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Prita in New York Times

Thursday, December 10, 2009

Prita's story is now in New York Times:
PRITA MULYASARI became famous, as her lawyer put it, for going from “e-mail to jail.”
Her ordeal began when she sent an e-mail message complaining about the poor treatment she received at a hospital to 20 relatives, friends and co-workers. The message, forwarded from one mailing list to another, eventually fell into the hands of the hospital’s lawyers, who sued for defamation. In no time, Ms. Mulyasari, 32, a mother of two infants, found herself sharing a jail cell with murderers and facing six years in prison, seemingly yet another ordinary Indonesian caught up in one of the world’s most corrupt legal systems.

This will surely raises Omni Hospital's Public Relation budget. I have argued in my op-ed that bringing patients to court is not a good way of settling problems. The monetary damage caused by Prita's initial email to Omni's reputation is insignificant compared to the public relations disaster following her detention and trials. The public fund is used for trials and prosecution, Omni spent a lot of money (and time) to pay their lawyers and finance PR campaigns and the house of representative, the ministry of health and Tangerang mayor spent considerable time to act as a mediator to the case. In the end, nobody wins.

If only it had been settled out of court, we could have allocated these resources elsewhere.

Hat Tip to Rumi

Indonesia gearing up towards Creative Commons

Sunday, October 25, 2009

One of my colleague leads a Creative Commons Project in Indonesia. Tempo reported that the activists are campaigning the license to law enforcement institutions, before submitting them later to the central government. 

I really hope that their efforts will materialize. I have noted in my last posts that some trivialities under our copyright law might hinder the application of CC in Indonesia.

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Revising Aceh's stoning law

Wednesday, October 21, 2009

According to an Aceh legislator:

However, a council member from the Prosperous Justice Party (PKS), Moharriadi Syafari, said the bylaw would come into effect 30 days after it was passed regardless of the governor’s refusal to endorse it.

Syafari advised people who are against the bylaw to apply for judicial review to the Constitutional Court. “If a revision is to be made by the zAceh legislature, it has to wait for a year. That’s the rule,” he said.

The President/Minister of Home Affairs has the power to annul the Qanun based on Art 235(2) of Law 11/2006 on Aceh Government. As far as I know, DPRA/DPRK can revoke Qanuns as they please, without any requirement of one year of enforcement. Or perhaps, I missed something? Please advise...

Rules for Dwarfs Risk Regulation of Nanotechnology and its International Context

Tuesday, October 20, 2009

A conference on nanotechnology will be held in Germany 30 November-2 December. According to the website:

We convene actors from Germany, Europe, and the United States to link previously separated regulatory debates. Participants will develop regulatory recommendations for German and European politics in frank and open discussions. This includes the prioritization of regulatory approaches and principles to guide the development of compatible regulatory systems on both sides of the Atlantic.

The price is € 160 including accommodation and meals; a reduction to € 80 is available for students. More detail here.

KPK - BP Migas; Conflict of Interest?

Sunday, October 11, 2009

The Jakarta Globe reported:

In a move to address persistent allegations of corruption in the multibillion dollar oil and gas sector, the Energy and Mineral Resources Ministry on Friday appointed an officer of the Corruption Eradication Commission to the board of directors of upstream oil and gas regulator BPMigas.

Lambok Hamonangan, the director of gratuity oversight at the commission, better known as the KPK, was inaugurated as BPMigas’s deputy for evaluation and legal advocacy, a newly created position.

Mind my ignorance, but wouldn't this leads to conflict of interest?

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Calls for premarket registration of nanotech product

EEB calls for premarket registration, stakeholders consultation and adequate legislative framework before a deeper entrance in nanotech market is made. In its brochure, it deems voluntary regulation as unsuccessful. I have yet to see where the failures are, but the EEB claims for lack of participation on the enactments of these codes.

It appears to me that the EEB stance are 'precautionary' in essence and relies more on command-and-control approach in nanotech regulation. The argument may have some merit provided that there are huge uncertainties surrounding nanotech products.

More regulatory framework of precautionary nature may reduce the risk of future market failure. But over-precautions will have implications on the growing market for nanotech.

Read more here.

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The new electricity law

Friday, September 11, 2009

The House of Representative recently passed the new electricity bill. The bill is perceived by the media as a real attempt to liberalize the electricity sector in Indonesia. But is it true that the law is an attempt to liberalize the sector? How does the law protect investor?

Under the new law, electricity provision are segregated into generation, transmission, distribution and retail and the private sector is allowed to participate. The question is of course, in which segment can the private sector participate and what are the incentives, rights and obligation?

I will return with the discussion later. In the mean time, you can have a look at the new law here (in Bahasa).

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The Social Cost of Cigarette (and its advertisement) in Indonesia

Thursday, September 10, 2009

Pramudya has been very kind in providing us a commentary on the recent Constitutional Court Decision on Cigarette Advertisement in his post. I agree with him that the negative externalities arising out of cigarette must be borne by the consumer and that -- given the explicit contribution to income -- dealing with tobacco industry in Indonesia would not be easy.

A research by Achadi et.al. quoting WHO suggests that around 10% of mortality in Indonesia annually (200,000 deaths) are caused by tobacco. 61% of other deaths are caused by non communicable diseases which may be related to active or passive cigarette consumption. Another shocking discovery quoted by Achadi's research is that more than one in two household in Indonesia has at least one smoker, and 98% of them smokes at home. What this means is that they pollute the air in their home and affects their children.

What are the health cost to children who are passive smoker? A research in the UK shows that at a worst case scenario where everybody smokes at home, the health cost per child would be 16.000 GBP per year. If broken down into the number of cigarettes (20 per day and remember that british cigarettes contained filters, non-cloved and are typically milder than Indonesian), the cost would be around 62 to 92 GBP per cigarette. What it means is that in order to offset the negative adverse effect of a cigarette to children, each will have to be priced around 62 Pounds (or at a current rate, around IDR 1.000.000,00). I think this figure still does not include the opportunity cost for getting sick.

The cost of a Dji Sam Soe cigar is around IDR 750. But that's not the true cost. It will raise health insurance premium, dental care, house insurance premium (cigarette butt is a little friend for the big fire), car insurance, cleaning costs, retirement fund and many other items I cannot list down since I am not an economist. And remember, smoking near babies may cost another 62-92 pounds per cigarette (excluding opportunity costs).

If smokers are unable to pay these costs, this will go to the state's expenditure. Which means, in the end of the day, non smokers will be paying for the true cost of every cigarette through their tax.

I don't smoke but occasionally I bring cigarettes as souvenirs. Makes me feel guilty :(
Okay, from now on, no more cigarette for souvenirs.

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Behavioral Monkeynomics

Tuesday, September 8, 2009

First of all, a hat tip to my Canadian friend who referred me to this article at Science Daily: "Monkeys Follow Economic Rules Of Supply And Demand".


C├ęcile Fruteau placed food containers with highly-desired pieces of apple in two groups of South African vervet monkeys. For the monkeys there was just one problem: only one in each group could open the food container. This monkey had a low position in the rank order and was therefore scarcely groomed. However, as soon as she acquired the power to hand out apples she was valued more and was groomed a lot by the rest of the group. Yet she could only enjoy that privilege briefly; the researchers placed a second food container that could be opened by another low-ranking female. From that moment onwards the market value of the first monkey was halved, and she was therefore groomed half as often.


Lessons for mankind:
  1. Its not how you look, but whether you have apples or not
  2. Male (monkeys) are materialistic. No gender question here
  3. Beware of your competitors!


