IJERD – International Journal of Environmental and Rural Development (2015) 6-2

Research article
erdBusiness Activities of “Transformed” Agricultural
Cooperatives and their Role in Supporting Local Agriculture
in Northern Vietnam
FUMIE TAKANASHI*
Hirosaki University, Aomori, Japan
Email: fumie-t@hirosaki-u.ac.jp
Received 31 January 2015

Accepted 20 July 2015(*Corresponding Author)

Abstract This study investigates the potential of “transformed” agricultural cooperatives innorthern Vietnam to support local agriculture as the market-oriented economy develops. Thiscase study approach examines four agricultural cooperatives introduced by the local
government. This study finds that, first, cooperatives try to provide agricultural support tomembers, but the private sector mainly leads this business. Second, the range of agricultural
cooperative business activities is expanding from production to livelihood support. Third, quite
a few cooperatives provide marketing support and began to direct production instead of selling
their members’ products in order to secure the quantities required to fulfill their contracts. The
results empirically indicate that cooperatives’ business activities has limited impact on local
agriculture or their members.
Keywords Vietnam, agricultural cooperatives, local agriculture, business activities

INTRODUCTION
The Vietnamese government began strengthening agricultural cooperatives’ (created by small holders)ability to operate in the market economy. First formed under Vietnam’s planned economy (similar to
China’s Model), the cooperatives have changed and lost their social role since the “Doi Moi” economic
reformed. A Cooperative law in 1996 forced them to choose between transformation into a new type ofcooperative serving their members according to International Co-operative Alliance (ICA) rules or
dissolution. In twenty years after the enforcement, there have been currently two types of agricultural
cooperatives. The first is the “transformed” cooperatives resulting from the 1996 law. The second is
newly established cooperatives formed after 1996. Transformed cooperative are multi-purpose
organizations organized around the community and based on regional relationships. Newly establishedcooperatives are organized based on members’ products, such as flowers, fruits, vegetables, fish,
livestock, and other single purposes.
Transformed cooperatives generally take over the organization, assets, activities, and businesses
from old cooperatives, which existed as politically controlled organizations. Accordingly, transformed
cooperatives are seen as nominal organizations, which business activities are diminishing. On the other
hand, after the transition, and particularly because of the new cooperative law established in 2003,
there is a clear lack of identity for such cooperatives. It is difficult to distinguish among limited
companies, charity organizations, and cooperatives. Aside from acceptance as a registered legal entity
as a cooperative member, cooperatives similar to a joint stock company are growing rapidly, especiallyin the South of Vietnam. Most cooperatives, in this case study, offer agricultural marketing output orbusiness efficiency, and are newly established. These are economically effective compared totransformed cooperatives, though they have lost the cooperative’s fundamental purpose.
Previous studies of agricultural cooperatives in Vietnam discussed changes in cooperative
functions after the Doi Moi reforms (Nghiem, 2006; Miyazawa, 2005). Trends or changes in activitiesⒸISERD87

