Rethinking Cooperatives in the 21st Century (9)

The co-operative is one of the oldest forms of economic organisation in the history of human civilisation. Long before modern nation-states defined it in juridical terms, the spirit of co-operation—working together, sharing risk, and distributing the fruits of labour equitably—had already become a collective instinct of human communities. From farming communes in Europe to fishing villages in South-East Asia, the principle of mutual assistance has sustained those most vulnerable to the pressures of market forces.

In Indonesia, this concept is deeply rooted in indigenous cultural values: gotong royong (communal co-operation), tepo seliro (empathy for others), and mufakat (deliberation and consensus). When the founding fathers of the nation set out to define the economic foundations of independent Indonesia, the co-operative was accorded a privileged place even in the constitution itself—Article 33 of the 1945 Constitution explicitly states that the national economy shall be organised on the basis of collective endeavour founded upon the principle of kinship.

This essay traces the long journey of the co-operative—from its origins in Europe and across the globe, to its establishment on Indonesian soil, the vicissitudes of the New Order era, and finally to the fresh vision of President Prabowo Subianto through the Koperasi Desa/Kelurahan Merah Putih (Red and White Village and Urban Ward Co-operative) programme. The essay also analyses two controversial issues that have accompanied the implementation of that programme: the procurement of imported vehicles from India, and the purchase of electric motorcycles for the Nutrition Service Units (SPPG).

THE CO-OPERATIVE MOVEMENT

From Global Roots to Indonesia’s Koperasi Merah Putih:

History, Challenges, and the Prospects for Indonesia’s Future

I. THE CO-OPERATIVE MOVEMENT WORLDWIDE

A. Origins and the Birth of the Modern Co-operative Movement

The modern co-operative movement was born from the suffering of workers and farmers under the Industrial Revolution in early nineteenth-century Britain. Harsh social conditions—low wages, long working hours, and the monopoly of distribution by large traders—drove a group of textile workers in Rochdale, Lancashire, to seek a collective remedy.

In 1844, twenty-eight factory workers in Rochdale founded what would become known as the Rochdale Society of Equitable Pioneers. They set aside one pound sterling each week to build a collectively owned shop selling everyday necessities at fair prices. Their endeavour gave rise to seven foundational principles that remain the universal reference point of the co-operative movement to this day: open membership; democratic governance (one member, one vote); distribution of surplus according to participation; provision of education for members; and political neutrality.

The Rochdale model spread rapidly. In Germany, Friedrich Wilhelm Raiffeisen founded rural credit co-operatives in 1864, which became the global template for savings-and-loan co-operatives. Hermann Schulze-Delitzsch had earlier established urban credit co-operatives in 1849. In France, Charles Gide developed the theory and practice of consumer co-operatives. In Denmark and the Scandinavian countries, agricultural co-operatives flourished and became the backbone of national economies.

B. Co-operatives Around the World

1. Co-operatives in Europe

Europe remains the heartland of the co-operative movement. In Italy, the Lega Cooperative, founded in 1886, shelters thousands of co-operatives across multiple sectors. In Spain, the Mondragon Corporation—established in the Basque Country in 1956 by Father José María Arizmendiarietta—has grown into a co-operative conglomerate employing tens of thousands of worker-members, spanning manufacturing, banking (Caja Laboral), education, and retail (Eroski). Mondragon is frequently cited as “the world’s most successful co-operative” for its ability to compete in global markets whilst upholding the values of economic democracy.

In Scandinavia, agricultural and consumer co-operatives dominate national economies. Denmark exports dairy and pork products on a vast scale through farmers’ co-operatives. Finland’s consumer co-operative network (S Group) commands over forty per cent of the national retail market.

2. Co-operatives in the Americas

In the United States, credit unions count more than 130 million members. REI (Recreational Equipment Incorporated), a consumer co-operative in the outdoor-equipment sector, manages a multi-billion-dollar turnover under a fully democratic business model. In Canada, the Desjardins Group in Québec has become one of the country’s largest and most trusted financial institutions.

3. Co-operatives in Asia

Japan possesses an exceptionally robust agricultural co-operative system through JA (Japan Agricultural Co-operatives), which serves virtually all Japanese farmers in the marketing of produce, the procurement of inputs, and the provision of financial services. South Korea and Taiwan similarly developed strong agricultural co-operatives that served as vital instruments of rural modernisation after the Second World War.

In South Asia, Bangladesh is renowned for the Grameen Bank founded by Muhammad Yunus—a group-based financial institution imbued with the co-operative spirit, serving millions of impoverished women through unsecured micro-credit. This model inspired inclusive finance movements worldwide and earned Yunus the Nobel Peace Prize in 2006.

C. International Co-operative Organisations

The International Co-operative Alliance (ICA), established in 1895, serves as the global umbrella body for the co-operative movement. Headquartered in Brussels, the ICA brings together more than 310 member organisations from 110 countries, representing over one billion co-operative members worldwide. The ICA also formulates and periodically revises the Co-operative Principles that serve as the universal benchmark. In 2012, the United Nations designated it the International Year of Co-operatives, in recognition of the co-operative movement’s contribution to sustainable development.

II. THE CO-OPERATIVE MOVEMENT IN INDONESIA

 

A. Historical Background and Indigenous Roots

The seeds of the co-operative in Indonesia had in truth already been sown long before independence. The values of gotong royong, the arisan (rotating savings circle), and the communal lumbung desa (village grain barn) had long constituted a system of communal economy alive in virtually every ethnic community across the archipelago. The sasi system of Maluku, the subak irrigation co-operatives of Bali, the lumbung pitih nagari of Minangkabau, and the julo-julo of various other regions were all indigenous proto-co-operatives of Indonesia.

In the colonial era, the modern co-operative was introduced by Raden Aria Wiriatmadja, a regent’s deputy (patih) in Purwokerto, who in 1896 established a Hulp en Spaarbank (‘Bank of Mutual Aid and Savings’) to assist civil servants ensnared by moneylenders. This initiative is regarded as the founding milestone of the co-operative movement in Indonesia. A Dutch official, Dr Wolff van Westerrode, subsequently developed the institution into the Hulp-Spaar-en Landbouwkredietbanken (Bank of Mutual Aid, Savings, and Agricultural Credit).

During the nationalist movement, organisations such as Sarekat Islam and Budi Utomo established co-operatives as part of their economic struggle against colonial capitalism. The movement’s leaders saw the co-operative not merely as an economic tool but as a medium for democratic education and the empowerment of a colonised people.

 

B. The Conceptual Framework of Indonesian Co-operatives

Bung Hatta—widely revered as the Father of the Indonesian Co-operative—formulated the conception of the co-operative in a manner more profound and contextually attuned to Indonesian realities. For Hatta, the co-operative was not simply an economic institution but a socio-economic movement rooted in the communal and mutually supportive character of the Indonesian people. He envisaged the co-operative as the chief pillar (soko guru) of the national economy—an alternative to both exploitative liberal capitalism and communism that denied individual freedom.

