Let cooperatives grow undisturbed, chief Herlambang says

By Rita A. Widiadana

JAKARTA (JP): Today, Indonesians mark the 51st National Cooperatives Day in observance of the First National Cooperative Congress in Tasikmalaya, West Java, on July 12, 1947.

The cooperative's founding father, economist and first vice president Mohammad Hatta, stipulated the cooperative system was the most appropriate economic means to promote people's welfare and living conditions.

The cooperative system, originally adopted from the concept of the British Cooperative Wholesale Society in Rochdale, England, was modified in each country to adjust to its social, economic and political conditions.

Hatta believed cooperatives could counterbalance capitalism, which he viewed as only benefiting a few of the ruling elite, particularly those who reaped riches from hundreds of years of Dutch colonial rule.

After 51 years of existence, cooperatives are still struggling to secure a strong foothold in the economy here.

Chairman of the Indonesian Cooperative Council Sri Mulyono Herlambang recently shared his views on the development and present activities of the Indonesian cooperatives. Excerpts:

Question: Do you believe that Mohammad Hatta's ideas on the cooperative system still hold potential in today's crisis?

Answer: Absolutely. We are watching how the crisis has crippled business activities, dominated mostly by large scale enterprises... In the past 30 years, policies generally favored these big companies, which relied mostly on foreign capital and imported materials.

...The government ignored the potential of small and medium enterprises including cooperatives... Local conglomerates... were easily shaken up by the crisis because their business foundations were fragile...

When the rupiah's value depreciated more than 80 percent against the U.S. dollar, large Indonesian corporations were burdened with mountainous debts, some bigger than their assets.

On the other hand, cooperatives and other small and medium businesses would likely survive more because they empower domestic capitals and local human and natural resources.

Q: So, how are cooperatives dealing with the crisis?

A: This is actually a good momentum for local cooperatives to show their teeth. Currently, the Indonesian Cooperative Council has registered its members to become major distributors of essential commodities to secure the distribution of foodstuffs.

Thousands of cooperatives across the country have been ready to provide foodstuffs and other basic goods at lower prices.

We also set up special programs for young and dynamic professionals, especially lay-off victims, to work at cooperatives.

Some financial institutions have already provided low- interest loans and grants to be distributed to cooperative members and those who badly need fresh capital to continue business.

We have to prepare ourselves to take over many positions, including the business distribution chains, currently left by large corporations.

Previously, we had little chance of doing such activities because our business capabilities have always been underestimated by many parties.

Q: But why haven't cooperatives and small/medium enterprises been unable to play more significant roles despite tax leniency and easy access to credit schemes, as well as partnerships with large corporations?

A: It's true that the government has launched affirmative action measures. For instance, it obliged state and private banks to allocate 20 percent of their credits to small and medium enterprises, but many cooperative members were unable to obtain such credits for various reasons.

State-owned companies have to allocate five percent of their profits to assist small and medium businesses, while private firms have to set up partnerships with cooperatives and small businesses if they want to bid government contracts.

Prominent conglomerates, known as the Jimbaran Group, also agreed to help. In reality, such measures were difficult to enforce because of the government's lack of consistency and transparency.

Q: How were such measures ineffective?

A: Some affirmative action programs to improve cooperatives and small and medium businesses were theoretically excellent. But, there was no mechanism to control and monitor the programs.

We discovered many irregularities in partnerships with state- owned and private firms. In bidding for a government contract, for instance, large private firms had frequently chosen "inactive" cooperatives as their silent partners.

Unfortunately, we have also found many irresponsible cooperative officials who abused opportunities for their own benefit. These officials have repeatedly received delivery orders from big firms but they preferred to subcontract them in return for a small amount of fees.

They are lazy people who use cooperatives as business tools. These are actually the persons who have tarnished the image of cooperatives.

Q: In certain ways, you cannot fully blame the government or the private sectors for failing to accelerate the programs...

A: ...Insiders are also responsible for hampering the cooperative developments. We are now struggling to solve our internal problems, including lack of human resources and capital.

Also, we cannot deny that many cooperatives here are not managed professionally. Many are run by people lacking entrepreneurship, management skills and integrity.

Ideally, a cooperative should be both a social organization and a business enterprise. In the past, a cooperative had always been regarded as nonprofit organization, but time has changed.

A cooperative must now grow quickly and professionally to match the economic strength of state-owned and private companies without ignoring its mission to improve the welfare of its members and the people in general. It must also be strong enough to actively take part in national development programs.

Q: Is there any effort to improve the quality and the working performance of cooperatives?

A: The Indonesian Cooperative Council has set up a joint program with Denmark's Cooperative Agency to train local cooperative officials...

We are also working with cooperative councils from the United States, Canada, Australia, Vietnam, Malaysia and other countries to set up a strong global marketing network.

We are continuously convincing people that they can improve their living conditions by joining cooperatives, and results are quite encouraging.

The number of cooperatives between 1993 and 1996 increased 15.5 percent, from 41,903 to 48,391, and membership has increased from 24.65 million to 27.17 million.

Assets have increased from Rp 3.57 trillion to Rp 6.58 trillion, while turnover increased from Rp 9.5 trillion to 12.58 trillion.

Q: In this "reform" era, do you see any beneficial government policy?

A: We are in a wait-and-see position. However, the new minister of cooperatives and small industries (Adi Sasono) has started to revise old regulations, including the existence of village cooperative units (KUDs) and it seems that the cooperatives and small/medium businesses would be given greater roles in the national economy.

But, more importantly, the government should stop its intervention in the operation of cooperatives. In the new order period, the government's intervention made the cooperatives so weak and dependent. It also created a fertile source of corruption and collusion among related parties.