KDMP, the great cooperative gamble

Fourteen months after President Prabowo Subianto unveiled the Red and White Cooperatives (KDMP) program as a vehicle for rural economic empowerment, the initiative increasingly resembles not a grassroots cooperative movement but a large-scale fiscal and governance experiment whose long-term sustainability remains uncertain.

The program's financing model has become one of its biggest sources of concern. The government has tasked state-owned banks with providing Rp 3 billion (US$184,000) in loans to each cooperative. Of that amount, Rp 1.4 billion is allocated for operational expenses, including staff salaries, while the remainder is intended as working capital.

Revisions to the financing framework have removed the dedicated salary allocation previously provided through the state budget, leaving the remuneration of around 30,000 cooperative managers uncertain. Current estimates suggest the Rp 1.4 billion allocation could translate into monthly salaries of only around Rp 690,000, raising broader concerns about whether the program can attract qualified personnel and remain operationally sustainable once construction spending is exhausted.

As implementation has progressed, attention has shifted from construction targets to the program's operational viability. Although more than 15,800 cooperatives had been completed by mid-July 2026, early performance has been uneven. Several cooperatives reported daily revenue of only Rp 100,000 to Rp 300,000, while a pilot cooperative in Melawai, Jakarta, with capital of Rp 3 billion, generated a profit of just Rp 78,000 over six months.

Research by the National Research and Innovation Agency (BRIN) paints a similarly mixed picture. Among 34 districts with poverty rates above 25 percent, 33 recorded no cooperative transactions, while cooperatives in the wealthiest districts generated transaction values roughly six times higher than those in the poorest areas. These findings suggest that the program's success depends not only on the number of cooperatives established but also on local market conditions and economic readiness.

This, in turn, raises questions about the cooperatives' ability to repay their loans to state-owned banks. Finance Minister Purbaya Yudhi Sadewa has sought to reassure lenders, saying the loans will be repaid over six years using village funds, with around two-thirds of those funds earmarked for debt repayment.

Yet financial sustainability is only one part of the challenge. Questions are also emerging over how the program is being implemented, governed and monitored on the ground. The government's decision to assign state-owned PT Agrinas Pangan Nusantara to rapidly construct cooperative offices and stores across participating villages has itself attracted criticism.

Several KDMP facilities have been built in locations with questionable commercial prospects, including one in Kediten, Central Java, situated around 1,385 meters above sea level on the slopes of Mount Prau, approximately 500 m from the nearest settlement.

Elsewhere, several cooperatives have remained idle or ceased operations shortly after opening despite substantial public investment. Such cases have fueled criticism that implementation has prioritized construction targets over market accessibility and local demand.

Analysts have also questioned the transparency of infrastructure procurement and the limited role of local communities in site selection, arguing that weak market mapping increases the risk of inefficient public spending while undermining the program's long-term viability.

The program has also significantly expanded the role of the Indonesian Military (TNI) in constructing KDMP offices and stores. Beyond supporting construction, the government has announced that medicines produced by the TNI's pharmaceutical laboratory will be distributed through the Red and White Cooperatives in partnership with the Health Ministry.

Together with the program's reliance on PT Agrinas Pangan Nusantara, this reflects an increasingly centralized delivery model in which state institutions play a growing role across the program's infrastructure, logistics and supply chains.

None of this suggests that the policy objective is misguided. Strengthening rural economies and expanding access to essential goods remain worthwhile goals, and some village cooperatives have demonstrated that the model can work under the right local conditions. However, these successes remain the exception rather than the norm.

As the government expands the cooperatives' role into increasingly strategic sectors, it must first address the governance and implementation challenges evident in the current rollout. Given the program's Rp 34.57 trillion public investment, expanding its mandate before resolving these foundational weaknesses risks institutionalizing them on a much larger scale.

The program appears to have prioritized rapid expansion over careful planning. Weak market mapping, questionable site selection, fragmented governance and opaque procurement arrangements suggest that implementation has outpaced institutional readiness, increasing the risk of inefficient public spending and governance failures.

Without meaningful reforms, the program risks becoming less a cooperative movement than an increasingly centralized state apparatus financed by substantial public resources but delivering uncertain economic outcomes.