8TH ASIAN CO-OPERATIVE MINISTERS' CONFERENCE - 2007

• The main purpose of the Ministers’ Conference on Co-operative Legislation and Policy that is organized every 4th year is to understand the priorities of the Governments and assert the advantages of co-operatives in building national economy.
  The main objectives underlining the conference include:
  • developing conducive and progressive co-operative policies and enactment of proactive legislation reforms;
  • enabling co-operatives to adapt with the fast changing global scenario;
  • creating a platform at international level for governments & movements to discuss key issues hindering the development of co-operative sector.
  The 8th Ministers’ Conference was concluded with the following declaration: • Noting the multi-dimensional impact of globalization on the socio-economic lives of peoples of Asia and Pacific and their institutions particularly cooperatives; • Taking note that while globalization and liberalization of national economies has resulted in enhanced economic growth and prosperity, its gains have not been equitably distributed among the people particularly the poorer and more vulnerable sections of the community; • Appreciating the desire of the Cooperative Movement to participate in the developmental process in harnessing the gains of globalization aimed at poverty reduction, employment generation and equitable national development ; • Realizing the importance of proactive cooperative legislation and enabling policies for creating conducive environment for development of cooperatives; • Appreciating the role of ICA to continuously facilitating the dialogue between the Cooperatives and the Governments to enhance the role of cooperatives for the economic growth and prosperity in the region. We, the participants of the 8th Ministers Conference on “Cooperative Legislation and Policy” held at Kuala Lumpur, Malaysia from 12-15 March 2007: Urge upon the Governments to catalyze the process of re-orienting the Cooperative Legislation and Policy to strengthen apolitical and autonomous character of cooperatives and to provide a positive level playing field to cooperatives to enable them to compete in the globalize market. Call upon the Cooperative Movements to contribute effectively in the process of economic development, amongst others, by organizing small producers including farmers, workers and protecting consumers through self-help mode and also ensuring increased participation of women and youth in the cooperatives. Exhort Cooperatives and Governments to strengthen management capacity, participatory governance and fair business relationship for ensuring healthy functioning of cooperative system through innovative strategies. Calls upon Cooperatives and Governments in the region to periodically review the efficacy/effectiveness of Cooperative Legislation and Policy as well as to introduce appropriate reforms considering the dynamic changes and trends emerging in their respective national economies. Recognizing cooperatives are an important and significant sector of the national economy effectively contributing to its development, we affirm our support for the Cooperative Movement as a sustainable and efficient institution through: 1. Encouragement of cooperative entrepreneurship by inculcating entrepreneurial spirit and skills among the members, leaders and managers of the cooperatives through education and training. 2. Attainment of economies of scale and strategic business alliances among cooperatives both domestically and internationally. 3. Role clarity among different tiers to enhance impact of the Cooperative Movement and 4. Harnessing the gains of the fair globalization and liberalization for the benefit of members. The conference witnessed intense deliberations among the participants and culminated with the group reports on the expectations of the co-operatives from the government and that of the governments from the co-operatives. The group reports and the interventions by Hon’ble Ministers have formed the basis for the set of following recommendations for the consideration and adoption at the level of the governments and co-operatives: 1. Clear Policy on the Co-operatives: a. There should be a consistent national policy, recognizing the distinct character of co-operatives as private self-help organisations, operating according to their own rules. Such policy should allow co-operatives to work in all fields of human endeavour and open co-operatives for all citizens. b. The legislation on co-operatives may be amended only after adopting a conducive national policy on the development of co-operatives. c. Government’s co-operative development policy should be expressed in clear terms in writing, either in a policy paper or a preamble to the co-operative law. d. There should be a periodical review of policy and law. The co-operative movement should be invited to participate in policy-making and law-making processes. e. The policy statement should define what a co-operative is (as what co-operatives are recognised) and what is the role of government vis-à-vis co-operatives. f. The role of co-operative apex bodies as legitimate representatives of the interests of affiliated societies and their members should be recognized. g. Based on the principle of subsidiary, the government should allow the self-regulation of the co-operative sector as a mechanism to strengthen the self-reliance of co-operatives within the legitimate legal framework. In that spirit, government should authorize apex co-operative organizations to regulate (not control) the affiliated primary co-operatives. h. Governments