Erik Villanueva's Blog on the Associative Economy

The Poor in the City after Typhoon Ketsana

2009-10-30T17:13:00.007+08:00

The Poor in the City after Typhoon Ondoy

The major typhoons that hit the Philippines towards the last quarter brought the worst flooding in the greater metropolitan Manila area in four decades. Wide, densely populated areas were inundated, damaging billions worth of infrastructure and affecting more than four million people. Many of those who were chased out of their homes by floodwaters have returned and started rebuilding or have relocated to new communities. But thousands remain in evacuation centers. They are the families of informal settlers living along major waterways that could no longer return to their homes even if floodwaters spawned by the typhoons have completely subsided.

In times of catastrophes, humans naturally look around for something to blame. The lack of disaster preparedness was readily blamed. Being typhoon-prone, the country would naturally be expected to put substantial resources on this. Deforestation is also one of the usual suspects and with reason, since only 30 to 40 percent of the precipitation hitting the ground goes directly to streams. Most of it, surprisingly, is taken up and used internally by plants. Some water penetrates soils and moves below as groundwater, feeding forests and replenishing aquifers. Heavy city build up, therefore, is also to blame, since water run off from wide concreted areas will need some time to find their way to the ground that will partly absorb it. In line with this, urban planners and architects began appearing on TV after Typhoon Ondoy to remind us that the subdivisions on natural catch basins are one major cause of the flooding. But the one usual suspect that will probably meet more consequence for the blame put on it are the informal settlers, also known as squatters, the homeless, who are accused of clogging waterways with their shanties.

But Manila, which lies in the Pasig River catchment basin and fed by waters from the Marikina river basin, has always been flood-prone, even when there were more forests and swamps, and less concrete, less subdivisions in natural basins, and less urban poor living along waterways. As Ondoy (international codename Ketsana) raged, Facebook users uploaded pictures showing old Manila (1910s, 1920s) submerged in floodwaters.

The Pasig River has always been vulnerable to flooding in times of very heavy rainfall and the Marikina River tributary is the main source of the floodwater. The Manggahan Floodway was constructed to divert excess floodwater from the Marikina River into the Laguna de Bay, which then serves as a temporary reservoir. But the only outlet of excess water in the Laguna Lake into Manila Bay is the Pasig River itself. In times of heavy rains, the rise of water in the Pasig River basin and in Laguna Lake, which is but a shallow lake with a mean depth of 2.8 meters, means that communities in these areas do not have much to hope for but endure the floods. Experts have revised old proposals for the construction of a water spillway from Laguna Lake to Manila Bay to cut through Parañaque instead, which is the narrowest strip of land at 8 kilometers between the two bodies of water. The spillway is supposed to have been implemented together with the Manggahan floodway but was shelved by post-Marcos administrations.

The geologic scale of the required solution to the flooding problem in Metro Manila makes the ‘squatter problem’ look like a puny diversion, and if implemented will actually make Metro Manila even more attractive to migrant workers who will then have to settle in the cities, informally.

Stop blaming the urban poor for the flood as they were blamed before for crime and blight.

According to the Laguna Lake Development Authority (LLDA), at least 400,000 squatters blocking key drainage channels of Laguna de Bay need to be uprooted in order to fix Metro Manila’s flooding crisis. These squatters are among the estimated one million people living on the shoreline of Laguna de Bay, which will stay flooded for up to five months unless drastic action is taken, according to LLDA chief Ed Manda. [1] DPWH Secretary Hermogenes Ebdane is proposing a review of zoning ordinances to stop squatters from clogging and rendering ineffective the flood-mitigation projects in Metro Manila and other flood-prone areas. [2]

That squatters clogged the waterways to cause the massive Metro Manila flooding was belied in some instances by the fact that their shanties were washed away by the floods. At the height of Ondoy, everyone with TV and Facebook watched in horror how the shanties, instead of damming up the water, were swept away by the water.

That they continue to clog the waterways, thus preventing the draining of excess water of Laguna Lake into Manila Bay, may be true and should provide an opportunity to push for housing relocations for the informal settlers. But should it be more of the same formula of relocating the informal settlers to far-away areas? But if it will be more of the same formula of relocating the informal settlers to far-away areas. It will be like moving them from a natural disaster area to economic wastelands, away from livelihoods and public services. And government efforts to keep the city free of squatters would be futile given the much larger and powerful forces that are driving urban migration and concentration of population in cities. The point is to make exits and entries to our cities accessible, rather than inaccessible, to everybody.

Why do poor people risk living in danger zones within and in the peripheries of Metro Manila? Because there is simply no other place for them in the city from where they derive a living, because the city is built up to suit the needs of the well-to-do and not of everybody contributing to its growth. The city is where people go to ‘make it’ in life, but most people have been eased out of the city even before they could get there. And so they are condemned to settle in danger zones – along the rivers, creeks, tidewater estuaries (esteros) and other waterways, and along railways, roadways or sidewalks and aqueducts, and under bridges. For the poor, these locations are better options than being far away from their occupations. Until the floods, the waterways were almost the safest place on earth; had they chosen to live on highway easements, death from trucks could have been a daily occurrence for them.

In the aftermath of Ondoy, the impression is that pollution and accumulation of solid waste on waterways are caused by the illegal settlers living along the waterways and riverbanks. It is true that the informal settlers are one source of pollution, but so is everyone else. Only 5% of households in Metro Manila have access to sewers, which means that the pollution and settled garbage in waterways and rivers are literally everyone’s sh*t. And if indeed the urban poor are singularly most responsible for the piling up of garbage in waterways, then what this means is that these communities lack access to the basic services of garbage collection and solid waste management. Without these services, garbage would pile up in the streets even in the most decent neighborhoods.

That the urban poor’s dwelling structures are not just erected along waterways but encroaching right on waterways to impede water flow might be true. But this is also an indication that, whereas there is some modicum of regulation to guide formal housing developments, nothing of the sort is provided to informal settlers. The result is the total lack of coordination, leading some squatters with no choice but to construct dwelling at the farthest edges of habitability. But if there is a government to guide them in their current plight as homeless citizens, even their temporary informal settlements can be much more orderly and safer. Of course, this might be unthinkable, since the overriding concern is that squatters are not supposed to be present on any land that is not their own. It would be like giving them some sort of tenure. Giving them some advice on how to squat and be safe would be like teaching a thief to steal and not get caught. But then squatters are not thieves, just people with no place to go, and temporary tenures can be justified as a means to encourage order, cooperation and safety in the construction of informal dwelling sites pending the resolution of the urban housing problem.

People whose homes along waterways were washed away by the floods are now being prevented to reconstruct their shanties where floodwater has subsided, ostensibly to keep them away from danger, but also to take advantage of the perception in the disaster aftermath that the informal settlers are to blame for the floods, and this is in order to pursue the social apartheid policy of relocating the urban poor to the provinces.

Can we say that those with no property in the city or those who could not afford rental housing have no right to stay in the city? Can we just leave it at that?

The issue is how to make the city accessible not only to the rich that have formal, secure jobs and own homes and businesses, but also to the large population of informal workers with nothing else to their names but their own persons. The alternative to accommodating the urban poor as an important sector of the city economy is having more exclusive urban enclaves for the middle class, complete with serene, soulless waterways and breathtaking views of lakes from their windows. Only the middle class in OECD countries can live that way. In Metro Manila, that will be a disaster even to the middle class who will then see that many of the amenities they take for granted is due to the willingness of urban poor workers to carry a low paying job or two to make the city economy run.

The idea that we should in fact ‘give back to nature’ what belonged to it (like urban waterways and swamps) sounds like an eco-fascist idea that is dangerous even to the middle class. The earth always has a use for any geologic feature on its face. We should instead engineer our waterways so that they become actually functional and better both in containing floods and in accommodating living spaces, parks, and a variety of other uses. As for the swamps converted by real estate developers, how about consolidating lands for medium-rise buildings so that the freed up lands can become forests and waters once again in the middle of the city? How about affecting also the way the middle class lives?

The flooding is natural and unavoidable, but the loss of life and damage to property is a result of our infrastructure gaps.

Academics have brought attention to the view that real estate developments impeded the flow of rain waters to waterways, and the extraordinary large amount of rains that poured over Metro Manila on September 26 simply underscored this. The Marikina River and other waterways that swelled when Ondoy battered Metro Manila are clogged not only by illegal settlers, but also by subdivisions, aggravating the heavy flooding that drowned many communities. The flood could have been lower and could have risen slowly if there were no constrictions in the waterways, according to University of the Philippines (UP) Marine Science Institute Professor Fernando Siringan. The badly hit Provident Village and the SM Mall in Marikina City are actually sitting on flood plains or flat spaces occupied by water when rivers swell, UP engineering professor Guillermo Tabios III said.[3]

Experts also believe water spillways to connect Laguna de Bay to Manila Bay should have been constructed long time ago to mitigate the capacity of the lake to absorb floodwaters.

Laguna Lake (or Laguna de Bay), is basically a large but shallow freshwater body, with an area of 949 square kilometers and an average depth of only 2.8 meters. It drains to Manila Bay via the Pasig River via the Napindan Channel. The lake is fed by 45,000 square kilometers of catchment areas and its 21 major tributaries from the river basins surrounding it. [4] [5] The Manggahan Floodway is an artificially constructed waterway that was built in order to allow water flows from Marikina River to be diverted to or from Laguna de Bay, apart from the 20 other rivers that empty into it.

The Pasig River has always been vulnerable to flooding in times of very heavy rainfall and the Marikina River tributary is the main source of the floodwater. The Manggahan Floodway was constructed to divert excess floodwater from the Marikina River into the Laguna de Bay, which then serves as a temporary reservoir. By design, the Manggahan Floodway is capable of handling 2,400 cubic meters per second of water flow, although the actual flow is about 2,000 cubic meters per second. To complement the floodway, the Napindan Hydraulic Control System (NHCS) was built in 1983 at the confluence of the Marikina River and the Napindan Channel to regulate the flow of water between Pasig River and the lake.

Pasig River winds generally north-westward for some 25 kilometers (15.5 mi) from the Laguna de Bay to Manila Bay. The Pasig River is technically a tidal estuary in that the flow direction depends upon the water level difference between Manila Bay and Laguna de Bay. During the dry season, the water level in Laguna de Bay is low and the flow direction of the Pasig River depends on the tides. During the wet season, when the water level of Laguna de Bay is high, flow is normally from Laguna de Bay towards Manila Bay. From the lake, the river runs between Taguig City and Taytay, Rizal, before entering Pasig City. This portion of Pasig River to the confluence with the Marikina River tributary is known as the Napindan River or Napindan Channel. [6]

The Napindan Hydraulic Control Structure or NHCS was also meant to prevent the increase of salinity from Manila Bay and pollution from the Pasig River from entering Laguna de Bay during these times of reverse flow. By closing the NHCS during times of rain, the water is effectively dammed in Laguna de Bay, preventing it from flooding the downstream portions of Pasig River and the tens of thousands of families living along the river.

According to one observer, the Napindan Channel is actually a waste of money. “It did not serve the purpose for which it was constructed as shown when Marikina River overflows, flooding the City and its neighboring towns unprecedented in its history. The theory that Napindan Channel will block the increasing salinity of the lake due to the intrusion of salt water from Manila Bay will not hold as it is a nature’s way of cleansing the turbidity of the lake and it has been always ever since.”[7]

It may then be too much to expect Laguna de Bay to catch waters coming from Metro Manila, even with the existence of the Napindan Channel and Manggahan Floodway. During heavy downpour, coastal communities of the lake are flooded for weeks and months until the water level subsides. The water level at Laguna de Bay is at 11.5 meters during the dry season and rises to 14.0 meters during the wet season. The Manggahan Floodway did not serve it purpose of diverting water from Marikina River as water level at Laguna de Bay rose to the level as that of the Marikina River as it was during the Ondoy flooding. Blames were put on dams for releasing water and on Napindan Channel for remaining closed. But dams not releasing water and opening Napindan could have spelled greater disaster.

The construction of Napindan Channel sparked conflicts over the uses of the lake as fishing grounds and as catch basin for flood water. Saltwater is said to have a disinfecting and rejuvenating effect on Laguna Lake, enhancing the growth of fish and aquatic resources. Napindan Channel is often closed at the onset of rainy season as a flood prevention measure. But this causes the rapid growth of algae, causing bangus and tilapia grown in the area to have a muddy taste (gilik). Although Department of Agriculture (DA) Secretary Cito Lorenzo said there is still opportunity in this, citing the demand of Chinese tuna catchers for this kind of bangus as bait, he said that LLDA should coordinate with the Metro Manila Development Authority (MMDA) on the proper scheduling of the opening and closing of the Napindan Channel in Taguig to allow the entry of seawater from Manila Bay to flow into Laguna de Bay through Pasig River. According to Lorenzo, “proper scheduling of the opening and closing of the channel will accrue to a win-win solution for both Laguna lake fishers and Metro Manila residents during the rainy months.” [8]

Experts are now reviving proposals for the construction of the Parañaque Spillway to unburden Laguna Lake of floodwaters. According to an urban planner, Architect Felino “Jun” Palafox, the flood map of September 1970 is eerily the same as the flooding that happened September 2009. He said constructing the Parañaque Spillway, which will allow the Laguna de Bay to directly flow to Manila Bay instead of having to pass by the already clogged Pasig River, could have prevented the flooding. Parañaque would be a logical choice, he said, as it is the “narrowest band of land” between Laguna Lake and Manila Bay at only eight kilometers. [9] [10]

In a TV interview, Palafox said the proposal was to build a two-level tunnel that will drain off excess water from Laguna de Bay into Manila Bay, to prevent the flooding of lakeshore towns. The upper level would serve as road tunnel for motor traffic westward towards Manila Bay and for eastward traffic towards Laguna de Bay. From zero elevation in Manila Bay, the topography goes up 30 meters within a 15-20 kilometer distance in the Quezon City area then goes down to 1.0 elevation within a 5-20 kilometer distance in Marikina and Laguna de Bay then goes up 300 meters again to Sierra Madre Mountains up to the shores of Pacific Ocean. Palafox said the topography will really allow water to be trapped in low-lying areas near Laguna de Bay such as Marikina, Taguig and Pasig, the hardest hit areas during Typhoon Ondoy, hence the need for another waterway. He said this analysis and study only constitutes the effective flow of water and maintenance of water levels in the different bodies of water. Inputs on global warming, which will produce six to seven meters increase in tides, are yet to be considered. [11]

In other interviews, Palafox said the construction of the spillway was covered by two presidential decrees in 1972 and 1974. It was part of the 327 recommendations that Palafox forwarded to the government when he headed the World Bank-funded Metro Manila Transport Land Use Development Project, which covered 40 towns and cities, during the ‘70s when flood also ravaged the Marikina area. According to the original plan, the Parañaque Spillway should have been constructed along with the Manggahan Floodway, which was the only one built. The floodway aims to maintain the level of water in Pasig River. But, according to Palafox, the Manggahan Floodway is not enough because it should have been a tandem project with the Parañaque Spillway.

President Arroyo said “we should already ask the DPWH to work on the spillway” after Palafox presented his proposal, while Congress leaders expressed readiness to fund the massive flood control project in next year’s national budget at an initial P5 billion to P10 billion to jumpstart it.[12]

Parañaque, however, is a heavily built-up area, and resolving the right-of-way issues would be astronomical. A critic of the proposal said “the project aims to build its tunnel under Sucat Road, which will presumably start near the Meralco Sucat Plant and presumably connect with the Parañaque River near the Parañaque Church in Barrio La Huerta, the diverted flood waters emptying into Manila Bay near the Chinese temple on the Coastal Road. This point is about 50 meters lower than the surface of Sucat Road. It is neither safe nor feasible to dig a trench or gorge this deep in such a heavily built-up and heavily populated area. The disruption to traffic flow and commerce would be catastrophic. The residents of nearby Posadas Village would certainly object to a tunnel being bored underneath or close to their subdivision. So would business and building owners along the length of Sucat Road.”

Unconvinced with the proposed Parañaque Spillway, others are proposing the construction of spillway and tunnel between Pangil and Paete, Laguna down to Lamon Bay. Accordingly, costly right-of-way problems can be avoided economic progress can be stimulated on the eastern section of Laguna de Bay. The tunnel or passageway, with an estimated 25 kilometers distance, may be put to another use, according to the proponents, as an access road during summer and be closed to travelers during wet season.

The geologic scale of the required solution to the flooding problem in Metro Manila makes the ‘squatter’ problem look like a puny diversion, and if implemented will actually make Metro Manila even more attractive to migrant workers who will then have to settle in the cities, informally.

The informal settlers are not the problem, they are the solutions.

There are more than 650,000 informal settler families in Metro Manila alone, according to a report of the Urban Asset Reform Program. Some of these and others outside Metro Manila that are blocking water flow out of Laguna Lake is 400,000, per LLDA figures. This is the actual number of families that will be affected by a policy of clearing the metropolis of squatters to make waterways work in preventing floods.

Using survey data of local government units and the National Housing Authority (NHA) in September 2007, the Metro Manila Inter-Agency Committee on Informal Settlers (MMIAC) puts the number of informal settler households at 544,609. The number of squatter families represents 21 percent of the estimated 2.6 million households in Metro Manila. One of every five households of informal settlers lives in danger areas such as riverbanks, floodways, roads, aqueducts, and under bridges.

President Arroyo has ordered the immediate relocation of families near waterways following the massive flooding. The MMIAC said half of the informal settlers, or more than 270,000 families, had qualified for the government’s 10-year socialized housing program worth more than P32 billion. The first available housing option is the development of off-site/off-city resettlement areas. An example of this would be the house and lot provision of the NHA costing P200, 000 per family in resettlement sites like Calauan, Laguna, in which case the government shoulders the initial costs and recovers these through affordable monthly amortization of P300 to P500. MMIAC said the government would need P3.225 billion yearly to come up with the 22,689 socialized housing units needed every year over a 10-year period. Specifically, the government needs to produce approximately 14,922 [housing units] per year over the current production of 7,767 units, according to the MMIAC report. It said this socialized housing backlog of almost 15,000 units was earlier projected and submitted to the NHA for relocation starting in 2007. [13] [14]

What is wrong with the government plan?

First off, it is socially costly. The informal settlers in various areas in Metro Manila were told by the NHA long before Ondoy that the available relocations for them are in far-away Pangasinan and Cagayan. Places far-away from the economic opportunities of the cities are exactly the places migrant workers leave behind, and this remains a very powerful demographic movement that a government flood control plan may not reverse. The plan does not mention providing both housing relocations in tandem with social services and sources of income and livelihood. Indeed, providing both housing and industries in the far-away relocation sites would be infinitely costly for the government and the entire society.

There can be a better alternative to far-away off-site and off-city relocation. In-city relocation is much cheaper, both in terms of providing housing and in terms of providing access to livelihood and services. The city economy itself, as an agglomeration of industries that create jobs, will take care of the livelihood part. The cost of service provision per capita in concentrated cities is much lower than in the rural areas, whether in terms of education, health, water, sanitation, and drainage systems.

And should be possibilities for in-site housing development, too. Flood control infrastructure in some esteros and rivers to large spillways need not exclude human settlements. After all, humans are supposed to be the beneficiaries of flood control. And waterways, with their associated risks and benefits, have always been preferred for human settlements throughout world history. We should attain both city inclusiveness, one that accommodates the poor, and safety from floods. Geology will ensure that Metro Manila will still be flooded even after the last informal settler is relocated to a far-away place. But what infrastructure development needs to achieve is to make populations safe from floods. Instead of simply removing the shanty housing along waterways, we need to dredge the waterways and build real well-planned socialized housing along it with access to proper drainage and solid waste management system.

This can work only for certain waterways. And shanty dwellers from other waterways will definitely need to be relocated elsewhere safe within the city. This implies that we need to free up more idle lands for housing by encouraging land owners to give up their landholdings to socialized housing under the Community Mortgage Program (CMP) and other socialized financing programs. Taxation on idle lands and better compensation packages to landowners making their lands available to CMP can be one route towards this.

Public lands can be freed for productive uses without the socially costly relocation schemes. Aspects of the solution must include urban living spaces that economize on land through medium-rise structures with individual dwelling units and social service units for the poor. These can exist side by side with high-end commercial districts and city blocks under a policy of mixed land use and integration of commercial districts with the economy of the poor.

What would be the benefit to the rest of the city dwellers and to the rest of the city economy? Social peace and cohesion, social unity, and the enduring foundations for the economic competitiveness and growth of the city. The millions of ambitious souls who throng to the city believing they have rights to enter it and to stay carry with them the spirit of enterprise and hard work to achieve a better life.

Draining the city of its informal workers-settlers and blocking their entry will deprive the city of the diversity that comes from these populations. Under an inclusive mixed-use framework, which recognizes the importance of diverse human settlements near or within commercial or industrial districts, a city’s economy can become robust, vibrant, and competitive.

If we see them as solutions rather than as problems, what role might they take?

In shaping the policies and programs for flood mitigation and the rehabilitation of the affected families and communities, the urban poor may have to assert their role instead of this being defined for them. The aftermath of Typhoon Ondoy and the current debate over the flood crisis in the greater Manila metropolitan area should provide an opportunity for the urban poor movement to highlight its demands for the right to the city. They have to defend themselves from evictions and further marginalization from the city.

A few initial proposals are already being considered within the urban poor movements:

• Reject the government’s policy of social apartheid called ‘Balik Probinsya’ rehabilitation option for the urban poor who are supposed to be clogging the waterways.
• Emergency relocations in ‘semi-temporary’/’semi-permanent’ in-city resettlements prior to in-city housing development projects for the urban poor (‘semi-permanent’ being a term borrowed from the Quezon City government).
• Implementation of 20% allocation of housing developments for socialized housing, starting with the disaster victims displaced by the flood from waterways and danger zones.
• Adoption of medium rise buildings for socialized housing in the context of mixed uses of urban spaces, including the mixed use between flood control infrastructure and socialized housing (like waterways with embankments fortified by Medium Rise Buildings or MRBs).
• Implementation of local-labor-intensive public works to include the clearing of waterways, sites preparation and construction for temporary relocations and for permanent socialized housing projects, as well as for community infrastructures that mitigate disaster vulnerability.
• Implementation of flood control infrastructure gaps of the metropolis, also to create more jobs.

These will have to happen in all Philippine cities.

Notes:

[1] http://news.yahoo.com/s/afp/20091008/wl_asia_afp/philippinesfloodlake

[2] http://businessmirror.com.ph/home/nation/16891-squatters-render-megadikes-ineffectiveebdane.htm

[3] http://newsinfo.inquirer.net/inquirerheadlines/nation/view/20091003-228150/Geologist-blames-floods-on-squatters-subdivisions

[4] Among these are the Pagsanjan River which is the source of 35% of the lake's water, the Sta. Cruz River which is the source of 15% of the Lake's water, the Balanak River, the Marikina River, the Mangangate River, the Tunasan River, the San Pedro River, the Cabuyao River, the San Cristobal River, the San Juan River, the Bay, Calo and Maitem rivers in Bay, the Molawin, Dampalit river, Dampalit, and Pele river, Pele rivers in Los Baños, the Pangil River, the Tanay River, the Morong River, the Siniloan River, and the Sapang Baho River.

[5] http://en.wikipedia.org/wiki/Laguna_de_Bay

[6] http://en.wikipedia.org/wiki/Pasig_river

[7] http://pinoybarkinghall.blogspot.com/2009/10/another-spillway-for-laguna-de-bay.html

[8] http://daweb.da.gov.ph/news_archive/2003/oct_news.html

[9] http://www.sunstar.com.ph/manila/para%C3%B1aque-spillway-prevent-floods

[10] http://www.bworld.com.ph/BW102309/content.php?id=074

[11] http://www.sunstar.com.ph/manila/para%C3%B1aque-spillway-prevent-floods

[12] http://www.mb.com.ph/articles/226746/president-revives-para-aque-spillway-project

[13] The MMIAC report was one of the documents submitted by MMDA to the Supreme Court on Oct. 13, 2009 in compliance with the tribunal’s December 2008 decision ordering government agencies to clean up Manila Bay . The Supreme Court, in its landmark decision, specifically ordered the MMDA and the Department of Public Works and Highways to dismantle structures and other encroachments on all waterways leading to the bay and to report to the tribunal the progress of their compliance.

[14] http://www.inquirer.net/propertyguide/aroundtown/view.php?db=1&article=20091019-230820

Politics and the Self-identity of Cooperatives

2009-05-22T19:59:00.000+08:00

Most co-ops and their leaders probably are unaware of the origins of the cooperative movement in the socialist and labor movements. 19th century cooperativism emerged as part of a general political response of the workers’ and socialist movements to prevailing capitalist conditions. The first teachers of cooperativism, among them Robert Owen, King, Charles Gide (Britain), Philippe Buchez, Lois Blanc (France) were intensely involved in campaigns for social reforms. They were also either philanthropists, utopian socialists or radical political reformers. They believe in a Cooperative Commonwealth governed by cooperation rather than competition. They thought that cooperativism can be an organizing principle for the whole of society and that the cooperative principles can serve as the organic laws of a future cooperative society. During the 1920s Ernest Poisson of France even proposed for the creation of a Cooperative Republic.

