PN can be categorized as a multi-purpose cooperative which offers the members various different but related or complementary, activities; e.g. marketing, input supply, credit, processing, insurance, retail stores, educational/guidance activities. It is generally believed that a multi-purpose cooperative fulfils a greater need and have a better chance of success than a single-purpose cooperative which restricts itself to one particular activity. In one PN, they could meet the normal requirements of fishermen. Their volume of business would be larger and overhead costs lower. The other advantage is that in the multi-purpose cooperative, it would be possible to establish a close linkage between credit, marketing and supplies. It means that fishery credit has the best chance of success if it is combined with supply and marketing. For example, PN provides credit to a member for his inputs, supplied by PN, which also markets his catch, and records the loan at the same time. Care must be taken, however, to minimize the risk by adopting a step by step approach. It is normally believed that credit should be started only after marketing and input supply have been firmly established.
In theory, there is no limit to the range of things which a PN can do. Examples can be found of PN taking part in many economic activitites as well as non-economics or social activities which include the following:
Marketing
Input supply
Credit and saving
Processing
Cold Store/ice making
Boat repair workshops
Cooperative retail shops
Insurance
Aquaculture
Principles
The principle behind the development of cooperative marketing is that PN will provide fishermen with services which enable them to enjoy higher economic returns, and PN will strengthen its financial standing through the collection of auction fees. Often, the artisanal fisherman is either at the mercy of middlemen, or has no marketing outlet at all. His production is too small for direct sale to consumer, and his bargaining power in relation to fish dealers is low. He does not have transport, since his own production is too low to keep a lorry busy. He has no proper storage. By joining PN, fishermen improve their bargaining position through auctioning and provide facilities, such as transport, packing and storage, which the individual cannot do on his own.
Auction
Fish Marketing Regulations (1973) stipulates that no fish can be dealt with in any wholesale market in producing areas except by way of auction, private arrangements or by such other methods as LKIM may determine by way of conditions in the license. Any lot of fish for auction must be sold to the highest bidder. Where the highest bid is made by two or more person, the sale goes to the person who made the bid first, and the auctioneer decides who made the bid first.
Either PN or LKIM acts as an auctioneer. He act as a “commission seller” on behalf of fishermen. The product is bulked and put up for auction at the LKIM Fish Market Complex. The fishermen receives the price actually obtained and the buyer pays a commission of 5% (maximum) of the sales prices to cover the PN's and LKIM's expenses.
Payment
In completion of auctioning of the fish, the fisherman is immediately paid cash by the buyer. PN or LKIM receives commission daily when auctioning takes place. At the end of the financial year, any profit made by PN will, in accordance with the cooperative principle, after allocation to reserve and payment of interest on shares, be paid out to the member fishermen in proportion to the value of fish each has sold to the PN (i.e. patronage rebate).
Value added
PN or LKIM operates the systems of sorting and grading which usually increase the value of the produce, and encourage, or even enforce, standards of preparation and packaging. PN is also sometimes involved in fish processing (e.g. Penang) of varieties which give the best return.
Floor price
Where a floor price had been placed on a lot of fish and in the bidding the floor price is not reached, the auctioneer can declare the fish unsold. Where the floor price is fixed by the auctioneer and the fish is unsold, the auctioneer must pay the owner of the fish a price not less than the floor price. However, if the floor price is fixed by the owner of fish or by the auctioneer with the consent of the owner, and the fish is unsold, the auctioneer is not held liable if the fish is unsold or subsequently sold at a price lower than the floor price. In order to cope with such situation, a mechanism called “rescue operation” has been deviced.
Rescue Operation Project
The project was established under LKIM financing (M$540,000) for the propose of providing alternative marketing outlets in case fish are unsold. In this context, two cases may emerge:
When buyers participating in the auction system refuse to buy fish at stipulated prices;
When the auction is boycotted by buyers.
The modus operandi of the project is illustrated in the flow chart (Figure I). Basically the operation is divided into six stages.
Stage I Catches are auctioned by LKIM complexes or PNs which set the floor price. The floor price is reduced by 10% if there were no interested buyers. If there are still no buyers who are willing to buy at the reduced price, the floor price is further reduced by another 10% which makes the new floor price equivalent to 80% of the original floor price.
Stage II If there are still no buyers at the floor price of 80% of the original floor price, the auctioneer closes tender where the buyers are invited to submit sealed written bids. Catches or part of the catches will be sold to buyers who have offered at least 70% of the original floor price.
Stage III The project will purchase the catches if and when no buyers quoted prices at least at 70% of the original floor price during the closed tender. The prices to be paid by the project to the auctioneer shall be at 70% of the original floor price.
Stage IV The project then shall sell the catches direct to retailers at prices equivalent or higher than the purchased prices.
Stage V If the prices offered by retailers were lower than the purchased price the catches shall be consigned to the major wholesale markets.
When the auction is boycotted by buyers, the project will automatically purchase 1 the catches at 70% of the floor price.
Stage VI If prevailing prices at the wholesale markets were found to be volatile or depressed the catches purchased shall be frozen and released through open auction only after market prices have become stabile.
Money collected by the project shall be deposited into the project's account and may be used as revolving capital.
FIGURE 1
OPERATION OF RESCUE FUNDS
The principle purpose of this activity is that the user or consumer can benefit from collective buying. The benefit might take the form of lower prices, or access to better sources, or, more usually, that the retail profits will be returned to the purchaser. PN retail stores are sometimes set up because there is no appropriate or efficient supply through normal commercial sources. PN normally deals with diesel, ice, nettings, gears, and fishing equipment, as well as general merchandise such as food, clothing and household requirements. Mobile shops could be considered to cater for the need of the members who sparsely live along the coasts. As a rule, however, this is an expensive way of distributing goods.
