The co-op network: A viable national supply chain?

(Conclusion)

Given the impressive strides taken by foreign cooperatives, it is not anymore wishful thinking for the cooperative system, with its communitarian persuasion, to become a kind of self-defense mechanism to curb the excesses of a free market economy or the depredation of a colonizing capitalism.

This realization, kindled by the successes of foreign cooperatives associations progressing along the value-chain, should encourage the formation of strong primary cooperatives as building blocks for healthy national federations skilled enough to outflank unscrupulous middlemen-capitalists who dominate the more lucrative aspects of the supply chain. Game-changing initiatives in the late ’80s and onward saw action in this direction. There was, for instance:

The National Credit Council’s “market-oriented credit policy” in the ’90s, reversing the then “supply-led dole-out mind-set” which only cripples the spirit of enterprise … making perpetual dependents out of the beneficiaries. For why work or save, if dole-outs are there for the asking, and by staying poor, or feigning poverty, assures fund entitlement?

The Integrated Rural Finance Program of the Department of Agriculture, Land Bank of the Philippines and Agricultural Credit and Policy Council, addressing co-ops capacity-building via values formation; project management and business operations workshops … disposed toward industry chamber formations as supply chain over the long term. And along the way, encourage the “small brother-big brother” development strategy; Landbank’s a) B2B pricenow.com,” an e-commerce project creating an e-marketplace for farmer cooperatives as initial attempt to bring the cooperative sector to the “networked era”; b) Gawad Pitak Awards, a recognition and incentives program for excellence, launched in the ’90s on a national scale; c) the push for Regional Liquidity Pools and the National Central Funding System as backup resource for investment opportunities and/or reserves in periods of financial stress; complemented by d) audit teams at regional level to give full meaning to self-regulation.

With the rollout of development initiatives in the late ’80s to the ’90s, bannered by Landbank’s mantra: “Cooperativism is not the best way, it is the only way” (though, at some points, bugged by discontinuities due to program shifts concomitant to midstream policy transitions over the years), the co-ops movement plodded along to become “more viable and productive. The operating co-ops grew rapidly, from 1,142 confirmed primaries in 1985, to 4,494 in 1993, to 23,836 in 2009…” (CDA, or Cooperative Development Authority-Department of Finance, 2009). “The movement’s contribution to the country’s GDP (gross domestic product) somehow reached a little less than 6 percent in 2007.” By end of 2014, registered cooperatives increased to 24,652 with total reported assets of P248.5 billion … increasing further to P429.7 billion by 2018, with 18,065 operating and 11,138 reporting coops. (CDA Coops Statistics, 2018).This groundswell in primary cooperatives, provides a strong base to bolster vertical growth through federations, and thereupon enhance sector-wide unity and cooperation conducive to: 1) building a competitive supply chain (i.e., coordinating value-adding tieups among farmers/growers and processors/manufacturers; wholesaler/marketers and end-users-consumers … all co-operators in the chain); and2) maximizing providential benefits to members and, perhaps, outreach activities that may extend to the wider frontier of a “sharing economy” wherein “market forces and economic practice serve collective interests, rather than just those of capital or the individual.”

Common success denominator

It is noteworthy that the successes of foreign cooperatives stand on a common denominator… i.e., vertical growth through active federations and or multi-disciplinary apex associations playing expansive roles in assisting member-co-ops in, among others: harnessing their capabilities through technology transfers and new trends in co-op business ventures (like packaging, branding of products and services, franchising or networking arrangements, or even outsourcing); mastering the art of marketing and distribution (the aspect of cooperative/product pooling; manufacturing and market information feeds; wholesale trading—both in local and foreign markets); and cultivating tieups with overseas farmers cooperative unions and/or federations.

The local federations— unless they are already into it—may take the cue from this confederal wisdom-in-action that emphasizes one thing: that federations and/or co-op business chambers should ably backstop their member-cooperatives in producing and marketing quality goods to meet customer demand up or down the supply chain … creating, more importantly, sales channels or strategic trading centers supportive of the chain. (For co-ops failures are not necessarily because they cannot adequately produce, but because they cannot profitably connect to the market). And hopefully, in due time, become relevant to the larger community of which co-ops are themselves citizens.

The reference to the larger community is plainly to drive home the point that it is not anymore healthy for co-ops to limit themselves around their circle of local membership. For by so doing, they leave the national/global field open to the domination by profiteering outfits.

Sustainable supply chain

If cooperativism is to be a way of life, the growth momentum must be sustained, along with the initiatives that have worked well for its self-development, innovation and viability. Institutional networking (among primaries and with federations) should not lag behind, but quicken toward strengthening a business-savvy apex association. For the widened business complementation that results will surely enhance value creation, improve profitability and broaden operational reach, making it a lot easier to scale up say, to wholesale “peer to peer trading” and/or “knowledge exchange”—both domestically and internationally.

Thereupon, blaze about a formidable value chain that may loop back as a sustainable supply chain beneficial unto themselves and/or their communities.

More than the organizational structure are the human values … the soft skills essential to sustain the structure. The all-important value of cooperative spirit among members. The trust factor between each other, strengthened by transparency, honesty and open consultation. The faithfulness to the objectives of complementation as basic ingredient for a sustained union; and holding on to that strong orientation for the common good, where people has primacy over profit!

The bottom line: An apex association with the vision to lead, the integrity to inspire and, the capability to model the way … as a broad-based supply chain seeking its place in a free market crowded by “for-profit” big boys. Yet indubitably hopeful of attaining the ends of distributive justice.

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