Hatta distinguished the Indonesian co-operative from its Western counterparts. He emphasised that a co-operative must spring from the genuine needs of the community, not from abstract ideology. ‘The co-operative is a joint enterprise to improve economic livelihoods on the basis of mutual assistance,’ he wrote. It is that spirit of mutual assistance which motivates people to join together, not the profit motive alone.

Article 33(1) of the 1945 Constitution affirms that ‘the economy shall be organised as a collective endeavour based on the principle of kinship.’ According to Hatta, this formulation is the constitutional expression of the co-operative ideal. The state does not merely permit co-operatives; it is constitutionally obliged to construct an economy that is co-operative in nature.

C. The Objectives of Co-operative Development in Indonesia

The objectives of co-operative development in Indonesia—as enshrined in successive legislation from the first Co-operatives Act (Law No. 79 of 1958) through to Law No. 25 of 1992—have been consistently directed towards several core aims. First, to improve the welfare of members in particular and society at large. Second, to contribute to the construction of a national economic order in furtherance of an advanced, just, and prosperous society founded upon Pancasila and the 1945 Constitution. Third, to strengthen the bargaining position of small-scale producers—farmers, fishermen, artisans, and petty traders—who are individually weak, so that they may compete collectively in the marketplace. Fourth, to broaden community access to capital, technology, markets, and information that have hitherto been monopolised by large capital interests.

In practical terms, co-operatives are expected to shorten distribution chains, reduce production costs, improve prices received by members’ produce, and provide goods and services at more affordable prices. In short, the co-operative serves as a mechanism for the fairer redistribution of added value than the free market, which tends to favour large capital.

III. CO-OPERATIVES IN THE NEW ORDER ERA

 

A. New Order Government Policy Towards Co-operatives

The New Order era (1966–1998) was a deeply paradoxical period for the Indonesian co-operative movement. On the one hand, the Soeharto government formally designated the co-operative as one of the pillars of the national economy, disbursing various development programmes and financial assistance. On the other hand, the policies it pursued systematically undermined the spirit and independence of the co-operative.

In 1967, the New Order government enacted Law No. 12 of 1967 on the Fundamentals of Co-operativism. In 1978, a Department of Co-operatives was established and later elevated to a full ministry. Various programmes were launched: the Co-operative Business Credit (KUK), the Village Unit Enterprise (BUUD), and subsequently the Village Unit Co-operative (KUD).

The KUD—conceived in 1973 and strengthened through Presidential Instruction No. 2 of 1978—became the most ambitious co-operative programme of the New Order. A single KUD was established in every sub-district (kecamatan), intended to serve as the distribution centre for agricultural inputs, the collection point for harvests, and the provider of credit for farmers. The government allocated substantial funds and granted KUDs various monopoly rights: the exclusive right to distribute subsidised fertiliser, the right to procure rice for the National Logistics Board (Bulog), and the right to distribute other basic necessities. 

B. Factors Behind the Failure of New Order Co-operatives

Despite appearing impressive on paper, New Order co-operatives—particularly the KUDs—ultimately suffered widespread failure. The causes were multidimensional and interwoven.

1. Excessive Political Interference

Co-operatives under the New Order lost their autonomy by becoming instruments of government policy. Management committees were often appointed by local officials rather than elected democratically by members. Co-operative activities were directed to support government programmes—particularly the Bimas (Mass Guidance) agricultural intensification and food self-sufficiency drives—so that members’ interests became secondary. The co-operative was transformed from a democratic economic organisation into an extension of the bureaucracy.

2. Corruption and Mismanagement

The flood of government funds channelled into co-operatives, unaccompanied by adequate oversight mechanisms, created fertile ground for corruption. Unaccountable committee members used co-operative funds for private gain. Non-performing loans accumulated because of lax credit appraisal and politically motivated disbursements. Many KUDs ultimately existed only on paper.

3. Dependence on Subsidies and Monopolies

A healthy co-operative ought to grow through its ability to serve members competitively. Yet New Order KUDs subsisted on government subsidies and monopoly rights. When those monopolies were rescinded—particularly under pressure from the International Monetary Fund following the 1997 financial crisis—KUDs lost their source of sustenance and collapsed. This dependency fostered a culture of reliance that was diametrically opposed to the spirit of self-reliance that should have constituted the co-operative’s soul.

 

4. Inadequate Human Resource Capacity

Co-operative management positions were generally filled by individuals appointed on grounds of political proximity rather than competence. The absence of training and co-operative education resulted in amateurish governance. Members were never educated to understand their rights and obligations, so that democratic control from below—the very heart of co-operative democracy—never functioned effectively.

 

5. Rigid and Bureaucratic Regulation

New Order co-operative regulation was top-down, rigid, and heavily bureaucratic. Establishing a co-operative required navigating a long series of procedures involving numerous government agencies. Innovation and member initiative were stifled by uniform rules that took no account of the diversity of local conditions. As a result, co-operatives were unable to adapt to the ever-changing genuine needs of the communities they were meant to serve.

 

6. The Legacy of Stigma Following Widespread Failure

The mass failure of New Order co-operatives left a deep stigma in public consciousness. The word ‘co-operative’ became synonymous with an institution that was inefficient, corrupt, and of benefit only to its committee members. This stigma became a serious psychological barrier to co-operative development in the reformasi era. Changing public perception proved as difficult as reforming the institutions themselves.

 

C. Post-New Order Co-operatives: A Faltering Reform

Post-New Order governments endeavoured to rebuild the co-operative ecosystem with renewed vigour. Law No. 25 of 1992, replacing its predecessor, sought to grant greater autonomy to co-operatives and to reduce government interference. Various revitalisation programmes were launched, yet the results remained disappointing. Co-operatives continued to lag behind state enterprises and private companies in their contribution to the national GDP.

One fundamental problem was that co-operative reform proceeded without a comprehensive ecosystem strategy. Regulation changes were not matched by adequate investment in human resource capacity, improved access to capital, or the development of business networks among co-operatives. As a result, successful co-operatives emerged sporadically here and there, but were unable to coalesce into a meaningful national movement.

IV. THE PROSPECTS FOR THE MERAH PUTIH CO-OPERATIVE

A. Background and Conception

President Prabowo Subianto responded to the challenges facing the co-operative movement with an act of considerable boldness and ambition. At a retreat for regional heads at the Military Academy in Magelang in February 2025, Prabowo first articulated the idea of establishing village co-operatives as an instrument of food security. This idea was crystallised at a Cabinet meeting at the State Palace on 3 March 2025, where the launch of 80,000 village and urban ward co-operatives under the name Koperasi Desa/Kelurahan Merah Putih (‘Red and White Village and Ward Co-operatives’) was announced.

Prabowo employed a powerful analogy to explain the philosophy of his programme. ‘A co-operative is like a palm leaf rib,’ he said in his address at the launch on 21 July 2025 in Klaten, Central Java. ‘A single rib has no strength worth speaking of, but if hundreds are gathered and bound together, they become a formidable force capable of sweeping away the economic problems of the people.’ He also declared that ‘the co-operative is a great home for the small, so that they may stand as tall and sit as low as anyone else.’

