THE ROLE OF COOPERATIVES IN THE PROVISION OF
HOUSING IN MALAYSIA
Dr. Alip Rahim, Abu Hassan Abu Bakar and Dr. Abdul Mutalip Abdullah
School of Housing, Building and Planing
Universiti Sains Malaysia
1.0 INTRODUCTION
Of all the basic needs that has attracted attention of development strategiest, housing has received the major attention. The focus has been on the housing supply system for the urban population especially the urban poor. Studies, have clearly show that there is a continum of housing supply system from the private sector to the popular and public sector (Drakakis-Smith, 1981). Each of these supply system is competing for the limited resources of land, labour, materials and capital and each of the supply system are existing within a complex local forces as well as linked to a broader national and even international patterns of development. It is the intention of this paper to address the role of one of these housing supply system.
This paper attempts to examine the role of cooperatives in the provision of housing in Malaysia. In the following sections of this paper we discuss the production and concumption sphere of cooperative housing. It begins with a general discussion of the history of cooperatives in Malaysia to situate the changing role of cooperative within the national economy and their role in the provision of housing. This is followed by highlighting their distribution in Malaysia. This is accompanied by a general discussion of the production and consumption sphere of cooperative housing with particular emphasise on the success and failures of cooperative role in the provision of housing.
2.0 DEFINATION OF HOUSING COOPERATIVES
There are various types of housing cooperatives (Dass, 1971: 7-8). The housing cooperatives as practise in Malaysia refers to cooperatives that ‘acquire land, develop them and construct homes and ultimately transfer them to members when loans are fully and completely settled. The members then take full control and enjoy complete ownership.”
However, according to Haji Abdul Aziz bin Abdul Wahab (the Registrar General of Cooperatives) there are other characteristic of a housing cooperatives which explicit in the following quotations.
- “the housing cooperatives act as “an agent for the members who themselves are the developers desiring to undertake the acquisition of land, preparing of sites and constructional of houses jointly with the view of reducing costs”.
- “the society executes contracts on behalf of members with third parties for the purchase, acquisition and development of land, the building of houses, the provision of facilities and the installation of supplies”.
- “the house are erected for the developers to own and dwell in” (Section 218 of the Housing Developers Control and Licensing Act, 1966 logically exempts housing cooperatives from all its provisions)
- “the housing cooperatives must comply with the Cooperatives Act of 1949 in order to be registered. The act stipulates that members must not be less than 100 Persons and they must have mutual interest that can be enhanced by cooperative set-up.
- “the society is first and foremost owned by its members, is autonomous and m anaged by a Board of Directors elected at the Annual General Meeting”.
- “the cooperative has a by-law allowing it to own land, receive spesific deposits from members for the purpose of meeting the costs of land the construction of house. It can also borrow funds outside to finance its housing projects.
Based on this definition one can conceptualised housing cooperatives are not just physical entities but a particular life style and value system where members are expect to uphold and cheris such as sharing, self help, mutual support, social and economic cooperation and interdependence. Members involvement in policy planning, construction, managing the cooperatives economic and social affairs wil help to reinforce values of cooperative living.
3.0 OVERVIEW OF THE ROLE OF COOPERATIVE AND HOUSING
3.1 The Early Period 1920 – 1957
The cooperative movement was introduced in Malaya by the colonial government in 1909. The cooperative movement take root in 1922 initiated by the colonial government in response to rural problems relating to credit and indebtness (Frederics, 1973 : 23). Hence the earliest societies to be formed were rural credit societies for the peasants, farmers and fishermen. The thinking was that the societies would help to eliminate exploitative middlemen credit sources. Besides the establishemts of credit societies, efforts were directed at forming marketing societies in 1930.
In urban areas there was the development of Thrift and Loan Societies particularly for government servants and latter the demand for consumer societies mainly from the members of the Thrift and Loan Societies (ILO, 1958; also Fredericks, 1973).