This one is most surprising:

A change in price - grooming for less long if there is another monkey that supplies apples - is only possible if a negotiation process takes place. Many economists assume that such negotiations can only take place if they are concluded with a contract. However, the vervet monkeys do not have the possibility to conclude such binding contracts and yet they still succeed in agreeing to a change in price for a service.


We, humans, should be ashamed of this fact. Monkey market can be very efficient even without a contract. Look at how their 'informal institution' can streamline transaction cost. No need for complicated regulations, monkeys can agree to reach amicable settlement that would bring welfare to their kind. If this were human, they would have to conclude a contract which will take sleepless nights no negotiate, pay a lot of money to the lawyers, file a claim to the court, bribe the judges, and in the end of the day, no one gets the apple.

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Indonesia needs a strong water services law

Monday, August 31, 2009

Following is my latest op-ed at the JP:


Indonesia Needs a Strong Water Services Law

Mohamad Mova Al `Afghani , Dundee , UK | Mon, 08/31/2009 11:56 AM | Opinion

The current condition in the water and sanitation sector is bleak. Only 31 percent of the urban population and 17 percent of the total population had access to piped water. Around 80 million Indonesians lack access to sanitation, contributing to 100,000 deaths annually and economic losses of up to US$6.3 billion.

The water law that was enacted in 2004 comprehensively regulates water as a finite natural resource. However, of all the law's 100 articles, only one (Article 40) specifically regulates water and sanitation services.

Meanwhile, the implementing regulation of Article 40, Government Regulation No. 16/2005 on the Development of Drinking Water Provision Systems (PP-16) regulates water and sanitation services only generally.

There are several possible reasons for this. The first is that the government perceives water services as a local problem and as such considers municipalities to be primarily responsible for water services. The second reason is that in order to avoid the law from being invalidated by the Constitutional Court, the Water Law does not regulate services specifically, but instead broadly and vaguely.

Indeed, the water law does not contain the word "privatization" but it does suggest at Article 40 that the "..private sector, as well as the cooperatives and other members of the society" may participate in the development of water services. Of course, some investment in water supply infrastructure can be small if they occur in rural areas.

However, in cities, water projects can be worth millions of dollars and involve multinational corporations and foreign lenders. It is certainly inadequate to regulate both these operations under the same article.

It is worth noting that the governance of water as a resource is different from water services, even though they are interrelated. The governance of water resources encompasses the management of groundwater, rivers, wetlands, lakes, catchments areas, effluent discharge and how water is allocated to competing interests such as the industrial, residential, farming and hydropower sectors.

The governance of water services is different as it deals with water supply and sanitation infrastructure (sewerage), as well as the rights and responsibilities these utilities have and what roles local government plays.

The interconnection between *services' and *resources' only comes where water is abstracted from the environment by the utility and returned to the environment as waste.

Due to the complexity of the governance of water services, some countries regulate them in a specific law. In the UK and Scotland, they are regulated under the Water Industry Act, and in South Africa they are regulated under the Water Services Act. France does not have any specific water services law, however, models of private participation are regulated explicitly through multiple legislations. These legislations, backed by the court, which can act as a quasi-regulator, explicitly acknowledges the legal relation between municipalities, consumers and concessionaire holders and regulates their rights and responsibilities.

The water services law has important functions for both consumers and investors. It protects consumers from disconnection or limitation of supply (in Indonesia, disconnection is allowed by PP-16, while in the UK and South Africa it is illegal to disconnect), it establishes a consultation mechanism for tariff setting, sets out transparency requirements and regulatory accounts, sets quality standards for drinking water and details consumer rights.

In Indonesia, the laws do not define what the "minimum standard of services" is, as it is defined in a contract. In many other jurisdictions, these standards are not subjected to market mechanisms through contracts but are a matter of statutory obligation. The reason for this is because a sub-standard service is a public health issue which requires state intervention.

Note that one of the functions of the water services law is guaranteeing the property rights of the water utility. Without sufficient regulation, investors mainly depend on contracts. The political character of water services sometimes presses local governments to assume control of some rights of utility providers, such as denying tariff increases, or even striping them off their concessions when they lose popular support.

The problem in Indonesia is that the government views private participation to be desirable in the water sector, but the Constitutional Court and the civil societies are very reactive to the idea. So the parliament and the government regulate privatization discreetly in order to avoid the wrath of the court and civil society.

In effect, privatization happens without adequate statutory oversight. This has strong implications for consumers and investors. For consumers, this means that their rights to enjoy good quality, uninterrupted water supply at an affordable rate and their rights to complain and to request compensation for substandard services is not legally guaranteed, but is simply a matter of private arrangements enumerated in a contract.

For investors, this means that their investment relies only in the mercy of local government in honoring their contract. If there is a dispute between the government and an investor, the court and tribunals will be left in the dark, as there are no clear rules that regulate the settlement of disputes. Hence, without a water services law, their investment will be at risk.

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Why is a speed limit rule effective?

Sunday, August 23, 2009

I had a discussion with my Canadian friend a few days ago. I told him, that I grew skepticial about the role of law in society. I explained, that it is very difficult to establish causation (or strong correlation) between a particular law and behavioral changes intended by the law. Put it simply, it is hard to argue that a particular law has any meaning at all in practice.

After discussing for several minutes, my Canadian friend then uttered that Canada has recently changed its speed limit rule. After the speed limit rule was altered, he said everyone in Canada complied to the rule despite the fact that the effort to socialize the rule is very minimum. Nevertheless, the news spread rapidly and everyone complies.

My friend then went on to explain that in Canada, a driver's license means a person's life. Without a car, it is difficult to travel from one place to another, and in order to be able to drive a car, one will need a driver's license. So when your driver's license is revoked, you'll be paralyzed.

Ah, so now I understand that for Canadians, a driver's license is everything. No wonder they quickly complied to the new speed limit rule. But... what if Canada has a more developed network of train systems? What if people had more choices of transport other than private cars? What if Canada is not as big as it is today, but shrinked and compressed to the size of Madura Island? Would the people there complies to the speed limit rule the way they do today?

I think economics might give a little enlightment. If there is no other alternative of supply (no substitute) and the good is a necessity of life, then the demand is inelastic. In this case, the police can act as a monopolist, it can charge a very "high price" such as imposing rigorous and expensive test for acquiring a driver's license and lowering speed limits. Drivers would have no other option but to "buy" the goods, that is, to comply with it. Of course, at some point if the pricing gets too high, for example if the police lowers the speed limit unreasonably in highways, drivers will think twice using cars and compel themselves to innovate in other means of transports.

In Indonesia, the case is different. People here have a variety of options for transportation in addition to private cars. Public transport is abundant and cheap. So the demand may not really be that strong for a driver's license. I guess the implication would be that people's compliance to traffic rules will be less than in Canada.

Of course, the explanation above still does not take into account that there are 'illegal' supplies of driver's license. If the black market is strong, then the police's monopoly power will decrease because the goods is easily obtainable at cheaper prices. Hence, there will be less incentive to comply.





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Is Privatisation Irreversible?

Monday, August 17, 2009



I took this picture at the Edinburgh Train Station Yesterday (Aug 16, 2009)

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The rivers are our brothers

Tuesday, August 11, 2009





Here's a quote from what is believed to be a speech of the Indian Chief, Seattle. If you are familiar with property rights theories and the tragedy of the commons, this speech offers another perspective in looking at the environment.

How can you buy or sell the sky, the warmth of the land? The idea is strange to us. If we do not own the freshness of the air and sparkle of the water, how can you buy them?

