Paper Presented at the 2024 Lancang-Mekong Agrıcultural Cooperation Forum (Nannıng, 3rd to 6th December 2024)

Can the ASEAN Roadmap for Cooperatıves be taken as a model for the development of Central Asıan Cooperatıves?

Five countries of the former Soviet Union’s Central Asia – Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan – have made huge strides in their efforts to reform tenure rights in agricultural land and change the traditional Soviet-style farming structure to a model closer to market principles (Lerman and Sedik, 2009). Two of the five countries – Kazakhstan and Kyrgyzstan – now recognize private ownership of agricultural land and allow land market transactions; Tajikistan retains state ownership of land but nevertheless allows land market transactions in the guise of transferable land use rights; only Uzbekistan and Turkmenistan retain the Soviet model of state-controlled rigidly nontransferable land, but even in these two countries land use and agricultural production have massively shifted from large collective farms to small leaseholders (Lerman, 2013).

According to the study undertaken for the FAO in 2013, cooperatives in Central Asia carry some common problems and weaknesses most of which changed to some extent during the transition from traditional Soviet-style structures to more market oriented models. These problems and weaknesses will be given in summary later in the paper.

Kazakhstan

OECD work to support the development of agricultural co-operatives in Kazakhstan began in 2014, within the framework of the Kazakhstan Regional Competitiveness Project, a joint initiative of the European Union and the government of Kazakhstan to promote regional competitiveness and inclusive growth in Kazakhstan’s regions. As part of the project, the OECD proposed three main recommendations to support the development of a grassroots co-operative movement in Kazakhstan’s agricultural sector (OECD, 2019):

  1. The legal framework has improved substantially with the adoption of a new law on agricultural co-operatives in October 2015, as well as the removal of three preexisting laws on co-operatives. Important tax concessions were extended to agricultural co-operatives, and registration procedures have been streamlined. Efforts to further strengthen the legal framework should continue, by ensuring that co-operative surplus (generated from transactions with members) is not subject to income taxation. The Tax Code could also be amended to facilitate transactions between co-operatives and their members and to mitigate any tax-related disincentives for households and individual farms to join agricultural cooperatives.
  2. Education and information services have received much attention: agricultural co-operative development programs were established in each region, and a national registration and system of statistical monitoring was launched. To further build awareness and trust in co-operatives, a more comprehensive education and training programme is needed, along with stronger governance structures, support for secondary and tertiary co-operative organizations, and better access to targeted extension services.
  3. Financial support has been poorly targeted, with around 60% of newly registered co-operatives consisting of inactive or “false” co-operatives established chiefly to secure public subsidies. Additional reforms should focus on helping co-operatives to better leverage internal and external sources of financing, reducing dependency on government support, improving the long-term sustainability of co-operatives, and encouraging private sector participation in co-operative financing.

Detailed 2014 Recommendations:

1. Reform the legal and regulatory framework for agricultural co-operatives:
1.1. Develop a single law for cooperatives, taking into account international good practice
1.2. Reduce the tax burden on agricultural co-operatives
1.3. Simplify registration procedures for co-operatives

2. Provide education, information services and technical assistance to agricultural co-operatives
2.1. Educate farmers to build awareness about the benefits of co-operatives
2.2. Provide information services and technical assistance to co-operatives

3. Provide targeted financial support for the establishment of agricultural co-operatives.
3.1. Develop targeted financing instruments for agricultural co-operatives
3.2. Encourage greater private sector participation in co-operative financing.

The strategic partnership agreement given below between China Co-op and Kazak cooperatives is a good example about the implementation of the ICA principle on “cooperation among cooperatives” (6th principle).

Kyrgyzstan

Attempts have been taken in recent years by the International Cooperative Alliance (ICA) to open-up the Kyrgyz cooperatives to outside world and assist in improving the policy and legal status. Experts were invited from different countries including China, Finland, Russian Republic, Turkey, India, ILO and Euro-Coop, and the expert group also visited the Kyrgyz Parliament. 

Memorandum of Understanding on the Establishment of Strategic Co-operation

Between

All-China Federation of Supply and Marketing Cooperatives ACFSMC and

National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan

(Beijing, September 2024)


2. Recognize that deepening all-round cooperation between the two countries’ cooperatives under the current international situation is an important initiative to respond to the Belt and Road Initiative, deepen cooperation between the two countries in the fields of agriculture and cooperatives, and promote the high-quality development of agriculture in their respective countries.
3. Recognize that strategic cooperation between Chinese and Kazakh cooperatives is an effective way to promote practical exchanges and cooperation between the two countries in the field of agriculture and cooperatives, and that the two sides should make joint efforts to promote exchanges and visits between high-level and operational delegations of cooperatives, as well as cooperation between the two sides in the areas of strategy and policy.
4. Recognize that giving priority to trade in agricultural materials, agricultural products and daily consumer goods and cooperation in the agricultural industry chain are of great practical significance to the fulfillment of the purposes and principles of cooperatives…

Cooperative experts after the workshop in Bishkek visited the Parliament and discussed the draft cooperative policy and law with the committee members.

