Thailand Law Forum: NGO Regualtion in East and Southeast Asia: A Comparative Perspective

d.	Taiwan. Like China, Taiwan has a dual establishment/supervision system for NGOs. The two types of entities allowed by law in Taiwan are the "social group legal person," which is the equivalent of the association in civil law, and the "financial group legal person," which is the equivalent of the foundation in civil law. Each type of entity must be established by local courts. But each must also have a "responsible authority," whose role is to ensure that the organization has permission to be established and that, once established, it stays within its mission and accomplishes its purposes appropriately. Until 1999 there were 20 different sets of regulations for ensuring whether NGOs would meet the requirements of the different ministries, but a 1999 regulation reformed the situation by requiring consistency among the various responsible authorities. Currently NGOs in Taiwan are in negotiations with the Legislative Yuan with the purpose of developing new legislation. According to Joyce Yen Feng, however, in a paper she wrote for the CUA Workshop, the parties are still far apart. The government draft has 48 articles, while that proposed by NGOs has only 19. The main aim of the proposed legislation is the same, however, which is to simplify and modernize the legal requirements for both types of NGOs in Taiwan.¹³

e.	The Philippines. Under section 88 of the Corporation Code of the Philippines, non-stock (not-for-profit) corporations may be formed for the purposes there stated. Although informal associations and charitable trusts exist, they do not have full legal personality. A not-for-profit corporation is the only type of legal entity permitted for an NGO in the Philippines.¹⁴ No permission prior to establishment is required, although licenses or certifications of competence are obviously necessary to perform certain functions (whether an organization is an NGO or a for-profit entity). Because non-stock corporations are subject to the same rules as other corporations, such entities are subject to the oversight of the Securities and Exchange Commission; and annual reports are required but actual supervision is limited.

f.	Vietnam. Like China, much of the legal framework for NGOs in Vietnam is in regulations or administrative practice and not in laws. The 1957 "Law on Association" and the later Civil Code (1996) regulate the NGO sector with scant detail. The Civil Code recognizes three types of entities within the NGO sector: social and socio-professional organizations; social and charitable funds, and other organizations, as provided by law.¹⁵ Regulations promulgated pursuant to the "Law on Association" set up a complex set of rules for the establishment and oversight of social organizations. In the main, these are closely connected with the Party or with mass organizations, such as the Vietnam Women's Association. The oversight body for NGOs in Vietnam was formerly the Government Committee on Personnel (GCOP), but the responsibility for oversight has been transferred to the new Ministry of Home Affairs. Drafting of a new and more detailed "Law on Associations" has progressed in recent years, but no draft has been promulgated for discussion or review.
g.	Thailand. Establishment and oversight of NGOs in Thailand is governed by the Civil and Commercial Code of 1925, which was last amended in 1992. In addition, the National Cultural Act of 1942 established the National Cultural Commission, which is responsible for both establishment and oversight of foundations and associations. Under the Civil and Commercial Code, the National Police Office Bureau has responsibility for establishment and oversight of associations, and the Ministry of the Interior has responsibility for foundations. This dual system of responsibility is similar to the system in Taiwan and China. The major difference is that in Thailand one ministry - the Cultural Commission - oversees and approves the substantive activities of NGOs, and another agency - the Ministry of the Interior or the National Police Office Bureau - regulates all other aspects of their activity. Regulation of both associations and foundations has been highly subject to government discretion. At present, though, Thai NGOs are working with the government to devise a new and more appropriate set of regulations for the sector and various drafts have been prepared.

h.	Indonesia. In Indonesia, both associations and foundations (Yayasans) are permitted by law, but most formal NGOs are Yayasans. Traditionally a Yayasan could be formed by a properly executed notarial act and without government prior approval. A new "Law Concerning Foundations (Yayasans)" passed the Indonesia Parliament in 2001. Under this law the Ministry of Justice and Human Rights is given the responsibility for the establishment and oversight of Yayasans. Although officials of the Ministry may seek advice of the "relevant agency" in determining whether or not to permit a Yayasan to be established, such a referral is not mandated by the law. Law No. 8 of 1986, which confers intrusive regulatory powers over NGOs on the Ministry of the Interior was not repealed. Annual reports are required of Yayasans under the new law, which also permits the Ministry of Justice to investigate their activities in certain instances. However, such investigations may only occur pursuant to a court order, which should diminish the possibility of intrusive investigations. It is too early to know, as yet, exactly how this new law will be administered.