There are a number of operational problems relating to supply inputs. The goods to be sold should be purchased in proper quantities so that they can be disposed of within a reasonable time. They should be displayed in an orderly way and should be properly labelled and safely stored. Goods must usually be paid for in cash, which entails a considerable capital outlay and may raise financial problems for many PNs. Members, however, do have the alternative of buying certain consumer durables with the help of “purchase with loan”. Payments from member fishermen for goods supplied must be recorded and stocks replenished before they are depleted, which means that an efficient system of book keeping and stock taking has to be used. Another problem not infrequently encountered may be that members fail to settle their accounts readily, or sometimes forget to settle them at all. PN must closely follow up the matter. There is an open access to PN retail stores for non-members, which will increase total proceeds. However, one has to be a member if he/she wishes to participate in PN's meetings and to share the possible surplus.
Credit and savings have not yet become common activities of PN. The principle behind cooperative credit is that an artisanal fishermen, on his own, is a poor risk for a bank overdraft. In any case, the interest he would pay would hardly cover the bank's administrative costs. The fisherman is thus, either without access to credit at all, or at the mercy of money lender, who may charge high rates of interest and probably exploit the fisherman over marketing and supply as well. If PN wishes to start credit business, a common fund is to be set up from which the members can borrow. Such fund can be established through the mobilization of savings from the members as well as the reserves that PN has accumulated from auctions and other business activities. The accumulated funds with PN could make the members available short-term loans. For the medium and long-term loans to finance large projects, BPM could provide such funds at a lower rate of interest. If PN's credit system is well established, it could guarantee members' obligations for loans extended by BPM or other credit institutions, as well as collection of repayments under trust arrangement with those institutions. In other words PN is responsible to the bank or credit institution for repayment of the members' loan. PN could depend entirely on their own resources; sometimes it could supplement these resources by borrowing from a bank or credit institutionis. Where PN carries out credit and savings business, the members could make application to PN for loans and these are to be approved or rejected by a special committee. The committee should have the responsibility for collecting repayments of the loans when they are due. PN may be able to attract more clients if it pays a higher interest rate than that offered by private banks.
Provision of advisory services is part of important functions of PN. For example, PN is involved in the supervision of aquaculture farms (e.g. cockles, prawn). Selected members become the owner of fish ponds on condition that they will be fully committed to aquaculture business. The harvests belong to the members and PN provides technical advice and arranges for marketing the products.
In implementing these schemes, collaboration is extended by BPM in the field of loan management. Loans are given to fish farmers for the acquisition of ponds, equipment, facilities as well as for covering various operating expenses. The funds are provided by LKIM, but deposited with BPM which is responsible for the management of loans (i.e. appraisal of applications, selection of candidates, disbursement, collection of repayment). Other government agencies such as Forestry Department, District Office, Department of Fisheries, Ministry of Rural Development as well as private enterprises provide their assistance within the sphere of their responsibility.
PN is playing an important role for social development, and the scope of PN's activities in this field could be further expanded. PN provide social facilities and services, namely, a community hall, a recreation room and kindergardens, a library, social infrastructure such as village roads, floating jetties, wells, small bridges, water supply, welfare funds and education funds. Moreover, PN may well provide an unique medium for social and adult education in such fields as home economics, maternity and child welfare, health education and pre-school classes to improve the quality of life in rural fishing communities. Women's group may initiate income generating activities (e.g. sewing classes). It must be born in mind however that PN can only succeed in their social purpose if they are, first and foremost, successful economic enterprises.
PN must develop in both members and employees a feeling of belonging, of sharing and caring and of working toward common purposes and collective benefits. In this respect, cooperative education and training play an important role. Cooperative education consists of members' education and cadre training. The education and training programmes should reflect the reality. In other words, they should begin with the needs that are urgently felt and recognised. Such programmes, are usually concerned with fishing methods, handling, processing, marketing, accounting, management and other activities undertaken by PN. PN could, for example, form a small study group among interested fishermen to experiment new techniques and methods to be adopted to the new situations.
If the chairman, the board of directors and all the members have a clear view of the problem of management, profitability and business, the manager and employees of PN can work efficiently. Since the member fishermen have had little access to receiving formal educational programmes, PN should use every opportunity to educate their members on essential matters through training courses or seminars. Programmes of such courses could range from the basic concept and practices of accounting and commercial or business management to practical training on aquaculture, fishing, processing, etc. PN may make up from its own funds the wages lost by fishermen attending training courses.
Member's interest in and support of PN can be accomplished through setting up intensive information systems on the operations of PN. Such information must be current and accurate. Some information could be on today's bulletin board for the members to see and appraise, particularly in the case of the sale of fish.
A newsletter could provide information on types and prices of goods and services available, members' gatherings, training programmes and other matters which may be of interest to fishermen such as on-going or pipe-line development projects. Such newsletter could also give advice on the use of goods and services; present test results (e.g. plastic fish boxes) and explain legislation and rules (e.g. import regulations).
As for the training of the employees of PN, the most critical areas are concerned with book keeping, accounting, auditing and the overall management of PN. Manuals are to be prepared on these matters to streamline the accounting and management system. Emphasis will have to be placed on “on-the-job” training by inviting experts in these fields to demonstrate how to deal with problems which arise in day-to-day activities. PN should consider to send its employees for both basic and advanced courses at the Cooperative Training College in Kuala Lumpur.
