Toward a New Cooperative System in Vietnam (1996)

   This document has been made available in electronic format
    by the Food and Agriculture Organization of the United
        Nations and the Committee for the Promotion and 
                  Advancement of Cooperatives

                        SD DIMENSIONS
                                                        May, 1996
         Toward a New Cooperative System in Viet Nam
                     by Bernd Harms 
           FAO Cooperatives Development Consultant 

1.   Introduction  

In 1986, the Government of Viet Nam initiated a reform process
to move from a centrally planned economy to a market-oriented
one, with elements of state regulation. This ongoing process
requires institutional reform in agriculture, as individual farm
households are now considered the sector's basic economic units.
Thus, the crucial importance of farm household participation in
agricultural and rural development has been recognised. This has
led to a much stronger emphasis on mutual self-help and reliance
on farm household resources, and reduced expectation that
Government will intervene to assist them.  

Under the centrally planned economic system, emphasis was laid
on creating very large co-operative units, as these were believed
the motor of progress, development, and greater socialisation.
Thus, many co-operatives in the Northern and former Fourth Zone
Provinces - which were initially established as village
co-operatives - had to merge with other smaller co-operatives to
create inter-village or communal co-operatives. In the South this
process started after national liberation in 1975, with the
initial creation of village and inter-village co-operatives.  

Farm households were members of all these kinds of co-operatives.
As the means of production, including land, was collectivised,
membership was obligatory if one wanted to profit from services
provided by the co-operatives. Children born in member farm
households were automatically registered as members when they
reached 16 years. When they married, the new family was
considered as a new member farm household. The co-operatives also
provided a number of services for the farm households, including
social welfare activities, schools, kindergartens and health care

2.   The impact of restructuring  

Under the reform policy, former agricultural co-operatives have
to completely restructure their organisation and business
activities in order to survive in a liberalised market economy.
It has been discovered that transforming huge former
co-operatives is a difficult undertaking. Many former
agricultural co-operatives and production groups - especially in
the North Mountain Region - were dissolved after land had been
allotted to the former members. Most had operated under marginal
conditions, with a inadequate resources and lack of capital.
Between 1988 and 1994, more than 2,950 co-operatives (i.e. 17.4
% of the total number of former co-operatives) and 33,800
production groups (i.e. 93% of the total number of production
groups) were dissolved by their members.  

By the end of 1994, a total of 16,243 former agricultural
co-operatives and 2,548 production groups existed throughout the
country, covering about 64% of all farm households. However, the
agricultural co-operatives show great differences in operational
performance. An estimated 15.5 % of the agricultural
co-operatives that had recorded good performance in the past
("good" cooperatives) were still able to provide necessary
services to member farm households.  

Many have become part of the "middle" performing agricultural
co-operatives, which now count for 40.4 % of the total number of
former co-operatives. These co-operatives are mainly engaged in
providing irrigation facilities and services. The high costs
involved, however, in running the co-operatives do not cover the
increased expenses. The co-operatives do not have sufficient
capital and funds to cope with this situation. Attempts to
increase levies on paddy rice harvested have alienated many
members, who are now trying to obtain the necessary services
elsewhere. Thus, many co-operatives have become dormant and exist
only on paper.  

These non-operational ("bad") co-operatives account for 43.3 %
of the total number of former agricultural co-operatives.
Although the leadership of these co-operatives remains in place,
they neither have economical activities nor provide any services
to the former members. The management costs are mainly paid out
of debt recovered from the members, from selling co-operative
assets, or from mobilisation of contributions from the members.
In many regions, however, members refuse to provide any
additional funds. As a result, the number of "bad" co-operatives
is increasing, thus becoming an obstacle not only to the
economical development of farm households but also to the economy
of the country as a whole.  

It has been found that smaller co-operatives are more able to
respond to the new conditions, as their range of service
provision is smaller and their collaboration with the member farm
households more intense. One could argue that more active
participation of the members will facilitate the reform process.
In general, survey results back this argument - 46.6 % of all
village co-operatives are considered as well-renovated, whereas
only a third of inter-village co-operatives and only 28.4 % of
the communal co-operatives meet the same standards.  

3.   The emergence of voluntary groups  

The situation of the former agricultural co-operatives, described
above, has led many farm households in the regions to voluntarily
group together with others in different types of groupings mainly
for income-generating activities. Their common criterion is
voluntary membership and the pursuit of members' economic and
social interests.  

