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UDC 334.735:631.115.8 (47)
PROBLEMS AND PROSPECTS OF THE AGRICULTURAL CO-OPERATION DEVELOPMENT
Mishchenko T.L., Candidate Economic Sciences Orel State Agrarian University, Orel City, Russia E-mail: priemn2@orelsau.ru
ABSTRACT
The article under review deals with the importance of cooperation in rural areas in the conditions of economic globalization. It emphasizes the necessity of the co-operative system development to improve the competitiveness of agricultural producers. The author presents the main directions of the Concept of co-operation development in rural areas, analyzes the work of the All-Russian Congress of rural co-operatives. The final part of this work presents problems, opportunities and prospects for the agricultural co-operation development.
KEY WORDS
Co-operation; Agricultural producer; Consumer co-operatives; All-Russian congress; Rural co-operatives; Social and economic importance; Rural areas development; Co-operation; Concept; Principles of co-operatives; Problems; Co-operation development.
The adaptation of an agricultural producer to new economic conditions within the common economic space is impossible without the effective functioning and development of rural co-operatives. This issue was considered at the First All-Russian Congress of Rural Cooperatives (RСRC), which was held from the 21-st to the 23-d of March in St. Petersburg.
The Program of the Congress was accompanied by the opening of the exhibition «Agrorus-regions» where the products of the agricultural co-operatives from different regions of Russia were presented. Then the delegates of the Congress exchanged their experience in the efficient functioning of co-operatives and the problems that hinder the co-operative system development.
The plenary session was opened by the Minister of agriculture N.V. Fedorov, who stressed the importance of the co-operative system for small and medium-sized agribusinesses and pointed out one of the main tasks - the exchange of domestic and foreign experience [2]. In addition, N. V. Fedorov reminded that nowadays the creation of cooperatives should be based on the close interaction of an agricultural producer with municipal and regional authorities, education and commercial networks.
The main role of the co-operative movement all over the world was reported by the President of the International Co-operative Alliance (ICA) Pauline Green. She particularly emphasized the idea of political leaders' support of the co-operative movement and stated that (as of the 01.01.2013) in the world there are 1 billion co-operatives and more than 100 million people work there.
The chief executive of Finland's Co-operative Institute Kari Khukhtala told about his cooperative experience. The share of the co-operative sector in Finland ranged from 40 to 80%. For example, co-operatives take 81% in the meat processing, in egg production - 45%, in timber cutting - 40%, in the sphere of services - 40%. The co-operatives are also engaged in the creation of rural infrastructure (housing and utilities sector, kindergartens, berries and mushrooms picking and other activities). The special attention should be paid to the domestic experience of the Bashkiria Agricultural University. On the basis of the University there has been created a business-incubator « A Live Village» for the development of dairy farms, which functions effectively, has its own bank account and works closely with the market. The objectives of the project development of MDF (management of dairy farms) are presented step by step in Figure 1.
The prime measure to fulfill the tasks was the questioning of small forms of economic management (SFEM), resulted in finding out a potential of commercial farms with the classification according to their activity.
Then with the help of promotions and tasting products of the potential segment the staff of the University have developed the brand «A Live Village». Having got the regional and municipal authorities' support they conducted training on the issues of co-operation in rural areas. These measures helped to organize the wholesale co-operative market, which annual earnings are more than one million rubles.
Figure 1 - The development goals of SFEM
Now the staff are developing a strategy of forming a co-operative platform for technological infrastructure with investment attraction to create a mobile agritechnical park and logistics centre.
The results of RСRС was the adoption of the Concept of co-operation development in rural areas up to 2020 and approval of a resolution of the 1-st All-Russian Congress of Rural Co-operatives [1]. The main goal of the Concept is to fulfill the directions for the co-operation development in rural areas, which will increase the effectiveness of the agro-industrial complex (AIC), the farm labor profitability and sustainable development of rural areas.
