Cooperative Movement in Thailand

1. Agricultural Cooperatives

            Agricultural cooperatives are established to enable farmer members to engaging in business together, thus helping one another in times of crisis as well as gaining for themselves a better livelihood and quality of life.

       A small credit cooperative named Wat Chan Agricultural Cooperative Unlimited Liability established at Muang district, Phitsanulok province on 26 February 1916 was the first agricultural cooperative in the country. From then on, the number of small credit cooperatives had steadily increased until the promulgation of the Cooperative Act,B.E.2511. Several of these small cooperative then grouped together, forming agricultural cooperatives at the district level. Larger and stronger cooperatives are, then, expected to provide a wider scope of services to members.

      Objective of Agricultural cooperatives are generally formed to meet the members’ needs as follows:
            1. To provide loans to members for productive and providential purposes at affordable interest rates;
            2. To encourage members’ thrift through savings and deposits; To provide agricultural products and daily necessities for sale to members at reasonable prices;
            3. To promote appropriate farm practices and disseminate technical know-how aimed to help members reduce production costs and obtain higher yields. With government assistance, members are introduced to proper cropping techniques. Another service is in the form of farm equipment (e.g., tractors. Water pumps, etc.) made available to members at reasonable charge; and To enable members to market products together, thereby obtaining higher prices for their produce and maintaining fairness in terms of weights and measures. Cooperative Operation

Organizational structure of cooperatives in the agricultural sector.

Agricultural cooperatives in Thailand are vertically organized in a three-tier system; primary cooperative at district level, provincial federation at provincial level, and national federation at national level. The primary cooperatives consist of individual members while members of provincial and national federations are cooperatives. At the provincial level, five or more primary cooperatives can together form a provincial federation which undertakes joint activities on behalf of their primary affiliates such as processing and trading of agricultural produce.
At the national level, there is the Agricultural Cooperative Federation of Thailand (ACFT) of which all provincial agricultural cooperative federations are affiliates. Note that there are also other national federations formed by specific types of agricultural cooperatives such as the Sugarcane Growers Cooperative Federation of Thailand, Swine Raiser Cooperative Federation of Thailand, Dairy Cooperative Federation of Thailand, and Onion Growers' Cooperative Federation of Thailand.
All types of cooperatives at all levels in Thailand are affiliated to the Cooperative League of Thailand (CLT), the top national apex organization which was established in 1968. The CLT is not involved in any business but operates as a cooperative education promoter of the country. Cooperatives have to pay 5% of their profit to CLT, as a fee for services.
Primary cooperatives at the district level are the foundation of the cooperative movement. They consist of individual members who are divided into groups at the village level. Members are directly involved in the affairs of the cooperative. Usually, the general assembly consists of the total members. According to the present Cooperative Act, the general assembly of members will elect the board of directors (BOD) with a maximum number of not greater than 15 persons with a two-year term. The BOD formulates the policy of the cooperative, and appoints a manager and staff to run the business of the cooperative (Fig.1)

Business Scope and Performances:

Business activities and scopes of agricultural cooperatives.
In order to achieve the economic and social interest of the members, agricultural cooperatives carry out various activities such as:
1) Provide production and consumption loans to members at reasonable rate of interest;
2) Encourage savings among members by promoting savings deposits;
3) Provide agricultural equipment such as tractors, water pumps, and agricultural inputs such as fertilizer, seeds as well as consumption goods to members at reasonable prices; and
4) Assist members to market their products at good prices and to maintain fairness in terms of weight and measurement.
Agricultural cooperatives engage in a wide range of business activities in responding to their members’ needs. Their main business may differ from one area to another but they are mostly involved in four businesses which are credit business, savings and deposit, marketing business, and purchasing business.

1. Credit Business
One of the main functions of agricultural cooperatives is to provide credit facilities to their members. Credit facilities provided by cooperatives cover a variety of activities, such as paddy farming, animal husbandry, debt redemption, and household consumption. The sources of funds for agricultural cooperatives are their own capital (share capital), deposit from members, and loans from financial institutions especially the Bank for Agriculture and Agricultural Cooperative (BAAC) and onward lending to their members for short-, medium-, and long-term periods. The short-term loans are only for emergency needs with a repayment period of two months. The medium-term loans are given for cultivation expenses, including purchase of fertilizers, and for other expenses during planting and harvesting. The repayment period of medium-term loans is 18 months. The long-term loans are given for the purpose of purchase of agricultural equipment, building or repairing houses, purchase of property especially land, and also repaying debts. The period of repayment is more than five years.

