Let cooperatives grow undisturbed, chief Herlambang says

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.