CO-OPERATIVE SOCIETIES BILL

Order for Second Reading read. 5.26 p.m.

The Acting Minister for Social Affairs (Dr Ahmad Mattar): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The existing co-operative legislation was enacted in 1925 and revised in 1953. Generally, this legislation has become outmoded owing to Singapore's rapidly changing socio-economic conditions and the diversification of co-operative activities in recent years. There are now 81 registered co-operative societies in Singapore, engaged in credit, consumer, housing, transport, producer, insurance and dental activities.

The present legislation, as it stands, restricts membership of a co-operative society to individuals and does not allow institutions, for example, trade unions, to join or form a co-operative society. Of the existing 81 co-operative societies, 13 are co-operative ventures established by the National Trades Union Congress and other trade unions. They have been allowed to register by exemption from certain provisions of the present Act as granted by the Minister. Otherwise, they would have to be registered as companies. However, since the primary object of trade union co-operatives is to promote the economic interest not only of their members but also of the public, it is time to recognise in law the co-operative ventures of the NTUC and other trade unions. For the past several years, trade union co-operatives have successfully carried out their operations and have no doubt made a significant impact on the economic and social activities in Singapore. Under this Bill, the co-operative societies will, by definition, include trade union co-operatives.

The Bill seeks to provide for more effective control of co-operative societies by the Registrar. It seeks to do this by increasing the Registrar's powers in relation to the audit, investigation, or liquidation of societies. The Registrar will have powers to suspend the operation of a society or to remove the management committee and appoint a new one to manage the society where the management committee does not perform its duties properly.

With this Bill, a co-operative bank or an insurance co-operative will be exempted from provisions governing the granting of loans and credit facilities, the investment of funds and the maintenance of a reserve fund, since these matters are adequately provided for in the Banking Act and Insurance Act.

Every co-operative society will be required to set aside 20% of its annual surplus towards its reserve fund, instead of 25% as provided in the existing Act. This transfer to its reserve fund may be reduced to 5% when the fund has reached 10% of the society's total paid-up capital.

This Bill also seeks to allow co-operative societies to form an apex organisation. The apex organisation is desirable as it will provide technical, legal and financial advice and centralised audit and training services to its member societies. The apex organisation will be financed by a Central Co-operative Fund towards which all co-operative societies will be required to contribute 5% of their annual surplus. The Fund, which will be administered as a trust fund by the Minister, will be used for co-operative education, training, audit and for the general development of the co-operative movement.

The Bill also contains new provisions for the amalgamation of co-operative societies. This will enable small societies to amalgamate into bigger and more viable organisations.

Other changes to be introduced are minor and they largely deal with the administration of the legislation and the organisation and management of co-operative societies. They are clearly spelt out in the explanatory statement at the end of the Bill.

The proposed changes are extensive and will require the existing Act to be repealed and re-enacted. I therefore propose to refer the Bill to a Select Committee so that it can be examined in detail.

Sir, I beg to move.

Question proposed.

Mr C.V. Devan Nair: Mr Speaker, Sir, very few Singaporeans realise that we in Singapore have pioneered a breakthrough in co-operative development, which may well prove a highly significant departure for other developing countries. Indeed, the Singapore model of trade union co-operatives is being increasingly recommended by international trade union and cb-operative organisations. as being one worthy of emulation by other developing countries.

My guess is that the Rochdale Pioneers who laid down the first principles of cooperation, which had heretofore been regarded as sacrosanct, will probably be superseded by the principles evolved by what one international observer called "the Singapore pioneers". It would therefore be a pity if Members of this House were to regard this Bill as yet another piece of legislation inspired by the Government, this time to regulate and control the co-operative movement in our Republic.

The truth is that this is one of the few Bills presented to this House which owes its originating impulse not to the Government but to our co-operative movement as a whole and, in particular, to our trade union co-operatives. As one of those associated with the formulation of this Bill and one who regards its contents not merely as a turning point for co-operative development in Singapore but as a model for emulation by other developing countries, I find it of special significance. In fact, Mr Speaker, Sir, the principles which form the basis of this Bill, not the Bill itself but the principles, are already being circulated by the Asian Regional Organisation of the International Confederation of Free Trade Unions to several trade unions not only in the Asian Region but also in Africa and Latin America, as a basis for their own programmes of co-operative development in their own countries. This was an unsolicited, but nonetheless gratifying development, brought about by the high regard in which our co-operatives are held by other trade unions and co-operative movements elsewhere in the world. Permit me to explain what I mean.

Sir, the underlying social philosophy of the co-operative movement was formulated during the first half of the 19th century by writers such as Robert Owen in Great Britain and Charles Fourier in France. The basic organisational structure, which has governed the operations of co-operatives in Singapore, as elsewhere, until the Singapore pioneers took a hand, dates from 1844, with the establishment in England of the first successful consumers' co-operative called the Rochdale Society of Equitable Pioneers.

