment, which may otherwise not exist. Many factors may impede social and economic development in poor communities. The absence of sustainable institutions with the capacity to provide both primary production inputs at competitive prices, and/or appropriate channels into home and export markets, remains a significant obstacle to wealth and employment creation, most notably in rural areas.

Ecological change

In 1980, a report by the International Cooperative Alliance (ICA) predicting the future of cooperatives referred to environmental degradation as follows:

Whatever else may be said about the century now approaching an end, it must be recorded as the period in which mankind has done more to poison and destroy the environment than in all previous eras of history. The industrial revolution of modern times, beginning about 200 years ago, started society on the road to destruction and spoilage of the whole human habitat, using the adage "muck makes money". The degradation of the environment has gone hand in hand with wasteful use of resources and disturbance of the delicate balances of nature. (ICA: Cooperatives in the Year 2000, London, 1980, p. 23.)

Pollution of water, soil and air has reached dimensions which can no longer be ignored either by the ordinary citizen or by the politicians. Climate change leading to droughts, forest fires and floods are causing increasingly heavy damage and forcing people to reconsider their lifestyle and attitude towards the use of natural resources.

Although in the industrialized countries much attention is being given to the control and prevention of pollution, the disposal and recycling of waste, the use of alternative and renewable sources of energy and the development of appropriate technologies, these issues are still far from being high on the agenda. Measures to make enterprises pay for the environmental damage they cause are still not as effective as they should be.

In the developing countries, desertification due to monoculture, population pressure, overgrazing, use of dangerous chemicals (such as fertilizers and pesticides) and the destruction of forests are the most important ecological dangers causing global climate changes.

The cooperative movement can rise to the challenge of these wide-ranging environmental problems. Probably the most important lesson learned during the 1980s was that it is possible to protect the environment and regenerate its productivity as long as the people concerned are involved and participate.

At a conference organized by the ICA in Rome in 1993, representatives of various types of cooperatives specified the contribution they could personally make towards environmental protection. The agricultural cooperative representatives, for instance, defined their role as one of promoting sustainable rural development and ensuring food security. The consumer cooperative representatives, on the other hand, advocated a policy of "three r's" — reduce, reuse, recycle — in order to achieve sustainable consumption patterns.

Technological change

Rapid globalization and fast-paced technological progress also present new challenges that are common to all countries. Heightened competition and economic change ensuing from global economic integration and technological advance can cause instability and make it difficult to maintain the employability of large segments of a country's labour force. At the same time, these new economic forces provide fresh opportunities for economic growth and employment expansion. The level and quality of skills that a nation possesses are becoming critical factors in terms of the ability to take advantage of these opportunities, while minimizing the social costs which rapid technological transformations and the transition to a more open economy entail.

Technological innovations have made it possible to use energy and raw materials more effectively and to substitute scarce raw materials by new synthetic products. Transport and communication systems have provided the opportunity to transfer jobs to places where labour is cheap and to separate production and assembly plants. Thanks to modern technology, fewer farmers can produce more food than ever before, and are even paid by the State to reduce their production to avoid surpluses. On the other hand, this high productivity is brought about by heavy use of chemicals which in turn contribute to the pollution of water, soil and air.

1.2. Developing countries

1.2.1. The changing role of the State

The developing world experienced several decades of working with state-sponsored and state-controlled cooperatives — which had been introduced by the colonial powers as development tools and subsequently used by the governments of the independent States for similar purposes. Unsuccessful and costly experiments were carried out on the basis of joint agricultural production, collectives and state farms as a way of increasing peasant production and productivity.

Alongside attempts at radical reform — such as the creation of cooperatives for the production of cash crops for export, service cooperatives for food crop production — handicrafts, small-scale industry, savings and credit and housing cooperatives have developed independently, slowly and sometimes with remarkable success.

Many self-help activities are carried out in informal groups and pre-cooperative organizations, which are sometimes preferred by their members because they are more flexible, less bureaucratic and not subject to official supervision.

In a time of rapid change due to structural adjustment programmes, cooperatives are seen as organizations capable of cushioning the adverse social effects of some adjustment measures.

The major obstacles to the development of cooperatives in developing countries include: misconceptions among policy-makers and planners of what cooperatives are and how they work; unrealistic expectations of what cooperatives can actually accomplish; the establishment of cooperatives irrespective of whether or not the minimum requirements for successful cooperative development are met; and the artificial acceleration of cooperative growth.

In developing countries, the need for clear guidelines on ways to promote, establish and run cooperatives is as great now — or even greater — than it was when Recommendation No. 127 was drafted. In many cases, continuous population growth, the declining manpower/arable land ratio, high investment in the public sector, prestige projects and military hardware, the expansion of state and para-state enterprises and the pursuit of industrial rather than rural development, coupled with policy deficiencies, corrupt practices and low prices for agricultural products, have generated a soaring foreign debt, high unemployment and underemployment, political instability, a stagnating economy and growing mass poverty.

Decades of neglect of rural development have led to massive rural/urban migration, which has compounded the problems of unemployment and underemployment in the exploding cities and siphoned off young, dynamic and active workers from rural areas. In addition, independent democratic organizations, including cooperatives and other self-help forms of organization, have sometimes been regarded by many governments as dangerous or potentially dangerous competitors for power.

In an attempt to halt this downward trend, foreign aid and the cancellation of foreign debts are made subject to structural adjustment conditions which compel the recipient governments to reduce their role in the economic and social sphere, lay off staff in the administration and in parastatal bodies, deregulate, decentralize and liberalize administrative, political and economic structures — thus to move from a planned to a market economy.

In the light of past negative experiences and following pressure from donor agencies, official development policy is also undergoing change. For instance, it is shifting target groups of development programmes to the rural poor and to disadvantaged groups such as women, youth and indigenous and tribal peoples. Furthermore, as far as agricultural development is concerned, the emphasis on improving and increasing the production of cash crops for export is changing. Attention is now given to the production of food crops for local markets, the processing of raw materials and employment creation outside agricultural production. Paternalistic programme planning and implementation are being replaced by participative approaches in project management and evaluation and participative research, policy formulation and law-making. This is leading to: a new interpretation of instruments for self-help promotion; a shift from state-controlled cooperatives as the only officially recognized form of self-help organization to a variety of forms ranging from informal groups to formalized but non-cooperative self-help organizations (such as farmers' associations, economic interest groups, etc.); and a rediscovery of the value of literacy campaigns, general education and community development for overall development.

Under structural adjustment programmes, the government services in charge of promoting development are also being restructured and their functions reduced. As a result, many tasks which were formerly in the hands of government officers are now being carried out by local institutions — as well as by organizations of the United Nations system, NGOs with regional offices (for example, ICA or the World Council of Credit Unions (WOCCU)) and joint ventures with partners in industrialized countries and developing countries.

The term "cooperative" has fallen into disrepute in many developing countries, particularly in those in which cooperatives were state-controlled in the past (e.g. in Ethiopia, Guinea, Madagascar, Mali, Sudan, United Republic of Tanzania and Viet Nam) and membership was not voluntary. Members consider the cooperatives "government affairs" and frequently do not know their rights, because they have never been given a chance to use them in practice. Even in other developing countries, which merely exercised product price controls and/or in which cooperatives practised equal treatment of non-members and there was little or no participation of members other than in trade terms, members are critical of their cooperatives. They do not feel promoted but rather exploited — or do not even see themselves as members. Since liberalization began, existing cooperatives have even been deliberately sabotaged by their members in some instances (e.g. industrial and housing cooperatives in Ethiopia); meanwhile new organizations have been established, firmly based on cooperative principles and voluntary membership.

