Cooperatives in Indonesia

ED 77.14 Community Development School of Environmental, Resources and Development Regional and Rural Development Planning AIT By: Asrul Sidiq (st 113961)

Indonesia
Cooperative 1896 was known Hulp En Spaarbank Patih Purwokerto named Aid and savings banks R.Arya Wiriaatmadja

Challenge from the Dutch/Holland colonial

1. July 12 is set as the day of cooperative Mutual aid and cooperative principles approved as a kinship Encourage the growth of cooperatives in the village
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12 July 1947 The results 2. 1st Cooperative Congress in Tasikmalaya

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Historical Background and Cooperative Development

The cooperative movement in Indonesia was greatly influenced by the development of cooperatives in Europe, which was an attempt to fight poverty and exploitation of human rights (Sharma, 1997). In Europe, the movement was initiated by the working classes, farmers, artisans and other lower class groups due to the deteriorating socio-economic conditions of workers caused by the industrial revolution. The movement was affected by the land revenue system enforced by the colonial powers. It created large scale landless labour and rural indebtedness in many regions in Indonesia (Sharma, 1997).

Historical Background and Cooperative Development

Cooperatives have been active in Indonesia since the Dutch colonial period. The first cooperatives were established by the Dutch government. Upon independence, cooperatives were recognized in the 1945 constitution and have experienced continual development until today. Travel history of cooperatives in Indonesia can be divided into two, namely the colonial period and after independence. After the independent Indonesian nation, the existence of cooperatives have been strengthened by the constitution.
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Historical Background and Cooperative Development

In explanation of the UUD 1945 (Constitution 1945) that says that the most suitable business up with the principle of kinship that is cooperative. Interpretation was often presented by Mohammad Hatta, who is often referred to as the formulator of the article. In explanation of the constitution is also said that Indonesias economic system is based on the principles of economic democracy, where the production done by all and for all that its form can be interpreted as a cooperative After Indonesian independence, the cooperative no longer as a reaction to the suffering caused by colonialism. But the cooperative has been a concerted effort to improve and enhance the living standard that is based on the principle of kinship
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Platform for Cooperative

The foundation is Pancasila (Pancasila is the official philosophical foundation of the Indonesian state) Structural foundation is the Constitution 45 Article 33 (1). Therein stated: The economy is conceived as a joint venture, based on the principle of kinship Operational basis is Law number 25 year 1992 Cooperative in Indonesia is an mandated institution as mentioned in The 1945 Constitution of the Republic of Indonesia. After 66 years in its development, cooperatives in Indonesia is still not developing well.

Laws

Government issued Law No. 14 year 1960 regarding the distribution of the main bank and assigned as the executing cooperative. In 1961 the National Congress held Cooperative I (MUSAKOP I) in Surabaya to implement the principle of guided democracy and economy. Government issued Law No. 14 years old in 1965, where the principle NASAKOM (Social Nationalist and Communist) were applied in the cooperative. In this year also held in Jakarta MUSAKOP II. In 1967 the government also has improved its Law No. 12 year 1967 about the principal In 1992, the new principal co-operatives Law No. 25 year 1992 regarding cooperatives. In 1995 the government has set a Law No. 9 year 1995 on the lending and borrowing.

The Purposes of Co-Operative in Indonesia

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Promote the welfare of members Achieving welfare and prosperity of society in general Help build the system of the national economy in order to realize an advanced society, fair and prosperous society based on Pancasila and the Constitution 45

Cooperative Principle

Cooperative membership is voluntary and open Cooperative management is in a democratic manner The distribution of business conducted in a fair proportion to his services each member Provision of fringe benefits are limited to capital autonomy Cooperative education Cooperation among cooperatives

Types of Cooperatives
In Indonesia, the most frequent types of cooperatives are the following: Credit Cooperatives promote thrift among members and create funds to grant loans for productive purposes Consumers Cooperatives procure and distribute commodities to members and non-members Producers Cooperatives undertake joint production whether agricultural or industrial Marketing Cooperatives engage in the supply of production inputs to members and market members products Service Cooperatives engage in janitorial duties, carpentry, medical and dental care, transportation, insurance, and other such services Multi-purpose Cooperatives combine two or more business activities of these different types of cooperatives. Most of the cooperatives in Indonesia are of this type.
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Categories of Cooperatives
Primary cooperatives operate at the grassroots or local level. In the marine aquarium industry, primary cooperatives are membership-based associations of villagers in a community or fishing site. Primary cooperatives review membership, conduct needs assessments, create and implement business development plans, and mobilize and manage their resources. Most of the information in this training manual is focused on the primary level. Secondary cooperatives are regional federations of primary cooperatives. Secondary cooperatives is to provide linkages both among primary cooperatives (to strengthen cooperation and networking among them), and between primary cooperatives and tertiary ones. Tertiary cooperatives are federations of cooperatives at the national level. In the marine aquarium industry, a tertiary cooperative might be a federation of all MAC-certified fishing cooperatives in Indonesia.