2. Savings and Deposit Business
Agricultural cooperatives promote savings among members. Savings can also be used to invest and generate profit to both cooperatives and their members. Members of agricultural cooperatives can open Savings Deposit accounts, Special Savings Deposit accounts, or Fixed Deposit accounts with their cooperatives. They are encouraged to deposit a part of the income they receive from selling their produce to the cooperatives in their accounts.

3. Marketing Business:
One of the important activities of agricultural cooperatives is marketing of agricultural products especially those produced by the members. Farmer-members can obtain good prices, while fair weights and measures are guaranteed. In some agricultural cooperatives, food processing such as milled rice and canned fruits were introduced to generate more income for their members. Some have also become centers for marketing of members’ products.

4. Purchasing Business:
The business of selling major agricultural inputs such as fertilizer, seeds, gasoline etc., and farm supplies and equipment also benefits members because it reduces production costs as well as household expenses. Farmers are assured of fair prices when they buy through cooperatives.

Type of Agricultural Cooperatives

            Agricultural cooperatives are generally organized among the people engaging in agricultural earning with varying kinds and degrees of need, thus resulting with various agricultural cooperative types. Besides the general agricultural cooperatives, there are some special types of agricultural cooperative such as:

            - Water Users Cooperatives. Members of the cooperative type are farmers living in the same area along a canal or other water source which they jointly use. Joint utilization and maintenance of this valuable resource is the main purpose of this cooperative type.

            - Land Reform Cooperatives. This cooperative type is established as part of the government’s land reform program in land reform areas. The main purpose is to assist farmer members in agricultural production as well as to enable them gaining access to capital, agricultural necessities, marketing, saving facilitating and improving members’ lining condition.

            - Special Cooperatives. This is formed among farmers who raise animals such as cattle, swine, etc. Joint marketing of these products enables members to obtain good prices and fairness in trading. Dairy cooperatives are among these. They either process milk for sale in the general marker or sell raw milk to private firms producing dairy products.

            - National Security Command Cooperatives. This cooperative type has been initiated by the Supreme Command to help people in remote areas improving their living conditions through productive occupation promotion.

            - Rubber Cooperatives. Rubber Cooperatives are organized among rubber planters. Through their cooperatives, the members share various aspects of  rubber production and marketing , including product development , processing and managing of the cooperative business.

            - Cooperatives in the Border Patrol Police School. This special cooperative type is under the auspices of Her Royal Highness Princess Maha Chakri Sirindhorn who believes in cooperative method of self-help and mutual help and mutual help which would provide the youth with a meaningful ways of future living.

 

 

2. Fishery Cooperatives

 

             Fisheries co-operatives consist of members who are involved in fishing activities, fresh water, brackish water and sea-water. The main purpose is to strengthen the production and marketing of fishermen through joint purchasing, marketing, access to loans and knowledge of the fishing industry, and also promoting of natural resources conservation.

 

Background
            The first fisheries co-operative started as a fresh water fisheries society named Pissanu Fishery Co-operative, Ltd., established in 1949 in Phitsanuloke province with 54 fresh water fisher folk members.
            There are three categories of fisheries co-operatives based on their members’ occupantion;
            - Deep Sea Fisheries Co-operatives-members involved in the following types of fishing: large fishermen who go fishing outside Thailand’s territorial water; middle fishermen who fish within Thailand’s territorial water; and small (traditional) fishermen who go fishing within 3,000 meters offshore.

 

            - Brackish Water Fisheries Cooperatives – members who are involved in shrimp and brackish water farming including the cultivation of aquatic animals.

 

            - Freshwater  Fisheries Cooperatives – members are involved in the farming of fresh -water fish and other aquatic animals (e.g. frogs).

 

Main Activities
            Main Activities of fisheries co-operatives, the same as in agricultural cooperatives, include:
            Marketing activity  – sale of members’ products.
            Purchasing activity – obtains fishing equipment and other necessities for sale to members. Consumer products and gasoline are included.
            Saving and loans.
            Service activity. - provides various services to members such ac setting up a fish and aquatic market, digging and improving fish ponds and training in new fish farming techniques.
            The aggregate business volume of fisheries cooperatives during 1990 to 2001 is shown in Figure 6, and the average business volume (per member) is shown in Figure7.
            The graphs showed the outstanding performance of purchasing activities that gasoline is the main item. The fluctuation during the first five year is reflected by the oil price that seems to be more stable during the last five year.

 

3. Land Settlement Cooperatives

 

            The primary objective of Land Settlement Co-operatives is to allocate land to the landless farmers or holding too small piece of land in order to make better living conditions. Its operational co-operatives. However, land settlement co-operatives put more emphasis on land development including familiarizing members with appropriate farming techniques and modern irrigation methods.

