Performance of co-operatives in Vietnam A systems thinking approach

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Introduction
* Agriculture plays an important role in economic development in developing countries; * but characterized by small scale farming. * The formal farmers organizations do offer opportunities to smallscale farmers. * Vietnam agricultural co-operatives still adjusting to market economy * Co-operatives were dissolved, amalgamated or liquidated, as they could not function as before due to economic reforms from centrally planned economy to market economy and households as unit of production.

Key Variables

* Land resource * Small-scale farming * Social capital

* Performance of co-operatives
* Government incentives * Enforcement of legal framework

* Structural weakness

Behaviour over Time

The pressure of population on arable land in Vietnam

1930

1960

1990

2000

2009

Population

Arable land per capita

Figure 1.0 The Vietnam's population and Arable land per capita in Vietnam

Behaviour over Time (cont.)

The importance of agriculture in Vietnam

1990

1995

2000 Industry

2007 Services

1990

1995

2000 Industry

2007 Services

Agriculture

Agriculture

Figure 2.0 GDP Shares of Major Industry Groups

Figure 3.0 Employment shares of Major industry Groups

Behaviour over Time (cont.)

The poverty, land resource and land policy evolution in Vietnam
The poverty in Vietnam is higher than some countries in the Asia region, about 22.83% (2004-2006) (UNDP 2010) The sizes of farms in Vietnam are normally small with Mekong Delta averaging about 1.2 ha (ACIAR 2006) Fragmented land holdings is the present problems to agricultural development This has been recognised by the government which is now encouraging land consolidation (ACIAR 2006)

1993 Urban

1998 Rural

2002 In total

Figure 4.0 Poverty rates in total and by area in Vietnam

Behaviour over Time (cont.)

The movement and business activities of agricultural co-operatives

1960

1992

1994

1997

2005

2008

1995

2008

2009

Agricultural Cooperatives

GDP Share of Cooperatives

Figure 5.0 The number of agricultural co-operatives

Figure 6.0 Co-operatives' contribution to GDP

Casual Loop Diagram

S Land reform S Population

Government O Incentives
S B3 S R5 O Collapsed Co-ops O B2 S B4 B8 O S Enforcement of Legal Framework S STRUCTURAL WEAKNESS LOOP B5 O S Need of O cooperation Opportunities Dependance O

Land fragmentation

Poverty O S S

Opportunism PROBLEM LOOP

Small-scale farming

R2 RATIONALE LOOP Product's S Quality

S Human resource S Management capacity O

O Economy of Scale S S Negotiation power R1 O Farming cost O Profits S Technology Farmers' Income S

S Formation of co-ops

B1

Structural weakness
S

Performance of co-ops
S R3 O R4 Membership Competion S S Credit access S S O Formation of informal groups S S

S S S Market access

S Infrastructure S

O O

Social captial
S

Benifits for PERFORMANCE LOOP farmers

B6

Financial capacity S

B7

Causal Loop Diagram 1.0 The Main Loop

Casual Loop Diagram (cont.)

Rationale loop
Population S Land reform S Land fragmentation Poverty S S O S R2 RATIONALE LOOP Product's S Quality O S Formation of co-ops S B1 Economy of Scale S S S Negotiation power R1 O Farming cost S Technology Farmers' Income S

Government Incentives

Small-scale farming
Need of O cooperation

Social captial
O Profits S S S Market access

Causal Loop Diagram 2.0 The Rationale Loop

Casual Loop Diagram (cont.)

Performance Loop
Government O Incentives

B2 Dependance O

Opportunities

Performance of co-ops
S S R3 O R4 Membership S Competion S O Formation of informal groups Benifits for PERFORMANCE LOOP farmers S

Social captial
S

Causal Loop Diagram 3.0 The Performance Loop

Casual Loop Diagram (cont.)

Problem Loop
Government Incentives
S B3 S Opportunism R5 O PROBLEM LOOP

Collapsed Co-ops

B4 S O

Enforcement of Legal Framework

Causal Loop Diagram 4.0 The Problem Loop

Casual Loop Diagram (cont.)