It was this society which created what is now known as the Rochdale Principles that have been adopted, with minor modifications, in most countries and used for a wide variety of co-operative activities. Briefly, these principles call for democratic control, open membership, no religious or political discrimination, service at cost, and education of the members. Members have a dual relationship to their association. They contribute its capital, and are also the association's own customers or patrons. In short, the earliest co-operatives were confined to serving their own members, but not society at large.

Once this principle was allowed to become sacrosanct, what served initially as a help and a stimulant to the development of co-operative communities, became a formidable barrier in later times to the development of viable co-operatives. Co-operators allowed themselves to forget that the merchant and capitalist succeeded precisely because they did not confine their markets to fellow merchants and capitalists. But co-operatives in later times were to condemn themselves to relative insignificance because they came to regard this Rochdale principle as inviolable.

Robert Owen and the Rochdale pioneers were reacting to the economic barbarism ushered in by the new Commercial Age which began with the Industrial Revolution in Great Britain. They saw competition and the pursuit of profit as being inherently evil, and advocated as a remedy the establishment of co-operative communities. It is useful to bear in mind that while Robert Owen was a good and well-intentioned man, none of the co-operative communities which he founded succeeded. Some of the crashes he was responsible for were quite colossal. Nevertheless, the Rochdale ideals had a powerful appeal and were to generate a movement, not altogether unsuccessful, in several European countries. Indeed, there were some significant successes, especially in the Scandinavian countries, which have become bywords in the co-operative movement.

So much for the historical background of the co-operative movement, necessarily very brief and very sketchy. The British had introduced practically identical co-operative laws in their colonial territories, all based essentially on the Rochdale Principles. Our own co-operative law in Singapore was first enacted by the British colonial adminstration 54 years ago, in 1925, with no significant changes since then.

By and large, the co-operative societies which came into being under this Act, were thrift and loan societies, and incidentally, Sir, more LOAN than THRIFT. Co-operative societies in other former British territories in Asia and Africa were generally characterised by inept management, poor performance, and an incapacity for growth, all of which were engendered by an uncritical and scrupulous adherence to the outmoded Rochdale Principles. Robert Owen's ghost continued to stalk the co-operative movements and to stifle all potential of significant social growth and influence on the part of co-operatives. If at all some success stories were registered, as they did in India, it turned out that co-operatives founded by employers were far more successful than co-operatives founded by workers,

It may be asked how the NTUC co-operatives, which were launched from 1970 onwards, managed to get off the ground at all, cribbed, crabbed and confined as they were by the existing Co-operative Societies Act. The answer is simple. We obtained the enlightened support and encouragement of the Deputy Prime Minister and Minister of Education, with whose help we managed to obtain exemption from a whole series of restrictive provisions in the current Co-operative Societies Act. Fortunately for us, the current Act does provide for wide discretion on the part of the Minister to exempt co-operatives from many inhibitory provisions of the Act. It was a discretion which no Minister in the past had ever thought of exercising, until intervention by the Deputy Prime Minister.

The first major departure effected by the trade union co-operatives was to provide, not only for ordinary individual membership, but also for institutional membership. The NTUC, its affiliated unions, as well as existing co-operatives, were thereby enabled to become institutional members of our co-operatives. And since institutional members, between them, possess a wide membership base, as well as greater financial resources, it was possible to inject sufficient capital in order to launch economically viable co-operative ventures. 5.40 p.m.

[Mr Deputy Speaker in the Chair]

Mr C.V. Devan Nair: The second major departure was the provision of sound modern management structures and practices which enabled our co-operatives to secure highly qualified professional management expertise. This was crucial for the success of our co-operatives. For we recognised that while the average co-operator may, like Robert Owen, possess a highly developed soul, nonetheless, like Robert Owen, he is usually grievously deficient in management expertise and capability.

The third major departure from the Rochdale Principles was that co-operatives like WELCOME, INCOME, FAIRDEAL, COMFORT and DENTICARE catered to the requirements not only of their own members but also of the public at large. INCOME does not sell life insurance only to trade union members. Nor do WELCOME, FAIRDEAL and the SILO supermarkets sell foodstuffs or school textbooks only to co-operative members. And our dental co-operative, DENTICARE, is ready to pull out the teeth of members and non-members alike, with equal impartiality. And if COMFORT accepted the fares of only union or co-operative members, our owner-drivers would not be able to make a living.

The results we have achieved in Singapore prove beyond a shadow of doubt that modern trade union co-operatives can and ought to play a much wider and more useful social role than could possibly have been envisaged by the Rochdale pioneers in their own more restricted times. However, the Minister does not have powers under the current Act to exempt us from all the restrictions of the present law. I might list a few of these here.

(1) Millions of dollars belonging to workers are invested today in trade union co-operatives. But however successful our co- operatives may be, our trade unions and their members are restricted by law to a maximum return of 6%. On the other hand, union funds invested in fixed deposits can earn interest of at least 7% annually. The Bill before us removes this outmoded restriction.

