Cooperatives the “only way forward” for efficient growth

February 24, 2022 | 11:31
New collective and cooperative economic models applying Industry 4.0 and international economic integration are being strongly developed to increase their contribution to the country’s GDP.
Cooperatives the “only way forward” for efficient growth
Cooperatives the “only way forward” for efficient growth, illustration photo

Building an advanced economic management model was highlighted by the prime minister at a national conference on the summary of the cooperatives and collective economy last week.

Minister of Planning and Investment Nguyen Chi Dung added, “In the past 20 years, along with the process of economic renewal and international economic integration, the economic sector has undergone various development stages, including both advantages and challenges.”

The most notable outcome is the transition from a poor-performance cooperative model to an autonomous and self-responsible cooperative model. “The collective economy has been improving in performance, gradually changing in association with the market mechanism. Cooperatives are becoming an important sector, contributing to ensuring social security, political stability at a grassroots level, and economic development of the country,” highlighted Dung.

The Law on Cooperatives 2012 is the basic legal framework for the establishment and organisation of the cooperative sector. With the current development of science and technology, the association and consumption of goods by cooperatives not only involve one district purchasing goods from another one, and cooperatives working with businesses in the province, but the links extending to various localities and even reaching overseas markets.

Digital transformation is deemed a step forward to help cooperatives promote both products and local information, as well as a transparent production process. Cooperative development in combination with digitisation will help accelerate the construction of new rural areas in localities, creating motivation for rural people to live and produce in their homeland, the minister said.

For example, the Chuc Son clean vegetables and fruit cooperative in Hanoi has applied eGap and iMetos from the Vietnam Cooperative Alliance (VCA) for the digital transformation of management along with numerous solutions like an electronic diary, production management on smartphones, field surveillance camera system, and QR code traceability stamps associated with the brand identity of Chuc Son.

Thanks to this application, the production and consumption chain of Chuc Son is maintained in a stable manner. Chuc Son’s revenue in 2021 was estimated to be about VND14 billion ($609,000), up 10 per cent compared to 2020.

According to the MPI, as of end-2021, there were 27,342 cooperatives (18,327 of them working in agriculture) with about six million members. The number of cooperatives has increased by 16,420 (about 2.5 times) as compared to 2001, while the number of members increased by 9 per cent and labour doubled compared to 20 years ago.

“Amid strong development of Industry 4.0, there is no room for small and household economies that are below standard and with uncompetitive goods. Cooperation is the only way for development,” said Minister Dung. “However, while the country is developing rapidly, the collective economy is facing a lot of troubles, not fully promoting itself or contributing enough to the economic development of the country.”

Over the last two decades, the growth of the collective economy and cooperatives has slowed down, equivalent to half of economic growth. The contribution to GDP is down from 8.06 per cent in 2001 to 6.65 per cent in 2005, 3.99 per cent in 2010, and 3.62 per cent in 2020.

In order to achieve the goal of creating an open legal framework and creating favourable conditions for the collective economic sector to develop actively and sustainably to become an important part of the economy, Minister Dung proposed five groups of policies.

The first group of policies aims to perfect core regulations on cooperatives. Members will be expended as much as possible, while all information will be clarified with the support of IT, and rules will be added to make everything transparent.

Second is the aim to build regulations on types of cooperative economic organisations and representatives. The government should add long-term cooperative groups that must be registered for the establishment of cooperatives into the revised Law on Cooperatives. Dung also proposed policies to expand the market, improving the ability to mobilise capital, creating a driving force for the cooperative sector to develop.

Additional policies will perfect and improve the efficiency of the management and administration of cooperatives and unions of cooperatives. The government will add a separate chapter on auditing, including internal and independent audits to ensure compliance with auditing standards.

The final proposal covers improving the effectiveness and efficiency of state management in the field of the collective economy.

By Minh Vu

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