ILO COOP 100 Interview
ILO COOP 100 Interview with Mr. Upali Herath, a cooperative practitioner from Sri Lanka
Established in March 1920, the ILO’s Cooperatives Unit marks its Centenary in 2020. On this occasion, the ILO COOP 100 Interview series features past and present ILO colleagues and key partners who were closely engaged in the ILO's work on cooperatives and the wider social and solidarity economy (SSE). The interviews reflect on their experience and contributions in the past and shares their thoughts on the future of cooperatives and the SSE in a changing world of work.
How did you start working with cooperatives?After my university studies, I was recruited to Sri Lanka Administrative Service (then Ceylon Administrative Service – one could call it Civil Service) in 1970 and was placed as an Assistant Commissioner and Assistant Registrar of Cooperative Societies. I served in the provinces and as the Principal of the School of Cooperation (now called National Institute of Cooperative Development). I went up in the ladder of Department of Cooperative Development to become the Commissioner of Cooperative Development and Registrar of Cooperative societies. In between I was loaned to National Cooperative Council (NCC) of Sri Lanka (apex body of the Cooperative Movement) to work as the Chief Executive and later to be the Director of NCC/Swedish Cooperative Center (SCC)/ICA Project for Training of Cooperative Trainers in Sri Lanka from 1977 to 1983.
I joined the International Cooperative Alliance in 1987. I was placed in the Regional Office for Asia and the Pacific as the Regional Advisor on Human Resource Development (HRD) and Consumer Cooperative Development. I worked with the ICA up to 1999.
I was a member of the Presidential Commission for Cooperative Movement of Sri Lanka during 2000-2001.
In Sri Lanka, I served as the ILO Team Leader for Rehabilitation of Cooperatives in Uva Province under UNDP/ABGEP Project from 2001 to 2002. Later I joined as a Director and the Managing Director of a Cooperative Insurance company from 2002 to 2008 and again from 2013 to 2019. I was able to set up a Country office with the Swedish Cooperative Centre (SCC- now We Effect) in 2008 and worked as the Country Director up to 2012.
I served as a consultant for the ILO to formulate a National Policy for Cooperatives during 2013-14 and later with the Ministry of Cooperatives until it was finalized with the Cabinet in 2018. In between I was a consultant with the ILO-LEED Project to review cooperatives in the Northern Province.
Now I function as a freelance consultant to We Effect and the Government of Sri Lanka.
What is the current state of cooperatives in Sri Lanka (sectoral, regional observations, new generation cooperatives, challenges, and opportunities)?Observations given here are primarily based on the data from the Department of Cooperative Development and some specific studies conducted by other parties.
In the case of legislation for cooperatives in Sri Lanka, neither the central government nor the provincial governments have adopted the Statement of Cooperative Identity of 1995 to reflect changes in the principles and ethics. Current legislation is in line with the Cooperative Principles of 1966. Currently, the central legislation remains with the Cooperative Societies Act No. 5 of 1972 and subsequent amendments in 1983 and 1992. Although the subject of cooperatives has been devolved to Provincial Councils (PCs) set up after the Constitutional amendment No. 13 of 1987, only 6 out of 9 have formulated their Statutes on Cooperatives. Other PCs still follow the 1972 legislation. Even the Statutes followed the same contents of the main legislation with trivial amendments, which are still debated to this day as violating some cooperative principles. The central government has appointed a committee in which I am a part, to suggest amendments to the cooperative legislation, which is currently finalizing the recommendations now.
For the ICA I have conducted a deeper analysis on the legal aspects and membership status in cooperatives. The report was presented along with the documentation of ICA-Asia Registrars Forum held in 2019 in Vietnam.
