INDONESIA COUNTRY PAPER The Ministry of Cooperatives and Small and Medium Enterprises The Republic of Indonesia INDONESIA COUNTRY PAPER POLICY AND PROSPECT OF AGRICULTURAL COOPERATIVES IN INDONESIA

Presentation Outline 2 I. Introduction II. Business Types Run by Cooperatives and SMEs Based on Economic Sector III. Present Situations of Cooperatives in Indonesia IV Agricultural Cooperatives Development in Indonesia V. Government Supporting for Cooperatives Development 2

I. Introduction (1) 3 GEOGRAPHY CLIMATE Indonesia is an archipelagic country (around 17.480 islands). It is located in Southeast Asia. Boundaries : North, Malaysia (Sarawak and Sabah States) and Pacific Ocean; East, Papua New Guinea; South, Arafura Sea; West , Indian Ocean; The total length of Indonesia’s coastline is 95.181 kilometers. The total area of Indonesia is 1.9 million square kilometers. The total sea area is 7.9 million square kilometers with an exclusive economic zone. CLIMATE Weather: hot and humid, The temperature ranges from approximately 23oC to 31oC. It has two seasons : The rainy season (December to March), while the dry season (June to October). 3

I. Introduction (2) 4 Government Language and Ethnicity Population Democratic country  a Presidential System. Governmental System: Central government, Provincial government (34 provinces), District government (409 district autonomous) Language and Ethnicity Languages: Indonesian (official), javanese, and more than 580 other languages and dialects. Ethnicity: Javanese 45%, Sundanese 14%, Madurese 7.5%, coastal Malays 7.5%, other 26% Population It is reached 237,5 million individuals (2010)  (1.4 percent annual population growth rate). Birth rate: 20.3/1000; infant mortality rate: 34.4/1000, life expectancy: 69.9. density per sq mi: 351 4

I. Introduction (3) The agricultural sector is vital to the national economy development  GDP establisment, the absorption of manpower and agricultural commodities export Agricultural cooperatives development is still sluggish due to several kinds of problems that derived not only from their internal problems but also due to the prevailing external conditions. The government of Indonesia take into account for promoting the development of cooperatives through the policy and program of cooperatives development Cooperatives as economic enterprises play strategic role in supporting the achievement of agricultural development. 5

Deputy Minister for Production ORGANIZATION CHART State Minister of Cooperative and SME Secretary for Ministry of Cooperative and SME Senior Advisor to Minister 1. SA for Institution Relationship 2. SA for Application of Basic Values of Cooperatives 3. SA for International Relation 4. SA for Utilization Technology 5. SA for Development a Conducive Business Climate & Partnership Head of Planning Bureau Head of Financial Bureau Head of General Affairs Bureau Inspectorate Deputy Minister for Institutional Development of CoSMEs Deputy Minister for Production Deputy Minister for Financing Deputy Minister for Marketing and Business Networking Deputy Minister for Human Resource Development Deputy Minister for Development and Business Restructuring Deputy Minister for Research of CoSMEs Deputy Assistant for Organization and Legal Status of Cooperatives Deputy Assistant for Foodcrop Agriculture and Horticulture Deputy Assistant for Financing Program Deputy Assistant for Domestic Trade Deputy Assistant for Enterpreneurship Development Deputy Assistant for Productivity & Quality Deputy Assistant for Cooperative Research Deputy Assistant for Export & Import Deputy Assistant for Business Restructuring Deputy Assistant for Development & Supervision of Saving and Loan Deputy Assistant for Policy of Cooperative Education Deputy Assistant for SMEs Research Deputy Assistant for Regulations Deputy Assistant for Forestry and Plantation Deputy Assistant for Facilities & Marketing Infrastructure Deputy Assistant for BDS Empowerment Deputy Assistant for Management of CoSMEs Deputy Assistant for Resources Research Deputy Assistant for Fisheries and Animal Husbandry Deputy Assistant for Public Participation Deputy Assistant for Capital Affairs Deputy Assistant for Partnership & Business Networking Deputy Assistant for Investment Facilitation of CoSMEs Deputy Assistant for Insurance & Financial Services Deputy Assistant for Monitoring & Evaluation of CoSMEs education&training Deputy Assistant for CoSMEs cadre development Deputy Assistant for Member of Cooperatives Deputy Assistant for Craft Industry and Mining Deputy Assistant for Information & Business Publication Deputy Assistant for Business System Development Deputy Assistant for Financing & Credit Security Deputy Assistant for Electrification and Misc.Business Deputy Assistant for Controlling and Accountability Deputy Assistant for Advocacy