IJERD – International Journal of Environmental and Rural Development (2015) 6-2

at the provincial or national level were also studied (Wolz and Bao Duong, 2010; Trung, 2009). Some
researchers investigated the role of cooperatives in agricultural distribution and marketing (Moustier etal., 2010; Takanashi and Sakazume, 2013) and compared Vietnamese agricultural cooperative
characteristics with those in Japan (Dung, 2010). These studies concluded that most agricultural
cooperatives worked mainly on irrigation management, assisted with starting difficult new businesses
to address the shortage of capital, and human resources. Most transformed cooperatives had
economically stagnated while new cooperatives achieved good economic performance. However,Miyazawa et al. (2005) argued that agricultural cooperatives maintained some security for theirmembers by maintaining the traditional rural community and working as a mutual cooperative, evenafter Doi Moi, and emphasized the importance of “transformed” cooperatives.
Transformed cooperatives organized around rural communities have the potential to coordinate tocounter the power of capital, support small holders’ livelihoods, and the local subsistence agriculturethat is the foundation of food security and an important part of the socio/economic/ecologicallandscape (FAO, 2013). Although previous studies mainly focus on efficiency in developing
commercial agriculture or cooperatives’ economic performance, few researches emphasize on how
agricultural cooperatives support local agriculture through their business activities.
OBJECTIVE
The main objective of this research is to examine the potential for “transformed” agricultural
cooperatives to support local agriculture and members as the market-oriented economy deepens.
METHODOLOGYThis study takes a case study approach to explore the trends in business activities of northern
Vietnamese “transformed” agricultural cooperatives. In-depth interviews were undertaken with four
agricultural cooperatives in Hanoi and Hai Duong provinces between November 2012 and January
2013 with the heads and management boards of each cooperative. They were asked about theirbusiness activities, how they started each business, and the businesses’ management systems. The
cooperatives were introduced to the researchers by the Department of Agriculture and Rural
Development in Hanoi and Hai Duong provinces, in accordance with the study purpose. This paper isorganized as follows. The next section provides general statistical data for current Vietnamese
agricultural cooperatives, as background information. The subsequent section presents the main results
and a discussion of the field research. The paper then concludes with findings and implications.
RESULTS AND DISCUSSION
Current Status of Agricultural Cooperatives in Vietnam
Cooperative sector and agricultural cooperatives: Table 1 summarizes the number of cooperatives
and agricultural cooperatives in Vietnam by type and industry sector in primary production. Vietnam
has 14,500 cooperatives, of which 44% are agricultural. The Red River Delta has a relatively highnumber of cooperatives, as 62.4% of all cooperatives are agricultural, and almost half are of thetransformed type. A high number of cooperatives are located in the North part of Vietnam. However,the new type of cooperatives tends to be established in southern Vietnam. Previous studies show thatthe most popular activity or business for agricultural cooperatives is irrigation, carried out by 73.4% of
agricultural cooperatives (Table 2). This is because most transformed cooperatives maintain irrigation
canals taken over from the old cooperatives and hold as a fixed asset. Technical extension comes andⒸISERD88

IJERD – International Journal of Environmental and Rural Development (2015) 6-2

42.0% of agricultural cooperatives providing these services is usually done through collaboration with
the District Office of the Department of Agriculture. Providing electricity (38.5%) is the third highest
activity. Marketing output considered as the most expected activity from an agricultural cooperative
accounts for only 1.8%, so only a limited number of agricultural cooperatives engage in this business.
Table 1 Cooperatives in Vietnam (2008)
Total

Newly
establishedTransformed

By Industrial sector(primary production)
Agriculture
Forestry
Fishery6374.0
59
200

Total

14,500

5,742

8,149

Red River Delta
North- East
North-WestNorth-Central
Central coast
Central highland
North-east

5,059
2,628
604
2,754
985
490
834

2,926
385
123
1,051
719
87
306

1,857
2,214
402
1,612
245
380
505

3155.0354.0
190.0
1462.0
527.0
136.0
109.0

9
17
3
11
4
9
3

26
57
11
18
13
3
13

Mekong Delta

1,146

145

934

439.0

3

59

561

335

218

274.0

Hanoi city

3

Ha Tay**
672
468
115
519.0
1
Hai Duong
701
183
475
318.0
3
* “To Hop Tac” (Farmer’s Group) is a voluntary association of farmers without cooperate personality**Ha Tay province is absorbed by Hanoi city
Source: Ministry of Planning and Investment (2009)

1
5

Table 2 Agricultural cooperatives’ business activities by region (2005)

153
15
58
4
9
11
28
13

Supplyingelectricity
3201
1696
348
20
660
418
31
19

Agriculturalextension
3492
2019
307
97
608
263
56
37

316

15

9

-

-

-

Total

Irrigation

MarketingTotal
Red River Delta
North- East
North-WestNorth-Central
Central coast
Central highland
North-east

8322
3463
1010
305
1591
707
200
282

6106
3047
627
180
1124
636
69
107

Mekong Delta

764

Ha Noi (2012)

958

CreditOthers

770
100
67
9
124
327
24
54

4331
2560
324
117
997
191
62
51

105

65

29

-

-

-

Hai Duong (2011)
349
315
4
0
27
0
- : no data
Source: data by region: Nghiem (2006), Data for Hanoi: DARD Hanoi (2012), Data for Hai Duong: DRD, Hai
Duong (2011).