The experience has been quite different in cooperatives which can freely market food crops or other items and the members' perception of cooperatives is largely positive. The same holds true for cooperative-type organizations in the informal sector whose members consider them as self-help organizations which are useful — if not vital — to them. Hence they are prepared to commit their own resources to strengthen joint undertakings. Credit unions are a good example of such self-reliant, self-managed organizations; and build on pre-existing groups, educated membership and democratic management and control; they also work with their own funds and offer their services to members only. Effective strategies by cooperative apex organizations can also lead to significant changes in the perception of cooperatives and thus in membership. A good example of this is the development in Indonesia where membership in cooperatives has increased almost tenfold in the last 20 years.

Despite such positive examples, many cooperative members and the general public still often perceive cooperatives as being state-controlled or state-sponsored, economically inefficient and socially defunct organizations, which put the interests of either the State or paid professional managers before those of their members. In order to overcome these prejudices, more publicity must be given to the positive examples of cooperatives working in the interest of and to the satisfaction of their members.

Mergers, resulting in very large cooperatives, have often changed the relationship between members and their cooperative. The liberalization and globalization of markets have made it almost inevitable that cooperatives seek to achieve a scale of operation that is economically competitive — for members clearly cannot benefit from their cooperative unless it is economically efficient. Yet not all cooperative mergers have been well prepared, either in terms of management capacities or in terms of bringing two distinct organizational cultures together while retaining member participation and control.

All in all the need to improve and strengthen the relationship between cooperative members and management and to develop new cooperative activities attuned to members' needs has never been greater. The preoccupation in many cooperatives with economic success to the exclusion of serving real member needs will have to be reversed if these cooperatives are to survive and prosper. Competition will remain fierce; and the capital resources available to cooperatives are unlikely ever to match those of their investor-driven competitors. However, cooperatives can and often do have the "competitive edge" — precisely because they exist to respond to their members' needs. If cooperatives could convince their members to forego short-term rewards in the interest of long-term investment, they might achieve a period of pronounced growth — especially when investor-driven companies, acting short term in many areas, will have to face the consequences of their need to satisfy the immediate demands of their shareholders.

1.2.2. Economic effects

The early phases of structural adjustment had a considerable impact upon many cooperatives. This may be resumed as follows:

Unemployment increased in many countries, often making it difficult for members of savings and credit cooperatives to meet their financial obligations (e.g. in Zimbabwe). In addition, inflationary tendencies made credit expensive and endangered repayments while causing negative interest rates on savings and a decrease in available loans; they also resulted in unreliable accounting and financial reporting.
The discrepancies between lending and borrowing rates also affected housing cooperatives which, as a consequence, frequently — and for several years — were less active than before structural adjustment (e.g. in Zimbabwe).
The purchasing power of the population usually declined dramatically (e.g. in Gambia) while food prices soared. Consumer cooperatives suffered the most from this situation. However, they were able, at the same time, to contribute significantly towards curbing inflationary tendencies created by speculative traders and to ensure a continuous supply of foodstuffs to the low-income population.
Many agricultural marketing and supply cooperatives lost their monopolistic status which had previously guaranteed them a certain economic success. Single channel marketing systems and regional parastatals in marketing and processing were dismantled in some countries and/or sectors. Many farmers and/or their cooperatives no longer received product or credit subsidies, credit guarantees, export or tax privileges and protection from foreign competition. The cut in producer subsidies, for example, caused the market share of Gambian groundnut cooperatives to drop from 81 per cent in 1986-87 to 52 per cent in 1989-90, lowered the market share of coffee cooperatives in Uganda from 100 per cent to 15 per cent and that of Ugandan cotton cooperatives from 100 per cent to 65 per cent. Consequently district or regional unions had vast overcapacities in processing and storage facilities and had to lay off personnel.
Apart from the suddenness with which they were exposed to competition from private and foreign suppliers (e.g. in Zimbabwe) agricultural cooperatives also suffered severely from increased input prices, transport costs and unreliable access to credit. As a result some producers situated far from markets were discouraged to produce — while there were others for whom the only marketing agent was a cooperative. Recently farmers and food processors have started to deal directly with each other, even allowing contracts for future crops (e.g. in Zimbabwe). The net effect of this trend varies according to the country. In some countries the experience of agricultural cooperatives in grain marketing, storage management, consumer and input-supply, as well as in the management of agricultural credit, has made them more important (e.g. in Zambia). In other countries, they have lost membership and support (e.g. Ethiopia). In any case, in order to meet the challenges ahead, cooperatives have to enhance their business skills, make sure they have access to the market information required and prepare to collaborate sufficiently well with other market participants. (These are the main points COOPREFORM, COOPNET and INDISCO address in their efforts to help countries restructure their cooperative sectors.)
There is another side to the coin, however. Privatization highlights the role of cooperatives in providing regular employment, paid employment, income generation, human resource development and improved social conditions. There are numerous examples of new cooperatives using the opportunities created by the liberalization of economies (e.g. consulting cooperatives formed by the former staff of cooperative authorities, workers' cooperatives of previous state employees (e.g. in the health sector) and insurance cooperatives where the state monopoly on this industry has been lifted (e.g. in Zambia). Many existing cooperatives are — or are in the process of — streamlining their activities thus eventually gaining footholds in new markets (e.g. the Gambia Cooperative Union and some Zambian cooperatives which now export agricultural commodities themselves).
In some countries official support programmes for owners of small and medium-sized enterprises (e.g. in South Africa) or for the local processing of raw materials have opened new possibilities for cooperative-type industries and support structures.
Repositioning is made more difficult for most cooperatives by the high costs they bear for having to give precise account to their members and for regular, statutory and costly external audits (while many private traders in developing countries are never audited). They also usually finance information, education and consulting services to their members and in general have social as well as economic functions to fulfil. Liberalization could lead to lower auditing fees if the auditing were carried out by cooperative federations, thus leaving cooperatives with the choice of which social programmes to offer to their members.
Cooperative movements in many countries have undergone — or are in the process of — restructuring in order to adjust to a situation in which they face tense competition and in which the State can no longer afford financial support or even extension services to promote cooperatives (e.g. Zimbabwe). Frequently this restructuring results in a decentralization of functions from the central to the district level. It is to be hoped that this too will increase the decision-making autonomy at the primary level and help relations inside the movement to become "bottom up".
A new balance between the power of the State in cooperative affairs (its regulatory, supervisory and promoting role) and an autonomous cooperative movement has yet to be reached in many countries. Legislative reforms in various areas are needed to reflect the general change and to provide the necessary equality in status for cooperatives so that they might compete on even terms with investor-driven enterprises. In many countries the development of a legal and administrative framework to prevent the misuse of economic power by the newly freed private sector and to curb malpractice has not kept pace with developments in business and trade. Furthermore, although most national cooperative movements are adjusting to competition, not all bureaucracies are convinced that they can safely let go of their controlling power over cooperatives and their assets which have been — at least partially — financed with public money or privatize "their" capital assets (e.g. parastatal storage or processing facilities) by selling them to cooperatives. In other countries communist land tenure arrangements have to be changed. This does not necessarily imply a change to outright individual tenure regimes; but markets for land use rights have to be opened up and membership of cooperatives made voluntary and divorced from local land right patterns before agricultural collectives can change into marketing and supply cooperatives (e.g. in the United Republic of Tanzania).
In recent years many countries have responded to the aftershock of structural adjustment by issuing new cooperative policy statements, new cooperative legislation and/or amendments thereto, details of which are provided later in this report.
In some cases, previously state-run services have been privatized and become cooperatives, which has softened the negative socio-economic repercussions of structural adjustment. Senegal is a case in point. In response to structural adjustment, self-managed irrigation schemes, cereal banks, credit intermediaries, consumer shops and input supply and marketing cooperatives have been able successfully to replace parastatals in the management of food security systems, procurement of inputs, maintenance of rural infrastructure, the provision of certain social services and the establishment of savings and credit schemes. Hence they have contributed to the mobilization and efficient use of local and internal resources — a vital factor for the revitalization of developing economies. Savings and credit cooperatives have also helped to cushion the effects that cuts in the credit subsidies have had for many. Group financing, revolving funds and credit-marketing link-up schemes have, in some countries, become incorporated into the cooperative sector and now provide new opportunities for using financial resources locally, thus resulting in less time lost in terms of transaction costs than would be lost if everyone had to take their money to a city bank or keep it under the mattress.

