Development of Consumer Co-operatives in Vietnam (1997)

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This document has been made available in electronic format
by the International Co-operative Alliance (ICA)
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May, 1997
(Source: Coop Dialogue, Vol., No. 1, Jan-April, 1997, pp.23-31)

Development of Consumer Co-operatives in Vietnam
by Upali Herath*
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(Many mixed economies and socialist economies in Asia have 
adopted a path of transition to an open market system during 
the current decade. The transition has caused varying 
difficulties to the civil society, specially the institutions 
such as collectives and co-operatives.

The paper, which has been presented at meeting of government and 
co-operative policy makers held in Ho-chi Minh city recently, 
discusseses the case of Vietnam as one of the economies in 
transition and its influence on co-ops. The paper deals with 
the main features of the emerging consumer society and future 
conditions for the development of consumer co-operatives 
quoting from the experiences elsewhere.

Editor)

01.An Overview of the Emerging Consumer Society
--------------------------------------------------------------
The emergence of a consumer society in Vietnam has started after 
1986 when 'Doi Moi'  policy was introduced. It was a turning point
from a controlled consumer behaviour to a unprecedented new way of
life as passive consumers for a long time going ahead with 
absorbing Western fads and styles. This sudden change has a 
historical logic which goes back to liberation of the country from 
colonial regimes and the transition from a feudal system to a 
socialist system. Consumerism in the capitalist sense
was unknown during this period which suffered from food 
scarcities, wars and a closed socio economic system.

Household economy was the most known phenomenon. The debate on the
household economy vs. collective economy ended up accepting that
household echomimia is a secondary economy of the farmers thus
establishing the existence of individualism in the society. The 
consumer interests and the identity of households as firms too 
have been established. 

'Doi Moi' approach to economic development has been pursued
cautiously during formative years. Property rights have been 
transferred to families and individuals through a gradual process. Transformation of the economic and social policies from a 
centrally planned socialist system to a market oriented economy 
is still continuing with debates among the investors as to which 
level of investments to make. Some prefer slow and steady 
transition while others are in a hurry. However, we may have to
evaluate the effects of the transition in terms of the impact on 
the civil society. The impact on the family income, their purchasing 
power, changing consumer behaviour as well as demand and supply of
consumer goods and services  are some of the indicators that 
can be used.

In the first place, the situation in regard to general socio 
Economic development would provide a basis for evaluation. 
The analysts from the ADB and the World Bank present a positive 
picture of economic growth in Vietnam during last five years.
The rate of growth has been considered satisfactory in a given
situation of economic sanctions, scarcity of capital
and technology and natural calamities.

The GDP growth rate has increased from 8.1% in 1993 to 9.5% in 
1995 with an estimate of 9.9% in 1997. Domestic savings increased 
from 14.8% in 1993 to 19.1% in 1995. Inflation has come down 
from 14.4% in 1994 to 12.7%in 1995. According to UNCTAD  figures, all merchandise trade has increased from US$ 2155 ml in 1987 to US$ 
3414 ml. in 1993. The exports have increased from US$3.5 bl. 
in 1993 to US$ 7.1 bl in 1995.  

The open economic policies have resulted in the increase of 
Employment from 23.7% in 1993 to 24.5% in 1995. The annual 
agricultural growth is about 4.5% and industrial output has 
grown by 14.6%. Service sector growth has been 11% per annum. 

However, Vietnam's entrance to ASEAN group has been considered 
With complex sentiments. Some fear about a possible competition 
with other partner countries due to tariff reduction and eventual
free trading. 

In the meantime, the state continues to hold natural monopolies 
but some are in the process of commercialisation. Joint ventures
with foreign investors are sought in many heavy industries which 
are basically state enterprises. 

Financial sector has been allowed to go into private banking-
mainly with foreign banks. This has been inevitable for generation 
of capital for entrepreneurial activities. 

Tax collection has not been able to achieve systematic functioning,
Thus loosing major income. The policy reforms on taxation has
taken place some years back. Mechanisms are to be evolved to reach
all enterprises still. The state has replaced collectives and 
co-operatives in maintaining and developing infrastructure facilities
and social services using revenue from state enterprises with 
tax levies and foreign assistance. The price structure of many 
commodities has changed drastically allowing interplay of market
forces. Earlier the prices of many essential consumer goods have 
been fixed. With the withdrawal of  controls, household income of
many farming families increased due to their ability to sell their 
products in the competitive market. Per capita income grew from
US$ 170 in 1993 to US$ 215 in 1994 which has a increasing trend 
annually. In spite of its low incomes, Vietnam maintains a higher 
ranking in Human Development index ( 0.523 in 1993) with a ranking 
of 121 out of 174 countries and has become one of the highest in 
that income category. 