Structural Weakness Loop
Dependance O B8 O

Government Incentives

Enforcement of Legal Framework

S Human resource

STRUCTURAL WEAKNESS LOOP B5

S Management capacity O

Performance of co-ops Structural weakness

S B7 Social captial

S Infrastructure S B6

O O Financial capacity S

S Credit access S S

Causal Loop Diagram 5.0 The Structural Weakness Loop

Mental Models
Perception of the old-style co-operatives
The collapse of co-operative still felt by farmers judging from their sentiments with their obsession with old-style co-operatives more often than not, the members saw co-operatives as quasigovernment agencies that provided useful services but did not belong to them (Birchall 2004, p. 15) the nature of co-operative was distorted, created vested interests among local politicians, civil servants and national governments that would not allow the cooperative members to own and control their own co-operatives (Birchall 2004, p. 15)

Mental Models (cont.)

Governments strategies
* The Vietnamese government is planning to reform the Co-operatives Law * Their intent indicates that the Law still has some loopholes that limit the performances and development of co-operatives * Many different discussions by leaders in different government departments and some co-operatives against this initiative., supporting the idea that the root of co-operatives problems is closely linked to farmers and local governments perceptions about the role of cooperatives * The way co-operative model is carried out (Dao 2007) and the law enforcement should be the main concern (Tu 2011) and rather than another new law

Leverage points and Intervention strategies

S Land reform S Population

Government O Incentives
S B3 S R5 O Collapsed Co-ops O B2 S B4 B8 O S Human resource S Management capacity O Enforcement of Legal Framework STRUCTURAL WEAKNESS LOOP B5 O S S S Formation of co-ops S Opportunities Dependance O Need of O cooperation

Land fragmentation

Poverty O S S

Opportunism PROBLEM LOOP

Small-scale farming

R2 RATIONALE LOOP Product's S Quality

O Economy of Scale B1 S S S Negotiation power R1 O Farming cost O Profits S Technology Farmers' Income S

Structural weakness S

Performance of co-ops
S R3 O R4 Membership Competion S S Credit access S S O Formation of informal groups S S

S S S Market access

S Infrastructure S B6

O O

Social captial
S

Benifits for PERFORMANCE LOOP farmers

Financial capacity S

B7

Causal Loop Diagram 6.0 The Leverage Points

Leverage points and Intervention strategies (cont.)

*
* * *

The mind-set or the paradigm out of which the system arises and rules of the system
The goals of the system The power to add, change or self-organize the system and structure of information flow Driving positive and negative feedback loops

The length of delay relative to the rate of system changes

Leverage points and Intervention strategies (cont.)

The mind-set or the paradigm out of which the system arises and rules of the system

change is not in changing the law but in changing of the mind-sets of local leaders and farmers respect by all concerned, of autonomy and independence of each co-operative and recognition of member controlled essence of cooperatives.

Leverage points and Intervention strategies (cont.)

The goals of the system the goal of the system is to deliver a fully functional and effective co-operative movement that will raise the living standards of small-scale farmers need to re-educate persons concerned on what goals they are working on so that they can have a single platform where all future actions (policies, laws, etc.) will be based

Leverage points and Intervention strategies (cont.)

The power to add, change or self-organize the system and structure of information flow
International Co-operative

National Co-operative Body

Secondary Co-operatives

Primary Co-operatives

Leverage points and Intervention strategies (cont.)

Driving positive and negative feedback loops Negative feedback-strengthened to increase its accuracy and rapidity of monitoring and the quickness and power of response and the directness and size of the corrective flows (Meadows 1999). Positive feedback-guide informal groups to be registered as co-operatives through a gradual process that will involve ironing out of negative perceptions about cooperatives.

Leverage points and Intervention strategies (cont.)

The length of delay relative to the rate of system changes It is important that enforcing mechanism (government department(s) concerned) is capacity build and has sufficient capacity to record and track changes or responses over time so as to administer correct measures at correct levels.

Learning Process

* System thinking has been an educative journey * Many issues require to be considered in order to understand a system * This calls for teamwork where everybody (of different disciplines) can participate and bring their experiences and paradigms into play

Summary and Conclusions

* The Vietnam co-operatives problems have been indicated in slow development and the collapse of many cooperatives through key variables and BoTs * Casual loop diagrams and in mental model express the close relationship between the needs of formation of co-operatives, their performances, the problems and the structural weakness leading to those problems

* The chain of different initiatives to alter the perception of co-operative role, strengthen human resources in several levels of co-operatives through training and education were suggested in The leverage points and intervention strategies * This paper highlighted the importance of vertical structural reinforcement in the co-operative system and the enforcement of co-operative law and policies

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