Sustainable Development is Not Working

The forest fires currently ravaging our land, while not avoidable, have been made far worse by a perverted approach to sustainable development.  The cost of these policies goes beyond life and limb, to the long-term viability of the rural economy.

The problem does not lie with the CFA and other forest fighters -- they are, as usual, doing a magnificent, indeed heroic, job on a shoe-string budget.

When the term sustainable development was first coined in the 1980s, it was meant to signify the marrying of market-driven economic growth and nurturing of the environment.  Over time and in application, the concept has been perverted.  Under the banner of sustainable development, resource industries have been garrotted, the environment has been nationalised, bureaucracy and politics have replaced markets, sources of funding have been lost and hands-off and preservation policy has replaced nurturing.

The polices have arguably been most perverse in the management of State forests, but they affect all rural and resource industries.

Since the 1980s, logging has been steadily squeezed off State land.  State forests have been converted to National Parks -- which have quadrupled in size -- and logging has been banned in an ever-increasing proportion of State forests.  As a result, logging is currently allowed on only 7 per cent of State-owned forested land and is set to decline further with the recently announced logging bans in the Otways.

The closure of logging has not only removed scarce jobs and investment from hundreds of rural communities, it has undermined these communities' capacity to manage and protect the environment.  The fact is that loggers have been the backbone of the fire-prevention and fire-fighting system.  They have provided most of the skilled personnel, the equipment and the access roads.  For example, logging contractors have typically provided 80 per cent of bulldozers essential to fighting fires.  With the demise of logging, these skills and equipment are waning.

The cessation of logging, along with the shift of forest to National Parks, has led to a sharp decline in the fire prevention.  Since the 1950s and, following the catastrophic fires of the 1930s and 1940s, controlled burning has been widely used in State forests.  These actions led not only to a substantial reduction in serious fires, but were proven to be advantageous to the forest environment.  While controlled burning does take place in National Parks, it does so at a very much reduced rate.  Further, over at least the last eight years, National Parks have consistently achieved less than half their planned level of controlled burning.  The result has been a dangerous expansion in combustible material in the forest.

The failure of the National Parks to adequately control the fire risk arises from a number of factors.  First, while Governments have been willing to ban logging and open new parks, they have failed to fund the consequences of their decision.  Second, the parks have been captured by political activists who demand a hands-off approach to mother earth.  Third, the parks are caught up in bureaucracy, slow to make decisions and fearful of taking politically risky actions.

Having cost lives and hundreds of millions of dollars damage, it is time to revisit land management.  A royal commission into the current fires would be a good start.

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Reform Fatigue? We've Only Just Begun

It has become fashionable to say that people are suffering from reform fatigue, that there has been too much change inflicted on us, and that it's time to take a breather in the pursuit of world's best practice in Australia.

Tiredness is not a reason for us to stop the change process.  Fear of the complexity, obstacles and consequences of change, however, might be the reasons for many to be reluctant.

On the waterfront much needed reform was achieved despite the best organised union and political campaign of opposition ever marshalled in this country.  But those were special circumstances.  The waterfront was a national disgrace and Patrick was left with no other option but to tackle the problem head-on if it was to survive.

But what happens to small and medium-size businesses without deep pockets?  Let's assume we have a mythical CEO who decides he has no choice but to dramatically change the way he does business.  This means a reduction in staff and a change to the work practices of those who remain.

His first call should be not to a human resources professional but to a lawyer specialising in industrial relations.  Why?  Because the labour market is regulated.  We have deregulated markets in goods and services, finance and currencies.  We have, for the most part, removed tariffs and trade impediments.  We persist, however, with the ridiculous notion that the market for our own human skills and effort should be determined by some legal bureaucrat we will probably never meet.

Implicit is the idea that, somehow, this person with whom we have had no contact knows and can negotiate better what we want than we can ourselves.  That is the fundamental proposition advanced by those in favour of regulation, namely the Labor Party, the Democrats and most of the minor parties.  It didn't work in the Soviet Union and it isn't working here either.  In other words, our desperate CEO is not allowed to do what makes economic sense.