Most cooperatives in Kyrgyzstan are production cooperatives – successors of former collective farms. There are hardly any “pure” service cooperatives, although production cooperatives partially fulfill the function of service cooperatives by providing farm services also to non-members. Cooperatives play a positive role in rural life (Lerman & Sedik, 2017):

  • Sufficiency of services in any given area improves when cooperatives step in to provide the services;
  • Farmers’ perceived wellbeing is higher for cooperative members than for outsiders.
  • Taxes are not perceived as a major issue by either cooperative managers or farmers. Tax code provisions exempting cooperatives from profit tax and VAT are generally respected.
  • Government support plays a minor role in agriculture: most cooperative managers and farmers surveyed report that they do not receive any support. This, however, has not led to a major outcry with demands for more government support in the survey.
  • Formal cooperation manifested in membership in cooperatives is very limited among the farmers surveyed. Informal cooperation is much more widespread, and the substantial gap between the frequency of formal and informal cooperation (8% and 22% of farmers surveyed, respectively) clearly suggests that there is a large potential for development and adoption of service cooperatives in Kyrgyzstan.

Uzbekistan

The Ministry of Agriculture, the Ministry of Economy and Industry of the Republic of Uzbekistan jointly with the Council of Farmers, farmers and owners of backyards of Uzbekistan, following the results of the experiment, before December 1, 2020, were instructed to make proposals on the advisability of extending the institution of a cooperative union of agricultural associations in other regions of the country.

The document establishes that members of an agricultural association may be farmers and owners of backyards, as well as other individuals and legal entities engaged in the production and provision of services for procurement, transportation, storage and marketing of fruits and vegetables. Membership in them is voluntary and is carried out on a share basis by introducing membership fees (shares) in the amount stipulated by the constituent documents.

Members of the agricultural association are not liable for obligations of the agricultural association and bear the risk of losses associated with activities of the agricultural association within the limits of the value of their contributions (shares), unless otherwise established by the constituent documents.

From March 1, 2019, an order is introduced in accordance with which members of agricultural unions specialized in the production of fruits and vegetables have the right to independently decide on the placement of agricultural crops and their subsequent replacement, and from January 1, 2020 – with the condition that, by February 1 of the harvest year, the relevant data be entered into the register of fruit and vegetable crops (Uzbek farmers to be united in cooperatives, 2019).

Turkmenistan

According to an FAO 2012 report, the agricultural sector represents only 19 percent of GDP in Turkmenistan. Although agricultural reforms involving distribution of land to individual farms and restructuring of large collective farms have been adopted the state still exercises substantial control over the agricultural sector. Peasant associations comprising individual agricultural producers, leaseholders, household plots, and daikhan farms control about 70 percent of the total land area. About 20 percent of the land is under state reserve while the remaining 10 percent is used by non-agricultural operators (The Global Good Practices Notes, nd.).

The ‘only’ legal instrument found in Turkmenistan is Law of Turkmenistan about consumer society, dated June 3, 2017, No. 565-V. This law determines legal, organizational, economic and social basis of creation and activities of consumer societies and unions (CIS LEGISLATION, nd.).

Tajikistan

Cooperatives were created in Tajikistan under the Agrarian Reform Programme for 2012-2022, as they were identified as a key drivers of agrarian reform. However, since the concept of independent and voluntary cooperation is new for the country, many cooperatives face challenges, including a limited understanding of cooperative business models and an unconducive legal and policy environment.

Cooperatives in Tajikistan are fledgling efforts which are badly in need of training and guidance. The general feeling is that cooperatives, once launched fairly effectively with donor assistance, are left pretty much on their own, without follow-up assistance, monitoring, and guidance. Cooperative managers naturally complain of difficulties with purchasing machinery or raising credit, but beyond that it is clear that they are untrained and without experiencing in managing a service cooperative. All cooperatives have formal business plans, but managers need training and guidance on how to implement the plans and how to work toward achieving their strategic objectives. Training and learning programs are needed for existing and potential cooperative managers (and also members). The field impressions in Tajikistan can be summarized as follows (Lerman, 2013):

  • The new cooperatives in Tajikistan are voluntary grass-roots initiatives, created with initial donor guidance and financial support;
  • They mainly engage in delivery of services, not joint production;
  • They are often informal and created in a sporadic manner;
  • They are characterized by small scale and limited scope of operations.

