The existing social and institutional structures at the village level are so occupied with immediate issues of survival that they have been unable to divert much of their energy to long term development goals. The situation is characterized by the existence of "social traps" which lead people to adopt short term solutions and ignore the long term consequences of their actions. At such low income levels future expected returns are also likely to be discounted at very high rates. It is a reflection of the state of affairs that very little new land was brought under cultivation since independence. Individually, the farmers lacked the resources which could enable them to develop new land. The opening of the Karakorum highway has created new economic opportunities. Technical inputs such as chemical fertilizer, improved seed varieties and other mechanical technologies are now available. However, to fully exploit these new opportunities, there is a need for additional inputs such as: new institutional arrangements, productive physical infrastructure at the village level, credit, reliable transport facilities and investment in human capital. This process required long term planning, large capital outlays and the need to work with the government. One program which is helping in this development is the Aga Khan Rural Support Programme (AKRSP). AKRSP identified the problem as one which needed a restructuring of economic incentives, increasing village productivity, providing crucial inputs and creating a village cooperative. Its underlying premise is that the creation of a broad-based, self-reliant and development oriented institution at the village level can help address the complex issues of development in the area. The objectives of this study are classified as the following: (1) to examine how the village organizations established by AKRSP work in practice; (2) identify functions which the village organization can undertake successfully; (3) identify factors which will contribute to the increased effectiveness of these structures and (4) assess the sustainability of these cooperatives at the local and regional levels.