If his business is in an industry which ACTU secretary Greg Combet quaintly calls "highly organised", our CEO will need to obtain agreement from the unions.  If not, he can expect dire threats followed by industrial action, accompanied by a union-run publicity campaign aimed at damaging his business.  If he resists the strikes and bad publicity, he can expect calls to his customers urging them to stop using his company due to its "poor industrial relations record".  If his company is listed, he can expect phone calls from institutional investors expressing concern about his company's "anti-union stance".

There will also be a legal campaign launched against the business in the Australian Industrial Relations Commission or the Federal Court.  If our CEO is doing a merger, he will fall foul of the transmission of business laws.  These laws act like a virus in that they can transmit bad work practices from one business to another.  If not done properly, a takeover can result in the unproductive arrangements of the business which is in trouble being transmitted to the more successful business.

Our mythical CEO is now potentially fighting in court on three fronts:  the AIRC, defending a huge unfair dismissal action;  the Federal Court, on a charge of breaching the freedom of association provisions of the Workplace Relations Act;  and a transmission of business case, which could result in his business inheriting the work practices that helped send his competitor under.

His share price will have been trashed and he spends his day going from lawyers' offices to courtrooms to media interviews.

His board is unhappy, to say the least, and our CEO has probably lost sight of what he was trying to achieve in the first place.  His family and friends will be starting to worry about his health or sanity.

There have been countless attempts to reduce the complexity and cost of the industrial and employment laws in Australia and this federal government has done much to implement change.  But the sad fact is that the labour market reform debate today is absurdly unbalanced.

Australia needs labour market reforms to ensure average companies with average managers dealing with average problems can strive every day for success over mediocrity.  To use language which has some currency today, Australia desperately needs labour market reforms, not for the elites, but for the battlers.

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Roos Tax Poor Farmers

Farmers are being accused of shortsightedness for failing to prepare for the present drought.  Yet few urban observers understand that the current crisis is caused by a level of hidden environmental taxes that the urban majority would never accept themselves.

The current drought provides an opportunity for farmers to rid themselves of a hidden environmental tax that is one of the greatest threats to their long-term viability, while at the same time correcting a major ecological imbalance.

On many properties, the excessive kangaroo population will eat as much feed as sheep or cattle.  All agree that roo numbers have multiplied because of added watering points, improved pasture and clearing.  But few non-farmers understand the full consequences of this.

It is worth noting that Burke and Wills, in their 1860-61 journey from Coopers Creek to the Gulf and back, shot their own camels and horses, scrounged for snakes, rats and birds but appear to have shot no kangaroos.  During their final weeks, the local Murris provided them with fish (from the natural watering points) and nardoo cakes but, again, no roo meat.

One can only conclude that if starving men with rifles, camped at a watering point, were not shooting roos, then there were very few roos about.

Today, while farmers must hand-feed their stock to keep them alive, the same number of roos will starve.  Many farmers will face the heart-rending task of shooting sheep rather than prolonging their agony.

And the roos?  Farmers are allowed a limited licence to cull roos.  The various environment ministers have assumed effective control over roo numbers but, negligently, have done nothing to ensure their health and wellbeing.

More importantly, as farmers have improved the productive capacity of their land, the relevant ministers have allowed their kangaroo herd to increase to unsustainable levels.

So where a paddock may have supported fewer than 1000 animals before European settlement, it may now support the equivalent of 6000, made up of 3000 sheep (or 300 cattle) and 3000 roos.  The farmer has produced an unambiguous ecological profit, in boosting roo numbers by 2000, but the community, through the minister, has said, "thank you very much, they're all ours, and we'll decide what happens to them".

Out of a total increase in carrying capacity of 5000 animals, the farmer has had no choice but to pay an "environmental tax" of 40 per cent of his (gross) new fodder reserves to accommodate the extra 2000 roos.

If he had reduced his herd of sheep to build up fodder reserves for the inevitable drought, he would only have made room for more roos.

So, now, every sheep the farmer sells, hand-feeds or agists ensures the survival of another excess roo that will be ready to deprive him of any future profits in good seasons.

