Transforming cooperatives into competitive pillars of the economy
The changing global economic landscape demands that Indonesia not only maintain growth but also strengthen the foundations of national productivity. Amidst digital economic competition, geopolitical uncertainty, and the need to accelerate the transformation towards a high-income country, cooperatives are regaining relevance as an important instrument for people-based economic development.
Since the early days of independence, cooperatives have been positioned as the ‘soko guru’—the pillars—of the Indonesian economy. This concept affirms that economic development should not rely solely on the power of large capital but must also provide space for the community to become the main economic actors.
Today, after decades of development, Indonesia possesses a very large people-based economic base. Micro, small, and medium enterprises (MSMEs) contribute more than 60 per cent of the national gross domestic product (GDP) and absorb almost the entire workforce in the business sector. However, the majority of MSMEs still face structural problems, including small business scale, limited access to financing, weak bargaining positions in the supply chain, and low utilisation of technology.
This is where cooperatives have a strategic role. Cooperatives can become institutions that consolidate the economic power of the people so that small businesses do not operate in isolation. Through cooperatives, business actors can achieve efficiency through collective purchasing, broader market access, more affordable financing, and product development based on market needs.
However, the cooperatives of the future cannot be built using old approaches. The transformation of cooperatives must be directed towards becoming modern, professional economic organisations that are data-driven, utilise digital technology, and are capable of integrating with national and global value chains.
The biggest challenge for Indonesian cooperatives today is not merely the number of cooperatives, but their institutional quality. Success has often been measured by the number of active cooperatives and their members. Yet, a more important indicator is the extent to which cooperatives can enhance the productivity and welfare of their members.
An OECD Economic Surveys: Indonesia 2024 report emphasises that the main challenge for Indonesia in becoming a developed country is increasing productivity. Indonesia’s relatively stable economic growth of around 5 per cent must be supported by increased innovation, human resource quality, digitalisation, and institutional reform.
In this context, cooperatives must undergo a paradigm shift. Cooperatives should no longer be viewed merely as economic institutions conducting savings and loan activities, but as engines driving member productivity. Agricultural cooperatives, for instance, must move beyond simply being collection points for harvests to becoming managers of the agricultural value chain. The same applies to fishing cooperatives, creative worker cooperatives, and service sector cooperatives. The key is to build a shared economic scale, so that members gain benefits that would be impossible to achieve individually.
Therefore, governance reform is an urgent necessity. Modern cooperatives must apply the principles of transparency, accountability, and professionalism. Management must possess managerial skills and business acumen, while oversight must be strengthened through digital systems and credible audits.