The essence of the co-operation is to ensure the competitiveness of the co-operative members in the realization of economic, social and other interests by uniting and maintaining legal independence. This essence is impossible without the co-operative principles that are common to all co-operatives in the world and can be updated and corrected in accordance with the changing economic conditions. Thus, the Concept has built a new principle of «Socio-economic importance for rural areas", which consists in active participation of a cooperative in the rural life. Developing its activities, co-operatives help to create jobs, stimulate consumer demand, improve infrastructure.
The main social base of rural co-operation is farms, private farm holdings and newly created «family farms», which provide the country with products on average more than 60 %. Thus, in the Orel region they produce 40% of grain, more than 90% of potatoes, vegetables and honey, more than 80% of fruit, berries, wool, more than 50% of livestock products (Figure 2).
m fruit m milk, meat
Figure 2 - SFEM products in the GDP
Today, however, it is not sufficient, the conditions of work within the common economic space dictate the tough competition in the food market and economic growth of the agricultural sector. Therefore, it is necessary to expand the social base of co-operatives and engage other market entities in the co-operative system.
The comparative evaluation of modern co-operation with its historically traditional tendency of development (Table 1) shows that nowadays the largest share in the structure of all kinds belongs to the production co-operatives - 62%, that is almost 50% more than in 1917. The consumer co-operatives take the second place in 2013 - 28%, but in 1917 they took the leading positions - 49% due to dairy products processing and consumer services. As for the credit co-operatives, in 1917, their share reached 34% and in 2013 - 9.6%, respectively.
Table 1 - The current state and dynamics of co-operation development
Co-operatives, thousands of units Years Changes, %
1917 1995 2007 2012 2013 2013 by 2012 2013 by 1917
APC (agricultural production co -operative) 8,1 7,9 10,1 10,3 12,2 118 150
ACC (agricultural consumer co -operative) 23,6 0,3 1,3 5,0 5,5 110 23
ACCC (agricultural credit consumer cooperative) 16,1 0,08 0,8 1,8 1,9 102 12
Total 47, 8 8, 3 12, 2 17,1 19,6 114 41
The co-operation development dynamics is characterized by the growth from 1995 hitherto, due to the fact that the state pays great attention to the support of small businesses by means of various Programs and projects for the rural areas development.
However, a comparison of the current year and the base one , shows that the cooperation development in rural areas doesn't reach even 50% of the historical period. In our opinion, the main reasons for this fact are: low investment attractiveness of rural industry; the high degree of the use of leased lands; non-observance of the principles of co-operation by the management; illegal conversions into joint stock companies; absence of the closed vertical system; tough conditions of taxation and credit policy and other reasons.
The question of financial and economic support of the co-operation development of rural areas which caused a rich debate among the participants of the Congress is of great importance nowadays. In the process of its solution there were many ideas to support cooperatives by the state, major market players, etc.
As we know, at present, there is only one measure of state support for all types of cooperatives - compensation of a part of expenses for interest payment on credits and loans. Moreover, consumer co-operatives can get this kind of support only for short-term loans to purchase and process agricultural products.
At present the Concept of the financial and economic mechanism improvement provides the following measures:
a) to reduce restrictions in the income share from 70% to 50% for services of the consumer co-operatives to recognize them as agricultural producers;
b) compensation of a part of expenses for interest payment on long-term credits and loans and provision consumer co-operation with grants to develop the modern material base which is to store, transport, process and sell the production;
c) compensation of a part of expenses of agricultural consumer co - operative on the initial fee payment according to the leasing agreement on equipment, transport, agricultural and special machinery, livestock, and other fixed funds, but not more than 35% of their value;
d) priority provision of grants to support local initiatives for projects of co- operation development in rural areas, which were chosen on a competitive basis in the subjects of the Russian Federation, and other measures.
