THE FEDERAL CONSTITUTION AND THE CO-OPERATIVES MALAYSIA -vs- COOPERATIVE SOCIETIES COMMISSION

Plaintiff’s DRAFT Affidavit in Reply

{for information and comments of Sister Co-operatives }.




IN THE HIGH COURT IN MALAYA AT KUALA LUMPUR
(APPELATE AND SPECIAL POWERS DIVISION)
ORIGINATING SUMMONS NO R1-24-01-08

In the matter of Order 15 Rule 16 of the High Court Rules 1980

And

In the matter of Sections 34, 42, 43 and 54 of the Malaysia Cooperative Societies Commission Act 2007

And

In the matter of Section 43 (2) of the Cooperative Societies Act 1993 (as amended by the Cooperative Societies (Amendment) Act 2007)

And

In the matter of Articles 4 (1), 5 (1) and (3), 10, 13 (2), 97, 102 and 104 of the Federal Constitution.

BETWEEN

KOPERASI KERETAPI BERHAD PLAINTIFF

AND

1. MINISTER OF FINANCE
2. MINISTER OF ENTREPRENEUR AND
COOPERATIVE DEVELOPMENT
3. MALAYSIA COOPERATIVE SOCIETIES COMMISSION
4. GOVERNMENT OF MALAYSIA DEFENDANTS

Plaintiff’s 2nd Affidavit (Draft)

I, CHE HANI BIN ISMAIL (NRIC No: 500410-10-5683/3618512) of Block E-3-2, Railway Quarters, Lengkok Abdullah, Bangsar, 59020 Kuala Lumpur being a retired employee of the Malayan Railway Administration affirm and state as follows:

1. I am the Secretary of the Plaintiff Cooperative Society.

2. I am authorised by the Plaintiff to make this Affidavit.

3. I have knowledge of the contents of this Affidavit from the records of the Plaintiff available to me.

4. I make this affidavit in reply to the affidavit of Dato’ Mangsor bin Saad affirmed on 9th July 2008 and served on the Plaintiff’s solicitors on 11th July 2008 more than six months after the service on 2nd January 2008 of my affidavit dated 2nd January 2008 on all the 4 defendants. The Plaintiff will rely both on the matters stated in this Affidavit and on the submission of our counsel at the hearing of this application.

Preliminary - Legality and not policy in question before this Honourable Court

5. I aver that the said Dato’ Mangsor Bin Saad has totally failed to address the objections raised by the Plaintiff as to the invalidity of Section 34, 42, 43 and 54 of the Malaysia Co-operative Societies Commission Act 2007 and Section 43(2) of the Cooperative Societies Act 1993 as amended by the Co-operative Societies (Amendment) Act 2007 as being inconsistent with, repugnant to and /or not in harmony with Articles 4(1), 5(1) and (3), 10, 13(2), 97, 102 and 104 of the Federal Constitution.

6. The Plaintiff has not objected to the setting up of the Malaysia Cooperative Societies Commission as such, nor has the Plaintiff objected to all the other amendments to the Cooperative Societies Act 1993 made by the Cooperative Societies (Amendment) Act 2007. The Plaintiff is objecting to what it contends are excessive and undefined unconstitutional powers given to the Malaysia Cooperative Societies Commission by the above mentioned provisions of the said two Acts of Parliament which the Plaintiff contends are unconstitutional.

7. The said provisions came into force on 1st January 2008 which was a public holiday. The Plaintiff commenced this action on the very next day on 2nd January 2008.

8. I verily believe that the said unconstitutional measures encroach on the rights of individuals to associate for their common good. I verily believe they are totally unnecessary in a democratic society, will be an impediment to all the cooperative societies and their members, are misconceived and if taken to address perceived wrongs in the co-operative movement are totally disproportionate measures .

9. Dato’ Mangsor Bin Saad in his affidavit made on behalf of all the 4 defendants appears to try to justify the said unconstitutional measures as being necessary to promote the national economy and to remedy what he claims to be an unhealthy state of affairs. He has also stated that various bodies have given their support to the establishment of the Malaysia Co-operative Commission.

9.1. The Plaintiff’s solicitors advise me and I verily believe that this Honourable Court is not properly placed to consider what is good government and it is not the function of this Honourable Court to decide on national economic policy matters, but is only concerned with whether the provisions the Plaintiff intends to impugn are consistent with the Federal Constitution.

9.2. I am further advised that no person or body can authorise law which is contrary to or inconsistent with the Federal Constitution which I aver is the supreme law of Malaysia.

9.3. Since the Defendants have made this an issue, I shall in this affidavit deal with the substance of the averments of the said Dato’ Mangsor bin Saad. However, I do this without prejudice to the Plaintiff’s contention that the said averments are irrelevant in considering the constitutionality of the provisions in question.

Preliminary - Attorney General’s Chambers cannot represent 3rd Defendant

10. I am advised by the Plaintiff’s solicitors and I verily believe that being a corporate body set up by statute the 3rd Defendant and its chief executive officer cannot be represented by the Attorney General’s Chambers and the learned Senior Federal Counsel attending to this matter who are not competent to act on behalf of the 3rd Defendant and its chief executive officer nor to give them legal advice pursuant to section 35 of the Legal Profession Act 1976, section 24 of the Government Proceedings Act 1956 and Article 145 of the Federal Constitution.
Preliminary - Authority to affirm this affidavit

11. I verily believe that Dato’ Mangsor Bin Saad’s objections to my authority to affirm the affidavit of the Plaintiff are unwarranted.

11.1. Under Section 44 of the Cooperative Societies Act 1993 the board of the Plaintiff is authorised to take legal action on behalf of the Plaintiff. As the secretary of the Plaintiff cooperative society, I verily believe that I am one of the principal office–bearers of the Plaintiff and I am authorised to execute affidavits herein.

11.2. I attach as exhibit P-8 a copy of the minutes of the Annual General Meeting of the Plaintiff held on 19 April 2007 which I attended. I verily believe that at the end of the meeting, the meeting unanimously approved an allocation for legal fees to take legal action in respect of amendments to the Cooperative Societies Act 1993 and the new laws to be imposed on co-operatives.

11.3. I attach as exhibit P-9 a copy of an extract of the minutes of the Annual General Meeting of the Plaintiff held on 25th June 2008 which unanimously approved this action against the Defendants and a copy of an extract from the speech by the Chariman of the Plaintiff Co-operative drawing the members’ attention to the action filed in this Honourable Court and the affidavit affirmed by me herein. I aver that a copy of the Originating Summons and my previous affidavit filed herein was published in the Annual Report booklet of the Plaintiff which was sent to all members of the co-operative, and no objections have been received from any member of the plaintiff to this legal action until now.

11.4. I verily believe that Dato’ Mangsor Bin Saad has stated that the Plaintiff has 1,749 members although I did not state how many members the Plaintiff has in my affidavit. I verily believe that the knowledge the Malaysia Cooperative Societies Commission has about the Plaintiff and the use of that information against the Plaintiff in these proceedings is unnerving.

12. I verily believe that the Registrar General of Co-operatives who oversees all co-operative societies and with whom the members of the Board of the Plaintiff are registered is an officer under the purview of the 2nd Defendant’s Ministry and should be fully aware that I am the Secretary of the Plaintiff.

13. I verily believe Dato’ Mangsor Bin Saad himself has not produced any evidence of any prior written authority from any of the four Defendants to affirm his affidavit and his representation by the Attorney General’s Chambers, which as I have contended earlier is against the law. I verily believe that this fact also foretells the degree of good faith or the lack of it which will prevail when the Malaysia Cooperative Societies Commission and the other Defendants use their unbridled powers under the various offensive sections.
Role of ANGKASA

14. I verily believe that the averment that is effectively trying to say that ANGKASA represents all cooperative societies and that it was authorised to endorse the unconstitutional provisions of the said two Acts is incorrect.

15. I am advised by the Plaintiff’s solicitors and I verily believe that it cannot reasonably be inferred that ANGKASA or any other party at all has authority to authorise or approve unlawful and unconstitutional provisions of the said two Acts.

16. Even on the facts, I verily believe that

16.1. although the Plaintiff is a member of ANGKASA the Plaintiff did not at all ever receive drafts of the said two Acts from ANGKASA for the Plaintiff’s consideration and comments

16.2. ANGKASA and Yang Mulia Professor Ungku Aziz have been inappropriately noted as supporting on behalf of all cooperative societies the unlawful provisions objected to

16.3. Yang Mulia Professor Ungku Aziz is a distinguished economist and also an academic but may not be familiar with and/or may not have any real practical knowledge of the cooperative spirit which makes a cooperative society truly effective

16.4. in any event, prior to the date when this action was filed, both ANGKASA and Yang Mulia Professor Ungku Aziz were obviously not properly appraised of the unconstitutionality of the said offending provisions. Alternatively, even if they had been so appraised they were not competent to approve these provisions which are objected to on the basis of their unconstitutionality.

