Showing posts with label transparency. Show all posts
Showing posts with label transparency. Show all posts
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Vague articles in information law gives rise to concern | The Jakarta Post

Thursday, April 15, 2010

A member of the Press Council, Wina Armada Sukardi, said on Monday in a discussion at the Press Council office in Jakarta that some of the articles could possibly criminalize the work of the press.

He cited Article 51, which stipulates that institutions or persons using information in an “unlawful manner” would face one year in prison and/or a maximum fine of Rp 5 million (US$544).

“There is no fixed definition of ‘unlawful manner’ so the press will be prone to criminalization,” he said.
Another speaker at the discussion, Mas Ahmad Santosa, a member of the Judicial Mafia Taskforce, said that there were also some requirements in the law that could make its implementation difficult.

“The person or institutions demanding information have to state the purpose of their request for information,” he said.

He continued that the law also gave room for public institutions to reject requests if the information had not been documented.

Quick blogging. Three interesting issues are raised here: (1) use of 'unlawful' information, (2) statement of purpose on using information and (3) the exemption clauses. I have discussed exemption clause on my previous article. I will discuss the rest later.

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Welcoming the freedom of information law | The Jakarta Post

Monday, April 12, 2010

Welcoming the freedom of information law

Mohamad Mova Al ‘Afghani ,  Dundee, UK   |  Sat, 04/10/2010 9:42 AM  |  Opinion

“Sunlight is said to be the best of disinfectants; electric light the most efficient policeman” (Justice Louis D Bran-deis, On Other People’s Money and How the Bankers Use it, 1933, Chapter V).

Not so many people know that next May, the Freedom of Information (FoI) law will come into effect.

This law will have tremendous implications in increasing transparency in government operations and to a certain extent, the business world.

The central idea of the FoI law is to bring government “into the sunlight”. The “sunlight” will allow the governed to observe clearly government operations that are otherwise performed in secrecy. Because they will be watched, it is expected that the public officials will behave accordingly.

The FoI law provides everyone, irrespective of their motives, a right of access to information held by public bodies.

The understanding of “public bodies” in our FoI law varies from all governmental branches in the executive, judiciaries and the legislative, to political parties, state-owned enterprises, non-governmental organizations and other legal entities receiving funding from the state or regional budget.

Not all information can be disclosed, however. The FoI law provides a restrictive list of information which could be exempted from disclosure.

Compared to FoIs in other countries, the list of exemptions in the Indonesian FoI law is very narrowly constructed.

This means that the exemption to disclosure only applies to very few types of information such as that related to defense, intelligence, law enforcement, intellectual property rights, personal information and diplomatic relations.

Other than the limited and narrowly construed exemption clauses, what makes our FoI more “generous” compared to other countries’ FoI laws is also the fact that there is an obligation to apply public interest testing to each and every exemption clause.

Other countries’ FoI laws, such as the English and Scottish laws recognize two types of exemptions: absolute and relative. If the exemption type is absolute, such as that related to security matters, the English FoI law requires no public interest testing.

The Indonesian FoI law, however, recognizes no absolute exemption. This means that a public interest test would be mandatory in any case.

What this means is that the exemptions to defense, intelligence and diplomatic relations as discussed previously are not absolute. If the Information Commission considers that there is a greater interest for transparency rather than keeping the information secret, the information should be disclosed, even though it is a security matter or even if such a disclosure is prohibited in other acts.

Is this a good thing? It depends on where you are standing. Imagine that because there is no absolute exemption clause in the legislation, one can actually submit an information request to the State Intelligence Agency, the financial intelligence unit (PPATK), the Central Bank and even private banks if they are state-funded.

If they fail to provide, one can always appeal to the Information Commission to ask for the application of a public interest test.

That being said, the Information Commissions (central and regional, depending on the case), actually have the discretionary power to decide on the fate of information in all branches of the government.

Their jurisdiction covers all departments, with respect to all types of information, without any exception.

Given that vast responsibility, the Information Commission may face complexities in settling disclosure cases. They will have to decide whether information such as defense contracts to purchase arms, the utilization of foreign funds to finance counter terrorism units, a company’s tax reports, governmental procurement contracts and diplomatic correspondences contain a certain public interest that warrants public disclosure.

Due to the fact that no single governmental department is free of corruption, one could expect that a public interest for disclosure could be found in a great number of cases. The pressures toward nondisclosure from the bureaucrats would be enormous. It is in this respect that civil society’s role is vital.

Although in the preceding paragraphs I have pointed out that our FoI law is “generous”, the vague constructions of the clauses still open gaps for the government to tamper with its enforcement, such as through the creation of nontransparent implementing regulation which may defeat the original object and purpose of the FoI.

It would be the ministry of communication and information that is tasked with the formulation of Peraturan Pemerintah (Government Regulations).

If this tendency toward openness is to be maintained, civil society needs to pay attention so that the enactment of the implementing regulations are transparent themselves and that the public is involved in the decision-making process.