should introduce support measures for co-operatives, where appropriate, for the activities that meet specific social & public policy initiatives e.g. livelihood creation for the disadvantaged section of the society, tax benefits, soft loans, access to public works programs and special procurement provisions. i. Since the co-operatives combine business and moral values together with ideal governance structure hence should be the most preferred choices in more holistic socio economic development of a country and also in guarding the globalization process. j. Considering the size and capacity of the co-operative movements in the developing and emerging market economies, co-operatives must diversify into innovative sectors like infrastructure building, service industry, disaster mitigation and preparedness, formal schooling, education and health care. 2. Political neutrality a. The principles underpinning the co-operatives stress independence of co-operatives, which implies among other things that co-operatives should stay aloof from party politics. b. The issue of political neutrality of co-operatives means that; co-operative office should not be used as a stepping stone for pursuit of political careers; co-operatives should not be used as instruments for the implementation of political programs and; co-operative leaders should not be used for political aims. c. Co-operatives must use their weight as a socio-economic movement to lobby for favourable framework conditions like the UK, the cradle of co-operative democracy, there is a Co-operative Party working together with the Labour Party and in Italy and Belgium co-operative groups are organised along the lines of political party programs to build an alternative economic force to lobby for favourable legal, economic and social framework conditions for this sector of “social economy”. 3. Drafting Co-operative Law: a. The relationship between government and co-operatives must be defined in the co-operative law. Each has to be given its role. Clear limits have to be set regarding government’s powers, especially the power to control and make amendments under the law. b. Type of law: Co-operative law is organisation law, which has to offer a reliable and lasting legal framework for co-operatives. It should be avoided to mix provisions of organisation law with elements of tax law and regulations for the promotion of co-operative development. c. Format of law: The options are one general law for all co-operatives or several special laws for different types of co-operatives. In case of several laws, they should follow a similar basic concept. d. Relations between law, regulations and by-laws: It is important to find the right dose of regulation, avoid over regulation and leave room for autonomy to adjust the provisions of the law to local requirements in the by-laws of individual societies. The right dose of regulation and autonomy means: Co-operatives must be given autonomy to make by-laws within the boundaries set by the law. Such boundaries are justified if they protect -the special character of co-operatives as a type of organisation, members’ interests, the rights of creditors and the interests of the general public. e. Law can serve as a checklist to determine - how far autonomy of co-operatives can go and how far restrictions of autonomy are justified. f. Legal drafts-persons: When drafting co-operative legislation, it is essential to bring the text of the law within reach of the ordinary citizen and co-operator. This means that the law has to be worded in clear and simple terms and avoid heavy technical language (law for citizens not law for lawyers); to avoid high level of abstraction but rather use examples and to avoid cross-references to other laws and within the law. Legal drafts-persons should work in collaboration with specialists from the co-operative movement and should take part in preparatory discussions to learn about the subject matter they are asked to regulate. 4. Contents of Co-operative Law (Issues to be dealt with in co-operative legislation) a. Definition of co-operative society: The law has to give a clear definition of co-operatives. This can be done by using the generally accepted definition of co-operative society as contained in the ICA Statement of Co-operative Identity. b. Formation of co-operatives: The law has to provide the tools to determine what is a genuine (bone fide) co-operative e.g. pre-registration audit, need for approval before registration, need to meet certain minimum standards like minimum number of founder members (not too few, not too many, depending on type of co-operative and circumstances). c. Formation procedures: The requirements to be met before registration should be spelled out in the law, reflecting registration policy. Minimum capital requirements vary from case to case. Therefore, the amount of capital required to start a co-operative should not be fixed in the law, but rather be assessed on a case-by-case basis during pre-registration audit. Bureaucratic obstacles should be avoided. d. By-laws: The minimum contents of the by-laws have to be defined in the law. However, autonomy is needed to adjust the general provisions of the law to the needs of the specific case. This autonomy should not be unduly restricted by making the law too comprehensive, by detailed regulations or by compulsory model by-laws. e. Membership, acquisition and termination, rights and obligations: It should be taken into consideration that members are the crucial part of co-operatives. Active membership must be mandatory and members’ interests need to be the driving force