As this survey suggests, the major problems with the general legal framework for NGOs in E-SEA (except in the Philippines, and in Japan with respect to NPOs) are the following:

Dual authority for establishment and oversight, which results in:

a.	excessive government control over which types of NGOs are permitted to exist (resulting in the virtual exclusion of advocacy organizations in many cases); and
b.	excessive bureaucracy for NGOs seeking to carry out their activities.

Intrusive regulation and administrative discretion, which results in:

a.	arbitrary treatment of NGOs that seek to carry out activities that the government does not like; and
b.	lack of independence for NGOs.

Gradually, however, this situation is changing. The creation of a legal form in Japan that is less subject to government control is the clearest sign of the change. And the lack of a requirement for permission from a relevant ministry in the Yayasan law in Indonesia seems clearly preferable to a mandatory two-track system. In addition, the negotiations between government and NGO leaders in Taiwan and Thailand indicate that governments are beginning to listen to NGO representatives about the need for legal reform that will allow the sector to operate more freely. It is ironic (and sad) that the changes in both Japan and Taiwan were provoked in large part by earthquake tragedies and a recognized inability of NGOs - hamstrung by intrusive government regulation - to respond to the crises. Hopefully these experiences will not need to be repeated before other countries in the region can create a more enabling legal framework for the NGO sector.

4. Tax Laws Affecting NGOs in the Region.

The tax preferences for NGOs in some countries in E-SEA are not very extensive. In Thailand, for example, only about 300 NGOs qualify for tax exemption because of the strictness of the requirements to obtain exemption. Tax deductibility in Japan is limited by legislation enacted in 2001 to a small group of "Tax-Deductible Specified Nonprofit Activities Legal Persons," which qualify along with the older form of "public interest legal persons." And there are currently no special tax benefits for NGOs in Vietnam.

On the other hand, some countries, such as the Republic of Korea, grant fairly extensive benefits to NGOs and their donors. Taiwan, which has rather strict criteria for tax exemption, has liberal deduction limits for donations to such entities (10% for companies and 20 percent for individuals). In China, where the "Public Welfare Donations Law" of 1999 specifies that both corporations and individuals may qualify for a tax deduction for donations, the regulations implementing the rule provide for a 30% limit for individuals and a 3% limit for corporations.

At present it is difficult to predict whether the tax preferences for NGOs will become more widespread in countries in the region. If the Japanese experience is any indication, however, it is probable that they will. As indicated above, the loosening of restrictions on establishment and oversight in the NPO law led shortly thereafter to the enactment of tax legislation that permits tax deductibility (but, ironically, does not provide for tax exemption!) for a wider class of NGOs than had previously received this status. The new law narrowly circumscribes the sorts of NPOs that may obtain tax deductibility for their donors, and it is complex and contains many different tests that must be met before an NPO can qualify. This means that tax officials will be more engaged than they were in the past in determining eligibility for the benefits the law permits. Thus, regulation of NGOs by the tax authorities may well increase as there is a decline in regulation through the requirement for permission to establish from relevant ministries.¹⁶

5. The Role of Self-Regulation and the Example of PCNC.

Self-regulation encompasses two distinct aspects - 1) internal regulation within NGOs, some of which is required by law; and 2) higher standards for transparency and accountability that are set by organizations themselves or by umbrella organizations to which they belong. With respect to the former, the laws of the E-SEA region are consistent with international good practice in requiring certain internal management and governance structures that are designed to make an organization function appropriately, requiring internal oversight mechanisms, and by making the activities transparent to members (when an organization has members). Detailed rules about annual reports set clear standards for external accountability, although it is not always clear that NGOs in the region must report to the public, along with the relevant government authorities.¹⁷

The other important aspect of self-regulation is the setting of higher standards for transparency, generally by umbrella organizations. In this regard, the recent experience with the Philippine Council for NGO Certification (PCNC) is well worth exploring in some detail. PCNC was launched in 1999, and it represents a unique approach to both self-regulation and the delegation of state powers (the granting of a special tax status) to the NGO sector.

As indicated by Fely Soledad, the Director of PCNC, in her paper for the CUA Workshop, the role of PCNC was negotiated between NGO sector organizations¹⁸ and the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR). Under the agreement, PCNC was granted authority by the government to certify NGOs, which would qualify for "donee institution" status for the deductibility of tax donations by both corporations and individuals. PCNC has taken its role seriously, and it is currently setting standards for six areas of NGO operations: vision, mission and goals; governance; administration; program operations; financial management; and networking. Whether all these criteria are necessarily related to the receipt of special tax status is debatable. But PCNC appears to perceive itself as playing a critical role in setting more general standards for the NGO sector.