Although the social experiments for cooperative communities of such pioneers as Owen and Fourier failed and proved unsustainable, cooperativism has remained as one of the most enduring working class traditions to emerge out of 19th century Europe. Today, the cooperative tradition is carried on by cooperative movements in most countries. Together they constitute the cooperative sector in their respective countries.

The idea of a Cooperative Sector was articulated by Dr. Georges Fauquet, former head of the Cooperatives Branch of ILO (1920-33). In his view, cooperatives constitute a distinct sector in the economy which can be sectoralized as follows into a public sector, composed of state enterprises; a capitalist sector, which is usually called as the private sector; a “private sector proper,” composed of the family, peasant and handicraft economies and other pre-capitalist units; and a cooperative sector, composed of cooperatives although closely intertwined with the private sector proper which its wants to integrate into formal cooperatives. Rather than imagining the cooperativization of all of society, the cooperative sector school believed that there are activities that can be done more efficiently by other sectors. The coop sector then becomes a counterforce to prevent the capitalist sector from being exploitative. This view is consistent with the welfare state model and democratic liberalism.

In the Philippines, the cooperative sector orientation is reflected in the idea of establishing co-ops as a strong and significant Third Sector of the economy, without having an articulated line on the capitalist or socialist options. The major cooperative organizations use ‘cooperative movement’ and ‘cooperative sector’ interchangeably.

John Craig notes that Marxist-Leninist (ML) concept of socialism believes in the predominance of political means before the revolutionary seizure of state power after which educational and cultural means are supposed to predominate. In an orientation on co-ops produced by an NGO, it is believed that co-ops are some sort of preparation for a more collectivist way of life, which would be more in line with ML thinking.

In centralized socialist experiences, as in Soviet Union, Eastern Europe and China under Mao, cooperative development was coordinated closely with state plans and purposes. Hans Munkner, a cooperative expert from Germany, said these are actually ‘socialist collectives’ and not genuine co-ops because they were not autonomous and member-controlled. They had to follow the party line. Cooperatives are considered to fit better such branches in which economic activity is basically decentralized. Otherwise, state socialization of the means of production is considered to be the superior economic form. In former socialist Yugoslavia, however, cooperative workers’ self-management was considered superior than state control. In today’s China under Deng, cooperatives seem to have relative freedom. After the fall of communist regimes in the former SU and Eastern Europe, cooperatives were treated similarly with state enterprises that are subject to privatization. The cooperatives concerned opposed these moves of the post-communist governments. The ICA intervened in their behalf and argued for their continuance as autonomous entities controlled by members.

In the Philippines, the National Democratic Front (including the CPP/NPA) apparently adopts a mixed economic model composed of the state, cooperative and private sectors. It seems, however, that their current cooperative organizing activities, if any, would have to be subsumed in the context of the revolutionary struggle, a concept known as ‘war economy.’

However, there are also various socialist movements that incorporate cooperative development in their agenda. They view cooperatives as an extension of workers’ solidarity and as an important but just one among the components of the socialist strategy. They follow the general track of the social democratic movements in Europe that emphasized on building the triad of the socialist party, the labor unions and the cooperatives as forces for socialism.

While the ML and socialist schools sees cooperatives in the larger framework of socialist development, the modified capitalism school believes that cooperatives are much a part of capitalism and that co-ops are the ‘epitome of the capitalist ideal.’ Co-ops lead the way to a more service-oriented capitalism and enable small producers to become capitalists in the better sense of the term. This school emerged in the 1930s in the agricultural sector of the northern American prairies. Proponents of this view believe that co-ops provide a decentralizing influence to capitalism and curb its excesses but, in context of the Cold War, they cannot be on the side of those wishing to destroy it, the communists for example.

Canadian cooperative writer John Craig identifies a ‘new age’ brand of cooperativism, which believes that the core problem of contemporary living is the sheer size of social organization. According to him, liberal capitalism, the welfare state and marxism all lead to uncaring, monolithic organizations. The ideal are smaller, humanistic, life-oriented organizations such as cooperatives. New age thinkers include Paul Ekins, Mark Satin, Ivan Illich, Schumacker and McRobie. This grew out of the protest movement of the 1960s and the oil shock of the 1970s. Perhaps also included in the new wave co-ops are those with environmental orientation.

The environmentalist and pacifist Seikatsu consumers’ movement of Japan for example uses the cooperative form as the organizational model for a more sustainable production, consumption and managing of resources. Feminists also adopt the coop model as a form that is more attuned to caring and sharing modes of living as an ideal of the feminist movement.

Lastly, there is also the religious orientation. The parish churches was instrumental in organizing credit and consumers co-ops that became the more successful wing of the coop movement. Even the El Shaddai and INC are said to also operate mutual economic help among members. (When an organization collects huge amounts of money from believers, it seems proper that at least some of these are not sent as advanced payments for a place in heaven but to make life bearable here on earth.)

In reality, cooperative movements may have mixture of various ideological orientations. Or they may choose not to express their goals in ideological or visionary terms at all. Some cooperatives and their members believe that their social and political identity lies in the cooperative movement. Others believe that as co-ops and co-op members, they belong primarily to the agrarian/peasant, labor, consumers,’ or other social movements. The primacy of identity is related to ideological orientation. These orientations have deep historical roots.

There are still those who claim that since cooperatives are by nature “non-partisan” and “politically neutral,” cooperatives may not and cannot form a political party. Obviously, such individuals are ignorant of the changes in the appreciation of cooperatives worldwide on the issue of political participation. The issue of political neutrality has been debated over the years within the International Cooperative Alliance (ICA) in connection with the formulation of the Cooperative Principles. The first published ICA Principles of 1937 included one about “political and religious neutrality.” This language, however, was abandoned in the ICA Congress of 1966.

In the words of a world-renowned Swedish cooperative author and researcher for the ICA, “certainly cooperative organizations cannot be neutral on political issues, since cooperative activity is, in itself, a political action. Many cooperative organizations have instead made this point clear by replacing “political neutrality” with “political independence.” This implies that cooperatives should carry out their own opinions without undue dependence on other organizations or on political parties. I consider that as the proper interpretation for the future.” (Sven Åke Böök, Cooperative Values in a Changing World, Geneva, International Cooperative Alliance, 1992, p. 50)

In England, the birth place of the modern cooperative movement, cooperatives established the Cooperative Party in 1930 after realizing that they could not count sufficiently on the members of parliament from existing parties (Liberals and Conservatives) to work for their interests. If they did not strive for direct representation, government would simply keep on ignoring them despite their number. In many other parts of the world, cooperatives were part of social and popular movements seeking progressive change. In our own national context, the political reformers and founders of Philippine nationhood, especially Dr. Jose Rizal and Emilio Jacinto, were in fact our first teachers of cooperativism.

The alignments of the major cooperative networks during the first party list elections in 1998 reveal the persistence of historical (and ideological) traditions. The so-called ‘private sector’ savings and credit co-ops, represented by NATCCO and PFCCO, gravitated around Co-op NATCCO and the Alliance of Cooperatives (ALLCOOP) while the agri-based co-ops of the PD 175 tradition supported BUTIL (formerly the Luzon Farmers’ Party). Other farmers’ co-ops supported ABA which was formed mainly through FFFCI. Of the co-op-based parties that vied for Congress seats, Coop NATCCO, ABA, and BUTIL, managed to get one seat each while APEC (based among the electric co-ops) managed to secure three seats. Parties with roots in the major co-op historical traditions made it to Congress.

Party list groups and political parties are the same. Under the Party List Law, parties and organizations of the marginal sectors compete for 20% of Congressional seats based on proportional representation. Voters select for for parties or organizations, each of which are required to put up their respective party list.

Coop-NATCCO represents mainly the privately initiated co-ops performing savings and credit functions. BUTIL – spawned by Sanduguan which is allied with Bangkoop (“Sanduguan is our political organization while Bangkoop is our economic organization,” leaders used to say). APEC – spawned by leaders and managers of electric co-ops; not necessarily supported by PHILRECA. CUP represents the traditional co-op union movement; disqualified after losing the 1998 and 2001 party list elections. ALLCOOP was originally envisioned to include all the major national organizations; vied and lost in the 1998 party list elections as an alliance of PFCCO and KKPPI with CFPI and some primaries. Current status: moribund. PROKOOP was envisioned as a joint political project of NATCCO, PFCCO, and two regional unions that disaffiliated from CUP (UMMC and CUST); in the process of registration as a regular national political party; status: uncertain, especially with the demise of Filmore Dalisay of PLDT Co-op and Union of Metro Manila Cooperatives.

Marxism and Cooperatives

2009-05-09T21:22:00.000+08:00

(Comments on Dr. Virginia Teodosio’s Cooperatives and Marxism in the Philippines, 2006)

We probably can highlight the emerging importance and counterhegemonic potential of the “cooperative movement” by also comparing its efforts and achievements with other actors in the market and within the larger sphere of civil society, and by pointing out its weaknesses as well. The following comments on ‘marxism, hegemony and the cooperatives of Filipinos’ is an attempt towards that; in the process, the comments make some bold assertions, not to refute the propositions of the paper but to call attention to a few possible data that may have been overlooked.

Co-ops are the most widespread form of popular organization in civil society – with over 60,000 registered with CDA, although only about half are operational and an even lesser number actually viable. Yet, this alone indicates how the masses are trying to respond to their own socio-economic conditions. Co-ops are based on the concept of self-reliance, that is, ‘people helping themselves’ by building their own capital as distinguished from ‘people helping other people’ as in the case of NGOs.

The latter category would include microfinance NGOs, which cater to the financing needs of the entrepreneurial poor but are not owned and controlled by the users of the financial service. Micro-finance NGOs are seen as competition by some co-op leaders, unaware of the particular segment that the micro-financing institutions seek to serve. Contrary to some claims of some co-op leaders, microfinance NGOs do deliver (the Kauswagan Bank and TSPI, top microfinance institutions in the country, are good examples). It could very well be that microfinance organizations are in a better position to help the poor who are unable to put up an initial share capital to become a member of a co-op and become entitled to its financial services. Co-ops may be more democratic, yet participation in a co-op entails initial costs that a poor individual may not be able to afford. Co-ops would be just one of the players catering to the poorer segment of the population.

There are co-ops however, that also serve as conduits of micro-financing loans for the poor. Such an arrangement allows the poor to eventually become a regular shareholding member and co-owner of the co-op. It should be noted that such loan funds are ‘conduited’ (co-op as conduit of funds coming from somewhere else – a micro-financing institution for instance) for poor non-members and do not come from the co-op own equity funds since co-op lending rules provide for members’ equity as condition for extending loans. Co-ops may have been very good in serving its members, who have all the incentives to ensure that their co-ops are run well since they imparted money to it, but microfinance NGOs have been able to develop social and business technologies to serve the financial needs of the very poor, the Grameen being a celebrated though not the only example.

The paper explores “the relationship of Gramsci’s Marxism and a cooperative movement that deserve greater recognition and more careful analysis to reflect their significance in the lives of the Filipino people,” as an “emancipatory, social phenomena in contemporary Philippine society and as “representing a distinct alternative that exists within capitalism.”

Robert Putnam’s study (Making Democracy Work: Civic Traditions in Modern Italy) showed that the high degree of associationalism and civicness are highly correlated to high economic performance and high quality of regional governance in northern Italian regions compared to the southern regions. In the Philippines, it could be shown, and there are various cases and anecdotal evidences that tend to show, that where people are concerned about community problems and involved in resolving them (as co-ops, POs, or other forms), marked improvements can be observed in community welfare, and local governments tend to respond and perform better. Co-ops indicate a certain degree of civicness among those who participate in them, and we can say that Philippine civil society is all the more vibrant because of the existence of co-ops. It is therefore worth exploring “the significance and implications of…cooperatives in terms of civil society being a precondition to the democratic process.” (It should be interesting to adapt Putnam’s methodology in a study of Philippine co-ops and local government performance.)

As to the extent cooperatives “help create the conditions in the country for … counter-hegemony,” it might be helpful to see how co-ops actually see their role, and to examine the actual organizational and ideological origins of the different cooperative networks and traditions. The following are some illustrations:

The agri-based co-ops originate from martial law’s Samahang Nayon program under PD 175, and Marcos himself, in a marginal note to his diaries, wrote that the “cooperative movement is the hope of our people.” The development of cooperative was part of Marcos’ “developmentalist” state agenda (along the mould of South Korea and Taiwan). The same is true for the electric co-ops and the transport co-ops. The 1987 Constitution and the Cooperative Code (RA No. 6938) enacted under the Cory government clearly locate cooperatives as a component of a liberal market economy.

The savings and credit co-ops came about as non-state initiatives, by private organizations including the Catholic and Protestant clergies. These cooperatives came about as part of the social initiatives of reformist institutions and individuals. However, community-based savings and credit cooperatives have linkages with the NGO/PO movement.

The workers’ co-ops came about as a reaction to, not as a component or as a product of, militant trade unionism, and some workers-based co-ops were initiated with the purposive intent of thwarting unionism in the workplace.

Probably the cooperative tradition that was more or less ushered by the advocacy progressive movement is the agrarian reform cooperatives, which came about with the implementation of the (now endangered) Comprehensive Agrarian Reform Program (CARP) under the Comprehensive Agrarian Reform Law (CARL).

The NATCCO Network, one of the most high profile national co-op organizations, is also successful politically, being the only co-op network to get at least 2% of the vote in three successive party list Congressional elections (under the Coop NATCCO Party List). It may have aligned close to the somewhat center-left “social democrats” (in Code NGO), it may have joined EDSA 2 against Erap, and it may have taken progressive positions on agrarian reform, reproductive health and women’s rights, retribution for martial law human rights victims, local sectoral representation, etc. Yet it voted affirmative to the House Justice Committee report exculpating GMA of the impeachment complaints against her in connection with the 2004 elections (local affiliates of the Coop NATCCO Party reversed an earlier call by Coop NATCCO Congressman Gil Cua for GMA to resign).

Other co-ops networks are outright traditional (apolitical, which means political in favor of the status quo), conservative, and reactionary. Leaders of co-op unions and transport federations take pride before Malacañang for preventing the participation of co-op members in popular protests against oil price hikes, EVAT.

Hence there might be a need to clarify the proposition that co-ops have “not become simple appendage of the state apparatus” because “their ideological struggle is one that draws on political, cultural and social engagements.” If we define the state as “not just as the apparatus of government operating within the public sphere…but also as part of a network of the private sphere of civil society,” then one can also assert that co-ops are more intimately integrated into or within the Philippine state than other private organizations. This is more pronounced under the Marcos regime, when membership under one apex organization (the Cooperative Union of the Philippines) was mandatory. Today, co-ops remain as one of the transmission belt for government: co-ops are represented as one of the 12(?) sectors in the National Anti-Poverty Commission (NAPC), an inter-department body headed by the President. Some co-op leaders complain that co-ops are not given enough importance by government and that there are not enough policy forums between government and cooperatives. Executive Order 95 signed by President Ramos in 1993 calls for the creation of cooperative development councils at the regional, provincial, and municipal levels, yet as an unfunded mandate there is only half-hearted and grudging compliance by local governments.

That “the cooperative movement is a distinct and separate historic bloc with alternative meanings and practices” is a seductive assertion, yet we also should note that there are distinct and separate traditions within the “cooperative movement” itself, as given in the preceding illustrations. Unlike in other social movements (such as labor, environment, or women) the apparent polarities within the cooperative movement are not between a reactionary hegemony and a counter-hegemonic progressive alternative. Co-ops are concerned more about what business practices work and what does not, and like ordinary businesses are on the look out for emerging best practices. Still, it may well be that there is an underlying reactionary vs. progressive dynamic within the co-op sector, as within other Philippine social movements. There are some co-op leaders who take issue with the preoccupation of graduating or transforming savings and credit co-ops into more businesslike and more bank-like financial institutions, arguing that the strength of co-ops lies in serving its members at cost, and that the “competitive advantage” of co-ops over other service providers will be undermined by adopting the more ‘capitalistic’ standards such as income to capital ratio as prescribed in the emerging standards such as COOP PESOS, even though the standards were developed with the active participation of the co-ops themselves. These co-op leaders are not among those who use the line that “co-ops are for service, not for profit” to hide or justify their inefficiency, as they are leaders of some of the most successful co-ops in the country. But this still begs the question: which one is the progressive and the reactionary stance in the case of adapting the practices of co-ops to compete better in the financial market place? If co-ops do not become more business-like and more like banks, even the commercial banks would soon discover the technology of micro-financing and strengthen even more their position in the financial industry.

All these do not negate the preposition that co-ops constitute an alternative option, or may even be counter-hegemonic, to the particular brand of predatory oligarchic capitalism in the Philippines. Being anti-Philippine capitalism, however, does not always mean being anti-capitalist per se, as many co-op leaders tend to admire and emulate the practices of the successful cooperative movements in Germany (the Raiffeisen movement), in Canada (the Desjardins movement), and elsewhere, along with the liberal democratic political culture and market economy that brought about or attended those successes, including the institutional design of co-op regulation in those countries.

These examples also do not in any way negate the contributions of co-ops in bringing about more self-reliance, commitment to democratic values, and empowerment to those who became part of these co-op development projects, whether initiated by the government, by the church, or by NGOs. Empowerment, democracy, self-reliance are not exclusively projects of the counter-hegemonic Left (narrowly or broadly defined), and these are much a part of liberal and neo-liberal discourse and social vision as the socialist and progressive discourse. Cooperatives, in a way, can be seen as ‘counter-hegemony within the capitalist hegemony.’

The Canadian John Craig (Nature of Cooperation) noted that while American agricultural cooperatives see themselves as an alternative to capitalism, they do not want to be identified with those opposing capitalism (such as the communists), and are more comfortable being seen as subscribing to a ‘modified service-oriented capitalism.’ In the Philippines no cooperative network subscribe to a consistently progressive and democratic agenda. NATCCO is closest, but it can buck down too to particularistic local demands for development projects.

The rhetoric of some co-op movement personalities can be different (this is not to take issue with them for using rhetoric); some would say “our aim is a cooperative republic,” or that cooperatives are the “middle way between capitalism and communism” or that “cooperativism is legal communism” etc. (these are heard and overheard in speeches and conversations and I have not encountered any serious exposition of any of these putative political lines.

There could be several reasons why cooperatives as cooperatives would tend to be more conservative and cautious in their political positioning. As enterprises in which members money are invested, they have real economic and business interests to protect and therefore would tend to be more negotiating and compromising rather than confrontational and unyielding on matters of principles. Such issues of policy advocacy and confrontations are the areas where the cooperative unions are supposed to play a role. A co-op union leader once remarked that co-ops as businesses should not fight political battles because they can be sabotaged economically. Accordingly, policy and politics is the realm of co-op unions. Co-op unions are non-business organizations; they can be registered at national, regional, provincial, and city or municipal levels. The Cooperative Union of the Philippines (CUP) was the mandated apex organizations under PD 175. With the demise of the Marcos government, it was soon wracked by dissensions, with national federations such as NATCCO, PFCCO, and FFFCI disaffiliating from it in 1989. Today, most regional cooperative unions under CUP are dormant or ineffective. The two most active regional unions, Union of Metro Manila Cooperatives (UMMC) and the Cooperative Union of Southern Tagalog (CUST) have also disaffiliated from CUP more recently. Over the past three years, UMMC and CUST leaders have endeavoured to establish the Partidong Kooperatiba ng Pilipinas (Prokoop) as a national political party.

To date, there has not been an avowedly and comprehensively progressive co-op network or union or association similar to those that can be found within other social movements. There has not been also a comprehensive political program on cooperatives being articulated by the progressive and socialist movements and the left and center-left mass political parties. (Unlike, for example, in Germany: in 1995 an SPD member, speaking before a political conference of activist groups, mentioned that the party is based on the pillars of the trade union and the cooperative movements). Co-ops do present a unique and viable option to many social and economic issues facing Filipinos. The challenge is to see the great day of engagement and eventual marriage (not mere flirtations) between progressive politics and the cooperative movement.

Meaning of the cooperative sector

2009-05-09T20:55:00.001+08:00

The cooperative sector can be defined as that sector of the economy carried out by cooperatives, defined by the International Cooperative Alliance as “autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.” The cooperative sector is distinguished from the state or public sector, which is carried out by the State and its instrumentalities including public corporations, and to the so-called private sector, which is carried out by private individuals and organizations.

This categorization has its disadvantages or limitations. For one, cooperatives are generally considered part of the private sector. They are composed of private individuals usually or generally pursuing private economic ends. The probable exception would be such cases in which cooperatives are de facto instrumentalities of the state or under its control and direction.

Moreover, several associational forms that are organized for the mutual aid of members and their common welfare cannot, formally speaking, be classified as cooperatives. These would be the trade unions or labor organizations, the occupational and professional associations, and various community associations. Then there would also be entities that are usually labeled as non-government organizations (NGOs), including foundations and non-profit non-stock corporations. These entities are commonly not being considered as part of the “private sector.” In radical discourse these are instead generally seen as belonging to the “popular sector” of the economy, in contrast to the state sector (controlled by the bureaucratic elite) and the private sector (controlled by ‘big’ capitalists).

Peter Drucker sees a public or state sector as the first sector, all wealth-creating business organizations including cooperative enterprises as comprising the second sector, and all non-profit organizations whose common function is not wealth creation per se but “human services” – including volunteer organizations, churches or religious groups, and non-profit schools, hospitals and charitable institutions – as comprising the third sector.

For the NGOs, the concept of “civil society” is based on a set of values by which a third sector (composed of civil society organizations) distinguishes itself from a first sector (the state) and a second sector (the market). Civil society organizations undertake ‘private action for the public good’ in contrast to the state, which undertakes ‘public action for the public good,’ and market sector, which is about ‘private action for private good,’according to Civicus, an international NGO alliance. Civil society is broadly defined as the self-organized section of society. On one hand, it is composed of indigenous and induced community groups, mass organizations, cooperatives, religious societies, trade organizations and professional organizations as membership organizations to help their members. On the other hand, it is composed of local philanthropic institutions, of NGOs (the private voluntary welfare and development organizations), area-based benevolent societies, service clubs, and non-profit companies as non-membership organizations to help others, observed Isagani Serrano. This definition can claim comprehensiveness as it includes practically all organizations that are non-state and not-for-profit. It places co-ops as part of civil society—the citizen-initiated, service-oriented section, instead of lumping coops with ‘private business.’ In Civicus definition, the state sector conduct public action for public good, the market sector is where private entities pursue private action for private good, while civil society is private action for the public good. One may argue that the problem with this definition is that some corporations can be much more effective in saving the environment and providing assistance to others than some NGOs. Moreover, some cooperatives are nothing more than extended private partnerships.

In cooperative discourse, there exists, according to Koenraad Verhagen, in each country a third sector composed of economic organizations that are neither state-owned enterprises nor private capitalist companies. These are usually composed of formal cooperatives and informal self-help groups that together constitute the “cooperative or associative sector” of the economy. In France, some cooperators call the third sector as the “social economy” composed of membership organizations such as cooperatives and even mutual fund organizations.

The definitions by Verhagen and by Drucker are positivistic. The “popular sector” and the “civil society” definitions, on the other hand, emphasize normative and ideological connotations. Verhagen’s definition does not include non-profit and voluntary organizations that are not actually cooperative in organizational form. Drucker’s definition is more encompassing in that it includes the non-profit but lumps co-ops with private business, thus failing to make a normative distinction between the two. Some definition of the civil society concept is broad enough (as Serrano’s). Civicus’ definition is somewhat confusing in that it tend to consider trade unions and cooperatives (which are organizations pursuing the collective private good of their members) as part of the market sector. There is no need belaboring the fact, however, that, in our normative connotation, cooperatives are both market institutions with civil society concerns (as emphasized by the seventh cooperative principle “concern for community” adopted by the ICA in 1995.)

In Verhagen’s definition, membership organizations, composed of formal cooperatives and informal self-help groups, constitute the associative sector of the economy, which is not to be confused with the so-called “informal sector.” The associative sector includes both registered cooperatives and informal self-self groups, in the same way that the private sector has registered enterprises and informal entrepreneurs. However, Verhagen’s definition also has normative connotations. He noted, “The development of an associative sector in itself is unable to solve problems of rural poverty or to change positively the position of low income groups, if the structure of organization’s membership is predominantly high and middle income.” For instance, a credit facility cooperatively owned by a group of well-paid employees or a marketing co-op of well to do planters is an associative economy in itself. Where this tends to happen we may, however, at the same time see the emergence of associative forms of organization among the poor whose success can be attributed to their effectiveness in counterbalancing trends of centralized authoritarianism and capitalist exploitation.

