Friday, September 17

Cooperatives: Defining the movement


Should you ask any Malaysian, aged between 30 and 40, about cooperatives – or ‘koperasi’ in Malay – many would associate the word with the place for students to buy exercise books and stationeries at very low prices.

While sounding very nostalgic to most of us, the school cooperatives do exemplify the most rudimentary form of business.

FROM THE BOOKS: A store assistant arranges exercise books at a secondary school’s cooperative shop. This shop – one amongst many in schools nationwide – exemplifies the most rudimentary form of the cooperative business. — Bernama photo

“It is not very much different. It is exactly how a cooperative is managed on a micro-scale,” said Noor Zeeta Mohd Ramli, director of Co-operative College of Malaysia (MKM) – Sarawak branch when met by BizHive Weekly in an interview.

In definition, a cooperative is basically an association or organisation formed by a group of individuals who share the same ultimate aspiration, namely towards mutual welfare of its members.

While it is a form of business that expects returns from its activities, the body itself is not solely profit-oriented.

“The very nature of it being set up by like-minded individuals with the same aim sets cooperatives apart from normal businesses. First and foremost, a cooperative is formed primarily for the benefits of its members,” explained Noor Zeeta.

Administered democratically, a cooperative can have between six to 15 individuals to sit on its board membership. Membership count, however, is subject to one cooperative’s own set of inhouse laws; although the Cooperatives Commission of Malaysia (SKM) – the nation’s overseeing body for cooperatives – does not set any limit.

OPTIMISTIC GOAL: Cooperatives Commission of Malaysia (SKM) – the nation’s overseeing body for cooperatives – targets to collect RM24 billion in business returns by year-end from economic activities carried out nationwide.

How it began?

Initially, the cooperative movement was introduced in the then-known Malaya by the British colonial government in 1909. It took root in 1922 in response to rural problems relating to credit and indebtness, according to University of Malaya’s former deputy vice-chancellor LJ Fredericks in his 1973 publication ‘Cooperative Structure and Government Policy in Malaysia’ for the Institution for Economics On Statistic.

Fredericks further outlined in the book that the earliest societies to be formed were rural credit societies for the peasants, farmers and fishermen – with the thinking that these societies would help to eliminate exploitative middlemen credit sources. Apart from the establishments of credit societies, efforts were also directed at forming marketing societies in 1930.

In urban areas, there was the development of the ‘Thrift and Loan Societies’ particularly for government servants; and later the demand for consumer societies.

In the post-World War II period, cooperatives remained preoccupied with indebtedness, although there were changes in the colonial policy towards the role of the movement. The creation of the Rural and Industrial Development Authority (Rida) in 1950 – which was later expanded into Majlis Amanah Rakyat (Mara) – helped to facilitate this objective.

Moving forward, the cooperative expansion into marketing societies grew from six in 1947, to 257 in 1956; whilst for the consumer society in 1956, it was 239 from only seven in 1947, according to an International Labour Organisation (ILO) report released in 1958.

Archival data from MKM showed that by 1956, a total of 2,123 cooperatives were registered in Malaya, with a membership of 240,301 individuals.

Today, cooperatives in Malaysia, as a whole, is worth RM21 billion in annual turnover, according to latest data from overseeing body SKM.

Addressing challenges

Nevertheless, the movement’s contribution to the nation’s gross domestic product (GDP) is still marginal.

According to MKM director-general Idris Ismail, cooperatives only contributed about one per cent to total gross domestic product (GDP) in 2010. In comparison, co-operatives in Switzerland and France contributed around 16 and nine per cent, respectively, to GDP.

“Even our fellow Asean member Vietnam derives 8.6 per cent of its GDP from cooperatives. As such, our co-operators should be more agressive and proactive to expand their contributions to the nation’s economy,” he stressed in a recent speech.

In her view, Noor Zeeta described the situation as a ‘paradox dilemma’.

“We simply don’t have the urgency to set up cooperatives towards a common goal. Obviously, we can say that our economy is stable enough for us to not be dependent to cooperatives, unlike developing Vietnam.

“Seeing this, we’re actually a bit complacent,” she stated.

Cooperatives — reloaded

Nonetheless, it would get a full recharge this year, beginning with SKM’s target to collect RM24 billion in business returns by year-end from economic activities carried out nationwide.

As commission’s executive chairman Datuk Md Yusof Samsudin said, it should be a realistic goal.

“To date, cooperatives’ economic activities have generated RM21 billion. A bulk of it is derived from the big cooperatives, with an annual turnover of more than RM5 million. Many of the cooperatives are engaged in the plantation, housing, transport and food processing business,” he pointed out.

On MKM’s sideview, Idris urged cooperative players to be bold towards exploring various fields, at the same time taking calculated risks to create new opportunities as well as jobs prospects. Under the National Cooperatives Model 2011-2020, the government has underscored the role of entrepreneurial culture, as well as the importance of creating and reinforcing human capital with any cooperative operation.

“Only with such capabilities can the sector be thriving. We aim to make co-operatives as vital a sector on par with both the private and public sectors going forward,” he said.

All said, a target would be pointless without any implementation. Thus, this is where MKM comes into play.

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