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How to Establish Cooperative?

Must have a minimum of 20 members Cooperatives of the earliest and most under is the primary cooperatives

Establishment of cooperative consists of several stages:

1. First of all is the collection of members, because to run a cooperative requires a minimum of 20 members. 2. Second, the members will hold a meeting of members, to conduct the election of cooperative board (chairman, secretary, and treasurer). 3. After that, the cooperative must plan the statutes of the cooperative. Then ask for permission from the state. Then they can run cooperatives properly.
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The symbol of the cooperative movement has a meaning as follows:

1. Chain represents a solid friendship. 2. Toothed wheel describes efforts to be taken continuously. 3. Cotton and rice means describes the prosperity of the people who should be run by cooperatives. 4. Scales means of social justice as one of the co-operative basis. 5. Stars in the shield means Pancasila, is an ideal cooperative. 6. Banyan tree describing the nature of community and a strong personality rooted Indonesia. 7. Indonesia Cooperative emblem signifies t he cooperative personality of the people of Indonesia. 8. Red and white national describe the nature of Indonesia.
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Indonesias Cooperatives in Figure

Total Co-Operatives (Unit) Year Active 2007 2008 104.999 108.930 Not Active 44.794 46.034 Total 149.793 154.964 Total Members (People)

28.888.067 27.318.619

2009
2010 2011

120.473
124.855 133.666

49.938
52.627 54.515

170.411
177.482 188.181

29.240.271
30.461.121 30.849.913
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Source: Ministry of Cooperative and Small Medium Enterprise of Indonesia

Indonesias Cooperatives in Figure

From total cooperatives in Indonesia (188.181), 54. 515 cooperatives is not-active cooperatives. 29 percents is not-active cooperative. Most not-active cooperatives are agricultural cooperative and saving & loan cooperative Not-active cooperatives means there are no more activities as a cooperative in these cooperatives

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Indonesias Cooperatives in Figure

200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0
2007 2008 2009 2010 2011

Total Co-Operative (Unit) Active Total Co-Operative (Unit) Not Active Total Co-Operative (Unit) Total

Source: Ministry of Cooperative and Small Medium Enterprise of Indonesia

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Indonesias Cooperatives in Figure

Total Members
32,000,000 31,000,000

30,000,000

29,000,000
Total Members 28,000,000

27,000,000

26,000,000

25,000,000 2007 2008 2009 2010 2011 17

Source: Ministry of Cooperative and Small Medium Enterprise of Indonesia

KUD (Koperasi Unit Desa/Village Unit of Cooperative)

The cooperative movement In Indonesia after independence in 1945 can be segmented into the KUD (Village Unit of Cooperative) and non-KUD (Prakash, 1997). The KUD is the multipurpose cooperative institution at the village level whose members come from the rural population and include farmers, farm workers, small traders and fishermen In contrast, the non-KUD segment includes thrift and credit cooperatives of civil servants, armed forces, industrial workers and traders.

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KUD (Koperasi Unit Desa/Village Unit of Cooperative)

While the non-KUD segment is not organized vertically, the KUD is structured vertically from provincial business federations of KUDs (the Puskuds) to a national federation (the Inkud). The vertical integration of KUDs is established by government with the main objective to maintain national food supplies in collaboration with Bulog (National Food Agency). KUD activities are processing, rice milling, and distributing essential commodities including farm inputs. KUDs were also provided with several services and facilities, warehouses, rice milling units, drying floors, transportation equipment, a monopoly on distribution of chemical fertilisers and disbursement of farm credit (Prakash, 1997).

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What about Indonesia's future prospects for cooperative?

Meanwhile, Soetrisno (2001) argues that the main features of the development of cooperative in Indonesia is the pattern of care to the program, namely: (i) sectoral development programs such as agricultural cooperatives, rural cooperatives, KUD; (ii) the institutions of government in cooperative public servants and other functional cooperatives, and (iii) boths stateowned enterprises (SOEs) and private (BUMS) in a cooperative employee. As a result the wider community initiative are underdeveloped According to him, the intervention of the government is too big to be one of the main causes of slow development of cooperatives in Indonesia. 20

What about Indonesia's future prospects for cooperative?

While the views of its structure, organization of cooperatives in Indonesia similar governmental organizations/civil society organizations are structured from the primary to the national level
a. It has demonstrated its lack of effective secondary role in assisting the organization of primary cooperatives. b. Not infrequently an instrument of exploitation of the resource collection.