In comparison to East European and CIS countries, the social cost 
of  reforms of Vietnam has been low. Although nearly 900,000 workers 
have been laid off due to the closure or privatization of state
enterprises and imposed cost reductions, unemployment continues 
to be comparatively low.

The impact of the entrance of the foreign investors has been felt 
mostly by female workers who could not balance their family 
responsibilities with the new technological skills that are needed. 
On the other hand, foreign investors prefer males in their regular 
employment. As a result, unemployment among female workers is 
increasing. The absorption of female workers in the unskilled 
service sector has not been able to offset the trend. The economic 
reforms and liberalization has resulted in growing consumer market.
During early years' cross border trade with China and Thailand 
which has been illegal but went noticed, ultimately developed
into a formalized and legal economic activity. With the opening of 
trade with China through an open route, the international trade 
has been booming.

Household equipment and utensils as well as luxury goods have 
Entered into practically every city and changed the consumer 
behaviour as well as their taste. However, a formal domestic 
trading network has not been established which should have a 
functional system with wholesale markets, local distribution net 
work and retailers. At least in the case of essential food 
commodities, wholesalers depend on village fairs, and small
time agents and ever changing micro industries. 

With the collapse of agricultural co-operatives and credit 
co-operatives, combining with declining trends in supply and 
marketing co-operatives, village fairs, street markets and urban 
wholesale markets ventured into supplying merchandise needed by 
retailers. Retail industry itself is not developed. Prices have 
been arbitrary and without much controls through proper market 
information or fair competition. 

Absence of a stock market in Vietnam indicates the fundamental 
stage of growth of private enterprises. Company monopolies or 
oligopolies have not yet been developed and this has helped to 
retain the family businesses without a threat. Co-operatives 
too could enjoy the advantage of such a situation as the capital 
accumulation and mergers are a far cry in the market. 

Corporate investors in consumer industry are still few in numbers.
Retailers comparatively are satisfied with a small turnover  and 
Overtrading is common in the absence of  management skill for 
business management. Family controlled businesses are majority in 
number still and many are not registered. They are basically 
convenient stores. Department stores and specialized shops are 
confined to the cities. However, the situation is changing rapidly 
with the change of consumer behaviour.

With the exposure to the media and advertising, the consumer 
taste is changing rapidly. Imported goods, food items and 
cosmetics as well as household equipment are new attractions. 
Demand for motorised transport means is ever increasing. These 
new interests are mainly catered to by private retailers which
is a contrast from many changing economies. Many  state 
enterprises and co-operatives are not responsive to new life 
styles. 

Retail technology maintained by consumer enterprises is still 
Traditional which basically employ counter sales. Sales promotion
strategies are still absent. Shops are centrally managed being 
private owned and without professional sales staff. The aspects 
of customer demand related information and proper accounting are 
still to be developed. Commodity specialization is still not common.

02. 	Relevance of Consumer Co-operatives in the Open Economy
-------------------------------------------------------------
Vietnam before  ' Doi Moi ' approach, has been built up on the 
collectives, co-operatives and state enterprises. Social welfare
and human resource development functions too have been looked 
after by these enterprises through the surplus they have accrued. 
When the parallel household economy was emerging, they rendered
the same service even with the transition to individual enterprises 
by property transfers. Therefore, at least for some time there was
no break down of community services although private enterprises 
did not participate in the task. Collapse of agricultural 
co-operatives created a vacuum which had to be taken over by
the local government bodies after some time.

The relevance of co-operatives in transitional economies have been
justified to the extent  that they supported the essential services 
to the community during the transfer not only from socialist 
economies to open economies but also from feudal economies to 
socialist economies.  They are essentially people based organizations 
although keeping the individual entrepreneurship as the foundation 
for economic activity. Many scholars maintain the relevance in terms
of balancing the market forces through interventions by the users 
of services through co-operatives. These common reasons are equally
applicable to Vietnamese situation too. 

