ARB/Agri Coops Are Major Economic Development Players

I have always believed that one way for the Filipinos to rise from poverty is to be an entrepreneur. But I always hear that a major hindrance to becoming an entrepreneur is the perennial lack of capital for those who are interested to engage in some kind of business enterprise. Maybe unknown to them is the alternative of associating or organizing a pool of people who are similarly interested to pursue a business through a cooperative enterprise. In this way, a core number of individuals could pool money, human resources and talent to build capital, and work together to produce more goods and increase income.

            There are more than twenty thousand cooperatives operating in the Philippines as of October 2011 with a total membership of more than eleven million people composed of farmers, fisherfolk, women, workers, vendors, teachers, government employees, the military, rebel-returnees, and from other sectors who are mostly poor and disadvantaged but they believe in cooperativism and seriously desire to build a better life for them and their families through association and cooperation. These cooperatives in the Philippines have a combined assets of PHP158.6 billion.

            On a global perspective, reports from the International Cooperative Alliance (ICA)indicate that over one billion people are members of cooperatives. In Asia, there are 45.3 million members of cooperatives. In Indonesia, 27.5% of families are members of cooperatives. In Japan, 33% of families are members of cooperatives. In Singapore, 50% of the population are members of cooperatives. Membership in cooperatives have increased because of the benefits they derive from being members.

            The contributions of cooperatives into the national economy are also steadily increasing. Agricultural cooperatives in Japan, for instance, agricultural cooperatives generate outputs equivalent to US$90 billion. This may be due to the fact that 91% of the farmers are members of cooperatives. In South Korea, 90% of farmers are members of agricultural cooperatives which have contributed to an output of US$11 billion. Fishery cooperatives in South Korea have a market share of 71%. In Vietnam, cooperatives contribute 8.6% of the country’s gross domestic product. In the Philippines, the cooperative sector is still a growing sector which contributed 4.2% of the country’s gross regional product in 2007. Cooperatives contribute generating and maintaining employment. Worldwide, around one hundred million jobs are provided by cooperatives, which is 20% more than multinational business enterprises.  In the United States, 30,000 cooperatives provide more than 2 million jobs. In Canada, over 155,000 are employed by the sector. In Indonesia, cooperatives provide jobs to 288,600 individuals. Philippine cooperatives, on the other hand, provided jobs to 102, 977 people in 2007, about 0.30% of the country’s labor force. 

            When I attended the Cooperative Regional Conference in Echague, Isabela sometime in  2012, I was awed by the large number of people who are active members of cooperatives in the Cagayan Valley Region. During that meeting, we were provided with information about what is actually happening in Congress, about the efforts and bills introduced to harness and support the collective efforts to strengthen cooperatives of agrarian reform beneficiaries (ARBs), of agricultural cooperatives, and to consolidate these cooperatives to maximize benefits from economies of scale. There was also a suggestion for the cooperative members to support Senatorial candidates  are sympathetic to the cooperative sector (although in hushed tones).

            However, there are were issues that came out, specially local and national officials who are stifling the growth of cooperatives by disregarding or refusing to honor the tax benefits and privileges that cooperatives are expressly entitled to under the laws of the Philippines. Some agencies of the government like the Bureau of Internal Revenue (BIR) and some officials of Local Government Units (LGUs) have various interpretations of the law and deliberately make it difficult for cooperatives to obtain the Tax Exemption Certificate.

            While it is clear that the spirit of the law is for cooperatives to be given preferential tax treatment as expressed in the law, that is, Republic Act No. 6938, now Republic Act No. 9520, this is not happening in some parts of the Philippines. Even the Supreme Court, in the cases that it has decided ruled that, “cooperatives, including their members, deserve a preferential tax treatment because of the vital role they play in the attainment of economic development and social justice. Thus, although taxes are the lifeblood of the government, the State’s power to tax must give way to foster the creation and growth of cooperatives.”  Justice Isagani A. Cruz, as quoted by Rep. Jose R. Ping-Ay in one of his speeches in Congress, said that: “The power of taxation, while indispensable, is not absolute and may be subordinated to the demands of social justice.” 

         After all, it is true that sovereign power resides in the people, and all government authority emanates from them. Is it really? cds