HIGH RISK INVESTMENT
Analysts also expressed doubts on whether the cooperatives will be well-managed, given the relatively short lead time from its inception to launch, with the Red-White cooperative programme first floated by Prabowo at a Cabinet meeting only in March.
“I doubt the government can find competent people to manage these cooperatives in such a short amount of time,” Achmad said, adding that the short timeframe also leaves little room for the government to come up with proper business models.
“Coming up with a business model that works is not easy. They must be tailored to the specific characteristics of a village, its economic potential and its people. Even then, it takes years to build the solid foundation needed for a cooperative to be profitable and sustainable.”
Experts say the lack of a viable business model and the top-down nature of the programme are reminiscent of Suharto’s Village Unit Cooperative (KUD) programme, which was also designed to be multi-functional rural enterprises.
When it was launched in 1973, Suharto made a pledge similar to Prabowo’s that the programme would cut down the middlemen, eradicate the predatory lending practices of loan sharks and ensure subsidised goods would not fall into the wrong hands.
“But because of mismanagement, debts were mounting, loans went unpaid, corruption was rampant,” Acuviarta Kartabi, an economist from Pasundan University, told CNA.
Government support for the 9,000 KUDs established during the Suharto regime ended when he stepped down as president in 1998. Since then, most have declared bankruptcy or have been abandoned by their members and fallen into obscurity. Only 385 are still active today.
“Such is the risk of establishing cooperatives born out of a top-down policy. They become dependent on government incentives and support because they were born not out of people’s needs and initiatives,” Acuviarta said.
Prabowo has promised that his Red-White cooperatives will be closely monitored, preventing cases of embezzlement and corruption.
“Technology will allow (cooperatives) to be monitored closely. All money coming in and out (will be monitored) through technology. (Corruption involving cooperatives) will be a thing of the past,” he said.
Prabowo also said that his programme “will be the backbone of local economies” and that people will do what they can to keep their local cooperatives afloat, with or without support from the central government in Jakarta.
