Assessing the Performance Efficiency of the Republic of Yemen Cooperative Societies: Applied Research on the General Cooperative Society for Agricultural Equipment

                                                            Abstract

This research aims at assessing Yemen agricultural cooperative Societies’ performance efficiency with particular reference to the General Cooperative for Agricultural Equipment.

      The assessment process looks at the Cooperative’s performance against specific fields of capacity, that is to say, its capacity to provide appropriate agricultural production input; its capacity to provide and invest sources of supply; its capacity for administrative performance; its capacity to secure economic output; its capacity to exploit the best available resources; and finally its capacity for social interaction.

      For ease and accuracy of measures, each one of the fields was allocated a number of main tasks and functions after having them tested by a group of experts. An indicator of profit rate on investment was also used to show the overall performance efficiency. Furthermore, methods of economic descriptive analysis and econometric analysis were applied by using the financial analysis of rates as well as a chronological analysis of the general trend by using the simple linear decline equation (small squares). A simple and multi linear decline analysis was also conducted to test the correlation between the indicators that measure tasks in the fields, and the main performance indicator by virtue of the significance of estimated marks, the significance level by Test t, specification coefficient of rate and Test f.

      The general findings of the research show that Yemen’s experience in the field of agricultural cooperatives is recent compared to some developing countries. Practically speaking, cooperatives in Yemen came into existence in the southern and eastern governorates in the 1950s, and in the northern governorates in the 1970s. And this obviously hindered the successful spread of agricultural cooperatives on all levels. Results show that the mean spread of cooperative societies in the whole of Yemen is estimated by 12.3, and that 83.5% of theses societies are concentrated in eleven governorates only. In addition, the average cooperative membership reaches about 3639 members on the national level and hence an estimated 293.7 members are affiliated to each cooperative.

      It was also found that 80.5% of the existing agricultural cooperatives are multi-purpose societies that are basically involved in commercial activities. Furthermore, the quality of cooperative activity components is marked low in terms of administrative performance, provision of premises, machines and equipment, differences in the capital available to the cooperative, and the concern shown in distributing profits. On the contrary, general cooperative societies appear to cherish distinctively high levels of activity components.

      With reference to the applied research study conducted on the General Cooperative Society for Agricultural Equipment, results show:

·        The Society’s highest level of performance efficiency was achieved during the study term in 1997-2001 according to the main performance indicator (i.e. profit rate on investment). It was estimated by 10% in 1998, but it dipped sharply to come bottom (2.8%) in 2000. In 2001, it, however, went up again to reach 3.4%. And in comparing the results of the main performance indicator with those of other performance indicators in the different fields, the research showed the following:

-         There is a high correlation between the results of the various rate indicators   

shown as follows: indicators of seed-and fertilizer-provision rate, tractor distribution capacity, marketing efficiency, costs of purchases made in the field of providing production input; indicators of the capital rate, reserves obtained, the rate of property from the field of raising sources of supply; profit indicators of the working capital, net surplus to sales in the field of gaining economic output; indicators of stock turnover rate, working capital turnover rate, total asset turnover rate, administrative and general expenditure to revenues, total profit to capital invested in the field of exploiting available resources; indicators of the members’ attendance rate in the annual meetings of the general assembly and the administrative board, the bonus and rewards allocated to the members by virtue of the administrative performance; and finally the main performance indicators of profit rate on investment.

              -     There is a clear contradiction in the results of the rest of indicators.

·       By using the equation of simple and multi linear decline, statistical test results showed a correlation between the main performance indicator (i.e. profit rate on investment) as a dependent variable, and the indicators of one of the tasks specified in the various fields as independent variables. The results are specified as follows:

-         There exists a positive and harmonious correlation between all the existing

rates concerning tractor-provision, seed-provision, marketing efficiency, reserves obtained, individual rights, total loans to total assets, liquid capital by using the efficiency of circulated assets, attendance of members in the annual meetings of the general assembly and the administrative board, working capital profits, net surplus to individual rights, stock turnover, working capital and asset turnover, sale profits to other revenues, total profits to total capital invested, debtor cycle and the mean value of social and cultural services intended for individual members. While in the meantime, there exists a negative correlation between rate indicators concerning costs of purchases, administrative and general expenditure and

the main performance indicator. And these results are more or less logical in the sense that they go with the logic and concept of the economic theory and can therefore exert tremendous impact on the profit rate on investment and hence the efficiency of cooperative societies’ performance.

-         It was found that there is a negative and insignificant correlation between the  

rest of indicators and the main indicator. And this seems to be an illogical result that does not go with the concepts of the economic theory. 

      The research concludes with a number of inferences, most important of which is the noticeable decline of the cooperative administrative performance efficiency levels. It also suggests a number of recommendations. The most important of these stresses the necessity of differentiating between the adherences to cooperative principles (e.g. Principle of Democratic Administration) and the availability of highly qualified and trained administrative cadre to run agricultural cooperative societies like other economic institutions.