Every part of this earth is sacred to my people.

Every shining pine needle, every sandy shore, every mist in the dark woods, every clearing and humming insect is holy in the memory and experience of my people. The sap which courses through the trees carries the memories of the red man.

The white man's dead forget the countryof their birth when they go to walk among the stars. Our dead never forget this beautiful earth, for it is the mother of the red man.

We are part of the earth and it is part of us.

The rocky crests, the juices in the meadows, the body heat of the pony, and man--all belong to the same family.

So, when the Great Chief in Washington sends word that he wishes to buy land, he asks much of us. The Great Chief sends word he will reserve us a place so that we can live comfortably to ourselves.

He will be our father and we will be his children. So we will consider your offer to buy our land.

But it will not be easy. For this land is sacred to us.

This shining water that moves in the streams and rivers is not just water but the blood of our ancestors.

If we sell you land, you must remember that it is sacred, and you must teach your children that it is sacred and that each ghostly reflection in the clear water of the lakes tells of events and memories in the life of my people.

The water's murmur is the voice of my father's father.

The rivers are our brothers, they quench our thirst. The rivers carry our canoes, and feed our children. If we sell you our land, you must remember, and teach your children, that the rivers are our brothers, and yours, and you must henceforth give the rivers the kindness you would give any brother.


This part criticizes the "white man":


We know that the white man does not understand our ways. One portion of land is the same to him as the next, for he is a stranger who comes in the night and takes from the land whatever he needs.

The earth is not his brother, but his enemy, and when he has conquered it, he moves on.

He leaves his father's graves behind, and he does not care.

He kidnaps the earth from his children, and he does not care.

His father's grave, and his children's birthright, are forgotten. He treats his mother, the earth, and his brother, the sky, as things to be bought, plundered, sold like sheep or bright beads.

His appetite will devour the earth and leave behind only a desert.

I do not know. Our ways are different from your ways.

The sight of your cities pains the eyes of the red man. But perhaps it is because the red man is a savage and does not understand.

There is no quiet place in the white man's cities. No place to hear the unfurling of leaves in spring, or the rustle of an insect's wings.

But perhaps it is because I am a savage and do not understand.


This part is teological prediction:

One thing we know, which the white man may one day discover, our God is the same God. You may think now that you own Him as you wish to own our land; but you cannot. He is the God of man, and His compassion is equal for the red man and the white.

This earth is precious to Him, and to harm the earth is to heap contempt on its Creator.


This one, predicts the fall of the "white man":

The whites too shall pass; perhaps sooner than all other tribes. Contaminate your bed, and you will one night suffocate in your own waste.

But in your perishing you will shine brightly, fired by the strength of God who brought you to this land and for some special purpose gave you dominion over this land and over the red man.

That destiny is a mystery to us, for we do not understand when the buffalo are all slaughtered, the wild horses are tamed, the secret corners of the forest heavy with scent of many men, and the view of the ripe hills blotted by talking wires.

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[Guest Post] Court Reporters’ Role in Depositions

Monday, August 10, 2009

Below is a Guest Post from Kat Sanders. Note: Under the Indonesian Legal System, an Institution called Panitera (Registrar and court secretary) is responsible for logistic and case administration from the beginning to the end. The registrar is a civil servant working under the Supreme Court. Normally it is required that they have a law degree.

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Court Reporters’ Role in Depositions

A court reporter is perhaps the most important person in the courtroom if you’re looking for the history of the trial – he or she is responsible for ensuring that every word said in the courtroom is transcribed into indelible records that can be analyzed and scrutinized down the ages. Court reporters are also very useful when it comes to recording depositions of witnesses, especially the ones whose testimony is very important to the case.

When using a court reporter for a deposition, accuracy and precision are important. To that extent, it’s wise to:
  • Talk to the court reporter and advice them about the nature of the case
  • Familiarize them with the name of the witness and other parties relevant to the case.
  • Instruct your witness to talk clearly and concisely
  • Talk at the pace you want your witness to talk too and enunciate the words clearly.
  • Avoid talking at the same time as your client or anyone else so that the deposition is recorded clearly
  • Advise your witness to also refrain from answering questions before you’re done asking them and from interrupting your sentences.
  • Make adequate arrangements to bring copies of all your records to the courthouse.
  • Tell your court reporter how often you require copies of the deposition.

Court reporters are trained to take down every word that is said in court and record a witness’ deposition word for word. This helps lawyers build their case and argue it later in court. Court reporters also facilitate the process of appeals with their transcripts which are reviewed by the concerned lawyers and sent to the higher court where the appeal has been filed. Witness depositions help lawyers prepare their cases more efficiently and easily.

There are various court reporter schools that offer degrees in the USA – they are usually distance education degrees that can be taken from the comfort of your home. In most Eastern countries, court reporting is a profession that is learned through experience. The reporters know how to take quick notes and are trained on the job to be able to record transcripts verbatim. Court reporting is a profession that is gaining in stature all over the USA, more because of the number of cases that are being tried every day.

By-line:
This article is written by Kat Sanders, who regularly blogs on the topic of online court reporter school at her blog Court Reporter Schools. She welcomes your comments and questions at her email address: katsanders25@gmail.com.

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'Disruptive' Technology in Water Supply

Sunday, August 9, 2009

As I have written in the previous post, nanotech may be able to revolutionize drinking water provision. Recently at the 2009 TED, an engineer demonstrated a non chemical nano-filtration bottle that could change filthy water into drinking water in a matter of second. The cost of the bottle is still quite high, around 116-170 GBP depending on the volume (filtration of up to 4,000 to 6,000 litres).

However, with better manufacturing, the price of the filter may significantly decrease in the future. If employed in a larger scale, this technology may decentralize water treatment facility and open doors for competition in the water sector.


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End of natural monopoly in the water sector?

Michael Pritchard demonstrated his Lifesaver Bottle that can turn filthy water into drinkable water in a matter of second. The portable lifesaver filter is said to have 15 nanometer pores, small enough to filter viruses. The running cost to produce 25.000 litres of water through a Jerrycan equipped with Livesafer filter is 0.5 cents per day.

If the technology develops and applied to drinking water infrastructure, we may soon say goodbye to natural monopoly in the water sector. Treatment costs will go significantly low making any household eligible to build their own treatment facilities so long as water sources are available.







This could be a bad news for water companies of course :)

Regulations on water services will need to accommodate the possibilities for liberalising the water sector.

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What will happen if the world's population go down?

Sunday, July 26, 2009

Lower land prices, higher labor prices, said Pete Alcorn. Surely, it will bring tremendous changes to social system: land reform, democratization and the rise of middle class. Alcorn suggest us to move beyond malthusian economy and pay attention to the tendency of population decrease.

In previous posts we have discussed a little about post-scarcity economics, which is a by-product of Molecular Manufacturing (MM). It may turn out that even without MMworld's population growth may decrease to negative within one century.

The reason for decreasing population may vary. In the past, it can happen because of wars. Now it seems unlikely. So plague -- such as virulent influenza viruses -- could be a scenario. Another scenario would be a relatively successful health and social programs which increases longevity but turned population growth into negative.

See Alcorn's talk here:




Gecko challenging a crocodile


NYT posted a story on the recent polemic between the gecko and the crocodile:

“Now our relations are no good because the K.P.K. started picking on their high officials,” said Erry Riyana Hardjapamekas, a former deputy chairman at the commission. “We suspect each other.” More recently, an active high-ranking police official, Susno Duadji, was wiretapped by the commission and caught asking for a $1 million bribe. In an interview with Tempo, the country’s most respected magazine, the police official said he knew he was being wiretapped and played along with the caller; in an allusion to the anticorruption commission and the police, he said, “It’s like a gecko challenging a crocodile.”