The considerable attention is paid to the work of Russian Agricultural Bank as an associate member of co-operatives and the development of new preferential offers on
financing co-operatives. Nowadays, one cannot avoid the question of informatization, when all economic processes are interrelated, and the information is the main engine forward. The information sources for the co-operatives in rural areas can be the audit associations, cooperatives of the second and next levels, associations, information-consulting services (ICS) created by other market entities.
Within the Concept realization, on a competitive basis the state will support the objects carrying out the following measures (Fig. 3).
Figure 3 - Measures for state support
The problem of the lack of qualified personnel in the economy co-operative sector is of great importance. The All-Russian Congress defined the main measures: personnel management training from among members of the co-operative; training of professional cooperative managers, not connected with the co-operative activities; training of members and associate members of the co-operative.
To fulfill these measures and improve education quality it is necessary to do the following:
a) to provide the Higher Schools accredited by the state with budget places to train citizens in the following fields: economics and organization of co-operative enterprise; management of the co-operative enterprise;
b) to create a master program «Co-operation»;
c) to conduct training courses on agricultural consumer co-operation;
d) personnel management training from among members of the co-operative;
e) to develop Programs and financial support mechanism for education and advanced vocational training for managers of co-operatives, shareholders, members of co-operatives elected bodies, including domestic and foreign training courses for experience exchange;
f) to compensate a part of the costs for training and advanced vocational training of specialists of rural co-operatives at the expense of the state budget;
g) to develop and execute pilot projects on co-operation development with scientific support at the level of rural municipalities.
The co-operation of today can and should help small and medium-size rural producers to join their efforts and compete with large agribusinesses. The domestic and foreign experience exchange in introducing innovative co-operative models connecting producers and consumers will help to position the co-operative supply in the international markets, as well as creating a common electronic training database, organizing joint scientific-practical conferences, symposiums, information base.
The analysis of the 1-st All-Russian Congress of Rural Co-operatives has allowed to get three groups of interrelated factors which influence the co-operative system development: opportunities - problems - prospects.
Today there are many rural co-operation problems and they all have different levels of influence on its development, such as shortage of initial capital, lack of professional personnel, low level of modernization of economical activity, large entrance market barriers, the absence of provision pledge and high interest rates, unavailability or absence of
statistical data on the co-operatives functioning, imperfection of legislative base, high level of competition in the sales markets.
The experience of the effectively functioning and developing co-operatives indicates the presence of different opportunities:
- presence of the co-operative market,
- organization of the regional Guarantee Fund,
- financing of information-consulting services from the regional budget,
- low credit rate (2%) for housing construction with a grace period of 3 years,
- establishing co-operative brands,
- joint efforts with the regional authorities.
And finally, the Concept confirms the prospects of further co-operation development in rural areas:
- training on the basis of the University,
- creating a common brand of the regional and Federal level,
- organization of wholesale and retail co-operative local and regional markets,
- forming logistics centers,
- improvement of legislation and tax accounting,
- marketing activities development,
- membership expansion (co-operatives, municipal authorities, regional authorities),
- targeted state support for the targeted indicators,
- subsidy on loans in agricultural credit consumer co-operatives.
Thus, the organization and development of agricultural co-operatives will improve the socio-economic role of development of rural areas, increase profitability by means of employment of population, improve rural infrastructure, bring the conditions of life to the urban standards and reduce the migration tendency. The indicators of measures efficiency will be: the number of functioning co-operatives, the range of services, the number and categories of shareholders, the share of co-operatives production in the total turnover, the share of the farmers who get services from the co-operative, the ratio of own and borrowed funds in agricultural credit consumer co-operatives, the share of employees of a co-operative having professional co-operative education and others.
REFERENCES
1. The concept of co-operation development in rural areas up to 2020.
2. National co-operation. №5 (39) October 2012.
3. Agricultural consumer co-operatives: theory and practice, teaching guide / T.L. Mishchenko, N.Y. Kovalenko, A.V. Tkach - Orel SAU, 2007, 265 pp.
