Some time ago Iran’s Third International Conference on Quality Management was held over a period of three
days. The organizers of the Conference were the Institute of Standardization and Industrial Research of Iran,
the Management and Planning Organization of Iran, the Institute of Quality Assurance of the UK and Iran Group of Surveyors, a private Iranian firm.

At the end of the Conference a Resolution was issued in which certain directives were given as guidelines for the country’s authorities to consider and to act upon as they deem fit. A copy of the Resolution was submitted
to the President’s Office and soon after the President himself issued an order to the relevant authorities for serious action to be taken in compliance with the Resolution.

A part of the Resolution deals with the cooperative sector. Article 5 of the Resolution reads: “While the Conference approves of liberalization/privatization as a final solution to the country’s economic problems, considering the (financial) limitations of the private sector in the present circumstances, it suggests greater attention be paid to the cooperative sector and towards this end the Conference recommends that this sector
be re-engineered to make it effective in creating cooperation and partnership by economic entities, real or legal, with other Iranian or foreign entities with the object of enhancing their comparative advantages and
turning them into competitive advantages at international level.”

Whereas this may sound rather clear and simple to those concerned, it may be as well to elaborate and expand
on the issue. The idea of cooperative activity is nothing new in essence, because human beings as social animals are by nature for the idea of teamwork and partnership. However, the cooperative economic sector and
the idea behind it are relatively modern and largely the results of the socialist school of thinking which attaches great significance to people and popular activities: the participation of people in all areas of activity, economy
included. The general idea is to have a large number of people who have small capitals, unite them such that the total capital will be large enough to allow them to engage in a field of activity, often working themselves to provide the human resources required.

The idea sounds very convincing and simple. In practice, however, things are not as simple as that. In Iran, the idea was seriously put forward at the onset of the Islamic Republic. It was even greatly emphasized for some
time but never succeeded to become an effective economic sector. This article attempts to probe into the issue and propose ways of materializing the concept.

The present Constitution of the Islamic Republic of Iran, which was drafted in the early days of the victory of the Islamic Revolution, allows three economic sectors: a large public sector, a relatively small private sector, and a cooperative sector.

While much has been said about the first two, the third, so far, seems to be more or less forgotten. In fact this is quite deserving as, during the past 20 years or so, our cooperative sector has been marginal and has contributed a very small share to the country’s total GDP. Some economists even claim that the cooperative sector has had an overall negative effect on the economy. A classic and often quoted example is the Tehran Taxi Cooperative Organization which operates under the Ministry of Cooperatives and which is one of the largest, perhaps the largest, cooperative in the country. Yet the taxis that run in Tehran as parts of this cooperative are mostly old and in poor condition; they are often filthy; they have no fixed and clear tariff; they are not safe as there is no way of knowing who the driver is because he is not identified by name or number
anywhere in the cab. This Cooperative has done nothing but to create a monopoly.

What happens when a cooperative is established under the Ministry of Cooperatives? Usually a large number of
people that have small capitals gather around and form the cooperative, often providing social or social security services that the state supports.

Eventually, it becomes an entirely state supported entity or dies out. This is not in line with the true philosophy of cooperatives, which aims at developing a spirit of partnership among the people of a society and creating synergy. The idea is to put a number of smaller institutes together to create a large and strong one, based on synergy. This is what the Department of Small & Medium Enterprises of the Ministry of Industries & Mines is supposed to be doing in parallel and duplication to the Ministry of Cooperatives and neither of them is actually doing so. Thus, at present we have a large number of cooperatives that lack adequate resources, are not backed by the necessary technology or scientific knowhow and are, therefore, running very inefficiently.

In today’s world “small is no more beautiful”; the small entity is bound to disappear, usually absorbed, eaten up, by the big ones. So, to survive, small units must get together or become satellites to larger entities. In our own country such an attempt was made in the automotive industry. A number of smaller units were created as satellites to larger entities: SAPCO and Sazehgostar, for example, as satellites to Iran Khodro and SAIPA; and they have been successful to a degree because they have the backing of the technical and marketing knowhow
of Iran Khodro and SAIPA.

Cooperatives, especially in industries, need technology, marketing, quality enhancement, and a lot of other things. What has been happening in Iran, however, is a process of distributing a part of the nation’s wealth among a group of people. This is exactly what the Ministry of Cooperatives recently did with respect to Tehran’s taxis. The Ministry gave a number of Samand cars, on easy terms, to taxis drivers. When you read the circular that the Ministry distributed among the Tehran Cooperative taxi drivers in this regard, you can easily see that effectively a part of the country’s budget is being distributed among a number of individuals without control, without supervision, without any strategy for total quality in services.

In my opinion one way out of the crisis is to establish quality management in our cooperatives: quality management based on competition in a free market. But this requires “re-engineering” of the management structures. The concept of quality must be emphasized here. All the shortcomings of Tehran Taxi Cooperative that were mentioned earlier are quality issues and this is why there is no customer satisfaction.

Consequently, it can only survive through monopolization and concessions, and this leads ultimately to a great deal of social and economic harm to the nation. Now, imagine that we have created a number of cooperatives and want to enter the international market with our export products! We have to teach these small entities how the free market operates; we must provide them with details and explanations on the latest standards and directives applicable in the target market; we must help them become competitive. Then leave them to stand on their own feet. They must be given loans that they know they must pay back – not spoiling them with financial aids.

We must also develop our cooperative sector at another level, a higher level. A number of small units can be grouped together and then, with the partnership of an international/ multinational company, they can form a joint venture. The Ministry of Cooperatives would have the duty of finding such an international company that
has access to latest technology, financial resources, latest know-how, effective marketing, well-established quality management… and convince it to enter into such a joint venture. That would be some achievement, indeed!

For such a task the Ministry of Cooperatives itself would need to identify and present to the world the country’s
potentials, arrange for transfer of technology to the country, help in financing, and set up the industrial clusters and joint ventures. To do all this the Ministry itself would require fundamental re-engineering. Something of the kind must be done otherwise our SMEs will remain very susceptible and shall be badly damaged by such events as our joining the WTO or by the globalization trend both of which are bound to cause many social, economic and even political upheavals.