17. I am advised by the Plaintiff’s solicitors and I verily believe that the provisions of the Federal Constitution cannot be ignored even by consent.

18. I am also advised and I verily believe that all citizens and the Federal and State Legislatures must all abide by the Federal Constitution and each and every one of its provisions which is the supreme law of the land.

Objections within the Co-operative movement

19. I verily believe that the article in the “Pelancar” October 2007 issue shown in exhibit DM-1 of the affidavit under reply appears to have been written by the General Manager of ANGKASA, an administrative officer.

19.1. He says that two persons Yang Mulia Professor Ungku Aziz and Puan Hajah Rahaiah Baheran studied the two Acts, put them up for discussion in conferences and approved them. The article does not give particulars of the offending provisions at all. I verily believe that neither Yang Mulia Professor Ungku Aziz nor Puan Hajah Rahaiah Baheran properly noted and realised the force and effect of the offending provisions.

19.2. I verily believe that the Plaintiff was not at all invited to any such conference to discuss any of the provisions of the two Acts even if there was in fact any such conference.

19.3. I verily believe all cooperatives were kept totally in the dark about the offending provisions of the two Acts. I verily believe that the drafts of the two Acts which have far reaching implications for cooperative societies was never distributed to the 5,170 cooperative societies in the country nor were their views sought.

19.4. I attach as exhibit P-10 a copy of a police report lodged on 14 April 2008 by one Datuk Hj. Ahmad Ghazi bin Hj. Abdul Hamid, who is known to me personally. I verily believe he is 65 years old and an active co-operator of more than 40 years standing. In the report, he states that the entire cooperative movement was kept in the dark on these offending provisions of the said two Acts.

20. I verily believe there has been a groundswell of opposition to these amendments once their full effect became known, and that the co-operative movement is shocked and dismayed at these draconian provisions stifling their freedoms.

20.1. I attach as exhibit P-11 a copy of a letter dated 7 January 2008 to ANGKASA from the Midlands Cooperative Union, which represents 39 cooperative societies, querying as to whether ANGKASA had met any party with reference to the establishment of the 3rd Defendant and referring to the Article in the Pelancar October 2007 issue.

20.2. I attach as exhibit P-12 as a bundle a copy of a letter dated 19 June 2008 from the Midlands Cooperative Union and sent to Y.M. Professor Ungku Aziz requesting him to state when ANGKASA consulted co-operative societies on these amendments and a copy of a reply dated 2 July 2008 failing to answer the query.

20.3. I verily believe that the Cooperative Union of Malaysia Berhad, which currently represents 4 cooperative societies, fully supports this action and has joined forces with the Midlands Cooperative Union to protest against the unconstitutional provisions in the two Acts. I attach as exhibit P-13 a copy of a letter dated 13 July 2008 from the Cooperative Union of Malaysia addressed to chairmen of cooperative societies calling upon everyone to support this action and also a copy of their letter dated 15th August 2008 to the 2nd Defendant objecting to these amendments with a resolution from a Workshop of co-operatives fully supporting the Plaintiff's legal action herein.

21. I attach as exhibit P-14 as a bundle documents shown in the “Pelancar” magazine of June 2008 relating to a dispute within the Board of ANGKASA which resulted in a majority of the Board terminating Y.M. Professor Ungku Aziz as Chairman of ANGKASA, and a decision by Dato Mangsor bin Saad, the chief executive officer of the 3rd defendant and the deponent of the affidavit in reply, reinstating Y.M. Professor Ungku Aziz.

21.1. I verily believe that Dato Mangsor bin Saad the Chief Executive Officer of the 3rd Defendant acted in bad faith, in conflict of interest and unlawfully in adjudicating the dispute between Y.M. Professor Ungku Aziz and the board members of ANGKASA purportedly under sections 62 and 64 of the Co-operative Societies Act 1993 and in reinstating Y.M. Professor Ungku Aziz.

21.2. I am advised by the Plaintiff’s solicitors and I verily believe that such a dispute more properly ought to have been adjudicated by the Cooperative Societies Tribunal pursuant to section 83 of the Co-operative Societies Act 1993 which is an independent tribunal which took over the duties of the Registrar General of Cooperatives to adjudicate such disputes.

21.3. I verily believe that one of the 7 charges against Y.M. Professor Ungku Aziz made by 9 out of 14 Board Members of ANGKASA was that Y. M. Professor Ungku Aziz failed to voice out and defend the interests of co-operatives in the drafting of the Co-operatives Commission Act whilst acknowledging that ANGKASA had never organised any discussion with its members relating to the establishment of the 3rd Defendant and the drafting of the Act.

21.4. I verily believe Dato Mangsor bin Saad’s conduct in exercising powers in excess of his jurisdiction in a matter in which he was implicated gives an indication that the Malaysia Cooperative Societies Commission is moving from the outset in the wrong direction.

22. I am advised by the Plaintiff’s solicitors and I verily believe that undefined powers given to government controlled corporations will promote despotism. I verily believe that the public will be left unprotected when the despot is not entirely benevolent. I verily believe that there is no substitute for the checks and balances as provided for and as required by the Federal Constitution.

23. I verily believe that Dato’ Mangsor Bin Saad who affirmed the affidavit under reply dated 9 July 2008 was formerly the Secretary General of the Ministry of Industrial Development and Cooperatives. I verily believe that he was fully aware or ought to be fully aware that the proposed two Acts were not distributed to all cooperative societies for comment but Dato’ Mangsor has affirmed an affidavit giving the impression that the offending provisions of the two Acts were agreed to by all cooperatives. Alleged liquidity problems of certain co-operatives

24. I crave leave to refer to Dato’ Mangsor Bin Saad’s averments to the effect that these offending provisions are necessary to remove the incidence of liquidity problems faced by cooperatives societies in the 1980s and in 1998.25. I verily believe that it is common knowledge that the recession in 1985 and the Asian Financial Crisis in 1997/1998 affected all sectors of the economy and not merely cooperative societies.

25.1. I verily believe that licensed banks, listed public companies, finance companies, private limited companies and even small registered businesses were all badly affected by the said 1985 recession and the 1997 Asian Financial Crisis. I verily believe that the Government in Malaysia as well as other countries that were affected had to take measures to assist enterprises in crisis because of the general economic downturn in those two periods. I verily believe this assistance was rendered even to licensed Banks, licensed Finance Companies and Government linked corporations.

25.2. It is not fair because of the recession in 1985 and the Asian Financial Crisis in 1997/1998 now to single out cooperative societies to be subjected to laws which are on the face of it, draconian, which will curb their enterprise and deprive them and their members of their money at the whims and fancies of persons in control of the defendants utilizing their unlimited powers given by the provisions now being challenged in this action.

26. I crave leave to refer to the newspaper article dated 1 January 2008 attached as exhibit DM-4 to the affidavit under reply. I verily believe that the said newspaper article does not state the name of the author and it is more in the nature of an advertisement for the Malaysia Cooperative Societies Commission the 3rd Defendant.
Mismanagement by a few no reason to infringe liberties of the many

27. I aver that there are sufficient safeguards which are constitutional within the Co-operative Societies Act 1993 which if properly utilized will protect members of co-operative societies from mismanagement.

28. I verily believe that the Bank Negara Malaysia’s audit of the accounts of 13 cooperatives in 2004 showing that the accounts of 10 cooperatives were unsatisfactory or very unsatisfactory does not justify breaches of the Federal Constitution. I verily believe that under powers contained in Section 71 of the Cooperative Societies Act 1993 the Registrar-General of Cooperatives ought to have dissolved those cooperative societies whose accounts were unsatisfactorily kept. I verily believe that the officers who were responsible for the maintenances of such unsatisfactorily maintained funds ought to have been charged in court. I verily believe that no such action was taken. I verily believe that it is not proper to castigate cooperative societies as a whole because of the state of a few.