1.2.3. Political effects

In many countries the cooperative movement has disassociated itself from the ruling party — if not all prior political affiliation (e.g. in Zambia). Not only are administrative functions being slowly but surely shifted from the national to the local level, this is also occurring with the general focus of political activity. At this point in time the localization of politics has not everywhere been sanctioned constitutionally. Yet the resurgence of terms such as "civil society" and "subsidiarity" in the public statements of international organizations and in national political agendas is so frequent that it may be assumed that this trend has already gained significant momentum. However, administrative decentralization and the transfer of real political decision-making power to the local level are not always met by the necessary corresponding allocation of additional financial resources to that level. Although this raises problems for the citizens in need of services in the general interest, it creates new opportunities for cooperatives. In building partnerships with local government, they can diversify their activities and/or be more effective in lobbying for regulatory change.

Not everywhere have local governments gained the capacities necessary to fulfil their new roles effectively. Unless they do, or can obtain assistance at a level close to the local level, the development contribution which decentralization promises in theory might not prove attainable in practice. Here cooperatives may be asked to assist in rendering services which will need to be remunerated, yet the relationship between local government and cooperatives could be fashioned in very many ways and the price for such services negotiated on the basis of local perceptions of value.

Cooperatives are also reporting that the process of democratization has made the need for literacy among their members even more important (e.g. Botswana).

1.2.4. New trends in cooperative promotion

The political and economic changes in developing countries have resulted in changed roles for the State, cooperatives and apex organizations alike. While the coexistence of "free enterprise (or commercial) cooperatives", "state-sponsored cooperatives" and "self-help groups" has become an accepted fact in many countries, the promotional roles of the State and apex organizations have been changed. This may be illustrated by the following:

In Zambia, the state marketing of agricultural products was stopped almost overnight whereas in Senegal, the State decided simply to dissolve state mechanisms and institutional structures of development and to transfer their functions directly to cooperative structures. In other instances the State planned a strategic and planned withdrawal (e.g. in Cameroon, Niger, Philippines, Singapore, the United Republic of Tanzania, Uganda), but this was not always accepted wholeheartedly (e.g. in Uganda) or successful. Elsewhere a policy of "muddling through" was chosen, without any but a cosmetic change to the salient policy and legislative issues. This usually resulted in weak control mechanisms encouraging negligence and unfair practices, unmotivated government officers, inefficient cooperative management and undetected errors, embezzlement, breach of trust and unsanctioned cases of corruption (e.g in the case of some credit cooperatives in Malaysia), thus tainting even further both the reputation of cooperatives and the image of the government service in charge of cooperative development.
In other cases, the Government legalized already existing but hitherto illegal, unregistered cooperative self-help organizations (such as ROSCAS, tontine, adjo, naam groups, harambee groups or gotong royong) or the establishment (and in some instances registration with simplified regulations) of alternative forms of cooperatives. This means that, alongside the formal cooperative sector, there are now a variety of cooperatives in many countries. These include: village groups in Burkina Faso, Mali and Niger; common initiative groups in Cameroon; economic interest groups in Senegal and other French-speaking African countries; credit cooperatives in Indonesia; and pre-cooperatives in Côte d'Ivoire.

As the State withdraws, cooperative apex organizations (federations, confederations, unions) have the opportunity to fill some of the vacuum left. Whether, however, they are ready to foster the kind of support that cooperatives need to reposition themselves as well as to supply long-overdue basic member education at local level, depends upon the various countries. In some instances, these tasks are fulfilled by NGOs and community organizations (e.g. Sadguru Water and Development Foundation in Gujarat, India, which has established more than 200 primary cooperatives in recent years and SEWA, also an Indian NGO, working with women cooperatives and "seed-loans"). In other countries cooperative apex organizations in the agricultural business sector have been edged out by non-cooperative crop-based organizations (in the United Republic of Tanzania, for example, the Association for Coffee, Cotton, Tobacco and Cashew Nut Crops). However, the Kenya Planters' Cooperative Union clearly demonstrates how, with accumulated experience, a cooperative federation can successfully reposition a whole cooperative sector and remain dominant in the industry.

Federations which until now have only had representative functions within a state-sponsored cooperative system (as was the case for most Asian federations) must learn how to provide support services and help their member cooperatives establish the necessary vertical and horizontal integration — including forward and backward linkages and the opening up of access to highly professional and well-focused management support services (in the fields of education and training, auditing, management consulting, project planning, capital restructuring, organizational development, etc.) — which primary cooperatives need in this process of transition; if they fail to provide this support, they may well perish.

On the whole, experiences in regard to possible new relations between the cooperative sector and the State would mainly suggest the following:

A mere transfer of Western policy, legislation or organizational models will not suffice. The development of a truly autonomous and self-reliant cooperative sector means that there must be room for experiments and mistakes. However, in order to reverse the negative trends produced by too much state intervention in past cooperative affairs, there must be recognition — if it is accepted that cooperatives form an integral part of overall socio-economic and political development — that the kind of support structures and political representation they need in developing countries go beyond those required by cooperatives in industrialized countries. The relationship between members and cooperative management, as well as those between cooperatives and local authorities are — for a whole host of reasons — different and the educational tasks ahead of institutions promoting cooperative development are much greater than in the past.
Without members' sustained support and involvement in business, capital and management, cooperatives simply cannot survive. This realization has been dawning upon those who set agendas for social and economic development. It is vital, though, that governments do not withdraw support too abruptly. Cooperatives and their apex organizations need time to mobilize their resources, build their strength and managerial capacities, and learn to cope with the pressures of competitive markets. Governments must therefore give cooperatives sufficient time and assess the cooperatives' capabilities before phasing out this support.