Vietnam had a unique situation by having collectives and 
co-operatives coexisting with each other and also the self 
help groups. As the transition was gradual, supply and marketing 
co-operatives which carried out consumer activities survived to 
an extent and in the case of provincial unions, the emerging 
economy was an opportunity more than a threat. They diversified 
their activities to processing and other service industries
through joint ventures with foreign partners and even engaged 
in import and export activities. At least they functioned with 
former membership thus safeguarding the economic interests 
of  a considerable section of the less affluent community. 
These co-operatives still have a relevance in the turbulent 
consumer market in Vietnam.

The market prevailing at present has not stabilised into a 
Disciplined consumer industry and experiences distortions. 
Unorganized private enterprises concentrating in the cities 
have different functioning with unsystematic price structure 
in the absence of a proper management approach to business. 
In such a situation, consumer co-operatives provide a
better alternative for consumer protection  so that they would 
receive a better dealing in the market. The co-operatives ensure
lower prices, assortment based on consumer demand, proximity to 
households and even rebates on participation. 

Eventually, consumer co-operatives help strengthening competition. 
This will support efficiency gains from the market. As the 
co-operatives believe in entrepreneurship with a human face, 
the primary interest will be the people but not the capital. 

Another justification is the contribution made by 
co-operatives for sustainable human development through 
ecological concerns and fair trading. Green consumerism is 
widely practiced by co-operatives in developed countries. 
Therefore this alternative trade would provide checks
and balances in the competitive market and discipline 
the competitors while serving the community.

03. Co-operatives Need a Level Playing Field
---------------------------------------------
In a transitional economy, specially where the policy directions 
are unclear and confusing  on one hand and imprisoned individual entrepreneurship supported by external capital  is escaping 
without sense of directions by themselves on the other hand, 
the co-operatives which are emerging as infants would experience  
an unforeseen struggle for their survival.

This is applicable not only to co-operatives but also to other 
small and medium scale enterprises. Distortions of the market 
competition and unethical behaviour are common in such a situation.
Therefore it is necessary to establish mechanisms and even 
institutionalized arrangements by the state to oversee the 
competition trends in the market with a view to eliminate the 
obstacles faced by small and medium scale enterprises
including co-operatives, thus preventing the acquisitions 
and dominance through unwarranted capital power. 

Co-operative sector in the developing countries who pursue 
Economic reforms with the aim of an open market system, has 
Experienced tremendous pressure from the governments to serve 
as a buffer for any eventualities that may occur during the 
transitional period. They are still made to serve as an extended
arm of the government to maintain food security and support 
poverty alleviation programmes as a part of structural adjustment. 
Given low margins without bargaining, they hardly function 
at par with private enterprises emerging through liberalization.

The underlying fact is that many governments feel insecure 
to let co-operatives go in their own way for their survival 
or death. Therefore it is relevant to discuss preconditions 
for existence of co-operatives irrespective of any type.

Depending on the economic philosophy and approaches of the
government, each country has adopted its own strategy for 
economic reforms aiming at market orientation.

Deregulation, privatization and policy changes in the areas of 
trade and investments are common features in this direction. 
Even in the case of privatisation different governments  have 
adopted different approaches.
Some have gone through commercialization or corporatisation 
of public enterprises and offering certain areas to private 
sector in natural monopolies whereas others have divested 
even natural monopolies from the government. India preferred 
workers co-operatives to private sector to transfer state 
enterprises, whereas Sri Lanka went ahead with selling state
enterprises through open bidding. 

In Vietnam, where fundamentality of the individuals had to be 
established, property rights have to be transferred to individuals
first while some of the state enterprises are still with the
government. Privatization of these enterprises and natural 
monopolies will take longer time than other countries. In this case, 
price control, tariff reform and devaluation have taken place
in an accelerated pace, whereas public enterprise  reform has
been gradual and still continuing.

The question is whether the state will prefer workers co-operatives 
To private sector. However, many properties of former co-operatives 
Which have collapsed  have been divested and sold to private 
sector which has become a disincentive for the existing and 
emerging co-operatives to compete with the private enterprises. 
As a result, assets which have been used for consolidating and 
integrating co-operatives horizontally and vertically have been lost.
Therefore, in order to strengthen the competitive position of the 
co-operatives, these assets have to be retained in the co-
operative sector itself. 

