A recently published World Bank study of farmers’ associations in China reviews a number of policy experiments that are now culminating in a draft Law on Farmers’ Economic Professional Cooperatives (农民经济专业合作社), which is expected to be released for public consultation before the end of the year, writes Nick Young. But, the authors of the World Bank study warn, although a clear legal framework would be a major breakthrough, local governments should support the development of farmers’ organisations without being tempted to direct or dominate them.
The Bank study, China: Farmers’ Professional Associations Review and Policy Recommendations, departs from the premise that autonomous farmers’ organisations can play an important role in supporting smallholder agriculture by pooling farmers’ resources for purchasing inputs, by facilitating technical training and support services and by marketing produce. The need for this kind of support is thought to be increasing as farmers shift from grain crops to more specialised and higher value products, and as retail outlets in major cities shift from market stalls to supermarkets that demand higher volumes of produce with consistent quality and timely delivery. Although these new markets offer opportunities for boosting the profitability of Chinese agriculture, individual smallholders are not well placed to compete in them.
However the report also notes that, unlike Europe and North America, China has little history of independent farmers’ unions or cooperatives. Moreover, since the break-up of Maoist rural communes in the late 1970s Chinese farmers have proved suspicious of any form of enforced collectivisation.
Unlike its Vietnamese counterpart, the Communist Party of China never created a “mass organisation” (on the lines of the Youth League, Women’s Federation etc) for farmers. The Ministry of Agriculture’s extension system, designed to give farmers technical advice and training, was crafted in a command economy era when officials interpreted their role as being to tell farmers what to do. Generally, it served to promote policies and quotas set by central planners who were mainly preoccupied with grain production. Now, the Bank study suggests, the agricultural extension system is ill-equipped to meet the needs of farmers who are trying to specialise in new cash crops where township and even county-level extension workers may have little or no expertise to offer.
Meanwhile, to fill the vacuum in support services, recent years have seen rapid growth of what are purportedly farmers associations. “The case studies showed a tremendous variety of associations out there,” according to Achim Fock, a senior rural economist with the Bank and one of the main authors of the study. There can be found, he says, “Everything from empty shells and government-dominated set-ups to real, farmer-controlled associations.”
Tim Zachernuk, co-author of the study and a consultant to the China-Canada Agricultural Programme, hazards a guess that, depending on exactly what you count, China may have more than 100,000 “farmers’ organisations.” But, he cautions, many of these are in fact created by agro-processing industries that often receive strong backing from local governments who see them as “dragon head enterprises” (龙头企业) that will bring agricultural modernisation. These firms organise farmers into supply chains, providing them with agricultural inputs and training in the name of a “producers' association.” Other associations, says Zachernuk, are created by local government agencies “as part of a drive to go to scale. They identify a local product [that has apparent market potential] and try to form an association around it.”
Zachernuk, who has more than a decade’s experience of working on rural development projects in China, reports that he has often visited the offices of county government agencies where “They have three name plates on the door,” one for the government bureau, one for a commercial enterprise and one for a farmers association.
What’s out there
A recent survey of 2,459 villages in six provinces found that people from 251 of the sample villages had participated in some form of “farmers’ professional association” and that an average of 28.5% of families in those villages were association members.1 This suggests that associations of some sort could extend to as many as 10% of China’s villages, and reach around 2.91% of Chinese farm households.Note 1Scott Rozelle, Shen Minguo and Zhang Linxiu, Farmer Professional Associations in Rural China: State Dominated or New State-Society Partnerships? pp. 197-228 of China’s Agricultural and Rural Development in the Early 21st Century (Bernard H. Sonntag, Huang Jikun, Scott Rozelle and John H. Skerrit, eds.), Australian Centre for International Agricultural Research monograph 116, Canberra 2005. This useful volume is the outcome of a series of international meetings and workshops held in 2003 and 2004 under the aegis of the Agriculture and Rural Development Task Force of the China Council for International Cooperation on Environment and Development, an advisory body established by China’s State Council in 1992.
The associations in this sample were, overwhelmingly, young organisations. Only two of them were established in the 1980s. A trickle of new associations began in the mid-90s, such that by the end of 1999 44% of the total were operational, and then growth began in earnest in the early years of the 21st century.