Civil societies recently campaigned in support of the 'Gecko'. They called their movement CICAK or Cinta Indonesia Cinta KPK (Love Indonesia, Love the Commission for Eradication of Corruption). Cicak is the Indonesian word for Gecko. As a symbol, they release the above emblem titled: "I am a gecko. I am bold to challenge a crocodile"

Draft Law on Commercial Court

Saturday, July 25, 2009

The Central Jakarta Court website published a draft Law (June 2009 version) on Commercial Court (in Bahasa). Click here.

The New Indonesian Mining Law

Thursday, July 23, 2009

ABNR/CastleAsia provided update on the new mining law here. The Jakarta Post published some report on divestment obligations for foreign mining firms here and here. A rather academic discussion is available on a paper here. IFLR published a memo on mining -- quite thorough here. There's a presentation giving a quite extensive overview on mining law here. There is also a short memo from Makarim, as well as Roosdiono.

Well, that should save some time for your research work -- and to ask more difficult question to your lawyers :)

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Govt limits liability for nuclear accidents

Sunday, July 19, 2009

The government recently issued GR 46/2009 on the limit of liability for losses caused by nuclear accidents. Under the recent GR, liability is limited into Rp. 4. Trillion (from the previous Rp. 900 billion). Read the said GR here (in Bahasa).

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Can public service law be applied to private sector?

Tuesday, July 14, 2009

Below is my recent Below is my recent op ed in Jakarta Post. Just a little typo at the 7th paragraph, it should read 'employer'.

Can public service law be applied to private sector?

Mohamad Mova Al Afghani , Jakarta | Tue, 07/14/2009 9:55 AM | Opinion

The House of Representatives passed the public services bill into law on June 23, 2009. The law can impose a variety of sanctions on public servants in the form of written warnings, removal from office, termination of employment and compensation to victims.

It stipulates recourse for violations of public service obligations (PSO) through the ombudsman offices, the House of Representatives and the administrative court. This law represents quite a breakthrough for bureaucratic reform.

As far as regulating government officials goes, the law is fairly strong. However, in sectors where services are privatized, it is unclear if and how this law is applicable.

Consider for example the administrative sanctions that can be given to an offender. If the case involves public officials, the law on civil servants can be used to prosecute, but this is not the case when the offender is private actor.

The law mandates that if the offender is not a civil servant, complaints must be directed to the government official who delegates the function of public service to the private actor — this is difficult.

If the offender is not a civil servant, their employment is regulated by the ordinary labor law and not the law on civil servants. The most an official can do upon receiving a complaint is to pressure the offender’s superior to take action, but the official cannot intervene in the process.

The accountability mechanism for the public and private sectors is also different. When a public official is involved, they are accountable to the House, because of his/her direct action in providing the service or through their custody of shares. This is not the case in the private sector, where employees are directly accountable to their shareholders and creditors – not politicians. Hence, recourse for the victim through the House is not relevant to private enterprise.

When public services are privatized, the relationship between private actors and the government is governed through private law. The role of public law is limited to licenses. If the government determines that private actors deliver substandard services, it can revoke their licenses.

However, license revocation does not automatically drive a private actor out of business. Private actors can sue the government in an administrative court in order to get their license back. While this process is underway, their revenue stream remains. This means that private actors can hire lawyers in their litigation against the government using public money.

In practice, license revocation rarely happens, especially if the service is vital and employs many people. The government will not risk revoking licenses for minor violations. As such, governance by licenses alone may not be efficient.

If so, then, how do PSOs extend to private parties?

The public service law, unfortunately, does not adequately address the private sector. This is discouraging, given the fact that the role of the state in providing goods and services is gradually decreasing. What the government should have done, and needs to do, is to create mechanisms that can hold private enterprises publicly accountable beyond the traditional administrative law.

In foreign jurisdictions, PSOs can be extended to cover private parties through contracts. This is known as public contracting. In general terms, public contracting means that the freedom of contract rule under general private law is constrained. A private actors’ maneuverability in stipulating provisions of a contract is limited. Any provisions which may obstruct the materialization of public service obligation will be deemed inapplicable.

In order to ensure PSOs are met when contracting to the private sector, the law can impose mandatory provisions in contract form. Conversely, the law can also prohibit private actors from conducting actions which would be detrimental to consumers.

Although there are similar legal principles in PSOs, as each industry has its own specificities, generic formulation is not possible. For example, prohibition of disconnection from services is a typical PSO for water and electricity companies, but would be irrelevant to a railway company. Similarly, cross subsidy obligations are relevant in the network industry, but that may not be the case in banking or healthcare.

The detail of PSOs for each industry should therefore be extrapolated on in sectoral regulations; the public service law can act as an umbrella regulation for each sectoral PSO. This means that a PSO for a water company should be detailed in terms of water acts and a PSO for an electricity company should be regulated by electricity acts.

The question remains whether the public service law will have an impact on incidents that occurred before it was enacted. The transitory provision of the public service law is silent on this matter. But if the answer is positive, preexisting contracts between private actors and the government which contain public service functions may need some adjustment.

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Is Skype Auto Recharge setting illegal?

Sunday, July 12, 2009

I am a regular skype user and found that its auto-recharge feature is annoying. Recently I found out that I am not the only one with this problem. Consider for example, this, this, this and this.

Auto recharge is of course a feature that can help many users. It can however, be illegal if it is entered into without the full informed consent of the consumer.

There is a part of the purchase page where we are supposed to tick the auto-recharge box. If this box is automatically ticked by skype, I think it will give a reason for either unconscionability challenge that may entitle consumer for liquidated damages or simply a violation of consumer protection laws.

Now, to answer the question of fact: Do you experience that skype auto recharge setting is 'by default'? Let me know your answer.

[OOT] The end of microsoft

Thursday, July 9, 2009

Some says that this will be the end of microsoft. Maybe not, but at least it will lower the price of computers.

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Hyperregulated Society and Its Discontents

Sunday, July 5, 2009

I have been reading Habermas theory of Juridification and the colonization of lifeworld. I came across my old article arguing in the same line.

Hyperegulated Society and Its Discontents
By
Mohamad Mova Al ‘Afghani*

The Jakarta Post,
Opinion and Editorial - June 28, 2005.

The recent National Legislation Program (Prolegnas) meeting listed 83 (eighty three) draft Laws to be enacted in the year 2006 and 53 draft Laws for the year 2007-2009. Interestingly, plenty of these draft Laws refers to non substantial issues.

Since 1999, there has been a trend toward “regulating everything”. Creating plenty of Laws or Undang-Undang is regarded as some sort of achievement and thus, promoting a step toward a modern and sophisticated society.

What went wrong with this paradigm is judging the modernity of a society by the number of regulations it creates. Laws can be plenty, but the question is, will enacting more laws guarantee its compliance? The more important question that should be raised is, do we actually need those Laws? Will those laws benefit the society if enacted?

Indonesian legal system recognizes hierarchy of rules ranging from the Constitution, Laws (Undang-Undang) and Government Regulations in lieu of Law (Perpu), followed by Implementing Regulations that consists of Government Regulation (Peraturan Pemerintah), Presidential Regulation (Perpres) and Regional Regulation (Perda). There had been around 8,000 something of such regulations so far. That figure still excludes bilateral treaties to which Indonesia is a party and sectoral regulations. A note must be taken that with the wake of decentralization, regions will enact regulations more often. If there are 400 cities/regencies in Indonesia and each of them creates 10 regional regulations per year, then there might be an addition of up to 4,000 regulations per year.