29. I verily believe that exhibit DM-5 in the affidavit under reply shows that 3 cooperative societies’ accounts were very unsatisfactory in the year 2003. I verily believe that the affidavit does not say what action was taken against those cooperative societies. I verily believe that these 3 cooperative societies have not to this day been liquidated by the 2nd or 4th Defendant through the Registrar-General of Cooperatives under his powers in Section 71 of the Cooperative Societies Act 1993 nor were their officers charged in court. I verily believe that if existing laws are not properly enforced further unconstitutional laws will not help at all.
Bank Rakyat & CCB

30. I verily believe in the same said newspaper article the crisis in Bank Kerjasama Rakyat (Bank Rakyat) in 1978 and the financial crisis in Bank Pusat Kerjasama (CCB) in 1985 are incorrectly lumped together as if they were similar instances of mismanagement.

31. I verily believe that it is public knowledge that in the case of Bank Rakyat there was criminal breach of trust and its managing director one Dato Abu Mansor was convicted and served a prison sentence.

32. I verily believe that in the case of Bank Pusat Kerjasama (CCB) there was no mismanagement. The said Bank Pusat Kerjasama was affected by the recession in 1985. I verily believe that there was no evidence of financial mismanagement of CCB at all whatsoever. I verily believe that the Government and Bank Negara Malaysia were unable to identify any instance of criminal breach of trust or any similar misconduct in CCB at all.

ANGKASA

33. I verily believe and reiterate what I stated earlier that ANGKASA has not acted as a representative of cooperative societies in the country. I verily believe that if ANGKASA is indeed a body representing cooperative societies in this country ANGKASA totally failed to assist numerous cooperative societies who had invested money in and who were shareholders in CCB.

34. From my recollection, from information in the Plaintiff records and from my conversations with other co-operators aver that in 1985 CCB had very large sums of money owing to it payable in monthly instalments over several years. I verily believe that there was more money owing to CCB than money owing by CCB to others. I verily believe that despite this, after substantially settling depositors and when the recession had cleared, Bank Negara Malaysia assigned the business of CCB to Phileo Allied Bank Berhad, a corporation which is not a cooperative society, leaving high and dry the shareholders of CCB most of whom were cooperative societies.

35. I verily believe that ANGKASA (if it in fact “represented “cooperative societies) did nothing whatsoever at all and could do nothing at all to prevent cooperative societies who were shareholders in CCB losing the whole of their investments running into millions of Ringgit in CCB.

36. I verily believe that when ANGKASA was originally formed the idea was that it would look after and represent the interests of rural cooperatives in addition to urban cooperatives. I verily believe that sometime in 1972 or thereabouts when ANGKASA was formed, it was intended to neutralize the Cooperative Union of Malaya which at that time represented cooperative societies in the country to promote the interests of cooperative societies and to make representations to the Government from time to time on matters relating to cooperative societies. The Cooperative Union of Malaya had no other function and was a force to be reckoned with, perhaps, I verily believe to a discomforting extent for the authorities then.

37. I verily believe that ANGKASA was thereafter given a sort of licence by the authorities to receive deductions from the salaries of members of any cooperative society and to pay the money so received to that cooperative society in consideration of payment to ANGKASA of a commission of 1% of the receipts. Such commissions were deducted by ANGKASA from the salary deduction at the expenses of the cooperative society to whom the salary deductions amount was payable as a loan instalment repayment. This commission was a substantial sum when lumped up altogether. I verily believe with the increase in cooperative societies using this facility the commission is now reduced to 0.6%. This is also a substantial income for ANGKASA. I attach as exhibit P-15 a copy of the audited income and expenditure of ANGKASA for the year ending 30 June 2007 showing about RM44,000,000.00 as substantially the commission income of ANGKASA from these salary deductions. I verily believe ANGKASA was wholly spending the money that they were collecting and did not act as a representative of the cooperative societies at all.

38. I verily believe that up to that time salary deductions were made by employers in accordance with the provisions of Section 24(3) (a) in the Employment Act 1955 permitting such deductions from salaries and the employers paid such deductions directly to the cooperative society to whom that deduction was owing without payment of any commission to a third party. I am advised by the Plaintiff’s solicitors and I verily believe that except as permitted by Section 24 of the Employment Act 1955 deductions cannot be made by employers from salaries of employees.

39. I verily believe that since then almost entirely the only business of ANGKASA has been to receive such loan deductions and to distribute them. I verily believe that ANGKASA also organises some courses, seminars and conferences. I verily believe that this is a duplication of the function, of the Cooperative College of Malaysia in Petaling Jaya which, as its sole function organises courses in cooperative enterprise. I verily believe that these courses, seminars and conferences organised by ANGKASA are usually poorly attended although large sums are expended in organising them.

40. I attach as exhibit P-16, P-17 and P-18 one set each of the annual reports of the national executive council of ANGKASA for 3 consecutive years showing their activities for the year 1 July 2006 to 30 June 2007, for the year 1 July 2005 to 30 June 2006 and for the year 1 July 2004 to 30 June 2005 respectively which I verily believe show that ANGKASA never made any representations whatsoever at all to the Government or to any party at all whatsoever on behalf of cooperative societies in the country. I verily believe that for as long as I am aware ANGKASA never considered it their function to ascertain problems of cooperative societies to make any representations on their behalf at all.

41. I am advised by the Plaintiff’s solicitors and I verily believe that the gazette notification published by the 2nd Defendant shown in exhibit DM-2 in the affidavit under reply stating that ANGKASA is the body representing cooperative societies is only for the limited purpose of Section 57 (2) (b) of the Co-operative Societies Act 1993 and does not authorise ANGKASA to make representations on behalf of the Plaintiff to agree to unconstitutional measures. I verily believe that unless ANGKASA is in communication with all cooperative societies on different issues and they make representations on behalf of cooperative societies in times of need ANGKASA cannot be considered at all to be both in fact and in law a true representative of cooperative societies on all matters. I verily believe that it is for cooperative societies to declare that ANGKASA is authorised by them to represent cooperative societies and not for the Government to do so.

Banks are different compared to co-operative societies

42. I verily believe that the provision requiring persons wishing to be appointed as directors of licensed financial institutions to first seek the approval of Bank Negara Malaysia should not be a precedent for requiring persons elected to the board of cooperative societies to be approved by the Malaysia Cooperative Societies Commission.

43. I am advised by the Plaintiff’s solicitors and I verily believe that the provisions in the Banking and Financial Institutions Act 1989 when read as a whole are materially different to the impugned provisions in the amended Co-operative Societies Act 1993.

44. I verily believe that licensed banks take deposits from members of the public whereas cooperative societies only deal with their own members.

45. I verily believe that currently all cooperative societies have by-laws approved by the Registrar General of Cooperatives. Unfit persons are already excluded by provisions in the by-laws disqualifying members not in benefit, members previously expelled from other cooperative societies within the preceding two years and members who are in default of their dues. I verily believe that such provisions if strictly enforced are already sufficient to ensure transparency and good management

46. I verily believe that there are only a few licensed banks in the country whereas there are 5,170 cooperative societies. On an average of 12 members in the board of each cooperative society the Malaysian Cooperative Societies Commissions will have to vet about 62,040 ordinary people each year to ascertain who are fit to serve in the board and who are not.

47. Members of cooperative societies are by and large ordinary people. I verily believe that submitting names of ordinary people to the Malaysia Cooperative Societies Commission for their approval before such ordinary people take office to manage their own funds is a severe interference with the rights of ordinary people to assemble and associate for their mutual benefit. I verily believe that with ordinary people as members of cooperative societies there is a real danger that the Malaysia Cooperative Societies Commission will not be likely to consider ordinary persons who oppose the Commission’s decisions as fit persons to serve in the board of any cooperative society.

48. I aver that the said offending amendment requiring the Commission to certify elected representatives to be fit persons does not fit Abraham Lincoln’s definition of a democratic system as being Government “of the people, for the people, by the people”.

Too much potential for abuse

49. I verily believe that the initial action of the Defendants foretell the future of the Malaysia Cooperative Societies Commission. I verily believe that Dato’ Mangsor Bin Saad, when he was Secretary General of the 3rd Defendant, the Ministry of Industrial Development and Cooperatives, had previously while in service studied and put up proposals and approved the setting up of the Malaysia Cooperative Societies Commission and approved the funds to be paid for the said purpose. I verily believe that he has been now appointed the executive chairman of the Malaysia Cooperative Societies Commission. I verily believe that there is a likelihood that there may have been a lack of detachment previously in the said administrative decisions. I am advised by the Plaintiff’s solicitors that for good Government the Federal Constitution envisages and provides for an independent civil service who have to be detached from politicians when carrying out and implementing policies for the common good.

50. I verily believe that cooperative societies develop out of the self-help motives of its members and should not be used or abused for political purposes, but the provisions of the two Acts leave it open to such abuse.