On GMA's P5-B subsidy to the Poor

2008-04-28T21:25:00.000+08:00

Offhand I think it is perverted (you heard it, PERVERTED) for the Catholic Church to be opposing government financial assistance to the poor. But the spokesperson from the Church-backed Caritas who raised concerns about the government P5 billion aid package is no pervert. He is in fact a good cooperative leader and someone I respect and care about. Sometimes it is better just to shrug our shoulders and endure in silence when Justice Raul Gonzales, Senator Miriam Defensor Santiago and other nitwits in government open their mouths. But when we seem to disagree with people from our own ranks (OUR OWN being that active and vocal section of our society concerned about social justice), then we should thresh out matters a bit more thoroughly.

I can understand if they (THEY, the Church as a community of the faithfu) are worried about the targeting methods used and the possibility that the not-so-poor might instead benefit from the dole out package announced by the government. This is the problem of leakage and moral hazard. I can understand if they are worried about the degree to which those who are able to work and can find work would be dissuaded from working because of the dole out. This is the problem of perverse incentives. It is understandable if they raise concerns about how Gloria and the ruling coalition aim to capitalize on the assistance program for the next electoral confrontation in 2010. This is the problem of how vote-maximizing politicians shape their public choices. Or how to make the program sustainable and over time cover more and more of the poor who actually need the dole out.

But what do we hear? Without mentioning relevant data, Fr. Anton Pascual said "The government, through this subsidy, only teaches the poor to be lazy and depend on the government or on other people for their daily needs," as the news said.

There are poor people and there are poor people. The next step, it seems to me, is to find out when and where and whom it is needed to give fish and when to teach how to fish. When to provide food and when to run seminars on micro-financing and cooperatives to help them acquire their needs on their own.

We don't teach a drowning person how to swim. At the very least, standing on the banks of the river we should scream to tell him how to stay afloat until the rescuers come or throw whatever we can for him to hang on to if we ourselves do not know how to swim, or plunge to the water even on the slightest confidence that we ourselves can stay afloat.

The idea behind giving dole outs to the very poor I believe is a sound one. It prepares them for more life-saving and life-improving opportunities the moment they can think well instead of hallucinating about heaven and the savior that will bring them there. It spurs local demand for local products, since the most immediate demand of the poor would be food and the most available and cheapest food they can find in their locality. It can drive up the starvation wages in the informal sector offered to the poorest unemployed. It can radicalize their options by not giving up, for instance, on the primary schooling of their children.

It can give them HOPE, and this is the most precious commodity around due to the sheer shortage of it. I suspect that when the hopeless hear that there is in fact hope, they as human beings as rational as you and I will restart seeing that improving one's self, saving for one's self and family, and finding work are much, much more worthwhile than wasting away in silence, or for some wasting away in style through gin, gambling and gangsterism (the three Gs of the poor, not to mention druGs and ruGby) as your children subsist on a tiny piece of GalunGGonG every other day. Luckier people still don't get why the poor waste their few pesos on vice. Think about it? Why? Dahil ba sa GaGo at GunGGong sila? Come on, think harder.

How about the prescription that "The present administration should cooperate with non-government organizations, non-profit organizations, cooperatives, micro-finance institutions, faith-based and church groups successful in livelihood, education, health and housing programs and social entrepreneurship" ?

Imagine yourself as a decision-maker in government as a Cabinet official or as a Congressman wanting to do good. Should you recommend to the President to give funds to these organizations so they can run their programs? Maybe you should, but this has been tried before and until now I wonder how the P500 million Lingap sa Mahirap Program under Erap, transferred to the poor through co-ops, created a dent in poverty alleviation. Until co-ops can offer something better on how to use micro-financing funds then public authorities will be justified in trying other methods. Maybe we should argue for something similar to Lingap, but co-ops should first publish an evaluation of their experiences under that program.

The next anti-GMA ruling coalition of the elites to capture power in 2010 must think about how to improve and expand the emergency financial assistance for the poor initiated by the GMA government. Although thoroughly discredited, GMA can still do good things being the President, and this is one.

erikvillanueva

Local Governments and Microfinancing

2008-04-16T19:59:00.002+08:00

Overview of microfinancing

ADB defines microfinance as provision of a broad range of financial services such as deposits, loans, payment services, money transfers, insurance to poor and low-income households and their microenterprises. There are three types of sources of microfinance: formal institutions - i.e. rural banks and cooperatives, semiformal institutions - i.e. nongovernment organizations, and informal sources - i.e. money lenders and shopkeepers. Institutional microfinance includes microfinance services provided by both formal and semiformal institutions. Microfinance institutions are institutions whose major business is the provision of microfinance services.

About 90% of the 180 million poor households in the region still lack access to institutional financial services. Most formal financial institutions deny the poor financial services because of perceived high risks, high costs involved in small transactions, the poor's inability to provide marketable collateral for loans.

Microfinance provides financial services, primarily savings and credit, to poor and low-income households that normally do not have access to formal financial institutions. It is widely documented that the formal financial system rarely provides access to poor entrepreneurs in developing economies. It is estimated that in most developing countries, the formal financial system reaches at a maximum the top 25 per cent of the economically active population, leaving the bottom 75 per cent without access to financial services apart from moneylenders. This is because the techniques used by financial institutions do not enable them to lend to the poor in a cost-effective manner.

One critical constraint which may prevent regulated banks from lending directly to the poor relates to interest rates. Microfinance is an inherently costly activity. Effective microfinance programs require intensive inputs in motivating and training borrowers and in follow-up, with regular monitoring and frequent loan repayments. Programs must go to where the borrowers are, rather than being located in regional centres. All of these factors add to costs. And loan amounts are small, implying low interest income per loan. To be sustainable, microfinance programs must therefore charge higher rates of interest than those charged on other loans. This is true regardless of whether programs are undertaken by specialised MFIs or regulated banks. The Grameen Bank, the largest and one of the most efficient microfinance programs in the world, charges an effective interest rate of 20 per cent per annum, and most smaller programs need to charge considerably more than this to be sustainable. Even if regulated banks adopt the techniques of specialist MFIs, they need to charge higher interest rates on their microfinance loans than on their other loans if their microfinance programs are to be sustainable.

Today, it is generally accepted that populations traditionally excluded from the formal financial sector can, in fact, be a profitable market niche for innovative banking services, and that microfinance can be very important in reducing poverty. The success of microfinancing activities in many countries including the Philippines show that it is possible to serve loans to finance the economic enterprises of the very poor (1) as a commercial activity that pays for itself, (2) without subsidy from government, and (3) with a very high repayment rates or very low defaults on loans, even in the absence of collateral. These are based on the observations that the poor need sustained access to financial services more than lower interest rates and they have the capacity to repay their loans and to save. Given these, microfinancing can be operationally and financially self-sufficient.

Although the microfinancing industry has gained fame only over the past three decades following the success of the Grameen Bank (“Bank of the Villages”) in Bangladesh, cooperatives have actually been in the business of providing financial services to the poor over more than 100 years, beginning with the “village bank movement” (or credit unions) initiated by Friedrich Wilhelm Raiffeisen, who was mayor of several German municipalities over the course of his career.

A distinction can be made between cooperatives and “microfinancing institutions.” Cooperatives are owned and governed by their members who are the savers and borrowers themselves and often build their capital from members. Other microfinancing institutions are organized as non-profit corporations or foundations governed by trustees in behalf of patrons that contributed the funds. Because of their nature as user-owned services, credit co-ops are sometimes thought of as conveniently catering more to the needs of the capable non-poor who can pay for their equity share and for the loans that they take out. Microfinance NGOs came to be seen as the only institutions with a directed focus on the poor and the technology for reaching the poor, but only that they are dependent on external resources of funds as non-profit and non-stock organizations.

Some private commercial banks are beginning to target the microfinancing market and would have the most extensive mechanism to undertake financial delivery. But private banks are still seen generally as lacking the willingness, the technology, and the vision to lend to the poor. Government supply-led credit programs would have the advantage of funding from government budgetary allocations and donor agencies, but that they are inefficient and unsustainable.

Co-ops could not have simply accommodated the poor outside their membership. Even as organizations focused on the poor and just like the microfinance NGOs, co-ops face the same information problems, inadequate collateral, and high transaction costs associated with processing small loans to those outside their membership. In the 1980s, attempts to dramatically increase membership in co-ops created tremendous past due accounts as high as 60%. The bankruptcy of some co-ops that followed created a conservative and cautious attitude to rapid expansion of membership. Even today, co-ops normally seek out ways to address the credit needs of the poor beyond their existing membership but not at the risk of high delinquency. However, the same cautiousness has produced a valuable experience among co-ops that high delinquency has nothing to do with the clientele. Whether a person is poor or not, delinquency issues can be resolved by imparting the needed knowledge and skills to the board and management running a financial service co-op.

As they claim to be the original microfinancing institutions, co-ops lately have started to present programs directed at non-members using the more recent microfinancing innovations. It differs from other microfinance programs in that co-op microfinance involves a process of raising the poor to the level of regular members with shareholdings and voting rights.

Government role in micro-financing

In the Philippines, there used to be at least 111 government credit programs, many of which involved government agencies lending directly to final borrowers. These programs have been criticized for being inefficient, highly politicized, uncoordinated and unsustainable. “Philippine experience has shown the huge inefficiency and high costs of using government non-financial institutions to implement credit programs. Recent research has shown the un-sustainability of government supply-led credit programs, the great capacity for leakage of the benefits of government credit programs to the non-poor, the duplication and overlapping of a number of credit programs leading to gross inefficiencies, the distortion of the financial market and weakening of private sector incentive to innovate.”

In 1995, the government established the People’s Credit and Finance Corporation (PCFC) as a government finance company for lending to the poor. The National Credit Council envisages that the corporation should gradually replace many of the other lending programs operated by line agencies of government.

PCFC lent funds to NGOs, rural banks, cooperatives and other intermediaries as ‘conduits’ for on-lending to the poor and aimed to ensure that such intermediaries are replicable, self-sustaining and operationally viable. PCFC also availed of funds from ADB and the International Fund for Agricultural Development exclusively to support microfinancing institutions replicating the Grameen Bank approach. PCFC also lent funds to conduits for capacity building.

Local government role in micro-financing

A local initiative that aims to use microfinancing as a tool for employment generation would then have to consider the emergence of viable microfinancing institutions, the phase out of credit programs directly provided by government agencies and their rationalization through PCFC, and the use of the microfinancing institutions as conduits of PCFC funds.

Although local governments may not access government funding to provide loans to end-users, they can perform other activities to facilitate micro-financing activities. In the survey of Asian countries undertaken by Banking with the Poor (BWTP), local governments seemed to play a role more in terms of identifying the targets of government-led credit programs. But rather than just being a tool in supply-driven credit programs, local governments can play the role of a genuine facilitator between the poor who seek out micro-financing and micro-financing institutions who seek out clients who are poor.

Microfinancing NGOs and co-ops are a response to the inability of private commercial banks to serve the credit needs of the poor. However, micro-financing institutions including cooperatives would, like private banks, also face costly information gathering needed to enable them to begin extending their services to new areas. At their end, the poor face the problem of searching for the financing package at the least cost and most suited to their needs.

Given a policy goal of helping the poor in accessing financing, local governments can use its machinery to identify and attract the poor for the benefit of microfinancing institutions, and to identify and attract the microfinancing institutions for the benefit of the poor. If these information services are operated on a regular basis, as what the Quezon City government is doing, the cost faced by the two parties can be drastically reduced and market transactions facilitated. More micro-financing supply would be forthcoming if the local government proved to be effective in identifying the clients sought by the microfinancing institutions. Information problems can be mitigated by local governments without incurring the same moral hazard problems present when they are used merely to identify the recipients of a government lending at a pre-set supply amount (example: Lingap para sa Mahihirap).

Quezon City experience

Quezon City provides a concrete example of local government facilitation of the micro-financing market.

In 2001, Quezon City started the Task Force Sikap Buhay to implement an assistance program for the city’s small entrepreneurs. In 2005, the program was transformed into the Sikap Buhay Entrepreneurship and Cooperatives Development Center (SBCC). There is a pending move to transform SBCC into a regular city department. SBCC is the equivalent of the cooperative development office (CDO). The appointment of provincial, municipal, and city cooperative development officers are authorized under the Local Government Code.

SBCC aims to promote entrepreneurship and self-reliance among its clientele, to expand the number of entrepreneurs and expand their businesses, develop community and institution-based training for entrepreneurial skills and values, and coordinate city-based co-ops, concerned government agencies, and local bodies.

Its three major programs are the following:

1. Facilitating access to capital loans and continually finding ways to increase the sources of capital loans. SBCC has assisted more than 20,000 micro-entrepreneurs in the last five years to access capital loans from its conduit or partner microfinancing organizations, which are cooperatives.
2. Expanding entrepreneurship training services by organizing entrepreneurship skills and leadership seminars through in-house trainors and institutional partners
3. Promoting cooperativism by proactively advocating the concept of cooperatives for economic endeavors, closely networking and coordinating with cooperative federations and alliances, promoting small entrepreneurs’ co-ops, and coordinating with the implementing the objectives of the Cooperative Development Authority. SBCC has published a Cooperatives Directory of Quezon City.

Quezon City is undertaking a micro-financing facilitation program that matches poor entrepreneurs with microfinancing institutions. Under this program, the city government entered into memo of agreements with Cooperative Rural Bank of Bulacan (CRBB), Novaliches Development Cooperative (NOVADECI), Eurocredit Cooperative to provide loans to the poor identified by the city for microfinancing assistance. These institutions have different pre-existing financing packages and policies and offer different lending rates. The agreements do not impose an obligation on the part of the partner institutions to revise their programs and policies.

CRBB is based in Bulacan but has pre-existing operations in District 2 in northern part of the city. NOVADECI was originally confined to the Novaliches District until it expanded to other parts of the city. Eurocredit is also based in Quezon City.

As a cooperative bank, CRBB has cooperatives as members/owners and can offer financial services to members and non-members, institutions or individuals. It operates a microfinancing program patterned after the world-renowned Grameen model, under which the borrowers, who are individuals, are organized into groups composed of five members who monitor each others compliance with the lending terms.

As primary cooperatives of the savings-and-credit type, NOVADECI and EuroCredit are owned by individuals and offer services only to members. The Grameen-style microfinancing for group borrowers that the two co-ops also offer is therefore contingent on a program of initially enlisting the microfinancing clients as associate members without voting rights and eventually graduating them to full membership. However, prospective borrowers may also opt to at once apply for membership, meet the regular membership requirements, and file the normal procedures for member’s loan applications.

Prospective borrowers among the poor are sought by barangay political leaders and mobilized to hear the orientation seminars, usually for groups of 25 participants, on the different microfinancing programs. The beneficiaries must be poor or with income below the poverty threshold, female, 18 to 60 years old, and must have an existing business, which can be of any type ranging from vending gulaman (sugared drink) to sari-sari store. Most of the beneficiaries in fact are engaged in direct selling business. In addition to these criteria, beneficiaries must be living in the barangay for not less than one year. Residents living in rented houses are secondary priorities. Only 15 out of 25 attendees in the orientation seminars usually qualify under these criteria.

The programs and policies of the microfinancing partners are presented by SBCC staff in orientation seminars. The staff presents first the programs of the microfinancing partner that operates in the areas where the seminar participants came from. As questions from the participants begin to unravel their particular preferences and qualifications, the staff ends up presenting the programs of all the other microfinancing partners. Thus, the needs, preferences and qualifications of the prospective borrowers are matched by information on the microfinancing institution with a program that suits them best.

The choice of microfinancing package by prospective participants is influenced by interest rates and other exigencies. The interest rate in CRBB’s microfinancing program is only 1.5% per month for 6 months and 2.5% in NOVADECI. These are way below what is normally made available to the poor by informal lenders as the most available alternative. Minimum loan is P5,000 per cycle of 6 months. Some participants, undergoing successive cycles, have already qualified to take out up to P40,000 in loans.

However, participants in group borrowing must undergo intensive seminars on group values and solidarity, and must actually search for group mates that they can trust. To form a group of borrowers, beneficiaries choose their own group mates who live close together in the same community. Applicants who are otherwise qualified but could not find qualified group mates living near them may not be accommodated by the program.

At least 3 groups composed of 5 borrowers each comprise a center, or at least 15 borrowers per center. Clustering the borrowers’ groups into centers is meant to facilitate monitoring, advisory, and enforcement by SBCC and the microfinancing partner concerned.

On the other hand, individual borrowing does not involve transactional relationship with another borrower or group of borrowers. However, this requires that one becomes a member of the cooperative and hence must put up a share capital and undergo cooperative membership education. This option is available under NOVADECI, which requires a minimum paid up capital of P830, and EuroCredit Co-op, which requires P5,000.

Of the qualified participants that underwent SBCC orientations, 60% opted to become clients of CRBB’s program, 20% of NOVADECI, and 10% of EuroCredit. The remaining 10% opted not to take a financing program. Most participants were generated in 2006, totaling 12,000 to 15,000. Since 2002 when the program started, the total is 20,000 participating poor.

SBCC workers observed that the criteria disqualify the entrepreneurial poor who are otherwise qualified except that they are male and above 60 years old (senior citizens). Persons with disabilities (PWD) and the out-of-school youth (OSY) are not covered by the program. Thus, a 73-year old fruit vendor at Philcoa who approached the program could not be accommodated.

Beneficiaries between 18 to 35 years old comprise 30% of the participants. SBCC staff said 18-year old applicants are accommodated only if she is the breadwinner of the family. Thus, young adults enrolled in the program are either working mothers or siblings supporting their families. However, an 18-year old can be accommodated into a group if one of the five group mates resigns or is disqualified.

The program apparently does not particularly target young people (18 to 25 years old) who may or may not be breadwinners or heads of families. However, the program does promote itself to young people. And yet, young people do tend to select themselves out of the program. SBCC participates as booth exhibitor in the job fair organized by the city government. In one of the job fairs it put up a streamer that read: “Pagod ka na bang maghanap ng trabaho? Bakit di ka magnegosyo?” (Tired of job hunting? Why not start your own business?) Very few young people took interest in the SBCC booth while booths put up by companies were queued by long lines of jobseekers.

SBCC staff further observed that the partners must attempt to accommodate all types of needs. SBCC Microfinance Development Officer Junnie P. Natad observes that CRBB project officers tend to be conservative and inflexible in the application of the qualification criteria. They also tend to rotate frequently post between their main operation in Bulacan and Quezon City, which seemed to him to be just as a training ground for new project officers of the co-op bank. The solution is to expand the set of microfinancing partners, and Natad said SBCC in fact is continuously seeking out more partners so that more beneficiaries and those with different characteristics can be accommodated. These include the senior citizens, PWDs, and OSYs. SBCC Entrepreneurship Division Chief Gloria Alcoran observes that microfinancing programs of the partners do not seem to include the “very, very poor.”

SBCC has 28 staff. There are two line divisions (Entrepreneurship Division and Cooperatives Division) and two staff units (Special Projects and Administration). The Entrepreneurship Division is divided into the Promotion and Networking Unit and the Monitoring Unit. The former is responsible for recruiting and orienting prospective microfinancing beneficiaries and linking with possible microfinancing partners. The latter, which is responsible for monitoring the centers composed of group beneficiaries, is further divided into District 2 Section and the District 1, 3 and 4 Section. There is a pending move to transform SBCC into a regular department of the city government.

Assessment

Quezon City’s facilitation of microfinancing has benefited a total of 20,000 poor from 2002-2005. Of the total, 15,000 were generated last year alone. If these numbers could have been generated even without the city’s intervention, then the program represents a deadweight loss to the city.

There are indications that the program represents an added value to society. Microfinancing, as an activity that delivers financial services to those who would otherwise be left un-served by financial institutions, is a relatively young industry. Even the cooperatives that traditionally included the poor in its membership are just beginning to target the poorer in their service coverage. The newly organized networks or federations of microfinancing co-ops and NGOs have yet to fully standardize their operations and pool enough resources to provide for common services to make the activities of their members more efficient. Such services may include common promotional activities and common credit investigation bureaus. Local governments can fill these gaps under a program of providing immediate relief to the financing needs of their constituencies.

Cultivating the micro-financing market serves the public interest. Economic information and imparting the values of entrepreneurship, savings, and credit-worthiness as contained in SBCC orientations and field work can be seen as public goods that, just like school education, are at least in principle available also to all types of financial institutions.

From a different take off point, such activities also represent an improvement in the content of the political constituency work of politicians and political parties. In terms of local administration, attracting and mobilizing private microfinancing institutions to meet local goals tend to keep local governments in the business of leading and coordinating, rather than in actually staking out meager public resources when alternatives can be made available.

Replicating the SBCC

Replicating the SBCC initiative should not be particularly difficult, particularly where there are existing microfinancing operations by co-ops or NGOs or both, and where there is an existing city or municipal cooperative development office. The appointment of cooperative officers by local governments is provided under the Local Government Code, although this is optional for provinces and cities (Section 487, R.A. No. 7160). In any case, offices taking care of entrepreneurial promotion and cooperative concerns have been instituted in a number of cities and provinces, partly in response to CDA’s advocacy and to Executive Orders No. 96 that calls on local governments to assist co-ops and to complement the work of CDA.

EO No. 96 mandates that “all departments, branches, subdivisions, and instrumentalities of the Government shall promote the formation of cooperatives under their respective programs by providing them with appropriate and suitable incentives” and instructs local governments to assist CDA in the collection of cooperative annual reports, mediation and conciliation of cooperative disputes, monitoring of compliance of cooperatives with the CDA rules and regulations, and implementation of programs for cooperative promotion and development. These are reflected in the statement of objectives and functions of the local cooperative offices.

Bulacan has its Provincial Cooperative and Entrepreneurial Development Office (PCEDO) even before E.O. No. 96. PCEDO’s Kaunlaran sa Pagkakaisa Program (KPP) initiated during the incumbency of Governor Roberto Pagdanganan involved extending assistance, including financing, to cooperatives. It is one of the most considered local government initiatives in cooperative development and is supposed to have inspired E.O. No. 96.

Muntinlupa City adopted the mandate for local governments under EO No. 96 for the functions, duties and responsibilities of its City Cooperative Office. Aside from technical assistance, the city government allocated P2 million (later increased to P5 million by Mayor Jaime Fresnedi) for lending to cooperatives.

Cooperative offices elsewhere would mostly serve to fulfill the mandate to support the promotion of co-ops, and E.O. No. 96 (which was written by CDA as signed by President Ramos in 1993) seeks to make local governments function like deputized agents of the CDA in assisting and regulating cooperatives, with the expectation that the assisted co-ops will meet local objectives in economic development, creating employment, or making credit more available.

In contrast, the SBCC initiative in Quezon City started on a certain objective, to provide financing to the poor, and enrolled cooperatives that could measure up to the task. E.O. No. 96 does not rule out innovations like Quezon City’s SBCC, but it provides little guidance for local governments on how to drive cooperatives to become more competitive and capable of meeting local goals.

Most cooperatives operating savings-and-credit services to members (who are mostly poor) have yet to extend micro-financing services to non-members (the poorer). However, cooperative micro-financing is catching up, with community-based savings and credit co-ops (like NOVADECI) beginning position in the microfinance market. NATCCO is undertaking a micro-financing program to enable its members to deliver financial services to the enterprising poor on a massive scale. Local governments aiming to help their poor would have to tap into the growing capabilities of these co-ops.

Areas for reforms

SBCC’s weakness in spurring youth entrepreneurship through micro-financing suggests that the youth tend to be more biased to institutional employment and to avoiding taking risks. However, workers generally are risk averse and given a choice will opt for opportunities other than self-employment. This has been observed in the Betcherman et al. studies. However, a study showed that although the young have a relatively low probability of being self-employed, they are distinguished from older age groups in that they are particularly likely to say they would like to be self-employed if they had the choice.

The programs of the microfinancing institutions assisted by SBCC do not particularly target young people in the first place. Thus, SBCC’s record should not be seen as an argument against youth entrepreneurial promotion and youth micro-financing. There are sections of the youth for whom micro-financing is a relevant service, only that a different set of criteria should be expected to make youth micro-financing work. The up-starting entrepreneurial young with yet no track record can be helped by small loans. Local initiatives such as the SBCC can still help young entrepreneurs by linking with an entirely different set of financing partners.

Moreover, a similar link up between local governments and microfinancing co-ops can be devised in the case of employment facilitation and manpower services. Manpower service cooperatives can be tapped to absorb jobseekers referred by the local governments based on the criteria established or required by the agencies.