Structurally, many of the cooperatives are outdated and are not re-aligned to suit modern day social enterprise requirements in the globalised market economy. They have not adjusted themselves to face the challenges specified under the Sustainable Development Goals (SDGs) of the United Nations or the emphasis of ICA SDGs. As an example, Sri Lanka Co-operative Marketing Federation Ltd (MARKFED) was supposed to be the national business organization for marketing cooperative agricultural products locally and overseas, which has carried out its functions since 1970s. Nowadays it is confined only to deal with some consumer services in competition with the Consumer Cooperative Federation and some Multi-purpose Cooperative Societies (MPCSs). The membership mainly consists of MPCSs that have switched their emphasis to consumer and banking business. Currently, there is no pure agricultural cooperative federation functioning in Sri Lanka.
The number of cooperatives has decreased from 9,191 in 2012 to 8,047 in 2016 in large part due to the inactivity of cooperatives. In terms of membership, there is an increase from 8.1 million in 2012 to 8.7 million in 2016. More than half (51 per cent) of membership is held by women members. In credit cooperatives the percentage of women is as high as 56 per cent. Employment in cooperatives was 38,774 in 2012 and 38,952 in 2016. Out of this, 64 per cent constitute employment by women. Low employment in comparison to the high number of cooperatives shows that the enterprises are small in size.
Composition of various types of cooperatives shows a clear diversification in recent times. Credit cooperatives are in the majority still, but the MPCSs are the strongest in terms of business share. Another trend is that new types of cooperatives have emerged. There are 40 self-employed cooperatives, 349 self-help cooperatives and 344 other types of cooperatives registered in Sri Lanka today. ILO’s LEED project has supported a considerable number of new types of cooperatives especially in the agricultural sector and among credit cooperatives. There are also a few organic farmers cooperatives. It is expected that this trend would continue, which is a positive development.
There are some challenges faced by cooperatives in Sri Lanka. These include:
Absence of supportive and updated legislation for cooperatives: Contents and the framework of legislation go back to 1970’s when the economy was socialist oriented, whereas currently Sri Lanka follows neo-liberal economic policies. The role of Registrar has to be re-defined and a proper regulatory mechanism has to be created as was done for private companies in 2000.
Lack of modern management systems in cooperatives: Cooperatives have not changed their management systems from 1970’s and the technology belongs to that era, whereas competitors have gone far ahead with digital technology, which was evident during COVID--19 period. Cooperatives were unable to deliver their services efficiently due to such problems. The absence of accepted efficiency norms and indicators have also been problematic. Due to the mismanagement of cooperative financial services, some credit cooperatives and rural banking cooperatives went bankrupt through bad investments with private financial companies and stock market. On the other hand, there are no proper regulatory mechanisms to deal with such problems.
Traditional political leadership in the governance of cooperatives: During 1970’s leaders that were politically aligned to the government that have been elected or appointed, continue still due to flaws in the cooperative legislation and the bylaws. Even in the case of some credit cooperatives, such groups are dominating. Such leadership does not have sense of direction for cooperatives and their interest are either self-driven or politically motivated.
Weakened regulatory mechanism: There was strong emphasis on the regulation of cooperative entrepreneurial activities, closely monitored by the cooperative officials in 1970’s which has been weakened after the devolution of the subject to Provincial Councils in 1987. As most of the cooperatives were not voluntarily formed by their members and were often government sponsored, this was necessary. As the systems are still the same, weakened regulatory mechanism has resulted in more corruption in cooperatives especially in financial and multipurpose sectors. The number of officers regulating cooperatives in the provinces and the centre has declined and specialized staff is lacking.
Emergence of pseudo-cooperatives: As the number of specialized staff to determine the applications for cooperatives and new projects in terms of cooperative identity has become few, some pseudo-cooperatives have been registered. Over the last decade, numbers of pseudo-cooperatives has increased especially in the financial sector by private investors. Many of them have ceased to function and many cases of frauds are pending in courts. There is a lack of capacity of regulators to evaluate such proposals for establishing cooperatives and new business projects.
Breakdown in the development of cooperative professionals in the government and cooperatives: Earlier system of developing regulatory staff through School of Cooperation has been changed with the devolution and the School has been converted to self-financed National Institute of Cooperative Development (NICD). Unitary status of cooperative officialdom changed when the recruitments and the administration were handed over to private companies. Some have tried to set up their own training institutions but failed. NICD does not have full-time trainers’ staff of their own to serve the needs of regulators. Training has not been systematic ensuring to ensure the integration with career path of the officers as done previously. This problem has caused tremendous strain on the legal functions of the Registrar, such as auditing and arbitration as well as liquidation work.