 

B. Structure and Mechanisms of the Programme

The legal foundations of the programme are formally robust. The government issued Presidential Instruction No. 9 of 2025 on the Acceleration of the Formation of the Merah Putih Co-operative on 27 March 2025, subsequently reinforced by Presidential Instruction No. 17 of 2025 on the Acceleration of the Physical Construction of Retail Outlets, Warehousing, and Equipment for the Merah Putih Co-operative, issued on 22 October 2025.

Each Merah Putih Co-operative is designed to operate six business units: a basic necessities shop, a savings-and-loan unit, a village pharmacy, a village clinic, a storage warehouse, and a logistics fleet. The concept is highly ambitious—the co-operative is not merely a collective shop but a complete service ecosystem at the village level. In addition, the co-operative is designed to process payments for PLN electricity bills and various other community needs.

In terms of financing, each co-operative is allocated approximately Rp 3 billion, channelled through PT Agrinas Pangan Nusantara—a state enterprise appointed by the government as the implementing body. The budget is drawn from multiple sources: the state budget (APBN), General Allocation Funds, Revenue-Sharing Funds, Village Funds, and loans from state-owned banks (Himbara) with a tenor of six years. The Ministry of Finance estimates annual loan repayments of approximately Rp 40 trillion over the ensuing six years.

On 21 July 2025—coinciding with the 78th National Co-operative Day—President Prabowo formally launched the institutional framework of 80,081 Koperasi Desa/Kelurahan Merah Putih simultaneously across the whole of Indonesia. The launch, centred on the village of Bentangan in Wonosari Sub-district, Klaten Regency, Central Java, was attended virtually by all regional heads throughout the archipelago.

C. Potential and Grounds for Optimism

If properly managed, the Merah Putih Co-operative has the potential to become a major breakthrough in the development of the Indonesian rural economy. Several reasons for optimism merit consideration.

First, the sheer scale of the programme— 80,000 units reaching virtually every village and ward across Indonesia—creates a distribution network of a kind never previously established. This network has the potential to break the distribution chains that have long been exploited by middlemen and large retailers, allowing farmers to receive better prices whilst consumers pay less.

Second, the integrated business model encompassing six units gives each co-operative the capacity to serve the comprehensive needs of village communities. Village pharmacies and clinics, for instance, address the demand for basic healthcare that has long been beyond the reach of many rural communities.

Third, the programme is aligned with the constitutional aspiration of Article 33 of the 1945 Constitution and with the sixth pillar of the Asta Cita vision of the Prabowo-Gibran administration, namely to strengthen equitable and inclusive economic growth and to alleviate poverty through the strengthening of rural economic institutions.

D. Challenges and Risks That Must Be Anticipated

Behind this optimism, some serious risks warrant careful attention lest the programme repeat the failures of co-operatives past.

First, managerial risk. The success of a co-operative depends critically upon the quality of its management and committee members. With 80,000 co-operative units required to become operational in a short space of time, the availability of competent human resources poses a formidable question. Intensive and sustained training and mentoring programmes are absolutely essential.

Second, governance risk and corruption. The very large sums of money involved—estimated at over Rp 240 trillion spread across 80,000 locations—present a serious risk of corruption and misappropriation. Various public policy observers have estimated that potential budgetary leakage could amount to trillions of rupiah. Transparent reporting systems, regular independent audits, and effective public complaint mechanisms must be built in from the outset.

Third, risk of overlap with existing village programmes. The Village Fund, which has flowed to villages since 2015, has its own governance framework and mechanisms. Reports that a portion of the Merah Putih Co-operative budget was drawn from cuts to Village Fund allocations of as much as seventy per cent have provoked protests from village heads. Synchronisation with existing systems constitutes a formidable task.

Fourth, sustainability risk. Co-operatives constructed with externally supplied ‘top-down’ capital are prone to becoming unsustainable once the flow of government funds ceases. A healthy co-operative must grow from the genuine ownership and active participation of its members. The programme must ensure that, in the long run, management of the co-operative is genuinely transferred into the hands of the village community.

V. THE PROCUREMENT CONTROVERSIES

 

A. Importing Pick-Up Trucks from India: Between Efficiency and the ‘Buy Indonesian’ Principle

One of the most contentious issues accompanying the implementation of the Merah Putih Co-operative programme has been the decision by PT Agrinas Pangan Nusantara to import pick-up trucks from India. The matter first came to light through an announcement by the Indian automotive company Mahindra and Mahindra Ltd. on 4 February 2026, stating that it would supply 35,000 units of the Scorpio Pick-Up to Agrinas for the Koperasi Desa/Kelurahan Merah Putih project.

The total number of vehicles to be imported subsequently proved far larger. PT Agrinas confirmed the procurement of 160,000 vehicles from various countries—approximately 24,500 units from Japan and China, whilst the remainder, roughly 135,500 units, originated from India. On 30 March 2026, Minister of Co-operatives Ferry Juliantono confirmed that 105,000 vehicles imported from India had already begun to be distributed incrementally to co-operative units that had completed their physical construction. The total procurement cost was estimated at Rp 24.66 trillion.

The choice of imported Indian vehicles provoked widespread controversy. The national automotive industry association GAIKINDO maintained that the domestic industry was in fact capable of meeting the demand for pick-up trucks in question. Wuling Motors, for instance, announced its readiness to offer light commercial vehicles manufactured locally in Indonesia.

The Government’s Case

PT Agrinas President Director Joao Angelo De Sousa Mota offered two principal justifications for the decision to import. First, a technical argument: four-wheel-drive pick-up trucks were considered more suitable for the challenging road conditions found in many of Indonesia’s rural areas. Second, an availability argument: total national vehicle production at the time was only approximately 70,000 units per year, far short of what would be needed to equip 80,000 co-operatives simultaneously. ‘If we were to add to that and buy 70,000 from the market, there simply would not be the stock,’ Joao explained. The government also stated that, going forward, the procurement of operational vehicles would prioritise the domestic automotive industry.

Criticism and Controversy

Many observers nonetheless considered the decision to be contradictory. Whilst President Prabowo had been vigorously championing the use of domestic products—he had even inaugurated the VKTR electric bus and truck factory in Magelang—his own flagship programme was choosing to import on a massive scale. This was viewed as an ambiguous signal that undermined public confidence in his economic nationalism policy.

From a macroeconomic perspective, the import of vehicles worth tens of trillions of rupiah risked exacerbating the national budget deficit, which in 2025 had already reached Rp 695.1 trillion, or 2.92 per cent of GDP—approaching the statutory ceiling of three per cent. Economists warned that if large-scale programmes such as the Free Nutritious Meals (MBG), the Merah Putih Co-operative, and the People’s Schools continued to be executed without adequate efficiency measures, the deficit could breach the limit, compelling the government to seek financing that might trigger inflation and interest rate increases.

A further criticism concerned the appropriateness of the procurement: a number of co-operatives already operating independently—such as Kopdes Penfui Timur in East Nusa Tenggara, which was named as a national model co-operative—stated that what they most needed was additional working capital and strengthened human resources, not operational vehicles.

The controversy deepened when it emerged that the procurement process employed direct appointment mechanisms opened by the Presidential Instruction, rather than a competitive tender. The transparency of the procurement process remained an unanswered question.

