There are over 15,000 farmer cooperatives in Vietnam. Business advisor Luc Groot explains why the long history of cooperatives is a mixed blessing.
Luc Groot: “What’s interesting about Vietnam is that it is quite different from other countries where Agriterra is active in. Agriterra has a local presence in a lot of countries where there are not a lot of cooperatives or where there is very little attention for cooperatives. Vietnam, on the other hand, has an enormous cooperative history. There is a lot of support from companies and companies for the concept of farmer cooperatives. They ‘get’ it.
And there are many, many cooperatives in Vietnam. Over 15,000. Almost all farmers are part of some kind of cooperative. But because of the socialist history of the country there is often uncertainty on the ownership of plots of land and real estate within cooperatives. This means that there are very little assets that can serve as collateral for banks or investors to finance a cooperative to, for instance, increase their processing facilities for cashew or rice. Acquiring financing or capital is the major road block in Vietnam.
But you can imagine that this is a huge political issue. What is public and what is private? I do not expect this issue to be resolved quickly. Luckily, recently, the maximum leasing period for farmers has been increased, which is positive because this provides more trust and assurance in the agri-business community.”
“Another difficulty is that agricultural cooperatives have their roots in political parties or organizations. This lead in the past to clandestine behavior or schemes where profits are skimmed from the company in an unsavory way. No wonder that there is still distrust amongst farmers about the cooperative efforts. That’s why the Agriterra cooperative selection process is very thorough and strict. There are many cooperatives which want to work with Agriterra, which is great. But we start off with a list of cooperatives which were interested to work with us and about 10 percent of these make the first cut.
New cooperatives are measured against the Agriterra yardstick. There has to be a sincere will to change the management, business mindset and financial transparency within the cooperative. This can be quite hard for certain cooperatives, especially if a lot of elderly people are members of the cooperative. At Agriterra we’re not only knowledge brokers but also change managers; we motivate people to make change possible. We’re looking for actual, tangible change, not just providing a report which ends up in a drawer. That’s also why I want to go to Vietnam. On the ground I’ll have the possibility to contribute more to our impact directly.”
“Agriterra has been present in Vietnam for the last 1,5 years. Last year we’ve helped to establish two business plans to get access to finance for rice harvesting machines and a peanut processing facility. Another example of our work is link Dutch businesses to our cooperatives to test for example a new organic fertilizer. Or we helped a cooperative to assess and investigate a new rice label which they thought would be profitable. But after the research done they decided that this particular course of action was not suitable and realistic. This is also very important; knowing what not to do at saves you time to work on other developments within your cooperative.
We see an important future for Agriterra in Vietnam. We’re currently working with ten different cooperatives and agricultural organizations, but we’re looking to increase the scale of our activities: we’ve hired new people on the ground versed in business development, finance and training in general. I’m looking forward to continue building on our presence locally.”