50.1. I attach herewith as exhibit P-19 a copy of newspaper reports in both the Berita Harian and New Straits Times of 6-7-2008 showing that a sum of RM30,000,000.00 from the Malaysia Cooperative Societies Commission will be distributed by state assemblymen in consultation with local cooperative department officers to the “poor”. I verily believe that this shows that the Malaysia Cooperative Societies Commission is likely to be used as an engine to promote the popularity of politicians.

50.2. I attach as exhibit P-20 another report dated September 2007 but only now shown to me which shows in page 8 and 9 that this allocation has been increased to RM69.5 million. I verily believe this increased allocation will be used for political purposes and not to promote cooperative societies which are always based on contributions from its own members and based on their use of such funds for their mutual benefit.

51. I verily believe that this same principle will be used to give out loans and give out doles from the collection from cooperative societies paid to the Central Liquidity Fund and the Cooperative Deposit Account which will be totally under the control of the officers of the Malaysia Cooperative Societies Commission and politicians without any benefit whatsoever to the cooperative societies from whom the money is compelled to be paid out to the two funds.
Provisions clearly inconsistent with Federal Constitution

52. I verily believe that the offending provisions of the said two Acts for contribution to the Cooperative Deposit Account and Central Liquidity Fund have the effect of stripping cooperative societies and their members of control over their own money or part thereof and their management of it without the need under Article 13 of the Federal Constitution to give adequate compensation to the said cooperative societies for the use of such funds.

53. I verily believe that making every single offence under the Malaysia Cooperative Societies Commission Act 2007 and the Cooperative Societies Act 1993 as seizable without regard to the severity of the offence or offences, is both draconian and contrary to the Federal Constitution. I verily believe that it will give the Malaysia Cooperative Societies Commission and politicians enormous, and in situations absolute powers not only over the funds of members in cooperative societies but also over the person and personal liberty of ordinary people who join cooperative societies and who serve as officers in cooperative societies. I verily believe that the said provisions can be used or abused to frighten or terrorise innocent members of cooperative societies to submit to various unconstitutional demands of the Malaysia Cooperative Societies Commission.

54. I verily believe that there is a degree of confusion on the part of the Defendants. On the one hand Dato’ Mangsor Bin Saad quotes figures to show that cooperatives societies are badly managed but on the other hand the Defendants have announced in their newspaper reports that they want to increase the number of cooperative societies from 5,170 societies to 10,000 societies by 2013 as shown in exhibit P-19 above.

55. I am advised by the Plaintiff’s solicitors and I verily believe that while Parliament has powers to make laws on cooperative societies, under the Federal Constitution such laws must be consistent with all the provisions of the Federal Constitution.

56. I ask that the fact that the Malaysia Cooperative Societies Commission has already started functioning should not be held against the Plaintiffs. This is because I am advised that the Plaintiff’s solicitors were prepared to proceed on 18-3-2008 and 20-6-2008 when this matter came up for hearing but on both dates counsel appointed by the Defendants asked for adjournments to prepare and file an Affidavit In Reply which said affidavit was only served on the very morning of 11-7-2008 when the action came up for mention. I verily believe that during this time the 3rd defendant carried on functioning despite matters pending before this Honourable Court.

57. I ask that the affidavits filed herein be read in open court and arguments be held in open court because cooperative societies and all their members will be affected by and are interested in these proceedings.

Affirmed by the deponent named above


Before me,


Commissioner for Oaths

CO-OPS MALAYSIA CONTRIBUTE 1% OF GDP

KUALA LUMPUR, July 8

Cooperative societies in the country contribute only one per cent to Gross Domestic Product (GDP), the Dewan Rakyat was told today.This was a far cry from the contribution made by cooperatives in developed countries which accounted for 10 per cent of the GDP, said Entrepreneur and Cooperative Development Minister Datuk Noh Omar."

It is for this reason that the Malaysian Cooperative Societies Commission (MCSM) has created 100 business opportunities for over 600 cooperative societies and it plans to create 800 more cooperatives based on categories, functions and areas."We also plan to nurture 200 more entrepreneur cooperatives as we want cooperatives to be managed like private companies and not as thrift companies," he said in reply to a supplementary question from Azan Ismail (PKR-Indera Mahkota).

To a supplementary question from Ismail Mohd Said (BN-Kuala Krau), Noh said in an effort to eradicate poverty, 30,000 grants would be given to 300 poor people in each constituency to subscribe to shares in the cooperatives.

To the original question from Azan, Noh said RM22.942 million in transactions were carried out by cooperatives in 2007, RM22.949 million in 2006, RM22.953 million in 2005 and RM22.940 million in 2004.-- BERNAMA

ACTS OF PARLIAMENT AND THE STATES

DO ACTS OF PARLIAMENT AND STATES GET DISTRIBUTED TO THE PUBLIC INTEREST GROUPS AND THE PUBLIC WELL IN ADVANCE BEFORE THEY ARE TABLED FOR ADOPTION AND PASSED INTO LAW - OR LATER BY WHEN IT IS TOO LATE TO ADDRESS AND REMEDY THE PROBLEMS CREATED BY THE ARMCHAIR BEURAUCRATS.

The Act applied in the case of the doctor recently jailed for not registering his clinic was passed in a manner typical of our Parliament – legislation was drafted secretly and surreptitiously and then rushed through Parliament.

Obviously, no one has the chance to read drafted legislation nowadays. And many don’t bother reading the drafts because they may be too busy scrounging around for other favours. Many do not even dare ask that drafts be posted for public scrutiny and comments as they would in civilised societies.

Laws must be passed only after they have had the consent of the governed, not the consent of those waiting for contracts and other perks. Drafted laws must be circulated well in advance to the public and civic groups so that people with a greater interest in the subject – and people whose love for their country is greater than their love for contracts and perks – have a chance to study and discuss the legislation.

It is apparent from the many bills that just fly through Parliament, that no member of the cabinet really takes a serious interest in reading drafted bills. Bills also receive rushed readings as evidenced in many cases.

The law passed by Parliament that might have lost this country a good doctor is a fine example of the ludicrous manner in which Acts are drawn up and passed.

THE COOPERATIVE SOCIETIES (AMENDMENT) ACT 2007 AND THE SURUHANJAYA KOPERASI MALAYSIA ACT 2007

Soon, two more rashly-passed bills – the Cooperative Commission Act 2007 and the Coooperative Societies (Amendment) Act 2007 – will pose problems for the more than three million people who are members of cooperatives in this country. Both bills are designed to strip cooperative societies of their funds for use by a bunch of bureaucrats who have no clue about managing or operating cooperative societies in real life situations.

Some urban cooperative societies have existed for more than 80 years, and many members have saved for their retirement and other needs exclusively through the cooperatives.

The two Acts were never brought to the public’s attention or to the attention of the more than 4,000 cooperative organisations in the country. Apparently, they were discussed with certain academics with little knowledge on how to manage and operate cooperatives.

Now that cooperative members are aware of the new legislation, cooperatives are finding themselves inundated with applications from members wanting to resign and withdraw their funds. This may portend the doom of voluntary cooperatives in the urban sector.

Without funds, and without the zeal of the cooperative members who manage these large public sector cooperatives, the movement will slowly cease to exist in this country.

Cooperatives in rural areas may creep along for sometime before they too wither and pass away. This will mean the end of the cooperative movement in Malaysia and the end of an era.

Long live the meaningless bills that are hurriedly passed by our ever alert members of Parliament!

THE SOCIAL CONTRACT - HOW DOES IT AFFECT CO-OPERATIVES

Man is born free, but everywhere he is in chains." - Jean Jacques Rousseau, 'The Social Contract'

The social contract is nothing more or less than a vast conspiracy of human beings to lie to and humbug themselves and one another for the general good. Lies are the mortar that bind the savage individual man into the social masonry." - HG Wells, philosopher and science fiction author.

How committed must an intellectual be? How passionate a life must an academician live? How incorruptible must one's ideals be in face of a country such as Malaysia whose government is at the brink of what Mekkah was at the time of the emergence of Prophet Muhammad (Peace be upon Him)?

These are my thoughts upon hearing that Dr Syed Husin Ali is launching the latest edition of his classic work on the analysis of the Malays.

I did not get the chance to become a student of Syed Husin, whom I have never met but have known through his writings. He would be on the top 10 list of those I would like to meet. I would have been a different student had I been guided by this man; one of the most respected public intellectuals Asia has ever known. He is an Antonio Gramsci of our times.