Most of the organisations were supporting specialisation in non-traditional areas. Livestock associations were the most common (44%). A significant number were devoted to orchard production (18%) and the remainder were divided between vegetables, cash crops and “special products,” with only a small fraction supporting grain cropping.
The survey identified a number of “robust correlations” between the development of associations and other factors. “Villages that had irrigation, were relatively close to the city and somewhat richer were most likely to have FPAs [farmers’ professional associations],” although poverty did not rule out the existence of associations. The poorest quartile of villages had 21% of the associations, whereas these were less concentrated in the next quartile (of relatively or near-poor villages).
Government’s hand was clearly visible in most cases. Fully 84% of associations were set up after officials had visited or written to village leaders suggesting the move.
Official backing appears not, however, to suffice in creating a functioning organisation. The survey found that 83% of the associations could be described as “formal” (in that they were registered, had a charter, etc), but that only 69% could be described as properly “functional.” A total of 29% were formally constituted but not counted as functional either because they were evidently businesses in disguise or because all decisions were made by a government official.
Intriguingly, a total of 15% were “informal yet functional.” These appear to be informal organisations created by farmers themselves and in the main managing to function despite their lack of formal status.
The overall picture, therefore, is of a government drive to create associations, with some too tightly controlled to function as needed, whereas farmer-initiated organisations are thinner on the ground but more likely to thrive.
Government ambivalence
According to Achim Fock, local officials in some areas remain cautious about associations either because government extension workers make money by selling agricultural inputs to farmers and do not want to lose this income stream, or from a general, politically conservative reluctance to empower farmers. (Even though the associations have economic rather than social objectives, the Bank study quotes Chinese researchers as observing that “Cooperatives are . . . a school where farmers’ democratic consciousness is fostered.”)
However, under pressure to narrow urban-rural income disparities, central government has become increasingly keen to stimulate the growth of associations. The first article of the 2003 Agriculture Law encourages the establishment of “farmers’ professional cooperative economic organisations” and this is echoed in State Council Document No. 1 for 2006, which pledges to “actively guide and support farmers to develop diversified forms of specialised economic cooperative organisations, speed up the process of legislation and strengthen, support and establish credit, financial, taxation and registration systems conducive to the development of farmers’ cooperative economic organisations.”
At the end of 2004, Zhejiang Province passed a law to regulate associations in the province, requiring them to register with the Industry and Commerce authorities, “under the leadership” of county Agriculture Bureaus. The law stipulates that farmers should own at least half the shares in a cooperative, but does not restrict membership to farmers and allows a single member to hold up to 20% of the shares. It endows the general meeting of members with supreme decision making authority and theoretically endorses the cooperative principle of “one member one vote” yet in practice allows exceptions, consistent with shareholding, such that a single member may control up to 20% of the vote.
Despite these departures from strict, cooperative principles, Fock and Zachernuk believe that the Zhejiang law is a major step in the right direction because it resolves the basic issue of legal status, which the study describes as the main stumbling block in the development of the sector. In order to have any real vitality, Fock and Zachernuk argue, farmers’ organisations must be “legal persons” able to enter into legal contracts, borrow money and make investments on behalf of members. The Bank study identifies a clear, legal framework as the single most pressing requirement for healthy associational growth. The Zhejiang law provides such a framework, and is likely to be reflected in the draft, national law.
Taxonomy soup
However, it seems that in the search for new institutions to stimulate the rural economy the ideas of “professional organisations,” “associations” and “cooperatives” are being regularly conflated.
True believers in cooperative movements include the Chinese NGO, Gung Ho (aka the International Committee for the Promotion of Industrial Cooperatives). Originally created in the 1940s to support industrial production in Communist-held areas of China, this worked throughout the 1990s in a variety of locations to foster rural producer cooperatives, with support from several international organisations, notably the Canadian Cooperative Association. More recently a Hong Kong-based NGO, Partners in Community Development (PCD), has been piloting similar work in Sichuan. Although recognising the need for a clear legal framework, groups like these also emphasise the slow and patient work that is needed to nurture understanding of cooperative principles and practice in a way that is genuinely “bottom-up.” Cooperative principles may be vulnerable when macro policy switches are thrown by higher levels keen to offer “guidance and support” in rolling out government-endorsed models.