7 Problem faced by Cooperatives & MSMEs Limited access to finance, resources, technology and market Problem faced by Cooperatives & MSMEs Low human resources  lack of management, entrepreneurial skills, and technology capability Limited used of modern equipment Low quality of cooperatives institution Limited capacity to fulfill huge market demands Inability to optimize the economic scale due to limited cooperation/networking among and between cooperatives and other business entities The government has been take into account for the development of CMSMEs. The development of CMSMEs has been promoted through policy reform, technical assistance, institutional strengthening, training & education, financing, enhance the participation of cooperative member and many kinds of other significant effort. 7

Source: Statistic Bureau Data on 2011 II. Business Types Run by Cooperatives and SMEs Based on Economic Sector Source: Statistic Bureau Data on 2011

III. Present Situation of Cooperatives in Indonesia A. Number of Cooperatives The number of cooperatives increased quite significantly, from 149,793 in 2007 to 194,295 in 2012. It means the figure increased by 44,502 units or 29,71 %. 9

10 B. Distribution of Cooperatives and SMEs Year 2011 10 BANGKA BELITUNG Micro & SME’s 220.577 Cooperative 929 CENTRAL KALIMANTAN Micro & SME’s 681.692 Cooperative 3.782 SOUTH KALIMANTAN Micro & SME’s 855.413 Cooperative 2.395 CENTRAL SULAWESI Micro & SME’s 454.514 Cooperative 1.903 SOUTH SULAWESI Micro & SME’s 1.750.642 Cooperative 7.796 GORONTALO Micro & SME’s 211.788 Cooperative 959 KEPULAUAN RIAU Micro & SME’s 251.880 Cooperative 1.850 WEST KALIMANTAN Micro & SME’s 681.692 Cooperative 4.138 EAST KALIMANTAN Micro & SME’s 688.167 Cooperative 5.338 WEST SULAWESI Micro & SME’s 1.750.642 Cooperative 7.497 NORTH SULAWESI Micro & SME’s 563.078 Cooperative 5.730 NORTH SUMATERA Micro & SME’s 2.406.577 Cooperative 10.802 SOUTH EAST SULAWESI Micro & SME’s 467.178 Cooperative 3.147 ACEH Micro & SME’s 906.193 Cooperative 7.099 NORTH MALUKU Micro & SME’s 111.896 Cooperative 1.283 RIAU Micro & SME’s 915.192 Cooperative 4.865 MALUKU Micro & SME’s 230.291 Cooperative 2.706 JAMBI Micro & SME’s 570.414 Cooperative 3.289 WEST PAPUA Micro & SME’s 272.865 Cooperative 903 WEST SUMATERA Micro & SME’s 1.101.017 Cooperative 3.619 PAPUA Micro & SME’s 142.299 Cooperative 2.302 SOUTH SUMATERA Micro & SME’s 1.288.865 Cooperative 5.122 BENGKULU Micro & SME’s 323.142 Cooperative 1.860 LAMPUNG Micro & SME’s 1.467.294 Cooperative 3.727 JAKARTA Micro & SME’s 2.652.008 Cooperative 7.507 BANTEN Micro & SME’s 1.832.987 Cooperative 6.056 YOGYAKARTA Micro & SME’s 969.705 Cooperative 2.410 BALI Micro & SME’s 978.726 Cooperative 4.207 EAST NUSA TENGGARA Micro & SME’s 1.232.122 Cooperative 3.351 CENTRAL JAVA Micro & SME’s 8.508.191 Cooperative 25.499 WEST JAVA Micro & SME’s 9.881.499 Cooperative 23.091 EAST JAVA Micro & SME’s 9.469.257 Cooperative 28.774 WEST NUSA TENGGARA Micro & SME’s 690.503 Cooperative 1.820 10

11 C. Self Owned Capital of Cooperatives The figure showed that the self-owned capital increased significantly during 2007 – 2012 by 154,19 %, or IDR 31.190.921,62 trillions from IDR 20.231.699,45 trillions in 2007, to IDR 51.422.621,07 trillions in 2012. 11

12 D. External Capital of Cooperatives The number of external capital increased by 120,37% or IDR 28.079 trillions from IDR 23.324 trillions in 2007 to Rp 51.403 trillions in 2012. 12

13 E. Business Volume of Cooperatives The number of business volume of cooperative in 2007 was Rp. 63,080 trillions, increased by 88,94% (Rp. 56,102 trillions) from 2012 figure of Rp. 119,182 trillions. 13

14 F. Members of Cooperatives The total number of cooperative members in 2007 was 28,888,067 persons, increased by 17.24% (4,981,372) to 33,869,439 in 2012. 14

15 G. Managers of Cooperatives The total number of cooperative managers in 2007 was 32,015 persons, increased by 13% (4,161) to 36.176 in 2012. 15