His story of his year of detention under the government-blessed instrument of dehumanisation called the Internal Security Act, is poignant. I was perhaps 11 when the ISA arrests happened. He will go down in history as one of the most conscientious intellectuals whose passion must be emulated. I was fortunate not to be ISA-ed. My passion must now be to write about the abolishment of the dreadful Act. That's the sacrifice Syed Husin has taken in order to get one's message of social justice and committed intellectualism across.

Syed Husin's thesis

In The Malays, their problems and future, Syed Husin developed the thesis that arguably explained the predicament of the contemporary Malays. He looked at the structure of domination that has plagued this race from feudal times immemorial. Reading Syed Husin is like reading Karl Wittfogel, Antonio Gramsci and Fredric Jameson all in one. In his seminal work, Syed Husin presented a genealogical order of the Malays, dissected its historical-materialistic dimension, provided a critique of the nature of elitism vis-a-viz pattern of ownership, and lastly presented a perspective of change that gives hope to this race that has been disgraced by its own political elite.

Like Wittfogel, he looked at society as an evolution of an entity in which the agriculture and maritime power not only gave rise to feudal lords but industrial power gave birth to the total power of the ruling regime; one that controls not only the productive forces of society but also created the religious class that culminate in the present day branded-religio-political ideology of "Islam Hadhari."

Like Gramsci, Syed Husin wrote about the emergence of the "hegemony of the ruling class" particularly in the Mahathir Administration in which what is projected to the masses is an image of "benevolence albeit authoritarianism" and the perception of "moral and intellectual leadership" foundation upon the power of Fordist industrialism, encultured in the image of production of goods such as national cars, microchip and tallest towers.

For 22 years, Malaysians were fed with this perception of the success of the Malays. Syed Husin meticulously analysed. Mahathir’s "Malay dilemma", Sanusi Junid's "Mental revolution" and Malik Munip's "Ketuanan Melayu/Malay dominance" amongst the leit motif of this new era of Malay industrial bourgeoise-ism that contributed to the near-destruction of this race itself circa 2008.

Like Frederic Jameson’s work on the cultural logic of late capitalism, Syed Husin wrote about a Malay history that marginalised the people and glorified the advancement of capitalist ideology, creating classes with material and cultural capital.

What went wrong with the Malays, as Syed Husin has analysed on a tour de force of Malay cultural analysis? What then must the Malay do, as he proposed as well?

The problem lies not in the here and now but in the past; one that needs to be de-constructed and reconstructed. It lies in the Malay psyche. It lies in the notion of hegemony as it relates to the political-economy of totalitarianism and controlling interests that continue to cement the master- slave narrative/relationship of the ruler and the ruled. That master-slave narrative has become a technology of psycholinguistic control and institutionalised as "culture".

The Portuguese, Dutch, Japanese, and British colonialists succeeded because the fertile ground of the slave mentality is already prepared historical- materialistically. We can see this mentality in the idea that a Malay political leader must not be challenged (such as in case of the presidency of the Umno) and this is a manifestation of this neo- feudalism hypermodern inner construct of the Malay in the Age of Cybernetics. Let us further analyse this psychological contradiction, using current perspectives of hegemony the Malays must learn to use in order to move beyond this non-issue of Malay politics.

The "Either-Or" illusion/dimension of the Mahathir-Abdullah problematique is not the issue. This is merely a manifestation of the shadow play of the "winners of history", and in what French sociologist Pierre Bourdieu would term as the "habitus" and the 'disposition' of the neo-feudal Malay mentality that will require a Lacanian (postmodern psycholinguistics) analysis. The character of the controlling interest, for example, in the issue of the Johor half bridge presents us with a holistic picture of the immense success of the collaboration between the ruler and the local political-economic elite in making sure that hegemony is maintained for material gains.

The common Malay does not need emotional outbursts or a Cold-War-ish 'amuk' as a tool of analysis, rather they need an excellent view of their own socio-psychological history to establish an even better foundation of a new society. At present, because of the moral bankruptcy of their own leaders, the poor common Malay is unfairly carrying the image of a 'silently-reproduced' people who are betrayed by their own 'nationalists' – all in the name of Takkan Melayu Hilang di Dunia. ('The Malay Shall Never Perish from this Earth'): a leitmotif of thought-control that masks the historical-material-political-economic nature of structural violence.

The non-Malays must understand the predicament from an intellectual perspective and must learn to arrive at a common ground to help each other progress to eradicate poverty and restructure society. We might have misunderstood each other based on selective historicising that have been produced as artifacts and historical facts and disseminated to each generation. The only history we know in short is the history of the ruling class.

At every epoch in history it has been such. The winners write history, the losers write poetry or study anthropology. Even the non-Malays have their own master-slave narrative and their own history of 'mental enslavement' that they need to reflect upon, revolt against, de-construct, and reconstruct so that only the signs, symbols, significations that are truly 'humanising' will be allowed to flourish.

The Yap Ah Loy symbolism of the 'founder' of Kuala Lumpur is a convenient mask of history that hides the structural violence embedded in the war over the control of tin mines. The history of the indentured servitude of the Indians in British Malaya is presented as 'facts' and seldom as narratives of human suffering and bondage in the historical march of progress of the American automobile and canning industries.

But how have the Malays been hegemonised and mentally imprisoned by their own rulers? We need to look at what 'hegemony' means; a term usually popular in international relations but ought to be extended into the realm of psychological construct in the analysis of cultures. Writings on the idea of hegemony, with its Greek root word 'hegemon' meaning 'lead', have mainly been popularly attributed to the work of the Italian intellectual Antonio Gramsci. For him, 'hegemony' represents a moment in history, or a 'historical bloc' in which the leader (in this case Mussolini,) gains acceptance based on his ability to lead, morally and intellectually, even in fascistic circumstances, as in the case of Mussolini, a Fascist Italy.

The status of civil society is achieved when the masses or the people accept the ideas of the ruling class (the regime and its doctrine) as common sense. As I have alluded to earlier passages above, the circumstance of the acceptance of this condition, according to Gramsci, is made possible with the dominance of 'Fordism' (the ideology of the modern system of production based on the influence of Henry Ford's automobile industry) as a common-sensical ideology; of which man's creative instincts are controlled, through a rationalisation process ideologised by Fordism and Americanism.

Common sense allows the Malays to accept politically whatever fate has dictated for them to behave. Historically however, the idea of hegemony is certainly not new. Religion, myth, and the supernatural have played their hegemonic role in maintaining a common-sensical view of how human beings should be cast and ordered on the ladder of existence and how to behave or be controlled socially and politically. The idea of the 'divine rights of kings' in the Middle Ages, is illustrated in the classic example of France's Louis XIV, 'The Sun King' who ruled for 72 years from the age of four, or universally, as in the case of the feudal monarchs in China, Japan, and India.

In Karl Marx's later writings, the analyses centered around the relationship between the development of classes to the maintenance of the ideology produced by the ruling class through hegemonic formations that correspond to the mode of economic production. In a similar vein, the French Enlightenment thinker Jean Jacques Rousseau wrote about hegemony in his idea of the 'social contract' in which the ruler and the ruled are bound by a covenant that would facilitate the maintenance of an orderly society. In modern times, the media especially television, plays its role in maintaining the hegemony of the advanced capitalism.

In the case of the Malay society, the idea of hegemony or 'political common sense' can be traced to the myth of the covenant between Sang Sapurba (the mystic/ philosopher-king) and Demang Daun Lebar (the ruler/representative of the people) in which the myth states that as long as the leader is just, the people will not depose him. Hegemony is also achieved through the installation, imposition, and inscription of the British colonial mode of production that put the class of colonial serfs or indentured slaves (paddy farmers, tin miners, and rubber tappers) in an orderly and appealing master-serf relationship.

The Algerian thinker Albert Memmi would term this as a classic coloniser-colonised relationship. Daulat, which connotes 'the divine rights of the Kings' is the hegemonic state of political being-ness wrought upon the Malays, especially during the Melaka sultanate spanning to the present day of the reign of the constitutional monarch and the nine hereditary rulers. Hang Tuah was too blind a hero. If in the days of the Sultanate of Melaka, daulat played its role as a hegemonising strategy similar to that of the concept of the 'divine rights of kings' in modern Malaysian political context, the modern state or the kerajaan (a synthesis of the concept of kingdom and statehood) operates to maintain that hegemony.