On the other hand, the training and development of cooperative employees remain with the outdated examination courses, in which the curriculum, methodology and the content remain unchanged since 1970s. They are only linked to their promotions as per the Co-operative Employees Commission rules. The training system is not responding to the issues in enterprise management.
As the National Cooperative Council and other national level business federations have insufficient resources, the training of leaders has suffered. The trainers’ staff in the NCC is insufficient in number and their competencies are limited. Hence, leadership training has suffered, lowering the standard of their functioning.
Focusing on the open market than the members in business: Collection of funds from non-members has increased by the MPCSs and credit cooperatives, which has created imbalance in investments. Meeting members’ resource needs has been bypassed through investments in the external sources, which has led to corrupt practices as well as negligence of members’ needs. Debt supervision has also been weak. Even in the case of consumer business, cooperative supermarkets and stores are inclined to compete with other sectors rather than meeting members consumer needs. This has caused the weakening of fundamentals of a cooperative enterprise.
There are also opportunities created in the current economy and global trends that can result in rejuvenation of cooperative enterprises. These include:
Changes in lifestyles in the community: the recent changes in the import taxes has led to the decrease in the number of imported consumer products, which led to middle class and increasingly low income groups to favor locally produced goods. These are relevant to agricultural and household tools. A few organic cooperative groups have emerged and some self-employed small-scale industry cooperatives are also on the rise. The locally made agricultural inputs and tools are now higher in demand.
New generation of enterprises: Self-employment is on the rise in the context of limited employment opportunities and mass layoffs during the COVID-19 crisis. Financial cooperatives that have excess capital could be used to support viable self-employment projects using different types of cooperatives. As the capital investment would no longer pay sufficient dividends, such arrangements would make them more viable. The trend has already started and private sector has already announced its willingness to participate in such activities. Cooperative financial institutions should also follow this trend.
Apathy on the part of the government: During recent times, including COVID-19 crisis, the government did not consider the cooperatives in the distribution of essential commodities and procurement of paddy, etc. and instead used their military and own state agencies. Despite this, some cooperatives have maintained their services to their communities in proximity and earned the good will of the community. Government apathy has been a motivator for cooperatives to act on their own and implement their initiatives.
New demands on ecology and sustainable livelihood: There is an increasing awareness of environmental concerns as Sri Lanka has been identified among the most vulnerable countries experiencing natural disasters (i.e., floods, drought, landslides and sea erosion). People are increasingly becoming aware of how unethical companies and industries contribute to exacerbating the situation. COVID-19 has enhanced the demand for better practices and promote socially responsible ventures. Cooperatives, being ethical and sustainable enterprises could take advantage of such a demand and venture into such enterprises. There is a need for paradigm shift on this direction by cooperative leaders and entrepreneurs.
Growing unemployment and shrinking of large industries and enterprises: COVID-19 has displaced considerable numbers of workers from closed companies, withdrawal of foreign investors, and termination of development projects and downsizing of companies. The government is not in a position to provide relief or social security for a labour force that are coming back from employment abroad due to COVID-19 pandemic. In such a situation, worker cooperatives could provide self-help and mutual help for such families in different fields. During the past few years, when the oligopolistic paddy milling companies started creating artificial shortages in the market, ‘Shakthi,’ a small paddy millers cooperative was formed, which had a positive impact in the rice market to offset difficulties faced by consumers. Worker cooperatives would be another proposition to address unemployment of youth, as the intermediary employment agencies have been exploiting labour. Worker cooperatives and collectives could be an answer for this, as there is a labour shortage in the market.
