ASIA PACIFIC PHILANTHROPY CONSORTIUM

STRENGTHENING PHILANTHROPY IN THE ASIA PACIFIC: AN AGENDA FOR ACTION

Background Paper: Indonesia

July 2001

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INTRODUCTION

This paper is based on views gathered from two national workshops in Indonesia. A wide range of issues on philanthropy in general was discussed. The first step was agreeing on the definition of philanthropy in the Indonesian context, as this term has never been academically discussed in the country. For this purpose, a definition was borrowed from the Philippines.

Philanthropy is defined as “the voluntary transfer of resources for charitable, civic and social purposes” and consists of two major types: charitable grantmaking and development grantmaking.1 A further definition of charity is the support of nonprofit organizations for the purpose of running social, educational, charitable, or other activities that serve the public good with full authority in the hands of recipients in terms of managing the grant.2 A development grant, on the other hand, calls for selective assistance to a nonprofit organization that pursues an agenda that is similar or related to the one defined by the grant-making organization.3

Furthermore, Velasco characterizes a charitable grant by a donor-grantee relationship initiated through a proposal or letter of request and forged on the basis of the donor’s priorities or focus or on personal behest or preferences. Development grants, on the other hand, are characterized by the proactive development of partner organizations and their capability in managing programs to meet the development needs of the target area.

Based on these definitions, a wide range of issues surrounding the philanthropic world in Indonesia was discussed by the stakeholders who attended the two workshops. The issues presented in this report are organized into five major parts. Attention was given in one section to specific forms of charity, including in-kind contributions and volunteerism. Another section discusses the regulatory framework and society’s interest in philanthropy. Last, an agenda for action is proposed to better develop the sector in this country. CONTEXT OF PHILANTHROPY IN INDONESIA Indonesian society has enjoyed a long tradition of philanthropic giving, especially motivated by religious causes, mainly Islam. Indonesia is the world’s largest Muslim country. The Muslim community constitutes almost 90 percent of the Indonesian population and the giving tradition is formally practiced through the mobilization of ZIS (Zakah, Infak and Sadaqah). 4 Based on Islamic teachings and customs, a Muslim who has reached a certain level of income5 must pay the Zakah-- amounting to as much as 2.5 percent of his or her annual net savings. Wealth for Zakah must be paid monetarily -- gold or silver in whatever form. Other forms are money, wares/merchandise, crops and livestock. Crops comprise agricultural produce that can be stored for extended periods of time. Livestock refers to camels, cattle, sheep and goats. In addition, the Muslim is encouraged to voluntarily donate other forms of almsgiving, the Infak and Sadaqah, irrespective of his or her level

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of income. Despite the fact that the major source of social funds in the country is ZIS, various organizations have developed techniques and methods for fund mobilization. With the on-going economic crisis in this country, interest by the corporate sector in helping the poor has been increasing. As will be elaborated later on, corporate means of giving are varied, from direct involvement, establishing corporate foundations, collaborating through a consortium, or encouraging employees to actively participate in social works. SOURCES OF FUNDS Comprehensive data on social fund sources in Indonesia are not yet available. It is clear, however, that the sources vary, ranging from individual to corporate giving. A recent survey conducted by Ibrahim6 (2000), involving 25 CRSOs (civil society resource organizations) provides an illustration of the composition of fund sources, although these groups are not fully grantmaking organizations.7 It is important to note that CRSOs mobilize resources from within and outside their countries and groups and pass them on to other civil society organizations and groups via grants and financing mechanisms.

The survey revealed that 65 percent of CSRO revenues come from international sources and 35 percent from domestic sources. Detailed information on the domestic sources is stated in Table 1 below. Domestic revenues are mainly derived from earned income activities (33 percent), and interest on endowment funds (17 percent). A smaller portion comes from individual giving (14 percent), government contracts (five percent) and donations from NGOs (three percent). Table 1. Composition of Domestic Revenue Sources of CRSOs

(N=25) Sources Composition

(percent) Endowment Income Other Earned Income/Fees National and Local Government Individual Donations NGOs Corporations Others

17 33 5 14 3 17 11

Source: Ibrahim (2000) A. Individual Giving The role of individual giving in financing the third sector in Indonesia, as reflected by Ibrahim’s survey, is relatively small, less than 15 percent. However, if other religious groups were included in the survey, the figure would be higher. Arguably, the incidence of giving to religion is more than 90 percent for all individual giving in Indonesia.8 A case study of several religious-based organizations revealed that they were not only able

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to operate with 100 percent domestic funding, but were also able to raise more than 90 percent of their funds from the public. The annual figure of funds collected by some of these organizations may reach between Rp. 200 – Rp. 1, 000 million (US$ 20-100 thousand). Notably, despite the fact that the portion of individual giving is still relatively small for philanthropy in general, its contribution for charitable purposes is very high. This figure is comparable with that of such developed countries as the United States, which reaches 79.6 percent,9 and Canada, which reaches 88 percent.10 In other words, it seems that in Indonesia the problem is more on the fund mobilization and the narrow interpretation of its possible uses beyond purely religious-based11. B. The Role of Religious Organizations

In connection with individual giving, the government of Indonesia has been mobilizing resources through official arrangements since the 1960s. The government encourages and controls a quasi-state institution for ZIS mobilization, called "Badan Amil Zakat/Bazis" (Zakah Collector Board). The Bazis has a hierarchical structure from the national level at the top to the village level at the bottom. In 1996, the number of Bazis was 277 institutions at the district level, 3,160 at the sub-district level, and 38,117 at the village level. The total amount of funds mobilized by the Bazis has been increasing considerably, as shown in Table 2. The figures reflect a major part of individual giving in Indonesia, reaching US$ 23.6 million in 1996.