The idea of daulat is cleverly inscribed onto the consciousness of the Malays. A good citizen is defined as one who is law abiding, God-fearing, and one who pays total allegiance to the Malay sultans or raja and the constitutional monarch such that to question the supremacy of the rule of the ceremonial king would be culturally prohibited. In many an analysis of the transformation of the Malay society from the times of the Melaka Sultanate to the emergence of the Malay nationalism we find the conclusion of the idea of a good Malay subject is one who surrenders total obedience to his or her Ruler (the sultan or the Raja).

The king is said to be '(Allah's) representative on this earth' and is thus bestowed with the Divine Rights. Social status is calibrated based on the sophistication of the signs and symbols of the Malay sultanate.

For example, royal awards are presented yearly to those who have demonstrated good service and relationship to the constitutional monarchical system. Upon receiving these awards, some recipients would even be given honorific titles. Many will use their honor to dishonorably gain economic privileges. The notion of the daulat or the 'divine sanction' still continues to this day.

The concept of a hero in Malay society is enshrined in Hang Tuah, the most popular symbol of the warrior-class in Malay history; the good 'polyglot', the magical-mystical Malay hero who pledged blind loyalty to the Sultan. The image of the warrior-blind loyalist is well-inscribed into the literature and consciousness of the Malays.

Today, enshrined, is the modern-day doctrine of allegiance to the ruler in the form of the Rukunegara or the 'Principles of the Nationhood'.

The myth of Hang Tuah, arguably, together with his friends Hang Jebat, Hang Lekir, and Hang Lekiu has been inscribed into the consciousness of the Malays and forms the foundation of the master-slave narrative. The ideological state apparatuses are employed to advance the economic development of the nation as well as to maintain social order so that the state can continue to pursue its development projects along the lines of state-sponsored capitalism that is increasingly taking the character of the corporation nation-state coloured by politics of race; a system that continues to prosper via a tight nexus between politics and business.

The Mahathir-Abdullah dilemma is a Malaysian dilemma that signals a breakdown in the political economic system; one that reduces the multiculturally impoverished into statistics of the New Economic Policy and glorifies individual political leaders as 'captains of industry' and 'nationalists' drowned in the wave of globalisation.

The history of the people of Malaysia, and especially of the Malays, must be rewritten in order for the marginalised, the enslaved, the colonised, and the wretched to be allowed to speak up and tell us what a more progressive historicising means.

A required reading

The perspective above provides an enrichment of the arguments put forth by the author of The Malays: their problems and future. Syed Husin Ali, the most respected committed intellectual has not only provided a critical analysis of what the Malays have gone through but what lies ahead particularly at this "defining" moment in which the Malays have finally realised the mental structures that are shackling them; structures built by the individuals and ideology that grew out of the historical and material conditions that too, must be deconstructed.

Syed Husin Ali's The Malays: their problems and future is a must reading for all Malaysians wishing to understand the predicament this country is in.









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ARM CHAIR CIVIL SERVANTS DEVISE CO-OPERATIVE LAWS

THE COOPERATIVE ACT (REVISED) 2007 MAKE THINGS LOOK SO EASY FOR ARM CHAIR GOVERNMENT SERVANTS WITH NO KNOWLEDGE OF MANAGING AND OPERATING CO-OPERATIVE ORGANISATIONS.

CCB COLLAPSED IN 1983. A NEW ACT CAME UP IN 1993. { THEN HOW IS THE COOP ACT 2007 INVOLVED WITH CCB.}

PULLING WOOL OVER THE EYES OF CO-OPERATORS.

The government recognized the cooperative movement as the third sector of the economy. As of 31 December the movement’s 5,861,000 members in 4,918 co-op societies generated RM7, 359bil in share capital with fixed assets of RM38bil.

Due to the instability caused by the mismanagement and corruption scandals of the 1980s, a new Cooperative Commission was passed by parliament.

It seeks to oversee and regulate cooperatives under the Cooperatives Act 1993, which is under amendment. Such regulation was due to the collapse of the Central Co-operative Bank (CCB) in the 1980s which caused others with dealings with it to be in trouble. Misappropriation of funds and mismanagement continue to plague the movement.

The new Commission is perceived to have flaws which need to be rectified opined a forum on cooperative societies. The details of the Cooperative Commission especially the 26 areas of prosecution for those found in breach of Cooperative laws was a point. A panel speaker pointed this as "too severe" for it could cause officers, many of whom held positions voluntarily, to shy away from top posts. { NOTE: This is what the powers that be want. So that cronies can take their places.}

The National Cooperative Organization of Malaysia (Angkasa) was criticized for failing in its role as an apex body to inform its members of changes.

A panel speaker said the ministry consulted Angkasa on the changes and inclusions but the members were not told.

New funds as the Co-operative Deposit Account (CDA) and the Central Liquidity Fund (CLF) were set up under the new law, requiring cooperative societies to put their finances in their own statutory reserve fund while "excess" monies are put into the CDA.

Referring to the Cooperative Development Trust Fund (CDTF) and the Cooperative Education Trust Fund (CETF), the Movement has not been told how their contributions to the two existing funds were used.

While monies in their Reserve fund, were used for investment, leaving it in the CDA would hinder the growth returns. These real concerns affect the members who are mainly from the lower income group and senior citizens.

Angkasa deputy president Prof Dr Mohd Ali Baharum said "there was nothing to worry about if co-op society leaders played by the book."

As for the CDTF requiring a 1% contribution from their net profits and the CETF, a 2% contribution, Angkasa general manager Nasir Khan Yahaya explained both were managed by committees appointed by the ministry. ( Who know nothing about physically operating and managing businesses.)

"We request finances to fund our educational programs from the CDTF through the committee," Nasir said. "We have nothing to do with the CETF that is used to run the Cooperative College of Malaysia. In all only 3% is going out of their coffers for the good of the movement as a whole."

Whereas contributions to the CDA and CLF, Nasir said, would belong to the society but be held in trust by the Ministry for better usage. For e.g. the CLF would be used to help co-operative societies with liquidity problems as a last resort. { If the have liquidity problems they should be closed. Not allowed to continue to survive on other people's monies.}

Besides which only large cooperative societies and credit cooperatives need to contribute to the CLF.

While co-ops needing funds for investment purposes could borrow from the CDA. "At the end of the day, the interest earned from lending activities sourced from these 2 funds would filter back to co-op societies by way of returns on savings," clarified Nasir. (Provided that the Borrowers have the decency to pay back the loans in regular instalments - which seldom ornever happens. Look at Koperasi KOBENA Berhad and Koperasi KOPEMA Berhad and many other Co-operatives of similar ilk. Their gut feeling: " Not our money - So why Pay? The Government will look after us as they have been doing the last 50 over years.)

In regard to members not being notified on the law, Prof Mohd Ali said it was not their place to do so prematurely, as it has not received the royal assent. ( NOTE: There is a limit to such nonsensical replies. Surely the members and the public should know before Laws are enacted - NOT AFTER - so that cronies benefit.)

When that is done Angkasa will undertake programs to orientate our members on how to deal with the chances. Allegation the members concerns and input were not solicited before Angkasa members went to the negotiating table to deliberate on the new act, prompted Prof Mohd Ali to clarify the apex body was aware of the issues faced by members which were raised regularly at annual general meetings. ( NOTE: Members of the Apex Councils are famous for collecting fabulous Allowances and gallavating on "Lawatan sambil belajar" and coming back with no input all to the Co-operative Movement.)

"For instance our members told us they wanted a fund set up as a backup in case certain co-operatives needed finances and that is how the CDA and the CLF came to be."{ NOTE: SO WHY RIP 50% of a Co-ops Funds to give to Co-ops that CANNOT LOOK AFTER THEMSELVES.)

It is fallacious to fear the Commission and the amendments to the Cooperative Act 1963 may stifle the industry. In conclusion it was said "it will be imperative for the guardians of the Cooperative Commission especially those who will be looking after the CDA and CLF to ensure all contributing societies are given the same treatment when the time comes for them to dip into these funds."

Transparency must be the keyword here. { This word does NOT exist in Malaysia.}

In the meantime cooperative societies were advised to obey the new rules before they cast their verdict. After all, there is provision in the law for the minister to implement it accordingly.

RECOMMENDATIONS - 8TH ASIAN CO-OP MINISTERS' CONFERENCE

8th ASIAN CO-OPERATIVE

Ministers’ Conference
12th to 15th March 2007, Kuala Lumpur , Malaysia

Recommendations

8th Ministers’ Conference on Co-operative Legislation and Policy was held in Kuala Lumpur from 12th to 15th March 2007.