Crisis in the financial market: The disaster caused by the pandemic has led to the collapse of financial market in Sri Lanka. Although the government has urged the financial institutions to provide relief to debtors, this has not yet been realized. Many micro-finance companies have closed and the depositors were in jeopardy. However, financial cooperatives have survived showing their resilience to disasters. In this context, financial cooperatives could take the lead in the micro-finance market with better strategies in place. The government is now compelled to relax some regulatory conditions for the financial institutions, but cooperatives would not need such relaxation as they function with their own capital and on their own terms. Cooperatives could ensure access to financial services of low-income groups, adopting more inclusive strategies.
Could you tell us about your work on cooperatives at the regional level, with the ICA Asia Pacific Regional Office?
I was recruited to ICA Regional Office for Asia and the Pacific in 1987 as the Regional Advisor on HRD and later the Consumer Cooperative Development Project. After a recession in the ICA during early years, we had to reorganize the Education Division into a HRD Division with a new management with new funding from the SCC and also the Consumer Cooperative Development with JCCU funding. Women’s Development division has been terminated after Women’s Decade. With the initial funding by the SCC in 1989 under HRD, we initiated a survey on gender in cooperatives in 14 countries in Asia and Pacific and conducted 2 regional workshops for future planning. JCCU was approached for funding a gender initiative, who agreed to extend their support. The gender initiative was established in 1991 with a Gender Officer from the JCCU. Regional committees on HRD and consumer cooperative development were re-activated. Another area that was developed was the youth cooperative sector, with the support from National Federation of University Cooperative Association in Japan. Long-term strategic plans were formulated and implemented during this period.
Extension of collaborative support from the SNCF Singapore and organizing bilateral activities and exchange programmes among members organizations were some of new activities during this period in addition to training activities on new methodologies and technology of training under the HRD Project. Publication of ‘Coop Dialogue’ – a journal on cooperative development created a platform for member organizations and cooperative experts to exchange experiences and perspectives. Another publication was the Consumer Cooperative Newsletter under the consumer development project.
I reviewed the membership of the ICA in the Region by 1988 to realize that they were traditional national organizations. I conducted a survey on other cooperative systems that were not within the traditional systems and suggested to extend the membership to such organizations working based on cooperative principles as members which was accepted by the new management. Hence organizations such as NATTCO from the Philippines, SEWA and CDF from India, and SANASA Federation from Sri Lanka were inducted as members. Recruitment of members from Papua New Guinea, Vanuatu, and Solomon Islands were on the way at the time of my departure. I also had some discussions with unconventional cooperatives of ex-militants in the Philippines and Tibetan refugee cooperatives in India. However, these initiatives were abandoned due to other member organizations’ preference.
Another sector that came under purview was the cooperative health sector. With the initiative of IHCO (Dr. Kato) and Japanese Health cooperatives, similar organizations in the region were mobilized and some regional seminars were conducted to create a system. As a result, Asia Pacific Health Cooperative Organization (APHCO) was established under the Consumer Cooperative Development Project in 1997.
In terms of HRD strategies and methodologies, the beginning was with CEMAS Project which concentrated on the management development in cooperatives funded by the SCC. By 1990, a new project on the basis of Cooperative Members Participation Methodology (CMPP) was introduced and I prepared some manuals and literature on this. The methodology was introduced in 5 countries in the Region with the meager funding, which continued as an activity until my departure. In the meantime, we collaborated with the ILO MATCOM Project and later ILO COOPNET Project on the development of training methodologies, curriculum designing and manual and handbooks. We conducted joint activities with these projects supported by the ICA and ILO through co-funding.
I left the ICA ROAP on completion of my contract worked with the JCCU for another year-1999.
Based on your work with cooperatives and also with the ILO, what do you think has been the role of the ILO in cooperative development in Sri Lanka and in the Asia Pacific region (policy, legislation, capacity building, rebuilding cooperatives, etc.)?
The ILO has been active in Sri Lanka for a long time since 1960s. The first major collaboration was through a management development project in 1973, when the Cooperative Management Service Centre was established in 1973 through ILO assistance. It undertook initiatives to improve management systems and new value added ventures in cooperatives. Management information systems and processing of agricultural products were introduced in cooperatives and exports were initiated. This project late became the Sri Lanka Institute of Cooperative Management under an Act on Parliament and functioned until 2002.