Table 2. Collected ZIS in Indonesia Year

Donation (Rp.)

1991 2,273,487,378 1992 10,896,196,828 1993 46,181,411,117 1994 52,345,500,969 1995 60,314,655,826 1996 235,968,314,342

Source: Bazis DKI

In addition to the official Bazis, there are many more community-based ZIS collectors known as Lazis (Lembaga Amil Zakat or Zakat Collector Institutions). The abilities of these organizations vary. Some are weak while others are as strong as those run by institutions that are comparable to the government. As will be shown in a later section of this report, three Lazis in East Java, West Java and Jakarta are now competing with the Bazis to collect funds in their respective working areas.

Similarly, in other religious communities such as Hindu, Buddhist, Protestant, and Catholic, individual giving is organized by the respective religious institutions. However, the ability to mobilize is much smaller and is limited to incidental events in their own communities.12

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C. Institutional Giving

The role and interest of the private sector in philanthropy in Indonesia are not yet well developed for several reasons. One is the relationship between the private sector and NGOs, which has been, in many ways, tense, if not adversarial. Another is that the business and NGO sectors view each other with suspicion.13 The regulatory environment has not been enabling, especially during the Soeharto era. There is little incentive, such as tax write-offs, for corporations to be engaged in socially oriented activities. The existence of semi-official foundations, or Yayasan, many of which were headed by the President himself, has drained some of the resources that the private sector may have otherwise contributed to social giving.14

With the reform era, the opportunity for business involvement in philanthropy is increasing. Interest has been expressed regarding various forms of social engagement, although systematic information on these activities is not yet available. An illustrative picture of corporate giving can be seen in Table 3 below.

Table 3. Corporate Giving in January-February 2001

No

Corporation

Period

Donation

*

Beneficiaries

Use

1 TPI January 2001

150 Direct Beneficiaries Food distribution

2 Hard Rock Hotel Bali

January 2001

120 Direct Beneficiaries Education and Scholarship

3 Dunkin Donat January 2001

244 Yayasan Dompet Dhuafa

Education

4 Freeport January 2001

570 Yayasan Aminef Scholarship

5 Singapore Airline

February 2001

100 Dept. of Education Scholarship and anti drug campaign

95 Gov of DKI Jakarta Greening

47.5 Dept. of Forestry

Greening

9.5 Gov of DKI Jakarta Greening

6 General Electric January -February

2001

907.231 IIEF Scholarship 997.5 Education 7 Citibank February

2001 308.75 Yayasan Mitra Mandiri Community Dev.

8 Mizan February 2001

21 Direct beneficiaries Scholarship

9 Gulf Oil February 2001

26.5 Yayasan Dompet Dhuafa

Victims of calamities

10

Indofood Sukses Makmur

February 2001

600 Direct beneficiaries Research

5

(Bogasari) 11 BP Indonesia February

2001 350 Direct beneficiaries Victims of

calamities 12 American

Express February

2001 480 Local Gov of Bali Culture Heritage

“Tanah Lot” 13 REI Jawa Barat February

2001 110 Direct beneficiaries Victims of

calamities 14 PT Bintang

Toejoe (Extra Joss)

February 2001

1000 Direct beneficiaries Meat distribution

Total

6,137

Source: Various press clippings • in Rp. million. Donations in US$ is converted to Rp. with exchange rate Rp. 9500/$US.

Table 3 shows that 14 corporations have spent more than Rp. 6 billion for charity and development grants in the first two months of 2001 alone. The 14 corporations consist of nine multinational (64 percent) and five national corporations (36 percent). In terms of fund allocation, multinationals contributed about 70 percent, while nationals contributed about 30 percent. The next section will describe four types of corporate participation in philanthropic giving in Indonesia. (a) Direct Involvement A corporation may be directly involved in social activities through its Corporate Secretary or Public Affairs division. Donations are delivered directly to community beneficiaries or the non-profit organization. (b) Involvement through Corporate Foundations A corporation may contribute by establishing its own foundation. In this model, a few corporations allocate money as a seed grant or endowment to the established foundation. Others allocate annual grants to support activities. In the past, due to reasons mentioned above, corporate foundations have not been a popular option. Nevertheless, a handful of corporate foundations are now in operation in the country, as listed in Table 4.