It is possible that the exemption clauses within the FoI law are “further reinterpreted” in the implementing regulation which in practice will allow more constrain to disclose requests.

To anticipate such a maneuver, I consider that for the majority of FoI issues, the implementing rule should be constructed from the ground up based on guidelines and case law, rather than top-down through Peraturan Pemerintah.

Give the information commission its autonomy to formulate guidelines through research, public consultations and discussion groups.

Let the parties argue their case before the information commission and courts and let the law evolve from this.

There are two reasons for this. First, it is because as I have argued above, there is much incentive for the government to be secretive.

The bureaucracy has an inevitable interest toward opacity in the interest of sustaining corruption and
collusion.

It is not likely that they can be expected to produce what Justice Brandeis termed above as a “disinfectant”. Thus, it is necessary to bring the law down to the people.

Second, learning from abroad, disclosure cases are settled on a case-by-case basis. The general principal only arises after factual cases are presented and argued before a tribunal.

Even up until today, there has been no one set of methodology for information commissions in other countries in balancing public interest in exemption clauses.

The idea of the FoI law is to allow the governed to observe clearly government operations that are otherwise performed in secrecy.

 
The writer is the founder of the Center for Law Information (CeLI).

My latest op-ed in JP.

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Water Governance in Malaysia

Monday, April 5, 2010

A new paper from Chan (2010) about water governance in Malaysia argues the importance of stakeholder participation, transparency and accountability. Chan opined that the current move towards the centralisation of water services provision in Malaysia should be reconsidered as it well have an impact towards participation and transparency in the water services sector. 

Below is the abstract:

Currently, it is widely believed that many water companies are linked to powerful politicians, making the awarding of contracts, tariffs and other management aspects non-transparent and ineffective. Ideally, politicians that govern should act on the professional advice of the water managers and not the other way around. Another area of water governance that needs to be intensified is the war against corruption. In the water sector, there should also be an all-out war on corruption at all levels of governance, in both the public and private sectors. Government should make all contracts in the water sector awarded through open tender with public consultation to ensure professionalism, fairness, transparency, accountability and good governance. Equally, all contracts and other relevant documents drawn up between the government and private companies should not be "classified" but instead be public documents available to the public for discussion, review and improvement. Another area to ensure better governance is for the government to engage and actively involved all stakeholders in the water sector, especially civil society and NGOs. Finally, the Federal Government should reconsider its plans to centralize the water sector by taking it over from State Governments. This is because, centralization would be contradictory towards involvement of all stakeholders and also pose problems to many states that had already privatized the water sector. Finally, governance of the water sector should be based on Integrated Water Resources Management which is the logical way forward in ensuring sustainable development. 

In my paper for the Journal of Water Law (forthcoming), I discuss in specific the problem of transparency in the water sector and explore how institutions and legal framework could tackle them. I agree with Chan that tarrifs, contracts and tender should be transparent. At page 151 he argued:

To achieve the above objective, the government should make all contracts in the water sector awarded through open tender with public consultation. This would ensure professionalism, fairness, transparency, accountability and good governance. Equally, all contracts and other relevant documents drawn up between the government and private companies should not be “classified” but instead be public documents available to the public for discussion, review and improvement.

The condition is similar in Indonesia. In my March 30th newspaper article, I wrote:

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.

It appears that both Malaysia and Indonesia faces similar problem with respect to the transparency of contracts and operations. Fortunately, Indonesia have a Freedom of Information Law which will be enforced starting from next month and we do not have (yet-- and hopefully never will have) an Official Security Act  (OSA). I red in Malaysiakini that some of the water deals are actually covered by OSA. 

Read Chan's full paper here





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What is the best indicator for a regulatory transparency?

Wednesday, March 31, 2010

Gutierrez (2003, paper here) tried to come up with an operational elements of regulatory governance.  He considered that autonomy and independence should be reflected in financial and budgetary independence and no free removal of commissioners; accountability is reflected through clear mechanisms for solving disputes, while clarity of roles and objective is manifested through the regulatory authority’s ability to impose fines and set tariffs. Finally, he opined that "..transparency and participation are operationalized by the existence of hearings for the setting of tariffs and other issues" (see pages 18, 19 and 24). 

However the argument that public hearing is the best proxy in determining regulatory transparency was disputed by Stern and Cubin (2003, paper here), who argued that it is too american-centric. Stern and Cubin argued instead that the requirement for regulator to publish their decision is the better proxy.  

Now the hard task for lawyers is in translating this into a legal concept.  First we need to choose which one is the best proxy. Should we obligate public hearing, or instead, it is adequate for the legal framework to require regulator to explain and justify their decisions? The devil will of course be found in the detail. Public hearing without adequate information disclosure is a non-sense. The legal requirement to explain and justify decision is also not clear in itself unless it is detailed further on how this should be performed.  



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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
established.

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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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.