We should not be proud of enacting plenty of laws Laws. Every creation of new law – irrespective of its forms -- is basically limiting human’s liberty, as what is previously unregulated becomes regulated and restricted. Today, we find that everything that can be regulated will be regulated. There is a Law for everything, from Advocate to Notaries to Medical Practice to Road to Water Resources. If the Prolegnas goes as planned, we will have Laws on Agrarian Resources, Land Rights, Mass Organization, Auction, Fishery Court, Postal Service, Technological Audit, Trade, Precursor, Nurse Practice, National Heroes, Pharmacy Practice, Protection of Personal Data and Riverbanks, just to name a few. Perhaps in 30 years, the question will no longer be “what is the regulation”, but, “what is not regulated”.

What kind of society that wishes everything to be regulated? This question can only be answered by sociologist and social psychologist, but, what can be inferred from this phenomenon is that there is a tendency which assumes that legal certainty and social justice will be materialized if the rule of the game is written on paper.

Writing and defining things on paper does not ensure the materiality of social justice. The more something is defined, the more loopholes it creates. One does not need to study linguistic to know that words will be never be sufficient to describe reality. Laws attempts to limit an understanding through its provisions but what it failed to describe becomes a loophole for those who wish to bend the law.

Not only that more Laws mean more restrictions and more loopholes, more Laws also mean more bureaucracy. New Law creates new social institutions, new “councils”, new “boards” and new “committees”. Existing Laws already creates bodies such as the Indonesian broadcasting commission, the Truth and Reconciliation Commission, a National Water Resources Council and the Toll Road Regulatory Agency. Let’s not forget that these new bodies create implementing regulations and oftentimes, approve licenses too. These bodies also needs funds to operate, these funds are allocated from the State Budget. So, more Laws also means more expenses for the State Budget and more expenses for the public, as licenses generally require “administrative fees”.

The law is always one step behind science and technological improvements. If this year we create 83 Laws, in the next 5 years, those Laws would be obsolete and needs to be amended. In that regard, the House of Representative might be required to enact 83 amendment Laws to cover the outdated Laws. This would eventually leads to the inefficiency of the House of Representative’s work.

Also, more Laws means more distance with the people. Lay people generally do not understand legal technicalities and thus tends to be alienated from the Law itself. The happiest people that gained benefit from hyperegulation are of course, the lawyers. More Laws means more jobs for lawyers.

There are solutions that can probably limit the negative effect of or even avoid hyperegulation.

First, enactment of Laws shall be permitted only to address issues that are really necessary or to amend the existing Laws which are deemed to be imperfect. Laws that are enacted should be broad and all-encompassing. Details can be left to Presidential Regulations (Presidential Regulations made as an attribution power under Article 4 of the Constitution) or other Implementing Regulations. In addition to that, enactment of Laws must be accompanied by publication of its preparatory works. Today, when we find ambiguous article in a Law, we look at its elucidation. Unfortunately, oftentimes the elucidation only say “sufficiently clear” and leave us puzzled by what the legislator really meant. To overcome this, The House of Representative’s Secretariat General must prepare the travaux preparatoire (preparatory documentations during HoR member debates in enacting Laws) so that readers will be able to understand what has been discussed during the sessions. This will also be useful for judges as one method in interpreting the provision of the Law.

Second, turn to the court. Let judges ‘make’ law, instead of only citing provisions of a code and decides sentencing. To answer legal questions, one will be required to have adequate legal reasoning capability and understands the methods of legal interpretation. To this extent, the legal education needs to include interpretation theory into its curriculum. What must not be neglected is that the court is not only asked legal questions. Aside from that, the Court are supposed to determine what is just, thus, the Court are supposed to answer ethical question which completely have a different method of reasoning compared to legal reasoning. Judges must then knows methods of ethical reasoning and implement game theories in their decisions, such as “the maximin rule”.

Third, promulgate the Laws, travaux preparatoires and Implementing Regulations. The legal science recognizes the “legal fiction” that everyone is deemed to have known the law. A person cannot say that he shall be excused from his wrongdoing simply because he has no knowledge that his action or omission is forbidden by the law. This is what underlies the creation of the promulgation institution, the public needs to be told what regulations that restricts them. During the kingdom age, the promulgation is done by the king by sending its men to public places, sound the goong or trumpet and announce the king’s newly enacted law. After independence, Emergency Law Number 2 Year 1950 on the Publication of State Gazette (Lembaran Negara) and State Report (Berita Negara) through its article 2 obliges the Laws to be published in the State Gazette in an Octavo-sized Paper, while other important state announcements shall be placed in a State Report in a legal-size paper. This law has been revoked by Law No. 10 Year 2004. Unfortunately, Law No. 10 failed to address clearly on how the dissemination shall be made. However, as governmental offices already uses word processors, it would be reasonable to assume that one method of effective dissemination is by utilizing the internet, through an official-integrated law information website. The government has done so through several websites but this has been done without proper coordination and is rarely updated.


Fourth, instead of making highly detailed Implementing Regulations regulating for how many days an application shall be submitted and the sizes of photographs it should attached, transfer administrative matters such as licensing or approving things to computer software. The era of rubber stamps has nearly ended. Application forms and licenses approvals shall be available on-line. This will cut bureaucratic red tapes and end unnecessary bureaucratic “extra costs”.

Finally, the paradigm shall be shifted, a good society cannot be measured from the amount of regulations it has created. A good society is a society that has few laws but is effective, as it served their philosophical, juridical and teleological purposes. The best society – the civil society -- is in the other hand, a society that can coexist peacefully without law or any other form of coercion that intimidates them.



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Franchise in Indonesia

Saturday, July 4, 2009

The franchise industry is booming in Indonesia, generating up to IDR 50 trillion annually, said the Jakarta Post. The legal framework for franchising has never been clearly outlined by the government. The nitty gritty of franchise agreement and the legislation surrounding it is elaborated in this page.

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Rewriting the antiterror law

Below is my 2005 op-ed on Indonesian Anti Terrorism Law in Jakarta Post.
Justify Full

Rewriting the antiterror law

The Jakarta Post , Jakarta | Mon, 10/24/2005 2:02 PM | Opinion

Mohamad Mova Al 'Afghani, Jakarta

Long unguarded coastlines, poverty, rampant corruption, a crippled legal system and widening social and economic gaps accompanied by mushrooming religious extremism have made Indonesia an easy target for terrorists. With a little cash and the misuse of Koranic verses, it will be easily possible to brainwash further candidates for suicide bombings.

All these factors have triggered the demand to amend the existing Antiterror Law with a new one that gives more powers to the government. A high ranking official referred to Malaysia's Internal Security Act and the U.S.' Patriot Act as benchmarks of antiterror law.

As a ""post-modern"" crime, the crime of terrorism is in many senses different from that of usual crimes. Unlike most ordinary crimes, terrorist attacks are often not accompanied by explicit demands, thereby blurring their true motivation. The terrorist organization often has networks in various countries, backed with enormous financial support and its cells successfully mingle into society, making it difficult for would-be terrorists to be singled out from innocent people. Not only that, their unpredictable, suicidal actions go against most normal people's sensibilities.

To cope with these extraordinary crimes, the world's legal systems have tried to introduce legislation that deviates from normal criminal laws. Several countries have permitted actions, including a derogation of an individual's civil rights, such as the quick detainment of suspects without judicial intervention, or arrests using intelligence information that deny the right of suspects to obtain legal counsel.