This falls under the mandate of the Public Employment Service Offices or PESO. PESOs are non-fee charging multi-employment service facility established under Republic Act No. 8759 (or the PESO Act of 1999) in capital towns of provinces, key cities and other strategic areas. Under the Act, a PESO shall ensure the prompt, timely and efficient delivery of employment service and provision of information on DOLE programs (Section 4) along the policy of promoting full employment and equality of employment opportunities for all (Section 2).

Among the functions of a PESO is to encourage employers to submit on a regular basis a list of job vacancies in their respective establishments in order to facilitate the exchange of labor market information between job seekers and employers by providing employment information services to job seekers, both for local and overseas employment, and recruitment assistance to employers (Section 5).

PESO’s job, and that of cooperative offices of local governments, can be facilitated or complemented by manpower service cooperatives, which are workers’ co-ops that operate like investor-owned manpower service agencies that supply on contract workers demanded by firms, except that the supplying firm itself is owned by the workers themselves. As owners, the workers subscribe to the needed capital stock, appropriate the income in the form of worker’s patronage refunds and interest on share capital, and elect the board and management. All things being equal, it is superior to investor-owned agencies that tend to exploit workers.

To remain competitive, manpower service co-ops must respond well to the demand for labor services by firms. This means they must attract into its fold enough number of workers in different skills categories, most of whom do not have the money to pay the subscription needed to become a regular member. However, manpower service co-ops can enroll workers as associate members, without voting rights but undergoing the same program of eventually paying the minimum capital subscription to become members.

Local governments, through the coordination of the PESO and the cooperative office, can provide information on workers in its jurisdiction to the manpower service co-ops and to provide information to workers on the qualification criteria and job requirements sought by the co-ops. This can help manpower service agencies save some costs associated with search and recruitment. It can help PESO and the local government on the costs associated with monitoring the job requirements of several firms and employers. With contractual jobs on the rise and available regular positions declining or not growing enough, monitoring job requirements can be a tedious undertaking.

By providing help to manpower service co-ops in informing and recruiting workers, local governments can encourage the right kind of manpower service co-ops: those that are competitive in supplying labor to firms, can provide the best benefits package to workers, and possibly can provide other services to member-workers such as savings-and-credit, insurance, and pre-needs.

Manpower service co-ops in general would have incentives to recruit younger workers who have less chances of landing in regular employment, unlike the older and more experienced ones. However, these co-ops would be in a better position to provide continuing employment as they can manage the placement schedules of its members from one job assignment to the next.

In the SBCC case, Quezon City did not have to allocate local funds as capital for micro-lending. In possible manpower service facilitation, local governments would not have to directly monitor the requirements of the employing firms. Link-up with manpower service co-ops can be most helpful in localities where people seek employment overseas of elsewhere in the country. Asiapro Cooperative, for example, supplies manpower services to firms based in Metro Manila and in Mindanao, and is studying to supply manpower services abroad.

The Problem Now is that the Poor Can't Afford Food at New Prices

2008-04-16T18:54:00.001+08:00

It's fine to enumerate everything that we should have done: better farming methods, investments in irrigation, organizing the farmers to increase efficiency, rationalizing land use to prevent conversion of irrigated and irrigable lands, etc. etc.

Surely we should still pursue them, so that we can be sure that we always have enough to feed everyone. That's aiming for food self-sufficiency. This is not the only way to attain food security, since Singapore or Hong Kong without rice fields are more food-secure than we are. But then we cannot just convert lands for the more profitable industrial uses. A certain level of food sufficiency is our best guarantee in times like these when global food prices are rising or when there are disruptions to food supply (natural calamities, even those not affecting rice fields directly).

But then focusing just on the supply side is not enough, and worse, can lead to the wrong policies. The rice exporting countries of Thailand and Vietnam do not convert rice lands as much as we do. And unlike the Philippines they are better endowed in terms of natural irrigation, which means that they do not have to spend as much as we do to bring more lands under cultivation. Yet they are also affected by rising rice prices.

The reason is simply that with rising international prices of rice, farmers and businessmen naturally have the incentive to export rice. The only way to prevent them from bringing rice across international borders is for home consumers to offer the same or higher bid for rice, or to physically prevent them by using the coercive power of the state. This is exactly what the rice exporting countries are doing to mitigate the impact of rising prices on their poor. Yet preventing rice from being exported across countries further adds to the escalation of rice prices.

It is said that rice production in the Philippines has actually increased by 10%. Our population did not increase that much since last year, which means that the need to import has been partly mitigated by the net increase in supply per consumer. But even with increased production, there is every incentive to import rice as long as the international prices are lower than domestic prices. This is the situation before the escalation of rice prices. The anomalous thing is that the country has actually imported rice now that international prices are rising!

Suppose that under the new conditions in which the world price for rice is higher, the country is able to increase rice production. This is highly probable since the new higher prices would provide incentives for farmers to take more risks and invest more. The result is that there would be more rice available. But would rice prices go down? Probably not.

To prevent rice prices from going up, government can impose price controls or ban rice exports. Farmers and traders-financiers will be at a disadvantage and will feel aggrieved if they are forced to sell rice at a lower price than the world prices. Even if government imposes a policy of preventing the exportation of rice, our porous insecure borders would almost ensure that domestic rice will go where they can sell at a higher price. Which means domestic prices will remain high even after increased production is realized.

This wouldn't be a problem for the economy as a whole. Farmers and others involved in rice will earn more. The relatively well off consumers can absorb higher prices (as food expenditures as percentage of income is small for well off households and very high for the poor).

So, the poor who are not involved in rice production (or staple food production in general) will be hurt the most. They're hurting even before the rise in prices. They will starve under the new prices. The reason is they do not have the income to buy enough food. What the government is doing with the rice queues is to subsidize the price of rice for the poor, and regulating purchase per family to avoid hoarding of the subsidized rice. But this welfare assistance can continue only for the very poor. Not for the poor that can be brought up to help themselves, but still with help from the government.

How? Employ the poor so they can have incomes. What will employ them? Emergency infrastructure projects to improve irrigation, as well as other public works that enhance the chances of food sufficiency and competitiveness of the country in the future and the productive capacity of its citizens (as being healthy and skilled). Build those roads and ports and primary health facilities and schools and water systems and housing projects.

But how can we ensure that these public expenditures, which can be augmented also by official development assistance from abroad, will not go to waste and line the pockets of politicians and DPWH personnel? Establish new rules so that community infrastructure projects that local communities themselves have identified and which they are willing to work for and manage are the ones that get funded. Stop the habit of funding only the projects of bailiwicks of Malacanang's political allies. With more responsibility on the part of local communities, the value of infrastructure projects can be protected over time.

Beyond these and other possible course of action are things that we cannot directly influence. Hundreds of millions in China have risen from poverty and are demanding more protein in their diet. This increases the demand for grains as feeds for livestock (cows). There is also this maniacal obsession with biofuels that transformed lands for food production to crop farming for energy. And there are probably more and more reasons why demand for rice and cereals is rising, or how supply could not cope fast enough.

These economic changes have differential effects on different sectors. We can remain a viable society to the extent that windfall gains by some sectors can be used to support those that are effected adversely.

Employ the poor now for projects that help the poor now in terms of income that can accrue to them and in terms of an economy that can create more jobs in the future.

Remembering the 1986 People Power Revolution

2008-02-25T13:10:00.000+08:00

Right at this very moment (in case my computer time is wrong, it is around 12:00 noon, February 25, 2008, Philippines) , people are gathering at various points in Metro Manila and the environs to march to Baclaran Church or at the People Power Monument in EDSA to commemorate the 1986 popular uprising that amazed that world. Similar actions are happening in the other major cities.

Forces affiliated with Laban ng Masa will rally at the People Power Monument at 1pm, and then proceed to the EDSA Shrine at Ortigas for a mass led by Bishop Bacani and Bishop Yniguez at 2pm. Part of this mobilization will march to Ateneo to hear a protest concert by various artists. Part will proceed to Baclaran for a mass at 3pm with the Black and White Movement, with Jun Lozada and Cory Aquino. Bayan and its affiliated organizations will march to Mendiola for a rally.

In all of these mobilizations, the objective is to press the government to resolve the NBN-ZTE scandal and to punish the guilty, and for Gloria Macapagal-Arroyo to resign as president. In the slogans and placards, the issues may appear off-topic, but really not so: JOBS, LAND, JUSTICE, SCHOOLS, HOUSING, HEALTH, SECURITY. These are the casualties of corruption and greed.

The organizations involved in these democratic, non-violent actions today are the coalitions Black and White Movement, Code NGO, Laban ng Masa, and Bayan, to name the major ones. The party list groups supportive of these actions and directly engage in the mobilizations are Akbayan! Citizens' Action Party, Partido ng Manggagawa, and Bayan Muna (you should remember these groups in the next party list elections). I hope more cooperative leaders will join these coalitions and organizations. Like Jun Lozada, none of these organizations is saint (and not even the Holy Roman Catholic Church is holy I can assure you that). Like GMA, they need redemption. Unlike GMA, they are working for their redemption instead of denying their need for it.

Pro-GMA forces might find the rallies being held today as nothing more than a ploy to destabilize the government and pave the way for an illegal power grab. The truth is that these same forces (the legal Left, the civil society groups, the church groups) have always mobilized the people on issues that matter to their lives, so that the people will have the means to fight back through direct public actions in the streets.

But even all these forces taken together are weak compared to the enormous clout of the elite. It is the politicians (and the military) at the very top of the power pyramid that are able to finally engineer a solution in times of political crises, and right now we do not yet know the emerging elite consensus on what to do with GMA. We can be sure that the elite factions are now trying to forge a solution that protects their interests, even at the expense of justice. And this is why resolving political crisis shouldn't be a matter just for the politicians to handle; the people's forces should be involved, as they are now.

Imagine a society in which there are no protest rallies to pressure government to be accountable for election scandals as large as Garci's, corruption in the scale of NBN's, extrajudicial killings to such a scale that alarmed the highest levels of the United Nations, looting of benefits intended for poor farmers in the scale as large as JocJoc Bolante's.

Imagine a society of sheeps and cowards and plainly of people who do not care. That's the kind society that should make us leave this country and adopt another. But for as long as there are people like those that are gathered at Baclaran and Mendiola and EDSA today, there's hope. Direct street actions, even in the face of repression, inspire our people that something is happening to change their lives. Where people march to make their government accountable, there is hope.

The Case of the Central Cooperative Financial System (CCFS)

2008-02-25T11:01:00.000+08:00

The Case of the Central Cooperative Financial System (CCFS)

The CCFS started out as an idea articulated by former Bulacan Governor Roberto M. Pagdanganan. Bulacan takes pride in having many operational cooperatives. Mr. Pagdanganan’s faith in the cooperative idea was strengthened by his exposure to the Raiffeisen system in Germany. He became president of the National Cooperative Movement (NCM), a group of co-op leaders and some government officials who underwent exposure in Germany under the sponsorship of the Hanns Seidel Foundation.

As representative of NCM, he was elected chairman of the Philippine Cooperative Center (PCC), which is composed of national cooperative organizations including NATCCO and some primary co-ops as well. His initial proposal was for the cooperative rural banks to form the core of a centralized financial system to be known as the National Consolidated Cooperative Bank (NCCB). Later on, he included the national cooperative federations in the NCCB concept to form the common shareholders together with the co-op banks, with government financial institutions as contributors of preferred equity shares.

Mr. Pagdangnan again revised his proposal, believing that co-ops are not yet ready to operate such a network. He proposed that the Land Bank of the Philippines should become the temporary apex bank for co-ops to manage the Centralized Cooperative Financial System (CCFS), with the coop banks, the coop federations, and primary coops as depositing members and as capital contributors. Co-ops would maintain their independence and autonomy but have to abide by operating and financial standards, including auditing systems to be established as part of the services of the system. Qualified coops would benefit from credit guarantee system, deposit insurance, liquidity pooling, investment services, and as conduit for loans. The idea was for co-ops under the CCFS to take advantage of the resources, technical services and facilities of LBP under some form of apprenticeship in operating a financial system. The Pagdanganan’s concept of the CCFS was contained in the second edition of his book ‘An Urgent Call for Cooperative Revolution.’

However, NATCCO was already pursuing a different track to cooperative financial integration, believing that regulations by central monetary authorities in the country impose limitation on the prospects of cooperative banks. Thus, instead of establishing a cooperative bank, NATCCO promoted the concept of a centralized financial organization among savings and credit co-ops. NATCCO has launched the NATCCO Central Liquidity Fund (NCLF), a facility funded from investments of cooperatives and which member cooperatives can draw from to cover liquidity requirements.

Others pinned their hopes on the MSCB, which were then already and recruiting into its membership and deposit base all types of co-ops, including other coop banks. Some even proposed that later on that co-ops banks that are members of MSCB can later on serve as branches of the MSCB after its conversion into a national coop bank.

PCC entered into an agreement of understanding with Land Bank and other government agencies for the establishment of the CCFS. As a center composed of national cooperative organizations, PCC was seen as the body to coordinate the effort to form the CCFS. A Technical Working Group chaired by Land Bank was established composed of several government agencies (LBP, CDA, Quedancor, PDIC) and national cooperative organizations including NATCCO, PFCCO, Bangkoop and others.

Along the way, national organizations finally concluded that the envisioned CCFS was not consistent with their existing plans. PFCCO leaders were of the view that supporting CCFS is not consistent with efforts to strengthen the MSCB as the future Bangko Kooperatiba ng Pilipinas. NATCCO was particularly concerned about the bundling of liquidity pooling, investment management, deposit and credit guarantees and other functions under the CCFS as common roof. It proposed that the CCFS should not include functions that are already being performed by the existing federations. Liquidity pooling and investment management are already being performed by NATCCO through its regional federations and at the national level through the NCLF. PFCCO is also operating central fund projects at the regional level. Some co-op networks such as Bangkoop was warm to the CCFS concept because they did not have liquidity pooling as a major network activity in the first place.

Another source of reservation about the CCFS is the role of government. Under the proposed scheme CCFS will not be a legal cooperative entity but will merely be a program managed by Land Bank. In the proposed governance structure, Land Bank will hold the chairmanship of the Management Council. The autonomy of cooperatives, according to the opposing view, will thus be sacrificed in exchange for the efficiency and leverage the Land Bank can supposedly deliver in behalf of cooperatives that will contribute funds to the CCFS liquidity and investment pool. According to the opposing view, the CCFS concept prepared by the Land Bank-led Technical Working Group skirt the process of horizontal trust and confidence-building among cooperatives and relies instead on the vertical authority of government through the Land Bank.

Because of these reservations, PCC decided not to sign the final memorandum of agreement with Land Bank regarding the CCFS. Some of PCC member organizations however have signed the agreement. The PCC Board instead issued a resolution ‘lauding the efforts that went into the formation of the CCFS’ and ‘to work for the improvement of the CCFS through its members’ who are CCFS members.

While co-op networks such as NATCCO and MSCB were already growing, the CCFS bogged down in debates about its legal personality (whether it should be registered as a co-op or as remain as a program or department of Land Bank). Even with Land Bank’s support, and even as it eventually registered itself as a cooperative (and therefore technically as a federation) it was able to mobilize only a small fraction of the financial contributions that NATCCO’s Central Liquidity Fund and MSCB had mobilized from their respective membership. There were those who express optimism that a convergence between NATCCO, MSCB, and the CCFS project is foreseeable. Co-ops would probably continue to belong to separate financial systems catering to the same market.

By that time, popular protests had ousted President Joseph Estrada and installed Gloria Macapagal-Arroyo as President. Mr. Pagdanganan, an ally of President Arroyo, was appointed Presidential Adviser on Cooperatives and later as Acting Chairman of the Cooperative Development Authority.

He was later transferred as Secretary of Agrarian Reform and then as President of the Philippine International Trading Corporation, now supervising the distribution of medicines for the poor. By this time, the Land Bank was already mulling over the transfer of management of the CCFS to a co-op network.

Building trust and the role of history and tradition

The national organizations did not reject the CCFS idea. In fact, they sought to revise some features of the proposed system to harmonize it with their existing activities. However, they found the final design inconsistent with their goals.

There is another dimension to the different attitudes of the co-op networks to the CCFS. Historically, some networks are most comfortable with government intervention. Others could not reconcile themselves to the idea of developing a network that pin its success on the support of the government or its instrumentalities (the Land Bank as manager of the system and other government financial institutions as capital contributors). This attitude historically evolved from their self-reliant development as networks in the face of failures of government cooperative development programs.

Cooperatives face the problem of rationally optimizing the efficiency of the distribution system they have set up. Succeeding in this regard means cooperatives must integrate or organize themselves as a network. If we believe that co-op members and their leaders are rational, then forming or joining networks would require just explaining and demonstrating its advantages. In the Philippines, this would not be as straightforward.

Co-ops performing mainly savings and credit activities in the Philippines come from different historical traditions. One significant tradition is spawned by the cooperative development programs of the 1970s, mainly in the agricultural sector. These co-ops are integrated into cooperative rural banks (CRBs).

On the other hand we have the savings and credit co-ops spawned by more or less independent initiatives. They have proved to be more viable and today co-ops with net worth of over 100 million pesos belong to this group. They oppose government attempts to marshal the formation of co-op networks and structures.

Both tendencies value their respective historical traditions. Despite the failures of government-led cooperative development in the 1970s, leaders developed during that period look back to that period as a time when government was coming in an appropriate way, only that some officials and bureaucrats and leaders spoiled the entire scheme through inefficiency and corruption.

Leaders of the “private” co-ops see a fundamental flaw in an approach that pin success on government intervention support, which in the context of a political culture marked by patronage would mean an erosion of co-op independence and autonomy. They also tend to acquire an ideologically purist attitude that view business innovations in co-ops with suspicion.

It is not enough to approach co-ops, as potential network participants, on the basis of rational economic interest. And although divisions according to historical traditions are important since they relate to the very rationale of the co-op existence, they must be overcome eventually. Yet it is important to recognize that trust and common values with other co-op traditions can be built by affirming each other’s identity and roots. Economic rationality of networks must be translated (or packaged if you will) as a set of common values and ideology because that is an important dimension of the language and outlook of co-ops or of their leaders. Co-op network building must ALSO be recognized as a process of social movement building based on common values and ideology, and not just as a rational economic process.

Memories of the 1986 People Power Revolution

2008-02-25T10:54:00.000+08:00

Revolutionary greetings to one and all on the 22nd anniversary of the 1986 people's uprising (or EDSA 1) that ended the Marcos dictatorship and restored democracy in our country.

We were at the headquarters of TAPAT (Tanggol Karapatan) near the Bustillos Church when we heard news that sections of the military had withdrawn support from the Marcos government. That was February 22, 1986, the beginning of 4 days of final confrontation between the Marcos government and the anti-dictatorship forces.

TAPAT was a coalition that monitored the February 7 elections. It was headed by Sister Mercy Contreras. I was then a volunteer for TAPAT, as a contribution from the Alliance of Concerned Teachers, in which i worked as a full time research staff, being an out-of-school teacher at that time. TAPAT was composed of organizations that did not want to participate in the campaign by BAYAN to boycott the presidential elections. They formed an anti-fraud coalition instead. I remember a heated debate between the volunteers: our job is to objectively monitor and report the conduct of the elections, said one side. No, our job is to expose how the fascist government is going to rig the elections, said the other side, my side.

It did not mean we avoided the anti-dictatorship rallies that were for election boycott. In one of the BAYAN rallies at Liwasang Bonifacio, I remembered one speaker saying: the kind of democracy that they (presumably those who were participating in the elections, whether on Marcos or Cory side) want is the democracy of debates, the democracy of endless speeches in Congress.

We knew what he meant. Democracy has to be more than just that. But the speech and the entire rally showed how completely isolated the mainstream Left was from the popular mood and perception: that here is a chance to boot out Marcos by voting for Cory. Practically a million people showed up in the pro-Cory rally at the Luneta (just before the February 7 elections, i can't recall). We were there as TAPAT, distributing anti-Marcos leaflets, which we wrote and which we mimeographed, and soliciting coins to a biscuits can. The can was filled with coins and 20-pesos bill.

Attention focused on the Batasang Pambansa, where the election returns were being delivered, and the PICC, where the COMELEC was conducting the national canvassing. In one evening at the Batasan grounds, we formed a human cordon around a suspicious vehicle carrying ballot boxes until opposition lawyers could file their protest. More people were coming. Ham radio was very popular among the young then (this wasn't yet the age of cellular phones). People were exchanging information and making speeches against Marcos over ham radio. A rock band called Agos volunteered to sing for the crowd, and asked to use our vehicle to bring in their instruments. It was a lively evening, songs and speeches. In our way to a residence in Fairview where we stayed for the night, Agos found that their amplifier was gone.

The following morning we were at the BAYAN rally at the Plaza Miranda. BAYAN was still holding separate rallies and mobilizations from the largely spontaneous and unorganized pro-Cory mobilizations. BAYAN leader Lean Alejandro knew we were at the great evening at the Batasan, an evening BAYAN could not be a part of. He asked: what happened? what was your role? what captured the imagination of the masses? TAPAT was probably the only organized mass force that evening at the Batasan. Lean probably knew how tied his hand was in trying pursuing a policy of opposing the dictatorship and not supporting Cory's electoral battle at the same time.

That evening or the next i guess, we headed to the PICC to gather whatever more information after receiving news of a walk out of COMELEC staff due to the manipulations of the election tallies. Plainclothes at the PICC mocked us, and one of them softly chanted Cory! Cory! while grinning maliciously. I realized it was because they thought we were kids, and at our early 20s we looked like thin, starving, unwashed kids. We entered the main hall and were amazed at the spectacular array of probably hundreds of computers. The government had to make this impressive technical set-up to hide fraud, i thought.

There were mobilizations almost everyday before and after the elections, as outdoor street protests and as in-door rallies. ACT volunteered to the foreign press several public school teachers who narrated commonplace, almost uncontroversial, instances of election irregularities, vote buying, and intimidations during the election. In one conference called by Teachers Alliance for Justice Against Corruption (TAJAC), which was organized by Rene Romero and Raul Segovia, a PUP instructor who earlier expressed in so many words his reservations about street actions suggested TAJAC should organize seminars on Gandhian non-violence. Someone rose up: "hindi na kailangan! magmartsa na tayo sa kalsada!" Now, 22 years later, i realized that at least i could have suggested we could conduct teach-ins about Gandhian tactics right during the rallies. (Gandhi said: "be the change you seek in the world.")

On February 22, after days of rallies, we TAPAT volunteers were taking a nap, lying on streamers and placards. Someone from the neighbors or from the landlords knocked, advising us to take extra caution under the entirely changed situation when Enrile and Ramos withdrew support from Marcos. That evening and for 3 days we were at EDSA. On February 25, we were at the gates of Malacanang.

The Case for Associative Water Systems

2007-11-28T14:50:00.000+08:00

The Case for Associative Water Systems

What is an associative water system

We define the associative economy as that section of the economy carried out by self help groups, associations, cooperatives, and other membership organisations. In the case of water provision, the forms of organizations can vary from informal self-help groups and people’s organizations (such as the water POs in Taguig) to large water utilities (such as the Sibonga Waterworks Cooperative in Cebu) owned by the water consumers themselves.

The common feature that distinguishes the organizations in the associative sector is that ownership and control of the water service rest with the consumers or users of the service in their capacity as users and consumers.

As users, they may capitalize the service fully on their own or contract financing to fully pay for the capital costs, or rent capital. They may also collectively perform the service of water provision on their own or contract a full time salaried staff or wage workers. They may own and/or operate their own water source or contract supply contract with water resource developers and/or suppliers. Aside from being consumers, they may also be equity contributors, workers (or volunteers), or suppliers. However, an associative water system is where consumers of water control and own the service in their capacity as consumers.

It has been estimated that almost half of the country is served by water utilities operated by local governments, rural and barangay water service associations (RWSAs and BWSAs), homeowners associations, subdivisions, cooperatives, and small private water providers. Any of these forms can be considered as associative to the extent that it involves consumer ownership and control. Water utilities run by associations as organized consumers can also be considered as pre-cooperatives. (Water districts were thought to be communal properties – hence owned by the water users themselves except that governance involves the appointment of the board by the municipal mayor – until the Supreme Court decided that they were in fact government owned and controlled corporations.)

Advantages of the associative form

Experiences in a number of urban poor communities in Metro Manila and outlying peri-urban areas show that domestic water can be viably supplied by service providers organized as consumer or customer-owned utilities. Most of these are today legally registered either as cooperatives or associations.

The organization of consumers facilitates and secures dependable water supply: (1) by reducing the cost of transactions either with third party bulk water supply providers or with sources of capital to build consumer-owned water supply capacity and distribution systems, and (2) by reducing the costs of managing the water system and enforcement of consumer subscription rules (thou shalt not steal water) through democratic control and peer monitoring that inhere in cooperative and associative organizations.

Moreover, cooperatives mitigate the costs of water tariff regulations as well as health and sanitation regulations through self-regulation by the co-op members themselves.