1.3. Countries in transition

In the former communist countries, cooperatives played an important role in the political system and the centrally planned economy. Communist-style cooperatives were instruments in the hands of government and the ruling party and fulfilled a number of functions. Indeed, they served to:

transform privately owned means of production into a special form of collective cooperative property as a transitional stage towards transformation into state property;
implement centrally made plans and adjust them, where necessary, to local conditions;
educate members in the communist way of life and offer them vocational training; and
fulfil social functions by providing social services to members, their families and other persons living in the area they covered.

These communist cooperatives (agricultural, handicraft and industrial collectives and consumer and housing cooperatives) differed substantially from cooperatives in the Western industrialized countries. However, as far as their objectives and operating methods were concerned, they were officially recognized as cooperatives by the ICA and United Nations agencies.

With the decline of communist regimes these cooperatives lost their ideological foundation and state support. As a result of liberalization and the transition towards a market-oriented economic system, the leaders of collectives, consumer and housing cooperatives had to reorient their business policy and develop entrepreneurial skills, which proved to be difficult after decades of working for the implementation of state plans. The privatization of collective property took various forms:

restitution of property to former owners (e.g. Czech Republic, former German Democratic Republic);
privatization by means of negotiable coupons, distributed to members, employees and former owners and sold to interested parties (Hungary, Russian Federation, Baltic States); or
dissolution and liquidation (in the case of unions and federations in Poland).

This left unsolved the question of the repayment of old debts — and in particular the repayment of loans issued by state banks to collectives and other communist cooperatives under the communist system.

In 1988, the former USSR adopted cooperative legislation which allowed the establishment of new autonomous cooperatives, with a minimum number of three members. These constituted the first legitimate form of private group enterprises — although they were only allowed to operate in a limited number of sectors (service providers, restaurants). In the absence of effective control mechanisms, this opportunity was largely used to legalize informal and illegal business activities and to carry on business for gain. However, while cooperative activities were legalized, the new cooperatives were subject to serious restrictions, such as heavy taxes and bureaucratic measures left over from the communist administration (e.g. limited access to land, loans, raw materials, spare parts).

During the early years of transition, governments were hostile to all forms of cooperatives and favoured the transformation of collectives into companies. Due to their lack of guidance and experience with the mechanics of a market economy, members of collectives often voted to retain the form of cooperation with which they were familiar rather than venture into unknown territory.

Efforts to restructure and "de-politicize" cooperative unions, federations and apex organizations proved to be difficult. Not only was there a lack of leaders with experience of autonomous, market-oriented cooperatives but the primary cooperatives were weak and disoriented through the transition process.

A major obstacle to the establishment of new service cooperatives of farmers, traders, craftsmen and members of liberal professions was the fact that, in the first years of the new regime, there were not enough private farms, businesses and individual entrepreneurs to constitute a membership after decades of collectivization.

Another obstacle was the lack of an adequate legislative framework regarding ownership of land, property rights and access to financial services. In addition, there was no effective administrative machinery to put the new legislation into effect. Although the economy was liberalized at high speed, reforms of government structures at national, regional and local levels lagged behind so that these structures remained largely unchanged.

The pace and success of transition have varied from country to country; however, some common problems have emerged more or less clearly:

after a decade of hasty redistribution of property, restructuring of former communist organizations and promulgation of new laws, there is need for a profound rethinking of known and tested concepts. A variety of models must be developed, not only to meet the requirements of the emerging market economy but also to cope with the challenges of the twenty-first century; which are very much the same all over the world;
after the dissolution or disintegration of the former communist collectives, especially in the rural areas, many of the social services which these collectives provided (day-care centres for children of working mothers and for the elderly, youth clubs, recreation and vacation facilities, construction and repair brigades, canteens) are no longer available. Local governments are unable to finance such services and the only way to re-establish them is to provide such services by means of organized self-help;
the most difficult task in the transformation of the economy and society — and the most important — is to change mentalities;
local promoters are needed to carry out member education among former members of collectives, many of whom have bad feelings against anything termed "cooperative". The general public in transition countries has to learn about cooperative values and principles, the benefits that can be derived from being a member of a cooperative in a market economy and the positive roles autonomous and self-reliant cooperatives can play in the new society;
the training of promoters and trainers is the key to the success of such endeavours. Indeed, multiplicators not only need to acquire knowledge about the cooperative way of doing business but have to be convinced themselves of the benefits of cooperation before they can convince others. In order to create a favourable environment for cooperative development in transition countries, the main emphasis must therefore be placed on elaborating clear concepts, models and guidelines for cooperative activities in these countries. These might provide a basis for the training of promoters and trainers, elected representatives and employees of cooperatives and inform members, the general public, policy-makers and administrators on cooperative self-help. The ICA identity statement might serve this purpose, together with the revised ILO Recommendation No. 127 and the United Nations Guidelines, elaborated by the Committee for the Promotion and Advancement of Cooperatives (COPAC).

1.4. Industrialized countries

In industrialized countries, cooperatives have gained recognition as an economic and social force. Service cooperatives of farmers, craftsmen, traders, members of liberal professions (such as medical doctors, pharmacists, tax consultants), consumers and tenants have developed from modest beginnings into large-scale, professionally managed business ventures in full competition with commercial firms. During the past four decades the number of primary cooperatives has been drastically reduced by mergers, while the number of members has increased. The economic efficiency and competitiveness of cooperative enterprises have thus been greatly enhanced, while the distance between individual members and their cooperatives has grown; in many cases, members have turned into mere customers and shareholders.

There is a clear tendency for large cooperative enterprises to detach themselves from their membership group and turn into management-dominated general interest enterprises.

A number of measures may be taken (and have already been taken in Japan) to prevent large cooperative enterprises from constantly trying to align themselves with the company model and, in the final analysis, losing their cooperative character, to preserve the cooperative identity of such large organizations and to make their managers aware of the fact that doing business the cooperative way may give them a competitive advantage over commercial firms. They must be made to understand that:

members are generally better customers than non-members;
business with non-members has to be restricted or even prohibited to avoid such business becoming the primary objective;
management can concentrate on high-quality services to members without continuously striving for shareholder value, because members are more interested in the quality and reliability of services than in high return on invested capital;
cooperation among cooperatives in integrated systems makes it possible to combine the advantages of closeness to members with those of large-scale operations; and
members are willing to support and control their cooperatives, provided membership is worthwhile and members are given real opportunities to exercise democratic control.

In practical terms, this means that: large cooperatives have to maintain and reinforce information and communication systems between members and management; build up representative structures; give office-bearers (voluntary leaders), managers and employees the opportunity to learn about the cooperative corporate philosophy; and use legislative mechanisms to tie cooperative managers to their task of member-promotion (e.g. prescribe transparency and accountability of managers towards members regarding services provided to them; promotion report as mandatory item of the agenda of general meetings; performance audit; liability of managers for failure to target membership promotion).

Alignment of cooperative enterprises with their commercial competitors also means that the tax treatment of cooperatives will be similar to those of commercial firms, if specific characteristics in their business policies and set-up no longer justify their particular cooperative status.

In many industrialized countries the established cooperative system is composed of a decreasing number of large primary societies and a similarly decreasing number of regional federations, unions and national apex organizations. In some countries there are relatively few newly established cooperatives (e.g. an annual average of 30 new cooperatives in Germany), whereas in others there is an increasing number of new cooperatives (e.g. Finland, United Kingdom).