The first problem to these laws is that there is no accepted standard legal definition of the term ""terrorism"". The term is more political than legal. According to the law and common doctrines, terrorism consists of two elements, namely violence or threat of violence and the spread of fear or terror. Plainly speaking, only the psychological element -- the spread of terror -- is what distinguishes terrorism from ordinary crimes. However, using this concept, many ordinary criminal offenses could still be categorized as terrorist acts, so long as they had managed to result in public fear.

This is what makes antiterror laws in this world generally bad laws: The crime itself is ill-defined. It is very difficult to measure the parameters of ""causing the spreading of fear or terror"". This element cannot be quantified and will depend heavily on the subjective interpretation of its users. This has so far been proven by how these laws have been put into practice.

Other than an elastic and broad definition of these crimes, antiterror laws commonly permit a quick detention of suspects without trial. Fortunately, our laws still require judicial intervention before detaining a suspected terrorist. The requirement to have judicial intervention in detainment and arrest originates from the notion of the Rule of Law. This means that every non-criminal is essentially free to move from one place to another.

Another practical reason to keep the judiciary involved in determining who is a terrorist is that our antiterror law permits the apprehending of individual based on intelligence reports alone. Elucidation of the law states that intelligence information could be derived from almost any relevant state institution, such as the Ministry of Foreign Affairs or the Ministry of Finance. This is a very loose and elastic provision as intelligence information is not as strong as ""preliminary evidence"" used normally in detaining a suspect under criminal procedural law.

The existing law obligates the police to obtain a warrant from the chief of a district court before conducting an arrest. Prior to issuing a warrant, the judge will have to conduct an examination of the preliminary evidence or intelligence information submitted to them within three days. It is thus understandable that the National Police have complained that judicial intervention in terror-related arrests has caused bureaucratic problems and hindered their work.

However, totally eliminating the judiciary's role in the detainment process is a very bad idea. What could be reformed is the length of the detention, which could be made shorter. The warrant-making authority could also be transferred to higher branches of the judiciary in a bid to simplify the bureaucracy.

The law also permits the random detention of highly suspected terrorists for seven days. This requirement is already tough and needs not to be extended. The police could use intelligence to monitor the suspected terrorists upon their release, or request the court for an extension of the arrest if new evidence is discovered. Efforts to reform the Antiterror Law must be conducted carefully so as not to infringe the international or constitutional rights of individuals. Indonesia has ratified civil rights conventions and would therefore have the international obligation to adhere to their provisions.

Protection from arbitrary arrests and detention is provided under the International Covenant on Civil and Political Rights to which Indonesia is a party. The Amended 1945 Constitution, Article 28D, also provides stringent protections of civil rights.

In the past, we have allowed a retroactive provision to be enforced against terrorism cases. Protection against non-retroactivity is actually something that is paramount under International Law and the Constitution. Although finally annulled by the Constitutional Court, the fact that the government and the House of Representative approved its use, is evidence that our community is becoming more permissive towards the use of excessive authority, although it has undermined the Rule of Law.

These are unpleasant signals in a society that is just beginning to succeed in building democracy. Oftentimes, the answer to social problems lies not in giving more power to the state to supervise the conduct of its citizens, or to restrict peoples' rights, but by social approaches.

These should be performed through civil education and the promotion of religious tolerance, accompanied by explicit support and real actions in combating terrorism through this nation's influential religious bodies, such as the Indonesian Ulema Council (MUI) and other relevant institutions.

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Hierarchy of regulations in Indonesia

Tuesday, June 30, 2009

I have been asked several times by my fellow lawyers working in foreign jurisdictions about the hierarchy of rules and regulations in Indonesia. This post will try to clarify.

The hierarchy of rules based on the old People Consultative Assembly Decree is no longer in force. The new hierarchy of rules and regulation is enumerated under Law 10/2004 on the formulation of laws and regulations, Article 7:
  1. 1945 Constitution
  2. Laws/Govermental Regulation in Lieu of Law
  3. Governmental Regulation
  4. Presidential Regulation
  5. Regional Regulation (provincial/municipal/village level)
Ministerial decrees and the decrees of non departemental chiefs do not have the binding power as regulations. They are binding in their respective sectors as an administrative decision.


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Legal loopholes in Nano Liability

Chris Phoenix at CRN referred us to a new report from Investor Environmental Health Network. The Report highlighted 8 loopholes under current regulations which, if go unrepaired, will trigger litigation bomb in the future.

Indonesia ranks 62 in FP failed states index

Monday, June 29, 2009

Indonesia's rank is 62 (out of 177 states) with a total score of 84,1. See the report here. Indonesia is colored orange, in the "warning" zone. Complete report is here, methodology is obtainable here.

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Public Service Law was passed by the House

Saturday, June 27, 2009

The House of Representative passed the Public Service Law last Tuesday (June 23). This law is expected to boost Indonesia's public service performance. The Law imposes sanctions to government officials in breach of public service obligations, in the form of warning, suspension and even termination of employment. An Ombudsman Commission will be set to monitor the implementation of this Law. Click here to view the final draft version of the law (In Bahasa)

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Bringing patients to court may not be efficient

Friday, June 19, 2009

This is my recent op-ed piece in JP. I tried to argue that litigating is not always the best option, both for producer and consumer in cases where credence good is involved.

Unlike buying clothes in a department store, the quality of a particular health, legal and financial service is hard to ascertain. Even if consumers have experienced the service, the long-term effect of the service remains unknown. Is there any guarantee you will not be sued for following your lawyer's advice, or that you will not experience any side effects for taking medication? No.

Health, legal and financial services exploit the high degree of information asymmetry between seller and buyer. Put simply, the service is there because laypersons don't know what to do. Clients don't know the law and patients don't know their disease.

As such, consumers rely heavily on their service provider. Demands are created by the service provider and not by the consumer alone. So clients follow their lawyers on which transaction structure they should enter into and patients follow their doctors on which pills they should buy and swallow.

Hence, at the tip of the business is trust and reputation. Reputation may be worth more than the actual quality itself. As reputation is earned through sustainable efforts in performing high-quality, honest services and a good relationship with consumers, it is the Achilles' heel of this business.

Do courts resolve tarnished reputations through their verdicts? The news that a former patient has been victimized by a health service provider is more likely to be good news for the media than news that a hospital wins a lawsuit over its former patient.

People are naturally more interested in stories where they can be projected into the situation. Hospitals are impersonal institutions owned by corporations, therefore it is not in the interest of the layperson to hear a story of them winning a lawsuit.

Is criminal libel a good recourse to repair a damaged reputation? One thing about going to criminal proceedings is that external factors come into play in the process - namely the police and the prosecutors.

Once a case has been lodged with the police and transferred to the prosecutors, it is no longer in the full control of the "victim" or their lawyers. Unlike lawyers, the police and the prosecutors worked on behalf of the state in the pursuit of (bureaucratic) justice, not in the interests of both parties.

It is not within their consideration if the hospital is interested in maintaining reputation and the former patient just wants to go home. As such, criminal justice institutions may decide to proceed with imprisonment although it may not be in the best interests of any party.

Conventional wisdom suggests going to court in libel cases to get an injunction - that is, to get a court order for the defendant to stop defaming the client.

However, this is effective only in the age of the printing press, not in the Internet age. Court injunctions are meaningless, as the cost of distributing and multiplying information for every user is very low. Once an email is sent, there is no way to stop it from spreading.