It is also important to formulate competition laws covering major 
areas of business and enterprises involved with the aim of achieving 
fair competition. Company laws were the  first to come covering 
these enterprises. A competition laws are yet to be formulated. 
The co-operative legislation came into force in 1996. During the 
interim period, the private enterprises have taken root and 
established themselves in the market, whereas co-operatives did 
not have a legal identity  and clear identity based on co-operative
values and principles. This has led to either transferring the 
corporate power from earlier nominated leaders to a new set of
entrepreneurs or give way to emerging pseudo co-operatives in
different trades. 

Producers and  handicraft co-operatives are the most  affected 
co-operative ventures. These pseudo co-operatives function as 
private companies in every sense except the name co-operative. 
It will be a long process to set up mechanisms to scrutinize 
these enterprises and take decisions. 

Structurally, level playing field is created by legislations 
affecting different forms of enterprises. Some of these legislations 
may be discriminatory in order to safeguard the weaker sections
of micro enterprises involving lower segments of the community 
although  there tend to be criticism on such a stand by the state. 

It will be worthwhile undertaking a comparative analysis of 
Company legislation and co-operative legislation from the 
point of the market
freedom. 

As it is, some of the provisions of the legislation ( e.g. 
Articles 11, 50, 51, and 52 )are wider in focus. Therefore, once 
the guide on the implementation of the law as per Article No. 56 
is prepared, only we would be able to know the extent to which 
the state and other authorities would intervene in co-operatives. 

Efficiency and sustainability are some of the key factors of 
competition. Therefore, one of the  primary aims is to achieve 
profitability sufficient enough for them to sustain their services 
in accordance with co-operative values and principles. While private 
enterprises which emerged after 'Doi Moi' policy had free hand in 
the market without much competition due to decline of the turnover 
of consumer co-operatives to 2% of the market share and the weak 
family businesses, they were unaffected by the
community services. 

Some of the co-operatives continued to bear the burden with local
government authorities. If this situation is not removed once and 
for all ,the impact will be disastrous for co-operatives. Therefore, 
alternative funding arrangements need to be established for community 
services through taxation and other sources. The seventh co-operative
principle only applies to serving the community from the surpluses 
on the decisions made by them for common purposes. 

In a future uneven competitive situation, the co-operatives will 
Essentially be benefitted by anti monopoly laws and fair trading 
laws as in the case of Australia, Sri Lanka and Republic of Korea. 

Consumer co-operatives normally function in a media controlled 
Market environment . Unethical and distorted advertising by 
private sector affect not only the consumer, but also consumers 
organizations such as co-operatives.

In order to offset this development, the government requires 
not only laws on consumer protection, but also commitment to 
promote sustainable pattern of consumption. This has been endorsed 
by the Agenda 21 of the United Nations. It states that the main 
cause of continuing deterioration of the global environment is the 
unsustainable consumption and production. Uncontrolled market 
influences by media supportrf companies would negate the efforts 
made by co-operatives to contribute towards sustainable consumption. 
Consumer education by co-operatives would not only re defines consumer 
needs in terms of sustainability but also support the tasks of 
the governments. At least the mechanisms have to be created for
setting quality controls for consumer products and if possible, 
for ecolabelling. 

One of the problems arising out of free market economy and 
Threatening the co-operatives  as in the case of Thailand is the 
monopolies created by cartels and transnational companies. As an 
example, MAKRO cartel impose conditional sales and onerous contract
terms to its so called members who are distribution agents. 
They hold decision making power on demand and supply of commodities 
as well as price structures. They also could create artificial 
demand for products. 

Competition laws should pay attention to dominance in market 
power by many external elements and pave way for free play of 
market forces. Although Vietnam is not yet affected by such 
problems, it is the ultimate reality one could expect in time 
to come.  Right now, one could easily see a war going on among 
multinational beverage companies. It is not merely a media war, 
but a more deep rooted international competition among
multinationals. 

Although there had been many controversies over the subsidies 
And privileges provided to state enterprises, these will check 
prices, restrictive business practices and would support 
co-operatives who would become natural agents for distribution 
of their products until such time competition laws are in place 
and market forces are evenly established. This will also ease out 
the scarcity of the capital faced by co-operatives. Subsidies and 
incentives as well as protectionism are still used by developed 
countries for food security and preservation of vital industries.

