Spread across all 753 local governments and organized by over 6.3 million people, Nepal’s cooperatives hold immense potential to drive the local economy, promote inclusive and environment-friendly businesses and advance the Sustainable Development Goals. If we are to harness the power of these cooperatives, this is the right time to equip the local governments with needful tools, as most of them have now initiated planned development efforts in all sectors.

As provisioned in the new federal Constitution, more than 80 percent of the primary cooperatives are under the purview of local governments. One of the important features of the prevailing constitution is that it has converted previous 3374 local bodies (which included municipalities/village development committees) into 753 local governments. The local authorities can now formulate their own policies, programmes, acts and regulations on a wide range of sectors, such as primary education, cooperatives, agriculture services and biodiversity conservation, water supply, conservation of local languages, culture, and art, among others—as long as they do not conflict with the national and provincial laws. However, administering cooperative is completely a new responsibility for the local governments. They do not have specific institutional memory, regulatory system, and standard experiences regarding how the cooperatives are regulated.

The local governments have, therefore, both challenges and opportunities to mobilize the cooperatives. Given this context, there are few immediate measures that the local governments could take to mobilize cooperatives for poverty reduction, job creation and sustainable development.

First, in order to effectively operationalize the cooperatives related local laws, the local governments should formulate, through a participatory process, specific rules and guidelines targeting the areas of competitive advantage, such as fruits and vegetables in the areas around the Kathmandu valley. Most of the local governments have enacted cooperatives related laws but enacting laws alone may not be sufficient. For example, some incentives for the cooperatives engaged in fruit production in municipalities adjoining the Kathmandu valley could go a long way in tapping the domestic market and reducing the import. Effective rules and guidelines could be adopted only when the local governments reach out to the cooperatives themselves. Interaction with the stakeholders—such as experienced cooperatives, district and national level sectoral unions and federations, Department of Cooperatives and Co-operative Training and Research Center—will help the local governments ensure effective implementation of laws, rules and regulations.

Second, there is an urgent need to build the capacity of the local governments to administer the cooperatives. Until the promulgation of the new constitution, Division Cooperatives were responsible for guiding, supervising and regulating the cooperatives at the local level. Division Cooperatives had a pool of trained officials to discharge the assigned responsibilities. Local governments don’t have such expertise and therefore they need to be supported in training their human resources on basic values and principles of cooperatives, Nepal’s cooperative movement and current legal provisions. Provision of the training on Cooperative and Poverty Management Information System (COPOMIS)—a government-promoted information management system—is equally urgent to maintain the real time information of cooperatives.

Third, local governments need their own plans and programmes to promote and engage the cooperatives in income-generation activities. At the federal level, there is some clarity and the policy environment is much favourable for the cooperatives. The federal government has offered a number of incentives through federal cooperative policy, periodic plan and annual budgets. Last year, the government brought more than 15 schemes to encourage the cooperatives in the production and marketing activities. In line with the federal policies and programmes, more of such incentives need to be introduced by the local governments, particularly encouraging cooperatives in establishing business infrastructures—such as processing factories for tea, coffee, ginger, cardamom, fruits, oil, rice, floor, among others based on the potential of the respective areas. These incentives and investments will be a game changer at the local level.

Fourth, the local governments can immediately take initiatives to promote entrepreneurship through education and training. Except for the saving-credit business, very few cooperatives are running their business successfully.  On an average, a cooperative in Nepal creates only 1.75 jobs, which is way to low than the global average, which stood at 5.44 in 2017. The sector’s contribution to the GDP is below 3 percent. Since local governments have a constitutional mandate to look after secondary education, they can introduce subjects like ‘entrepreneurship development’ and ‘cooperative business’ to produce capable workforce at the local level. In the long run, such efforts will naturally promote a cooperative culture in the society and contribute to the broad based and inclusive growth in the country.

Private sector is considered as the main source of employment in the liberal economic regime. However, evidences suggest that growth of healthy cooperatives help achieve several socioeconomic indicators, particularly relating to social inclusion, rural development and women’s empowerment. Moreover, as cooperatives are guided by a set of internationally agreed principles and values, cooperatives-based businesses and social enterprises are generally more considerate to the environmental standards, hygiene, child friendliness and social justice, among others. These features demonstrate that promotion of cooperative-led businesses not only help increase income sustainably but also contribute to achieve some of the Sustainable Development Goals (SDGs) at the local level. It is already time local governments gear up to arrange better legal mechanism, develop required human resources, and formulate appropriate programmes to bring about a new cooperative movement.

[Mr. Basnet is Under Secretary, Ministry of Land Management, Cooperatives and Poverty Alleviation and Ghimire works with Cooperative Market Development Programme and specializes on economic policies]