Organizational system and representing economic and social interest (cooperatives )

Organizational system and representing economic and social interest (cooperatives) Assoc. Prof. Dr. (CSc) Zsarnóczai, J. Sándor Szent István University Faculty of Economic and Social Sciences Institute of Regional Economics and Rural Development zsarnoczai.sandor@gtk.szie.hu CEEPUS, Gödöllő, 31st August 2009

Main Subjects • 1- Organization and representing interest; • 2- Some main international experiences from EU: Danish-Swedish ARLA-Foods Cooperative; • 3- Some EU experiences: COPA and COGECA, their brief historical background. CEEPUS, Gödöllő, 31st August 2009

1- Organization and Representing Interest, Namely COGECA • 1- Data given by COGECA (General Committee for Agricultural Cooperation) in EU: • - number of cooperative members in EU increased • to 115 million members by the end of 2003 • from 29,6 million members in 1990/1991 - four times more – as 389 % - during one and half decade. • 2- Increase of number belonging to cooperative members provides proof for development of cooperative movement, as strategic aim in EU. • 3- Three sectors, as primary, secondary, tertiary, having important economic role, mainly banking, basic agricultural and food production, integrated product channel. CEEPUS, Gödöllő, 31st August 2009

2- Organization and Representing Interest, Namely COGECA • Statement on the Co-operative Identity Definition and cooperative principles • A co-operative: voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. • The value of co-operatives is based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. • Believe in the ethical values of honesty, openness, social responsibility and caring for others. • All activities: in fields of economic, social, political and educational activities. • 1st Principle: Voluntary and Open Membership • 2nd Principle: Democratic Member Control • 3rd Principle: Member Economic Participation • 4th Principle: Autonomy and Independence • 5th Principle: Education, Training and Information • 6th Principle: Co-operation among Co-operatives • 7th Principle: Concern for Community CEEPUS, Gödöllő, 31st August 2009

3. THE ECONOMIC IMPORTANCE OF CO-OPERATIVES IN EU • EU focuses its cooperative assistance programmes on three technical areas: • 1. - design of national policies, strategies and legislation to enhance cooperatives' role in development, emphasizing the need for synergy and the economic efficiency gains to be derived from their involvement in decision-making and programme implementation; • 2. - development and refinement of concepts and techniques for coalition-building and partnerships in support of rural development and food security; • 3. - internal capacity-building to make cooperatives, along with other civil society organizations, equal and efficient partners in development. CEEPUS, Gödöllő, 31st August 2009

4. THE ECONOMIC IMPORTANCE OF CO-OPERATIVES IN EU Strategy of EU cooperative movement, which is as follows: • 1 - Promote the EU co-operative movement, even in direction to the world cooperative movement, based on mutual self-help and democracy. • 2 - Promote and protect co-operative values and principles. • 3 - Facilitate the development of economic and mutually beneficial relations between its member organisations. • 4 - Promote sustainable human development and further economic and social progress of people, thereby contributing to international peace and security. • 5 - Promote equality between men and women in all the decision-making and activities within the co-operative movement. CEEPUS, Gödöllő, 31st August 2009

5. THE ECONOMIC IMPORTANCE OF CO-OPERATIVES IN EU • Some differents of co-operatives from other business organisations: • 1 - Co-operatives have to be as efficient in their business and use their capital at least as efficiently as other players on the market. In this respect cooperatives are no different from other players on the market. • 2 - The co-operative difference – the social dimension “cooperative advantage”: member/user-led as opposed to investment-led organisations. • 3 - Support to co-operative development in developing countries and to countries in economic transition contributes to economic growth shared by many. The co-operative method is socially inclusive – not exclusive as is the case with purely investment/profit-led organisations. CEEPUS, Gödöllő, 31st August 2009

