Economy, Business And Markets

Are Cooperatives Losing Momentum?

The share of cooperatives in Iran’s GDP currently stands at 7%.The share of cooperatives in Iran’s GDP currently stands at 7%.

A total of 2,530 cooperatives, which created 39,952 jobs, were formed in Iran with an investment of 494.34 billion rials ($11.43 million) over the nine months to Dec. 21, the Ministry of Cooperatives, Labor and Social Welfare announced.

This is while more than 2,880 cooperatives were set up and generated 49,890 jobs over the same period of last year, Tasnim news agency reported.

The highest and lowest numbers of cooperatives founded during this year’s eight-month period were in Fars (323) and Qom (14) provinces respectively. The lion’s share of the cooperatives pertains to those active in the fields of services and agriculture. Services cooperatives created the highest number of jobs over the period.

Out of the total number of enterprises founded over the period under review, 357 were women’s cooperatives that created more than 4,340 jobs.

The parliament has tasked the government with increasing the share of cooperatives in gross domestic product to 25% by the end of the Sixth Five-Year Development Plan (March 2022).

This share was also targeted by the Fifth Five-Year Development Plan which, according to the head of Iran Chamber of Cooperatives, Bahman Abdollahi, now stands at 7%.

“Some 160,000 cooperatives have been registered in Iran, of which 110,000 are operating in 120 fields, including agriculture, services, housing, transportation and production, among others. The rest have been closed down due to financial problems,” he was quoted as saying in early 2017.

Abdollahi noted that close to 20 million people are members of cooperatives, but only 2 million have found employment in the sector.

Development plans, devised by the government and ratified by parliament every five years since 1991, are meant to provide broad directions for a wide range of economic reforms and social priorities.

A cooperative refers to a firm owned, controlled and operated by a group of users for their own benefit. Each member contributes equity capital and shares in the control of the firm on the basis of one-member, one-vote principle (and not in proportion to his or her equity contribution).

 Fundamental Challenges

The cooperatives sector has undergone huge changes in the last few decades, thanks to new trends in business models and technologies, as well as many challenges globally, Alireza Qaragozlou, deputy for int’l affairs at Iran Chamber of Cooperatives, wrote in an article published in Financial Tribune in June.

According to Qaragozlou, the first challenge mainly concerns human resources in the cooperatives sector.

“First of all, we see a relative high median age in cooperatives. The other issue is that cooperatives suffer from low education levels in terms of computer sciences, English language and general knowledge,” he said.

“It is evident that this is common in all countries that have a high median age in the cooperatives sector and no inclination to update. This does not undervalue the elderly population in cooperatives, but its clear consequence is that cooperatives are unable to keep up with the new trends.”

The official referred to the cooperatives’ dependency on government support as another weakness in the way these enterprises run their affairs.

“’Oppression’ is a familiar catchword between Iran’s cooperatives officials who want to justify the weak performance of Iran’s cooperatives movement. It seems that Iranian cooperatives have been waiting for a helping hand from outside all the time, since being oppressed means someone withholds a helping hand or inflicts cruelty! So a better word to describe this situation would be ‘inability’ rather than ‘oppression’, which emphasizes the weaknesses of cooperatives themselves,” he said.

According to Qaragozlou, since the economy of cooperatives is people-oriented rather than equity-oriented and based on group cooperation, cooperatives have received more funds in comparison with private companies from governments and international organizations.

“Appraising the governments in terms of budget deficits and debts to pension funds and social security, it becomes clear that governments can’t play a sustainable role in providing cooperatives with resources. So the cooperatives’ dependency on the government is not valid anymore and the continuity of this dependency would allow the government to intervene further in the cooperatives sector,” he said.

Finally, the official considered the cooperatives’ lack of responsiveness to IT trends as a major handicap.

“Cooperatives are new to electronic approaches in sales, distribution, customer relationship management, etc. and e-cooperative business models remain unknown. As private sector competitors follow up all trends and utilize new IT-based approaches to claim a bigger market share, the continuity of this challenge would irreparably damage the cooperatives movement across the world,” he said.

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