According to Soetrisno (2001), this phenomenon is now to be altered because of changes in the orientation of a growing business in line with the process of globalization and liberalization of trade and economy. To change this direction can only be done when the arrangement began to be placed in the autonomous region.

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What about Indonesia's future prospects for cooperative?

The view from Soetrisno (2001) mentioned above are also supported by Widiyanto (1998) which says that the success of cooperative efforts in Indonesia usually depends on two things. First, the government program because cooperatives are often used as a "continuation" of the government in regulating the economy joints. Second, the desire to meet the needs of members, so the cooperative of cooperatives is often used as a means of meeting the needs of members who are usually also associated with a program that has been proclaimed by the government.
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Challenges and Future Development

The challenges for cooperative in Indonesia come from the national and global economies. Changes in the world economy can be identified as globalization and liberalization, while the change in the national economy can be seen from the greater openness and deregulation of the Indonesian economy, privatization, bank restructuring and regional autonomy. These changes have increased the competition faced by cooperatives. The ability of cooperatives to face threats and opportunities arising from globalization is strongly influenced by the ability of the quality and efficiency of the cooperative
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Challenges and Future Development

The challenges facing cooperatives are improvement of managerial skills, establishment of systems of market intelligence and business federations and the provision of information on quality control and anything else related to their activities. The future development of cooperatives is needed, not only for managers, but also for the members. The business environment also needs to improve in line with the adjustment of cooperatives.

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Problems

Internal Problems
Lack of understanding of the benefits of cooperative members and the knowledge of the obligations as a member. There should be a group of people who have common economic interests who are willing to work together and hold a social bond. In the group there must be a character that serves as a driving force to move the cooperative organizational goals right direction.

External Problems
Condition that supports the growth of cooperatives has not been in harmony with the will of the members of cooperatives, such as government policies are clear and effective way to fight the cooperative system of infrastructure, services, education, and counseling
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Problems
The capital structure of the most cooperatives in Indonesia is weak due to their limited ability to mobilize own capital both from their own business activities as well as from members. Cooperative has also limited access to capital from external sources. It is because government more focus in small medium enterprise. Financially strong and selfreliance cooperatives can play an important role in increasing their members welfare and thereby contribute to a more equitable income distribution. It is argued that vertical and horizontal integration of smallscale enterprises, which can be associated with cooperative members, will be beneficial to those members. However, most cooperative establishments in Indonesia will not survive once the government subsidy ends. 26

Roles of Government in Cooperatives in Indonesia

The government provides low-cost funds to cooperatives that come from outside the budget and APBN (state budget). Government expected to create a business climate that encourages the healthy development of the cooperative. As an economic organization, The development of cooperatives may not be released from the competitive conditions faced by economic actors to another. The Government is expected to ensure the process is in a healthy competition. Participate actively in efforts to build cooperative. The participation of the Government, driven by an awareness to participate in building a cooperative, is also highly expected by the cooperative movement. This is partly driven by the limited ability of cooperatives in developing countries, to establish himself on strength alone.

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Roles of Government in Cooperatives in Indonesia

During the era of long-term development of the first stage, the development of cooperatives in Indonesia have shown that the results are satisfactory. In addition to growth quantitatively, qualitatively also managed to establish the main pillars to support the development of independent cooperatives. The pillars: Ministry of Cooperative and Small Medium Enterprise of Indonesia, Bukopin Bank, Cooperative Insurance of Indonesia, Cooperative Audit Services, and Cooperative Institute for Indonesia

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Conclusions
1. Prospects for co-operatives in Indonesia, among others: As a tool to enhance the economic struggles of people's welfare, Social economic democratization tool, as one of the nation's economic artery Indonesia The human community builder tool to strengthen the economic position of Indonesia and are united in regulating the economic governance of the people 2. Cooperative enterprise growth can be achieved through the growth of economic activities of its members, an increase in the intensity of the relationship of business done by its members, an increase in the number of members and increase the work done by non-members.
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References

Rahardjo, Dawam M. (2002a), Development Policies in Indonesia and the Growth of Cooperatives, Prisma, The Indonesian Indicator, No.23. Mubyarto (2000), Membangun Sistem Ekonomi, Yogyakarta: BPFE. Mulyo, Jangkung Handoyo (2004), Revitalisasi Ekonomi Kerakyatan Melalui Pemberdayaan Gerakan Koperasi, INOVASI, 2(XVI), November Hendar dan Kusnadi (2005), Ekonomi Koperasi, edisi kedua, Lembaga Penerbit FE-UI, Jakarta.

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Thank You
What we Indonesias want to bring into existence is a Cooperative Commonwealth M. Hatta (Father of Indonesia Cooperatives, first vice president of Indonesia)

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