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IJERD – International Journal of Environmental and Rural Development (2015) 6-2

Outline of sample cooperatives: The four sample cooperatives are of the transformed type, which
each includes 2-4 communes; so there is a relatively large number of cooperatives (888 for A, 1,680 for
B, 2,440 for C, and 1,457 for D). A and D cooperatives can secure some government land for housing
and industrial use because these cooperatives are located close to the center of Hanoi or Hai Duongprovinces. A cooperative lies along the dike of the Red River, an area that traditionally suffers fromfrequent floods. It is recognized as a disadvantaged production area. However, Hanoi city approves A
cooperative as a safe vegetable production and marketing cooperative and the city has invested inirrigation. Consequently, safe vegetable production is rapidly growing, especially for leafy vegetables
as this area has good access to the center of city. B cooperative is 18 km from the center of Hanoi andis strongly influenced by urbanization though it maintains the traditional production system dominatedby rice. C cooperative is located between Hanoi and Hai Duong city. D cooperative is between Hai
Duong and Hai Phong city. As many industrial zones have been constructed, there is an outflow offarm labor, and the number of part time workers has significantly been increased.
Previously, new members without cultivated land in a cooperative’s jurisdiction could not join atransformed cooperative, and these cooperatives did not accept capital injection from members. B andC cooperatives revised their constitutions to solicit new members in 2008, and 38 and 43 new members
were registered for B and C. The cooperatives pay dividends to these new members based only on theircapital contribution invested in the cooperative’s operations.
Additionally, business activities for daily support are growing, especially in the two cooperatives
in Hanoi city. Agricultural cooperatives pick up garbage, supply household water, manage consumer
markets in the commune, and subcontract construction. Table 4 shows that these activities provide alarge percentage of total business profit.
Business Activities of Transformed Agricultural Cooperatives
Overall business direction: Table 3 shows the sample cooperatives’ current business activities. Most
are engaged in irrigation, technical extension, pest extermination, purchasing inputs, and distribution ofelectricity, which they continue from the old cooperatives. In terms of agricultural production, thesecooperatives begin contracting agricultural work such as plowing by tractor, agricultural production,and marketing after the transition.
Table 3 Business activities of sample CooperativesⒸISERD

90○○

ConStruc-tion

Management ofmarket

▲
○

Water

A ○
○
○
○
○
○
B ○
○ ○
○
●
○
○
C ○
○ ○
○
○
○
D ○
(seed)○○○
Shaded activities are taken over from old cooperatives*cooperatives’ own farm. Cooperatives manage the farm as their business▲ Until 2011 (from 2011, People’s committee undertaking）● From 2012, started on a trial basis
Source: Field Research (2011-2012

Garbage pickup

Electricity

MarketingGroup purchase

Production*

Daily life support

Plowing

Pest
Exterminati
on

Plant
protection

Extension

Irrigation

Agricultural production
Support for agricultural
work○

IJERD – International Journal of Environmental and Rural Development (2015) 6-2

Table 4 Annual profit and rate by business activity
Construction

Garbagepickup

ElecTricity

Grouppurchase

Marketing(mil. VND)

Production

Veterinary

ProfitPlant
protection

Total
revenue

Irrigation

Rate by business activities

50.0
-

12.0
-

(%)

A
NA
750
10.0
30.0
10.0
B
10,012
373.4
3.0
75.0
C
1,292
4.09
49.7
48.8
0.4
1.0
D
0
-0.1
Whole
1,011
833
country
Hanoi
950
70
Hai
491
11
Duong
**including all cooperatives (not only agricultural cooperatives)** - = no benefit, space=no data
Source: Field research (2011-2012), MPI (2009), DARD Hanoi (2012), DRD Hai Duong (2011）

