Why Co-operatives?

The reconstruction can draw from the revitalisation of co-operatives but is dependent on leadership 

Given that the co-operatives lack political strength after the war, they are easily intimidated by the bureaucracies, who t hreaten them with blocking approvals for routine functions

The co-operatives (Known as Multi-Purpose Cooperative Societies-MPCS) in the North have gained significant funds through the Budgets for 2018 and 2019. These allocations totalling over Rs 2.5 billion for producer and credit co-operatives are a strategy to revitalise the war-torn rural economy and provide relief to the indebted population in the North. 
What are the challenges facing the Northern co-operatives today? And are co-operatives the appropriate vehicle for rural reconstruction?

Historical context

.The history of the co-operative movement in the North and Sri Lanka more broadly reaches back to the early twentieth century. The British colonial government initiated co-operatives to address farmer indebtedness and the agricultural crisis in the early twentieth century, and then expanded them for distribution of essential items during the Second World War. 
By Independence in 1948, co-operatives had become widespread and Left-leaning governments from the late 1950s and into the 1970s strengthened co-operatives to boost rural development. 

The history of co-operatives in the North, and particularly Jaffna, has some interesting characteristics. First, co-operative development was tied to advances in both formal and informal education in Jaffna. Second, in its nascent stage in the 1920s and 1930s, the co-operatives gained much from the remittance economy of those working in colonial Malaya and the energies of those who returned as Malayan pensioners. 
Third, the co-operatives have a caste character—the leadership comes from the Vellala upper caste communities. However, with the emergence of producer co-operatives, particularly those formed for caste-related occupations such as fisheries and toddy tapping, co-operatives also became institutions for advancing the interests of certain middle and oppressed castes. 

Post-war challenges

.One of the central challenges facing co-operatives in the post-war years was the lack of capital-both investment and credit to increase production. 
During war-time, co-operatives could not produce and invest, their savings were depleted and assets lost. In addition to the destruction of property, looting by various armed actors was rampant, where the LTTE in particular extracted co-operative finances and manipulated the boards of co-operatives to ensure its dictates. 
With the co-operatives’ books in trouble, the excessively risk-averse banks in the North are unwilling to lend or charge high-interest rates for loans. Such constraints on investment and working capital have undermined co-operative production and business.
These problems are compounded by the role of the political leadership and bureaucracy after the war. The co-operatives are over-regulated with laws drafted in the 1970s. While the co-operatives are a devolved subject, the Northern Provincial Council under the leadership of former Chief Minister Wigneswaran, from 2013 to 2018 was an utter failure; they did not even pass the statutes necessary to upgrade the legal workings of the co-operatives much less provide a vision for co-operative development. 
Furthermore, the co-operatives were weighed down by the Provincial Co-operative Ministers, whose political machinations denied the co-operatives of the autonomy necessary to consider revival.

Given that the co-operatives lack political strength after the war, they are easily intimidated by the bureaucracy, who threatens them with blocking approvals for routine functions. 
Furthermore, the market-oriented policies of successive governments in Colombo after the war also constrained much-needed state support and resources towards co-operative rebuilding. Indeed, until 2018 there were neither major projects nor compensation for war-time losses to revitalise the co-operatives with state funds. Without capital investment to upgrade co-operative production facilities, they were unable to compete with more technologically advanced production from the rest of the country and the global market.
Next, the co-operatives lost much of their educated middle-class leadership, as they overwhelmingly migrated with the war. 
Furthermore, the political culture of violence and overt intimidation during the war resulted in genuine local leaders avoiding public roles. In this way, the historically important role of educationists and progressives in co-operatives were severed. With the class character of the co-operative leadership changing, the social and informal linkages to work with the bureaucracy to strengthen co-operatives have also weakened. 

• Co-operatives are capable of pooling community resources
• Are co-operatives appropriate vehicle for rural reconstruction?

Research to develop new products with local resources and economic models for a fast-changing global market are major challenges for co-operatives. The Palmyrah Research Institute (PRI) in Jaffna is the only technological research institute in the North. 
Palmyrah is one of the most important natural resources in the North, research and extension from PRI needs to contribute towards upgrading the products of the Palm Development Co-operatives. However, given the capacity problems of PRI, support from institutions such as the Colombo-based Industrial Technology Institute (ITI) is going to be necessary to produce marketable goods. Co-operatives are essentially social institutions and their development requires engagement by social scientists, but the contribution of the Jaffna University has been nil. Therefore, co-operative revival requires considerable external support in the future. 

Rural alternative

.Despite the tremendous devastation with the war and the problematic post-war reconstruction policies, the legacy and institutional memory of co-operation in the North is a powerful social asset to organise and reintegrate a war-torn society. Farmers, fisherfolk and Palmyrah-based workers require social and institutional supports to strengthen their productive activities. 
The co-operatives are effective institutions to provide meaningful credit without pushing rural folk into the debt trap as with the now prevalent predatory finance companies and money lenders. The low-interest co-operative credit scheme with the Government grant in the North over the last six months is now circulating among tens of thousands of rural households.
Next, co-operatives are capable of pooling community resources and facilitating enhanced rural production. One of the central challenges of reconstruction in the war-torn North is to rejuvenate production and employment and create a virtuous cycle with the re-investment of an accumulation from such products in the local economy. The fifty small co-operative industries initiated with investment in Budget 2018, and now to be augmented with an additional fifty industries in the budget this year have considerable potential.
The strength of co-operatives is their inherently democratic structure and the principle of equality with one vote for one member. And any profits accruing to the co-operatives are either shared by their broad membership or re-invested in the co-operative contributing to the local economy. 
This is not the case with the Colombo-based companies and multi-national corporations, whose profits belong to their wealthy shareholders and are syphoned out to Colombo and other capitals. 

While the reconstruction of the war-torn economy can draw from the revitalisation of co-operatives, the realisation of such a vision is ultimately dependent on leadership, including from the political class capable of mobilising society. And here the Tamil political leadership has been more a liability than an asset. 
Co-operatives have some political and social limitations. All over the world, co-operatives lean towards the status quo and are comfortable to be under the patronage of the state as opposed to pushing for radical change. 

Furthermore, while co-operatives in Third World countries have done much to uplift a lot of the lower middle-class communities and the working classes, they have rarely addressed the social and economic problems of the subaltern classes; the marginalised including slum dwellers and pauperised rural folk.
Amidst these challenges, an important Northern co-operative initiative for rural development is in the works. The Government has put funds where they need to go. 
The co-operatives and their membership are again beginning to expand. The success of this reconstruction alternative is dependent on social mobilisation and the co-operative movement’s determination to better the economic lives of its members, to strengthen rural society, to ensure its independence from the state and to struggle against its 
social limitations.