After the war although there were changes in the colonial policy towards the role of cooperatives, the preoccupation of cooperatives with indebtness was still emphasised. In the post war period saw the establishments of agricultural cooperatives, which was part of the government plans to cooperativise the rural economy. The aim was to nuture and develop an independent society based on the cooperative principles. The creating of RIDA (Rural and Industrial Development Authority) in 1950 help to facilitate the objective of cooperative through self and intergrated rural development. The cooperative expansion into marketing societies expanded from 6 in 1947 to 257 in 1956 whilst for the consumer society in 1956 it was 239 from 7 in 1947 (ILO 1958 : 5).
Hence, initially the role of cooperative was centered in the rural areas mainly in provision of credits and in marketing. However, with changing socio-economic activities as a result of the war and the rapidly changing urban pattern because of rral urban migration and also the rapid growth of population in urban areas lead to a serious shortage of accomodation (Newcombe : 1956). Das (1971 : 2) document the shortage of housing and exorbitant prices of house lead to widespread demand for tea money to acquire houses. The widespread urban housing problem received the serious attention of the cooperative movement and was addressed and discussed in conferences organised by the movement.
Consequently the cooperative movement were increasingly drawn ino the housing questions (Das 1971). Although the role of housing cooperative in Malaysia started after the war, Thrift and Loan Societies, especially those well established ones had introduced provisions in their constitution to provide mortage loans to enable their members to own homes even prior to the war. The importance of Thrift and Loan Societies during the period of 1925 – 1931 is shown by the total loan given out from 577,057 ringgit to 1,964,022 million ringgit for social and productive investment. This was between 90 – 98 per cent of the aggregate loans, Hawa Mohammed Salleh (1987-29) documents the socially productive expenditure of the Thrift and Loan Societies in the form of land purchases, cultivation expenses, rent assessment and house purchase and repairs. However, these societies ability to undertake such activities were limited because of their short term credit organisation and hence required adequate liquidity funds at all times to issue loans and to refund shares or subscriptions to members as and when required. The amount set aside for mortgage loans were limited to between 25 to 3 per cent of the subscribed capital. In view of this problem and the realisation of the need to extend housing development, the cooperative movement saw the needs for establishing a housing cooperatives. The Cooperative Movement felt it was necessary to establish cooperative specialising in housing construction having powers to raise sum of money and retaining within themselves experienced personnel, knowledgeable in matters relating to long term finnancing, costing, contracts and building works (Dass : 1977).
3.2 The Period of Expansion of Housing Cooperatives in 1949 – 1970
The first housing cooperative Teluk Anson English School Teachers’ Housing cooperative was registered on April 9th. 1949 and this was followed seven month later by the Kuala Lumpur Housing Cooperative with a membership of 330 and share capital of MR21,700.
With Malaya achieving Independence in 1957 the number of housing cooperatives grew from 2 in 1949 to 30 with an asset of 62 million ringgit (see Table 1).
The reason for this growth was that the housing cooperatives was the housing cooperatives was the alternative housing delivery system in a situation where there were shortage of cheap houses and the related problem of exorbitant charges on loans with short repayment periods (Cheah 1986).
The manifold increase of housing cooperatives can also be attributed to the setting up of Housing Trust in 1950 based on the Housing Trust Ordinance No. 62 1950 and the formation of the Federation of Cooperative Housing Societies. The Housing Trust
Table 1 : The Statistic For Cooperatives Involved In Housing in Malaysia
(1949-1987)
YEAR
/ NO. / MEMBER / SHARA (000) / ASSET (000,000)1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987 / 2
na
28
30
39
47
67
65
61
57
60
60
na
62
64
63
63
64
50 / 330
na
4593
5255
8557
12994
13084
13369
11828
18685
22422
na
33584
47000
51000
42120
52327
27560 / 21.7
na
1400
na
4900
5500
6700
na
8900
11800
na
12000
19000
34236
15100 / 0.1431
na
7.45
na
62
79
74
86
103.2
na
1146.67
134.7
205.3
189.9
Source : Jabatan Pembangunan Koperasi
provides technical assistance and advises as well as source of finance to the cooperatives in addition to its larger function providing house at the national level. The Federation of Housing Cooperatives on the otherhand was set up to coordinate the housing cooperatives and to negotiate with the government for more expeditious alienation of land to the societies and to provide technical experts (Federation of Malaya Annual Report 1957). However, the success of the Federation was questionable. For example in 1965 only 14 housing societies were affiliated and this represented a concentration of 30 per cent. In a five year period from 1961 to 1965, they were neither report or statement on the numbers of loan given out nor any housing activity. Hence, the society exists in name only.
