Many co-operatives function as enterprises
By Thuy Dung - The Saigon Times Daily
HANOI – Some 32% of the co-operatives nationwide are functioning as enterprises but still enjoys the State preferential polices for co-operatives, heard a seminar on the amended Co-operative Law in Hanoi this Tuesday.
Nguyen Minh Tu, head of the Department of Co-operatives at the Ministry of Planning and Investment, said even policymakers found definition of co-operative controversial. Therefore, there are some regulations in the prevalent Co-operative Law that inhibit the positive development of new-type co-operatives.
As a result, many co-operatives are taking advantage of the legal loopholes to exist as enterprises in nature.
According to the planning ministry, contribution of co-operatives to the gross domestic product (GDP) has been falling over the past years. In 1995, co-operatives’ contribution made up 11% of GDP, but the percentage dropped to 5.22% in 2011.
Moreover, co-operatives recorded poor and unstable growth, equal to only a half of the growth rate of the entire economy.
In 2007, there were 14,500 co-operatives across the country, but now there are only 12,200 left, dipping 16% in four years.
Tu said co-operatives in Vietnam have yet to get out of the old model. Furthermore, there is misunderstanding between the model of co-operatives and enterprises stipulated in the Enterprise Law.
The data of the planning ministry showed that there are two kinds of co-operatives nationwide.
Co-operatives of the first kind focus on serving their members, accounting for 68% of the total number of cooperatives nationwide. This model supplies products and services to 5.3 million members.
Meanwhile, 32% of co-operatives are functioning as enterprises. Co-operatives of this kind mainly operate in industry, create jobs for a mere 6% of members and mostly supply products and services to the market, which make up 90% of their revenues.
Tu said the second model does not serve the economy and create jobs for co-operative members as mandated, but simply aims at profits.
Duong Dang Hue, head of the Department of Economic-Civil Legislation under the Ministry of Justice, said the amended Co-operative Law points out five basic distinctions between enterprises and co-operatives, in which the key distinction is management mechanism.
While the ultimate goal of enterprises is gaining profits and pay dividends to shareholders, co-operatives place the economic efficiency of member households on top priority. Participating in co-operatives, households can improve economic conditions thanks to more efficient production and business, lower input costs and outputs of higher quality.
Deputy planning minister Dang Huy Dong said the nature of new-type co-operatives will adhere to seven recommendations of the International Co-operative Alliance, which will help the poor and the disadvantaged better deal with the harsh competition in the market economy.