Tax collection  mechanisms should be equally imposed on all 
Enterprises irrespective of co-operatives, private companies or
public enterprises. Such is the ideal. However, dichotomy is that 
co-operatives observe uncompromised business ethics and transparency 
in their business transactions and accounting, while private 
enterprises many a times defect on this. This issue has been 
under debate in many newly opened economies. Many countries 
in the Region have understood the difference and provided 
compensatory arrangement in the taxes through exemptions and 
other incentives to co-operatives. Considering the shareholders 
as lower income groups, such an action is justifiable.  Even  in 
the field of income distribution, there is a growing gap between 
poor and rich in open economies. 

Intervention in artificial price fluctuations  is a another 
task for the government to maintain a market equilibrium. 
Establishment of anti-monopoly authorities or regulatory bodies
would not only help consumers, but also co-operatives. 

Labour legislation is another area which requires attention. 
TThe current co-operative legislation does not provide for
separate rules for labour management in the co-operative sector 
except in the case of chief executive and the accountant, hence 
it is implied that common labour legislation is applicable. 
The experience elsewhere has shown that labour disputes are
always costlier and cause delays. In some countries, separate 
co-operative labour legislations are visible and made simple to
exercise. However, it is premature to comment upon the labour 
management  as the experience in Vietnam is still to see.

04.	Which kind of Consumer Co-operatives?
-------------------------------------------
Consumer co-operatives belong to the service sector. With the
liberalization policies of the government, service sector is 
expanding and the share of employment too is increasing. Therefore, 
it is appropriate to consider the type of services that could be 
considered by co-operatives and also the alliances they may build 
up in the process. The services that could be rendered range from 
so called ' natural monopolies' to'open enterprises' in terms 
of control. Telecommunication, electricity supply and health 
services are natural monopolies of the state in many countries.
The consideration has been that it would be very difficult to 
make them open to competitive trade and also risky to have any
break down in the services. In certain countries, they are either
commercialized or corporatised in distribution areas. Co-operatives
too are functioning in the distribution of these services. Energy 
co-operatives, telecommunication co-operatives and health co-operatives 
are some of the examples. While the state maintaining and developing 
the infrastructure, and electricity generation, co-operatives 
undertake the distribution.

In many countries, transport co-operatives are competing with 
the private and state sectors. In this process, cost efficiency 
is achieved and consumer gets a better deal. However, regulation 
of public utilities by the state is understandable and necessary 
to protect consumers in terms of prices, security, quality of 
services and efficiency. Some times, subsidies are attached to 
these services as in the case of health, education, and transport
services, but this should not attach any conditions in terms of 
business. These co-operatives not only help consumers, but also 
technical and service personnel for gainful employment. 

In the open service enterprises sector, the co-operatives play 
a vital role in maintaining low cost operations of the household. 
In order to achieve this, diversification of small retail business 
is necessary with modernized shops. Concept of a retailer in modern 
times is perceived as a customer responsive oriented and a demand
based person. 

The consumer co-operatives should not be made to support to 
maintain a distribution system for products of MNCs and TNCs, 
but to support domestic small and medium scale manufacturers of 
similar products. This is an ethical issue rather than a issue 
of turnover and profits. 

The co-operatives maintain its own value system and strategic 
alliances. By maintaining such a stand, consumer co-operatives 
would not only support majority of small scale entrepreneurs but 
also a fair market competition. It will also promote manufacturers 
and suppliers of ecologically friendly products and healthy 
commodity production. Such a principle also contributes to prevent 
MNCs and TNCs from adopting monopolistic and oligopolistic strategies 
to dominate the local consumer market through setting up of common
enterprises and joint ventures to share the market. 

The business policy of consumer co-operatives should aim at 
Maximising economic benefits to the user members and sustainability 
at their own levels in which they are an integral part. 

The focus of the consumer co-operatives are human beings which means
that they scrutinize their business activities and merchandise on 
the basis of sustainability of better lives. Promotion  of eco-friendly 
products and fair trading activities are such examples. Responses to 
economic and social justice as an example of seventh co-operative 
principle illustrates this vision. 

Horizontal and vertical strategic alliances play a very important 
role for consumer co-operatives in their struggle for survival.
If they have adopted alliance strategies as soon as the market 
economy was on the move, many supply and marketing co-operatives 
would have survived. Alliances have been a common strategy among 
many private companies for their survival and growth. This strategy 
would lead companies or co-operatives to competitive advantages in
the market place. It will increase market share,volume of trade and productivity.

