The government’s Regulatory Reform Council issued an opinion on Japanese agricultural co-operative group’s self-reform plan on Wednesday, Nov. 12, stating that provisions on the JA group’s central and prefectural unions should be deleted from the Agricultural Co-operative Society Law and the unions should become general incorporated associations.
The council clearly stated that no legal grounds will be necessary for the unions after the reform takes place, when they inherit the existing unions’ consulting and auditing functions.
Members of the ruling Liberal Democratic Party who are close to the agricultural industry are strongly opposed to the council’s opinion which goes far beyond the reform plan compiled by the government and the LDP in June. The Central Union of Agricultural Co-operatives (JA-Zenchu) is also protesting that the opinion does not reflect the reality at all.
The opinion was compiled and released by the council’s agriculture working group headed by Yasufumi Kanemaru, Chief Executive Officer of Future Architect Inc., after the group conducted a hearing on the JA group on its self-reform plan earlier in the day. The announcement came at a time when the government and the LDP began discussing a bill to revise the Agricultural Co-operative Society Law, which will be submitted to the ordinary Diet session next year.
Regarding central and prefectural unions, the JA group proposed in its self-reform plan that their roles be integrated into three functions – representing and advising primary JAs and working as a liaison among them. The plan said such functions should be clearly stated in the law to make sure that the unions play the role expected by primary JAs and their members.
Meanwhile, the council denied the need to legally authorize the unions, saying they “should be able to conduct such functions in response to requests, without any legal background.”
Especially concerning the functions of consulting and auditing, the council expressed concern over the fact that one organization is involved in both management consulting and auditing of primary JAs, claiming that auditing by the JA-Zenchu “cannot be regarded as external auditing in a true sense.” It strongly called for abolishment of obligatory auditing by the JA-Zenchu, stating that auditing by certified public accountants is sufficient.
The council also said that the unions must be converted to general incorporated associations as soon as possible, in order to produce results in reforming the JA group. But the proposal is facing opposition from some LDP members, as the idea of incorporating the unions is not included in the agricultural reform plan compiled by the government and the LDP in June, although it proposes that the unions be transferred to a “new, autonomous system.”
As for restricting the use of JA services by non-farmer members, the council said the measure should be introduced as soon as possible with clear numerical standards. It also said the National Federation of Agricultural Co-operative Associations (JA Zen-Noh) and prefectural federations “should be allowed to operate freely, liberated from restrictions and supervisions of the Agricultural Co-operative Society Law,” adding that it hopes a consensus will be created soon to make them into joint-stock companies.
Protests from LDP
LDP members with farming connections were bewildered by the council’s opinion. Concerns were also voiced at their meeting held the same day.
The opinion “is going back to the radical proposal which we thought we managed to push back,” an LDP member close to the agricultural industry angrily said. The LDP member said the council’s proposals of incorporating the JA-Zenchu and introducing quantitative restrictions on the use of JA services by non-farmer members go beyond the measures adopted by the Cabinet as a part of its regulatory reform plan, saying the move does not go in line with the decision-making procedure of the nation’s policies.
JA-Zenchu objects
The JA-Zenchu protested the same day against the fact that the council’s opinion was released immediately after the meeting between them, criticizing that the council is rushing to conclusions.
In the meeting with the council, the JA-Zenchu suggested that they hold technical discussions based on actual conditions, but the opinion was released by some media even before the announcement.
“The opinion was released amid lack of understanding for co-operatives, and it was far from the real situation,” the JA-Zenchu said.
The JA-Zenchu expressed opposition towards the council’s claim that no legal grounds are necessary for central and prefectural unions, noting that legal authorization “is indispensable to respond to primary JAs’ needs.”
Referring to the council’s proposal of abolishing obligatory auditing of primary JAs by the JA-Zenchu, the JA-Zenchu said the auditing “is not an obligatory task which hampers free management (of primary JAs), but something that helps strengthen their governance necessary to conduct business activities aggressively and improve their credibility among stakeholders.”
“In order to respond to co-operative members’ needs, auditors well-versed in JAs must conduct business operations audits and financial audits as a package,” the JA-Zenchu said. “It is the most efficient and effective auditing.”
As for the use of JA services by non-farmer members, the JA-Zenchu explained such services have contributed to promoting regional agriculture and revitalizing local communities. Restricting the use of such services “would negatively affect efforts to realize vitalization of local economies by coping with population decline, aging and creation of job opportunities,” the JA-Zenchu said.
(Nov. 13, 2014)