The conference was organized by the Ministry of Entrepreneur and Co-operative Development (MECD), Government of Malaysia in collaboration with the ICA Asia Pacific and ANGKASA the National Co-operative Organization of Malaysia.

The main theme of the conference was “Fair Globalization through Co-operatives”.

In all 311 delegates from 22 countries including Hon’ble Ministers Incharge of Co-operative Development from seven countries in the region attended the conference.

The idea of conferencing on vital issues before the co-operatives came in the year 1990 in the background of co-operatives having received preferential support & financial assistance from governments and in turn governments overwhelmingly protecting and supporting the co-operatives with financial assistance, managerial support and tax benefits to promote income opportunities, equality, justice, social equity & social responsibility.

The main purpose of the Ministers’ Conference on Co-operative Legislation and Policy that is organized every 4th year is to understand the priorities of the Governments and assert the advantages of co-operatives in building national economy.

The main objectives underlining the conference include:

• developing conducive and progressive co-operative policies and enactment of proactive legislation reforms;

• enabling co-operatives to adapt with the fast changing global scenario;

• creating a platform at international level for governments & movements to discuss key issues hindering the development of co-operative sector.

The 8th Ministers’ Conference was concluded with the following declaration:

• Noting the multi-dimensional impact of globalization on the socio-economic lives of peoples of Asia and Pacific and their institutions particularly cooperatives;

• Taking note that while globalization and liberalization of national economies has resulted in enhanced economic growth and prosperity, its gains have not been equitably distributed among the people particularly the poorer and more vulnerable sections of the community;

• Appreciating the desire of the Cooperative Movement to participate in the developmental process in harnessing the gains of globalization aimed at poverty reduction, employment generation and equitable national development ;

• Realizing the importance of proactive cooperative legislation and enabling policies for creating conducive environment for development of cooperatives;

• Appreciating the role of ICA to continuously facilitating the dialogue between the Cooperatives and the Governments to enhance the role of cooperatives for the economic growth and prosperity in the region.

We, the participants of the 8th Ministers Conference on “Cooperative Legislation and Policy” held at Kuala Lumpur, Malaysia from 12-15 March 2007:

Urge upon the Governments to catalyze the process of re-orienting the Cooperative Legislation and Policy to strengthen apolitical and autonomous character of cooperatives and to provide a positive level playing field to cooperatives to enable them to compete in the globalize market.

Call upon the Cooperative Movements to contribute effectively in the process of economic development, amongst others, by organizing small producers including farmers, workers and protecting consumers through self-help mode and also ensuring increased participation of women and youth in the cooperatives.

Exhort Cooperatives and Governments to strengthen management capacity, participatory governance and fair business relationship for ensuring healthy functioning of cooperative system through innovative strategies.

Calls upon Cooperatives and Governments in the region to periodically review the efficacy/effectiveness of Cooperative Legislation and Policy as well as to introduce appropriate reforms considering the dynamic changes and trends emerging in their respective national economies.

Recognizing cooperatives are an important and significant sector of the national economy effectively contributing to its development, we affirm our support for the Cooperative Movement as a sustainable and efficient institution through:

1. Encouragement of cooperative entrepreneurship by inculcating entrepreneurial spirit and skills among the members, leaders and managers of the cooperatives through education and training.

2. Attainment of economies of scale and strategic business alliances among cooperatives both domestically and internationally.

3. Role clarity among different tiers to enhance impact of the Cooperative Movement and

4. Harnessing the gains of the fair globalization and liberalization for the benefit of members.

The conference witnessed intense deliberations among the participants and culminated with the group reports on the expectations of the co-operatives from the government and that of the governments from the co-operatives.

The group reports and the interventions by Hon’ble Ministers have formed the basis for the set of following recommendations for the consideration and adoption at the level of the governments and co-operatives:

1. Clear Policy on the Co-operatives:

a. There should be a consistent national policy, recognizing the distinct character of co-operatives as private self-help organisations, operating according to their own rules. Such policy should allow co-operatives to work in all fields of human endeavour and open co-operatives for all citizens.

b. The legislation on co-operatives may be amended only after adopting a conducive national policy on the development of co-operatives.

c. Government’s co-operative development policy should be expressed in clear terms in writing, either in a policy paper or a preamble to the co-operative law.

d. There should be a periodical review of policy and law. The co-operative movement should be invited to participate in policy-making and law-making processes.

e. The policy statement should define what a co-operative is (as what co-operatives are recognised) and what is the role of government vis-à-vis co-operatives.

f. The role of co-operative apex bodies as legitimate representatives of the interests of affiliated societies and their members should be recognized.

g. Based on the principle of subsidiary, the government should allow the self-regulation of the co-operative sector as a mechanism to strengthen the self-reliance of co-operatives within the legitimate legal framework. In that spirit, government should authorize apex co-operative organizations to regulate (not control) the affiliated primary co-operatives.

h. Governments should introduce support measures for co-operatives, where appropriate, for the activities that meet specific social & public policy initiatives e.g. livelihood creation for the disadvantaged section of the society, tax benefits, soft loans, access to public works programs and special procurement provisions.

i. Since the co-operatives combine business and moral values together with ideal governance structure hence should be the most preferred choices in more holistic socio economic development of a country and also in guarding the globalization process.

j. Considering the size and capacity of the co-operative movements in the developing and emerging market economies, co-operatives must diversify into innovative sectors like infrastructure building, service industry, disaster mitigation and preparedness, formal schooling, education and health care.

2. Political neutrality

a. The principles underpinning the co-operatives stress independence of co-operatives, which implies among other things that co-operatives should stay aloof from party politics.

b. The issue of political neutrality of co-operatives means that; co-operative office should not be used as a stepping stone for pursuit of political careers; co-operatives should not be used as instruments for the implementation of political programs and; co-operative leaders should not be used for political aims.

c. Co-operatives must use their weight as a socio-economic movement to lobby for favourable framework conditions like the UK, the cradle of co-operative democracy, there is a Co-operative Party working together with the Labour Party and in Italy and Belgium co-operative groups are organised along the lines of political party programs to build an alternative economic force to lobby for favourable legal, economic and social framework conditions for this sector of “social economy”.

3. Drafting Co-operative Law:

a. The relationship between government and co-operatives must be defined in the co-operative law. Each has to be given its role. Clear limits have to be set regarding government’s powers, especially the power to control and make amendments under the law.

b. Type of law: Co-operative law is organisation law, which has to offer a reliable and lasting legal framework for co-operatives. It should be avoided to mix provisions of organisation law with elements of tax law and regulations for the promotion of co-operative development.

c. Format of law: The options are one general law for all co-operatives or several special laws for different types of co-operatives. In case of several laws, they should follow a similar basic concept.

d. Relations between law, regulations and by-laws: It is important to find the right dose of regulation, avoid over regulation and leave room for autonomy to adjust the provisions of the law to local requirements in the by-laws of individual societies.

The right dose of regulation and autonomy means: Co-operatives must be given autonomy to make by-laws within the boundaries set by the law. Such boundaries are justified if they protect -the special character of co-operatives as a type of organisation, members’ interests, the rights of creditors and the interests of the general public.

e. Law can serve as a checklist to determine - how far autonomy of co-operatives can go and how far restrictions of autonomy are justified.

f. Legal drafts-persons: When drafting co-operative legislation, it is essential to bring the text of the law within reach of the ordinary citizen and co-operator. This means that the law has to be worded in clear and simple terms and avoid heavy technical language (law for citizens not law for lawyers); to avoid high level of abstraction but rather use examples and to avoid cross-references to other laws and within the law. Legal drafts-persons should work in collaboration with specialists from the co-operative movement and should take part in preparatory discussions to learn about the subject matter they are asked to regulate.

