Cooperatives are the backbone of Indonesia’s economy and have a long history closely tied to empowering the people’s economy. The Ministry of Cooperatives of the Republic of Indonesia has revived the role of cooperatives through the latest government policy.
One of the programs currently promoted by the ministry is the revitalization of Village Unit Cooperatives (KUDs) to achieve food self-sufficiency.
Dr. Dumairy, an economist from the Faculty of Economics and Business at Universitas Gadjah Mada (FEB UGM), welcomed the government’s initiative to revitalize the role of KUDs.
He noted that the role of KUDs has been increasingly neglected since the 1998 reform era.
“I think revitalizing not just KUDs specifically but cooperatives in general is a great idea,” he said on Saturday (Feb. 8).
According to Dr. Dumairy, in the early 1980s, the government aimed to make cooperatives the backbone of the economy, aligning with Article 33 of the 1945 Constitution. He believed that cooperatives were the most suitable business model for Indonesia.
At that time, KUDs were developed by Village Unit Enterprises (BUUD). A well-performing BUUD could be upgraded to a KUD, eventually leading to the establishment of KUDs in every district.
A growing KUD could then be further upgraded to an independent KUD, formed by merging several KUDs.
“Back then, cooperatives were entrusted with various government programs. If they met 13 specific criteria, they would be upgraded to independent KUDs, with their performance evaluated every two years,” Dr. Dumairy explained.
He noted that KUDs experienced significant growth, competing to improve and maintain their performance.
“Unfortunately, the planned biennial evaluation never took place because soon after, we entered the reform era,” he said.
He acknowledged that KUDs played a crucial role in helping Indonesia achieve food self-sufficiency.
Regarding the government’s target of revitalizing cooperatives, Dr. Dumairy believed that if the program was well-implemented, Indonesia could once again achieve food self-sufficiency without relying on rice imports. He pointed out that a similar achievement was made in 1994, largely thanks to KUDs.
Dr. Dumairy explained that the partnership between KUDs and the National Logistics Agency (Bulog), particularly through Regional Logistics Depots (Dolog), allowed farmers to sell their harvests to Dolog via KUDs at a guaranteed minimum price set by the government.
This encouraged farmers to sell their crops to KUDs rather than intermediaries, who typically purchased produce at the lowest possible prices.
“This is very different from dealing with intermediaries, who aim to buy at the lowest price,” he explained.
With this system, farmers could sell their produce at a fair price regardless of the season, ensuring they would not suffer financial losses even during peak harvest times.
However, Dr. Dumairy emphasized several aspects the government must consider in implementing this revitalization program.
Like Village-Owned Enterprises (BUMDes) management, KUD management needs to be improved, with evaluations every two years and better oversight of savings and loan operations.
Since the government has also developed BUMDes alongside KUDs, ensuring that both institutions can coexist effectively is essential. The expert warned against forcing farmers to become KUD members.
“There could be a rivalry between BUMDes and KUDs, even though their goal is the same—to improve rural welfare,” he said.
Dr. Dumairy also highlighted the importance of appointing competent, high-integrity individuals to manage KUDs rather than assigning tasks to civil servants or village officials with other responsibilities.
This would allow KUD management to focus on improving member and farmer welfare. He also suggested that the Ministry of Agriculture’s initiative to train one million new farmers could be integrated with KUD programs.
Finally, regarding savings and loan management, Dr. Dumairy questioned who would oversee the system—the Ministry of Cooperatives or the Financial Services Authority (OJK). If OJK were to oversee it, frequent administrative requirements could burden KUDs, as OJK typically conducts reviews every two weeks.
Additionally, if OJK deemed a cooperative’s savings and loan activities unviable and ordered its closure, it could undermine one of the key attractions of cooperatives. Therefore, Dr. Dumairy stressed the need for careful consideration to prevent conflicts between regulatory bodies.
“Who will oversee it? We don’t want to hear about cooperative leaders running off with members’ money again, do we?” he remarked.
He hoped continuous improvements and learning would accompany the government’s efforts to revive cooperatives. Rather than repeating history where cooperatives rise and fall, the system should be sustainable and function as intended.
Author: Leony
Editor: Gusti Grehenson
Photo: Pojoksatu.id