But what is the farmer's duty of care?

Australia's 100 million kangaroos are clearly not endangered, so a farmer's environmental duty of care should not extend any further than maintaining a proportion (10 per cent to 30 per cent) of the presettlement roo population levels.

This natural footprint or, "Undisturbed Ecological Value (UEV)" is the level that is produced without extra watering points, etc.  It is the ecological equivalent of the Unimproved Capital Value that is the basis for land valuations and local government rate levies.

No one would seriously suggest that council rates could be fairly levied without a proper system of valuation, and environmental taxes, such as the kangaroo impost, are no different.

The case is overwhelming.  The roo burden on farmers is one that the rest of the community is unwilling to bear.  It is unjust, discriminatory and an inappropriate exercise of power.

So what can the farmer do?  Shooting the suffering beasts without a licence would be the most humane thing to do, but it could also see you in court.  No one doubts that millions of roos, sheep and cattle will suffer a slow cruel death in this drought.  The only moral and ecologically sustainable option is to make their suffering as brief as lawfully possible.

The solution applies equally to domestic stock and community stock.  If shooting is not an option for practical, legal or economic reasons, then, rather than watch animals suffer over six months, farmers should concentrate the animals they want to keep at a few watering points where they can be hand-fed to minimise energy loss from searching for food.

Remaining watering points should be shut to ensure the suffering of non-essential stock lasts for only a few days rather than a few months.

Once this adjustment has been made, the watering points can be reopened and essential stock can be redistributed to graze the remaining fodder at more sustainable levels.

This action would appear to be lawful, at least in Queensland.  Queensland Parks and Wildlife has established a precedent by filling in dams on farm land that has been taken into the national parks estate.  The intention is to return water flows and, hence, roo numbers, to presettlement levels.

Farmers have indulged the idle whims of the ill-informed for far too long.

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Can't See the Trees for Law

Farmer Jim is thinking of felling one of the 20,000 trees on his property for fence posts, but he has a problem -- he has used up his 30-tree (0.15 per cent) exemption.

So he looks at one of the 19,970 remaining trees:  He has to consider what slope it is on:  whether it is a rare species:  whether it has, or might soon have, any hollows:  what native animals or birds are feeding off it or are likely to do so:  what effect it has on the forest canopy:  whether it is near a stream:  whether it is of Aboriginal significance ...

Then he will be in a position to make a lengthy submission to government seeking permission to fell.

Welcome to the world of tree-by-tree approvals.

Over the decades government legislation has diluted freeholders' rights in a bid to provide for essential public services, to control harmful activities and, more recently, to prevent excess development.  This has resulted in extremely interventionist regimes.  Such regimes are necessary, particularly in crowded urban areas.  But they are not costless.

While planning regimes have generally not destroyed the economic value of a whole class of property and deprived landholders of the incentive to care for it, state governments are now in the process of doing just this.

They are establishing native vegetation legislation that will quarantine large areas of Australia, effectively eliminating freehold tenure.  In opting for coercion rather than co-operation, for preservation rather than management, they will also ensure that their environmental objectives will not be attained.

At the national level, the legislation is intended to prevent widespread additional clearing of private native forest and woodland.  At the local level, this will be done by depriving landholders of historical legal rights and existing economic value.

The method of expropriation is through the familiar requirement for official permission that will be hard to obtain and seldom granted.  Permits will generally be required from government before native vegetation can be disturbed.  Native vegetation is widely, if vaguely, defined, but will encompass most native forest and woodland.

Some exemption has been granted so that landholders can remove or take a number of trees per annum.  The exemptions bear no relation to existing rights.  In one NSW regional plan, it is 30 trees per property.  On a property with 100ha of trees (not uncommon), there could be up to 40,000 trees.

Restrictions on land and water use, fauna protection and Aboriginal and heritage protection are all on the shopping list of activist groups.  In addition, as farmers grapple with prolonged drought, and volunteer bush fire brigades risk their lives on public and private land, the more mundane and complicated business of policy formulation is pushed out of the limelight.