Table 4. Corporate Foundations in Indonesia

No Corporation

Foundation

Major Concern 1 Rio Tinto Rio Tinto Foundation Agriculture, Health, Education 2 Matsusita Gobel Matsusita Gobel Education

Foundation Human Resource Development

3 Aqua Friends of Aqua Foundation Education and Environment 4 Mizan Mizan Foundation Education

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5 Astra Dharma Bhakti Astra Foundation

Small Enterprise Development

6 Alliance Alliance Foundation Health 7 General Electric GE Fund Education and Social Welfare 8 Unilever Unilever Peduli Foundation Education and Social Welfare,

Small Enterprise Development (c) Involvement by Consortium Another model for companies to get involved in philanthropy is to establish or participate in a social organization. It is different from the previous model, as it focuses the company’s grants on development. In other words, the company chooses to support intermediary groups rather than operate social programs independently.

This model was initially applied in the 1980s, when a group of individuals and corporations established Environmental Partnership Fund/Dana Mitra Lingkungan (DML). Currently, DML has 300 members, including individual and corporate donors. DML distributes its funds to organizations with a program, vision and mission in the environmental sector. Another example is Mitra Mandiri Foundation (YMM), an affiliate of United Way International that was established in 1995.

In addition to DML and YMM, PT. Van Melle tried to pioneer the same mechanism several years ago, although it was a simpler model. The candy enterprise allocated social funds to environmental conservation and reforestation activities that were implemented by a co-committee of Van Melle’s employees and by independent individuals. The fund has allocated a total annual portion of Rp. 200 million15 through the Van Melle Small Grants Programs (VMSGP). Currently, however, PT. Van Melle’s management directly coordinates the mechanism.16 (d) Involvement of Employee Organizations

In addition to consortium involvement, corporations in Indonesia have started to involve employees in various social and humanitarian activities. Two corporations in Indonesia that have already adopted this approach are General Electric and Citibank.

General Electric Indonesia established GE Elfun Indonesia in 1998 and already has 100 members from 300 volunteers.17 This organization has contributed more than 10,000 volunteer working hours and donated US$ 36,100 (as of March 2001). GE Elfun Indonesia has carried out 36 projects in health education, empowerment, education, environment, and humanitarian issues. All members of GE Elfun are volunteers and unpaid. Their active participation does not correlate with their career development in GE.18 On the other hand, Citibank motivates its employees to become volunteers for various humanitarian activities through the Citibank Peka Community Center, which was established in 1999. Currently, it registers 800 employees as volunteers. They serve two hours bi-monthly for any NGO in Indonesia.19

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In addition to the two aforementioned multi-national firms, some local firms have formed similar employee organizations with typical programs. The programs are carried out spontaneously at the existing mosques of the firms. The most popular one is ZIS. Of firm-based philanthropy, it is worth noting The Habibie Center (THC), which is exceptional. The center, which was initiated by BJ Habibie and his wife, sons, and brothers in 1999, supervises six large foundations with ten employees. It has a main fund of US$ 50 million,20 of which almost 100 percent was contributed by BJ Habibie. Its primary services cover human rights and democracy, media development, maritime, technology, information, and human resources development. THC is much like a multi-purpose foundation. STRENGTHENING VOLUNTEERISM Among the Indonesian people, volunteer work or volunteerism has been ingrained and traditionalized, either in the daily lives of their neighborhoods or throughout wider social activities. Some of this is inspired by religious tenets. For example, in Java, particularly the rural areas, people are still familiar with mutual assistance in such activities as wedding ceremonies, funerals and house construction. All members of the community, youth and adults, provide volunteer assistance to their neighbors. The construction of social facilities, roads, bridges, and worship buildings are frequently carried out together, with people contributing manpower, expenses and facilities. A similar tradition and culture are found in other ethnic groups in Indonesia. In Toraja of South Sulawesi, Arisan Tenaga refers to mutual assistance in cultivating the farmland of one villager or another group. The landowner only provides some food for the volunteer workers, but in return, the landowner donates money to the group’s cash fund. The same tradition is also practiced by the Dayak people through their local culture called Sa’aleant. In urban areas, such traditions have gradually vanished, due to materialism and consumerism. In cities, everything is valued by money and materials, and people prefer to pay for the service or mandate it to their servants. However, during economic and financial crises, acts of volunteerism become common again. Various natural disasters and social conflicts throughout Indonesia have motivated people to be more concerned with the multi-faceted crisis. Many professionals who were not previously active in social activities have demonstrated their great participation. Three forms of volunteerism have recently developed. One is volunteerism by individuals who are not coordinated under a special organization. Another is volunteerism that is coordinated under a certain group or organization for incidental or temporary programs. The third is volunteerism that is managed by a group or organization with professional and sustainable programs. The third type is characterized by a strong oral and written commitment from volunteers to be actively involved in implementing programs and routine and continuous activities. This type of volunteerism sets up a special division or organization specifically to recruit volunteers professionally. Table 5 shows the current

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pattern of volunteerism.

Table 5. Volunteerism Pattern Type of Volunteerism

Participants

Fundraising Artists, Public Figures, Students Facilitation and Advocacy Lawyers, Psychologists, Doctors,

Univ. Students, Victims’ Family Profession Lawyers, Psychologists, Doctors,

Accountants Technical Assistance Employees, Students

FUND DISTRIBUTION

Data on social fund sources and information on the allocation and distribution of social funds in Indonesia are not sufficiently available. Information only covers a general description of sectors susceptible to such loans or grants. The sectors are varied, from assistance to victims of calamities, education and health, small enterprise development, research and environment. In addition, smaller sectors may be included, such as advocacy, consumer and human rights protection and legal assistance. The distribution of ZIS-based funds has already been specified under Islamic rules to the eight beneficiary groups.