After decades of continuous growth and unshaken belief in almost unlimited economic and technological progress, the limits of growth have become visible. People have become aware of the dangers of the destruction of the environment, the social tensions caused by long-term mass unemployment and the growing gap between the rich and the poor in an affluent society. Problems caused by undermining the social security network in a society characterized by increasing individualism, disintegration of family structures and an increasing number of elderly persons without family support, are becoming increasingly apparent. These serious changes in the social, economic, demographic and ecological environment in which cooperatives have to operate make it vital to reconsider the role that they will play in the future.

While in many European countries cooperatives are considered elements of the private sector, in other countries (e.g. Belgium, France, Italy, Portugal, Spain) cooperatives, together with associations and mutual insurance organizations, are perceived as part of a new, alternative or "third" sector of the economy, referred to as "économie sociale". In this "third" or alternative sector, the hierarchy of goals pursued is different from that of investor-driven enterprises. The well-being of the members — or more generally mutual solidarity, concern for the community and protection of the environment — rank above shareholder value. However, also in this "third" sector, economic efficiency and competitiveness remain preconditions for survival in the market-place.

After building full-service social welfare states for decades, governments have been forced to cut down on expenditure because of the growing burden of public debts. This has resulted in a reduction of public spending on social security and health services, causing hardship for the less advantaged groups of society. To fill the gaps left by the withdrawal of the State, private initiative and organized self-help are becoming increasingly important.

Growing unemployment is also caused by strategies of industry to modernize through merger and acquisition and to develop new labour-saving technologies which replace workers by robots. As a result, factories or enterprises belonging to large international conglomerates may disappear practically overnight — together with the jobs they used to offer, if this fits into the corporate strategy. In such an environment, large numbers of workers lose their jobs and tens of thousands of young persons remain without training opportunities or jobs, with the danger that they might be excluded from the mainstream of society.

There is an urgent need to deal with these problems which apparently cannot be solved either by the State or by the market. This is a classical scenario for cooperatives, applying the principles of self-help, mutual assistance, solidarity and social responsibility.

New forms of cooperatives are emerging in response to these problems. However, they are not always recognized as useful and supported by most of the established large business cooperatives. They often lack an appropriate legal framework geared to their needs, because the existing cooperative legislation has been drafted and/or amended over the years to meet the needs of large cooperatives (e.g. in Germany). In these cases, the organizational costs are too heavy for small cooperatives to bear. Furthermore, general support services for establishing new enterprises are often not accessible to such new cooperatives. A research project sponsored by the European Union (DIGESTUS) is currently investigating what changes have to be made in the laws governing business organizations in the European Union Member States to make the legal framework more favourable for small, self-managed firms or cooperative societies.

In some countries, special legislation (e.g. Italy, United Kingdom) or amendment of existing cooperative legislation (e.g. France) have already improved the legal environment for such cooperatives. Special organizations or programmes have been set up to disseminate information on new cooperative solutions for pressing social, economic and environmental problems (e.g. France, Italy, United Kingdom). These solutions include: community cooperatives; cooperatives for social solidarity; unions d'économie sociale as multi-stakeholder cooperatives; and associations pursuing non-profit economic activities (Japan).

1.5. From state-sponsorship to autonomy: Return to grass-roots democracy

1.5.1. Change in environment, changing roles

As a result of the changing environment in the developing countries and transition economies the roles of the State and cooperative apex organizations in cooperative development have altered. While some countries have taken radical measures to extricate the State and Party from the cooperative movement — such as Poland's decision to dissolve all politicized unions and federations of cooperatives and "start from scratch" — others have developed "planned transition" alternatives for a "softer" reorganization of the State to enable it to provide the necessary support services and the cooperative movement to shift from state-sponsorship to autonomy.

As the implementation of structural adjustment programmes continues and liberalization takes root in the developing world, the countries which were once the principal supporters of cooperatives are rapidly withdrawing their support for them. The vacuum thus created has made it imperative to look more closely once again into the role of the cooperative apex organizations to examine whether they might take over some of the functions held earlier by the State. To provide the necessary assistance to cooperatives as they undergo major adjustments, the apex organizations will need to reposition themselves in such a way as to foster support that expands and enhances the effectiveness of the emerging autonomous cooperatives.

The vacuum in the field of cooperative promotion at the grass-roots level is now being filled by some specialized local NGOs and community organizations in many developing countries. As mentioned earlier in the text, the Sadguru Water and Development Foundation in Gujarat (India) has assisted tribal groups in recent years to establish more than 200 primary cooperatives to generate employment and income. Local NGOs are also conducting member education programmes aimed at strengthening member participation in cooperative management. Another NGO in India (SEWA) has been helping groups of poor women to organize themselves in cooperatives and obtain small loans to initiate business ventures.

1.5.2. Globalization and regional trading blocs: Opportunities and risks for cooperatives

Globalization has reinforced the influence of market forces while overcoming many of the problems inherent in geographical distances through advances in communications and transportation. Rapidly declining telecommunications costs are tightening financial integration, opening up possibilities for new types of international trade and promoting the diffusion of ideas. Globalization has greatly increased the importance of multinational companies, NGOs and regional trading blocs and fostered policy coordination between countries; it has also created a need for mechanisms, national as well as local, to enforce credible rules.

The "East Asian Miracle" and the recent crisis have revealed both the promise and the perils of globalization. By liberalizing trade, economies in the region have enlarged the markets for their producers and derived productivity gains from competition both in the export sector and for import-competing industries. By attracting foreign direct investment, East Asia (and some of the Latin American countries) have secured access to capital, technologies and organizational expertise. This has enhanced industrial capability overall, boosted the modernization of infrastructure and brought about a much-needed overhaul of producer services such as banking. However, the crisis spreading across the region since mid-1997 highlights some of the risks associated with globalization. For instance, financial integration can magnify the severity and duration of shocks as a result of transmission effects. In the absence of robust safety nets, such as cooperatives, these can lead to a worsening of poverty and a deterioration in the political climate. Thus the change in the complexity of the development process caused by globalization makes it a major factor in future institution building and policy.

The globalization of trade and finance is a phenomenon in which cooperatives seem to take little interest, with the exception of cooperative banks such as Crédit Agricole (France), Norinchuki Bank (Japan) and Rabobank (the Netherlands), and insurance cooperatives operating under the umbrella of the International Cooperative and Mutual Insurance Federation (ICMIF) which has developed a global reinsurance system.

The regional trading blocs established in Europe (EU and EFTA), in the Americas (NAFTA and MERCOSUR), in Asia/Pacific (SAARC, ASEAN and APEC) and in Africa (SADC, PTA and CEEC) are building new barriers to protect the economies of member States. On the threshold of the new millennium, cooperatives are now discussing how to react to these economic groupings. In Europe, for instance, cooperatives have started discussing the impact of enlargement of the European Union (EU) on cooperatives and their members. In an ICA European seminar held in 1997, it was pointed out that cooperatives would have to confront some negative repercussions of European integration. The reality of the open market means that only the strongest will survive. In order to create economic strength, small and medium-sized cooperative enterprises will have to consider the possibility of mergers. In this case, care must be taken to ensure that cooperatives do not lose sight of their social responsibility, i.e. the care of their members.