behind genuine co-operatives. Interventions must be spelled out to enhance the ability of co-operative leaders to make membership meaningful, in particular to offer a co-operative advantage (membership value, benefits exclusively for members) and to attain member-oriented effectiveness. f. Equal status of members should be a basic co-operative rule. The importance of active membership, conditions of eligibility, provisions of associate members and transactions with non-members etc must be clearly explained. g. Business with non-members should not be a barrier for growth. But of course, free riders should not be encouraged. In this regard co-operatives should be prudent enough and maintain their specific profile even while dealing with non-members. h. Governance: Leadership of elected and democratically controlled office-bearers being a valuable asset and distinctive feature of the co-operative must be protected by the law. Co-operative law must set the framework for election of trustworthy leaders, standards of good governance, accountability and liability of office-bearers by defining - conditions for eligibility to co-operative leadership posts, the term of office (to be fixed in the law or left to be fixed in the by-laws), powers and duties of office-bearers and their liability, remuneration of services (whether paid or honorary, unpaid services), transparency by submitting data and reports to the general meeting, to auditors and to the general public, sanctions against illegal and corrupt practices, member control and minority rights. i. The relationship between elected directors with professionally qualified and employed managers must be dealt with in the law, laying down what should be the rule and what could be exceptions, setting out who decides the policy and who executes the policy. j. Audit and supervision: In co-operatives, regular annual or bi-annual audit is a must. The law should regulate, who carries out the audit (specially trained co-operative auditors cum advisers or certified public accountants), the scope of the audit (only financial audit or also management audit, audit of member-oriented effectiveness and social audit) and the scope of supervisory powers of the government agency in charge of administering the co-operative law (inspections at any time, inspections during audit or in case of inquiry). k. Rules against demutualization: The law should not allow transforming indivisible co-operative capital, accumulated over the years from undistributed surplus, into divisible capital that may be distributed among the current members by transformation of co-operatives into companies or by dissolution. Either such decisions should not be allowed at all or only if a quorum of two thirds or three quarters of all members attend the special general meeting convened for that purpose and vote with a two-thirds or three quarters majority. l. Merger, dissolution and liquidation: Standard regulations can be used taking into consideration the need of protecting minority rights and the rights of creditors. m. Women Participation: Women’s role in society is an issue that reaches far beyond co-operative law. Usually, equal rights of women are guaranteed in the constitution. These rights have to be respected by all laws including co-operative law. For co-operative development policy and co-operative law this means that all rules and provisions have to be avoided, which discriminate against women, e.g. in conditions of admission to co-operatives as members. 5. Globalization & Co-op Advantages: a. In the era of globalization the co-operatives must see it as an opportunity for all the co-ops to highlight and capitalize the CSR aspect of co-operatives evidently distinguishing them with other corporate structures thereby giving them a competitive edge. b. Co-operatives must adopt universally acceptable standard code of co-operative governance (being more effective than corporate governance) and co-operate globally to protect the interests of most vulnerable section of the society and must incorporate it as one of the guiding principles of co-operatives in the ICIS. c. Governments should move forward with proactive approach towards serving the interests of poor by creating a harmonious society through co-operatives duly protecting the livelihood of informal sector in rural and urban areas and attaining uniform growth of the society. d. Governments must involve co-operatives in the WTO round of negotiations on critical issues bothering the small producers, consumers and farmers. e. Requirement of the World Trade Organization and Agreement on Agriculture necessitates examination of issues such as market access, domestic support, export subsidy, trade related aspects of intellectual Property Rights, sanitary and phytosanitary measures including specific Agreements on varied commodities. f. Co-operatives at international level must consider the option of setting up “International Co-operative Joint Purchase Union” to transact the procurement and supply of processed farm produce, consumer goods, services etc. in different countries since it will substantially reduce the costs and improve the profit margins. g. To increase competitiveness of the co-operatives due to structural distinction in the market oriented economy, ICA must create an International Co-operatives’ Commercial Site on its website as hyper link for maintaining a knowledge bank to bring harmony in the co-operative laws of different countries, undertake structural advancements, innovative diversifications and promotion of international trade activities of co-operatives. h. In order to spread uniform benefits and advantages of globalization, there is a need to establish International Co-operative Bank to financially back up the developing co-operative economies in the world and more so in the terrorism vulnerable and disaster prone countries. 