Academics and Activists Criticise Red-White Village Cooperative Project
Several critical observations have been raised by Djohermansyah Djohan, Professor of Governance Science at the Institute of Domestic Government (IPDN), regarding the Red-White Village Cooperative project. Concerns have been expressed that management errors could have detrimental effects in the future.
Djohermansyah stated that cooperatives subject to top-down governance structures risk repeating the failures of the past. The principles of cooperatives that drive grassroots economics should be bottom-up in nature, not mandated projects from the central government, given that decision-making authority rests with members.
“The government should facilitate rather than rigidly direct cooperatives,” he stated in a written statement on Friday, 27 February 2026.
Before the Red-White Village Cooperative project, he recalled that Indonesia had previously experienced the Village Unit Cooperative (KUD) programme. Although conceived nationally, the programme’s growth was relatively organic and gradual as not all villages were simultaneously compelled to implement it.
Subsequently, following the enactment of the Village Law in 2014, Village-Owned Enterprises (BUMDes) emerged as an alternative to the KUD programme. In practice, BUMDes grew in accordance with the local potential of each village, with some proving unsuccessful.
“However, the process was adaptive and contextual,” said Djohermansyah.
In contrast to the Red-White Village Cooperative, he continued, this project emphasises the need for the policy to be implemented simultaneously across approximately 80,000 villages and urban villages throughout the country.
The problem, according to Djohermansyah, is that villages are heterogeneous in nature, with some being self-sufficient and others not yet ready. Therefore, policy cannot be standardised for simultaneous implementation. Furthermore, villages possess original autonomy based on customary rights that have long preceded the formation of the state.
“The Constitution mandates respect for village traditions and characteristics. Policies that force implementation potentially violate the spirit of decentralisation,” said the former Director-General of Regional Autonomy at the Ministry of Internal Affairs.
The Red-White Village Cooperative project was previously scrutinised because it affects the allocation of village development funds. This policy is contained in Ministry of Finance Regulation Number 7 of 2026, signed by Finance Minister Purbaya Yudhi Sadewa, and came into effect on 12 February 2026.
Under its provisions, village development fund allocations will be distributed at 58.03 per cent to support this project. Implementation of this support takes the form of instalment payments for the construction of cooperative retail outlets, warehouses, and equipment.
Herman N. Suparman, Executive Director of the Committee for Monitoring Regional Autonomy Implementation (KPPOD), cautioned that implementation support for the Red-White Village Cooperative project should not allocate village development funds beyond half of the total. This is because village development funds constitute a mandate established in the Village Law, both the 2014 and 2024 versions.
He further stated that the Village Law also establishes a principle known as subsidiarity, whereby all village government management remains under village control, including planning for both short-term and long-term development, and must be supported by compatible budgeting.
“Village development funds represent the state’s commitment to recognising village autonomy,” said Armand, the familiar term for Herman, on 19 February 2026.
He explained the provisions of Article 72, subsection (1), letter b, which states that village income is sourced from allocations in the State Budget (APBN).
Article 72, subsection (2), establishes that budget allocations in the form of village development funds from regional transfer funds should effectively support programmes with a village basis implemented equitably and increased in accordance with the state’s fiscal capacity.
However, referring to the Village Law paradigm, Armand stated that the Red-White Village Cooperative project is not actually a village initiative but rather a central government programme.
“If the budget is allocated, that means the commitment has already been broken,” he said.