Another parallel solution could be improved cooperation with cooperatives from other sectors. If the mutual assistance system among cooperatives works well, difficulties are easier to surmount. This is the basis of the 6th Principle of the ICA: "Cooperation among cooperatives".

Does enlargement represent an opportunity or a threat for cooperatives? The answer to this question is very complex, but one thing is certain: much depends on the cooperatives themselves, on national policies and on how cooperatives take advantage of this immense opportunity to minimize possible threats.

1.5.3. Decentralization brings new hopes and challenges

Alongside globalization, we are also witnessing a shift in the focus of political activity to the sub-national level — a process known as localization — which may be attributed to many causes. At the end of the cold war, many powerful forces were unleashed. The conspicuous failure of the centralized economic model became apparent and there was an international circulation of ideas among a growing and more politically aware urban population. There was also the belief that many governments were failing to realize broad-based development. All these factors are diminishing the authority of the centralized State, placing greater emphasis on local identities and creating a popular demand for greater participation in public decision-making.

Decentralization is the transfer of decision-making powers to more directly concerned, lower levels of government and administrative authority. The latest moves towards decentralization in Europe include the recent vote for devolution to a Scottish Parliament and the 1992 revision of article 23 of the German Constitution to give the German Länder a qualified say in European affairs. And in France, the 22 regions are steadily extending their original regional planning remit. In recent years, attempts have been made to turn prefecture governments (the most important local governments in Japan) from national organs into local political bodies that are much more responsive to local constituents.

In some regions, this is leading to the redefinition of borders and outright secession: 21 new countries have been created since 1990. In countries in which political accommodation has proved possible, the spread of localization is evident in the increasing share of sub-national governments in total government spending.

National governments have responded by decentralizing in a variety of ways, by granting local autonomy; by increasing local resources; or by shifting functional responsibilities to sub-national governments. In principle, decentralization can be a means of improving the efficiency and responsiveness of the public sector. By transferring decision-making powers to levels of the government that are closer to the beneficiaries, decentralization can give citizens greater influence over the level and mix of the government services they consume and greater ability to hold their public officials accountable. To date, however, it is not clear that the potential benefits of decentralization have been achieved. Meanwhile, local authorities in most countries need to develop the capacity and procedures to take advantage of the opportunity provided by decentralization.

The opportunities offered by decentralization should not be overestimated. Decentralization will not bring about the inclusion of marginalized groups in public life, but it does create the social and political structures that might make this possible. Cooperatives may be considered as an important structure in this context. It is widely known that cooperatives are more creative and responsive to the needs of their "communities". But the willingness to contribute to or participate in local development requires a minimum of resources and knowledge — and takes time. As self-government policy creates an initial temptation to expand services, cooperatives and other community-based organizations might have a better chance to build new partnerships with local government entities to diversify their activities.

1.5.4. "Participation": New partnerships emerging in development

The word "participation" has been part of the development vocabulary since the 1960s. At that time, however, it was usually understood to mean people's involvement in some very specific kinds of programmes. Today, participation is viewed as integral to the overall development effort. Global changes have had a major influence on this shift in approach: increasing democratization and more open political systems; more open economies and trading systems; higher levels of education in the developing countries and increased human resource capacity; more rapid and widespread forms of communication and information flow; and increasing concern about environmental and poverty issues.

Traditionally, many development operations have been subject to what might be termed the "external expert syndrome". In other words, outside professionals set the objectives of a project, undertake its analysis, prepare it for financing and manage the implementation. Local stakeholders might be "consulted", but are rarely allowed to have real influence based on their knowledge. This "syndrome" has reached staggering proportions in some regions and, according to a World Bank estimate, over 80,000 technical assistance expatriates were working in sub-Saharan Africa at an annual cost of around $4 billion a year.

Failing to involve local people in development has often led to resentment against so-called "external" approaches, a lack of commitment to projects and — ultimately — a failure to achieve desired results.

This shift in approach has also influenced the UNDP's funding modalities. From the early 1990s onwards, the so-called "agency execution" modality has been replaced by "national execution". A number of bilateral development agencies, including Canada, Germany, the Nordic countries, the United Kingdom and the United States have also made changes in their development assistance policies to support local institutions for participatory development.

Cooperatives are known to be schools of participation. This shift in development approach has therefore opened a new window for cooperatives to build partnerships with other players and stakeholders, such as local and national governments, donors, NGOs and international organizations. Cooperative organizations in industrialized countries have established specific development units in their structures to assist cooperatives in the developing countries. The Rabobank Foundation (the development arm of the cooperative bank of the Netherlands), Canadian Cooperative Association (CCA), KF Project Centre (Sweden), German Cooperative and Raiffeissen Federation, Crédit Mutuel (France), Legacoop (Italy) and Central Union of Agricultural Cooperatives (Japan) are among the builders of this new and participatory movement-to-movement development alternative.

1.5.5. The survival kit for primary cooperatives: Participation plus mergers

Cooperatives must recognize that they have to maintain their local community base to be able to respond to the qualitative issues on service delivery. At the same time, they must achieve all the leverage and economies they can to stay competitive. The decision to merge is vital for many cooperatives. Developing the will to merge, the management capacity to merge, and maintaining links to the membership, require leadership and professionalism and an appropriate organizational culture.

Cooperatives that simply grow big and fall to the threat of management take-over will fail commercially as well as cooperatively. If they fail to capitalize on their best competitive resource (i.e. their unique cooperative identity and membership), commercial failure will be certain. Competition will remain intense and the capital resources potentially available to their rivals are too great for them to survive without a competitive stance that differentiates them and mobilizes their stakeholders. The cooperative identity provides them with the competitive edge.

A shared culture and objectives could greatly facilitate the smooth implementation of mergers between cooperatives that were value- rather than institutionally-oriented. Focus on the democratic rather than the associational aspects of cooperation has created barriers to change. Emphasis on formal governance has left many members effectively excluded from involvement. The result of this is often the worst of all worlds — narrow parochialism from the lay leadership and low participation by the mass membership, on the one hand, and a cynical management which only views membership as a handicap on the other. Today the techniques and technologies exist to communicate, consult and involve vast number of members over great distances on frequent occasions. Ensuring regular contact with the members on terms that make sense to them and the other stakeholders could ensure that cooperatives enjoy leverage and locality after having merged.

2. The potential of cooperatives

2.1. The potential of cooperatives in general

The potential of cooperatives to contribute to overall economic, social and societal development was well described in the report to the 49th Session of the International Labour Conference (The role of cooperatives in the economic and social development of developing countries) when the process towards the adoption of Recommendation No. 127 of 1966 was set in motion. Since that time they have continued to fulfil an important role in creating (self-)employment opportunities, improving working and living conditions for millions and making essential infrastructure and services available in areas in which neither state nor investor-driven enterprises would venture.

Cooperatives have also done much to integrate poor, indigenous and tribal peoples, as well as women, into the mainstream of economies. Today their contribution towards the alleviation of migration pressures and the creation of jobs for young people, disadvantaged population groups or the handicapped, who would otherwise have been unemployed, has become increasingly important. The efforts of cooperatives to establish international trading and information networks, make optimum use of local and natural resources and make available educational and technological advances in remote areas, also bear witness to their specific aptitude to draw advantage from economic, social, ecological and cultural progress.