 

            The first allocation of agricultural land to farmers using co-operative method was introduced in 1935 in Pathumthani province. Total farmland of 657 hectares was purchased from the Ministry of Finance for allotment in the form of land hire-purchase co-operative. Later in 1938, by the government’s issuance of the Royal Decree Determining the Forcible Area in Chiangmai province, the first Land Settlement Co-operative was established in Sansai district, Chiangmai province, covering the area of 1,426 hectares.

 

            In 1975 the enactment of the Land Reform Act B.E.2518 set up the Agricultural Land Reform Office : ALRO to handle the allocation of farmland. The new land settlement cooperative was automatic freeze. The on-going land settlement cooperatives still operate to the completion of issuing land title such as title deeds. After that they will operate as general agricultural cooperatives.

 

Types and Main Business
            There are three main types subject to the source of land received for allocation.
           
- Land Settlement Co-operatives from any public vacant land and farmers who have fulfilled the co-operative conditions will later be given the right of land ownership
- Land Hire-purchase Co-operatives – may be purchased from private land owners for allotment. When the farmers have paid all the installments and fulfilled all the requirements, they will be granted the right of land ownership.
- Land Tenant Co-operatives. – forest reserve areas which are extensively squatted by farmers and cannot be restored to their original condition may be acquired and rented out to farmers through land tenant co-operative method. Land ownership will not be transferred to farmers, but the right of land utilization can be inherited.
The aggregate business volume of land settlement cooperatives during 1990 to 2001 is shown in Figure 8, and the average business volume (per member) is shown in Figure9.
Although the main businesses of land settlement cooperatives are in the same function of agricultural cooperatives but the graphs showed the opposite performance of members’ participation that the most important activity is marketing function. In the fluctuation, upward trends are noticeable each activity.

 

4. Thrift and Credit Cooperatives (Savings Cooperatives)

 

               Thrift and Credit Co-operatives or Savings Cooperatives and set up to promote savings and provide loans among members. Generally in Thailand they formed by occupational basis of members but for those forming by community basis will be named as Credit Unions.

 

 The first occupational base co-operative was formed among officials of the Co-operative Promotion Department and employees of the Co-operatives Bank in 1949 in order to solve the severe problems. The consistently increasing living cost has brought a big burden to the low income people not only farmers but cover to others such as government officials. They tend to deal with this problem through the money lenders who charge them very high interest rates. By so doing their indebtedness is increased even more and the situation becomes more serious to them.

 

For the first community saving cooperative, the Soon Klang Thewa Credit Union Co-operative was established in the slum area in Bangkok in 1965. This for solving the poorest people’s problems as mentioned above. They are in different occupations but living in the same area.

 

Objective and Main Activities
            As a financial institution, the specific objectives of Thrift and Credit Cooperatives and aimed to encourage thrift and providing loans among members.

 

            To encourage saving habit, the cooperative operate in two ways. The first is forced savings by accumulating in share capital based on monthly income. The second is depositing as current and fix deposits. These savings will be benefited in term of dividend for share and interest income for deposits.

 

In providing loans to members, in general there are three types of loans provided they are:1) Emergency loans for crisis or emergency cases, 2) Ordinary loans for general purpose but subject to the net monthly income and the individual characteristics and 3) Special loans – usually providing for real estate ownership. The interest expense is charged in fair rate.

 

According to these aims, the cooperative operates in a financial sector and has two main activities; savings and providing loans. But for progressive savings cooperatives today they involve more in members’ welfare and social responsibilities.

 

The aggregate business volume of savings cooperatives during 1990 to 2001 is shown in Figure 10, and the average business volume (per member) is shown in Figure 11, Both activities are clearly obtained the increasing trend as shown.

 

5. Consumer Cooperatives (Cooperative Stores)

 

                Consumer Co-operatives are formed by consumers in obtaining various goods at reasonable various goods at reasonable prices and guarantee standard. It is a legal body, registered under the Co-operative Act B.E.2542, with its members as its share-holders. Members voluntarily co-invest in their co-operative stores to fulfill their purchasing needs in a way that will sustain their economic well-being.

 

The first co-operative store is Thailand was established in 1937 at a village in Sena district, Ayuthaya province. Later on, it was spread all over the country not only in general business areas but many of them operated in the specific areas such as universities, colleges, hospitals, factories, military offices, and so no.

 

During the last decade of 20th century, the competitive degree in retailing business in Thailand is aggressively high. The big international retailing stores start their operations and expand over the whole kingdom. At the same time, in other scale, the convenience franchised stores also expanded; new shops were opened day by day. The high price competition and large budget of sales promotion of the modern superstores created the great impacts to cooperative stores. This was not affected only to the cooperative stores but to the small retailing shops and stores at local level too. These difficulties seem to go on with long lasting. Anyway the cooperative stores in specific areas had less impact than those in general business areas – in the battle fields. Many cooperative stores had closed down.