(2) Unrealistic restrictions on control of even well-run and business-oriented co-operatives, which are and indeed have to be properly run, and are governed by their own laws, e.g. INCOME being strictly subject to the Insurance Act.

(3) The absence of a clear provision limiting the liability of members to their subscribed capital in the co-operative. This has been a cause for concern, especially for committee members.

What I have stated are examples only and they are by no means exhaustive.

We therefore made representations to the Government for the repeal of the present Act and for the enactment of a new and more comprehensive Co-operative Act, which would discard outmoded, obsolete co-operative concepts totally irrelevant to modern societies, and would accommodate and deal with the modern-day institutional type of co-operative which has a wide membership base.

The Government responded by engaging the services of an International Labour Organisation (ILO) expert. The ILO sent us a good man. Indeed, in many respects he was a good Owenite. He therefore proved to be the wrong man. For he too was possessed by the ghosts of the Rochdale pioneers. An added disqualification was that he was an expert on African co-operatives. One would have thought that the Singapore experience would have been of far more significance to Africa than vice versa.

Anyway, the expert came, and he put up a draft Bill, many parts of which the NTUC rejected as grossly unrealistic. The expert's own concepts were strongly coloured by his African experience, and he had difficulty accepting the modern-day successful co-operative in Singapore as coming within his narrow definition of a co-operative.

When the expert discovered that the institutional trade union co-operatives of the NTUC had won international recognition and approbation as being bona fide co-operatives, he reluctantly agreed to allow them to be treated as co-operatives by the exceptional exercise of a discretion by the Minister. This again was objectionable. After all, the whole purpose of the exercise was to give trade union co-operatives a legal validity and existence of their own, as co-operatives. But here was an expert who seriously suggested that trade union co-operatives should be allowed to exist, but only on sufferance.

In order to exercise the ghosts of the Rochdale pioneers, as well as the African sprites, goblins and spirits, out of the expert's draft Bill, the Minister for Social Affairs wisely decided to set up a special committee, a Singapore committee, to revise the draft Bill, under the chairmanship of Mr Sat-Pal Khattar, a Director of INCOME, and comprising representatives of the Singapore National Co-operative Union, the NTUC, the Registry of Co-operatives, and the senior legal draftsman in the Attorney-General's Chambers.

The revised draft Bill prepared by this committee was submitted to the Cabinet. The Cabinet's own load (burden) in considering the need and implications of this Bill was thankfully lightened by the fact that some senior Ministers, including the Deputy Prime Minister, the Minister for Law, the Minister for Labour, the Minister for the Environment and the Minister for Communications, had direct experience of the restraints and inhibitions under which the NTUC co-operatives are obliged to operate at the moment, by virtue of the fact that they either head or sit on the Boards of Trustees of our co-operatives. The hard-headed wisdom with which they have guided the development of our co-operatives proved to be of great value.

In addition, the NTUC's wisdom, some have called it cunning, in inviting Ministers to become trustees of our co-operatives has paid dividends, in terms of Cabinet Ministers who have thereby acquired an objective appreciation of the social potential of co-operatives in Singapore and, as a corollary, a critical appreciation of the basic defects in our co-operative laws.

Sir, here I might give a tip to Backbenchers, many of whom quite sincerely believe that Members of the Cabinet generally have thick hides, impervious to the sharpest and most pointed of their barbs. One way out of their problems on the question of pensioners, why not recommend to the Pensioners' Association that they ought to put on their board of trustees pensioners like the Minister for Finance, the Minister of Defence, the Minister for National Development. Then these worthy Gentlemen would come to appreciate the problems of pensioners. I hope the Pensioners' Association will take that tip.

The special committee which drafted this Co-operative Societies Bill had a healthy respect for the fact that neither the Deputy Prime Minister, nor the Minister for Law, are persons who can be taken for a ride. They were therefore obliged to produce a draft Bill, which was at once sensible and hard-headed because we knew who our examiners were. There are provisions which provide for the proper regulation of co-operatives, and for the regular monitoring of their performance.

However, since this is a Bill which covers new ground, and has developed new concepts of the role and potential of co-operatives in our Republic, we should welcome the decision to refer the Bill to a Select Committee, so that the views of members of the public and those of interested organisations may be taken into account, before the Bill is re-submitted to this House.

Much obliged, Mr Deputy Speaker, Sir.

Dr Ahmad Mattar: Mr Deputy Speaker, Sir, with such eloquence and with all the salutary remarks from the Member for Anson in support of the Bill, need I say more!

Question put, and agreed to.

Bill accordingly read a Second time.

Resolved,

"That the Co-operative Societies Bill be committed to a Select Committee consisting of Mr Speaker as Chairman and seven Members to be nominated by the Committee of Selection." - [Dr Ahmad Mattar].