The Indonesian government has officially launched the Merah Putih Village Cooperative, promising it would drive rural economic development. Yet from its design to its launch, Kopdes MP has sparked debate: can it truly empower villages, or will it instead add to the fiscal burden?
A CELIOS report titled *The Economic Impact of the Merah Putih Cooperative* finds that most cooperatives are still underperforming; 59.42% report annual revenue below IDR 300 million. The program also poses significant risks: an opportunity cost to the banking sector of IDR 76.51 trillion, potential defaults of IDR 85.96 trillion, and losses that could reduce GDP by IDR 9.85 trillion, lower household income by IDR 10.21 trillion, and eliminate more than 824,000 jobs. Although there are potential gains—an operating surplus of IDR 1.19 trillion and net tax revenue of IDR 360 billion—they are far smaller than the resulting macroeconomic risks.
CELIOS emphasizes that rural economic policy must balance nationalist spirit with fiscal prudence. Rather than rushing to expand Kopdes MP, the government should delay its implementation until adequate institutional readiness is in place and focus on strengthening cooperatives that have already demonstrated strong performance.
The Indonesian government has officially launched the Koperasi Desa Merah Putih (Merah Putih Village Cooperative), carrying a strong nationalist label and the promise of driving rural economic development. Yet, from its design to its launch, Merah Putih Village Cooperative has sparked debate: will it truly empower villages, or merely add to the fiscal burden?
A CELIOS report, "The Economic Impact of the Merah Putih Village Cooperative", finds that most cooperatives remain underperforming; 59.42% earn less than IDR 300 million annually. The program also creates significant risks: an opportunity cost to banks of IDR 76.51 trillion, a potential default of IDR 85.96 trillion, and losses that could reduce GDP by IDR 9.85 trillion, lower household income by IDR 10.21 trillion, and cost over 824,000 jobs. While there may be modest gains—IDR 1.19 trillion in business surplus and IDR 360 billion in net taxes—the scale is overshadowed by broader economic risks.
CELIOS argues that rural economic policy must balance nationalist spirit with fiscal prudence. Rather than pushing ahead with Merah Putih Village Cooperative prematurely, the government should pause its rollout until institutional readiness improves and focus instead on strengthening cooperatives that already demonstrate strong performance.
Download the report on the economic impact of the Merah Putih Cooperative