UK CHARITY COMMISSION'S GRIM ASSESSMENT OF

C O N F I D E N T I A L SECTION 01 OF 02 JAKARTA 013475

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/14/2011
TAGS: PGOV EFIN ETTC KISL PTER SOCI ID UK
SUBJECT: UK CHARITY COMMISSION'S GRIM ASSESSMENT OF
INDONESIA'S NGO SECTOR


Classified By: Political Officer Catherine E. Sweet, Reason 1.4(d)


1. (C) Summary. The UK Charity Commission's Southeast Asia
and Pacific representative provided us with his assessment of
Indonesia's charities sector on December 5. Indonesia falls
far short on legislation governing charities, governmental
regulation, and NGO self-regulation. Relations between the
government and the charities sector are strained and
characterized by mutual suspicion, a legacy of the Suharto
era when many NGOs served as opponents of the authoritarian
regime and, as a result, were repressed by Suharto. The
Commission is planning a series of workshops and fora to help
address these weaknesses. Although Evans sees signs of hope,
he believes that a long-term change in culture is required
before the charities sector can be properly regulated. End
Summary.


2. (C) On December 5, Ben Evans, the Southeast Asia and
Pacific International Program Representative for the UK's
Charity Commission, provided us with his assessment of
Indonesia's charities sector. Evans painted a rather grim
picture based on his evaluation of three factors: legislation
governing charities; government regulation and
implementation; and NGO self-regulation. He also
characterized relations between the government and the
charities sector as marked by mutual suspicion, a legacy of
the Suharto era when many NGOs served as opponents of the
authoritarian regime and, as a result, were repressed.

Incoherent Charities Legislation
--------------


3. (C) According to Evans, there are two major flaws in
Indonesia's charities legislation. First, there is no single
category for non-governmental organizations. Instead, NGOs
are classified as either associations or foundations, with
associations defined as membership organizations and
foundations as non-membership organizations. In practice,
however, NGOs essentially have free choice as to define
themselves, regardless of membership status (for example, the
mass Muslim organization Muhammadiyah is classified as a
foundation even though it has some 30 million members). Most
opt to become foundations because the Indonesian term for
foundation, "yayasan," is popularly understood to indicate a
charitable organization.


4. (C) Second, separate and very distinct laws govern
associations and foundations, with different ministries
overseeing their implementation. Evans said that on paper,
the law governing foundations is quite good. The
associations law, however, is just "two-thirds of a good
law," since it leaves out specifics on regulating
associations' finances. The legislation, passed in 1985, is
a carryover from the Suharto regime that was designed
primarily for political purposes, namely to keep NGOs from
opposing the president.


5. (C) Evans cautioned that getting better laws on the books
will be difficult for several reasons, not least because
passing any new legislation in Indonesia is challenging.
More important, Indonesian NGOs often serve as vehicles for
powerful individuals to advance their personal interests,
resulting in strong opposition to tightening regulations.
(Note. Although not cited by Evans, traditionally a
significant portion of the military's funding comes not
through the state budget but through businesses run through
its very wealthy yayasans. End Note.) At best, Evans
concluded, better legislation offers few advantages and
significant disadvantages to powerful Indonesians and the NGO
sector.

Weak Governmental Regulation
--------------


6. (C) Evans characterized governmental regulation of
charities as even worse than the legislation. "It's just not
there," he quipped. One of the biggest stumbling blocks is
that regulatory authority is split between two ministries:
the Ministry of Law and Human Rights for foundations, and the
Ministry of Home Affairs for associations. Evans says that
the Ministry of Law and Human Rights is the worse of the two,
lacking adequate resources or sufficient will to regulate
foundations. This is further exacerbated by the foundations
themselves, who Evans reported have effectively refused to
abide by the legislation.


7. (C) As for associations, they are legally obligated to
register with the Ministry of Home Affairs. Evans says that

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ministry officials told him that approximately 17,000
associations have registered, although when pressed they
admitted that only a few hundred have actually completed the
full process. In Evans's estimation, there are in fact more
than one million active associations in Indonesia.
Nevertheless, Evans is more upbeat about the Ministry of Home
Affairs, which he says is considering drafting a new
associations law (although Evans believes that the best case
scenario would be for one ministry to oversee all NGOs).


8. (C) Evans identified two additional impediments to
effective governmental oversight. First, neither the
Ministry of Law and Human Rights nor the Ministry of Home
Affairs has any regulatory offices outside of Jakarta.
Second, there is a total absence of coordination between the
two ministries. Still, he feels that the GOI is taking the
charities regulation more seriously than in the past, as
evidenced by the MOU the Ministry of Home Affairs signed
recently with the Charity Commission. He also has identified
allies within the Ministry of Home Affairs, as well as within
some political parties and NGOs.

Lack of Capacity Hinders Charities' Self-Regulation
-------------- --------------


9. (C) Evans reported that there is a real lack of
understanding of accountability and transparency principles
in the charities sector, and a desperate need for
capacity-building. Furthermore, absent effective
enforcement, there are few incentives for NGOs to comply with
regulations. In other countries, Evans said, NGOs are eager
to follow the rules so that they can obtain tax-exempt
status. However, there are no tax breaks for charities in
Indonesia (and even if there were, he added, they would not
be particularly attractive since few Indonesians fulfill
their tax obligations). Evans suggested that new legislation
could include negative incentives for self-regulation, such
as stipulating that unregistered NGOs would be ineligible to
receive government funding or open bank accounts. In the
meantime, the Charity Commission will be pushing for the
sector to develop an indigenous, voluntary code of conduct.


10. (C) Evans noted that relations between the sector and
government are shaky. Both parties still view one another
through the prism of the Suharto era: the charities suspect
the government of wanting to repress NGOs, and the government
suspects NGOs of being foreign-funded vehicles that foment
opposition. There are signs of hope, however, Evans noted.
During a three-day conference that the Commission organized
in Bali, the government showed a new willingness to
accommodate the NGO sector.

Charity Commission's Plans to Strengthen Regulation
-------------- --------------


11. (C) Evans bluntly stated that there must be a cultural
change on charity regulation, which will only occur with
time. For its part, the Commission plans to hold a national
forum in late February or March that would bring together
national and regional government officials, NGOs, donors,
academics, and political party representatives for three
simultaneous conferences on legislation, government
regulation, and NGO self-regulation. Evans is also
organizing workshops devoted specifically to developing
better legislation, in conjunction with the U.S.-based
International Center for Non-Profit Law.


12. (C) To build regulatory capacity, Evans will run an
inter-ministerial forum in February on improving coordination
and devising a strategic approach to regulation. The Charity
Commission plans to send a small number of government
officials to the UK, the Philippines, Singapore and Pakistan
to help get them up to speed on different regulatory
approaches. Evans described the Pakistani model as
particularly promising for the Indonesians, which includes a
simple online NGO database that is maintained both centrally
and in the regions. Finally, Evans is trying to build
support from within the NGO community for a voluntary code of
conduct and better regulation. He tells them that regulation
of the sector is inevitable, and it would be to their
advantage to help shape the legislation before it takes
effect.
PASCOE