The role of the government was also important in providing the impetus for growth through the alienation of land to the cooperative for housing. The other important factor for the growth was the credit and finances through the Thrift and Loan Societies afforded to the cooperative, since most of the members of housing cooperatives were also members of Thrift and Loan Societies. The link allowed the flow of finance to the housing cooperative. Towards the later stage, the establishment of Central Cooperative Bank facilitated further the channeling of resources from the Thrift and Loan Societies to the housing cooperatives. The bank policy was to provide loans to the housing cooperatives up to two third of the asset at interest rate of 8 percent per year and pay back period of 15 years.
Between 1957 to 1965 the economic and political situation in Malaya was more stable and through the two five plan – First Malaya Plan (1956-1960) and especially in the Second Malaya Plan (1960-1965) housing received the government’s attention. Housing cooperative was still considered as an important housing delivery system along with the major production system of the Housing Trust. Hence, the growth of housing cooperative was still rapid from 30 in 1957 to in 1964 but less than the figure recorded between 1949 to 1957 from 2 to 30. This substantial growth was still possible inspite of the government policy emphasise was on the rural and agro-based cooperatives. In 1963 for example the number of housing cooperatives was 40 with membership of 5,255 and a working capital of nearly 12 million ringgit.
The establishment of the Cooperative Central Bank in 1958 to mobilise funds from individuals and member societies was also responsible for the increasing number of h ousing cooperative formed. After three years of its establishment, the CCB comprosed of 36 urban Thrift and Loan Societies, 10 cooperative housing societies and one cooperative insurance society (Bank Negara Report, 1960:22).
In 1963 there were 57 urban cooperative societies as members of CCB and 1970 there were 102 urban societies as members and 1,423 individual members. The bank continue to provide loans for cooperative societies to undertake various development projects and also grant loans for individual to purchase house. The figure indicates the important of Cooperative Central Bank in the provision of funds to cooperative housing.
Most the housing cooperatives in the early years raised funds from commercial bank and other financial insitutions by mortgaging their housing schemes. In 1960’s the housing cooperatives faced with difficulty in obtaining loans began to expand their fund based by launching their own deposit scheme to attract new savings. The other method as mentioned earlier was through loans from the Cooperative Central Bank and the Malaysia Cooperative Insurance Society.
The housing cooperative increased further from 47 in 1964 to 66 in 1967. The government also plays an important role in the expansion of housing cooperatives by providing the largest allocation of development funds to housing cooperatives as compare to the other types of cooperatives (see Table 2).
Table 2 – Breakdown of Government Funds Alloated to Cooperative Societies
Peruntukan / Baki 31/12/69 / Baki 1971Padi Kuncha
Padi Purchase / 3,500,000
7,900,000 / 2,901,216
5,965,000 / 2,631,126
5,622,860
Medium Terms Loans / Issue / Baki 31/12/69 / Baki 1971
Fisherman co-operatives
Poultry
Big Rice Mills
Small Rice Mills
Malayan Co-operative
Wholesale Society
Rural Transport
Bertam Estate
Land Development
Rubber Marketing
Coffee Marketing
Fertilisers
Pepper Marketing (Sar)
Estate Purchase
Housing / 737,000
71,000
570,000
624,000
500,000
322,000
2,050,000
140,000
119,000
70,000
700,000
40,000
8,550,000
38,300,000 / 569,878
64,500
423,666
624,950
150,000
70,000
1,473,334
117,500
85,000
59,500
700,000
40,000
8,500,000
38,000,000 / 279,191
-
270,000
624,950
-
-
1,246,668
117,500
42,362
-
380,738
-
8,500,000
38,115,860
Source : (Malaysia Year Book, 1972) pg. 260