Showing posts with label good governance. Show all posts
Showing posts with label good governance. Show all posts
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PEW's Research: Transparency makes citizen happier, more engaged

Friday, March 4, 2011

PEW has just released its latest survey on transparency of governance in local communities. The result: if the government shares information well, they also feel good about their civic institutions. Following is the summary of PEW's findings (see p.2):

  • Those who think local government does well in sharing information are also more likely to be satisfied with other parts of civic life such as the overall quality of their community and the performance of government and other institutions, as well as the ability of the entire information environment in their community to give them the information that matters.
  • Broadband users are sometimes less satisfied than others with community life. That raises the possibility that upgrades in a local information system might produce more critical, activist citizens.
  • Social media like Facebook and Twitter are emerging as key parts of the civic landscape and mobile connectivity is beginning to affect people’s interactions with civic life. Some 32% of the internet users across the three communities get local news from social networking site; 19% from blogs; 7% from Twitter. And 32% post updates and local news on their social networking sites.
The relationship between transparency system and 'trust' is unsurprising. When information is concealed, people will suspect that those holding the information is hiding something. On the contrary, when information is disclosed, people tend to perceive that everything runs well.

Hence, transparency system can also be used to exploit the masses. This is not an argument for opacity, but only to note that 'disclosure' is not always equal to 'transparency'. 

Read PEW's full report here.

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RI water services suffering from a lack of governance

Tuesday, March 30, 2010

Below, I repost my article at today's JP
RI water services suffering from a lack of governance

Mohamad Mova Al ‘Afghani ,  Dundee, UK   |  Tue, 03/30/2010 9:48 AM  |  Opinion
From more than 300 water utilities currently operating, only a quarter is said to be financially healthy. The rest is either suffering from high debts or continuously failing to be able to cover its costs.

Meanwhile, the population keeps increasing and the quality of water from surface and groundwater sources is rapidly decreasing due to deforestation, pollution, saltwater intrusion and other problems caused by climate change. Experts are pessimistic that Indonesia will be able to achieve the Millennium Development Goal (MDG) target on water by 2015.

What is the real problem in the water services sector? There are funds out there ready to be invested by the private sector, but yet, most private sector participation in the water sector is failing.

Water is also abundant in this country, but in the form of floods or waste. Many reports consider that the real problem is not the lack of financial or natural resources, but the serious lack of governance.
Given the seriousness of water for our daily lives, it is a pity that we do not have any single national legislation dedicated specifically to managing water services.

The reason for this is partially because of regional autonomy, that those are the duties of local governments. 

Has local government paid enough attention to governing water services? No. What I hear most is the fuss about regional bylaws regulating the decency and morality standards of their citizens, such as those related to gambling, prostitution, alcoholic beverages or women’s clothing.

I am not suggesting that public morality cannot be regulated. It’s just that in terms of priorities, we are certainly losing our sight. There are obviously more people dying and ill because of waterborne diseases rather than from gambling or prostitution.

It is the lack of access to sufficient and safe water which contributes to the escalation of criminal and socially immoral activities.

Within the world of water activism itself, the debate is often sidetracked. In Indonesia, people tend to always debate between public versus private ownership of water utilities. I think they are asking the wrong question.

We know so much about the failure of privatization but yet so little about the success of public water utilities. So the real question should be aimed toward a solution: What governance mechanisms work for either public or private water utilities? In what circumstances can water be privatized and in what circumstances is a public ownership desirable?

This sidetracked debate has contributed to a bitter reality, that is, that both privatized and nonprivatized services develop without adequate governance.

Jakarta, for example, which has a population of more than 10 million in daylight, is regulated through bylaws enacted in 1992 and 1993, way before privatization (by way of concession) was carried out in 1998.

These bylaws are poorly drafted and do not reflect the need to incorporate post-privatization reality. What is happening now is that, in practice, Jakarta drinking water services are regulated mainly through concession contracts.

This fact is appalling because water is a political good that contracts alone are never enough to regulate.

When a Jakarta citizen asks to what rights are they entitled as a water customer, there’s not much that the 1992 and 1993 bylaws can answer because the 1998 privatization has changed the landscape of accountability from Jakarta’s local government and PAM Jaya to its concessionaires.

Some of the answers could be provided in the concession contracts. Unfortunately, the concession contracts are said to contain a confidentiality clause and therefore are never to be found in the public domain.