Rather than go to court, I would argue for a market-based solution. From the plaintiff's point of view, going to court means they have to pay litigation costs and legal fees. If they win in civil court, they may not be able to recover the costs as the defendant may not have enough money to pay. If it is the insurance company they are suing, the insurance company may decide to appeal, which means more costs and more publicity for the plaintiffs. If at all they finally win the case, it will not bring the damaged reputation back, so they will still need to pay a public relations company to repair the damage.

From the defendant's point of view, the judicial process is lethargic, cold, cumbersome, costly and often does not reflect their sense of justice. From the taxpayers' point of view, legal proceedings mean a burden for their tax money. Taxpayers pay every penny for electricity, water and other utilities spent by the police, the prosecutors and judges. Yet, like laypersons, judicial professionals do not know about medicine.

That is why judges need doctors to stand as expert witness. If there are two expert witnesses with conflicting views, one from the plaintiff and one from the defendant, judges will just have to choose the most convincing one and take the opinion into their decision. The end result could be far from we call "the truth".

In a market-based solution, the parties stay out of court. If the health service provider does something wrong, they pay the patient and the patient can agree not to sue at a price. If providers don't do anything wrong, they ask the patient to issue a public apology and a sum of money to the extent that they can pay. The cost expended in this mechanism is much lower compared to going to court.

This mechanism requires the government to reduce information asymmetry in the market as parties can only negotiate when the evidence is available.

In practice, this means medical records should be made available to the patient. Criminal, administrative and civil sanctions should be introduced for those who tamper with medical records or retain them from patients.

This setting will provide incentives for honest behavior. It will make information discovery cheaper for patients and insurance companies, and also prevent burdening taxpayers through complicated judicial proceedings.

The writer is the founder of the Center for Law Information.

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Virtual worlds and the science gateway to democracy

Friday, June 5, 2009

C Milburn argued that virtual worlds such as Secondlife opens the gateway for science towards democracy. As I have previously written, secondlife's copybot resembles a nanofactory. Future post molecular manufacturing society could be benefited by the simulation from these virtual societies. How secondlife handle copybot might be an inspiration on how we handle nanofac.

Download the paper "Atoms and Avatars: Virtual Worlds as Massively-Multiplayer Laboratories" here.

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Housewife on trial for defamation

Wednesday, June 3, 2009

Prita Mulyasari, the housewife detained for sending letter about her experience of (alleged) medical malpractice will undergo her first criminal trial tomorrow. Prita was brought to both civil and criminal suit by PT.Sarana Meditama Internasional Cs (presumably the legal incorporation of RS Omni where she was treated). She had lost the civil suit, but was nevertheless detained by the police for the criminal prossecution.

If I were the plaintiff's lawyer, I would recommend to revoke my client's criminal offense complain to the police. With internet activists standing behind her, it would be a bad move to go on with criminal proceeding. The reputational damage caused by media blow-up does not worth the penny the hospital spent for litigation costs and public relations costs.

Tanggerang District Court website has an op-ed column about this case.

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International Regulation

Wednesday, May 20, 2009

International Approaches to the Regulatory Governance of Nanotechnology" is available for download from the RGI website.

Nanotechnology seemed to be going towards the Private Ordering path

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HP 3 Rights, What Strategy for NGOs?

Tuesday, May 19, 2009

Following my Articles on HP-3 in Jakarta Post ("The need for Clarification on HP-3 Rights" and previously "Coastal Management Law Review?") it is relevant to ask question on which course of (legal) action would our Civil Societies colleagues take, in response to the enactment of Coastal Law.

I can think of three possible actions by Civil Societies:
  1. Judicial Review. Most activist would blame the Law for its interest in privatizing coastal areas. As such, they would be inclined to invalidate Law 27/2007. But what reasons can be used to submit the JR? Roughly speaking, I would say that any attempt to invalidate Law 27/2007 will have a very minimal chance of success. I do not see any provision under the Law which diametrically contradicts the Constitution. True, that the implementation of the Law may deprive certain members of the societies (such as the Adat Community) from their Constitutional rights, but in general, the black letters of Law 27 guarantees the preservation of existing traditional rights. Thus, if JR is to be opted, the most convincing hole would be to contradict the ill-defined HP-3 rights against "legal certainty" provision of the Constitution. I am not suggesting that this measure would be effective as property rights needs not to to be fully defined (a 'complete' property rights is impossible anyway), but there is a chance of success since "legal certainty" is weighed considerably by the Court. In any case, a move in reviewing Law 27 must not be aimed at winning the case completely (which result in the complete invalidation of the law) but simply in getting partial invalidation of harmful articles or, if not possible at all, in gaining the Court's recommendation for safeguarding its implementing regulations.
  2. Legislative Review. If one thinks that the Law is insufficient or defective invalidation may not be the option. The Court's function is in ensuring that provisions of Laws are Consistent with the Constitution. So, if there are provisions of laws which is consistent with the Constitution but is nevertheless defective, the Court may choose to reject the petition to invalidate and recommends it for a legislative review. However, when a Law is recommended for a legislative review by the Court, it does not necessarily follows that the parliament will take the Court's suggestion. There are so many Bills that the Parliament needs to enact in any given year and there are political (as well as administrative) costs for rediscussing an already-enacted bill.
  3. Implementing Regulation and Its Reviews. Law 27 will require plenty of government regulations and regional regulations to be implemented. In terms of technicalities, this measure is the most technically feasible. It is easier to change implementing regulation than annuling a provision of a Law or modifying it through legislative measures. Option #1 involves proceedings at the Constitutional Court and option #2 involves deliberation by parliament members. Option #3 however, only involves the government. It is easier for the government to enact regulations which are friendly to the cause promoted to Civil Societies. But because Option #3 rests on the discretion of the government alone, there is always a chance of capture by business interests. A way of rejecting an enacted government regulation is by conducting an appeal to the Supreme Court. Note however that the appeal for Government Regulation (against a Law) in the Supreme Court would take a very long time, as the Supreme Court has a very high case-load.
From these options, I would suggest Civil Societies to first submit a JR to the Constitutional Court. This must be done with a caveat that it has a minimum chance of success, so the aim of the JR should not be in entirely invalidating the Law but in obtaining partial invalidation and recommendation from the Constitutional Court in safeguarding the Law's implementing regulation.

This move will benefit Civil Societies developing monitoring and stakeholder participation capacity during and after the property rights setting takes place, as institutional set-up for HP-3 (zoning, etc) and its implementation are prone to capture.

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The need for clarification on HP-3 rights

Thursday, May 14, 2009

I published an article in today's Jakarta Post:

Law 27/2007 enables private ownership of coastal zones through a system called HP-3 (which governs the right to commercialize coastal waters). The idea behind this system is to allow the exploitation of the currently neglected, but potentially profitable, 81,000 thousand kilometers of Indonesian coastline and its 12 mile wide territorial sea.

A HP-3 grants ownership to water columns (above the seabed to the water surface) in Indonesian territorial zones. In most cases, the Law stipulates that HP-3s will be granted by local governments. The Law says that the first period of ownership is granted for a period of 20 years but can be extended. As the law does not impose any limitation for extension, it is presumable that HP-3s could be owned perpetually. It is also worth noting that a HP-3 certificate can be used as collateral to secure a loan.

We know from theory that in order to be functional, property rights must fulfill the "3Ds" rule: definability, defensibility and defeasibility. Property rights can only be efficient within these three aspects, and only if transaction costs are low.