B. The Procurement of Electric Motorcycles for SPPG Heads: Between Regulatory Obligation and Budgetary Efficiency

Almost simultaneously with the controversy over the Indian vehicle imports, the public was exercised by reports of the procurement of electric motorcycles for the heads of the Nutrition Service Units (SPPG)—the technical implementing units of the Free Nutritious Meals (MBG) programme at the grassroots level. Early reports circulating in social media cited a figure of 70,000 units, which immediately provoked widespread outrage.

The National Nutrition Agency (BGN) subsequently issued an official clarification. BGN Chief Dadan Hindayana stated that the figure of 70,000 units was inaccurate. Actual procurement amounted to 21,801 units out of a total of 25,000 units planned under the 2025 procurement programme. The chosen vehicle was the Emmo JVX GT—an adventure-style electric motorcycle manufactured domestically by PT Yasa Artha Trimanunggal, with a Local Content Level (TKDN) of 48.5 per cent and a ground clearance of 320 mm.

The price of Rp 42 million per unit attracted debate—all the more so given that this was far removed from the affordable electric motorcycles familiar to the general public. However, the BGN explained that this price was in fact below the market price of Rp 52 million, had been negotiated through the government’s e-catalogue procurement system (LKPP), and was grounded in Presidential Instruction No. 7 of 2022, which mandates the use of electric vehicles as official government transportation.

Clarification from the Ministry of Finance

Finance Minister Purbaya Yudhi Sadewa had stated that the budget application for the motorcycles had in fact been rejected the previous year, since the government wished to focus expenditure directly on food provision rather than on supporting operational vehicles. ‘Our focus is on how funds reach the children’s plates,’ said Purbaya. This statement revealed a significant internal lack of synchronisation between government ministries and agencies—a matter that deserves serious attention with regard to inter-agency budget co-ordination.

Policy Analysis

The SPPG electric motorcycle controversy in reality reflects a deeper tension in the governance of the government’s priority programmes. At least three aspects merit particular scrutiny.

First, transparency and accountability. Large-scale procurement processes that are not proactively communicated to the public generate information readily susceptible to misinterpretation, thereby eroding trust. Better public communication could prevent the unnecessary escalation of controversies.

Second, expenditure priorities. In an era of tight fiscal pressure, every item of government expenditure must pass a rigorous test of relevance and effectiveness. Does the head of an SPPG unit genuinely require a Rp 42 million electric motorcycle, or would a far less expensive conventional motorcycle suffice? This question needs to be answered through a transparent feasibility study.

Third, policy consistency. Both controversies—the Indian vehicle imports and the SPPG electric motorcycles—exhibit the same pattern: large-scale procurement by flagship government programmes that raises questions about process, value for money, and consistency with professed principles. This pattern must be urgently addressed if public trust in the Prabowo administration’s ambitious programmes is not to be gradually eroded.

VI. CRITICAL OBSERVATIONS AND RECOMMENDATIONS

A. Lessons from History

The history of Indonesian co-operatives is a mirror that must always be consulted before taking the next step. The failure of the KUDs of the New Order era was not because the co-operative as a concept was inherently flawed; it was because co-operatives were made to serve as political and administrative instruments rather than autonomous and democratic economic organisations. To repeat the same pattern—establishing co-operatives en masse from the top down, making success contingent upon a flow of government funds, without building the capacity of members—would be to repeat the same tragedy.

B. Ensuring Internal Co-operative Democracy

A healthy co-operative is one in which its members are sovereign. The election of management committees must be genuinely democratic, free from interference by local officials. The Annual General Meeting must function as a real forum for accountability, not a mere formality. Mechanisms for removing corrupt or incompetent managers must be readily available to members. Without robust internal democracy, the co-operative will simply become a petty oligarchy at the village level.

C. Substantial Investment in Human Resources

The quality of human resources is the single most important determinant of whether a co-operative succeeds or fails. The government must allocate a budget of comparable magnitude to the physical investment—for management training, financial literacy education for members, and the cultivation of the co-operative entrepreneurial spirit. Without competent people, a magnificent co-operative building will be nothing more than a monument to failure.

D. Multi-Layered Oversight

With total expenditure exceeding Rp 240 trillion dispersed across 80,000 locations, the risk of corruption and misappropriation is very high. The oversight system must be multi-layered: internal oversight by a strengthened supervisory board within each co-operative; external oversight by independent auditors; community oversight through accessible reporting platforms; and oversight by the Audit Board (BPK), the Corruption Eradication Commission (KPK), and law enforcement agencies. Blockchain technology or real-time information systems could be harnessed to ensure transparency of fund flows.

E. Long-Term Sustainability

The Merah Putih Co-operative programme must be designed from the outset with a clear government exit strategy. Substantial government support at the start is indeed necessary as a kick-off mechanism, but there must be a clear roadmap for how co-operatives will gradually achieve financial independence. Measurable performance targets—turnover, numbers of active members, growth in surplus distribution, and loan repayment rates—must be set and evaluated on a regular basis.

F. Synchronisation with the Existing Ecosystem

The Merah Putih Co-operative must not operate in isolation. It must be integrated with existing programmes: the Village Fund, BUMDes (Village-Owned Enterprises), KUR (People’s Business Credit), and the distribution networks of state-owned agri-food enterprises. Such synchronisation demands serious and consistent cross-ministerial co-ordination—a persistent weakness of Indonesian bureaucracy that must be addressed.

VII. CONCLUSION

The co-operative is not an antiquated idea from the past. It is an answer that is relevant—indeed, increasingly relevant—to the challenges of global economic inequality in the twenty-first century. Mondragon in Spain demonstrates that a co-operative can compete in global markets. The Grameen Bank in Bangladesh demonstrates that a co-operative can lift millions out of poverty. The dairy co-operatives of Denmark demonstrate that a co-operative can dominate international food value chains.

Indonesia, with its 80,000 villages and wards, its deeply rooted tradition of gotong royong, and the largest domestic market in South-East Asia, possesses all the prerequisites for making the co-operative a genuinely effective pillar of its economy. President Prabowo’s vision, expressed through the Koperasi Desa/Kelurahan Merah Putih, points in the right direction. It responds to market failure in distributing prosperity to rural areas, and it responds to the constitutional mandate of Article 33 of the 1945 Constitution—which has for too long remained mere rhetoric.

Yet the success of this programme cannot be determined by the speed of its formation or the grandeur of its physical infrastructure. It will be determined by whether the co-operatives that are established are genuinely democratic, genuinely managed by and for their members, genuinely transparent and accountable, and genuinely sustainable beyond the tenure of the government that founded them.

The controversies surrounding the Indian vehicle imports and the SPPG electric motorcycles ought to serve as a lesson that large-scale programmes require careful planning, meticulous co-ordination, and proactive public communication. When public trust is eroded by controversies that could have been avoided, the energy and political capital needed to sustain a long-term programme are dissipated to no good purpose.