6. THE ECONOMIC IMPORTANCE OF CO-OPERATIVES IN EU • Three main branches of the economic activities: • the primary sector, • secondary sector and • tertiary sector. • Aims at strengthening their competitiveness on the world and EU markets. • To build the integrated product channel from the lands of farmers to table of consumers. On this product channel, cooperatives integrated the basic production activities, for example the plantproduction, animal husbandry; and manufacturing activities in food industry; and service activities, like transporting, storing, advisory works. • The cooperatives want to increase their value added activities in order to increase value of their input. CEEPUS, Gödöllő, 31st August 2009

Table 1.: The number of cooperative business, members and employees in EU, as a percentage of each sector and all sectors of 41 European Countries at the beginning of XXI. Century (in %) CEEPUS, Gödöllő, 31st August 2009

Table 1.: The number of cooperative business, members and employees in EU, as a percentage of each sector and all sectors of 41 European Countries at the beginning of XXI. Century (in %) • 1. Number of cooperative business • 2. Number of members • 3. Number of employees • EU of 41 European Countriesin % CEEPUS, Gödöllő, 31st August 2009

Table 2.: The co-operative movement has the following weight in the European Union (based on the 2000 definition) per industry CEEPUS, Gödöllő, 31st August 2009

7. Danish Cooperatives • The cooperative main advantages: they are non-profit organisations, so the competition rule does not limit their share on national and EU domestic markets. • In 2001 the Danish Crown cooperative could produce 95% of red meat – mostly pork – in Denmark. • The production concentration resulted in cooperative development Denmark became the fourth biggest pork producer in EU, and first pork exporter on the world market. • Danish cooperatives: • 50% of large sized supermarket chainsand25% of all retail trade became owned by cooperatives. Danish cooperatives extended their share in bank and insurance sectors. CEEPUS, Gödöllő, 31st August 2009

8. Swedish-Danish ARLA-Foods Cooperative • Swedish-Danish ARLA-Foods Cooperative has realized integrated product-channel-cooperatives in field of milk production, and Danish-Crown Cooperative realised one in meat production. • ARLA Foods, the joint Danish-Swedish co-operative, was established on 17th April 2000 as a result of the amalgamation of MD Foods, in Denmark, and ARLA, in Sweden. • This co-operative provides at least 90 percent of their milk production, procession, and sales. • The cooperative is active in 22 countries and employs 18.200 people. There are some important countries, in which ARLA-Foods Cooperative has had traditional activity, for example: naturally in Sweden and Danish Kingdom, and then UK, Canada, USA, France, Germany, Italy, Japan, Russia, Poland, Hungary, Brasilia, United Arab Emirates and others. CEEPUS, Gödöllő, 31st August 2009

9. Swedish-Danish ARLA-Foods Cooperative • By the end of 2001, ARLA-Foods Cooperative has realised sales worth 38,1 billion Danish Crowns, i. e. US$ 4,7 billion. • Integration of the single parts of the product channel (production, processing, and sales, including exports) can be efficiently realised also in a co-operative form. • The ARLA-Foods Danish-Swedish is the biggest common dairy production, manufacturing and marketing co-operative in European Union, which works in 22 countries by about 15 thousand members, of which there were 7921 Danish and 6988 Swedish farmers. • By the end of 2001 ARLA Foods increased its turnover more than two times within a year. The value of the turnover increased by mostly increasing production and only partly by increasing prices. The share of Denmark and Sweden in the total turnover decreased from 53 percent in 2000 to 50,6 percent by the end of 2001. • From the developing countries the Middle East countries have the biggest share, which increased from 5,0 percent in 2000 to 5,5 percent in 2001. It is resulted by higher purchase power capacity and increasing market demands in MENA countries. CEEPUS, Gödöllő, 31st August 2009

10. Swedish-Danish ARLA-Foods Cooperative In 2005 (Financial Times) • Swedish-Danish ARLA-Foods Cooperative was one of the first 10 biggest corporations, companies, coops of all over the world! • Swedish-Danish ARLA-Foods Cooperative was one of the first 10 biggest cooperatives of all over the world! • Swedish-Danish ARLA-Foods Cooperative integrates into activities of NASA of USA! • 2 or 3 Danish Cooperatives were of the first 10 biggest cooperatives of all over the world! CEEPUS, Gödöllő, 31st August 2009