6. Contradictions and Dilemmas: a. Government expectations and co-operative autonomy: Government expects co-operatives to carry out their operations in line with government’s policy. Government is expected not to interfere in co-operative affairs, except when co-operatives ask government for assistance. b. Democracy and efficiency: In the event there are no persons with the required qualifications among the members to take on the leadership the option of inducting external directors to join the co-operative to train and groom leaders inside the co-operative movement may be tried. c. Co-operatives and poverty alleviation: Poverty is not only a problem of lacking resources but also of lacking ability to cope with change. Part of the answer is capacity building. Another means to help may be to provide promoters/development entrepreneurs with capital assistance. If co-operatives are involved in poverty alleviation campaigns, it has to be clear who pays the extra (social) cost: the members, if they so desire or the agency asking co-operatives to become active in this field. d. Who can promote co-operatives? Promoting co-operatives requires special skills that have to be learned. Therefore, promoters of co-operative development must be trained for their work and need special service conditions to be motivated for their difficult and challenging task. Offering suitable service conditions for co-operative promoters may be more important than offering a suitable co-operative law without an efficient service to administer the law. Co-operatives should be encouraged to enter into strategic smart partnership with private sector in a win win situation to leverage on respective strengths. e. Limits of co-operative autonomy: There is a need to find the right balance of guidance and supervision of co-operatives on the one hand and autonomy required by voluntary self-help organisations on the other. 7. Conclusions: a. Co-operative development should interest every government because co-operatives are a worldwide known and tested form of mobilising people and their resources for their own development. b. When co-operators help themselves by pooling their resources and working together for their own benefit, they create wealth, employment, knowledge and a sense of solidarity and thereby, indirectly, contributing to the development of the country as a whole. Therefore, co-operatives should be officially recognised as desirable and useful organisations having their own distinct character. c. As locally rooted organisations, directed by democratically elected leaders, co-operatives can become a nucleus of local development in favour of both the poor and the better off. Trust in elected leaders and member/user control is an asset, giving co-operatives an edge over commercial business. d. An appropriate legal framework can help to elect competent and trustworthy leaders and to hold them accountable. Provision of regular audit by specially trained auditors can enhance transparency and restrict corruption in co-operatives. e. Co-operative law has to define the boundaries within which co-operatives can work according to their own rules, principles and by-laws, allowing what is beneficial and prohibiting what is detrimental or potentially dangerous. f. Where government’s co-operative development policy and co-operative laws are made in a participatory process and reviewed from time to time in partnership with the elected representatives of the co-operative movement, the chances of creating an conducive environment for co-operative development are good. g. Strong and vibrant co-operatives can compliment the efforts of governments in the development of a nation by actively contributing in drafting the public policy and regulating the advocacy work. Co-operative sector must build its capacity to influence legislation & public policy (protection of vulnerable section of the society by involving women & youth in co-op ventures / actions) through active participation in the dialogue with government and lobbying with concerned ministries. h. Co-operative legislation must be in line with the ICIS and contain provisions on timely conduct of elections, maximum time limit for super session of a managing committee, independent and professional audit, uniform tenure of managing committee, regular and timely conduct of general body meetings, right of a member for access to information, compulsory system of filing returns and provisions for offences and penalties. i. Acculturation and training programmes for co-operators should be geared towards inculcation of entrepreneurial values as well as best practices in management, finance and governance. This will encourage co-operatives to be more business like, efficient and strategic in identifying new value additive features for the benefits of their members. j. Co-operation among co-operatives should be enhanced, especially through vertical integration with absolute role clarity so as to improve the bargaining power and flexibility of the co-operatives to operate globally. k. The trade between co-operatives at domestic and international levels should be encouraged through e-trade, e-commerce, e-auction, e-network and also by organizing regular trade fairs, expositions, participation in international gala trade events and the governments must help co-ops to showcase their strength through policy support.