Bung Hatta once wrote: ‘The co-operative is not only about economics. It is a school of democracy.’ If the Merah Putih Co-operative succeeds in becoming a school of democracy in 80,000 villages and wards—a place where citizens learn to lead, manage, and exercise oversight collectively—then it will leave a legacy that far transcends economic statistics. It will strengthen the foundations of democracy from below, from the village, from the people.

May the history of the Indonesian co-operative record not only figures and programmes, but also the genuine empowerment of its most ordinary citizens.

REFERENCES

International Co-operative Alliance (ICA). Co-operative Identity, Values and Principles. Brussels: ICA, 2015.

Hatta, Mohammad. Membangun Koperasi dan Koperasi Membangun [Building Co-operatives and Co-operatives Building the Nation]. Jakarta: Inti Idayu Press, 1987.

Kartasasmita, Ginanjar. Pembangunan untuk Rakyat: Memadukan Pertumbuhan dan Pemerataan [Development for the People: Reconciling Growth and Equity]. Jakarta: CIDES, 1996.

Ministry of Co-operatives and Small and Medium Enterprises of the Republic of Indonesia. Law No. 25 of 1992 on Co-operativism. Jakarta: Kemenkop, 1992.

Presidential Instruction No. 9 of 2025 on the Acceleration of the Formation of the Koperasi Desa/Kelurahan Merah Putih. Republic of Indonesia, 27 March 2025.

Presidential Instruction No. 17 of 2025 on the Acceleration of the Physical Construction of Retail Outlets, Warehousing, and Equipment for the Koperasi Desa/Kelurahan Merah Putih. Republic of Indonesia, 22 October 2025.

Tempo.co. ‘Pemerintah Impor Mobil India untuk Koperasi Merah Putih’ [Government Imports Indian Vehicles for the Merah Putih Co-operative]. February 2026.

Kompas.id. ‘Impor 160.000 Mobil Kopdes Saat Pembatasan BBM Dinilai Tidak Logis’ [Import of 160,000 Village Co-operative Vehicles Amid Fuel Restrictions Deemed Illogical]. April 2026.

BBC News Indonesia. ‘Koperasi Merah Putih: Para Pejabat Tinggi di Jakarta Beda Pendapat soal Impor Mobil dari India’ [Merah Putih Co-operative: Senior Officials in Jakarta at Odds over Indian Vehicle Imports]. February 2026.

The Conversation Indonesia. ‘Efek Polemik MBG: Pengadaan Motor Listrik BGN Tetap Bakal Dikritik Meskipun Prosesnya Sah’ [The MBG Controversy Effect: BGN Electric Motorcycle Procurement Will Continue to Draw Criticism Despite Its Legality]. April 2026.

merahputih.kop.id. Official Portal of the Koperasi Desa/Kelurahan Merah Putih. Accessed April 2026.

Neraca.co.id. ‘Koperasi Merah Putih, Langkah Strategis Prabowo Capai Swasembada Pangan’ [The Merah Putih Co-operative, Prabowo’s Strategic Step Towards Food Self-Sufficiency]. July 2025.

KPPOD. ‘Prabowo Kebut Megaproyek Koperasi Merah Putih’ [Prabowo Accelerates the Merah Putih Co-operative Mega-Project]. November 2025.

[Part 1]

[Part 8]

Bahasa

Rethinking Cooperatives in the 21st Century (8)

The origins of the Indonesian cooperative movement are often romantically associated with post-independence ideals. Still, it is crucial to recognise that the true intellectual architect behind the movement was not President Sukarno, but rather Mohammad Hatta, who is rightfully honoured as the Father of Indonesian Cooperatives. Unlike Sukarno, whose political rhetoric often elevated cooperatives as a symbol of national pride and anti-imperialism, Hatta approached them with a more grounded economic philosophy. His vision was shaped by his deep engagement with European cooperative theory, especially during his time studying in the Netherlands. Hatta believed that cooperatives were the most effective tool for resisting colonial capitalism and uplifting the economic position of the Indonesian people, especially the poor and marginalised.

The mind of Mohammad Hatta was like a symphony composed of sharp intellect, clear conscience, and life principles that could never be bought—and scarcely ever matched. Within his thoughts lay not only the vision of a nationalist leader, but also the depth of a philosopher whose life was devoted to human dignity and justice. Where many figures leaned on emotion and charisma, Hatta’s strength was reason: his logic was calm yet firm, like an anchor in the storm of a young republic. His democracy was not the noisy spectacle of cheers and slogans, but one rooted in principle and moral awareness. To seek Hatta’s equal is to search for someone likewise nurtured by books, humble in spirit, and profoundly bound by moral responsibility—a combination exceedingly rare in today’s politics. 

Mohammad Hatta was officially honoured as the Father of Indonesian Cooperatives on 12 July 1953, during the Indonesian Cooperative Congress (Kongres Koperasi Indonesia) held in Bandung, West Java. This title was not just a ceremonial recognition—it symbolised the nation's deep respect for Hatta’s lifelong dedication to the cooperative movement and his visionary economic thinking.

The congress, which brought together cooperative leaders and activists from across the archipelago, unanimously acknowledged Hatta’s intellectual and moral leadership in advancing cooperatives as a foundation of Indonesia’s economic independence. His writings, speeches, and advocacy had inspired a generation of Indonesians to see cooperatives not merely as financial entities but as a vehicle for social justice, empowerment, and national dignity.

Even decades after that historic congress, Hatta’s name remains synonymous with the cooperative ideal in Indonesia. His legacy is not just engraved in textbooks or commemorative plaques—it lives on every time a community forms a cooperative to help one another rise together.

Hatta didn’t see cooperatives as mere economic institutions, but as democratic spaces for collective ownership and mutual progress. To him, the cooperative embodied both economic practicality and moral integrity—an instrument through which Indonesians could stand on their own feet (berdikari). He famously wrote and spoke extensively about cooperatives, embedding the idea into the national consciousness long before it gained mass traction. His name and legacy continue to define the cooperative identity in Indonesia today.

During the Old Order, Hatta's vision was often invoked, though not always applied in practice. Sukarno used the concept of cooperatives as part of his ideological narrative, but the actual implementation often faltered due to political instability. It was not until the New Order that cooperatives received extensive institutional support—though, ironically, this support sometimes came with state control and politicisation, diluting their democratic essence.

The Reformasi era sought to restore Hatta’s original intent by reimagining cooperatives as tools for grassroots empowerment. With the emergence of new civil society actors and more decentralised governance, the cooperative movement gained a fresh spirit, moving away from bureaucracy and towards innovation.

Today, in the digital era, cooperatives continue to evolve. From farmer cooperatives using apps to track supply chains to creative collectives sharing revenue through blockchain, the essence of Hatta’s vision lives on—only now, it wears sneakers instead of batik.

Whilst the ambition behind Koperasi Merah Putih is grand—forming tens of thousands of village/kelurahan cooperatives to strengthen local economies, cut supply chains, support farmers, etc. — critics have flagged several substantial challenges, risks, and potential failures that might undermine the project if not handled closely and carefully.

