President Prabowo Subianto officially inaugurated 80,081 Merah Putih Village Cooperatives (Kopdes Merah Putih) in Klaten, Central Java, on Monday, July 21, 2025.

"In the name of God, Bismillahirrahmanirrahim, this afternoon, Monday, July 21, 2025, I, Prabowo Subianto, President of the Republic of Indonesia, officially launch the institutional formation of 80,000 Merah Putih Village and Subdistrict Cooperatives," he declared during the ceremony.

The legal basis for the cooperative’s establishment is outlined in Presidential Instruction (Inpres) Number 9 of 2025.

The President warned against a repeat of past mistakes, particularly the “chairman profits first” mentality—a criticism that arose during the New Order era involving Village Unit Cooperatives (KUDs).

“I remind all cooperative leaders to carry out their duties responsibly. In the New Order era, KUDs were mocked as ‘chairman profits first’. We cannot allow that to happen again,” Prabowo emphasized.

Cooperatives Minister Budi Arie stated that 103 model cooperatives have been established so far. He hopes the Kopdes Merah Putih will become the backbone of rural economic independence and contribute significantly to national economic growth.

Food Affairs Coordinating Minister Zulkifli Hasan noted that the cooperatives serve as tools to eliminate middlemen and loan sharks that burden farmers. The cooperatives are also expected to streamline the supply chain from farmers to consumers.

Commonly known as Zulhas, he explained that the Kopdes would go beyond buying harvests—it will also distribute essential goods sold by the government and state-owned enterprises, such as 3-kg LPG, subsidized fertilizers, BriLink services, and electricity.

However, Izzudin Al Farras, Head of the Center for Digital Economy and SMEs at INDEF, expressed skepticism about the initiative’s multiplier effect.

He argued that the top-down approach used to create the cooperatives won’t be effective in truly improving the rural economy or the welfare of members.

He fears the project may remain a paper plan, lacking practical implementation, and warns that top-level orders may force villages into compliance without local relevance or purpose. He recommends a bottom-up approach instead.

He also warned that the benefits might end up being monopolized by a small group of village officials exploiting the cooperative for their personal and group interests.

He stressed that due to the Ministry of Cooperatives’ limited human, financial, and organizational resources, monitoring must be strengthened by involving central and regional governments, SOEs, and the public.

Responding to Prabowo’s reference to KUD, Izzudin added that the Home Affairs and Village Ministries must play a strategic role in coaching local officials, especially because many cooperative leaders may come from the inner circle of village heads.

He also called for active involvement from regional Cooperative Agencies, given their deep networks in rural communities.

To prevent cannibalism toward MSMEs, he suggested the government limit Kopdes Merah Putih operations to basic needs, as defined in Inpres No. 9/2025.

This way, secondary and tertiary sectors would still be open to local entrepreneurs to foster grassroots entrepreneurship. Proper enforcement of this instruction is crucial to prevent Kopdes from displacing small and micro businesses already struggling.

CORE: Kopdes Contradicts Bung Hatta's Cooperative Ideals

The Center for Reform on Economics (CORE) Indonesia believes that the concept of Kopdes Merah Putih contradicts the ideals of Indonesia’s Father of Cooperatives, Mohammad Hatta.

In its June 4, 2025 COREinsight report, CORE emphasized that cooperatives are not tools for individual or political gain, but collective instruments born from the community’s shared desire to improve living standards.

“If the Kopdes becomes a monopoly-style business, it betrays Bung Hatta’s philosophy. Cooperatives aren’t meant to chase profits but to strengthen people’s economic resilience,” CORE stated.

CORE also raised concerns that the project might turn into a political tool or be hijacked by elites. A key issue is the financial structure.

According to Inpres No. 9/2025, there are two funding schemes: channelling and executing. The channelling model allocates APBN (state budget) funds through the Ministry of Cooperatives for initial infrastructure development. Estimated costs may reach Rp400 trillion (assuming Rp5 billion per cooperative), posing fiscal risks.

The executing model uses KUR (People’s Business Credit) loans through state-owned Himbara banks.

CORE believes default risks are high, as these cooperatives are newly established. Without proper governance, the scheme could compromise national banking portfolios and lead to financial mismanagement.

Without participatory spirit and sound governance, Kopdes Merah Putih may repeat the failures of troubled cooperatives across regions.

Shofie Azzahrah: Guard Democracy, Prevent Elite Control

Next Policy researcher Shofie Azzahrah reminded how New Order-era KUDs were often controlled by local elites. Cooperative officials were usually appointed by the state, not elected by members.

She stressed that Kopdes should embrace economic democracy, granting members decision-making power, voting rights, and supervisory roles.

To avoid market cannibalism, she proposed four key safeguards:

1. The cooperative’s bylaws (AD/ART) must involve village leaders and local economic experts to define business boundaries and protect non-member micro enterprises.

2. The Ministry and local governments should designate appropriate business sectors for Kopdes. It must serve as an aggregator and facilitator, not a competitor.

3. Kopdes should form partnerships with local businesses, particularly in agriculture, livestock, and fisheries.

4. Multi-tiered oversight from village councils (BPD), regional inspectorates, and cooperative watchdogs is vital to ensure fairness, transparency, and prevent monopolization.