The distribution of social funds can be revealed from the results of the survey on 25 OSMS (Organisasi Sumberdaya Masyarakat Sipil) organizations, described earlier (Ibrahim, 1996). Table 6 below indicates that the highest proportion of social fund distributions is made to education and training (76 percent), followed by institutional, community, and micro-credit development (72 percent), environmental conservation (48 percent), publishing, public information, and advocacy (36 percent), and emergency assistance and research (32 percent). Smaller portions are made to human rights and social services (24 percent), community health (20 percent) and legal assistance (12 percent). Interestingly, a portion of social funds is allocated to philanthropic works and volunteerism (12 percent).

Table 6. Area of Grants Distribution (N=25)

Programs Proportion (percent)

Education and Training Institutional development Community development Micro credit Environmental conservation Publishing and Public information

76 72 72 72 48 36

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Advocacy Emergency assistance and natural disaster Research Human rights Social services Community health Legal assistance Philanthropy works and voluntarism Others

36 32

3,224 24 20 12 12 4

Source: Ibrahim (2000)

CURRENT ISSUES ENABLING FACTORS

A. Laws and Regulations

In analyzing nonprofit sector development in Indonesia, it is necessary to consider enabling factors as far as government policy is concerned. In nonprofit sector development, there are at least two kinds of policies that must be taken into account: policy on the nonprofit organization system and policy on the taxation system as it is applied to the nonprofit sector.

In Indonesia during the New Order Regime, the nonprofit sector, including its organizational arrangement and funding sources, was under quite restrictive regulations. Regulations regarding this and other sectors were aimed at asserting government control over their existence and activities, rather than their development. Regulations could be a serious threat to those NGOs that were critical of government policies.

With the fall of the New Order Regime, regulations on the nonprofit sector have generally been improved. Freedom of organization and expression are more secure, despite its indefinite implication towards NGOs and philanthropy development.21 One enabling factor that may be conducive toward the ‘life’ of this sector is the new provision of tax reduction on the social budget.

During the New Order Regime, the government did not provide any incentive for nonprofit sector development, such as tax deductions or exemption.22 In accordance with Laws No. 7 of 1993, all foundations that provided social services in the fields of religion, education, health, and culture were possibly eligible for a tax exemption. However, according to the new Laws No. 10 of 1994, tax exemptions for foundations working in these fields are restricted to grants, donations, presents, inheritance and government subsidies.23 Reforms on these laws were made by the government of President Abdurrahman Wahid through Laws No. 17 of 2000 on the Third Revision of Laws No. 7 of 1983 on Income Tax. One significant change from these reforms is that tax deduction

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on taxable income can be considered for certain social spending. This correlates with Laws No. 38 of 1999 on Zakat Fund management issued by the previous administration, the Habibie government.

Both of the laws correlate to and regulate two important aspects. First, Zakat is not a tax object. Second, Zakat (of income) may reduce taxable income. This means that the government provides tax dispensation over income spent for social purposes. The above regulation is effective for both personal and corporate taxpayers who work on nonprofit or for-profit orientations. On the other hand, during the New Order regime, government did not regulate or restrict the aims and scopes of work that could be served by a nonprofit organization. The restriction of business activities and individual income of a person who was active in a nonprofit organization was not clearly specified or regulated. This resulted in much abuse of nonprofit organizations and foundations for private interest. With pressure from various parties, including IMF, the government of Indonesia is drafting a Bill on Foundations to minimize these abuses. Whether or not the bill will be accommodating remains to be seen. Various NGO activists have observed that its present draft has many clauses that would increase government control over the nonprofit sector.24

B. Community Awareness and the Role of Media

Enthusiasm for fundraising among Indonesians is quite high, although accurate information on the subject is still under study. Mobilization seems to be key to public fundraising for social causes. Several organizations that have carried out systematic mobilization campaigns succeeded in calling thousands of people to become regular donors. People’s enthusiasm is indicated by their active contributions to fundraising activities held by the mass media. Successful examples are the efforts of the Kompas, Republika, and Suara Pembaruan newspapers.

Table 7 below shows funds collected through these newspapers about 40 days after the program announcement on aid to victims of the Bengkulu earthquake (June 2000). The total amount of funds raised was from Rp. 311 million to Rp. 675 million, an average of Rp. 6.7 million to Rp. 16.5 million per day. The per donor average was Rp. 465,000 to Rp. 704,000. These amounts show the high intensity of public philanthropy in Indonesia, considering that the minimum regional wage in Jakarta is Rp. 426,500/month. Closer inspection of the donor list reveals that donors are not only from among the rich, but also from low-income populations, with the donation rate starting at Rp. 10,000 or less to the millions of rupiah.