11. Role of Co-operative Banks, Credit Unions in Irish Development Policy • The LEADER program financed partly by EU aims at promoting: • - economic activities of the rural areas based on implementation of innovation projects. • - In LEADER II. program the low contribution of private sector to financing of projects was 41,4 percent, as amount of 75 million EURO. • - The LEADER Plus program for 2000-2006. The FEOGA Guarantee Section of EU contributed to this program by 2020 million EURO. • Activities of co-operative banks in LEADER programs (LEADER = Links between Actions for the Development of Rural and Economy) in European Union and Ireland have increased considerably. • In EU the European Association of Co-operative Banks has 37 million members, also members of co-operative banks, including saving, credit co-operatives and credit unions. The co-operative banks have 17 percent market share of total banking sector in EU. CEEPUS, Gödöllő, 31st August 2009

12. Role of Marketing Cooperatives in EU • The role of marketing cooperatives in sale and storing of agricultural - food products by end of 1990s. • In 1998 shareof marketing cooperatives was • - 70% of dairy product sale in Germany; • - 100% of sugar-beet sale, 94% of dairy product for storing, 65% of storing capacity of dairy product in Austria; • - 75% of olive oil sale and 70% of wine sale in Spain; 82% of dairy products sale in Portugal. • The share of marketing cooperatives was • - 55% of wine products sale, 41% of fruits and 38% of dairy product sale in Italy; • - 55% of dairy product sale in U.K.; • - 49% of dairy product sale, 52% of wine sale in France. CEEPUS, Gödöllő, 31st August 2009

13. Role of Marketing Cooperatives in EU • The market-share of co-operatives also was higher in field of • butter, cheese and milk powder in EU (EC Dairy, 1985-96). • There were several co-operatives among the largest dairy processing companies of the world in EU, for example earlier MD Foods in Denmark, ARLA in Sweden. There were Sodiaal in France, and VALIO Ltd. in Finland. • In EU milk producers controlled 70% of milk-selling within co-operative, while in Hungary it was less than 5% of processing. Processing has concentrated in Hungary, first largest four processing companies provided 38% in 1998 and 53% of processed milk in 1999. • Vertical co-ordination makes easier to keep EU qualitative demands, and bargain position of processors became stronger than producers, but large chain stores’ one became stronger than processors’ one. Type of vertical co-ordination inside a company is vertical integration, which can be based on co-operative model, as in EU. CEEPUS, Gödöllő, 31st August 2009

14. THE ECONOMIC ROLE OF COPA IN EU The COPA (Committee of Agricultural Organisations) first started out: • - 13 organisations in EU, • - today 29 organisations in EU, • - represent both general and specific interests of farmers, • - COPA was recognised by EU authorities for agriculture. • Representative of farmers is COPA attending 1958 Stresa Conference. • Farmers have their organisation, COPA in 1958. • Then in 1959, the agricultural co-operatives of EU created organisation representing their interests by name of COGECA (General Committee for Agricultural Co-operation). COPA’s Secretariat was established in Brussels in 1959 and it merged with that of COGECA in 1962. CEEPUS, Gödöllő, 31st August 2009

15. THE ECONOMIC ROLE OF COPA IN EU • COPA has main aims: • - to examine matters related to the development of EU’s agricultural policy; • - to represent the interests of agricultural sector as a whole; • - to seek solutions which are of common interest, and • - to maintain relations with EU authorities and with any other representative organisations or social partner established at European level. • COPA is advisory organisation having decision making and representative process based on the well skilled manager-staff. • Well built network of COPA working structure by three basic elements: • 1 - to enable representatives of EU from agricultural production and areas to discuss • mattersto suggest solutions to the problems posed; • 2 - to co-ordinate work in the agriculture, agricultural policy and policy in general; • 3 - to represent all sectors and areas together. • Following structures: Assembly consisting of representatives delegated by the member organisations; Praesidium consisting of one representative per member organisation. CEEPUS, Gödöllő, 31st August 2009

