Can co-ops start a viable national supply chain?

How far has the cooperative sector progressed in this country? Has it made an appreciable impact on the local economy? Does it pack the caliber of a competitive national grassroots supply chain, at least in agribusiness (e.g., in agricultural fresh produce or processed food products; in livestock and marine products; or in farming inputs on a reverse supply flow), that a state development-finance institution may assiduously lend support to in order to further strengthen its systems-infrastructure capability?

Quick flashback

It was toward the tail end of the first industrial revolution (the beginnings of modern science which, with the emergence of factory systems, brought great material progress circa 1800 to mid-1900s, but disrupted the craft system, dislocated households and created enormous unemployment) when modern cooperatives sprouted in the west.

The soundness of the cooperative concept—combining egalitarian philosophy of socialism and entrepreneurial freedom of capitalism—propelled its spread to all occupational classes worldwide, from craftsmen, to wholesalers, manufacturers, cooperative bankers, marketers, consumers, etc.

Anchored on the same “principles of self-help, self-responsibility, equality, equity and cooperation,” these occupational classes (with dominant presence at both ends of the supply chain i.e., farmers-producers/processors at the point of production on one end; and wholesalers-marketers/consumers at the point of sale on the other) logically transform to a broad-based cooperative value-chain backed by federations (mutually owned and controlled by the member-cooperatives themselves) and conveniently double as the backbone of a supply chain.

Strengthening cooperatives’ own supply chain loosens the stranglehold of capitalists/middlemen on the local economy. Co-ops’ income increases, in turn incentivizes countryside productivity.

How do we compare?

It is said that Philippine cooperativism had its beginnings over a hundred years ago, with the first cooperative setup by Dr. Jose Rizal while in exile in Dapitan. Yet, we seemingly don’t come close to the success of our neighbors’ cooperatives.

Take for example the achievements of South Korea’s National Agricultural Cooperative Federation (NACF). Focused on increasing the income of farming households by expanding sales channels and reducing farming costs, NACF governs agricultural and supply business unit, livestock marketing and supply unit, the extension and support unit and the cooperative banking unit, leaving member-farmers to fully concentrate on farming. Thanks to its financial operations from bank to insurance, securities, capital and futures, it has become one of the nation’s largest financial institutions.

Another successful co-op is Japan’s ZEN-NOH, or the National Federation of Agricultural Cooperative Associations. It is involved in the marketing, tracking and quality assurance of the products of its members.

Thailand’s ACFT or Agricultural Cooperative Federation has also shown success in providing help to members. It counts as members specialized groups such as Onion Growers’ Cooperative Federation of Thailand, Sugarcane Growers Cooperative Federation, Swine Raiser Cooperative Federation and Dairy Cooperative Federation of Thailand. In 1966, the Bank for Agriculture and Agricultural Cooperative (BAAC), which is similar to the Land Bank of the Philippines, was established to exclusively support agricultural cooperatives and individual farmers.

Malaysia’s National Farmers’ Association (Nafas), was established in 1972 as an apex organization of agro-based cooperatives and farmers’ organizations (FOs). These “FOs are an important and effective marketing organization for fresh agriculture produce and food products, taking advantage of existing marketing channels; while the State Farmers Organizations (SFOs) and the Nafas undertake further value-adding role as wholesalers, manufacturers and exporters.”

Clearly, foreign cooperatives have grown remarkably strong and sustainable, even actively working as shareholders/partners in the banking and insurance business, in agriculture and livestock, in manufacturing, in transport, in marketing and exports. They have even expanded to providing health care, housing and energy services.

Nurtured generally by a trustworthy and visionary management, they metamorphosed into large national federations attaining a decent degree of economic power by linking both ends of the supply chain. INQ

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is management and development finance consultant, past president and advisory council member of the Government Association of CPAs, past director of Philippine Institute of Certified Public Accountants and former senior officer of Landbank. Feedback at @[email protected] and [email protected] For previous articles, please visit map.org.ph.