Table 7. Funds Raised on Dompet Bengkulu Among Three Media

Media Kompas Republika Suara Pembaruan

Period (day)

41

38

46

11

Total Revenue Rp.674,780,312 Rp. 576,183,902 Rp. 311,723,290 Donors

959

1140

669

Average /Day

Rp. 16,458,000

Rp. 15,163,000

Rp. 6,777,000

Average /Donor

Rp. 704,000

Rp. 505,000

Rp. 465,000

Source: Processed from the media report (25 July 2000)

The above data indicate the significant role of mass media in social fundraising. Its success lies in its high transparency, especially television media, which is more particular in its interactive characteristics. Although many donors prefer to remain anonymous, the transparent manner of the fundraising gives donors a sense of security and accountability. It would be encouraging if mass media-based fundraising programs are performed not only for natural disasters, but also as part of the media's social responsibility. Table 8 below presents several national and regional mass media that conduct fundraising programs.

Table 8. Various Fundraising Programs Run by Media

Media

Printed National Programs Local Programs

Kompas ‘Dompet

Kemanusiaan’or

Kedaulatan

Rakyat Dompet

Bencana

Alam

Republika Dompet Dhuafa Bali Post Dana Punia

Suara

Pembaruan

Dompet Bencana Pikiran Rakyat

Panjimas Pundi-Pundi

Umat

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Ummi Takaful

Electronic

TV SCTV Pundi Amal

RCTI RCTI Peduli

TPI TPI Peduli

Indosiar Peduli Kasih

ANTEVE Dompet Dhuafa

Radio JKT News

FM

Incidental

CHALLENGES AND CONSTRAINTS TO SUSTAINABLE FUNDING

Based on the previous discussion, it can be observed that philanthropy and social works in Indonesia are quite promising, because enthusiasm among various circles of NGOs, corporations and funding agencies in that sector has gradually increased. However, for continued development, philanthropy still has challenges and constraints.

Donors themselves, for instance, are reluctant to develop a more transparent culture in making contributions; many donors wish to remain anonymous. Such a culture handicaps recipient organizations in developing a systematic donor profile database. Without a database, communication that is vital to maintaining a long-term relationship between donors and recipients cannot be established.

Fundraising organizations do not grasp the importance of developing and managing a donor database. As a result, it is difficult for them to manage their own donor base, such as the upgrading of a donor’s status from incidental to permanent or “small” to “big,” etc. They do not even know the profile of their own donors.

The other challenge is the lack of transparency and accountability in the distribution of social funds by either community groups or, particularly, the mass media. Without transparency and accountability, misappropriation of funds is possible and can create public mistrust.

In the corporate sector, constraints also stem from the management of the companies. The establishment of corporate foundations is not yet effective, due to the reluctance of

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management to allow the foundations to be independent of the business, consequently, executives are not able to fully implement the foundation's mission and vision.25 Companies seem to prefer to carry out direct contributions both to organizations and communities, such that businesses in Indonesia prefer to bestow charitable grants, rather than development grants. This fact raises a question of sustainability, as charitable grants are generally distributed for incidental and consumptive uses. Of the total Rp. 6.15 billion in donations in January-February 2001, as presented in Table 3 above, more than Rp. 4 billion (66 percent) can be classified as charitable. The remaining Rp. 2 billion (44 percent) was for development.

In the public sector, the government policy on tax dispensation for social expenditures remains discriminatory. First, dispensation applies only to donations that are given to the Zakat fund. Second, the legal institution gives dispensation only to Bazis, which is established by the government. Clearly, such a discriminatory policy on social and philanthropic activities discourages social contributions from private individuals and corporations. It is unclear why the voluntary Infak and Sadaqah, which should logically be higher than the obligated Zakah, are not treated equally. Also, non-Moslem individuals or corporations that want to pay their Zakah or other social donations have yet to be provided with the same incentives.

In the civil society sector, a constraint on development is limited resources. Available resources that can be used for developing philanthropy, as detailed in the above data, are inadequate, resulting in low-level professionalism and skills in this sector. Research, surveys, data collection and references on this sector are also insufficient. Training for fundraising and grantmaking management organizations and professional fundraisers has been minimal.

RESPONSE AND NEW DEVELOPMENTS Interestingly, the ongoing economic crisis and political instability have stimulated philanthropic endeavors in society as a whole. Fundraising techniques and strategies have become more effective and innovative, including sophisticated methods through the use of the Internet, banking facilities and credit cards. Philanthropic organizations, like Al Falah of East Java, Darut Tauhid of West Java and Dompet Dhuafa of Jakarta, have shown encouraging results in fundraising. The organizations have been able to register a total of 126,244 donors (see Table 9) with a tendency to increase every year. However, these philanthropic organizations lack the capacity to manage their donors. As a result, their donor database is static and they are unable to analyze information and develop an effective fundraising strategy.

Table 9. Registered Donors for Three Islamic Organizations

No

Institution

Founded

Location

Registered Donors

Raised Funds/Month (in Rupiah)

14

1

Al Falah

1987

East Java

81,711

200,000,000

2

Darut Tauhid

1990

West Java

14,513

200,000,000

3

Dompet Dhuafa

1994

DKI Jakarta

30,000

1.000,000,000

Total

126,224

1,400,000,000

Community-based Zakah institutions (Lazis) have the potential to be comparable to the government Bazi, once they reach professional levels. Table 10 below compares Bazis Jakarta and Yayasan Dompet Dhuafa (YDD) over a five-year period, showing the latter’s potential. After five years of operation, Dompet Dhuafa’s fundraising results surpassed that of the state-owned Bazis Jakarta. This is due, among other things, to YDD’s innovative fundraising programs.