The Bank study acknowledges the risk of top-down and government-driven growth, noting that at local level:
“Officials responsible for policy implementation are often working with a limited understanding of the principles of cooperatives and generally work within traditional government structures where ‘instructing farmers what to do’ is the norm . . . Farmers, with no tradition of participatory and democratic decision making, limited education and a habit of submissively complying with instructions issued by the government, often become passive participants in the process of creating ‘farmer organisations.’”
Moreover, the Bank study notes that the practice in China has been to create organisations with heterogenous membership. Yet, it points out:
““When organisations are made up of members with widely disparate or even conflicting interests, the purpose and focus of the organisations becomes blurred, the weaker members of the organisation fail to gain their equitable share of the benefits and the organisation becomes unsustainable.”
External catalysts
Nevertheless, the study deems government support essential, but emphasises that it needs to be the right kind of support: facilitating and enabling, rather than directive and controlling.
In light of the danger of government or businesses playing too dominant a role, the authors of the 2,459-village survey suggest that “It could be that a third party is needed to get FPAs started.” They caution, however, that “if an outside force is needed to start an FPA it can also be a disruptive force, and the role of those charged with jump-starting China’s FPA movement will require a delicate balancing of catalysis and interference.” They suggest that a new corps of “farmer promoters” could be engaged to find that balance.
In recent years several international agencies have also sought to serve as catalysts for farmers’ organisations. Examples include the China-Canada Agricultural Programme, working in several provinces of western China, and an EU-funded integrated rural development programme in Panam County of the Tibet Autonomous Region. However, Tim Zachernuk warns that donor-driven associations can also be unsustainable. In the late 1990s he worked in Huoshan County, Anhui, on a Dutch government funded rural development project that facilitated the creation of several tea growers’ associations. He now feels that farmers signed up for these mainly because they were interested in accessing project funds for equipment, and “once they got the equipment they weren’t interested any more.”
Zachernuk now points to training programmes carried out by the University of Sasktchewan, under the aegis of the China-Canada Agricultural Programme, which encourage initial, all-round problem and context analysis, rather than assuming that farmers’ associations or cooperatives are necessarily “the answer.” He also emphasises the great diversity of China’s rural areas, pointing out that the actual needs of farmers and herders vary widely across regions, and thus that any new regulations should preserve a significant degree of flexibility.
Alert to the dangers of providing the wrong kind of incentives, the Bank study is generally cool about direct government financial support, subsidies or tax breaks for farmers’ organisations. Whilst not ruling out start-up support, it urges that such support should be targeted mainly to capacity-building and training activities to embed cooperative principles, good governance, leadership and transparency.
Advocacy precedent
Despite the likely pitfalls and the near certainty that implementation of new regulations will be slow and complex, World Bank staff are sanguine that the draft cooperative law will take policy development on to a new level.
An apparent precedent was set last year with the enactment of a Water User Associations Law. The Bank’s water sector projects and several other internationally funded programmes (including the Dutch-funded development project in Anhui) had created village-level water user associations (WUAs) in an effort to improve the efficiency and equity of irrigation water distribution; but, despite the social and environmental benefits of this approach, the new associations were for several years left in a legal vacuum, unable to realise their full potential.
According to Achim Fock, the passing of the WUA law was the culmination of “A process of many, many years [with] different local regulations building towards consensus . . . It had to be shown on the ground that things were working, that there were some very good examples, that they improve water use, and improve relationships with government.”
A similar dynamic, Fock suggests, has been at work in the field of farmers’ economic organisations, with policy research and experiments slowly garnering support of key policy researchers—such as those at the State Council’s Development Research Centre, which is planning to hold a large conference to discuss the draft law as soon as it is made public.
Yet, Fock stresses, although a draft law is indispensable, a very great deal will rest upon the manner of its implementation. Farmers associations, he says, are more complex than WUAs because they are “even more voluntary.” To function effectively, WUAs need to involve the whole community, whereas participation in farmers associations or cooperatives should, by definition, be entirely voluntary.
Organisations like Gung Ho and PCD are likely to be very busy in the future, getting that message across not just to farmers but to local government officials.