Major problems and weaknesses of cooperatives in Central Asia

Taking the above-mentioned FAO study in mind, one can summarize the most common major weaknesses of cooperatives in Central Asian countries as follows:

  1. Cooperative identity crisis: Almost all cooperatives were seen as if they were government-controlled economic and service entities, rather than ‘real’ cooperatives owned and controlled by members.
  2. Legal framework: Cooperatives did not have a separate legal framework taken ICA principles as a basis.
  3. Access to finance: Cooperatives did not have a unique source of their own for financing.
  4. Capacity building and training: Cooperatives did not have their own training institutes, only specially-established government/party centers trained cooperative managers to serve for the interest of the government.
  5. Lack of cooperative apex bodies: Existing cooperative apex bodies were created earlier and run by the government/party, rather than by cooperatives themselves.
  6. Lack of ‘sense of ownership’ among members: Members (or rather users) did not have a sense of ownership as cooperatives were established by the state through a top-down approach, without member participation.
  7. Poor community responsibility: Cooperatives did not take into account of the changing needs of community they live in due to centralized decision-making process.
  8. Lack of international cooperation: Cooperatives are not yet members of the International Cooperative Alliance (ICA)

China–ASEAN relations

China became a dialogue partner of ASEAN (Association of South-East Asian Nations) in 1991. In 2003, relationship was elevated to strategic partnership. To enhance economic cooperation, China has hosted, since 2004, an annual China-ASEAN Expo in Nanning. In 2015, 10 ASEAN leaders signed a protocol to upgrade the ASEAN-China FTA.

China-ASEAN Chamber of Agricultural Commerce, abbreviated as CACAC, was established with the permission of the State Council of China, the approval of the Ministry of Civil Affairs of China, and the support from the ASEAN Secretariat on December 26, 2007. It’s an organization concerning foreign affairs under the charge of All-China Federation of Supply and Marketing Cooperatives (CHINA CO-OP), the first international chamber of commerce with “China-ASEAN” in the title in China, and the only international organization in the field of China’s agriculture and agricultural materials with foreign investment and trade cooperation. It is also a practitioner of the Lancang-Mekong Cooperation Fund Project. On the occasion of the seventh anniversary of Lancang-Mekong Cooperation, CACAC specially launched a series of activities of Celebrating Lancang-Mekong Week 2023 and Enjoying Lancang-Mekong Friendship to publicize the positive outcomes of Lancang-Mekong cooperation in the field of agriculture and agricultural materials, reflect the participation and achievements of ACFSMC and CACAC in Lancang-Mekong cooperation projects, showcase the good effect and great potential of Lancang-Mekong cooperation, and raise the awareness of Lancang-Mekong cooperation, thus further promoting Lancang-Mekong cooperation (CACAC Secretariat, 2023).

It is important to highlight that the responsibility about relations and administration of CACAC from China side was given to ACFSMC which increased the role of CCHINA CO-OP and made possible for cooperatives to take a greater role in the affairs of CACAC.

ASEAN Policy Paper: ASEAN Roadmap for Enhancing the Role of Agricultural Cooperatives in Agricultural Global Value Chains, 2018-2025

The ASEAN Sectoral Working Group on Agricultural Cooperatives (ASWGAC) has developed a policy paper on agricultural cooperatives in 2018 entitled ‘ASEAN Roadmap for Enhancing the Role of Agricultural Cooperatives in Agricultural Global Value Chains’ (ASWGAC, 2018).

The paper was prepared on the basis of a study conducted among ASEAN Member States (AMSs), the most important support needed by agricultural cooperatives are in the areas of institutional and capacity building, competitiveness, access to markets and access to finance to improve their positions in specific value chains. In addition, AMSs also work in many other areas to assist agricultural cooperatives. In order to strengthen the participation of agricultural cooperatives in agricultural global value chains, ASEAN has been facilitating a dialogue on agricultural cooperative development through the ASEAN Sectoral Working Group on Agricultural Cooperatives (ASWGAC) and the ASEAN Centre for the Development of Agricultural Cooperatives (ACEDAC). One major need identified is the creation of a roadmap for agricultural cooperative development in ASEAN.

The objectives of the roadmap were explained in the text as follows:

  1. Provide guidance for enhancing participation of ASEAN agricultural cooperatives in the agricultural global value chains;
  1. Advance the implementation of Strategic Thrusts 2 (Enhance trade facilitation, economic integration and market access) and 5 (Assist resource-constrained small producers and SMEs to improve productivity, technology and product quality, to meet global market standards and increase competitiveness in line with the ASEAN policy Blueprint on SME development) of the ASEAN Cooperation in Food, Agriculture and Forestry 2016-2025 (FAF 2025); and,
  1. Serve as a framework to harmonize agricultural cooperatives’ legal structures and institutional arrangements within and among ASEAN member countries and share best practices.