However, their path of development has varied from country to country. In some developing countries they were state supported to the point of becoming state controlled because it was believed they could achieve economies of scale, break the power of monopolies and help their members integrate into the economic mainstream. Cooperatives in communist countries became part of the concept of common ownership of means of production and were meant to help overcome human alienation. In industrialized countries they were seen to be private sector organizations, but also frequently received state support if and where their functions were deemed socially valuable.

State support

State support to cooperatives has not proven altogether satisfactory for the reasons outlined earlier in the text. In the case of many national cooperative movements state interference turned out not to be promotional but rather an obstacle to their inherent potential to create employment and raise working and living standards. In this respect, cooperatives have been unable to play as significant a role in social development as was hoped earlier this century. Lately, however, most governments have expressed their interest in a situation in which members could establish autonomous and self-reliant cooperatives in order to pursue their economic and social aims through self-help — or could restructure existing cooperatives along these lines. Yet, there is no blueprint for creating this situation easily; there are only ideas (see later sections of this report) which may be derived from economic theory and the scientific analysis of past successes and failures.

Competitiveness

We need to appreciate that cooperatives are private self-help organizations and that in order to be competitive and provide long-term economic and social advantages, they have to be simultaneously efficient in three different areas:

towards their clients/members, i.e. they must deliver the envisaged services;
institutionally, i.e. they must be both economically viable and socially effective;
towards their (external and member) financiers, because unless they also satisfy their interests they will be unable to obtain the necessary funding.

Being efficient in these three areas implies different things depending upon the environment or sector concerned. Commercial farmers, for example, differ considerably from part-time (industrialized Western European countries) or subsistence farmers (developing countries and transition countries) — both with regard to the services and economic results they expect and with regard to their education, economic knowledge and the kind of relationship they wish to have with their cooperative. Furthermore, these various groups face different planning realities: modern commercial farmers look at monetary markets and modern policy and law, while most subsistence farmers are concerned with local, often traditional, law and their standing in the community which is frequently fairly closed. People who are entirely integrated into markets and the modern legal system also have different expectations of the role they can or should play in running this organization than people who have so far always relied on customary systems for their access to resources, their legal status and their social security. And last but not least: it might be easier for a commercial cooperative in an industrialized country to obtain finance for growth than a new rural cooperative in a developing or transition country attempting to obtain start-up finance.

During the last century — and in the first half of this one — a large number of cooperatives in industrialized countries developed into successful and well-funded movements because they were innovative (e.g. the Raiffeisen cooperatives in Germany). They often achieved this success despite unfavourable environmental conditions — and even used these conditions to their advantage in the course of their activities. Today, however, although many cooperatives have reached economic scales — sometimes with significant support from the public sector — which allow them to compete effectively, many of them have accepted high proportions of non-member capital, given up being truly member-driven organizations and/or are in the process of transforming into investor-driven enterprises. On the other hand, numerous new cooperatives are being established (in developing countries and transition countries as well as in industrialized countries), mostly in reaction to changing lifestyles and levels of public service provision. These new cooperatives frequently represent the type of organization people turn to in their search to obtain what may be termed "club, collective or public goods", which the State cannot or does not deliver. Interestingly enough, infrastructure cooperatives today represent the strongest of all cooperative sectors in Romania.

International experience

International experience shows that the critical factors for the success of a cooperative are usually tied to its own membership group (levels of participation and identification) as well as to external (environmental/political) factors and that internal obstacles to motivation and active participation can be as serious as all external obstacles taken together. The difference is that internal obstacles first can be relieved at least in part by clever strategic management of group and business processes, while a single cooperative has problems dealing with external obstacles — particularly those resulting from adverse property rights, which are more difficult to overcome in countries where patrimonial élites have been in power for a long time (e.g. in several African countries) or where whole national systems of property rights have to be newly created as in many countries in transition in Eastern and Central Europe and in Asia.

What cooperatives can offer

Interpreting this evidence further, it becomes apparent that cooperatives can only achieve their comparative performance advantage over other organizations under specific local circumstances and by means of appropriate organizational norms. This knowledge still has to be applied to the design of development policies — and therein lies the difficulty. Yet, economic theory explains the comparative advantage that cooperatives have over other types of organizations in that they:

develop a transaction cost advantage in mobilizing member initiative and resources;
show a particularly high level of flexibility and adaptability to changing market situations;
can successfully produce for or develop demand in niche markets due to their limited size;
can build up own resources (e.g. indivisible capital, which in cases is a cheaper source of finance than any other) which make them truly autonomous, able to survive independently of external support and able to compete in the relevant markets;
can become important local financing institutions, combining the local need for safe-keeping with that of entrepreneurial access to credit;
inspire innovation, diversification and specialization in their members' enterprises;
establish self-financed federative systems (e.g. regional coops or national unions) for consulting, training, marketing and political representation; and
positively influence the institutional and normative patterns of local and national environment and international markets.

Evidence further points to the comparative advantage of cooperatives in social terms because they:

are largely dependent on the membership of natural persons and thus usually locally bound, owned, directed and controlled;
are the first to face the needs of the local population, are responsible (and hopefully accountable) to them and can rely on the knowledge of local circumstances as well as development potentials in planning their actions. This seems to be one of the prime reasons which render them uniquely effective for the privatization of public services and as suppliers of local infrastructure;
instil a high level of identification of the group with the organizational aims;
promote local knowledge and understanding of democratic processes;
avoid the development of a recipient mentality on the part of members;
are institutions capable of managing communal properties without either widening the gap between ownership and control rights or squandering precious resources by merely administering what should be wisely utilized — both in terms of the local economy and ecology;
cannot run away merely because the capital employed can earn more elsewhere, thus giving local citizens a good measure of certainty in their own economic planning;
bring members closer to their aims even if — or particularly when — environmental conditions have changed to their disadvantage.

Apart from these direct advantages, cooperatives are also seen to have indirect and longer term social and economic effects, which influence entrepreneurial attitudes and environmental conditions. Indeed, they are able to:

initiate or support group processes resulting in the replacement of status thinking and misplaced fear of social reprisal by achievement motivation and confidence for the individual, both essential pre-conditions for local entrepreneurship (and particularly important in developing and transition countries);
develop new, democratic structures of social control in primary units by integrating local habits, value systems, traditions and customs;
limit the risk and multiply the gain from local experiments, spread local knowledge and allow for efficient use of public funds spent on training and consulting services to small businesses, farmers, craftsmen and women.

2.2. Economic activities

2.2.1. An overview

Cooperatives have significantly contributed to economic growth throughout the world. The United Nations estimated in 1994 that the livelihood of nearly 3 billion people, or half of the world's population, was made secure by cooperative enterprises. Nearly 800 million individuals are members of cooperatives today, compared with about 184 million in 1960. They account for an estimated 100 million jobs and are economically significant in a large number of countries providing foodstuffs, housing, financial and a wide variety of consumer services.