10.0-

Support for Agricultural Production: Plowing
Of the cooperatives, three of them contract plowing by tractor. However, B and C cooperatives do not
own a tractor, and so coordinate and mediate contracts between members and a contractor.
Contractors are usually a local group with members contributing capital that own a tractor. Eachcommune has several groups with contracting services that cooperatives coordinate, so all members
have equal access to the service. Cooperatives determine contracting needs through board members or
the heads of internal groups before plowing season, then negotiate prices with a contractor, allocate andrequest the work. Once complete, the cooperatives collect bills from each farmer and settle thepayment. Contract fees are presented for consideration before a general meeting of cooperative
representatives to ensure that the price is reasonable. B cooperative does not take commission for thiswork.
C and D cooperatives, which do not have enough contractors in their commune to provide
plowing services to all households, make an effort to meet members’ needs. For these cooperatives,
members’ demand for plowing service has increased with the development of contractors inneighboring communes. C cooperative has started its contract plowing service since it received
government financial support in 2008 to purchase three tractors. Now, two board members are engaged
in this business, and the cooperative has hired six operators. Accordingly, these groups can plow all
agricultural lands in the commune.
D cooperative also lacks the contractors to meet members’ demand and considers purchasing
tractors. Though the cooperative cannot follow through the plan, it is unable to obtain a loan orgovernment support. As a result, six board members, managers of the cooperative, executive membersof the People’s committee, and farmer’s union together capitalized on this new business by purchasing
three tractors, which are owned and managed by the cooperative. The six invested members canreceive dividends when this business earns a profit.
Support for Agricultural Production: Marketing and Production
Among the four cooperatives, only A cooperative markets agricultural outputs. A and B have begun
cooperative farm management and production on a trial basis.

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IJERD – International Journal of Environmental and Rural Development (2015) 6-2

Since Hanoi city was selected as a safe vegetable production area in 1999, A cooperative hasarranged contracts with supermarkets and venders for school meals since 2003. It is to provide a stable
distribution outlet for members’ products. It has become difficult to secure enough supply to meet thecontract amounts in terms of quality and assortment because agricultural labor is declining as thenumber of farm households. A cooperative opens the cooperative’s land by leasing land from members
and hiring labor. Some of the cooperative’s farms are used as experimental fields for new agricultural
techniques.
B cooperative has started producing and marketing seed potato since 2012. The cooperative
provides training and information for all members, and 14 interested members invest to hire labor andlease 3 ha of agricultural land to produce seed potato. All products from this field are sold to othercooperatives through B cooperative, which will consider investing in cold storage if more members
participate in this business in the future.
CONCLUSION
Transformed agricultural cooperatives took over the business and activities from old cooperatives. The
cooperatives have recently expanded their activities to include daily life support. Quite a few
cooperatives market their agricultural outputs. Some of the cooperatives distribute agricultural products
due to changes in the local agricultural production structure. Cooperatives have now become a businessorganization and a competitor to small households.
The consumer market is scattered, as the population has not yet concentrated in Vietnam’s big
cities. Additionally, agriculture in Vietnam is traditionally very small and multi-item production, so it
is still not specialized and geographically concentrated. Under these conditions, it is difficult forcooperatives to organize marketing by taking advantage of scale, especially in urban neighborhoods.
Marketing support through other means, as supporting farmer’s markets, might be required in the
future. Due to structural changes in the business sector and an outflow of labor, demand for agricultural
production support is expanding. Most agricultural cooperatives act as intermediaries between
contractors and members, though farmers’ groups usually lead this business rather than the cooperative.
However, contractors who can not provide services to meet members’ demand for contract work havestarted to provide plowing services as their own business. This kind of effort will be important tomaintain local agriculture.
There are three basic trends in cooperatives’ business activities. First, the private sector mainly
leads agricultural support. Second, business has expanded to include daily life support. Third, many
have begun to own land; and because of coming from the same background, they have suffered from a
serious capital shortage. All agricultural cooperatives have tried different means to earn active capitaland profits. Under existing conditions, transformed cooperatives have prioritized keeping profits frombusiness activities for the cooperative itself rather than for its members, so these business activities
have limited impact on members or local agriculture.
There are several limitations to this study. The sample consists of cooperatives located in only two
provinces, which are too small to draw conclusions about the entire cooperative movement in Vietnam.
Future studies can explore some of the issues identified in this study by using a larger sample of“transformed” agricultural cooperatives.
ACKNOWLEDGEMENTS
This work is supported by the JSPS “Institutional Program for Young Researchers Overseas Visits.”ⒸISERD92

IJERD – International Journal of Environmental and Rural Development (2015) 6-2

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