Table 10. Total Income from ZIS

Year

Bazis DKI

YDD

1997

10,967,480,548.50 1,541,716.814

1998 6,762,772,558.16 3,054,290.757 1999 8,122,693,568.87 6,079,320.283 2000 8,416,629,931.68 11,395,570.642

Other innovations are the emergence of new philanthropic umbrella organizations, founded by corporate employees. In a fashion similar to Bazis and Lazis, eleven employee philanthropic organizations established a national umbrella institution in 1997, called Komite Kemanusiaan Forum Zakat/FOZ (Committee on Zakat for Humanity). Table 11 lists the eleven founders of FOZ.

Table 11. FOZ Founders No

Institution

Field of Business

1 2 3 4 5

Bazis Bank Tabungan Negara Bank Muamalat Indonesia Bazis BBD Bazis Bapindo PT Internusa Hasta Buana

Banking Banking Banking Banking Freight Forwarding

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6 7 8 9 10 11

Bazis Pertamina Hotel Indonesia Baitul Maal Pupuk Kaltim Baitul Maal Pupuk Kujang Bazis STEI Bazis DKI

Oil and Gas Hotel Fertilizer Manufacturing Fertilizer Manufacturing University Local Government

Source: FOZ brochures For the corporate sector, direct involvement in social activities has expanded from restricted charitable causes to public education and advocacy. An example of direct involvement of corporate philanthropy is Indofood, a giant food corporation that is funded by the Pustaka Anak Nusantara program of Visi Anak Bangsa. A series of 32 short films promoting Indonesian cultural diversity was produced. Another example is PT. Sampoerna, a large cigarette manufacturer that supported Komite Pendidikan Pemilih/KPP (Committee on Voter Education) in promoting the 1999 general elections through public service advertisements on five private TV networks, using the cast of the famous TV series Si Doel Family. The campaign also publicized in a special edition of the weekly Madani magazine, with a print-run of 20,000 copies. Overburdened with proposals from organizations seeking funds, many corporations are planning better ways to fulfill demand. The phenomenon has resulted in many corporations establishing philanthropic organizations to channel their funds in the community. There was serious discussion as to how to create an umbrella among corporations, drawing from the successful model of Philippine Business for Social Progress (PBSP) in the Philippines. The potential to fundraise through intermediary groups seems to be more acceptable and appreciated with such successes as Dana Mitra Lingkungan (DML) and Yayasan Mitra Mandiri (YMM). The loose, flexible membership model developed by YMM appears to be more effective than DML’s strictly tie-up model. YMM has succeeded in reaching 26 corporations, generating large amounts of cash and in-kind donations. During the implementation of previous field projects, both DML and YMM contributed funds to local non-profit organization groups in the amounts of Rp. 1 billion and Rp. 600 million, respectively. Table 12 below compares the two organizations.

Table 12. Comparison of Two Consortiums

Institution

Dana Mitra Lingkungan(DML) Yayasan Mitra Mandiri(YMM)

16

Established

1983

1995

System

Tie-up Membership

Loose Partnership

Members

300 (Corporation/individual)

26 (Corporations) Main Issue

Environment

Education and Health Disbursed Funds

Rp. 1,008.5 million (1997)

Rp. 595 million (1999) Beneficiaries

NGO/Self help Groups, University, Individuals

NGO, Self-help Groups

In the midst of the private sector’s enthusiasm in carrying out its social responsibilities, certain civil society organizations have questioned the sincerity of corporate philanthropic activities. Transparency and accountability of fund recipients should be considered, including the need for an immediate response and concrete resolution, such as the development of a Code of Conduct. There is also the idea of applying a sort of watchdog for philanthropic programs,26 an internal and self-regulatory mechanism to ensure accountability and transparency among NGOs in the form of good governance. This is an essential requisite for the sustainability of particular partnerships among stakeholders.27

CONCLUSION

The future of philanthropy in Indonesia has better prospects if there is a high level of mobilization among individuals and corporate philanthropy, stimulated by a more accommodating tax regime. However, active advocacy is needed to establish impartial and indiscriminate tax policies. Individual NGOs, intermediary support agencies and businesses would need to invest more time and effort in building capacity in this area, but the multiple benefits in the form of increased donations, volunteer support and community building would amply justify the extra work.

On the other hand, more accountability, transparency and professionalism among NGOs must be engendered. This is important to lessen the tension between the business sector and NGOs on the one hand, and to increase public and private trust in the non-profit sector, on the other. Intermediary group involvement, rather than direct corporate involvement, is a more acceptable means for corporate social engagement.

Public relations and communication of NGOs’ roles and efforts are much needed, but must be supported by good internal governance and a Code of Conduct. Media training for journalists and editors is an important step toward increasing public awareness and interest in philanthropy and social development. Media involvement in social fund mobilization efforts needs to be further encouraged, as it has proven to be very effective.