Such experiences are consistent with economic literature suggesting that for utilities as natural monopolies, the costs of ownership and market contracting are minimized if formal and/or effective ownership is assigned to the utility customers. A good material is Henry Hansmann’s “Ownership of the Firm” (in Journal of Law, Economics, and Organization vol. 4, no. 2 Fall 1988, Yale University). Lawrence B. Morse’s “A Case for Water Utilities as Cooperatives and the UK Experience” (Department of Economics, North Carolina A&T State University, Greensboro, NC) follows up Hansmann’s analysis.

In Morse, market power held by one class of patrons (investors) can cause another class of patrons (consumers) to incur considerable market contracting costs. Imperfect competition and monopoly in the output market imposes significant market transacting costs on the consumers unless they are the owners. Thus, government has to impose price regulation on investor-owned utilities. However, regulation is also a form of market contracting costs. These regulatory costs include not only the staffing, office, and so forth, expenses of the regulatory agency, but also the costs incurred by the utilities themselves in gathering information and making their price request cases. There is also the government and industry costs realized when pricing decisions are appealed.

Morse further notes that risk bearing is one form of ownership cost. One aspect of risk bearing is the risk that may be created when one, as opposed to another, class of patrons is the owner. Additional market contracting costs will be incurred in the future when a water utility inappropriately postpones long-term investments. To the extent that investor owners have shorter time horizons and base decisions on market rather than social costs and benefits, investor-owned utilities have a greater risk of long-term under-investing. This may partly explain the failure of investor-owned providers (if they are not to be called “utilities”) to provide to a number of waterless urban poor communities in Metro Manila.

In Binangonan, 21 barangay-level water co-ops took over the function of water distribution from the barangay government. Results so far: reliability of water supply, drastic reduction of non-revenue water, affordable water rates. The water co-ops have proven to be a more efficient form of enterprise in running water utilities. The water utility operated by the municipal government for the poblacion area is losing money. The water co-ops serving the outlying barangays are not losing money.

Urban poor resettlers in Penafrancia, Antipolo used to buy expensive water from delivery trucks. Organized as the Lungsod Silangan Resettlers Association, Inc. Multipurpose Cooperative (LUSRAI-MPC), they raised initially about P60,000 and took an investment of P1 million in 2002. This qualified them to take a total loan of P6 million from two NGOs to pay for water reticulation. The coop entered into a bulk supply contract with Manila Water and now provides reliable water to residents. All loans have been paid since.

In Bolivia, the policy for private sector participation has not attracted as much private investment as was once hoped for. Evidence indicates that cooperatives may provide an alternative way to meet the water and sanitation needs of poor urban communities. The Cooperativa de Servicios Públicos Santa Cruz or Saguapac, a water supply and sanitation (WSS) cooperative in Santa Cruz, Bolivia’s largest city, is the world’s biggest water cooperative. Established in 1979, Saguapac now provides water to over two thirds of the 1.25 million inhabitants of Santa Cruz and continuously provides good quality water through house connections. Some 97 percent of connections are metered and 95 percent of water charges are collected.

A case study on Saguapac (“Consumer Cooperatives: An Alternative Institutional Model for Delivery of Urban Water Supply and Sanitation Services?” by Fernando Ruiz-Mier and Meike van Ginneken, World Bank Water Supply & Sanitation Notes, Note No.5, World Bank: Washington DC, 2006) observes the following:

Owned and controlled by its customers, Saguapac is an enterprise based on honesty, discipline and efficiency. With the help of modern technology, it is trying to build a better-informed society that values water. The cooperative’s corporate culture embodies values of self-help, responsibility, democracy, equality and solidarity.

Saguapac provides its employees with competitive salaries, work stability and the possibility of promotion, and tries to treat everyone equally irrespective of rank. Recognizing that some members’ ability to pay their bills was affected by Bolivia’s economic crisis, Saguapac organized courses for housewives and young people to help them acquire a trade. This has not, however, distracted it from its main role.

Saguapac’s success is partly attributable to the characteristics that stem from its cooperative structure. Its organizational structure has enabled it to isolate decisions from political interference, adopt decisions unrestricted by awkward procedures, and maintain a strong focus on consumers’ needs.

The two-tiered electoral system of Saguapac’s Board contributes to strong member participation that helps maintain a strong customer orientation and encourages a high degree of integrity among elected officers. The continuity of its management has defined a corporate culture dedicated to improved service provision. The high degree of self-reliance and a strong sense of regional identity and the well-organized and powerful civic movement in the city of Santa Cruz are very favorable to cooperatives.

In the case of the Binangonan co-ops, the Lusrai co-op, and the Saguapac, the associated consumers own and control the water utility and appropriate the residual income or surplus. This control can be “intimate” in small communities or “formal” in larger co-ops. In any case, boards that set actual policies are elected from among members. Members receive earnings in proportion to their patronage, aside fro the normal rate paid on their share capital. Co-op members vote on the business plan, including all major decisions in investment, service coverage, and tariffs. In some co-ops, members set inefficiently low tariffs. In some others, members accept tariff levels higher than those faced by customers of surrounding MWSS concessions. Losses are borne by members. Surplus accrues to members.

In the case of bulk water supplied by central utlities, associative water systems have been able to actually reduce the costs of transactions and build a stable market, enabling MWSS concessionaires (Manila Water in particular) to supply to previously waterless urban poor communities at a cost lower than what consumers previously faced when supply was delivered by inefficient methods using delivery trucks and ground water pumps in critical watersheds.

Organized consumers can further realize efficiency gains, as should be reflected in lower water tariffs per cubic meters of household consumption, if the reduced cost of associatively managing and monitoring the water distribution system, leading to dramatic reductions in non-revenue water, is considered in the bulk water price setting of the MWSS concessionaires.

The problem of securing capital to build water supply capacity and distribution does not pose a particularly serious problem for consumer-owned water utilities in urban poor areas when we consider that (1) there is an efficient credit market that caters particularly to the poor, provided by financial service cooperatives and non-profit foundations, and (2) there are available public financing options, and that the attendant inefficiency and moral hazard issues of such public funds can be mitigated by making them available to the organized consumers based on performance (efficient operation for a period of time is rewarded by using public funds pay for a significant balance of the capital loan of the cooperative).

Although investor-owned banks are not considered an option at this point, the dependability and stability of a consumer water utility’s customer base would make it qualified even for commercial loans.

Regulating associative water systems

NWRB is responsible for issuing water permits and certificates of public convenience to water utilities. CDA is responsible for registering and regulating co-ops. The Cooperative Code (R.A. No. 6938, 1990) defines the broad principles that differentiate the roles of CDA and NWRB in regulating water utilities as cooperatives under Section 96 to 98.

Section 96 of the Cooperative Code defines public service co-ops as those “organized to render public service as authorized under a franchise or certificate of public convenience and necessity duly issued by the appropriate government agency.” Such co-ops may include: (1) power generation, transmission, and/or distribution; (2) ice plants and cold storage services and electric cooperatives qualified as cooperatives under the Code; (3) communications services including telephone, telegraph, and telecommunications; (4) land, sea, and air transportation cooperative for passenger and/or cargo; (5) public markets, slaughterhouses and other similar services; and (6) such other types of public services as may be engaged in by any cooperative.
Under Section 97, no public service cooperative shall be registered unless it satisfies the following requirements: (1) it has the favorable endorsement of the proper government agency authorized to issue the franchise or certificates of public convenience and necessity; (2) its articles of cooperation and by-laws provide for the membership of the users and/or producers of the service of such cooperatives; and (3) it satisfies such other requirements as may be imposed by the other pertinent government agencies concerned. The Code provide provides that “In case there are two (2) or more applicants for the same public service franchise or certificate of public convenience and necessity, all things being equal, preference shall be given to a public service cooperative.”

Under Section 98, “(1) Internal affairs such as the rights and privileges of members, the rules and procedures for meetings of the general assembly, board of directors and committees; for the election and qualifications of officers, directors, and committee members, allocation and distribution of surpluses; and all other matters relating to their internal affairs shall be governed by the Co-op Code. (2) All matters relating to the franchise or certificate of public convenience and necessity of public service cooperatives such as capitalization and investment requirements, equipment and facilities, frequencies, rate-fixing, and such other matters affecting their public service operations shall be governed by the proper government agency concerned. (3) The Cooperative Development Authority and the proper government agency concerned shall jointly issue the necessary rules and regulations to implement this Chapter.

Section 98-C provides a much-needed opening to improve the regulation of associative water systems. The associative character of water systems run by consumers calls for the following recommended features of CDA-NWRB Joint Rules and Regulations:

1. Water co-ops are self-regulating since members vote on tariffs and service qualities. Therefore tariff regulations applied to MWSS concessionaires and other private utilities should not apply to associative water. Although the CDA is concerned only about water co-ops, joint CDA-NWRB guidelines can also extend to water associations in so far as their members regulate their own water tariffs.
2. Regulation is not merely to protect one set of stakeholders against the opportunistic behavior of another. NWRB-CDA joint regulatory rules should promote standards that generate trust. Water co-ops that are certified as complying with CDA and NWRB standards (including NWRB’s recommended service levels and quality) would enjoy more trust from other users who are not yet members, from financing organizations, and other stakeholders.
3. NWRB-CDA joint regulations should promote customer and community ownership of water systems. It is the mode with the most chance to work and become sustainable.
4. Deputization of CDA by NWRB, such that Section 97(1) is mitigated, especially for cooperative sub-distribution in areas covered by existing concessions and water districts (that already have their CPCs).

Transformation to associative forms

About one-fifth of the country is served by government-owned water districts supervised by LWUA and by stand-alone water delivery systems operated by cities, municipalities, and the barangay. Metro Manila is served by investor-owned water providers acting as concessionaires of the MWSS, the government water utility.

Operational issues have given rise to proposals in Congress allowing for the conversion of the water districts into either stock cooperatives or stock corporations, thereby further extending the possibilities for direct consumer control, even as they also would open water districts to private investor takeover. At the same time, existing laws actually already provide for preferential treatment to cooperatives in the operation and management of public services including water supply. Local governments are also mandated under the law to support the promotion, organization, and development of cooperatives.

There is a need however to push the existing proposals towards associative systems.
Senate Bill 2595, filed in the last Congress, amends PD 198 or the Provincial Water Utilities Act. It raises the authorized capital stock of LWUA from P2.5 billion to P50 billion, authorizes LWUA to take foreign loans up to USD 1 billion, and mandates water districts to convert into either stock cooperatives or stock corporations within 5 years. Assets of water districts will be converted into government contributions represented by LGUs to the water cooperatives or corporations. Government shall maintain at least 40 percent of the shares of stocks in a water cooperative or corporations. No single member (of the cooperative or corporation) shall own more than 20 percent of the capital stock.

The problem with this proposal is that as a primary cooperative, water cooperatives can be composed of natural persons only, which means that government (LGU) will only be an associate member holding preferred shares. There are no provisions in existing laws allowing government regular membership in any cooperative at any level or tier. To avoid these issues, government can simply adopt the case of Binangonan in which the assets of local government water systems were transferred to the consumer-owned cooperatives free of charge. Such a move can be justified since the consumers have paid for the assets already by way of the water tariffs or charges. There is also an almost perfect one-to-one correspondence between the public or the community and the consumers in any particular locality.

Consequently, unlike the cases of natural gas and telephone utilities where there is only a partial correspondence between consumers and the public, it would be politically feasible for a government to hand over a water utility to consumers. Such a handover removes the weighty practical problem of how water utility customers might organize themselves so as to raise the capital to purchase the utility. It is reasonable for government authorities to turn over a publicly owned water utility to its consumers because water utility assets have been paid for out of water rates and taxes, when public funds have been invested. Public utilities are, in effect, held by the state in trust for the public.

Members exercise control but the following limitations maybe imposed, as suggested by the paper by Morse: (1) members cannot sell, bequeath or otherwise transfer their ownership or membership; (2) when consumers leave a water utility’s jurisdiction, they automatically forfeit their ownership without any compensation and, correspondingly, when consumers move into a water utility’s jurisdiction, they automatically become members without any initiation fee. Domestic, commercial, and industrial users are classified as consumers. The feasibility of any or all of these proposals can be weighed against the actual needs in Philippine localities.

Water providers organized as non-profits may object to the provisions requiring water districts to convert into stock coop or stock corporations. Some water providers should definitely be allowed to remain as non-stock, non-profit organizations. However, the option to become a stock co-op or a stock corporation means that the water service entity may legally raise capital from members. This is a critical step in making water service self-reliant and sustainable.
Stocks are simply the capital raised by an enterprise. Stocks are divided into shares issued to different people who become shareholders or stockholders. This makes possible the undertaking of economic activities that require large capital that no single entity can afford to shell out. In a cooperative, stocks are also divided into shares. Owners of shares or stocks are also called shareholders or members (but they are seldom called stockholders in common usage). However, control and ownership of the cooperative by the members are exercised by virtue of other characteristics aside from being capital contributors. In user cooperatives, the member-users control the co-op in their capacity as users or consumers of the service.

The word “stock cooperative” may not be found in the Cooperative Code (RA 6938). However, cooperatives are meant to issue common or preferred shares to members, who can either be regular or associate members. The exception is that in primary cooperatives “No member.... shall own or hold more than twenty per cent (20%) of the share capital of the cooperative.” (Section 74).

In water cooperatives, consumers control the water utility in the sense that they divide the surplus among themselves and they elect the board that appoint the managers of the firms (which can be equivalent to specifiying the quality of the product (water service). The subscribers may opt to source their capital from every imaginable way but control remains in them in their capacity as subscribers. Even if the option of being a stock corporation is adopted by a particular water district or public water provider, control should remain with the actual subscribers.

A proposed law that aims to open alternative ownership forms for water districts should definitely include the cooperative option at the very least. However, it must also observe the spirit of existing laws -- the Cooperative Code and the Local Government Code -- preferring the cooperative option in public services.

Sustaining the associative water sector

Further gains can be realized if water utilities as consumer-owned co-ops are integrated horizontally and vertically in terms of technical, financial, and management cooperation. Another dimension is policy cooperation.

The following is a proposal for sustaining the associative water sector:

1. Existing water co-ops and associations to convene an “associative water center.” The center will serve as a surrogate federation of these water consumers acting as providers/utilities themselves until the eventual formalization of the center as an industry/sectoral federation registered with the CDA.
2. Technical, organizational, management, and financing modules of the convenors will be “franchised” as a package that can be appropriately adapted to localities in need of water systems (immediate targets: Bagong Silang, resettlement areas in Bulacan, Laguna, and Cavite)
3. Experienced community organizers will supply the needed social preparation and organizing skills.
4. The center may also include technical and financial partners as associates, including possibly the PCWS, the FSSI, IPD, and others.
5. The center will eventually develop itself as a financial institution and as a BOT center for associative water systems.

The purposes of the center must include implementing and operating replicable and sustainable models of water supply systems in rural and urban poor communities based on consumer ownership and control; establishing a system for the management of knowledge on associative/ self-help water supply systems (research, documentation, communication, coaching and consultancy); developing partnerships with people’s organizations, governments, financing institutions, and the private sector, for the replication of such models in poor communities elsewhere and anywhere in the country; assist the institution of reforms in local and national rules to improve the regulation of and promote co-production on water supply and water resource management.

Bagong Silang as a target area for associative water systems

Bagong Silang, or Barangay 176 of the City of Kalookan, is a resettlement area now hosting 360,000 residents who face inadequate and irregular water at inordinately high costs due to both poor supply and demand conditions. Maynilad’s piped distribution covers only a fraction of the residential sprawl, through which only 2 drums (targeted to increase to 5 drums) of water per family per day can be delivered. The MWSS concessionaire appears reluctant and unable to extend pipe connections to more households and sites anytime soon due to unfavorable cost-benefit prospects brought about by inherent higher costs of supplying to Bagong Silang as an elevated area, high ratio of non-revenue water (70%), the lack of social mechanisms that elsewhere made possible the reduction of non-revenue water from 65% to 35%, as for instance in Taguig covered by MCWI’s, and the existence of city-provided deep wells providing water to other residents. Yet the 17 deep wells provided by the government of Kalookan City under its Lokal na Patubig do not have enough capacity to adequately supply their respective service areas. Many sites do not have pipe connections and about five percent of residents have to rely on water delivered by trucks thanks to President Arroyo and Mayor Echeverri.

However, there is a chance to improve the distribution of existing supply. This would involve cooperative consumer investment in installing facilities to collect water at nighttime when water pressure is relatively high so that water can be made available on demand during daytime. Residents can also be encouraged to efficiently collect rain water to mitigate the demand on the already overstretched supply capacity. Supply from an already installed deep well of Maynilad can also be diverted to sites most in need of water, particularly Phase 9 wherein residents rely on trucked water deliveries.

All these engineering measures can be helped if consumers voluntarily cooperate through a consumer cooperative or a network of such co-ops from many sites in the barangay. Supply can be further improved if Maynilad adopts the strategy of bulk water sales to the consumers’ water service co-ops. This transaction can be realized if such co-ops can ensure dramatic reductions in non-revenue water, which is a very likely possibility. With bulk sales, Maynilad charges the cooperative for water supplied through a mother meter, which must provide an incentive for the co-op to minimize as possible the water losses along the distribution lines from the mother meter. Moreover, since the co-op will undertake pipe-laying, individual metering, maintenance, monitoring, enforcement and administration, the co-op should be able to negotiate better bulk water tariffs from Maynilad.

The varieties of the existing supply and distribution may affect the course of action consumers have to take in forming their cooperatives. Households with pipe connections with Maynilad may find it appropriate to form co-ops that will manage Maynilad’s bulk water supply. Such co-ops will be formed if (1) dramatic reduction in non-revenue water, (2) proper price setting for Maynilad’s bulk water, (3) consumer tariffs lower than current inefficient prices, and (4) increased water supply from Maynilad can all be realized as a set of interconnected outcomes. For its part, the city government would have an incentive to turnover the operation of the city-provided wells to consumer co-ops if supply and distribution can be improved leading to lower water consumed per cubic meter. Unconnected areas would have greater incentives to organize their co-ops but would face the highest set up requirements.

Residents have organized the Bagong Silang Community Water Service Cooperative, with the technical assistance of IPD. The ongoing work in Bagong Silang is being informed by the experiences of the water Pos in Taguig and the cooperatives in Antipolo and Binangonan. Extending the associative water movement to the resettlement areas of Bulacan, Cavite, and Laguna is an immediate possibility through the cooperation of urban poor groups with groups oriented to associative water.

Cooperatives: Ready for Politics?

2007-11-22T14:16:00.000+08:00

Cooperatives: Ready for Politics?

Third Sector Views Issue No. 4 July 1996 (a publication of the Cooperative Foundation Philippines, Inc.)

Philippine cooperatives are considered to be a traditional, apolitical lot. Challenging official policy in the streets -- through rallies, demonstrations, pickets -- is simply not their cup of tea. But not anymore. Last July 22, about 3,000 cooperative members marched to Congress to oppose the EVAT. Last October 16, they once again marched to confront the government's liberalization policies. With a base of about 4.5 million and a growing though still modest economic clout, the cooperative sector may be expected to seek new venues to herald its coming of age as an important social actor. The political arena readily comes to mind.

Indeed, a political role does not run counter to the basic cooperative principles but is derived from them. Political action is an extension of the cooperative mission of building its countervailing power and capabilities to respond to the needs of the members and to intervene shaping its environment.

Cooperative political options

Cooperative organization and action in the political arena may take various forms. Several options are in fact already at the disposal of cooperatives. At the local level, cooperatives take advantage of constitutional and LGC provisions on the right of POs to be consulted and participate meaningfully in making decisions. Although cooperatives and the NGO/PO community in general have yet to skillfully maximize these provisions, it is also true that the current participatory mechanisms have their own limitations.

Thus, some cooperative leaders have opted to vie directly for seats in the local councils, either as independent or party-affiliated candidates on a cooperative platform. In Davao del Norte for example, 90 leaders of cooperatives assisted by the Cooperative Foundation Philippines (CFPI) won seats in the barangay councils. In Bataan, coop leaders made their way to a municipal council. Aiming for cooperative-oriented local governments has been proven to be a viable option. It seems that progressives and reformers in general do indeed have a better chance of winning ‘micro elections’ where money politics have less proportionate influence.

At the national level, the cooperative experience is the political lobby, embodied for instance by the Supreme Cooperative Council of the Philippines (SCCP), chaired by former Sen. Manuel Manahan until 1990. The Council advocated the movement’s position for a new cooperative code. This is also the idea behind the Technical Working Group on Cooperative Legislation that has been conducting representations to press for the exemption of cooperatives from EVAT.

Local participation, lobby work and mass pressure politics must remain as important components of a cooperative political strategy. But already there are some indicators of a trend towards a more pronounced cooperative political role. Some groups that keep an eye on the party list system are wooing cooperatives as a major constituency. Under the party list system, a party or a coalition will be entitled to a number of seats in Congress proportionate to the number of votes garnered by the party. Voters vote for the party of their choice, not the individual candidates. The seats due to the party will be assumed by the candidates on the party list according to priority.

A large national labor center is in the process of putting up a labor-cooperative party, with trade unions and workers’ cooperatives as major constituencies. If the envisioned party can harness the votes from all the local unions and primary coops under its wings, it can be assured of seats in Congress. The cooperative movement itself can constitute a party under the party list system. If such party can harness the cooperative vote, it can become a significant political player.

The party list system is just one of the options. A cooperative political party may also opt to enlist as a coalition partner in an existing national party. If it is sufficiently strong and credible, this could be a way of infusing principled politics among the major parties, which are mostly parties of politicos wherein the rank-and-file are treated simply as errand boys, without a say in party policy. Or, the cooperative movement may simply be content at being a machinery for harnessing cooperative votes in favor of candidates or parties that agree to carry the cooperative agenda. Under this option, cooperatives endorse pro-cooperative candidates from whatever party, as was the case during the Aquino (1992) and Pimentel (1995) senatorial campaigns. This, however, defaults coops from developing a political movement of their own and consigns them to being mere riders to the parties of the elite.

The case of the two senators showed how important it is to have pro-cooperative representation in Congress. The movement can build on this to press for a distinct sectoral representation. Sectoral seats in the House of Representatives appointed by the President are presently based on the definition of the basic sectors. The idea is to ensure representation for sectors that otherwise would not be adequately represented. Such representations through executive appoinments would not have been necessary if we truly have an even political playing field. But because our political system fails to be consistently democratic, affirmative action is necessary in favor of the basic sectors and their organizations.

Given the complexity and diversity of our society today, there is also an old-fashioned tinge to the idea that a congressman can adequately represent his district and that congressmen collectively can represent the entire country. The more we move toward diverse representations to reflect diverse constituencies, the better for Philippine democracy.

These same argument goes for a distinct cooperative representation. In general, the more representation for basic sectors, the better. More sectoral representation will always pose a countervailing influence on the rest of Congress, many of whom are from the affluent and powerful sections of society.

Lastly, launching a cooperative party as a national party is another option, although one that would be very difficult to achieve. The experience of other social and popular movements was not very encouraging. The major example in recent history would be the Partido ng Bayan/Alliance for New Politics (PnB/ANP) umbrella, an electoral initiative of the Left and left-of-center forces which was terribly cloberred during the 1987 senatorial elections (Horacio R. Morales, Jr. of CFPI vied for a senate seat under this banner).

Whatever the option or options the cooperative movement may take, the idea of a distinct cooperative political movement has come of age. It would be quite an unnecessary limitation for the cooperative movement to impose on itself the role of a bystander or spectator. Those who still feel uneasy or frightened about the idea of cooperative in politics fail to remember that the original cooperative visionaries themselves (Robert Owen in England or Rizal and Jacinto in the Philippines) were social reformers and political activists at the same time.

The cooperative identity

There are more than 37,000 registered cooperatives in the Philippines. Only 4,516 were registered before R.A. 6938 was enacted in 1990. The rest were registered after the enactment of the law. We have therefore a very young movement. About 65 per cent of the coops are agricultural multipurpose cooperatives, although the share in terms of assets of industrial and service coops is increasing. About 21 per cent are non-agricultural multipurpose cooperatives and the rest are credit, consumer, service, producer and marketing cooperatives. Central Luzon, Southern Tagalog and Southern Mindanao top the list of regions with the most number of coops.

It is tempting to say that a sector composed of 37,000 organizations with a mass base of about 4.5 million individuals constitute an enormous political potential. This view has its own merits and limitations.

One wonders if cooperatives as a whole in the country really constitute a movement or merely a congeries of organizations as diverse as a crowd in Quiapo on a Saturday. But wait, it was a crowd on a Saturday, most if not all sharing a common purpose: to pray to the Black Nazarene.