With respect to definability, the Law stipulates that a HP-3 covers a three dimensional space from the seabed up to the surface. This would mean that the seabed falls under another system of regulation. There is however, some interface between the seabed and the water column, and this becomes an issue in sea mining operations. If there is an overlap of ownership between the two (the seabed is granted to an oil company and the HP-3 on the surface is granted to an aquaculture company, for example).

A way of preventing this problem is by coordinating the awarding of property rights between the two areas. That is to say, the awarding of any marine mineral resources exploitation license by the central government must be coordinated with local government.

In another scenario, if both a seabed exploitation licenses and a HP-3 for the adjacent surface are owned by the same entity, disputes could occur from one area to another, which could dilute the value of the property of the neighboring HP-3 owner. One way to anticipate this is for the local government to stipulate which area is used for what. Zoning mechanisms must be very solid in order to prevent property rights disputes.

The law also does not define exact rights within a water column. A water column may be an area passed-though by highly migratory species protected under international law, which therefore cannot be harvested, even by HP-3 owners. A way to address this issue is by clarifying the dos and don'ts for HP-3 owners when implementing regulations.

Another significant problem is that marine boundaries constantly change because of natural phenomenon. HP-3 limits could be confused if the baseline used to measure a sea boundary also changes because the sea level rises. I am not certain as to what mechanism could be used to adapt to this problem.

As for defensibility; defending a property rights in the ocean is relatively more difficult than on land. On land, one can install fences in order to defend and mark their property. This is not possible in the sea. Nets can be used, but if used too extensively they could capture protected species. The surface structure could be used, but that should not hinder navigation for vessels passing through the area. And in any case, it is difficult to exclude traditional fishermen from fishing in HP-3 zones, as they may not be equipped with GPS.

HP-3s are interestingly defeasible enough. Defeasible basically means that the property rights can be transferred. In theory, a property right must be defeasible in order to enable exchange, so that a market can develop. The Law does stipulate that HP-3s can be transferred or encumbered with a mortgage. It is not yet clear which government department would be responsible for the registration of the mortgage. As long as the government has not clarified any institution responsible for the mortgage registration, the idea of mortgaging the sea will not be enforceable. Mortgage is an important part of the whole scheme, as it allows banks and other investor to enter and finance the project.

As we can see from the above explanations that property rights in the sea could be very costly in terms of its definability, defensibility and defeasibility. A huge amount of information would be required to define the property rights. Sonar imaging, GIS interpretation or anthropological studies on the existence of traditional fishing rights would expend a huge of amount of cost.

But these things are essential because, without a clear definition of property rights, future disputes may occur. Defending property rights is also difficult and the costs will be borne by the owners. If the cost of defending the property rights is more than the benefit of exploiting it, then it will not be a worthy investment. As for defeasibility, there is a high cost for institutional set-up. An institution will need to be established in order to maintain marine cadastre and administer HP-3 titles and their encumbrances.

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Preemptive Strike

Sunday, May 10, 2009

I found my old article about preemptive strike (2004). The article was written when John Howard (who, at that time was racing for another period of premiership) issued a statement that he will employ preemptive attacks to terrorist bases, when necessary. As you remember, the war on terror was the hype in 2004.

Australia had been active in the regional diplomacy, leading a multinational armed forces responsible for the security of post-referendum East Timor. Meanwhile terrorist activities in Indonesia was reaching its peak period (The Bali Bombing, Marriot and the Bombing of Australian Embassy). Morever, preemptive strike has always been Bush'es doctrine. So Howard's statement was important in this context. Implicitly, it appears that he wanted to show that Aussie has some muscle to maintain security in South East Asia.

Some quote:
Australian Prime Minister John Howard recently said he would not hesitate to order preemptive strikes against terrorist bases overseas. The statement was further clarified that such an attack would not be directed against "able" countries such as Indonesia.
However, this statement would seem to require a serious response, as this was not Howard's first concerning the issue.
The spread of "preemptive-ism" across the region is something of concern, since a preemptive strike will likely raise distrust among nations, provoke international anxieties and undermine the UN's role in maintaining peace and security.





The Boss is in Time 100

Friday, May 1, 2009

SBY made it to Time 100's, "Leaders & Revolutionaries" #9:

The time is right for Indonesia, as the world's most populous Muslim nation, to assume a more prominent position in Asia and throughout the Muslim world. In response to President Obama's warm overtures to Muslim countries for a new phase in relations with the U.S., Yudhoyono can take the lead and chart a new course for the region.

I didn't wrote that, it's Anwar Ibrahim's remark for Time magazine.

Just a perfect timing.

Nice job people... :p

Disclaimer: I am not trying to campaign anything here.

Convergent Regulatory Framework?

Friday, March 27, 2009

Does nanotech regulation needs to be standardized or can state develop their own laws about nanotech? I am more into a standardized framework, although of course, in reality there is always a gap. Read Lloyds report here.

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Transparency in water utilities

Monday, March 23, 2009

I argued in my newspaper op-ed that the natural monopoly character of water services justifies its transparency. The purpose of water services regulation is to reduce natural monopoly and decreases information asymmetry. Transparency mechanisms work in that direction by allowing information to be interpreted by competing interest groups, thereby enhancing the regulator's capacity in deciphering information and producing more qualified decisions. Read more.

Economists have agreed that in every regulatory case, governments can never attain the same level of information as the company. Companies always know more about their own situation compared with the governments that regulates them.

The danger with this information asymmetry is that companies may inflate their actual costs and pass it on to consumers to pay. They may choose to deal with particular suppliers related to them (possibly a subsidiary of their parent company) rather than other suppliers offering lower prices.They may refuse to expand their network to slums or scarcely populated areas citing the reason of lack of capacity, although they actually can. Or, companies may conflate the number of leakages to add to the cost component.

As a result, governments must then be very well-equipped to be able to regulate water companies effectively; they must have all the technical, financial and legal auditing capability to discern and decipher information about water utility. The problem in most developing countries is that governments lack these regulatory capacities both in terms of human resources, technology and budget.

One way to mitigate this problem is by introducing transparency to the sector. Stakeholders can complain if they know that the company prefers to strike a water supply deal with real estate developers rather than invest in poor areas.

Potential suppliers can complain that they have been discriminated against, despite their ability to supply with cheaper costs. With transparency, governments can have help in interpreting information from other water companies, creditors, suppliers, consumers, NGOs, academia, the press or other interested parties.

However, it is difficult to make water utility companies agree to transparency. This response is natural as it is always better for them to conceal information than to be transparent.
Companies protect their information through confidentiality clauses in contracts and through trade secret laws. Freedom of Information laws typically do not work as they provide a blanket exception to disclosure when it comes to commercial confidentiality.

The US Rules the Wave?

Sunday, March 22, 2009

The US (and not the brits) will rule the wave. US will become the next Ottoman Empire. The next 100 years will be all about the United States. Europe will decline. Space-based solar power will be developed. Stratfor founder George Friedman said on the launching of his new book.



Hat tip to Chris Phoenix at CRN

Nanotech Law Webinar

Saturday, March 21, 2009

KHK Law is holding webinars starting next month:

All webinars will be conducted from 1:00 p.m. – 2:30 p.m. EST

April 1, 2009 Legislation, Regulation and Small Business – 2009 Outlook

June 4, 2009 Nanotechnology in the Marketplace

Sept. 10, 2009 Nanotechnology, Food and Food Packaging

Nov. 19, 2009 Product Liability and Nanotechnology

The cost for Individual Webinar is $145 and $495 if you signed up all four. More detail here.