First, there is the issue of top-down imposition. Some observers say that Cooperatives should grow organically from the local community, driven by local needs and mutual trust. When a cooperative is established chiefly via government instruction, there is a danger that its members see it as yet another government programme rather than a self-help institution. Critics argue this risks undermining the basic cooperative principles such as member control, autonomy, equality, democracy, and solidarity. 

Second, human resources (HR) capacity is often judged insufficient. Many villages lack people with managerial, accounting, strategic planning, or technical skills to run a cooperative well. Some of the proposed cooperatives’ leadership is elderly or inexperienced, especially in rural areas. Without enough training, mentorship, or ongoing support, there is a risk of mismanagement, low efficiency, or even collapse.

Third, there is concern about transparency, governance, and oversight. Critics point out the risk of fraud, misuse of funds, or elite capture (where local elites or political actors capture control of cooperatives for their own benefit). Many call for strong, independent systems of audits, public reporting, and community participation in oversight. 

Fourth, financial / funding models are questioned. Critics warn that starting cooperatives with ambitious capital or credit lines without ensuring viable business plans, markets, or cash flow could lead to unsustainable operations. If cooperatives are dependent on government support (loans, grants, or subsidies) rather than market-oriented operations, there may be risk when support reduces or is withdrawn. Also, mismatches in scale, potential losses, or payment defaults may burden the local government or the state budget. 

Fifth, legal and regulatory clarity is mentioned. Some argue that there isn’t yet a fully developed legal basis or regulation that ensures that these new cooperatives preserve their cooperative “identity”—that is, abiding by the cooperative principles, not becoming de facto arms of government or dominated by non-members. Also, different villages have radically different local conditions, potentials, and constraints; a one-size-fits-all programme faces risk. 

Sixth, partnerships, technical support, and sustainability. Several reports say that while many cooperatives are being formed (legal entities, etc.), operating them meaningfully (making them work, making them entrepreneurial, ensuring ongoing income streams, linking to markets, having logistics, etc.) is still deeply uncertain. Also, support infrastructure (technical assistance, access to credit, stable supply chains, storage facilities, transport) needs strengthening.

In sum, critics say that without careful attention to governance, capacity building, community participation, risk mitigation, and market integration, the risk is high that many of the cooperatives will become legal shells that absorb funds rather than engines of local prosperity.

During the Old Order under Sukarno, cooperatives were often treated more as political symbols than as genuine economic instruments. Mohammad Hatta, the so-called “Father of Indonesian Cooperatives,” had envisioned them as vehicles for economic democracy, but Sukarno’s regime increasingly tied them to nationalist rhetoric rather than building sound managerial and financial structures. As a result, many cooperatives in that era existed only on paper, lacked professional management, and were vulnerable to inefficiency and corruption.

When the New Order under Suharto took control, cooperatives were re-engineered into bureaucratic extensions of the state. Rather than being independent organisations owned and managed by their members, they were frequently used to channel government subsidies, distribute fertilisers, or control village-level trade. While this gave them visibility and funding, it simultaneously undermined their autonomy. Cooperatives became “top-down” projects, run with instructions from Jakarta rather than initiative from the grassroots. Many citizens began to associate cooperatives not with community empowerment, but with bureaucratic obligations.

By the time of the Reformasi era, the word “cooperative” had already lost much of its credibility. Society had grown sceptical, seeing them as relics of bureaucratic control rather than dynamic engines of economic progress. Politicians may still praise the cooperative model, but ordinary Indonesians often prefer more flexible microfinance institutions, digital platforms, or informal community savings groups. In short, the lack of enthusiasm stems not from the irrelevance of the cooperative idea itself, but from the historical baggage of mismanagement, politicisation, and the perception that cooperatives are outdated and inefficient compared to newer financial tools.

If cooperatives are to stage a comeback in Indonesia, they must shed the baggage of their past and reinvent themselves within the digital economy. Rather than being perceived as dusty bureaucratic projects, they should transform into agile, tech-savvy platforms that genuinely empower members. Digitalisation is the crucial key: mobile apps can allow members to save, borrow, and track dividends in real time, while blockchain technology could ensure transparency and prevent the leakages that crippled so many cooperatives in earlier eras.

Moreover, cooperatives must rediscover their original spirit as people-centred economic institutions. In the age of gig work and fragmented livelihoods, a cooperative could provide collective bargaining power, fairer prices for farmers and small producers, and access to wider markets without exploitative middlemen. If combined with proper education and entrepreneurial training, cooperatives could become attractive again, especially for younger generations who are looking for both solidarity and innovation.

Nevertheless, the cultural challenge remains: cooperatives need to rebrand themselves. They must be seen not as relics of Sukarno or Suharto, but as twenty-first-century start-ups with a social mission. If this transformation is successful, Indonesia could rediscover the cooperative model as a powerful alternative to both unbridled capitalism and rigid state control, fulfilling Hatta’s vision in a form that speaks to today’s digital natives.

If Indonesia truly wishes to revive its cooperative movement after years of dormancy, the starting point must be trust. For decades, cooperatives have been associated with inefficiency, corruption, and state interference. Without rebuilding confidence among ordinary citizens, any relaunch will only repeat history. The most sensible entry point is therefore small-scale pilot projects in communities where mutual trust already exists—such as farmer groups, fishermen associations, or urban creative collectives—where cooperatives can prove their worth through visible results.

The second foundation is education. Many Indonesians do not fully understand what a cooperative is beyond the stereotype of a savings-and-loan shop. Schools, universities, and vocational programmes should reintroduce the cooperative model as a modern, democratic business structure, showing how it differs from banks or private firms. Once people grasp that a cooperative means “owned by members, run for members,” they are more likely to engage seriously.

Finally, the movement must start with digital infrastructure. A twenty-first-century cooperative cannot rely on dusty offices and handwritten ledgers; it must live on smartphones, with transparent accounting systems and user-friendly apps. If the revival begins with trust, education, and technology, cooperatives can once again become relevant—not as relics of past regimes, but as engines of inclusive growth for the future.

Now, let’s imagine this “cooperative revival” as if it were a three-season Netflix series.

Season One would have to focus on rebuilding credibility. After years of neglect, the cooperative brand carries the weight of mistrust, so the first step would be to showcase small but tangible successes. Pilot cooperatives in farming villages, fishing communities, or urban neighbourhoods could demonstrate that this model still works when managed transparently. These “episodes” would centre on trust, where communities begin to see that a cooperative can actually deliver fairer prices, cheaper credit, and collective strength.

Season Two would move into expansion and education. Once the first examples prove reliable, the narrative shifts towards scaling up and teaching the next generation. Schools, universities, and training centres would introduce cooperative values as part of economic literacy, while digital tools would make it easy for anyone with a smartphone to join and participate. This season would be about growth, energy, and the rediscovery of cooperatives as modern institutions rather than dusty relics.

Season Three would finally embrace digital transformation and long-term sustainability. Cooperatives would no longer be small experiments but integrated players in the national economy. Blockchain-based ledgers, mobile apps, and transparent governance would make them competitive with banks and fintech platforms, while their member-driven ethos would keep them socially grounded. In this final act, the cooperative becomes not merely a nostalgic idea from Hatta’s time, but a twenty-first-century engine of inclusive prosperity.

