That is a question some people might ask nowadays, considering the current reality of cooperatives in Indonesia that does not reflect what the UU no 25 Tahun 1992 said: cooperatives should be the backbone of Indonesian economy. This law itself is the result from the thinking of Bung Hatta and some of our founding fathers that seemed to believe that cooperatives, not capitalism neither socialism, is the “one best way” for Indonesia, citing that cooperatives and Indonesian cultures have the same root, which is collectivism, popularly known as Gotong Royong. However, bearing in mind the current state of Indonesian economy that instead of cooperatives, it is the large companies that play a major role; if Bung Hatta and some of our founding fathers continues to live until today, they might be disappointed and learn that their belief is wrong.
To add more disappointment and irony, countries that does not declare, either explicitly on implicitly, that cooperatives should be the base of their economies have seen that their cooperatives are thriving. For instance, some of the largest retailer in Japan and Swiss are actually cooperatives (Japan’s Co-op Kobe with 1.2 million members and Swiss’ largest supermarket chain, Coop). Another famous example of large companies that are actually a cooperative are ACE Hardware and Associated Press (AP). Even KPMG is registered as a cooperative in Switzerland. Well, we could say that this is a contradiction, isn’t it? So, back to the main question: why our cooperatives could not thrive?
The lack of initiatives[1]
Most of our school textbooks and some people may argue that the lack of financial support from the government is one of main factors that causes cooperatives in Indonesia does not flourish. Although this is somewhat true, the real answer might rely on the issue of incentives. Indonesian cooperatives are lacking of incentives to grow.
Why Indonesian cooperatives are lacking of incentives? First and probably, it is because the mentality of our cooperatives. Because it is written in the law that cooperatives should be the backbone of Indonesian economy, many cooperatives might feel safe when they started their cooperative businesses because the law makes the government should help them. But, when reality doesn’t come to live up the expectation, which is the fact that government could not provide many help as they had expected before, most of them become bankrupt. This is proven by the current fact that around 70% of Indonesian cooperatives are effectively bankrupt. Then, when people have seen that cooperatives are not promising, they opted to set up other small enterprises, such as warung and toko kelontong, rather than setting up or joining a local cooperative.
When we compare with cooperatives in other countries, they know that the government would not provide any sort of incentives to help them to develop the grow since the very beginning. Thus, in order for the cooperatives to survive, they need to find ways that enable them to be profitable. The example of this case is AP. They started off as a little cooperative, formed only by five minor daily newspapers. Knowing that the government may not support them, they innovated new technologies that had enabled them to deliver the news on the same day it was reported in the times where Google had not yet existed. This make AP grow and currently, it is one of the world’s biggest news transponder.
Moving on, another answer of our main question maybe could be found on our own law. While the law regarding cooperatives (UU no 25 Tahun 1992) does not specify whether members of a cooperative could be a foreign national, our investment laws (there are many of them) barred foreigners to set up a joint-venture cooperative. The reason of our lawmakers do not permit such thing maybe because of the thinking that allowing foreigners to form a cooperative would mean a death sentence to the local cooperatives and a sort of wrong perspective of nationalism such as everything should be take care by Indonesian, although actually some foreigners could provide greater input. This prohibition may hinder the prospective of our largely cash-needed and poorly managed cooperatives from getting some exposure from some full-pocketed and insightful foreign investors.
On the other hand, there is a country with a quite assertive reputation but has got along with this issue. China has changed its own law so it has granted foreigners the permission to form a joint-venture cooperative with a Chinese national, thus might giving the local cooperative the upper hand not only in financial terms, but also on managerial skills. This progressive and pragmatic policy has turned out to be a success in China. If the Indonesian government want to boost Indonesian cooperatives, our policy makers might need to think a bit creatively and follows China’s footsteps, considering the largely consumptive nature of Indonesian, a thing that current cooperatives could not take advantage of.
Although the debate might be far from over, it may be fairly said that there are two main reasons why Indonesian cooperatives could not thrive. The first reason relies on the lack of incentives. Although the government could provide more incentives for our cooperatives, such as by funding it or give managerial training, it is largely up to the cooperatives itself to find the incentives needed to grow. It could be fairly implied that our cooperatives need to strip of the mentality that the government would help them.
