Research and Reports

It is proposed that Recommendation No. 127 be revised to provide an appropriate framework for the promotion of cooperatives in the twenty-first century, which is universal in its application, emphasizes the position of cooperatives as privately owned member-controlled organizations and recognizes their need to function within a competitive environment and to sustain their identity, having a distinctive role both as economic enterprises and within civil society. The most appropriate way of providing such a framework is now being sought.

The changes affecting cooperatives and their future potential

The report documents the many changes that are influencing cooperatives in differing ways in developing countries, transition economies and industrialized countries. Cooperatives have responded to this radically changing environment in a variety of ways; some cooperatives have gone out of existence whilst others are flourishing in the new conditions. The advantages to nations of having strong cooperatives as one of a variety of forms of private sector organizations, and their ability to play a constructive role in both economic life and within civil society, have been highlighted - not least, their potential to generate and sustain employment, to support entrepreneurship and wealth creation and to provide much-needed social services in the face of the reduced capacity of the State to do so.

A new role for government in relation to cooperatives

The most appropriate ways in which governments may in future provide a positive framework in which cooperatives can grow and prosper need to be found. The pro-posed revision of Recommendation No. 127 could be a most valuable means of encouraging the adoption of new, more relevant governmental policies in relation to cooperatives. In particular governments may consider adopting policies that:

• are even-handed towards cooperatives but at the same time take account of their capacity to contribute to the general well-being of the nation and the special features that distinguish them from investor-owned companies;
• will stimulate the growth and expansion of cooperatives whilst respecting their integrity and their right to self-determination, recognizing the special nature of cooperatives as self-help enterprises;
• encourage cooperatives to accept fair application of competition policy which brings a balance into the market-place;
• recognize that cooperatives need in principle to be taxed equally with other forms of commercial enterprise; the principle of "equal treatment" should apply and any incentives offered to investor companies and their shareholders should also be made available to cooperatives; nevertheless, tax concessions may be justified for certain types of cooperatives, to encourage activities that are deemed to be in the public interest; transitional tax benefits may also be appropriate to allow cooperatives to start having a share of the national business "cake" enjoyed by investor-owned companies;
• ensure that curricula of education and training establishments pay sufficient attention to cooperative forms of enterprise and that students in all kinds of schools, colleges and universities are aware of the cooperative business option; and
• where necessary, facilitate the transition of cooperatives from state control and interference to genuine member-controlled enterprises.

The legal framework

The design of an appropriate legal framework for cooperatives must take into account the primacy of member interests, the autonomy of the cooperative enterprise, legitimate public interests, and the current political, social and economic context of the respective country. Many nations are experiencing a shift in paradigms which seek to replace the State with the market as an engine of growth and development. This is demonstrated by the policies of deregulation, privatization and liberalization that have been adopted almost everywhere in the world. The present global context gives cooperatives a real chance to operate on the basis of internationally accepted values and principles. This can be reflected in contemporary cooperative laws, so that cooperatives can in future compete on a "level playing field" with other enterprises.

The promotion of cooperatives

Cooperatives are probably best promoted by providing them with a favourable climate in which to develop. Favourable conditions include the right of cooperatives, whenever it is practical, to organize their own support services and avoid parallel or competing services offered by public or other subsidized service providers.

Member education and training of elected member representatives, managers and employees, not only in their technical duties but also in the rules, benefits and ways of making cooperation function effectively, are of crucial importance; in most cases it is in the provision of such education and training that assistance to cooperatives may be most usefully provided.

Both employers' organizations and workers' organizations, as well as governments, have the opportunity to work in collaboration with cooperatives to further their mutual interests. Whilst some valuable experience in such activities already exists, the most effective ways of fostering such collaboration need to be developed.

Structural change within cooperatives

The worldwide trend of amalgamating small local cooperatives into larger units as a reaction to merger and acquisition policies of investor-owned competitors looks set to continue. This seems necessary in many cases so as to build up and strengthen vertically integrated cooperative systems, including cross-border cooperation at the inter-national level. This works best if cooperatives are given autonomy to federate and to agree on their own structures. There is a new awareness of the need to establish integrated cooperative systems to fill the space vacated by the state-owned undertakings and the State's progressive disengagement from direct involvement in cooperatives. The larger and more professional primary cooperatives become, the less they need and are willing to pay for the services of regional cooperative federations or unions. Accordingly, a merger of primary societies leads to the reduction of the number of secondary and tertiary societies, often resulting in a one-tier cooperative structure.

It is advocated that cooperatives should be placed in a position where they can perceive the new environment not as a threat but as an opportunity. Liberal, deregulated market economies should create new business opportunities for all forms of enterprise, including cooperatives. However, the more an economy is deregulated, the more important the original cooperative values and principles become. In this situation, cooperatives need to stress their unique comparative advantages, which offer people an alternative to enterprises that have the paramount objective of achieving maximum "shareholder value".

International linkages and support for cooperative development

Linkages between national and international bodies and institutions involved in cooperative development could be maintained and encouraged to ensure effective synergy and to enable cooperatives to optimize their vast employment-creation and income-generation potential.

The ILO, with its unique tripartite structure, could further expand its activities aimed at creating employment opportunities through cooperative business enterprises by:

• providing information and capacity-building services to employers' and workers' organizations and other organizations interested in employment creation through cooperatives, in collaboration with other international partner organizations and institutions (e.g. ICA, COPAC, ICFTU);
• assisting cooperatives through technical cooperation programmes to become more competitive, to strengthen local capacities, to provide consultancy services, and to facilitate the access to and dissemination of information through networking and partnerships;
• advising government on policy issues regarding cooperatives in order to create a favourable climate for cooperative development;
• arrying out research in collaboration with partner organizations and institutions, and involving the social partners in strategies to promote sustainable economic activities and employment through cooperatives;
• organizing collaborative activities between the ILO, the social partners and cooprative organizations and institutions aimed at employment creation through cooperatives, and ensuring that both men and women participate in these activities on an equitable basis;
• carrying out studies on the role of cooperatives in poverty alleviation and in bettering the socio-economic conditions of particularly disadvantaged groups such as indigenous and tribal peoples, the disabled and unemployed youth.