Pragmatically speaking, applying the three-season phased approach—legal formation, pilot operationalisation, and full-scale nationwide rollout—requires time, careful coordination, and patience. Yet the Merah Putih Cooperative programme has political and economic pressures demanding immediate action. The government cannot afford to wait years for perfect preparation; there is both a symbolic and practical need to demonstrate progress.

The solution, therefore, lies in a hybrid approach. Core pilot cooperatives can continue to serve as living laboratories for governance, bookkeeping, and market integration, while simultaneously scaling up legal formation and registration of additional units. Tranching the release of resources—whether seed capital, government guarantees, or training support—ensures that cooperatives do not become “ghost entities” on paper while still signalling momentum.

Moreover, technology can be leveraged to accelerate oversight. Digital dashboards, centralised reporting platforms, and online training modules can allow rapid assessment and support of newly formed units without waiting for months of in-person auditing. This way, the programme can show tangible results to the public, satisfy political imperatives, and gradually build operational capacity in a structured manner.

Communication is also key. Clear messaging that some cooperatives are pilot-ready while others are still in formation helps manage expectations, reduce the risk of perceived failure, and maintain public confidence. It’s about creating a sense of motion and achievement without overstating operational readiness.

In short, the way forward is simultaneous scaling and piloting: allow a fraction of cooperatives to operate fully while the majority are progressively onboarded, with resources and oversight distributed in a staged but accelerating pattern. This keeps the programme alive politically, economically, and socially, while still respecting the realities of time, training, and human capacity. 

When it comes to capitalisation, the government’s support for cooperatives must be both practical and credible. The first step is to provide access to affordable seed capital without drowning them in bureaucracy. Instead of burdening cooperatives with endless paperwork or politically motivated loans, the state should design financing schemes that are simple, transparent, and directly accessible to member-driven initiatives. This could include revolving funds managed at the local level, where accountability is built into the process.

Secondly, the government must offer credit guarantees. Many cooperatives, particularly those in rural areas, cannot obtain loans from banks because they lack collateral. By creating a guarantee system, the state can reduce the risk for financial institutions and encourage lending to cooperatives without the crippling interest rates that often follow informal borrowing.

Finally, long-term government support should focus on capacity rather than mere cash injections. Training in financial literacy, modern accounting systems, and digital platforms ensures that cooperatives can manage funds responsibly and grow sustainably. In short, government intervention in capitalisation must not only put money into the system but also build the skills and structures that prevent that money from being wasted.

If capital is poured into cooperatives without proper oversight, the risks are immense. The first danger is the familiar ghost of mismanagement: money might be absorbed by untrained administrators or vanish through corruption, leaving members disillusioned and sceptical. This does not only waste public funds but also damages the reputation of the cooperative movement itself, reinforcing the old stereotype that cooperatives are inefficient and unreliable.

A second risk is dependency. If cooperatives are constantly fed with subsidies and soft loans without being trained to generate their own sustainable revenue, they risk becoming welfare projects rather than genuine economic institutions. Such dependency creates fragile organisations that collapse as soon as government support dries up.

Finally, poorly monitored funding can trigger political capture. Local elites or opportunistic figures might hijack cooperative funds for personal or electoral purposes, turning what should be a collective empowerment tool into yet another instrument of patronage politics. In such a scenario, the cooperative not only fails economically but also contributes to deeper cynicism about the link between state, society, and trust.

The first strategy to prevent these risks is transparency by design. Cooperative funds must be tracked with digital tools that allow every member to see where money comes from and where it goes. If accounting is accessible through mobile apps or online dashboards, it becomes much harder for mismanagement or corruption to hide in the shadows.

The second safeguard is strong capacity-building. Training programmes in financial literacy, governance, and digital management should be mandatory for cooperative leaders. It is not enough to inject money; members need the skills to steward those funds responsibly. This professionalisation of cooperatives can transform them from vulnerable grassroots groups into credible economic actors.

A third strategy is community oversight. Instead of leaving monitoring solely to government auditors—who themselves may be politicised—cooperatives should empower their members with voting rights, audit committees, and regular public meetings. When members themselves feel ownership and responsibility, they become the most effective guardians against abuse.

Finally, the state must adopt a “sunset clause” approach to subsidies: financial support should decrease gradually as cooperatives become self-sustaining. This ensures they grow strong enough to stand on their own, avoiding the trap of permanent dependency. Combined, these measures create a culture of accountability, resilience, and independence, which is the true foundation of a lasting cooperative revival.

In terms of capitalisation, the government’s support for cooperatives often begins with the provision of credit facilities, channelled through state-owned banks and special funds earmarked for small and medium enterprises. These measures are designed to reduce dependency on informal moneylenders who impose predatory interest rates, ensuring that cooperatives gain access to fairer financing. Beyond this, successive administrations have attempted to inject capital through grant schemes or soft loans, though these efforts are frequently hampered by bureaucratic inefficiency and corruption at the distribution level. Another approach has been the promotion of savings and loan cooperatives, which function as grassroots financial institutions capable of self-sustaining capital growth if well-managed. More recently, there has been a push for digital financing platforms to integrate with cooperatives, theoretically expanding their access to broader capital markets. Yet the recurring challenge remains the limited financial literacy of cooperative members, which often undermines the intended impact of these governmental interventions.

Indonesia’s macroeconomic backdrop in 2025 is mixed but generally supportive of targeted, well-designed pro-poor interventions. Growth projections for the near term sit around the mid-to-high fours (roughly 4.8–5.0 per cent), which signals resilience but also confirms that the economy is not firing on all cylinders yet; policymakers are therefore seeking ways to broaden domestic demand and lift productivity. 

Inflation has been unusually benign in 2025, giving the central bank room to ease monetary conditions; Bank Indonesia has already cut policy rates in a pro-growth stance, and the government has moved to deploy a fresh stimulus package to support consumption and job creation in the short run. Those policy choices create a window of opportunity to inject capital and support programs that target vulnerable communities — provided that such injections are well governed. 

At the same time, structural challenges persist: unemployment and underemployment remain meaningful constraints on inclusive growth, and although poverty has been declining, tens of millions still live near the poverty line. Any large-scale programme intended to reach villages must therefore be calibrated to solve real market failures (credit access, market linkages, logistics, aggregation of supply) rather than merely creating legal entities. 

From this perspective, Koperasi Merah Putih can be a useful instrument today—but only if it is re-designed around a strict set of success conditions. The cooperative model is especially well-suited to (a) improving farmers’ bargaining power and cutting out exploitative middlemen, (b) pooling credit and risk for micro-enterprises, and (c) leveraging social capital for collective investment in storage, processing or market access. However, these benefits are real only when cooperatives have competent management, transparent governance, viable business plans and credible market linkages.

Therefore, the pragmatic answer is: yes, Koperasi Merah Putih can be part of the solution today — but only as a disciplined, pilot-driven programme that emphasises capacity building, market integration, financial transparency and time-bound public support. If the programme is rushed, top-down, or treated mainly as a headline-grabbing rollout, it will likely reproduce past failures and crowd out more effective local solutions.