We had collaboration with the ILO MATCOM Project by the ICA/NCC Cooperative Teachers’ Training Project in early 1980’s which produced training material for cooperative training. ILO/NORAD Project on Setting Effective Training Policies & Standards was another project with which we had interactions and collaboration on national events as a part of the NCC.
I worked with ILO Colombo on a few projects as a consultant:
- Team Leader on the Rehabilitation of Cooperatives in Uva Province during (2000 – 2001)
- National Consultant to formulate a National Policy on Cooperatives (2012 - 13)
- Consultant to evaluate cooperative performance of newly established cooperative in the Northern Province under ILO LEED Project.
My observations from the above experiences are as follow:
Regionally, the ILO and the ICA became closer allies in cooperative development during this period, which helped bring the governments and cooperatives together for a common understanding on the role of cooperatives in the national development. It has also contributed to create a better understanding by the government authorities to create an enabling policy environment for independent cooperative systems. Being an inter-governmental organization, the ILO had better stand with the governments.
Regionally, we were able to make efficient use of resources for common activities through co-funding. This was especially the case in MATCOM and ILO-COOPNET activities. Vast literature of manuals and training material were produced throughout this process.
We could avoid duplication of activities in the member countries and promote collaborative activities on a commonly agreed agenda. COPAC was helpful at the centre to create such an atmosphere. ILO Recommendation No. 193 on the promotion of cooperatives has been the key for many activities to facilitate development since the adoption of the Statement of Cooperative Identity. The Recommendation was especially important in drafting the National Policy in Sri Lanka.
Introduced in 2012 I translated My.Coop training package on agricultural cooperative management into Sinhalese for the ILO. It is being used by cooperative trainers across Sri Lanka.
The ILO has often worked through the government or through the endorsement of government authorities in Sri Lanka. I think this could be a constraint to receiving support for cooperatives directly. As there is a regulatory authority with the post of Registrar, I think that with the Registrars’ consent, technical assistance could be extended more directly to cooperative federations. It is noted that there is no separate Ministry for cooperatives under the central government or the provincial governments. As the current development systems are widely politicized, such assistance may not reach the actual beneficiaries in certain situations. Especially in Sri Lanka, there is an inherent political influence on cooperatives.
The world of work is facing many challenges (e.g. climate crisis, demographic changes, pandemics) today. How do you think cooperatives fare in the face of these changes?
Cooperatives are organizations of the communities hence they have to serve and exist with the people’s needs and aspirations. They serve the members’ needs, emerging from the socio-economic issues faced by them. The current climatic crisis and demographic changes cannot be overlooked by cooperatives since they are essential to the maintenance of the community livelihoods. The pandemics have shown the need for civil society consciousness and understanding as expressed in cooperative principles. In certain countries, cooperatives have done tremendous work, but unfortunately, the cooperatives in Sri Lanka were poorly equipped to face such a situation, although they have done their best in essential food and commodity distribution and supporting low-income families.
The cooperatives need to re-think their role in the community beyond their traditional activities. They need to integrate mitigating climatic changes, preserving ecology and promoting sustainable consumption and livelihoods. Japanese consumer cooperatives show how this can be done by creating mechanisms for environmental auditing, recycling and sustainable norms in management. Sustainability audits should be introduced covering environmental aspects and recycling and encouraging organic ways of agriculture as well as management of household waste. Promoting community health practices are another common activity that can be done by all cooperatives.
Peace and reconciliation as well as supporting migrant population through the formation of cooperatives are some of the areas relevant to Sri Lanka. ILO LEED Project has initiated some micro-financing activities on cooperative basis in Northern Province for families affected by war, which is commendable and should be expanded. There will be half a million workers coming back from Middle East and other countries displaced by COVID-19, which would not get another opportunity to go back. They would need support for their survival with their families, which the government may not be able to support due to economic crisis. This is another area of self-help activity on cooperative basis.
In sum, cooperatives can creatively re-think their role in their society in order to tackle the most urgent challenges we face today.