June 27, 2025
JAKARTA – The government is rushing to roll out the Red-White Cooperatives (KMP) program by July 19, even as the Cooperatives Law revision is still being deliberated at the House of Representatives.
Experts have criticized the move as a regulatory shortcut that risks legal inconsistencies, undermines the democratic principles of cooperatives and exposes them to poor governance and potential financial pitfalls.
The KMP is a flagship initiative of President Prabowo Subianto aimed at establishing 80,000 cooperatives across villages nationwide.
Coordinating Food Minister Zulkifli Hasan, who leads a special task force to expedite the program, told reporters on Wednesday that the President would inaugurate the initiative a week after National Cooperatives Day on July 12, because of conflicting travel schedules.
The announcement came after a closed-door cabinet meeting on Monday at Prabowo’s private residence in Hambalang, West Java, to iron out the program’s details.
Cooperatives Minister Budi Arie Setiadi said on the same day that 80,133 cooperatives had already been registered under the program.
These cooperatives will be eligible for loans of up to Rp 3 billion (US$183,723.60) each from state-owned banks, with total potential disbursements reaching Rp 400 trillion. The loans are to be repaid using village funds allocated through the state budget over a six-year period.
The program is expected to boost village welfare, address rural economic challenges and accelerate regional economic growth. It also aims to create jobs and stimulate the economy in both rural and urban areas.
The government is pushing ahead with the plan despite the fact that a bill intended to revise the existing Cooperatives Law and to provide legal foundation to the program has yet to be scheduled for final deliberation at the House.
Deputy Cooperatives Minister Ferry Juliantono said the bill was already on the House Legislative Body’s (Baleg) priority list and could be passed soon.
“It’s only a matter of time [before finalization]. The existing law is outdated and no longer relevant as a legal umbrella for today’s cooperatives,” Ferry said on Sunday, as quoted by Kompas.com.
However, Mufti Anam, a lawmaker from House Commission VI, which oversees trade, industry and cooperatives, pointed out major gaps in the bill that require further discussion, such as protections for grassroots cooperatives, stronger governance and safeguards to prevent them from becoming “vehicles for vested interests.”
“So far, the bill has only gone through one discussion with [House] Commission VI. Most of the work lies with Baleg, but we hope the process genuinely reflects issues on the ground,” Mufti told The Jakarta Post on Wednesday.
Baleg chair Bob Hasan was not immediately available for comment when asked whether the bill would be ready before July 19.
Regulatory shortcut
Association of Strategic Socioeconomic Cadres (Akses) chairman Suroto said that by pushing ahead with the program before establishing proper legal groundwork, the government was not only bypassing regulations but also betraying the core spirit of cooperatives, which are meant to emerge democratically from communities.
“Legally forming a cooperative is easy, you basically just need at least nine ID cards and a notary,” Suroto said. “But building a productive one is a different story.”
He further noted that the program currently rests solely on a presidential instruction and a ministerial circular, bypassing necessary revisions to the Cooperatives Law, the Village Law and regulations on village-owned enterprises.
In the latest draft, as seen in a Baleg public hearing livestreamed on YouTube in March, the bill proposed expanding cooperative activities beyond savings and loans, allowing them to operate on a larger scale given the substantial budget allocated.
The bill also proposes the establishment of two new regulatory bodies, a Cooperative Supervisory Authority and a Deposit Insurance Corporation (LPS) specifically for cooperatives, intended to protect customer deposits, mirroring the roles of the Financial Services Authority (OJK) and the LPS in the banking system.
Muhammad Saleh, a researcher at the Center of Economic and Law Studies (CELIOS), doubts the bill would be passed any time soon since the program has already moved ahead of regulatory revisions by taking “policy shortcuts”.
He also warned that while creating new oversight bodies may be necessary in principle, it could create conflicts with existing laws.
For instance, the 2014 Village Law grants communities the right to manage village-owned enterprises collectively. The draft bill, however, would allow village funds to finance state-mandated cooperatives and place village heads in supervisory roles.
Further complicating matters is a clause that could shield cooperative managers from liability if they can demonstrate “good faith” and an absence of direct financial loss to the cooperative.
“This is dangerous,” Saleh told the Post. “Without a transparent, participatory process, removing legal liability could allow one person to dominate the cooperative, when in reality, losses often happen off the books or through indirect channels.”
A CELIOS study estimates that the village cooperative program could result in nationwide losses of up to Rp 4.8 trillion annually, with each village potentially leaking around Rp 60 million per year.