By virtue of the principle of co-operation among co-operatives 
this is a more appropriate strategy for co-operatives to follow. 
Alliances need to be considered with producers co-operatives, 
agricultural co-operatives and handicraft co-operatives which 
are interdependent in making goods and services available for 
farmers, workers and artisans. Stake holders in these enterprises 
who depend on them for survival could work together in a
business alliance based on common values and principles.

05. Consumer Co-operatives of the Future
----------------------------------------
Considering the policy declarations of the government in relation 
To economic reforms, we could expect more influx of consumer
goods from neighbouring countries, specially from China and 
Thailand, which would form the assortment of family shops and 
co-operatives. One cannot expect oligopolies yet in the absence of multinationals and transnationals engaged in wholesaling and 
retailing. This situation would benefit co-operatives, if
they take hold of the opportunity to consolidate themselves 
into a vertical structure aimed at importing and wholesaling 
of consumer goods.

Co-operatives will not need patronage by the state in form of
capitalization or management  as discussed at many levels, but a 
level playing field vis a vis foreign investors, and joint venture 
with private sector companies is important. 

Raising capital for higher business volume will continue to be
a problem. Since the credit co-operatives have collapsed, 
the co-operatives were dependent on state banks more than their 
members for working capital. Therefore, new generation of 
co-operatives may need to evolve a strategy to raise capital 
through shares, deposits, and partnerships without compromising 
in their corporate governance. Partnership with producers
and manufacturers in business has been practised by many 
co-operatives in the world. 

The increasing gap between poor and the rich will be an issue 
for consumer co-operatives in the future. At a time when the 
consumers no longer depend on state distribution system and 
monopolies, the affluent who have more purchasing power would 
need different kinds of consumer commodities vis-a-vis low income 
groups except basic food items. 

The question may arise whether the co-operatives should cater to
rich or poor. They may need to consider the target groups who 
will be attracted to the ideals of co-operatives than the economic considerations.

In order to strengthen the position in the consumer market, 
Franchise system will be one  of the potential alternatives. 
Dividends have been paid for such bold steps in consumer 
co-operatives in Hue already. Vietnam has an advantage of promoting
family businesses and household economy during the transition period,
which is a good potential for partnerships with co-operatives. 
Tonga and Singapore have practised this strategy for
gaining upper hand in the wholesale market  for some time. 

Reducing marketing costs and other overheads will be one more 
Strategy for gaining competitiveness. Consumer co-operatives 
could work with the farmers organizations and micro entrepreneurs 
in the lines of what has been propagated as 'prosumer society' 
(Tofler) to get their supplies more than unpredictable market sources. 
Combined with supplies from state industries, which are becoming 
competitive with the private sector after commercialization, 
co-operatives will be able to reduce the costs by eliminating the intermediaries. This contract system is practised in Japan,
Sweden, and many other countries. Even in former Czechoslovakia,
customers were involved in the commodity specifications from the
suppliers for consumer co-operatives who were normally agricultural 
co-operatives and small industrial co-operatives. 

Dependence on the open consumer market has landed consumer
co-operatives in to serious difficulties in many countries in the 
Region such as Thailand and Malaysia. There are many such cases
in Europe, USA and Scandinavia too. Co-operatives are essentially
user based and member controlled which help them to survive with 
small margins. Therefore, emerging consumer co-operative sector 
in Vietnam may need to have strong affiliation to member users 
and driven by their needs and interests. 

The consumer co-operatives will have at least have freedom 
to take decisions on operating the business legally under new 
legislation. It is a progressive legislation to the extent that 
there are no restrictive provisions for business decision making 
and compared to be more improved than some of the ex-British 
colonies. The co-operatives in Vietnam will be able to maximise 
on the legal status and business freedom unless any controlling
procedures are imposed by state administration in form of guidelines
or procedures. However, the spirit of the legislation will be the
key for such impositions. 

Viability factor will be an important factor for a decision on 
the size of consumer co-operatives. With the limited purchasing 
power of rural consumers, entering into practices which cannot 
generate sufficient surpluses for employing professional managers 
will affect such co-peratives. 

The consumer co-operatives, at least at the beginning, may have 
Difficulties in their procurement at competitive prices in the 
absence of importing and wholesaling companies of their own. 
They need to replace supplies with suppliers from village markets 
and provincial level produce markets in addition to state and 
co-operative producers. Few large consumer co-operatives  such as 
Saigon co-operative could federate into wholesale organizations
in addition to retailing. Joint buying operations have comparative
advantages over single buyers system. A network like this will
be able to undertake central ware housing, processing and packaging
based on the needs of the co-operatives. 