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Broad-based coalition building is essential. University involvement is also crucial, especially in relation to academic endeavors to develop further concepts and gather baseline information that will facilitate both social and business groups in building their respective capacities in this relatively new frontier. Interest has been expressed by certain faculty at the University of Indonesia to establish a Center for Corporate Social Responsibility. A clearinghouse on NGOs, foundations and other related matters should be established, even with such a small first step as putting together a comprehensive directory.

Human resource capacity building is another important area that needs to be addressed. Fundraising training is especially important, but training on database and donor management is also needed. International and regional cooperation and collaboration could facilitate training on a longer-term basis. Knowledge transfer on various topics regarding philanthropy and third sector development should continue to be carried out among international and regional players for their mutual benefit.

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PARTICIPANTS OF THIS PAPER

Representatives from NGOs, corporate foundations and intermediary groups, as well as donors, provided the contents for this report. Findings from a preliminary survey on the current situation of philanthropy in Indonesia were included in the discussions. Two consecutive national workshops were conducted in Jakarta on February 26, 2001 and April 5, 2001. The report was prepared by Zaim Saidi, assisted by Kurniawati, Hamid Abidin and As’ad Nugroho, researchers from PIRAC who collected data.

19

ATTENDANCE LIST

NATIONAL DISCUSSION STRENGTHENING PHILANTHROPY IN THE ASIA PACIFIC

INDONESIA’S PERSPECTIVE

CEMARA HOTEL, JAKARTA 26TH FEBRUARY 2001

1. Ms. Atie W. Soekandar

Chairperson Mitra Mandiri Foundation (United Way Indonesia)

2. Ms. Rondang Lubis

Finance Officer PACT Indonesia

3. Mr. Zaim Saidi

Chairperson PIRAC (Public Interest Research and Advocacy Center)

4. Mr. Alex Wijaya

Manager Dharma Bhakti Astra Foundation

5. Ms. Elizabeth

Program Manager YAPPIKA

6. Ms. Josephine

Chairperson, Indonesia Chapter GE Elfun

7. Mr. Kustiwan Kamarga

Executive Director Sahabat Aqua Foundation

8. Mr. Moechtadi Sadjazali

Chairperson Dana Mitra Lingkungan Foundation

9. Ms. B J D Gayantri

CSO Development Specialist CSSP (Civil Society Support and Strengthening Program)

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10. Ms. Nike Dewayani

Assistant Donor Relations WALHI (Friends of the Earth Indonesia)

11. Mr. Eri Sudewo

Chairperson Dompet Dhuafa Foundation

12. Mr. Iskandar Zulkarnaen Chairperson Forum Zakat

13. Mr. Agus Sarwanto

Sec. Executive Forum Zakat

14. Mr. Richard Holloway

Programme Advisor on Civil Society Partnership for Governance Reform in Indonesia

15. Ms. Dinny Jusuf Board of Advisor Suara Ibu Peduli (The Voice of Concerned Mothers)

16. Mr. Noke Kiroyan

Chairperson Rio Tinto Foundation

17. Mr. Tom Malik Executive Director Rio Tinto Foundation

18. Mr. Anang Noor Deputy Director External Relations Rio Tinto Indonesia

19. Ms. Monica Tanuhandaru Volunteer Team Suara Ibu Peduli (The Voice of Concerned Mothers)

20. Mr. I. Gino Latief Sn. Executive Director

21

Mitra Mandiri Foundation (United Way Indonesia) 21. Mr. Hamid Abidin

Research Coordinator PIRAC ((Public Interest Research and Advocacy Center)

22

ATTENDANCE LIST

SECOND DISCUSSION STRENGTHENING PHILANTHROPY IN THE ASIA PACIFIC

INDONESIA'S PERSPECTIVE

RIO TINTO OFFICE, JAKARTA 11th April 2001

1. Ms. Atie W. Soekandar

Chairperson Mitra Mandiri Foundation (United Way Indonesia)

2. Mr. I. Gino Latief Sn

Executive Director Mitra Mandiri Foundation (United Way Indonesia)

3. Ms. Sinta Widimulyani Project Coordinator PACT Indonesia

4. Mr. Zaim Saidi

Chairperson PIRAC (Public Interest Research and Advocacy Center)