By adopting a specific social practice and hoping to propagate it, coops has in fact created a movement among themselves, even without central coordination or formal unity. By identifying themselves as coops and by wanting to be recognized as coops, they have bound themselves to certain norms, values and principles that are defined enough to provide a basis for identification and by which they can be morally judged and tested, even if these norms, values and principles themselves are dynamic and changing.

Given a very natural and conservative basis of commonality — the practice and promotion of self-help and cooperation — coops are perhaps even more cohesive than, for example, the peasant movement, or the trade union movement, or the PO/NGO sector wherein specialized orientations may actually pose a hindrance to unified action. Coops as coops as a whole is a sector upon itself, a class upon itself. The cooperative form provides them a common identity and structure that are necessary in acquiring a sense of meaning, which is a fundamental human need. At the practical level, they are so intimately interconnected. They are regulated by common laws and are subject to a wide range of common issues and problems. There is therefore a basis for cooperative action among cooperatives. The point is that for those having the coop sector or coop movement mentality, cooperatives constitute a unique social creed or ideological orientation in itself. Although there are cooperative organizations within this coop movement that also identifies easily with, say, the labor movement or the NGO/PO movement, they maintain still that they are primarily a cooperative movement.

However, if we consider all the cooperatives in the Philippines, we find that not all of them may consider themselves as belonging to the ‘cooperative movement.’ Some of them will identify themselves as part of the labor or socialist movement, the environmental movement or perhaps some general or specific idea of a civic or social movement. Some may not even identify themselves as part of a social movement. Or, worse, as a group with some special relationship with a patron — a government agency, an NGO, or a politician.

This brings us to the concept of primacy of identity. For entities who belong to the ‘cooperative movement,’ cooperativism is the primary social movement — other orientations are just part of it. For other social and political movements, cooperatives is an important but secondary orientation and constituency. Cooperatives organized by TUCP or BMP regard themselves as primarily a part and extension of the labor movement. Workers’ coops organized after the company has closed shop and the labor union deactivated fit in this category, as exemplified perhaps by the taxi coops started by former worker unionists of La Tondeña or perhaps even the NUWDECO.

A well articulated cooperative ideology, existent in some of the coops of the coop movement school, can very well provide the conscientizing and visionary framework for organizing an alternative movement. The adoption by CFPI of the ‘work through partners’ approach is actually an adaptation to realities in the Philippines: that many groups with which CFPI is dealing wanted to ensure that the primacy of their movement as natdems or as AMA or as BMP is maintained.

An overview of ideological orientations

The primacy of identity is related to ideological orientation. These orientations have deep historical roots. We can tentatively identify some of the current ideological strands among cooperatives in the Philippine setting as related to older ideological traditions.

19th century cooperativism emerged as part of a general political response of the working class and socialist movements to prevailing capitalist conditions. The first teachers of cooperativism, among them Robert Owen, King, Charles Gide (Britain), Philippe Buchez, Lois Blanc (France) were intensely involved in campaigns for social reforms. They were also either philanthropists, utopian socialists or radical political leaders. They believe in a Cooperative Commonwealth governed by cooperation rather than competition. They thought that cooperativism can be an organizing principle for the whole of society and that the cooperative principles can serve as the organic laws of a future cooperative society. During the 1920s Ernest Poisson of France even proposed for the creation of a Cooperative Republic.

Although the social experiments of such pioneers as Owen and Fourier failed and proved unsustainable, cooperativism has remained as one of the most enduring working class traditions to emerge out of 19th century Europe. Today, the cooperative tradition is carried on by cooperative movements in most countries. Together they constitute the cooperative sector in their respective countries.

The idea of a Cooperative Sector was articulated by Dr. G. Fouquet (1935). In his view, cooperatives constitute a distinct sector in the economy which can be sectoralized as follows into a public sector, composed of state enterprises; a capitalist sector, which is usually called as the private sector; a "private sector proper," composed of the family, peasant and handicraft economies and other pre-capitalist units; and a cooperative sector, composed of cooperatives although closely intertwined with the private sector proper which its wants to integrate into formal cooperatives.

Rather than imagining the cooperativization of all of society, the cooperative sector school believed that there are activities that can be done more efficiently by other sectors. The coop sector then becomes a counterforce to prevent the capitalist sector from being exploitative. This view is consistent with the welfare state model and democratic liberalism.

In the Philippines, the cooperative sector orientation is reflected in the idea of establishing coops as a strong and significant Third Sector of the economy, without having a articulated line on the capitalist or socialist options. The ‘cooperative movement’ as articulated by the major cooperative organizations or apexes also reflect this stand.

The Marxist-Leninist (ML) concept of socialism on the other hand believes in the predominance of political means before the revolutionary seizure of state power after which educational and cultural means are supposed to predominate. By and large, ML parties believe that coops are some sort of preparation for a more collectivist way of life.

In centralized socialist experiences, as in Soviet Union, eastern Europe and China under Mao, cooperative development was coordinated closely with state plans and purposes. Hans Munkner, a cooperative expert from Germany, said these are actually ‘socialist collectives’ and not genuine coops because they were not autonomous and member-controlled. They had to follow the party line. Cooperatives are considered to fit better such branches in which economic activity is basically decentralized. Otherwise, state socialisation of the means of production is considered to be the superior economic form. In former socialist Yugoslavia, however, cooperative workers’ self-management was considered superior than state control. In today’s China under Deng, cooperatives seem to have relative freedom. After the fall of communist regimes in the former SU and eastern Europe, cooperatives were treated similarly with state enterprises that are subject to privatisation. The cooperatives concerned opposed these moves of the post-communist governments. The ICA intervened in their behalf and argued for their continuance as autonomous entities controlled by members.
In the Philippines, the National Democratic Front (including the CPP/NPA) apparently adopts a mixed economic model composed of the state, cooperative and private sectors. It seems, however, that their current cooperative organizing activities, if any, would have to be subsumed in the context of the revolutionary struggle, a concept known as ‘war economy.’

However, there are also various above-ground socialist movements that incorporate cooperative development in their agenda. They view cooperatives as an extension of workers’ solidarity and as an important but just one among the components of the socialist strategy. They follow the general track of the social democratic movements in Europe that emphasized on building the triad of the socialist party, the labor unions and the cooperatives as forces for socialism.

While the ML and socialist schools see cooperatives in the larger framework of socialist development, the modified capitalism school believes that cooperatives are much a part of capitalism and that coops are the ‘epitome of the capitalist ideal.’ Coops lead the way to a more service-oriented capitalism and enable small producers to become capitalists in the better sense of the term. This school emerged in the 1930s in the agricultural sector of the northern American prairies. Proponents of this view believe that coops provides a decentralizing influence to capitalism and curbs its excesses but, in context of the Cold War, they cannot be on the side of those wishing to destroy it, the communists for example.

There are other orientations that consider cooperatives as an important if not the major or crucial components of their vision. ‘New age’ cooperativism believes that the core problem of contemporary living is the sheer size of social organization. Liberal capitalism, the welfare state and marxism all lead to uncaring, monolithic organizations. The ideal are smaller, humanistic, life-oriented organizations such as cooperatives. (New age thinkers include Paul Ekins, Mark Satin, Ivan Illich, Schumacker and McRobie. This grew out of the protest movement of the 1960s and the oil shock of the 1970s.)

Perhaps also included in the new wave coops are those with environmental orientation. The environmentalist and pacifist Seikatsu consumers’ movement of Japan for example uses the cooperative form as the organizational model for a more sustainable production, consumption and managing of resources. Feminists also adopt the coop model as a form that is more attuned to caring and sharing modes of living as an ideal of the feminist movement.

Lastly, there is also the religious orientation. The parish churches was instrumental in organizing credit and consumers coops that became the more successful wing of the coop movement. Even the El Shaddai and INC are said to also operate mutual economic help among members.

In reality, cooperative movements may have mixture of various ideological orientations. Or they may choose not to express their goals in ideological or visionary terms at all.

The civil society orientation

In Citizens: Strengthening Global Civil Society published by Civicus (1994), the “civil society” concept is based on a set of values by which a third sector (i.e. civil society organizations) distinguishes itself from a first sector (i.e. the state) and a second sector (i.e. the market) which are all assumed to interact in the present-day setting. In this theory, sectoral distinction is indicated generally by the source of action and its purposive direction. Hence, civil society undertakes “private action for the public good” in contrast to the state practice of doing “public action for the public good” and the tendency of the market sector to perform “private action for the private good.”

In history and actual practice, cooperatives are put up by members primarily seeking to achieve a common good for and among themselves (making it a candidate for the second sector). As the cooperative concept gained acceptance in societies, it has also been the tendency of states to either introduce the general rules of operations of cooperative movements through legislated policies and/or directly intervene in local cooperative development through executive programs (making them close to or part to the first sector). Civil society literature however cite cooperative experiences in promoting the third sector model albeit short of concluding that cooperative movements do indeed qualify as agents of civil society.

However, the relevance of the civil society concept is that there should be entities that are non-state (or not even attempting to take over the government), that are non-market, but are primarily out to do something beyond the market mechanism and the mandatory state mechanism. Within civil society resources and decisions are shared and distributed according to the values of solidarity and sharing, voluntary action, caring and mutual help, and cooperation — in short the civic orientation. These are the values and principles that are at the core of the cooperative identity. Conversely, the existence of cooperatives is an indicator of the civic tradition.

Elements of cooperative politics

What we are trying to point out is that cooperative politics must realize that it shares a lot of common ground with the rest of civil society, beyond sectoral identities and ideological orientations.

If we try to put up a party, we don’t expect to harness only the votes of our direct constituents or members, even if we have 4.5 million people to draw these votes from. For all we know our immediate relatives may not even vote for us. Our direct constituency is of course limited but our stakeholders among civic-minded people go much beyond that.

The world’s best cooperative traditions (Rochdale, Raffeisen, Desjardins, etc.) grew out of the social and popular movements and uniquely grounded to culture which perhaps explain their relative success. Cooperativism has a historic and natural affinity to the various popular and social movements: peasants, labor, consumers movements etc. In the Philippines however, the situation is different. We have a cleavage with the so-called NGO/PO movement, believing it to be a hybrid not worthy of our fraternal affection. If ever, we relate to a very narrow section of the NGO/PO movement.

At a time when the ICA itself calls for cooperatives to forge strategic alliances beyond their natural friends, Philippine coops apparently have yet to forge meaningful ties with various other popular and social movements that are also desperately trying to do something to change society in favor of the poor. Building strategic alliances with the social sectors and developing friends beyond our mass base must be an important element of cooperative politics.

Perhaps the dangers and pitfalls of traditional Philippine politics, its guns, goons and gold, are already well appreciated by cooperatives. Patronage and money politics is anathema to the cooperative notion of horizontal relationship among voluntary equals. At this point, what we need to be forewarned about is the pitfall of the traditional ideological party. We don’t seem to have a preponderance of ideological parties competing in the electoral arena here. But what we need to ensure is that if we reject traditional politics of the elite, we do not necessarily adopt the ways of the other extreme.

The old ideological parties pose their alternative in visionary terms. Sometimes they become so agitated about how completely radical their vision is from the status quo that only the most devoted militant could understand what they’re talking about. To win adherents, they have to goad and push and demand complete loyalty after that.
Cooperative politics must be light touch but must appeal to the best side of the rational mind and sensitivities. Rather than promising a new order to replace the old, cooperative politics and ideology must present itself as a set of practical values and norms that altogether constitute an organizing principle for our social and political institutions in the here and now. Rather than being a vehicle for the interests of a particular class or sector, cooperative politics must be identified as a consistent party for equality, justice, transparency and solidarity that are in the interest of all. These are values that are liveable today despite the adverse social context. Not just as something to look forward to only in the future.

Cooperatives and Civil Society: Preparing for Globalization

2007-11-22T14:06:00.000+08:00

Cooperatives and Civil Society: Preparing for Globalization

Third Sector Views Issue No. 3 June 1996 (a publication of the Cooperative Foundation Philippines, Inc.)

Civil society must rapidly facilitate the formation of an alternative economic system that will serve the needs of the poor or those that are marginalized by the effects of economic globalization.

The existence of numerous cooperatives, community associations, trade unions and sectoral organizations, NGOs and social movements in the Philippines is now being regarded as evidence to the strength and vibrancy of the country's civic life. Civil society in the country is said to be much stronger than in many Asian countries where the impulse of citizens to self-organize may be restricted. The proliferation of organizations for cooperation and mutual help is considered as an index of the development of social capital. Thus, the strength of civic associational life has encouraged sober hopes that Philippine society will eventually live up to its potential in overcoming underdevelopment and social inequalities.

Cooperatives and civil society, however, must face up to new challenges brought about by rapid global changes. There has been much optimism about the prospects of unprecedented economic growth in view of the APEC summit in Subic this November. Optimism about the country’s prospects rests on the fact that it is in the midst of the fastest growing region in the world. To take advantage of the Asia-Pacific boom, government is undertaking a massive restructuring of the economy towards liberalization and taking an active part in building APEC as a free trade area.

Globalization is not something that is yet forthcoming. Globalization has been sweeping the world. Rapid advances in information and communications technology have made global business networking possible, offering business actors with great flexibility in tapping capital, materials, technologies and markets anywhere in the world. Multinational corporations and multinational finance are leading this process, with the largest bulk of global trade actually being made between subsidiaries of the same multinational corporations. It is also said that in any 24-hour period, some US$350 billion circulate around the world via computers in speculative trade in financial currencies, without connection to the actual exchange of trade and services.

The new global economy also rests on the pillar of liberalized trade and investment policies. On the assumption that the creation of wealth and generation of employment can be rapidly facilitated with liberalized trade and investment, economies are gearing to open up wider than before and countries put pressures on one another to open up their economies.

Despite the bullish economic forecasts, however, the prospects of a developmental and environmental crisis have not significantly diminished. Economic growth as currently unfolding is creating islands of industrial growth amidst a wide sea of stunted development. The powerful forces of economic globalization exclude more and more people from mainstream economic development, especially those belonging to the bottom layers of society, those without land, those with little education, and those discriminated against because of their gender. Economic growth is also being paid for by depleted natural resource base and polluted air, waters and soil and these are all most likely to continue despite more growth and even as a direct result of growth.

The UNDP reports in 1996 that despite the dramatic surge in economic growth in a few countries, 1.6 billion people were left behind and worse off than they were 15 years ago. Likewise, 89 countries are worse off economically than they were 10 years ago. The very rich are getting richer. The assets of the world’s 358 billionaires have reportedly exceeded the combined annual incomes of countries accounting nearly half of the world’s people. UNDP calls this “ruthless growth.” Despite the triumphal march of the neoliberal economic model worldwide, global inequalities are worsening.

Even in terms of sustaining growth in the usual sense, there seems to be little to be enthusiastic about the country's plunge in APEC. The Philippines remains as a net importer, with exports generally consisting of low value added products such as semi-processed materials, garments and electronics. It appears that the Philippine trade strategy has been based on the interests of narrow sectors such as the sugar planters and garments producers that are too dependent on their relationship with the US. For instance, the sugar industry live and die based on the US imposed quota. This is the reason why productivity in sugar is the same as 100 years ago.

We also can not pin our hopes on our supposed comparative advantage in labor export. Remittances from OCWs constitute about 30 per cent of GNP. Surely this is the single most important source of income that is keeping the economy afloat. We should also take into account, however, that our neighbors such as China, India, Pakistan and Vietnam have huge labor surpluses and are all starting to have a more open and outward orientation.

Developing trade competitiveness of the Philippines requires a strong government that is able to negotiate and leverage in behalf of the national interest. There must be an industrial policy that uses the right incentive system to encourage local industries to produce high-value-added goods. But this will be determined by how well we keep our house in order. We cannot be competitive if most of our people have little purchasing power. The size of a country's domestic market is one of the most important bargaining chips the country could use in international trade negotiations. We can not bargain effectively if our domestic market remains undeveloped due to the stalled implementation of redistributive asset reform (like agrarian reform) and poor agricultural productivity.

In the face of these trends, the relevance of organization, capacity-building and mobilization of the affected sectors for collective economic, political and social action remains undiminished. Cooperative organization and action remains as the most effective mechanism to defend the poor and vulnerable sectors against the negative effects of economic globalization.

The cooperative movement is currently embodied in the Philippines by over 37,000 formally registered cooperatives. Only 4,516 were registered before R.A. 6938 was enacted in 1990. The rest were registered after the enactment of the law. We have therefore a very young movement. About 65 per cent of the coops are agricultural multipurpose cooperatives, although the share in terms of assets of industrial and service coops is increasing. The rest are credit, consumer, service, producer, marketing and non-agricultural multipurpose cooperatives. In general, any group of persons that is consistent with the ILO definition and operating according to the ‘cooperative principles’ as defined by the International Cooperative Alliance (ICA) and the law may be considered as a cooperative. Under R.A. 6938 only registered cooperatives may be called cooperatives. If we include countless other grassroots and popular associations engaged in socioeconomic solidarity and mutual help, the cooperative sector in its generic sense is actually much larger.

By adopting cooperation as a social practice and hoping to propagate it, cooperatives have created a movement among themselves, even without central control or formal unity. By identifying themselves as cooperatives and by wanting to be recognized as such, they have bound themselves to certain norms, values and principles by which they can be judged and tested, even if these norms, values and principles themselves are dynamic and changing. It is this shared identity that will tide cooperatives over whatever threats the changing economic setting may pose.

Much has yet to be done, however, in terms of developing viable and sustainable cooperatives that can increase the leverage of the poor in accessing markets, tapping financing and resources, and influencing decision-making. While the cooperative movement has managed to dramatically increase its membership base over the past five years, there has been little achievements so far in terms of integrating and mobilizing its collective economic potentials for greater competitiveness in the national economy. Functional linkages that take advantage of combining the market capacity of cooperatives are lacking. There is also a lack of mutually beneficial linkages between the cooperative sector and other popular and social movements. However, things are changing. National cooperative organizations are increasingly pursuing greater unity and cooperation in view of current economic trends.

The idea of developing competitiveness for organizations that are supposedly based on the values of cooperation may seem odd. But there is no denying the fact that cooperatives, in order to be viable and effective in serving its constituents, ought to be efficient and innovative, which are the hallmarks of competitiveness in the usual business sense. The distinction is that in the cooperative setting this could be achieved through greater cooperation or what has come to be called in business parlance as strategic alliances.

The task, in our view, is for the cooperative movement and the rest of civil society to rapidly facilitate the formation of an alternative economic system that will serve the needs of the poor or those that are marginalized by the effects of economic globalization. We envision an associative economic sector composed of cooperatives and other membership organizations primarily of people of limited means. By establishing horizontal and vertical economic linkages between these people’s organizations, we can build an economy based on our own values of cooperation and mutual help, self-reliance and participation, trust and sharing and non-exploitation.

Such will be the basis for strengthening the people’s claim-making power over resources and public policies, bargaining power in the market and generally, countervailing power vis-à-vis the more established power centers and market players.
The commercial success of private businesses has been made possible by business networking. Thus, they have been able to achieve competitiveness through cooperation. This offers some lessons. Organizations of civil society, cooperatives, NGOs, the labor unions and social movements must forge functional economic ties and networks of cooperation in order for them to become a significant player in the life of the country.

The common efforts of cooperatives and other civil society organizations can focus initially on areas where there are chances of success. In fact there are certain areas where cooperatives enjoy relative visibility and therefore it will be of great importance to determine how cooperatives may be strategically positioned for leadership and competitiveness in these areas. In the utilities sector, the degree of presence of cooperatives is underscored by the existence of large national transport service federations and a national rural electric cooperative association. In the field of insurance, there is a successful national cooperative insurance system. Meanwhile, the cooperative banking system has proven itself to be a significant alternative to private commercial banking and usury in the countryside while the credit union movement is in the forefront of current attempts to establish a national cooperative apex bank.

While cooperatives in these areas have yet to measure up to the market potential, their achievements are already a great step ahead of certain areas where attempts to establish national cooperative systems failed, as in the case of agricultural marketing. The development of the agricultural cooperative sector since the turn of the century has been marked by islands of inspiring success stories amidst a sea of colossal failures. Despite the existence of consumer cooperatives, the cooperative movement is still very weak in the consumer retail sector while a cooperative sector in manufacturing and industry is virtually nonexistent. But these areas, which pertain to food security, consumer welfare and industry, can be the subject of joint planning too by the NGOs, the social movements and cooperatives. Developing strategic alliances among cooperatives and with such compatible organizations must be pursued systematically in order to develop the competitive advantage of the associative sector in various areas of the economy.

The situation nowadays demands innovative strategies for harnessing the potential of the people for mutual help and cooperation. The spirit of civic responsibility developed through decades of social and political action by the NGO-PO community must be translated into networks of economically and socially beneficial cooperation. In addition to the various efforts to contend with the schemes of transnational capital, as manifested in the APEC process, building the economy of the popular sector should be given a prime importance.

The Cooperative Business Form and Types

2007-07-16T17:01:00.000+08:00

The Cooperative Code defines a cooperative as “a duly registered association of persons, with a common bond of interest, who have voluntarily joined together to achieve a lawful common social or economic end, making equitable contributions to the capital required and accepting a fair share of the risks and benefits of the undertaking in accordance with universally accepted cooperative principles.” (Section 3)

Despite some divergences, co-operatives are conceived to follow the internationally accepted co-operative principles articulated in the Statement on the Co-operative Identity, a basic document that is used to distinguish cooperatives from other business forms, which was adopted by the Centennial Congress of International Co-operative Alliance (ICA) in 1995. This document defines a co-op as “autonomous association of persons united voluntarily to meet their common economic and social needs and aspirations through a jointly-owned and democratically-controlled enterprise.”

In general, cooperatives are governed on a “one member, one vote” basis. Co-ops thus combines the equal control shared by members of partnerships with the legal personality conferred on corporations. Membership is open: anyone who satisfies certain non-discriminatory conditions may join. Economic benefits are distributed proportionally according to each member's level of economic participation. Depending on the type or purpose for which the co-op is organized, a member receives higher dividends, or patronage refunds, the more the member borrows funds from, or purchase goods from, or delivers supplies to, the co-op, aside from the interest on capital shares. Interest paid on share capital is limited. Some part of the co-operative's surplus is devoted to cooperative education and training. Co-operatives cooperate among themselves. Lastly, co-ops are guided by concern for community. If a firm is consistent with these principles, then its success depends on operating an economically viable and democratically managed business in which the members have the knowledge and capacity to participate in the decision-making process and ultimate control of the co-operative. See Annex for the full text of the Statement on the Cooperative Identity.

There are at least four different forms of business organization: (1) single proprietorships, in which the proprietor owns 100% of the capital; (2) partnerships, in which ownership and the capital required is shared between two to three partners; (3) corporations, in which ownership is shared by a minimum of five stockholders, each of whom must own a minimum of one share of stock (which means that four incorporators may hold just one share of stock each and the fifth incorporator holding all the rest of the shares of stock.) In contrast, ownership of a cooperative is shared by a minimum of 15 members or shareholders, provided that not one member may own more than 20% of the capital.

A cooperative differs fundamentally from other firms that are owned and controlled by the individuals who invested the capital of the firm. Control of a cooperative is based on the member’s personal rights derived from his/her patronage of the service of the cooperative aside from his/her property rights derived from his/her capital contribution. As owners of the firm, they have another right: to appropriate the residual income of the firm.

Cooperatives may be generally classified as either consumer or producer cooperatives. Classification is also often based on their function or type of economic activity. The Cooperative Code lists 6 types of cooperatives: credit, consumer, producers, service, marketing, and multipurpose cooperatives. The typology is based on the kind of activity the co-op is undertaking. Thus, a credit co-op provides credit services while a consumer co-op is engaged in the distribution of consumer goods, and so on. However, the type of activity a producer co-op is supposed to be undertaking is not specific, as it is defined simply as “one that undertakes joint product whether agricultural or industrial,” and especially when we can think of any co-op as undertaking the production of some goods or services. Service co-ops are defined as those that provide particular services identified in the Code as “medical and dental care, hospitalization, transportation, insurance, housing, labor, electric light and power, communication and other services.” The Code further contains special provisions on public service co-ops. The typology therefore is specific in some types and yet too general in others.

The type into which a co-op is organized is essential to the co-op’s business and organizational strategy. It must be able to be quite sure about its primary stakeholder structure and be clear about it before its own members, business partners, government regulators, and other stakeholders.

An alternative or adjusted typology is herein proposed, one which follows Henry Hansmann’s theoretical models of firm ownership. In this typology, business forms are determined by the primary stakeholder group controlling the firm and the nature of its transaction with the firm. Co-op type is based on the nature of transactions the co-op owners have with their co-op. In other words, the type of co-op is determined by who, or what set of stakeholders, are cooperating in the first place. Figure 1 shows the basic stakeholder groups of a cooperative firm, or of any firm for that matter. A firm would have its suppliers or capital (the investors), the suppliers of raw material goods used by the firm to produce its own output (the suppliers), and the suppliers of labor (the workers, including management). The other group of stakeholders includes the users of the output or product of the firm (the customers).

