Cooperatives multiplying but failing to flourish

In April, 36-year-old Sohn Jae-won and four other street waffle vendors pooled 5 million won ($4,488) and established a cooperative. The move has helped them expand to the point where they’re now selling their own cream and dough to over 30 waffle shops, but that doesn’t mean the money is pouring in.

“We can’t say that we’re making enough revenue to share, but we feel better than when we were just vendors,” Sohn told the JoongAng Ilbo.

With the Seoul government encouraging entrepreneurs to team up into cooperatives to improve their power in the marketplace, the number of co-ops has spiked. But many don’t have a solid enough foundation to see many benefits.

In December last year, 20 drivers got together 1.1 million won and started a chauffeur service. But they haven’t managed to get the business off the ground. “We can’t do any business due to a lack of capital,” said one member of the co-op.

On June 22, the city saw the creation of its 500th cooperative - Norayangjin Fisheries Wholesale Market Cooperative.

“We established it to improve the distribution structure of the market and to find both producers and vendors who can cooperate with each other more efficiently,” Lee In-cheol, the head of the co-op, told the JoongAng Ilbo.

The city government has been pushing small-business owners to start co-ops since December last year. It made doing so easier, dropping the required number of participants to five and putting no limit on the minimum initial investment. Since then, an average of about two cooperatives has been established every day.

When on a radio program on July 15, Seoul Mayor Park Won-soon said, “Establishing a cooperative has become the hope of many citizens in the lower income bracket in the current competitive world.”

But too many co-ops have been started up without enough money to get them going.

According to a document obtained by the JoongAng Ilbo, 103 of the total 500 organizations were established with less than 1.2 million won. Two of the 103 were started with just 500 won. The city government is aware of the problem, but says there’s no way of controlling it.

“Some cooperatives have been established for social networking in local neighborhoods,” a city official told the JoongAng Ilbo, asking to remain anonymous.

And too many cooperatives have too few people. Of the 500, 110 went with the minimum of five members.

“The survival rate for a cooperative gets lower if it doesn’t have enough members,” Yonsei University economics professor Sung Tae-yoon told the JoongAng Ilbo.

“Each member receives dividends based on how much they invested. If you don’t invest enough, you don’t feel responsible for the business.”

BY AHN HYO-SEONG, SOHN GUK-HEE [sakwon80@joongang.co.kr]