5. Mr. Alex Widjaja

Manager Dharma Bhakti Astra Foundation

6. Bapak Kustiwan Kamarga

Executive Director Sahabat Aqua Foundation

7. Mr. Moechtadi Sadjazali

Chairperson Dana Mitra Lingkungan Foundation

8. Mr. Ahmad Juwaini

Director Dompet Dhuafa Foundation

9. Mr. Agus Sarwanto

Sec. Executive Forum Zakat

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10. Ms. Hanny H. Soewarno

Corporate Communication Dompet Dhuafa Foundation

11. Mr. Kusnandar PLE Manager Dompet Dhuafa Foundaiton

12. Mr. Jamil Azzaini Director Dompet Dhuafa Foundation

13. Ms. Nana Mintarti PPM Manager Dompet Dhuafa Foundation

14. Ms. Geni Achnas Executive Director Tifa Foundation

15. Mr. Achmad Zaky

Operational Manager Mer-c Foundation

16. Mr. Hamid Abidin Research Coordinator PIRAC ((Public Interest Research and Advocacy Center)

17. Mr. Tom Malik Executive Director Rio Tinto Foundation

24

1 Velasco, Gisela, T. ‘Overview of Organized Philanthropy in the Philippines,’ in Tadashi Yamamoto (1996), Emerging Civil Society in the Asia Pacific Community, JCIE. p. 592. 2 The italic words were added and agreed upon by national dialogue participants in Jakarta to clearly distinguish the term charity grant from the term development grant. 3 See Velasco. 4 There are two types of Islamic charity. There is Zakah, which is obligatory and is the right of the poor over the wealth of the rich. It amounts to 2.5 percent of a year's savings. The word Zakah itself means "purification," and the purpose is to purify legally-earned wealth. The other is Sadaqah, or voluntary charity, which depends on need and the amount of excess wealth. Infak is basically the same as Sadaqa,h but is dedicated by the giver. 5 The minimum requirement for someone to pay the Zakah is equivalent to 85 grams of gold if he or she holds savings for a year,. 6 Ibrahim, Rustam (2000). Direktori Organisasi Sumberdaya Masyarakat Sipil: Indonesia. The Synergos Institute. Series on Foundation Building in Southeast Asia. 7 “CSRO” in the survey refers to private, nongovernmental organizations that are locally owned, governed and operated. A CRSO should also be independent and non-profit in nature. Ibid. h. 3. 8 A household survey is being conducted on this issue by PIRAC. 9 Baron, Barnett F. (1997). Funding Civil Society in Asia: Philanthropy and Public-Private Partnership. The Asia Foundation. Working Paper #3. July 1997. 10 Rickerd, D (1996) Canada: ‘Nongovernmental Underpinnings of the Emerging Asia Pacific Community’ in Tadashi Yamamoto (1996). Emerging Civil Society in the Asia Pacific Community, JCIE. 11 In developed countries, in fact, a similar problem can be found. In terms of the sources of income for American NGOs, individuals are not their major source of income and have not been for many years. In the 1950s, American charitable organizations (i.e., NGOs broadly defined) raised about 70 percent of their income from private donations. By 1996, Salamon found that only about thirteen percent (12.9) of total funding for NGOs came from individual donations and corporate and foundation grants. About thirty percent (30.5) came from government grants and contracts, and about 57 percent (56.6) derived from client dues, fees, investment income and related sources. (Lester M. Salamon, Helmut K. Anheier, and Associates, The Emerging Sector Revisited: A Summary (Baltimore: Johns Hopkins University Institute for Policy Studies, 1998, p. 11 and Appendix 3.). Salamon's estimate of the relative size of private contributions is somewhat lower and that of government funding somewhat higher than reported in America's Nonprofit Sector: Facts and Figures (Washington: Independent Sector, Spring 1998), which gives estimates of 18.9 percent for private contributions and 31.7 percent for government payments. By sector, government funding as a share of total revenues accounted for 36 percent in health services, 17 percent in education, 42 percent in social and legal services, and 11 percent in the arts. (Virginia Hodgkinson et. al, The Impact of Federal Budget Proposals Upon the Activities of Charitable Organizations and the People They Serve (Washington: Independent Sector, 1995). The same broad pattern holds for the European countries included in the Johns Hopkins study. Whichever figure one chooses, private charitable contributions from individuals, foundations, and corporations are much lower as a percentage of total NGO income in the US than most people realize. 12 This information is based on several discussions with knowledgeable people on the subject. 13 The issue of the NGO-business sector relationship is discussed in Hadiz, Vedi R. Civil Society Resource Organizations and Development in Asia: The Case of Indonesia. Synergos Institute. 14 Ibid. 15 Corother A.L. and Estie W. Suryatna. ‘Support for Indonesian NGO Programs Through Corporate Philanthropy’ in Tadashi Yamamoto (1996), Emerging Civil Society in the Asia Pacific Community, JCIE. p. 592. 16 This information was given by Ir. Rinaldi, Manager for Quality and Environment, PT Van Melle, Indonesia. 17 ‘GE Elfun hijaukan Taman Medan Merdeka Monas.’ Bisnis Indonesia, 1 Feb 2001. p. 14. 18 The information is provided by Josie Setyono, an Elfun Indonesia manager. 19 Citibank Peka (Peduli dan Berkaya). Fact Sheet.

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20 This figure was reported in the newspaper and is not confirmed. 21 See Saidi, et.al. (2000). ‘Kebebasan Berkesenian Pasca Reformasi.” Jurnal Demokrasi dan Ham. Vol. 1, No. 2. September-November 2000. 22 Arinanto, Satya (1999). ‘ Organisasi Nirlaba dan Hukum di Indonesia’, in Filantropi dan Hukum di Asia, Thomas Silk (editor). APPC, 1999. 23 Ibid. 24 A coalition of NGOs is now watching the development of this bill. 25 This concern was raised by one of the corporate foundation’s executive directors. 26Participants of the Corporate Social Responsibility Workshop, held by Yayasan Lembaga Konsumen Indonesia (YLKI) on March 15 2001, have conveyed this critical point. 27 Transparency, accountability, and parameter matters for private NGOs were key issues in the Short Discussion on April 5, 2001, following the National Workshop held on February 2001.