4. Contents of Co-operative Law (Issues to be dealt with in co-operative legislation)

a. Definition of co-operative society: The law has to give a clear definition of co-operatives. This can be done by using the generally accepted definition of co-operative society as contained in the ICA Statement of Co-operative Identity.

b. Formation of co-operatives: The law has to provide the tools to determine what is a genuine (bone fide) co-operative e.g. pre-registration audit, need for approval before registration, need to meet certain minimum standards like minimum number of founder members (not too few, not too many, depending on type of co-operative and circumstances).

c. Formation procedures: The requirements to be met before registration should be spelled out in the law, reflecting registration policy. Minimum capital requirements vary from case to case. Therefore, the amount of capital required to start a co-operative should not be fixed in the law, but rather be assessed on a case-by-case basis during pre-registration audit. Bureaucratic obstacles should be avoided.

d. By-laws: The minimum contents of the by-laws have to be defined in the law. However, autonomy is needed to adjust the general provisions of the law to the needs of the specific case. This autonomy should not be unduly restricted by making the law too comprehensive, by detailed regulations or by compulsory model by-laws.

e. Membership, acquisition and termination, rights and obligations: It should be taken into consideration that members are the crucial part of co-operatives. Active membership must be mandatory and members’ interests need to be the driving force behind genuine co-operatives. Interventions must be spelled out to enhance the ability of co-operative leaders to make membership meaningful, in particular to offer a co-operative advantage (membership value, benefits exclusively for members) and to attain member-oriented effectiveness.

f. Equal status of members should be a basic co-operative rule. The importance of active membership, conditions of eligibility, provisions of associate members and transactions with non-members etc must be clearly explained.

g. Business with non-members should not be a barrier for growth. But of course, free riders should not be encouraged. In this regard co-operatives should be prudent enough and maintain their specific profile even while dealing with non-members.

h. Governance: Leadership of elected and democratically controlled office-bearers being a valuable asset and distinctive feature of the co-operative must be protected by the law. Co-operative law must set the framework for election of trustworthy leaders, standards of good governance, accountability and liability of office-bearers by defining - conditions for eligibility to co-operative leadership posts, the term of office (to be fixed in the law or left to be fixed in the by-laws), powers and duties of office-bearers and their liability, remuneration of services (whether paid or honorary, unpaid services), transparency by submitting data and reports to the general meeting, to auditors and to the general public, sanctions against illegal and corrupt practices, member control and minority rights.

i. The relationship between elected directors with professionally qualified and employed managers must be dealt with in the law, laying down what should be the rule and what could be exceptions, setting out who decides the policy and who executes the policy.

j. Audit and supervision: In co-operatives, regular annual or bi-annual audit is a must. The law should regulate, who carries out the audit (specially trained co-operative auditors cum advisers or certified public accountants), the scope of the audit (only financial audit or also management audit, audit of member-oriented effectiveness and social audit) and the scope of supervisory powers of the government agency in charge of administering the co-operative law (inspections at any time, inspections during audit or in case of inquiry).

k. Rules against demutualization: The law should not allow transforming indivisible co-operative capital, accumulated over the years from undistributed surplus, into divisible capital that may be distributed among the current members by transformation of co-operatives into companies or by dissolution. Either such decisions should not be allowed at all or only if a quorum of two thirds or three quarters of all members attend the special general meeting convened for that purpose and vote with a two-thirds or three quarters majority.

l. Merger, dissolution and liquidation: Standard regulations can be used taking into consideration the need of protecting minority rights and the rights of creditors.

m. Women Participation: Women’s role in society is an issue that reaches far beyond co-operative law. Usually, equal rights of women are guaranteed in the constitution. These rights have to be respected by all laws including co-operative law. For co-operative development policy and co-operative law this means that all rules and provisions have to be avoided, which discriminate against women, e.g. in conditions of admission to co-operatives as members.

5. Globalization & Co-op Advantages:

a. In the era of globalization the co-operatives must see it as an opportunity for all the co-ops to highlight and capitalize the CSR aspect of co-operatives evidently distinguishing them with other corporate structures thereby giving them a competitive edge.

b. Co-operatives must adopt universally acceptable standard code of co-operative governance (being more effective than corporate governance) and co-operate globally to protect the interests of most vulnerable section of the society and must incorporate it as one of the guiding principles of co-operatives in the ICIS.

c. Governments should move forward with proactive approach towards serving the interests of poor by creating a harmonious society through co-operatives duly protecting the livelihood of informal sector in rural and urban areas and attaining uniform growth of the society.
d. Governments must involve co-operatives in the WTO round of negotiations on critical issues bothering the small producers, consumers and farmers.

e. Requirement of the World Trade Organization and Agreement on Agriculture necessitates examination of issues such as market access, domestic support, export subsidy, trade related aspects of intellectual Property Rights, sanitary and phytosanitary measures including specific Agreements on varied commodities.

f. Co-operatives at international level must consider the option of setting up “International Co-operative Joint Purchase Union” to transact the procurement and supply of processed farm produce, consumer goods, services etc. in different countries since it will substantially reduce the costs and improve the profit margins.

g. To increase competitiveness of the co-operatives due to structural distinction in the market oriented economy, ICA must create an International Co-operatives’ Commercial Site on its website as hyper link for maintaining a knowledge bank to bring harmony in the co-operative laws of different countries, undertake structural advancements, innovative diversifications and promotion of international trade activities of co-operatives.

h. In order to spread uniform benefits and advantages of globalization, there is a need to establish International Co-operative Bank to financially back up the developing co-operative economies in the world and more so in the terrorism vulnerable and disaster prone countries.

6. Contradictions and Dilemmas:

a. Government expectations and co-operative autonomy: Government expects co-operatives to carry out their operations in line with government’s policy. Government is expected not to interfere in co-operative affairs, except when co-operatives ask government for assistance.

b. Democracy and efficiency: In the event there are no persons with the required qualifications among the members to take on the leadership the option of inducting external directors to join the co-operative to train and groom leaders inside the co-operative movement may be tried.

c. Co-operatives and poverty alleviation: Poverty is not only a problem of lacking resources but also of lacking ability to cope with change. Part of the answer is capacity building. Another means to help may be to provide promoters/development entrepreneurs with capital assistance. If co-operatives are involved in poverty alleviation campaigns, it has to be clear who pays the extra (social) cost: the members, if they so desire or the agency asking co-operatives to become active in this field.

d. Who can promote co-operatives? Promoting co-operatives requires special skills that have to be learned. Therefore, promoters of co-operative development must be trained for their work and need special service conditions to be motivated for their difficult and challenging task. Offering suitable service conditions for co-operative promoters may be more important than offering a suitable co-operative law without an efficient service to administer the law. Co-operatives should be encouraged to enter into strategic smart partnership with private sector in a win win situation to leverage on respective strengths.

e. Limits of co-operative autonomy: There is a need to find the right balance of guidance and supervision of co-operatives on the one hand and autonomy required by voluntary self-help organisations on the other.

7. Conclusions:

a. Co-operative development should interest every government because co-operatives are a worldwide known and tested form of mobilising people and their resources for their own development.

b. When co-operators help themselves by pooling their resources and working together for their own benefit, they create wealth, employment, knowledge and a sense of solidarity and thereby, indirectly, contributing to the development of the country as a whole. Therefore, co-operatives should be officially recognised as desirable and useful organisations having their own distinct character.

c. As locally rooted organisations, directed by democratically elected leaders, co-operatives can become a nucleus of local development in favour of both the poor and the better off. Trust in elected leaders and member/user control is an asset, giving co-operatives an edge over commercial business.

d. An appropriate legal framework can help to elect competent and trustworthy leaders and to hold them accountable. Provision of regular audit by specially trained auditors can enhance transparency and restrict corruption in co-operatives.

e. Co-operative law has to define the boundaries within which co-operatives can work according to their own rules, principles and by-laws, allowing what is beneficial and prohibiting what is detrimental or potentially dangerous.

f. Where government’s co-operative development policy and co-operative laws are made in a participatory process and reviewed from time to time in partnership with the elected representatives of the co-operative movement, the chances of creating an conducive environment for co-operative development are good.

g. Strong and vibrant co-operatives can compliment the efforts of governments in the development of a nation by actively contributing in drafting the public policy and regulating the advocacy work. Co-operative sector must build its capacity to influence legislation & public policy (protection of vulnerable section of the society by involving women & youth in co-op ventures / actions) through active participation in the dialogue with government and lobbying with concerned ministries.

h. Co-operative legislation must be in line with the ICIS and contain provisions on timely conduct of elections, maximum time limit for super session of a managing committee, independent and professional audit, uniform tenure of managing committee, regular and timely conduct of general body meetings, right of a member for access to information, compulsory system of filing returns and provisions for offences and penalties.

i. Acculturation and training programmes for co-operators should be geared towards inculcation of entrepreneurial values as well as best practices in management, finance and governance. This will encourage co-operatives to be more business like, efficient and strategic in identifying new value additive features for the benefits of their members.

j. Co-operation among co-operatives should be enhanced, especially through vertical integration with absolute role clarity so as to improve the bargaining power and flexibility of the co-operatives to operate globally.

k. The trade between co-operatives at domestic and international levels should be encouraged through e-trade, e-commerce, e-auction, e-network and also by organizing regular trade fairs, expositions, participation in international gala trade events and the governments must help co-ops to showcase their strength through policy support.