The aggregate business volume of consumers’ cooperatives (cooperative stores) during 1990 to 2001 is shown in Figure 12, and the average business volume (per member) is show in Figure 13.

 

6. Service Cooperatives

 

               The service cooperative is another cooperative type formed by persons engaged in the same occupation to deal with common concerns including building up employment security and maintaining the members' existing occupation.

 

Background
The first service cooperative formed among traditional umbrella makers' groups, named Bo Sang Umbrella Makers Cooperative, was established at Ton Pao sub-district, Sankampaeng District, Chiengmai Province in 1941. Presently, the Cooperative has expanded its business to cover a wider service to their members and re-name it as the Bor Sang Umbrella Handicraft and Wood Products, Ltd.

 

Later, in 1953, the Nongkham Electricity Service Cooperative, Ltd. was established in the Nongkham district, Bangkok to provide electricity services to the general public. However, in 1978 the Provincial Electricity Authority of Thailand was established to take over this cooperative business for achieving the economy of scale. In 1954 the Aranyik Knife Cooperative, Ltd. was set up at Tung Chang Sub-district, Nakorn Luang District, Ayutthaya Province. The number of service cooperative has increased since then.

 

Objectives

 

Service cooperatives are set up for a number of reasons such as

 

  1. To provide services within the cooperative framework for members.
  2. To procure supplies/materials and consumer goods for sale to members at fair prices;
  3. To encourage thrift among members through savings and deposits;
  4. To provide loan funds to members for occupational uses, including releasing in times of crisis;
  5. To create markets for members' products;
  6. To assist members in matters of court litigation;
  7. To promote social safety among members and their families;
  8. To promote self help and mutual help concept among members;
  9. To provide cooperative education and training including related subject on members' occupation; and
  10. To cooperate with other cooperative organizations for cooperative movement development.

 

The operation of service cooperative is patterned as that of consumer cooperative in the preceding section. At the annual general assembly, members will elect their representatives according to the new Cooperative Act 1999 (B.E.2542) not exceeding 15 persons as board of directors, whose responsibility is to administer the cooperative.

 

Types of Service Cooperative

 

At present, there are several types of service Cooperative such as:

 

  1. Cottage Industry Cooperatives. These are formed among handicraft workers to deal with problems of raw materials and marketing. They encourage the utilization of local materials for production
  2. Transportation Cooperatives which are formed among low-income people, engaged in transport services. Currently, this cooperative type consists of: Bus Cooperatives; Taxi Cooperatives; Tricycle Cooperatives; and Mini-bus Cooperatives.
  3. Housing and Community Service Cooperatives These are formed to serve groups facing housing and/or community needs problems. They can be sub-divided to two types of Housing Cooperative and Community Service Cooperatives.
  4. Infrastructure Service Cooperatives. These are formed among people in the same or nearby communities to deal with shared infrastructure concerns. There are currently three categories under this cooperative type of Electricity Cooperatives; Artesian Well Water Cooperatives; and Water Supply Cooperatives

 

There are still other service cooperatives apart from the ones mentioned above. These are: Employment Cooperative of Thailand, Ltd.; The Thai Construction Service Cooperative, Ltd.; and the Drinking Water Cooperative, Ltd.; and etc.

 

Benefits to Members

 

There are both general and occupation-specific benefits to those who join with service cooperatives. Among them are:

 

    • Cottage industry cooperatives help members to improve their skills and production techniques to meet quality standards required by the market. Through joint buying and selling, members are able to save costs as well as increase incomes.
    • Transportation cooperatives allow legal service operations by members, assuring them of consistent incomes and enabling them to keep track of transportation regulations.
    • Housing cooperatives enable members to attain the basic necessity of housing for their families at affordable costs.
    • Community Service Cooperatives ensure that community infrastructure is maintained properly over time, thus making full use of the members' own as well as government expenditures on these infrastructures. The cooperatives shall play also in improving community health and safety.
    • Infrastructure Service Cooperatives allow members access to necessary infrastructure at reasonable cost.
    • All types of service cooperative provide members the opportunity to improve their quality of life through increased incomes, safety and access to occupational and family needs.
    • Members receive dividends annually, and rebate according to business done.
7. Credit Union Cooperatives

              The first credit union in Thailand was organized on July 25, 1965 by 13 pioneers with initial saving 360 Baht, its name was “Soonklang Thewa Credit Union”. Fr. Alfred Bonninque believed that dreams will come true if people join hands together and achieve their goals without bias to other people. This is the principle he believed people in the slums of Huay Kwang, Bangkok should observe to improve their live and be of equal level to other people in the society. The credit union is the meeting point of people who trust and people who help people.

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