16. THE ECONOMIC ROLE OF COPA IN EU • Representativestake part in Praesidium meetings: the President of COGECA, the President of CEJA (European Council of Young Farmers), the Chairman of the COPA Women's Committee, and the Chairman of COPA’s General Experts Group. • Represents of COPA to take decisions within the general guidelines laid down by the Assembly. Positions of the Praesidium are taken jointly with COGECA. • Organisations of COPE, like Presidency, Group of General Experts. Also Working Parties and Specialist Sections are working. COPA has more than 50 Working Parties, sub-Groups and Specialist Sections, either from specific commodity sectors or for general questions (structural, social, environmental etc.). • COPA contacts withthe European Institutions, as Commission that drafts proposals; for submitting to the Council for adoption or to European Parliament, the Economic and Social Committee and the Committee of the Regions for their opinions. CEEPUS, Gödöllő, 31st August 2009

17. THE ECONOMIC ROLE OF COGECA IN EU 1. COGECA’s representatives • Important agricultural co-operatives currently are for agriculture, the supply and marketing area and food industry of EU, which is illustrated by the end of 2000: • About 30 000 co-operative enterprises • Almost 9 million members • Over 600 000 persons employed • About 210 billion EURO turnover • Over 50% of shares in the supply of agricultural inputs • Over 60% of shares in the collection, processing and marketing of agricultural products. • Secretariat presents economic and social developments of agricultural co-operatives in EU. CEEPUS, Gödöllő, 31st August 2009

18. THE ECONOMIC ROLE OF COGECA IN EU 2. COGECA as the lobby of agricultural cooperatives • Recognised representative body of all agricultural and fishery co-operatives in the EU, COGECA represents their general and specific interests vis-a-vis the Community authorities: European Commission, Council of Ministers, European Parliament, Economic and Social Committee, Committee of the Regions. • COGECA takes part in all Community policies, to set out framework for co-operatives integrating to multifunctional European Model of Agriculture and increasing farm income from market. • CAP and its market organisations for commodity sectors have been one of the European key policies. Its integration meeting demands of society in areas as • - environmental - consumer protection, product quality, animal welfare, • - food chain, guarantee competitiveness of cooperative of farmer. CEEPUS, Gödöllő, 31st August 2009

19. THE ECONOMIC ROLE OF COGECA IN EU 3. COGECA as a platform for inter-cooperative relationship • - representing political interests vis-a-vis the Community authorities, • - COGECA promotes relations between co-operatives across borders. Offer an intense exchange of information, experience and opinions to the co-operative business representatives. Some other important activities were: • The drawing up of a list of co-operatives active in import and export. • The recording of the 500 co-operatives with the highest turnover, • A symposium on the importance of a single currency for the trade with goods in the agri-food sector. • Comparative studies on: - Taxation of co-operatives, • - Position of co-operatives in national competition law, • - Co-operative training systems, • - Intel-nationalisation of agricultural co-operatives. CEEPUS, Gödöllő, 31st August 2009

20. Co-operatives Strengthen Aims of the CAP • 1.a. The agricultural co-operatives support the objectives of the CAP • 1.b. Role of the co-operatives to strengthen level of quality and food safety • 1.c. Importance of co-operatives in development of rural areas in fields of economic and social life • 1.d. The agricultural co-operatives provide value added to agricultural products CEEPUS, Gödöllő, 31st August 2009

21. CONCLUSIONS • 1. The bargain positions should be strengthened for cooperatives within large scale selling and storing, • - each farmer does not enough capital capacity to realise concentration in production, manufacturing and selling. • 2. General issue is the market information is not adequate, which is resulted by lack of market-analysis and statistical indications. • 3. Recently there was a significant concentration in processing of main agricultural and food products in EU. • 4. Cooperatives could extent the infrastructure-background for food and agricultural basic production for farmers and manufacturing. • 5. The importance of qualitative development. CEEPUS, Gödöllő, 31st August 2009

THANK YOU FOR YOUR ATTENTION! CEEPUS, Gödöllő, 31st August 2009

Organizational system and representing economic and social interest (cooperatives )