On the other hand, a citizen in Bogor can obtain clarity that they are entitled to a discount and even exemption from payments if their water utility delivers substandard services because Bogor municipality enacted a bylaw in 2006, stipulating the rights and obligations of the customer.

This is not to say that Bogor’s water services bylaws are perfect as there are many clauses which need amendment.

This is to say that when local government has a strong will to govern water services, it can.

Currently, there are several other water services cooperation, concessions and joint ventures taking place or being planned, oftentimes with the support of International Financial Institutions (IFI).
Reading their reports, I am skeptical that enough attention is given toward transparency, accountability and participation, all of which constitute an important element of governance.

Some reports even modeled water services as a sale-and-purchase transaction like other ordinary goods, whereby the Regional Water Company (PDAM) bought water from the private sector and re-sold it to customers, away from the scrutiny of local parliament and other accountability mechanisms. 

If this is the way to go, then we are doomed to another failure because no privatization is ever successful without proper regulatory governance.

If local government wishes to privatize, they should tightly regulate the private sector. No contracts can be above the law, especially when it comes to an essential element of human life such as water.

If they don’t regulate, they will soon realize that they will lose control. Prices rising, taps not flowing, no investment made to extend the network. 

When this happens, the citizens will come after them to demand responsibility. If they find no favorable answer, they can start taking matters into their own hands, such as by stealing water from the network.
This, in turn, will raise the burden on those who actually pay the price. If the local government decides to terminate the contract, the private sector will threaten to use international arbitration.  

Thus, local governments should start establishing the framework for transparency, accountability and participation through regional bylaws. If the services are to be privatized, they must ensure prior consent from the citizen.
Contracts should be available in the public domain, rights and duties of both customer and the service provider should be stipulated under bylaws, complaint mechanisms should be set up, redress should be available to customers, service levels and the consequences of violations thereof should be

No contracts can be above the law, especially when it comes to an essential element of human life such as water.

The writer is a PhD candidate at the UNESCO Centre for Water Law, Policy and Science at the University of Dundee, UK.

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Legal System and Governance Transparency

Friday, March 26, 2010

Bushman, Piotroski and Smith (2004) distinguished between two elements of Corporate Transparency: Governance Transparency and Financial Transparency. The factors of financial disclosure are segments, r&d, capex, accounting policies and subsidiaries. Meanwhile, the factors of governance disclosure are major shareholders, management, boards, director and officer's remuneration and officer's shareholdings.

The results of their study is very interesting. They found that financial transparency is correlated with political economy, while governance transparency is correlated to legal systems. Financial transparency is higher in states where state ownership of enterprises and bank is low while governance transparency is higher in common law systems compared to civil law tradition.

One of the explanation for this result is because governance transparency is highly dependent of efficient judicial system and legal framework, and it appears, civil law countries are not that efficient with respect to their judicial system. 
On the qualitative side, it will be interesting to evaluate if legal frameworks in civil law countries are -- independently of the efficiency of their judicial systems -- adequate with respect to corporate reporting.  It would also be interesting to see if this situation in civil law tradition can be rectified using both mandatory and voluntary disclosure policies combined with incentive.

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CSR/GCG for utility companies

Monday, December 24, 2007

I wrote a paper explaining why certain Good Corporate Governance (GCG) and Corporate Social Responsibility (CSR) norms needs to be practiced by utility companies. You can download the paper here.


This paper argues that utilities delivers basic services to society, a function that was previously undertaken by the state. Given the problematic nature of corporations, the prevalence of natural monopoly in utilities, the asymmetric information present in certain utility markets and the social costs that may occur due to utilities privatization, stronger government intervention in utilities might be desirable. It must however, be conducted in a manner which aligned the corporation's self-interest of profit seeking with the social cost. The inspiration for such regulation can come from the recently growing CSR and GCG norms.

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E-procurement website launched

Saturday, January 6, 2007

For those interested in supplying goods and services to the government without the need of disbursing "extra-cost", try signing up at the govt's e-procurement website. The website is prepared for 2007 goods supply.

e-procurement was sought after leaks and markups was found. In year 2006 alone, around 10 and 50 percent of the state procurement budget had been misappropriated.

The legal basis for the e-procurement is a Presidential Decree issued in 2003 (downloadable here and attachment here, in bahasa).

As I clicked the wesbite however, it only says: "sorry, no packages are opened for auction, yet". Try it yourself here.