In a conventional firm, the suppliers of investment capital are the firm owners in their capacity as suppliers of capital. In the cooperative business form, ownership is assigned to other stakeholder groups. Thus, a co-op is owned by the customers themselves, or by the suppliers themselves, or by the workers themselves, who at the same may or may not also supply the capital to the firm.

A user cooperative is one which is owned by the users or consumers of the products and services produced by the cooperative, or one the members of which are at the same time the market for the co-op. It is owned by the users in their capacity as users. Thus, credit co-ops, consumer co-ops, water service co-ops, electric co-ops, the mutual insurance co-ops and other co-ops whose users are at the same time the owners are all users’ cooperative. User’s cooperatives are actually the more traditional and mainstream cooperative form.

The actual producers of the products of these services are someone else with which the user co-op has a contractual relationship, such as the staff of credit co-ops, suppliers of consumer goods, or suppliers of water and power. The purpose of user co-ops is to realize economies of scale in bulk procurement and therefore to reduce the cost of goods for the consumers. In principle, consumers join together to combine their purchase transactions to realize cost discounts and other advantages that are afforded to large buyers. The users themselves may or may not supply the capital required – usually they do as part of their membership obligations – but their control of the co-op is assigned to them in their capacity as users rather than as source of capital.

Users cooperatives are organized as such because that is the ownership set-up that will most minimize the costs that the firm has to face (according to Hansmann, they face the least ownership and market contracting costs). For instance, water supply co-ops and electric distribution co-ops are organized as user cooperatives since water and electricity provisions are natural monopolies due to the nature of technology for producing these services. Under a monopoly, the firm has the tendency to restrict output in order to maximize the firm’s profits. There is therefore a basis for government intervention either to regulate the prices of the monopoly firm’s output to approximate the competitive level or to undertake the operation of the water or electric utility. Regulation is costly, while government ownership has its own associated agency problems. Given these alternatives, best option is for the market of the firm product itself to assume ownership under a cooperative set-up.

In other public services, there would seem to be no compelling theoretical reasons for user ownership. For instance, slaughterhouses, ice storage plants, transport services, and public markets can be owned and operated by other set of stakeholders, such as the producers or workers in such services without the need to resort to price regulation to approach competitive levels since there would be many others producers that can supply these services. A public market can be owned exclusively by vendors/stallholders without sacrificing efficiency (in fact the most efficient public markets are owned by corporations or single proprietors).

User ownership may be justified in rural electricity, in solid waste management as well as in other services that have a monopoly by virtue of the high sunk cost, the relative smallness of the market, implying a high cost of duplicating delivery mechanisms and correspondingly low exit options for consumers of the service. If exit is not easy voice needs to be exercised. In the case of other services e.g., public markets – where exit is not always possible – such as in rural areas – then maybe voice in the form of user ownership of aspects of an operation may be important. In public markets (consumer and vendor) voice is important because local officials are not profit or welfare maximizing, they have multiple objectives. The market also fails or is incomplete in other respects. For instance, in the case of solid waste management there is a need for downstream collection and then processing of waste. In the case of agriculture processing – see Hayami – there are also common facilities that can serve different producers (economics of clustering). The regulation need not always be about protecting the consumers, but making sure that win-win strategies indeed happen. I don’t know if consumer/producer cooperatives can substitute for the need for regulation in such instances.

Take the case of transport service co-ops, a distinct class of the cooperative tradition in the Philippines. The organization of transport service co-ops is formerly regulated by the Executive Order No. 898 issued in 1983. EO No. 898 changed the name of the Committee on Transportation Cooperatives created under Memorandum Order No. 395 issued in 1973 into the Office of Transport Cooperatives (OTC). It also transferred all the powers and functions of the Bureau of Cooperatives Development over transportation co-ops to OTC. Since the passage of the Cooperative Code (RA No. 6938) in 1990, transportation co-ops are governed by the “Special Provisions on Public Service Cooperatives” under Chapter XII of the Code. The Cooperative Code classifies all co-ops organized under the provisions of EO No. 898 as public service cooperatives.

Article 97(2) of the Code provides that the articles of cooperation and by-laws of a public service co-op must provide for the membership of the users and/or producers of the service of such cooperatives. This provision must be reviewed. There seem to be no compelling theoretical and practical basis to allow only for the membership of users, or of users together with the producers, in such public services such as public markets, slaughterhouses, and even transport services. These services can be owned and operated by producers or workers only.

The registered transport service co-ops (involving jeepneys, buses or taxis) are usually composed of the operators, the drivers, and support workers such as mechanics, although the dominant stakeholders are really the operators who hire drivers and mechanics. Because of this, transport service co-ops can be classified as producers’ co-ops, since they are composed of the producers of the transport service. At the same time, they also provide producer services to the producer-members, including franchise management, providential credit as well as loans for drivers to acquire their own vehicles, vehicle insurance, third party liability insurance, motor vehicle supply, gas and oil, and others. The customers of these co-ops are nonmembers, the riding public (as the customers of a farmers’ marketing co-op are the consuming public). There should be no compulsion that transport service co-ops should include users (the riding public) in its membership, as suggested by Article 97(2) of the Code.

There are some assertions that the problems of the transport co-ops (they are generally financially small) are due to the fact that the owners are the operators rather than the consumers. The premise of this assertion is that genuine co-ops must deal only with members. This is false since producer co-ops deal with the general market while user co-ops deal with members only. Existing transport co-ops are composed of operators (and drivers) since there is no compelling economic rationale for commuters (users) to form their own transport service co-ops, as transport services can be competitively provided by many firms.

There are other services that could be supplied by many providers and yet user ownership is still the best ownership option. It is costly for financial firms to cater to the more numerous smaller savers and borrowers. However, lending costs can be mitigated if borrowers themselves have a financial stake in the financial firm and if they possess enough information, trust and bonding with their peer borrowers that allow for less costly monitoring and enforcement of loan contracts. This is in fact the case in savings-and-credit co-ops, which are able to provide services to small savers and borrowers, who are their owners, better than banks and informal lenders.

Co-ops owned by suppliers of inputs are more unconventional. Cooperatives owned by suppliers of either capital, labor or raw materials inputs can be generally classified as producer co-ops. They produce goods and services for the outside market. A producer can be an owner, operator, or holder of any enterprise producing goods and services for the market. A producer can also either be a holder who directly contributes most of the labor inputs to the enterprise (such as farmer-tillers, craftsmen, and micro-entrepreneurs) or one who primarily manages his holdings and hires workers. The most common type of producer co-ops is the marketing co-op, which aggregates and markets the products of its members for the best price in the market. For example, vegetable and fruit farmers supply or deliver their products to the cooperative to undertake collective marketing in their behalf. Marketing coops therefore are co-ops owned by suppliers of the goods being marketed.

In general, co-ops owned by the suppliers of raw materials inputs to the co-op in their capacity as suppliers can be called suppliers’ co-ops. These are actually the kinds of co-ops that are usually referred to as producers’ co-ops. The most common examples of this type are the agricultural marketing and processing co-ops owned by member-farmers, such as the dairy co-ops in Denmark or India (and there dairy co-ops too in the Philippines) to which the member-farmers supply milk for processing into various dairy products for sale in the market. A farmers’ co-op that receives palay produce from member-farmers for milling and sale to the market is another example. These agricultural co-ops, owned by farmers who deliver their produce as inputs to the firm, usually also provide producer services for their members, such as the bulk procurement of farm supplies, technology, and equipment as well as the provision of credit.

Non-agricultural producers can also form suppliers’ co-ops. This type of co-op is relevant to small and numerous producers of bags and footwear, leather crafts, trinkets, furniture and home decors, processed food including sweets and delicacies, and other small and home-based industries. The industries in these products are composed mostly of small proprietors that employ few workers. They face encroachments from both the high-technology competitors and the cheap labor competitors from abroad. Due to trade liberalization, some of these once-thriving industries in the provinces are facing extinction. Supplier’s co-ops of such proprietors that collectively market their products can bring them back to a competitive footing here and abroad. Such co-ops may also provide other producer services for the member-entrepreneurs, such as procurement of supplies, technology, and product quality standards for the member-producers. In Korea, an example of co-ops of this type is the KIMICO, which markets and distributes agricultural machineries produced by its members who are the manufacturers.

Non-agricultural suppliers’ producer co-ops must be too few to count and there is no educational and promotions program for this type of co-op. One possible reason is the view that “co-ops are for the poor” and that proprietors and small entrepreneurs (larger than micro) are not supposed to benefit from the provisions of the Cooperative Code. This is false. Producer co-ops can help small entrepreneurs become competitive in the marketplace and create jobs. Those concerned with cooperative development must promote producer co-ops among the small entrepreneurs.

Another type of producer co-op would be one in which the producers use the bulk procurement services of the co-op. The producers directly deal with the outside market but source their merchandise and inputs from the co-op that secure the input goods at the least possible cost in behalf of their members. One community co-op leader observed that instead of organizing consumer-owned co-op stores, a co-op that performs collective procurement in behalf of sari-sari store owners (who are producers of retail service) may enjoy more support. School canteens operated by teachers’ co-ops under the Federation of Teachers’ Cooperatives (FTC) have in fact organized a central procurement system that negotiates for better terms with food manufacturers

Workers’ co-ops are producer co-ops whose owners are the suppliers of labor inputs or workers in their capacity as suppliers of labor inputs. Workers co-ops are popular in the US (particularly in the plywood industry), in Italy, and in Spain (which has the Mondragon group of cooperatives owned by workers). More on this are found in the discussion in subsequent sections.

How about co-ops whose owners are the suppliers of capital? First let us clarify that in all the preceding types of co-ops, the member-customers, or the member-suppliers, or the member-workers also provide capital shares to the co-op. However, they differ in nature and function due to the different capacities in which their members own them. A workers’ co-op is owned by the workers of the co-op firm or plant in their capacity as workers. A farmers’ suppliers’ co-op is owned by the farmer-suppliers/farmer-members in their capacity as suppliers. Firms owned by the suppliers/owners of capital in their capacity as suppliers/owners of capital can be called as an “investor co-op.” There is no such thing actually under the cooperative law, since such co-op would simply be the conventional investor-owned firm to which the Corporation Code applies.

However, this framework has implications for co-operative and business regulatory laws: There has to be a unification of business laws covering co-ops, corporations and other business forms. A cooperative should also be able to own and control a corporation, as supplier of capital. It is allowable under existing laws for a cooperative to invest in and operate businesses other than its primary business. Thus, some cooperatives operate stores, travel and tours service, funeral care, and other services. However, it is not clear if a cooperative may own and control a corporation that involves other investors. A co-op should be able to take advantage of the same powers and privileges afforded to private firms under the Corporation Code.

Labor Contracting and Manpower Services Co-ops

2006-09-15T18:19:00.000+08:00

Labor Contracting and Manpower Services Co-ops
and the Nature of Workers' Cooperatives:
An Initial Analysis

by Erik Villanueva

(Note: I'm improving this article. Reactions to this article are most welcome. Please post here at the koopforum e-group or directly to erikvillanueva@yahoo.com)

A comparative rapid appraisal recently conducted by the University of the Philippines-Mindanao revealed high incidence of cheap labor, rampant employment of minors, poor working conditions, and exposure to chemicals in three major banana farms in Davao City. This has prompted the DOLE Regional Office to field labor inspectors in various plantation sites to validate the results of the study, as a step before the issuance of compliance orders to plantation firms that would be found to be violating labor laws.

One of main findings presented in the study was the non-compliance of prescribed wages among banana plantations on contracting services through the grower scheme. Farmers are paid P150 to P185 a day instead of the regular daily minimum wage of P214 for plantation workers. The study also noted the creation of cooperatives for labor contracting. The DOLE Regional Office has affirmed that even if the contractors are employing laborers, they should be treated as employees and must follow labor standards.

In recent years, many new co-ops were organized and registered with the Cooperative Development Authority (CDA) to perform manpower services to meet the outsourcing requirements of companies, including corporate farms or plantations, food processing companies, food chains, and various others. They are registered as manpower services co-ops. Examples of these co-ops include the Staff Search Asia Co-op, Asia Pro Co-op, Pro-Skills Co-op, Fast Track Co-op, and many others. In the absence of a clear cut definition of a workers’ co-op in the law, most of these co-ops would classify themselves as workers’ co-ops. The rapid increase in the number of cooperatives involved in the manpower services business has been triggered by the changes in the labor market and in the policy environment for manpower outsourcing business.

The UP-Mindanao study has once again brought attention to the issue of whether some co-ops supplying manpower services are in fact engaged in labor-only contracting. Another issue is whether manpower services co-ops that have supposedly organized themselves as workers’ co-ops may still fall under the regulatory jurisdiction of Department of Labor and Employment.

This is not a trivial issue, both domestically and globally. There is actually a dispute between the trade unions and workers’ cooperatives in Italy over the application of labor laws. In brief, Italian trade unions wanted to apply industry-wide agreements on the total annual wage even to the “working partners” (or the member owners) of cooperative firms. The co-ops believe that as firms controlled by the workers themselves, they should be allowed more flexibility in setting their own wage rates. The dispute over the definition of “working partner” was made more acute by a court judgment in 1995 that for working partners in cooperatives, entrepreneurial traits override those typical of workers employed in non-cooperative firms. This has been opposed by the Italian unions.

Furthermore, in the US, it has been noted that workers’ co-ops provide greater flexibility for job retention during recessions. Labor is considered a fixed rather than a variable cost over the short run in co-operatives although labor costs can be manipulated over the long run. Members can decide to reduce hours or wages and spread the work among them to provide job security. This has been observed empirically in the study of plywood plants owned and operated by workers co-ops. This kind of flexibility would be something private employers can only dream of, and is almost impossible under existing Philippine labor laws.

Moreover, one of the largest co-ops in the manpower outsourcing business in the Philippines, Asia Pro, has actually taken the position that it should not be covered by labor regulations because as a workers’ co-op, there is no employee-employer relationship between it and its members.

Further complicating the situation is the fact that there is no mention of workers’ cooperatives in Republic Act No. 6938 or the Cooperative Code, the general law regulating cooperatives in the Philippines. The nearest type of cooperative under which workers’ co-ops would fall is the producer co-op.

The Existing Regulatory Context of Manpower Services

Firms or agencies that provide manpower outsourcing or job contracting services are regulated by the Department of Labor and employment under Department Order No. 18, which was issued on February 21, 2002 and took effect on March 16, 2002.

Job contract agreement under the job contracting scheme is a new manning arrangement allowed under the department order. It permit business entity particularly manufacturing companies to sub-contract specific job, work, services or project to a legitimate job contractor duly registered by the DOLE.

DO No. 18 provides regulations for contracting or sub-contracting arrangements. Accordingly, the order has been promulgated to enhance employment promotion; promote observance of the rights of employees to just and human conditions of work, security of tenure, self-organization and collective bargaining; and enforce the prohibition on labor-only contracting.

The department order reaffirms that contractual employees are entitled to the rights and privileges enjoyed by regular employees under the law. The rules affirmed the rights of workers to “safe and healthful working conditions, separation benefits, overtime, 13th month pay, rest leaves and other standards; social security and welfare, self-organization, collective bargaining and peaceful action; and security of tenure.” It also affirms the power of DOLE to regulate, for the purpose of promoting and reinforcing employment, the labor contracting and subcontracting arrangements allowed under the law.

The new rules expressly prohibit “labor-only contracting” or the practice in which the contractor or subcontractor recruits or places workers to perform a job, work or service “directly related to the main business of the principal.” Section 7 of DO 18-02 would consider, under contracting or subcontracting arrangements, the contractor or subcontractor as the employer of the contractual employee “for the purposes of enforcing the provisions of the Labor Code and other social legislation.” Under the department order, the principal shall also be liable with the contractor in the event of any violation of the Labor Code, including the failure to pay wages. Under Section 7, the principal would be deemed the employer of the contractual employee where there is labor-only contracting, or where the contracting arrangement falls within the provisions provided under Section 6.

DO No. 18 supersedes the old rules under DO No. 10 of 1997, which was subject to criticism by some companies due to its stringent rules on contracting arrangements. The old rules listed certain activities as permissible contracting arrangements. The new department order does not contain a list of permissible contracting arrangements anymore and simply maintains the prohibitions in contracting arrangements and safeguards. The omission of the list of permissible activities gives both the DOLE and the industry players more flexibility, although some local service contractors have expressed some reservations over such deletions.

Observers of the manpower services industry have noted that D.O. No. 18-02 appears to recognize the need for local companies to explore alternative work-arrangements in order to compete globally, particularly the outsourcing of certain activities. Under the old rules, a company was prohibited from contracting out a service if it displaced the company’s regular workers. This prohibition was made without qualification and it tied the hands of most companies if they need to downsize their organizations to ensure the viability of the business. In the new order, the DOLE maintained the prohibition of contracting-out of services which may lead to the displacement of regular workers but with certain qualifications. The prohibition now reads: “contracting-out of a job, work or service when not done in good faith and not justified by the exigencies of business and the same results in the termination of regular employees and reduction of hours or splitting of bargaining unit.”

With this development, the general prohibition in the old rules on contracting-out services resulting in a displacement of regular workers appears to have been tempered. Under the current order, it now appears that companies may outsource a service even if its regular workers are currently undertaking the activity. The company, however, would be required to justify that such a contracting arrangement was done in good faith and demanded by the exigencies of the business. This development balances the interests of labor and management by protecting the regular workforce without sacrificing the viability of a company.

The current order also substantially decreased the possible liabilities of a company involved in a contracting arrangement. Under the old rules, a company may have been liable along with a contractor for violation of registration requirements by the contractor to the DOLE. Fortunately, the DOLE removed this unnecessary burden on companies with the current order. The current order now limits the possible solitary liability of a company with its contractor to only two instances: (1) violation of the Labor Code, and (2) non-payment of wages.

Despite the criticism raised by some sectors against the new department order, it can be seen as a positive step. With the present economic climate, companies must be allowed some flexibility in right-sizing their organizations in order to survive. More importantly, in the sensitive area of labor legislation, countries must always maintain a healthy balance between the interests of labor and management. Through the department order, the government aims to promote a more liberal policy on outsourcing without sacrificing the interests of labor.

Manpower Service Co-ops Seek Exemption from DO 18

Last November, the CDA called a consultation meeting with co-ops in the manpower outsourcing business, following a request from DOLE for CDA to issue an opinion regarding the position taken by some manpower services co-ops that they should not be covered by rules and regulations issued by DOLE.

Some of the co-ops in this business have argued that DOLE is not supposed to regulate them because of their nature as co-ops. They argued that:

1. They are co-ops owned by their member-workers
2. They provide job placement services to their member-workers
3. Their members are self-employed individuals who use the services of the co-op
4. They are not the employing firm for the workers thus placed
5. There is no employee-employer relationship between the co-op and the co-op member.

On the basis of these arguments, leaders of co-ops engaged in manpower services have requested the Cooperative Development Authority (CDA) to formulate a regulatory framework for this class of co-ops. CDA has responded by requesting a survey of employment and personnel policies, capital share structure, management, and other operational practices of co-ops in the manpower services business.

There is a need to compare the declared operational characteristics of manpower services co-ops against the conventional understanding of workers’ co-ops or labor-managed co-ops as found in mainstream economic and business literature, the latter being based on the long standing practices worldwide.

Characteristics of Workers’ Co-ops

A workers’ co-operative is a firm owned and controlled by its workers. Despite some divergences, workers co-operatives are conceived to follow the internationally accepted co-operative principles articulated by the International Co-operative Alliance (ICA).

What are these co-operative principles? First, membership is open and voluntary. Second, there is democratic control at all levels of the enterprise based on one member, one vote. Third, interest paid on share capital is limited. Fourth, workers share in any profits, usually in proportion to their work contribution. Fifth, some part of the co-operative's profits is devoted to worker education. And sixth, co-operatives cooperate among themselves. If a workers' co-operative is consistent with these principles, then its success depends on operating an economically viable and democratically managed business in which workers have the knowledge and capacity to participate in the decision-making process and ultimate control of the co-operative.

Like other co-operatives, a workers' co-operative differs fundamentally from a private firm, be it a corporation, a partnership, or a single proprietorship. Private firms are controlled by the capital owners who are the individuals who invested the capital of the firm. In this case the owners transact with the firm as suppliers of capital. In contrast, control of a workers' co-operative (or a labor-managed firm, as it is equivalently known), is based on workers’ personal rights derived from a worker’s labor contribution rather than on property rights derived from a capital contribution. As owners of the firm in their capacity as workers or employees, they have another right: to appropriate the residual income of the firm.

Co-operatives also differ from employee-owned firms, such as firms with an employee stock ownership plan (ESOP) in the United States and elsewhere. The membership right in an ESOP is based on share ownership and not on the functional role of labor in the company. ESOPs have been established primarily for tax advantages, without creating widespread employee ownership. Many ESOPs systematically have excluded lower- and middle-paid employees. Only a handful of ESOPs is more democratic, and gives workers full control of the firm and complies with the above definition of a worker co-operative.

Another important distinction is between workers' co-operatives and co-operatives of workers, such as savings-and-credit co-operatives and consumers' co-operatives whose members are workers in a given firm or locality. Many of such co-ops are among the most viable and successful in the Philippines. However, the nature of participation and control of workers as members in such co-ops is not as workers per se but as savers and borrowers or as consumers. Under the Co-operative Code (Republic Act 6938), co-ops are also categorized as institutional if membership is limited to employees of a given firm (as in a co-op of teachers in a school) or as occupational co-ops if membership shares a common occupation (as in a co-op of carpenters, or market vendors).

In the light of existing international experiences and standards, workers’ co-operatives are not to be confused with co-op services or facilities, such as credit co-ops and co-op stores, which are owned by workers in their capacity as consumers. For instance, the PLDT Employees Credit Co-operative, one of the largest and most successful co-ops of workers, is not a workers' co-operative in our definition, but an institution-based co-op of the savings-and-credit type.

Moreover, a co-op supplying manpower services may not be automatically classified as a workers’ co-ops. A group of people may agree to form a job contracting agency, hire staff to run the agency, and contract workers for job placements in the customer companies. If they agree to run the agency on a cooperative basis, that is, by assigning one vote per member regardless of the capital contribution, the agency becomes an investors’ producer co-op, which would be almost synonymous with a conventional company (following the analysis made by Yale economist Henry Hansmann on the relationship between firm ownership and efficiency). If they agree to divide all the staff functions in the agency all among themselves as owners, instead of hiring a staff, the agency would still fall short of being classified as a workers’ co-op. This is because DO No. 18-02 would consider the contractor or subcontractor as the employer of the contractual employees. If they are considered employees of the manpower agency and are not owners of that agency, then the agency cannot be classified as a workers’ co-op. In both cases, the contractual employees are inputs purchased by the owners (the investors in the first case, the agency staff in the second case) to deliver the final outputs (manpower services) to the market (the client companies).

In the light of the international experiences and standards (absent an expressed standard in the Cooperative Code) and in the light of the regulatory framework for manpower service agencies, we can conclude that the only way manpower services co-ops can classify as workers’ co-ops is when those who are contracted by the co-op for deployment, or to supply labor services, to a client company, are themselves owners of the co-op.

Following an analysis made by University of Zurich economist Ernst Fehr's: if the control and management of a firm is assigned exclusively to the workers in their role as workers on the basis of “one worker-one vote” principle, we call this firm a labor-managed firm or a worker co-op. Under this definition, labor-managed firms (LMF) are not characterized by the absence of hierarchy or by the prevalence of a particularly egalitarian income distribution or by the existence of collective property rights in the firm’s capital stock. These organizational and distributional arrangements are compatible with the definition of an LMF and may, therefore, be adopted by particular LMFs. The definition implies that the transformation of a capitalist firm (CF) into an LMF involves the redistribution of one important right, namely the ultimate right to determine the firm’s policy, from the capital owners (with voting rights) to the workers.

This means, for example, that if all capital owners of a firm happen to be also workers of that firm and the ultimate decision making power is vested in the workers in their role as capital owners, the enterprise is not labor-managed. The reason for this is that the one worker-one vote principle is not guaranteed because some workers may own more voting shares than the others and some workers may sell their voting shares to non-workers.

If the constitution of this firm rules out the possibility that non-worker hold voting shares and requires each worker to hold the same fraction of voting shares, it meets the definition of a pure LMF because the one worker-one vote rule is fulfilled.

Despite these distinctions, workers’ co-ops, or all co-ops for that matter, are not to be regarded as some sort of a half-way house between public firms and private firms. Co-operatives are owned and managed by private individuals, and should be considered as fully belonging to the private sector, except that they are governed and run differently. By implication, co-ops should be accorded all the rights and privileges given to the private capitalist firms.