A survey conducted in 31 collective groups showed that without
exception these groups were formed after 1988, the beginning of
the renovation process. The main objectives and activities of the
collective groups are to provide support services to strengthen
their members' economy in order to increase their income. Their
size allows the groups to work and produce in a more flexible
manner than huge co-operatives. Although the groups perform a
variety of activities, following main forms can be distinguished:

*    joint irrigation groups composed of farm households who do
     farming in the same field. They jointly dig canals to
     improve irrigation and the drainage of these fields and
     very often jointly prepare the land, plant the same crop,
     harvest at the same time and market their products  

*    joint liability groups, formed in order to gain access to
     bank credit. The individual farm households very often have
     no collateral. Group members jointly guarantee repayment. 

*    professional groups, made up of farm households exercising
     the same profession: gardeners' associations, shrimps
     rearing groups, sugar cane plantation groups, hybrid maize
     groups etc. These groups are formed to guide and to help
     each other, to try new technologies and experiences,     
     process and market the products together, avoid the stress
     with private traders while negotiating prices and quality,
     assist in setting up and developing specialised production

*    marketing groups bringing together input suppliers,
     producers and traders to ensure steady and timely delivery
     of produce in the field of  poultry raising, milk
     production (dairy cows) etc. Groups have also  been formed
     for off-farm activities such as tailoring.

*    production groups, voluntarily formed by members who
     contribute labour and capital. Examples are rice milling
     groups, tractor groups for land preparation, fishing
     groups, animal rearing groups, afforestation groups, shops
     for input supply run on a group basis, artisans and     
     handicraft groups for repair work, agricultural products
     marketing, etc. In general, these joint production groups
     operate as small-scale enterprises and play an important
     role in employment creation and income generation for

On average, collective groups are made up of 18 members with the
highest figure of 86 members and the lowest of three members. As
in the co-operatives, most of the members are farm households.
Group leadership normally consists of one to two persons in the
bigger groups, but only one person in small groups.  

In general, local authorities have supported the establishment
and operation of the collective groups. They encourage and
legally recognise the establishment and operation of the
collective groups, provide guidelines on production activities,
facilitate groups' access to input provision to be distributed
to the individual members, and accept groups signing contracts
for the exploitation of land and water for production. They also
assist groups in credit application procedures and guarantee the
safety and security of business activities, production sites and
areas, provision of rooms for group activities. In some regions
local authorities and social organisations even provided
financial support to the collective groups.  

4.   The role of government and external assistance  

As the economic responsibility for decisions moves from the
Government planners to independent economic actors, such as farm
households and co-operative and group leaders, legal rights and
obligations must be created to give effect to these new economic
roles. Farm households and their organisations have relied on
government agencies for the overall management of their economic
transactions; now they need to be able now to rely instead on the
rules and resources provided by an independent legal system. A
specific government policy on co-operatives and collective
groups, to guide action in the current situation, needs to be

The Government should act as facilitator in the process of
renewal. In addition to creating a generally enabling
environment, the provision of funding for training, technical
assistance and investments is essential. This must, however, be
done in such a way that co-operative or group autonomy,
self-financing and self-reliance is strengthened and not
undermined. Government policy needs explicitly recognise this and
implement the necessary supportive approaches.  

The medium- to long-term orientation of the Government to
co-operative or group support activities should be their transfer
to a co-operative movement itself once the integration process
has taken place. Ultimately, the government function should be
confined to policy matters regarding co-operatives and groups,
their registration and de-registration, and the supervision of
adherence to the co-operative legislation.

The development of a genuine co-operative network is a long-term
process. It requires a continuous participatory dialogue within
the co-operative and group movement and with external agencies,
that may provide assistance supplementary to internally mobilised
resources. Such external assistance can often be of value in
providing for the training and education of member households in
participatory and co-operative practices, as well as the training
of co-operative leaders, management and staff in vocational and
co-operative skills. The development of the required business and
entrepreneurial skills in a competitive market economy is of
particular importance in a previously state regulated economy
such as Viet Nam.  

All participants in the process of co-operative and collective
group development need to be fully aware of the fact that genuine
co-operatives and groups are owned and controlled by their
members. They must, for the achievement of their objectives and
their sustainability, be autonomous and independent from any
undue external influence. Party and Government institutions and
officials, donor agencies and others can play a valuable role in
the evolution of genuine and strong co-operatives and groups.
Their role, however, is temporary and they must serve as
facilitators and not decision makers. Sensitisation and education
of all concerned is needed to ensure that this attitude is
internalised and applied in the implementation of a co-operative
and group development process.