The question of whether the government should channel direct funding into Koperasi Merah Putih is both political and economic in nature. On the one hand, targeted capital support could provide the initial fuel that allows cooperatives to organise members, acquire basic infrastructure, and achieve economies of scale. Without such seed money, many cooperatives may remain trapped in small-scale operations that are unable to compete with middlemen or corporations. This argument suggests that some level of government injection is indeed necessary, particularly in the formative stage.

On the other hand, the experience of previous cooperative programmes in Indonesia shows that indiscriminate capital injections often produce dependency, weak accountability, and ultimately very high rates of default. The risk is that cooperatives become “political projects” rather than viable business entities, with loans treated as grants and repayments neglected. In such an environment, the risk of non-performing loans (NPLs) could rise substantially — potentially even higher than the commercial banking sector’s NPL rate, which typically hovers around 2–3 percent in normal times. For poorly managed cooperatives, the effective NPL rate could easily exceed 10–15 percent, which would undermine the entire scheme.

Therefore, the rational approach is not to ask whether government money should flow, but under what conditions it should flow. If disbursements are linked to strict milestones—digital accounting, audited reports, market contracts secured — the risk of NPLs can be reduced and public money can act as catalytic capital rather than wasted subsidy. If, however, funds are poured in quickly without such safeguards, the cooperative project is almost certain to replicate past failures and drain fiscal resources without lasting impact.

Assume the government disburses Rp 1,000,000,000,000 (one trillion rupiah) equally across 1,000 cooperatives.

Step-by-step arithmetic (digit-by-digit):

Total fund = 1,000,000,000,000.

Number of cooperatives = 1,000.

Per cooperative = 1,000,000,000,000 ÷ 1,000 = 1,000,000,000.

(Because 1,000,000,000,000 divided by 1,000 = 1,000,000,000.)

Scenario A — 10% NPL:

Portfolio loss = 1,000,000,000,000 × 10% = 1,000,000,000,000 × 0.10

Portfolio loss = 100,000,000,000.

(Move one decimal place: 1,000,000,000,000 → 100,000,000,000.)

Loss per cooperative on average = 100,000,000,000 ÷ 1,000 = 100,000,000.

(One hundred million rupiah loss per cooperative.)

Scenario B — 15% NPL:

Portfolio loss = 1,000,000,000,000 × 15% = 1,000,000,000,000 × 0.15

Portfolio loss = 150,000,000,000.

(Fifteen per cent of one trillion = one hundred fifty billion.)

Loss per cooperative on average = 150,000,000,000 ÷ 1,000 = 150,000,000.

(One hundred fifty million rupiah loss per cooperative.)

Interpretation and context:

A 10–15% NPL on a government-backed cooperative portfolio is substantially high compared with typical commercial banking NPLs (which in benign times are often in the single digits, frequently around 2–3%). At 10% NPL, the state would effectively lose Rp 100 billion of the Rp 1 trillion injected; at 15% NPL, the loss rises to Rp 150 billion. Those are material fiscal hits and would undermine public confidence if they stem from weak governance or political capture.

The most practical way to ensure that public money allocated to Koperasi Merah Putih does not simply become another pool of wasted funds is to impose a disciplined framework of conditionality and transparency. Government support should never be released in one lump sum, but rather in carefully designed tranches that are only disbursed once cooperatives meet specific milestones such as the implementation of digital bookkeeping systems, the completion of independent audits, or the securing of formal market contracts.

To reduce the burden of risk on the state, a partial credit guarantee scheme combined with revolving funds should be employed, thereby encouraging commercial banks to participate while ensuring that responsibility for repayment is shared. At the same time, portfolio diversification must be enforced: resources should not be concentrated on a single commodity or confined to one province, but spread across sectors and regions to minimise systemic vulnerability.

Capacity-building is equally essential, for no amount of funding will succeed if cooperative managers lack the financial literacy, credit assessment ability, and recovery mechanisms necessary to keep the organisation afloat. Moreover, transparency must be brought to the forefront by mandating a public-facing digital dashboard that allows both members and the wider public to track financial flows in real time.

Finally, any subsidies or interest support must be designed with a sunset clause, meaning that they are temporary measures intended to ease the transition, not permanent crutches. Over time, cooperatives should be expected to operate independently, standing on their own commercial viability rather than leaning indefinitely on the state.

By 21 July 2025, 80,081 cooperatives had been inaugurated under the Merah Putih scheme.  Also, there is a statement by the government that many of those cooperatives have obtained legal status (i.e. become formal entities). 

In terms of operational activation, there are some targets and small-scale claims. For example, the Ministry of Cooperatives aimed for 15,000 units of Kopdes Merah Putih to be “active/operating” by August 2025. In some provinces, local statements indicate that by October 2025 they plan for full operation — Aceh, for instance, says they are preparing to bring all their units into full operation by end of October. The national program expects 80,000 units of Kopdes Merah Putih to be fully operational by 28 October 2025.

So the picture is: legal formation has largely been achieved in terms of numbers, but the leap from legal status to fully functional cooperatives is still in progress and is being scheduled to culminate in October 2025.

The Merah Putih Cooperative movement represents one of the most ambitious economic social experiments in modern Indonesia. In theory, it seeks to revive Bung Hatta’s cooperative spirit — a vision of self-reliant communities bound by shared ownership, fairness, and local productivity. Yet in practice, the initiative sits uneasily between the idealism of grassroots economics and the pragmatism of state-driven policy. The mass registration of more than eighty thousand units may look impressive in headlines, but the real test lies in whether these cooperatives can evolve into living, breathing economic organisms rather than remain mere administrative creations.

At its best, the programme has rekindled national conversations about economic independence and collective empowerment. Across villages and towns, it has sparked curiosity, hope, and a sense of belonging that echoes the old promise of “gotong royong.” For some communities, especially in agricultural and artisanal sectors, the Merah Putih cooperatives could indeed become the bridge between small-scale local effort and national-level opportunity. These early successes, however, remain isolated, and the larger machinery of oversight, training, and access to markets still demands deeper attention.

The greatest danger, therefore, is not failure in intention but failure in execution. A cooperative without capable management, digital literacy, or transparent bookkeeping is a body without a heartbeat. If the focus remains on quantity rather than quality, Indonesia risks repeating the pattern of countless past economic programmes: politically celebrated but economically hollow. Sustainable growth cannot be built on ceremonial inaugurations alone — it requires daily discipline, skill, and trust among members.

For the Merah Putih initiative to truly honour its name, it must demonstrate the spirit of red and white not just in banners and logos but in the moral courage to be accountable. That means open dashboards, periodic audits, and a culture where success is measured by shared prosperity, not bureaucratic statistics. Only then can the cooperative movement shed its image as a symbolic project and become a genuine engine of equitable growth.

In the end, Hatta's dream was never about numbers or targets; it was about dignity—the ability of ordinary Indonesians to stand tall without dependence. Suppose the Merah Putih cooperatives can rediscover that essence. In that case, Indonesia’s cooperative renaissance might yet become not merely another government programme but a living testament to what unity in diversity can achieve when translated into real, shared economic power.

[Part 9]
[Part 7]

Bahasa