Price stabilization, income distribution and poverty alleviation 
have been the underlying spirit behind the co-operative legislation. 
These are the indirect results or benefits that can be gained
from the co-operative system, but should not be the main criteria for establishing consumer co-operatives. Such moves have resulted 
in the decline of co-operatives in some countries. The efforts 
have ended up in state control over co-operatives even in their 
business decision making. In a market economy,such co-operatives 
will not survive when the state intervention is withdrawn. 

In regard to the institution building for consumer co-operatives, 
The structure has to evolve itself with the formation of primary 
co-operatives and horizontal alliances and joint buying operations.
This has to be supported by promotional agencies through awareness
raising on emerging consumer issues such as prices, inferior quality 
products being marketed through unethical advertising etc.  The user
will decide the form of co-operative to be formed and its business 
policy and practices. The groups need to be homogeneous enough to
work together having same interests. Gender equality and women's 
participation will promote stable consumer co-operative organizations. 

Considering the number and the size of the target population,
Vietnam has a potential for university, college and school 
consumer co-operatives. These co-operatives are also important 
in the sense of developing active co-operative members, leaders 
and staff for the future. By the time they enter into the community, 
they would have practised self management and self help activities. 

There is a challenge faced by even existing consumer co-operatives 
For developing their work force and the committee members on the
aspects of management and retail industry. Training facilities at 
present are inadequate to meet the requirements. Therefore it is 
important to develop training components at least in larger consumer co-operatives to manage on the job training. A set of trainers has
to be trained from the existing managers so that they could 
ultimately become a permanent training staff. 

Establishment of a progressive personnel policy and a career 
Development system for the employees will strengthened the staff 
and serve as incentives for joining the co-operative sector.  
The members of consumer co-operatives should be enlightened 
on the current issues and engage in active economic participation 
in decision making. Dependence on outside clientele and government 
support would not only undermine the practice of co-operation, 
but also face the risk of failure in the open market place.
Saxena and Craig have reviewed some successful and failed consumer
organizations in different parts in the world using this criteria
which shows a clear relationship between these factors. The results 
of the analysis is given as a table on this page. This analysis 
provides valuable indicators for the survival of consumer co-
operatives.

In the case of membership and clientele, women form a strong and
sustainable group for economic participation as well as leadership 
due to the fact that they are the stakeholders in consumers 
consumption. They are also a more stable group in the sense 
that they are with the families. 

The consumer co-operatives can adopt what is known as ' retail 
life cycle'combined with m joint buying system. This is a growth 
from retail shop net work managed by neighbourhood members groups 
of consumer co-operatives which grow into a distribution system 
with chain stores which aim at bigger department stores run by
provincial and national level co-operative unions. Hyper markets 
are the future with growing purchasing power of the middle class. 
At a time of changing consumer demands for healthy and environment 
friendly products, storeless co-operatives such as Seikatsu Club 
in Japan are distant dreams, but worth pursuing at least for
an exclusive clientele. 

06. In Conclusion
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For a transitional economy, to become market oriented, from
centrally planned system many structural changes tend to be 
employed. In order to have a smooth transition and to set
off the problems of scarcities to the poorer sectors of the 
community, consumer co-operatives play an important role. 
They maintain a food security activities and a fair distribution 
system to avoid break downs. They prevent hardships from the closure
of state enterprises or mushrooming private enterprises with
short life cycles. Level playing field for consumer co-operatives
to function in an equal competition with other sectors is a pre 
condition for the survival for consumer co-operatives. Legal 
identity is one of such a condition. Off setting uneven 
competition require competition and antimonopoly legislation 
mechanisms. Transition has to be supported byregulatory measures
and the hitherto undertaken community services to be supported 
by an efficient revenue mechanisms created through tax legislations. 

The existing successful co-operatives would need consolidation
And business alliances with the other co-operatives as well as 
Supportive enterprises in the state and the private sector. 
The international community of co-operatives have to continue 
supporting the efforts through technology transfer for co-operative 
business and management and if possible through inter co-operative
trade.

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* Upali Herath is the Regional Consumer Advisor for ICA Regional Office
for Asia and the Pacific, New Delhi.