The macroeconomic significance of cooperatives may be seen by the market shares they hold. In Burkina Faso, agricultural cooperatives are the largest producers of fruit and vegetables for the national market and in Côte d'Ivoire they are responsible for 77 per cent of cotton production. In Uruguay cooperatives produce 90 per cent of national milk production and export 70 per cent of the surplus wheat production. In the United States, in 1998, 33 per cent of the agricultural market was comprised of cooperatives and rural electricity cooperatives operated more than half of the electrical lines, providing power to more than 25 million people in 46 states. In 1997, the contribution of cooperatives to GDP in the Philippines was 16 per cent. During the same year, cooperatives in Denmark were responsible for 94 per cent of milk processing, 69 per cent of farm supply and 66 per cent of cattle-slaughtering. Folksam, a Swedish insurance cooperative, held 48.9 per cent of the household insurance market and 50 per cent of group life and accident insurance. In the Republic of Korea, 40 per cent of local agriculture was marketed through cooperatives.

Another impressive macroeconomic fact lies in the contribution cooperatives make to the maintenance of self-employment as well as the direct employment they are able to create worldwide. In transition countries productive and workers' cooperatives have traditionally been the largest employers in the economy. In the Russian Federation, the consumer cooperative movement reported 511,300 employees in 1998, while 92,000 persons were employed in the Union of Agricultural Cooperatives and Societies in the Czech Republic in 1997. In a number of African countries, cooperatives have become the second largest employer — surpassed only by the government. In this region the majority of salaried jobs have been created by activities in the agricultural sector — agricultural marketing, production, processing, etc. In South Africa alone agricultural cooperatives employed about 100,000 people in 1996; in Morocco the corresponding figure was 42,000.

In Brazil, it is estimated that the Organization of Brazilian Cooperatives (COB) provides over 296,000 jobs, while Unimed do Brasil, a health cooperative, appears to employ 148,000 people. In India, cooperatives have, it is calculated, created over 13.8 million jobs. In industrialized countries the direct employment created by cooperatives is much higher than commonly held. In Japan, it was reported that the consumer cooperative movement provided 58,000 full-time and 95,000 part-time jobs in 1997. The cooperative sector of the EU alone seems to have offered more than 3 million jobs in 1995. At the end of 1992, the European Association of Cooperative Banks reported that European cooperative savings and credit institutions had created 425,000 jobs; the General Committee of Agricultural Cooperation in the EU (COGECA) and the Union of Independent Retailer Traders' Groups in Europe (UGAL) alone had 720,000 and 719,000 employees, respectively. This list is not exhaustive.

The greatest direct economic impact of cooperatives at the micro level surely lies in the additional income they create for their members. They achieve this by: securing higher prices for their products (marketing cooperatives); lowering input costs — thus either enabling members to use higher input levels, achieve higher production levels and/or have larger profit margins (supply cooperatives for farmers and craftsmen); employing their members (productive cooperatives), introducing innovations; offering insurance (insurance cooperatives and mutual societies) and credit at a more favourable overall cost; and paying reasonable interest on savings in addition to saving members transaction costs by being accessible locally (savings and credit cooperatives). Consumer service cooperatives help their members obtain consumer goods (consumer cooperatives) at lower prices; deliver education (university cooperatives); or lower their cost of housing (housing cooperatives), travel (tourism cooperatives), medical or elderly care (e.g. care cooperatives).

Means by which cooperatives deliver economic activities

The most successful cooperatives promote their members by improving:

the productivity of their subsistence activities or in their own enterprises;
their market position as producers, consumers or employees;
their access to material and non-material resources;
the predictability of incomes, production levels and prices;
their living conditions through the provision of social and physical infrastructure;
their know-how, formal or informal knowledge, standards of information or education and training.

Drawing on recent research, most of the comparative advantages of cooperatives over non-cooperative NGOs and conventional business organizations may be attributed to their lower transaction costs, which may be explained by:

their particular organizational form: their specific combination of hierarchies in executive and implementing management on the one hand with democratic decision-making and market forces on the other;
their ability to lower information costs, e.g. by overcoming asymmetric systems of information;
the fact that they limit production and market-related risks for their members; and
the fact that they carry out mutually dependent rather than one-sided investments.

In the past, it was frequently held that cooperatives had two major advantages: their ability to achieve economies of scale and to break the power of monopolies. However, this is not so relevant today because wherever economies of scale matter most, purchasing the relevant produce from large firms usually proves more lucrative than production inside a cooperative. Furthermore, the monopolies that cooperatives were able to break in the past were usually of a local nature, whereas they could hardly ever tackle regional or national monopolies.

Cooperative advantages

Cooperatives may also have advantages when it comes to horizontal and vertical integration. They can relate particularly well to other cooperative enterprises with which they have forward or backward linkages; however, even private firms are frequently eager to work with cooperatives since they rely less on external short-term capital than investor-driven firms and, by virtue of that fact, face less speculative influence from non-sector stakeholders. Decisions on cooperation are also usually made by — or at least in the interest of — members and according to a whole range of criteria. Cooperative collaboration frequently encompasses a long-term view of interests, a member-focused appreciation of risks and allows for interdependent investments by both members and cooperatives which are only possible because members share the same information and ownership status. This in turn increases the trust members and cooperatives have in each other and heightens the level of loyalty over and above that which could be built up with any other partner.

Small savings and credit cooperatives — which frequently played a role in the transition from subsistence to market economies and were of vital importance in Eastern and Central European countries in transition and during structural adjustment in African and Asian countries — can, just like local moneylenders, benefit a great deal from their cost advantage with regard to obtaining information on their customers/members. The knowledge gained (and distributed) by the cooperative may be called "coordinative knowledge" and represents a valuable asset which is equally important in other kinds of cooperatives. Agricultural cooperatives, for example, can profit much from their members' knowledge on local soils and micro-climates when it comes to making mechanization available or introducing new crops.

The secret of the potentially lower information cost and investment trust advantages of cooperatives lies in the fact that knowledge remains accessible in a decentralized manner, yet it is still available for coordination. The specific trade-off between common and individual knowledge of potential competitors, that is to say the "economic use of knowledge and learning" is at the root of many comparative advantages of cooperatives versus investor-driven organizations and official intermediaries.

In general cooperatives can derive the maximum economic gain from their comparative organizational advantage if they are active in the following areas:

supporting members by supplying them with inputs for their agricultural and non-agricultural production, trade and service activities;
processing and marketing of primary products and services;
collective production of consumer or industrial goods or service delivery by members;
collective production and supply of local infrastructure (public goods), such as education, training, health and care services, energy, drinking and irrigation water;
information, education, training and consulting services (e.g. improving the entrepreneurial competencies and innovative capacities of their members);
supporting their members in the exercise of their political, economic and modern legal rights (including opening access to institutions of modern law, encouraging the use of members' full credit worthiness, creating access to markets and developing markets where none existed before, etc.).

To what extent cooperatives will have an economic impact on member households or enterprises will depend, however — apart from their membership composition — primarily upon their degree of participation in the setting of objectives, monitoring and control processes, as well as upon the availability of the necessary capacities. That is precisely why cooperative management has to be different from the management of investor-driven firms.

2.2.2. Trends in cooperative delivery of economic activities

Agriculture

The experience of agricultural cooperatives in grain marketing, storage management, consumer and input-supply, as well as in the management of agricultural credit, increased their status in some countries (e.g. in Zambia), while they lost membership and support in others (e.g. Ethiopia). In the Czech Republic, on the other hand, most collectives transformed successfully into service cooperatives and the sector has remained strong, showing 92,000 employees at the end of 1997. In order to meet the challenges ahead they will have, nonetheless, to enhance their business skil