Conversely, having the nature of a cooperative firm does not exempt a player in a particular industry from observing regulations that apply to the industry. Thus, all public transport franchises are regulated by the LTFRB, including those granted to transport service co-ops. All water co-ops would fall under the regulatory authority of the NWRB. It appears logical therefore, that all manpower outsourcing agencies, co-ops or not, must be covered by DOLE’s Department Order No. 18. This has been the position taken by the Business Enterprise and Cooperative Mentors, Inc. (BECMI), a consulting firm that has assisted retrenched and retiring workers in San Miguel, Jolibee, and other private firms in forming workers' co-ops as outsourcing partners of their former employers.

Is there a need for a new DOLE Order to cover only manpower service co-ops, including workers' co-ops? Or should the regulation of such co-ops fall solely on the CDA? The situation of workers in the plantations in Mindanao as reported by UP Mindanao indicates that these issues need prompt resolution.

Food for thought: if we believe that the cooperative set-up is the most efficient set-up for the production and delivery of certain goods and services, then how come co-ops in the Philippines have been successful mainly in savings and credit and not in consumers' distribution? and why are workers' co-ops rare? how can we really justify genuine consumer control of electric co-ops and water co-ops?

More on the Danish cartoons

2006-09-15T18:07:00.000+08:00

More on the Danish cartoons

Pareng Jun, Mr. Bong, Rey, Taps (lahat ng nagcomment sa Danish cartoons):

Gusto ko na sanang iwanan itong isyu na to ng Danish cartoons dahil di pa ako nakakapagluto. Heto nga at di ko na mapagtanto kung panong hiwa ang gagawin ko dito sa patatas at kamates na isasahog sa ginisang Baguio beans na may halong corned beef at nang may maiulam na kame. Huling hirit na lang:

In koopforum@yahoogroups.com, "elpidiomendozajunior" wrote: "Tol, if you're a deep-dyed and soaked liberal there's really no reason to raise a howl over any crappy stuff because you don't give a hoot. If you're a conscientious liberal, you want some debate over the crap. If you're a right-wingnut, you would want a fight over the silly stuff (or you issue a fatwa;))."

I'm a conscientious liberal and want debate on the issue, especially since GMA created new powers for herself like banning rallies and gagging the media. GMA now has assumed the power to stop what it considers seditious speech on the streets and in the press. I think this is related to the demand by a religious group that its beliefs be observed by the rest of society (as in "we believe that depicting the Prophet Mohammad in art is blasphemous and therefore we expect everyone not to depict the Prophet Mohammad in art").

In koopforum@yahoogroups.com, "Jaime Escober, Jr." wrote: "I think that a newspaper has that right and freedom to publish the cartoons, but any right and freedom must be exercised responsibly. It is insensitive, to say the least, to depict a person or thing that a group of people hold sacred, especially if the portrayal is unfavorable or negative to that group. Doing so would be tantamount to insulting them."

Some Muslims recognize that the Danish editors have the right to publish the cartoons, since being non-Muslims, they are not bound to observe Islamic doctrines, but insist that the cartoons were insensitive to say the least, and therefore, full circle, must still be censored. Some Muslims believe that the act of publishing the cartoons is blasphemous and that the editors deserve to die.

Even dictators will profess respect and recognition of freedom of speech (or expression, inquiry, and academic, artistic, and religious freedom), up to a point where freedom begins to threaten their power.

Why is freedom of speech guaranteed in democratic constitutions, that no law shall be passed abridging freedom of speech? It is because free speech is bound to hurt or offend someone. The guarantee seeks to protect speakers against the special interest of those hurt by free speech. (The issue of libel is a completely a different issue. If you say my mother is a whore when she is not, then my mother can sue you for good money.) We need to protect freedom of speech of a person, of a minority group of persons, and of all people, not only from dictatorships but also from democratic governments, from bigoted majorities, and from bigoted minorities. Freedom is the highest value; it defines our humanity. Freedom is the core and essence of being human.

It is an individual choice whether to curtail his or her own personal freedoms and beliefs, at the very least in order not to offend other people's sensitivities. I hated standing for the national anthem before the last full show, but why should I insist on my personal preference when it is far cooler to maintain a civic connection with most people who respect the national anthem? I don't pray, but spirituality is a defining characteristic of being human (no matter how irreligious or atheistic a person is), and therefore I bow my head in silence and meditation, especially before a conference on really important issues like developing cooperatives, access to water, or how to stop GMA from morphing into a Marcos, etc. And I really have no problem with some religious sensitivities, since I now hate pork (like Muslims), dinuguan (like Iglesia ni Cristo), and many more.

From what I've read, the editors of the newspaper Jyllands-Posten called for artists to send in drawings of Mohammed to highlight the case of Kåre Bluitgen, who said no cartoonist wanted to illustrate his children's book on the life of Mohammed for fear of violent reprisal by Muslims. That fear had some basis in fact. To highlight the issue of self-censorship and religious tolerance in Danish society, the Jyllands-Posten (JP) called for different artists to give their interpretation on how Muhammad may have looked. I scrounged the Internet for copies of the cartoons as published in the newspaper (you can go to Wikipedia, for one). I saw the facsimile of the JP page in its September 30, 2005 issue containing the images. How did the cartoonist depict Mohammad?

The first cartoon showed the writer Kåre Bluitgen wearing a turban with an orange dropping into the turban, with the inscription "Publicity stunt." In his hand is a child's stick drawing of Muhammad. The proverb "an orange in the turban" is a Danish expression meaning "a stroke of luck." Thus the first cartoon is satirizing the author Kåre Bluitgen and his motives to gain publicity for her book.

The next cartoon showed the Islamic star and crescent partially symbolizing the face of Muhammad. His right eye is the star, the crescent surrounds his beard and face. The message is that Islam and Muhammad are one and the same. Blasphemous? It looks cute actually, if you ask me. The Christian equivalent probably is the face of Jesus superimposed on a cross, something that can hang from Madonna's neck, even if Catholic Irish Sinead O'Connor protests it as blasphemous too when hung from Madonna's neck. My equivalent would be Che Guevara's famous photograph superimposed on a golden star on a red field of the the socialist flag. For cool Maoists (if cool Maoists exist), the equivalent is Andy Warhol's famous print of Mao.

The third is Muhammad with a bomb in his turban, with a lit fuse and the Islamic creed written on the bomb. This is one of the more outrageous of the 12 cartoons. The moral equivalent of this one to me is depicting Rizal holding a bolo to slit the necks of friars. Rizal never asked his followers to slit the necks of friars. But suppose you were a young sacristan and ward of a friar at the time Katipuneros were attacking churches and Spanish garrisons shouting "Mabuhay si Doktor Jose Rizal!" and executing friars. Then the image would directly appeal to you that Rizal is being used by a violent revolution against clerical rule. In the same breath, the Danish cartoonist was not saying Muhammad is a terrorist, but that Islam and Muhammad are being hijacked by terrorists to justify terror.

The next is another outrageous cartoon, showing Muhammad standing in a gentle pose with a halo in the shape of a crescent moon. The middle part of the crescent is obscured, revealing only the edges which resemble horns. Intolerant interpretation: the cartoonist is mocking us Muslims by suggesting that Muhammad is evil. Tolerant interpretation: the cartoonist shows the actual ambiguity of Islam in the minds of non-Muslims in Denmark; Islam is supposed to be a good thing and yet the Danes tend to associate Islam with evil due to the way terrorists use Islam. The cartoonist is wrong, but thank him for his candidness.

The fifth is an abstract drawing of crescent moons and Stars of David, and a Danish poem on oppression of women. Translated in English the poem is said to read as: "Prophet, you crazy bloke! Keeping women under yoke." This is a direct attack on Islamic tenets on the role of women. And yet this is not something that originates only from holier-than-thou Christians, who are putatively more enlightened in their treatment of women. Muslim women are fighting for more equality within Islam. The Revolutionary Association of the Women of Afghanistan (RAWA) held underground make-up sessions just to defy the Taliban, who used Islam to the hilt to oppress women.

The sixth shows Muhammad as a simple wanderer in the desert at sunset, with a donkey in tow. What does it show? Muhammad as a simple wanderer in the desert at sunset, with a donkey in tow, period.

The next cartoon shows a cartoonist working at his desk, nervously drawing the figure of Muhammad while looking over his shoulder for a possible Muslim who might be around to disapprove of what he is doing. The eight cartoon showed two angry Muslims charge forward with sabres and bombs, while Muhammad addresses them with: "Relax guys, it's just a drawing made by some infidel from southern Denmark," connoting a harmless local from the middle of nowhere." The message in both is that cartoonists fear drawing Muhammad due to (all too real) threat of violent reprisal by Muslims, which is exactly the issue that Jyllands-Posten aimed to highlight by soliciting and publishing the cartoons.

The ninth cartoon is my favorite: An Arab-looking boy pointing to a blackboard which was written with Arabic letters, translated as "The journalists of Jyllands-Posten is a bunch of reactionary provocateurs." The boy is labelled "Mohammed, Valby school, 7.A," implying that this is a child of Islamic immigrants to Denmark. On his shirt is written "The Future." The cartoonist is trying to question the motives of the newspaper for soliciting the cartoons, and echoing the views of some people in Denmark, including Muslims, that Jyllands-Posten is a right-wing Islamophobic reactionary newspaper. Muslims facing discrimination and intolerance in Denmark would find that this cartoon speaks for them, not against them.

The 10th cartoon shows Muhammad prepared for battle, with a blade in hand; his eyes are covered by a black bar. He is flanked by two women in traditional Muslim garb, having only their wide open eyes visible. To me this is one of the truly tasteless cartoons. The cartoonist is not good enough as the message is not sharp. So what if Muhammad was also a warrior? So what if he had two wives? It's just like an image of James Bond with a pistol with two Bond girls by his side.

The 11th is superb as a political cartoon, showing Muhammad in heaven greeting suicide bombers with "Stop, stop, we have run out of virgins!" It is said that suicide bombers fighting for Islam will go to straight to paradise where virgins await them. Life on earth can really suck; between that and life in heaven with not one but several virgins, I'm not surprised why some people would be happy to blow themselves up.

The last cartoon in the middle of the facsimile shows a police line-up of seven people wearing turbans, with the witness saying: "Hmm...I can't really recognise him." In the line up are the following: a Hippie (with the peace icon on his pendant), a woman identified as a Danish politician, Jesus (with halo over his head), Buddha, Muhammad, an Indian Guru or swami, and journalist Kåre Bluitgen, carrying a sign saying: "Kåre's public relations, call and get an offer."

Calling the cartoons "highly inflammatory" is one-sided to say the least, and at most an overstatement. A more liberal and tolerant interpretation would be that this is the way some members of the Danish community view Mohammad and Islam and the self-censorship by cartoonists for fear of Islamic reprisal.

The controversy has been confined so-called "Danish Islamophobic `free speech' neo-conservatives" and the Danish Islamic community, and the diplomatic tension between Denmark and Islamic countries. At a certain point Danish Islamic imams said they no longer demand apologies from Jyllands-Posten.

Instead they said they want a guarantee from Danish authorities that Muslims can freely practice their religion without being provoked and discriminated and a declaration from Jyllands-Posten that the cartoons were not with the intention of mocking the Muslim faith. However, the situation has all changed in February when newspapers in Europe also published the cartoons and provoked protests by Muslims.

When the anti-Danish demonstrations broke, Conrad de Quiros in his column said "Bill Clinton has called the cartoons appalling and compared it to anti-Semitism. I agree: even if the cartoons were not addressed to Muslims in general but to Muslims in Europe who submit to religious intolerance, they go well past the bounds of decency. They do not depict those fanatical followers as terrorists, they depict the source of their faith as being so. Those are two different things."

I disagree with Clinton and with de Quiros. If Muslim terrorists use Islam as justification for their acts, cartoonists are bound to depict that fact by a drawing that shows Mohammad wearing a bomb shaped turban.

If, as de Quiros suggested, black hooligans were to invoke Martin Luther King Jr. in looting white homes and raping white women, then a cartoonist will soon depict Martin Luther King as an angel of death. If Christian terrorists bomb abortion clinics in Jesus' name, some cartoonists will depict Jesus as a murderer. Muslim terrorists, black hooligans, and Christian anti-abortion terrorists actually do criminal things. Cartoonists portray an irony by linking evil acts to deeply revered beliefs. And even if such kind of cartoons were offensive to Muslims, to blacks and to Christians, in moral terms they still pale in comparison to the actual crimes and offenses being committed by terrorists and hooligans who invoke Islam, Martin Luther King, or Jesus. A common sense of proportion will tells us that the provocative cartoons, which are what cartoons are meant to be, are much, much tamer compared to the actual outrages committed by terrorists in the name of religion, of their cause, or of God.

Provoking deep sensitivities is an objective of the cartoonist, or any art for that matter. It is just like saying hey your otherwise peaceful tolerant ideology is being hijacked by terrorists. Look! They're making it appear Muhammad is a terrorist. What are you gonna do with it?

In the case of the Jyllands-Posten cartoons, the editors may have actually anticipated a howl from Muslims crying foul, you have no right to depict Mohammad like that, he has never condoned terrorism. In fact, the Koran says so, so your cartoons are over the top and have no basis in fact whatsoever. But the reaction generated so far by the cartoons could not have been anticipated by anyone: over a series of cartoons Palestinian gunmen warned that they would target citizens of France, Norway, Denmark and Germany after papers in these countries all published the caricatures!

The Danish cartoonists may not have been successful in provoking in a positive way, in encouraging thinking how terrorists who shout "God is great" before blowing themselves up in a bus full of children have given God a bad name and instead have only provoked more threats of terrorism. Such reactions according to Kofi Annan, Bill Clinton, and Conrad de Quiros are proof media freedom should be exercised responsibly. How does one behave responsibly: one, for your own safety, do not mock God (and pray: God protect me from your followers!); two, you have no right to mock God (and God is what priests and imams say it is); three, you may be safe even if you exercise your freedom, but please don't offend those who believe in God. The first one is self-censorship and surrender, like the restraint of journalists during dictatorship. The second one is outright denial of freedom of speech at the level of principle (this principle has been overthrown by the Enlightenment). The third one is the reasonable one; yet sometimes or maybe most of the time the intention of speech is to push the issue to the extremes to the point of being offensive or provocative, and that includes questioning the validity and sacrality of deeply held beliefs.

Should take precedence over something as fundamental to secular democracy as freedom of speech and expression. In one of the blogs, someone said how would you feel about an article being published which contained interviews with various people, asking for their opinion of Muhammad? Suppose one of the interviewees answered "I think Muhammad was a murderer" or something of the sort. Do you think the newspaper would be anti-Islamic in publishing such an interview? If the newspaper JP really did solicit artists to create depictions of Muhammad then their only "sin" is in asking Muhammad to be depicted in the first place, and in exercising poor taste in at least some of the chosen drawings.

The disproportionate reaction probably was fueled by opportunists with an agenda. There were also reports that a delegation of Danish imams toured Islamic countries carrying extremely offensive drawings that did not appear in JP (not of the 12) and passed them off as those published by JP, including a fabricated picture of Muhammad
with a pig snout. Maybe there is a conspiracy to provoke Muslim reactions in order to provoke anti-Islamic reactions in order to provoke a crisis with Iran, whatever.

Islam is no more inherently violent or intolerant than any other major religion. Nor are the passages contained in the Koran any more unambiguous and uncontradictory than those contained in the Old and New Testaments. One can find support for almost any idea in these writings, including violence, and therein lies the danger of usurpation of religious faith for the furtherance of political power. Historically, most instances of religious intolerance and violence have arisen when government and religion are merged into a single institution, e.g. the Crusades, the Inquisition, the Taliban, even Communism (with a secular religion called Marxism that prompted Marx to say he is not a Marxist).

To say that Islam is a religion of violence is false. But it is equally false to claim that Islam has not, and is not now being used, to promote violence, and that texts from the Koran (and from the Bible for that matter) do not contain something handy for terrorists to use to justify terror.

So, what's the point finally? There might be some reactionary Islamophobic fascists hiding behind liberal free speech who are ready to provoke religious violence by Muslims in order to ignite anti-Islamic reactions. Ironies of ironies they all belong to the same camp. On the other hand there are Muslims who may or may not view the cartoons as necessarily offensive, yet will definitely refuse to be drawn into attacking freedom of speech as a nonviolent way to level differences.

Right after 9/11, I was in mIRC chatrooms debating ignorant American kids (or pretending to be kids, if someone says he or she is 16, assume that she or he is 32) who thought the US should go to war against rag head Muslims and their false religion.

From thereon I decided to grow a goatee, in the fashion of Muslim men, as a sign of solidarity with those who would face discrimination in an American military and cultural counter-strike. I still wear the goatee. And even before that, I was a Bosnian Muslim and agreed that arms should be sent to Bosnian Muslims to resist the genocidal fascist Christian Serbs.

I am still a Palestinian and in spirit I am hurling stones to the IDF and throwing myself up to barricade against Israeli bulldozers (mind you, in spirit). I am Bangsamoro when Christian politicians in Mindanao were derailing even just the creation of a tiny and pathetic version of autonomy called the ARMM. I was an East Timorese Catholic too.

But now, on this issue, I am a Dane, a secular liberal Dane who asserts a right to question even the most sacred things in the world.

Itutuloy ko na po ang paggigisa ko.

posted Mar 11, 2006 at koopforum@yahoogroups.com

Parishioners and the State, Citizens and the Church

2006-09-15T17:59:00.000+08:00

Parishioners and the State, Citizens and the Church

Erik Villanueva

I was sitting inside an office at the North Wing of Congress, trying to prepare a policy briefer on water supply, as requested by my good Congressman Guillermo P. Cua, which is so important an issue that I decided to pour more gray matter over it. As usual, while working we were tuned in to the proceedings at the plenary hall. Congressmen took turns spilling their take on a statement by the Catholic Bishops’ Conference of the Philippines. An article by Amado Doronila was mentioned. I had just half-read Doronila’s article appearing in the Inquirer issue that morning and found that it was just one of the usual Doronila, na para sa akin madaming sinasabi pero di ko makuha kung ano ang gustong sabihin, if I may sound e a bit more overboard. So instead of working on an important issue (water), I took some time out and tackled a useless issue in an “idiotic vicious downward spiral” (right, quote from my friend Taps) “where ordinary Filipinos refuse to be a part of.”

Amado Doronila’s analysis on the relationship of Church and State entirely misses the issue regarding the place of religion in a liberal democracy. It is confused and tends to infect others with confusion.

“No law shall be passed abridging the freedom of speech, of expression, or of the press,” according to Section 4 of the Bill of Rights (Article II of the Constitution).

The Constitution does not say that you are not supposed to enjoy these rights and freedoms once you become a priest or a bishop. No law can be passed abridging these freedoms even where priests and bishops are concerned. Priests and bishops, after all, do not lose their citizenship for being priests and bishops of whatever religion.

Thus, it is a wonder why and how Mr. Doronila has to belabor whether the Church can make statements on the issue of Charter change, as similar sentiments have been forwarded by various other groups.

Apparently, the reason why Mr. Doronila is taking on the Catholic Church is that there is supposed to be a division of labor between the “political” and the “moral or spiritual,” and that the Catholic Bishops’ Conference of the Philippines (CBCP) has threaded beyond its province when it issued statements against Charter change, the postponement of the elections, or the mining laws. This betrays a lack of understanding of the historical origin of the provision that “The separation of Church and State shall be inviolable” in Section 6, Article II (Declaration of Principles and State Policies Principles) of the Constitution. There was a time when the Catholic Church was de facto part of the State, and that was during the Spanish colonial administration in the Philippines. There was a time when the Catholic Church was constitutionally part of the state structure in some countries in Europe. Such an arrangement could not be consistent within the framework of a liberal democratic state. Under our own Constitution, the integration of the Catholic Church or any religion or religious organization with the state would not be consistent with the Constitutional guarantee for religious freedom under Section 5 of the Bill of Rights, even if the majority of Filipinos are Catholics.

While the Constitutional principle of separation of Church and State originated in reaction to either de facto or constitutional power of the Catholic Church, this principle applies to all religion.

Still, the Constitution accords some recognition of religious activities. “Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements, actually, directly, and exclusively used for religious, charitable, or educational purposes shall be exempt from taxation,” according to Section 28(3), Article VI (The Legislative Department). Still this could not be interpreted as giving an inordinate recognition of religion when the separation of Church and State is supposed to be in force. This provision simply aims to highlight the non-profit role of charitable institutions, churches, parsonages, convents, mosques, non-profit cemeteries, and the properties at their disposal, including the fact that these non-profit enterprises provide public benefits. Under the law, other entities deemed to be delivering some public good are also exempted from taxation.

Elsewhere in the Constitution, the Church-State separation principle is even more forceful, in the provision that “No public money or property shall be appropriated, applied, paid, or employed, directly or indirectly, for the use, benefit, or support of any sect, church,denomination, sectarian institution, or system of religion, or of any priest, preacher, minister, other religious teacher, or dignitary as such, except when such priest, preacher, minister, or dignitary is assigned to the armed forces, or to any penal institution, or government orphanage or leprosarium,” in Section 29 (2), Article VI (The Legislative Department).

But then the Constitution further accommodates religion when it provides that “At the option expressed in writing by the parents or guardians, religion shall be allowed to be taught to their children or wards in public elementary and high schools within the regular class hours by instructors designated or approved by the religious authorities of the religion to which the children or wards belong, without additional cost to the Government,” in Section 3 (3), Article XIV (Education).

However, separating the Church from the State does not imply a tacit agreement between the Church and the State that the former should only delve on spiritual and moral issues and avoid political issues. This is grossly wrong. The Catholic Church, after all, is just one of the various and many other corporate organizations founded by or composed of Filipino citizens, regardless of the amount of extraordinary reverence most Filipinos accord to it. The fact that its purpose is primarily religious in nature is just a secondary point. If a private organization of citizens -- whether civic, political, or cultural in nature -- can express its ideas and opinions on any issue as a matter of right, then the same right should be accorded also to the Catholic Church as a corporate entity and to bishops and priests as individual citizens. The same goes to any other religious groups. The fact that religious organizations enjoy or exercise moral influence on their members does not in any way makes them candidates for censorship.

Of course, as an institution the Catholic Church ought to be responsible in their pronouncements in the context of rational public discourse that aims to bear on public policy. Sharon Cuneta, obese as she is now, has to be more responsible than encouraging her fans to concoct artery-clogging condiments like a certain brand of mayonnaise with garlic and bagoong for longganisa and chicken lollipops, or Kris Aquino than encouraging her fans to stuff themselves with canned corned beef. Given the influence they have on their followers, they probably should be more circumspect about what product to endorse, and given the increasing incidence of heart problems and dyslipedemia (high blood cholesterol) among Filipinos. In the same breath, the only issue with the bishops is whether they have been responsible enough to consider all the implications of their call to abolish the Mining Act. But the way to confront statements like Sharon Cuneta’s, Kris Aquino’s, and the CBCP’s is to present contrarian evidence, not to muzzle their right to endorse or to issue statements.

What the brouhaha over the CBCP’s critical statements may actually betray is a reality as insidious as the attempt by some quarters to question the rights of religious leaders to exercise free speech. “No law shall be made respecting an establishment of religion,” according to Section 5, Article III (Bill of Rights). And yet some quarters, especially politicians, seem to be saying to the bishops “to leave politics and economics to us and we will leave morality to you.” This is not acceptable, as it implies that on certain moral issues such as abortion, cloning, stem cell research, gay marriage, the state has to submit to the precedence of religious morality. Under the principle of free expression and free inquiry guaranteed by the Bill of Rights, moral or political truths or both cannot be the monopoly of the church and any church, or the state or any state, or both.

Of course, what politicians are worried about is that parishioners may not see whether a particular pronouncement of the bishops is made based on dogma or based on reason. If it is based on dogma, then it is not subject to debate and all parishioners have to do is to submit to them if they were to remain in that religion. If it is based on reason, then it is subject to debate.

Church or religious dogmas of course are the business of the Church and of their parishioners, who must submit to those dogmas voluntarily. They are not the subject of rational public policy discourse. They are outside the realm of public politics, rational discourse, and scientific inquiry. However, when the pronouncements by religious leaders, whether based on religious dogma or on factual investigation, begin to bear on public policy, they can and should be confronted by rationale discursive engagement, not censorship, and not even to an appeal to a putative division of expertise between mundane and spiritual matters.

My personal views? The Catholic Church and other religions must continue to voice their stand on every moral, ethical, social, and political issue facing Filipinos. They may be wrong in calling for the revocation of the Mining Act, but they are right in emphasizing the rights and welfare of workers and indigenous peoples. They may be wrong in opposing Charter change at his point in time, but they are right in inviting attention to the way the government is using Charter change to advance its political interests and deflect attention to its misdeeds. Priests, nuns, bishops, brothers, sisters, ministers, pastors, etc. may be right or wrong, but they always have rights.

posted Mar 17, 2006 at koopforum@yahoogroups.com