Roadmap for 2018-2025

In this roadmap, four main pillars have been identified as the foundation for agricultural cooperative development in ASEAN towards 2025:

  1. Institutional and capacity development;
  2.  Competitiveness;
  3.  Access to finance; and
  4.  Access to markets.

Under each pillar, measures have been identified that are equally important and should be simultaneously strengthened to make ASEAN agricultural cooperative development successful in the long run.

This initiative of ASEAN about development of agricultural cooperatives is an important step forward and should be taken as a basis by each of the ASEAN countries, particularly cooperatives and their apex organizations. It is important to note that agricultural cooperatives, as mentioned in the roadmap, have been taken into account as part of the ASEAN development policy.

The following points in the roadmap should particularly be highlighted:

  • Institutional development and capacity building
  • Support good management systems and human resource development initiatives
  • Formulation of policies for enabling environment and legal framework
  • Strategies to be developed on how agricultural cooperatives can stay competitive
  • Fight against climate change and support climate-resilient varieties and technologies
  • Incentives for consolidation or merger of small agricultural cooperatives to attain economies of scale
  • Promotion of global value chains through agricultural cooperatives
  • Promotion of sustainable finance for agricultural cooperatives
  • Access to new markets, using market information systems.

For the purpose of implementation of the roadmap and for other purposes, a special entity was formed in 1977 entitled Asean Cooperative Organization (ACO), but so far no information has been found about its activities.

Can ASEAN Roadmap be a model for the development of agricultural cooperatives in the Central Asian Countries?

It can be said that cooperatives in the ASEAN countries are economically more advanced compared to those in the Central Asian Countries. Some cooperatives in ASEAN are taken in the ICA list of the largest 300 cooperatives of the world. In addition, some cooperatives in ASEAN have membership not only in the world’s top cooperative organization, ICA, but also some regional and sectoral cooperative organizations (ACCU, ICA Asia-Pacific, etc.).

In recent years, cooperatives in Central Asia have been part of the ICA’s development agenda due to their development potential and strategic location. It is therefore important to note that the ASEAN roadmap for agricultural cooperatives can be taken as a model to develop a unique strategy.

Partnership with Central Asian cooperatives: What can be the priorities?

First of all, for policy and legal framework for cooperatives, a common understanding among Central Asian governments is needed. For this, not only the Roadmap, but also the UN Guidelines on Cooperatives (2021) and ILO Recommendation No. 193 (2002) should be taken into account.

Second, cooperatives need some sort of a strong “recognition” of the governments about their role in agricultural development and marketing. In this particular field of action, the Roadmap can help.

Third, cooperatives in Central Asia should reach economies of scale by bringing up their economic potential to the negotiable level. This will give them a chance to take part in regional expo arrangements to sell their products and to meet with their counterparts from other countries as well as learn from them best practices. It should be highlighted here the important role played by CHINA CO-OP by bringing together the representatives of the ASEAN and Central Asian cooperatives in this important Expo in Nanning.

To share good practices, training and networking among the two sides is also important. So, not only this, they can also understand the value of being part of the global value chains and access to new markets.

China Co-op is pioneering in the establishment of this partnership between Central Asia and ASEAN cooperatives through bringing them together in Nanning and giving a good chance for the Central Asians to learn from the ASEAN experience.

ASEAN can also benefit from this partnership. Central Asian products can reach ASEAN consumers through cooperatives directly without any intermediaries. In return, ASEAN products can also meet the Central Asian consumers through cooperatives of both sides. This indeed creates a win-win situation.

A good example in setting up partnership and design joint work schedule to achieve common objectives is the MOU developed between ACFSMC (China Co-op) and Kazakhstan cooperatives (see the text in box).

It may be suggested that the Asian Cooperative Organization (ACO) can be activated as a first step to strengthen collaboration among member cooperatives and implement and monitor the Roadmap.

ASEAN
Finally, it will have a very strong impact on the process if the Belt and Road Initiative (BRI) of China includes cooperatives as ‘civil society’ development partners in its investment programs at the grassroots level and it will accelerate the process of development and collaboration between Central Asia and ASEAN. In addition, BRI can establish linkage between cooperatives and other social economy organizations among cooperatives in other countries including Mekong countries and Mongolia. Mongolia is important because it was the UN member state who proposed the UN International Year. Also, the government pays attention to the social role of cooperatives.

A final reminder: The UN has declared, second times, thanks to the Mongolian permanent representative in the UN, 2025 as International Year of Cooperatives. Therefore, in the process of revision of the Roadmap in 2025, it is recommended that the forgotten references should be included. These references are Sustainable Development Goals of the UN, ILO Recommendation on the Promotion of Cooperatives, No. 193, UN Guidelines on Cooperatives, ICA and cooperative values and principles, artificial intelligence, social economy, platform cooperatives for employment creation, role of cooperatives in mitigating climate change and renewable energy, activation of ACO, etc.

ASEAN

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