PCNC is a useful experiment and one that deserves attention not only in the E-SEA region but elsewhere as well. Indeed, it has become a model for recent proposed changes in the regulation of NGOs in Pakistan. Nonetheless, the learning curve for any new agency - governmental or nongovernmental - is steep. As of December 2001, PCNC had evaluated only 85 of the many thousands of NGOs in the Philippines. But this is not an argument against the model - only a caution about how quickly a new agency can establish routines that will be both efficient and efficacious. PCNC is most worthy of note because it is unique, not only in E-SEA, but in the world - it is the only known instance in which the tax authorities have been willing to give up their jealously guarded powers.¹⁹

Regardless of the wider applicability of the PCNC example, it points to a more general lesson with respect to self-regulation for the region. That is that other governments should begin to be more trusting of the NGOs that operate in their countries. The Philippines experience has shown that this works and works well. Other countries that appear to be following this lead are Japan, Taiwan, and Thailand, where the governments have been negotiating with the leading NGOs and NGO networks to accomplish regulatory reform.

6. Conclusion

The discussion in this paper points to several issues that must be addressed in E-SEA in order to create a truly enabling legal environment for NGOs in the countries of the region.

1)	Any two-track structure for establishment and oversight should be administered in a way that will not impede the creation of NGOs, even ones that may advocate for change in government policies. Although there must be some oversight by relevant ministries, this should not interfere with the freedom of association of individuals seeking to form NGOs nor with their freedom of expression once the NGO is formed. Instead of a two-track process for NGOs, it would be preferable if substantive ministries were involved only through the process of licensing or certifying any group or entity that wished to engage in an activity affecting the public, such as health, education, or social welfare. That way there is only one set of rules, and they apply to NGOs in just the same way they apply to others.. NGOs are not more likely than business organizations to engage in problematic or even fraudulent activities. This means that the legislation that regulates them - and the manner in which it is applied and implemented -- should not be more intrusive then the legislation applicable to business organizations.

2)	There should be only one authority or ministry charged with the establishment and oversight of NGOs. This will reduce confusion and create a "level playing field" for all NGOs, regardless of their field of activity. It will also assure that this organ of the state develops a specialized understanding and expertise with respect to NGOs, which should work to be benefit of both the government and the NGOs.

3)	Tax preferences for NGOs should be created or increased in E-SEA countries. All types of public benefit organizations, including those that engage in some forms of advocacy, should receive tax exemptions, while their donors should be permitted to take deductions for their contributions within liberal limits. The tax authorities properly have responsibility for the regulatory aspects of tax preferences, but their oversight should also not be too intrusive.

4)	Other countries should look at the experience of the Philippines and the PCNC and consider whether self-regulation might enhance the ability of the state and the NGO sector to work together more cooperatively.

There is little question that the countries in E-SEA are all participating in what Lester Salamon has aptly called the "associational revolution."²⁰ The influence of global and domestic forces in this regard has had a strong influence on state-civil society relations in this region. Citizens are making demands for social services that governments cannot meet and should not expect to. Pluralism is causing citizens to demand a greater voice in policy decisions. The laws affecting NGOs should adequately reflect the needs of society and permit civil society to have a truly enabling legal framework that meets the social needs of the 21st century.

Part 3

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(13) See Joyce Yen Feng, "Efforts on improving the NGO/NPO legal environment in Taiwan," a paper presented at the Workshop on The Legal Framework for Civil Society in East and Southeast Asia, April 12, 2002.

(14) The influence of American law can be seen in this legal framework, for it uses common law rather than civil law legal forms.

(15) There is also a "Law on Scientific Organizations," which provides special rules for those NGOs.

(16) But see the example of the Philippines, discussed in the text, infra.

(17) It is a good practice to require reporting to the public, for it allows the public to serve an important oversight role. See Guidelines, supra note 5, Section 8.6. As noted above in the text, the new Trust Law in China requires that annual reports be made available to the public.

(18) PCNC is an "umbrella of umbrellas," being comprised of the leading NGO networks in the Philippines. See Fely I. Soledad, The Philippine Council for NGO Certification, paper presented at the CUA Workshop on The Legal Framework for Civil Society in East and Southeast Asia, April 12, 2002.

(19) The only other known complete delegation of regulatory authority is in The Netherlands, where the oversight of fundraising is carried out by a nongovernmental body. See Central Bureau of Fundraising, http://www.cbf-keur.nl/.

(20) See Lester M. Salamon, The Rise of the Nonprofit Sector, Foreign Affairs 109 (July/August 1994).

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