16 H. Workers of Cooperatives The total number of cooperative workers in 2007 was 339,390 persons, increased by 15.94% (54,112) to 393,502 in 2012. 16

IV. Agricultural Cooperatives in Indonesia A. Number of Agricultural Cooperatives 31,27% 45,56% 30,38% 46,77% 17

B. Members of Agricultural Cooperatives 83,33% 84,11% 18

C. Business Volume of Agricultural Cooperatives 67,14% 66,36% 19

A TYPICAL STRUCTURE OF AGRICULTURAL COOPERATIVES Business networking within and inter cooperatives (Rural/Village Cooperative Unit (KUD)) in Indonesia PUSKUD KUD Farmers, Rural People INKUD National Level Tertiery Cooperatives Province Level Secondary Cooperatives Subdistrict Level Primary Cooperatives Rural Level Member 20

V. Government Supporting for Agricultural Cooperatives Development A. Credit For People’s Business Objective : To solve collateral problem encountered by micro and small enterprises in accessing credit, especially to banking institution. This program is for feasible but not bankable businesses. Features of the Programme: The Government Recapitalised 2 (two) State Owned Credit Guarantee Companies amounting to Rp.1.45 trillion. The gearing ratio is 10. Therefore the credit available for MSMEs under this programme is Rp.14.5 trillion. Maximum loan of Rp 500 million for each borrower Maximum interest rate 16% year 21

22 Risk Bearer : Credit Guarantee Company 70%, Bank 30%. Fees for Credit Guarantee is paid by the Government. Loans for all sectors of Economy Total Loan (May 2013) Rp. 115.46 Trillion for 8.7 million debitor 22

B. Training National Level Provincial Level 23 Enterpreneurship for leaders, managers, and members of cooperatives Provincial Level Accounting training Bookkeeping training Cooperative training Marketing training Cattle farming training 23

C. BIG SCALE COOPERATIVE DEVELOPMENT 24 Policy: Minister of Cooperatives and SMEs Decree No.07 Year 2011 Concern of Guidance of Big Scale Cooperative Development Objective To increase the potential of cooperative to become Big Scale Coperative To increase the number of big scale cooperative each province To strengthen partnership and business network among cooperative To increase role of cooperative as distribution leveling in national economic Target 2014 : 3 cooperatives per province 24

D. SHS SHOP Policy: MOU between Deputy Minister for Production and President Director for Sang Hyang Seri (State Own Company) Objective Optimize the role of cooperative to provide agro-input with better services 25

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ORGANIZATION CHART State Minister of Cooperative and SME Secretary for Ministry of Cooperative and SME Senior Advisor to Minister 1. SA for Institution Relationship 2. SA for Application of Basic Values of Cooperatives 3. SA for International Relation 4. SA for Utilization Technology 5. SA for Development a Conducive Business Climate & Partnership Head of Planning Bureau Head of Financial Bureau Head of General Affairs Bureau Inspectorate Deputy Minister for Institutional Development of CoSMEs Deputy Minister for Production Deputy Minister for Financing Deputy Minister for Marketing and Business Networking Deputy Minister for Human Resource Development Deputy Minister for Development and Business Restructuring Deputy Minister for Research of CoSMEs Deputy Assistant for Organization and Legal Status of Cooperatives Deputy Assistant for Foodcrop Agriculture and Horticulture Deputy Assistant for Financing Program Deputy Assistant for Domestic Trade Deputy Assistant for Enterpreneurship Development Deputy Assistant for Productivity & Quality Deputy Assistant for Cooperative Research Deputy Assistant for Export & Import Deputy Assistant for Business Restructuring Deputy Assistant for Development & Supervision of Saving and Loan Deputy Assistant for Policy of Cooperative Education Deputy Assistant for SMEs Research Deputy Assistant for Regulations Deputy Assistant for Forestry and Plantation Deputy Assistant for Facilities & Marketing Infrastructure Deputy Assistant for BDS Empowerment Deputy Assistant for Management of CoSMEs Deputy Assistant for Resources Research Deputy Assistant for Fisheries and Animal Husbandry Deputy Assistant for Public Participation Deputy Assistant for Capital Affairs Deputy Assistant for Partnership & Business Networking Deputy Assistant for Investment Facilitation of CoSMEs Deputy Assistant for Insurance & Financial Services Deputy Assistant for Monitoring & Evaluation of CoSMEs education&training Deputy Assistant for CoSMEs cadre development Deputy Assistant for Member of Cooperatives Deputy Assistant for Craft Industry and Mining Deputy Assistant for Information & Business Publication Deputy Assistant for Business System Development Deputy Assistant for Financing & Credit Security Deputy Assistant for Electrification and Misc.Business Deputy Assistant for Controlling and Accountability Deputy Assistant for Advocacy