Moreover, media commentators tend to avoid the complexities of bad regulation.  There are simpler, more interesting targets, such as farm subsidies, or more exciting, if long-discredited, fantasies such as turning the coastal rivers inland.

The usual defenders of the rural sector have been muted or, in some cases, have been bought off by chimerical promises of compensation, such as the National Farmers Federation's joint bid with the Australian Conservation Foundation to get $65 billion from the public purse to solve salinity and buy out farmers.

There has been a whisper of compensation for expropriated rights, but political promises in this area are notoriously fragile and compensation is always hard to get and slow to be delivered.  Full compensation for loss of capital value and for ongoing maintenance of areas that government has effectively expropriated would be enormous.

Other potential champions of the rural sector, such as the NSW Opposition, are desperately trying to look like a pale green shadow of government.  The Green movement has strongly supported the legislation.  More sinister, it has also attempted to stifle debate by seeking to exclude landholders even from their minority role in consultation processes on the grounds of their direct interest.

This is rather like excluding voters at an election, or ratepayers from local issues, on the grounds that they will be damaged by the actions of government.  The fact is that this policy is costless both to those who promote it and to most of those who pass it into law.

It has substantial benefits for those in the bureaucracy who devise the policy, because it provides employment and power.  The costs to the real stakeholders, the landowners, are very high.  The costs to the community generally are well into the future beyond the next election, while the policy dynamic is profoundly biased against the rural sector.

But there is a better way:  If the state and Commonwealth governments were serious about the future of our native vegetation, they would focus on the detection and regulation of large-scale land clearing.

Aerial and satellite surveillance permits regular detailed inspection, and hence control, of those who flout the law.  Instead of alienating thousands of private forest landholders -- who are not clearing -- government should enlist their support.

It is a myth that the average farmer knows or cares less than the average Green about land on which he has worked for years.

In NSW, the area of parks and reserves has risen from one million hectares to five million hectares since 1970 while the number of parks has increased from 100 to an unmanageable 580.

The area of state forest there is 2.8 million hectares-- still substantial, though no longer a viable resource at current extraction rates.

A more co-operative regime would allow for sustainable forestry activities, while providing for protection of significant environmental values.

We are surely beyond the point of believing that large, regular random blazes in neglected public parks are preferable to the alternative of detailed forest management.

Perhaps the states also might look at the big picture before deciding to lock up land in addition to that which they already conspicuously fail to manage.

In those regions where forest cover in public hands is more than 20 per cent, the need to lock up more land should be presumed unnecessary.  For the Green movement there will never be enough parks or enough regulations that simply reject human activity.

But other people must live on this continent, and their productive activities must support the public domain.

We need to look at more intelligent and tailored solutions.  Perhaps it is time to say enough is enough.

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Boys Set Up to Fail in New System

IS there a crisis in boys' education?  Judged by the recently released parliamentary report, Boys:  Getting it right, the answer is yes.

To quote from the report:

NATIONALLY, girls' results in Year 3 and Year 5 Literacy Benchmark tests are up to five percentage points higher than boys.

THE Year 12 retention rate for girls is between 11 and 12 percentage points higher than it is for boys.

GIRLS' average levels of achievement in a majority of subjects assessed at senior secondary level are higher and the gap in the total has been widening.

MORE than 56 per cent of students in higher education are women.

Why are boys disadvantaged?  The first thing to note, as highlighted in the report, is that the way literacy is taught guarantees failure for many boys.

Until the advent of "whole language" (where children are taught to "look and guess"), literacy was taught in a more structured way associated with a phonics approach.

Whole language is based on the mistaken belief that learning to read and write is as natural as learning to speak and all teachers need to do is to "immerse" children in a rich language environment.  Forgotten is that writing is unnatural and boys, in particular, need to be taught in a methodical way.  A second reason why boys are disadvantaged is the "feminisation" of the curriculum.  During the '80s and '90s, the status quo in schools was attacked by feminists, left-wing academics and teacher unions as "ethnocentric, patriarchal and bourgeois".

Even the way teachers taught changed to favour girls and to disadvantage boys.  Teachers no longer stood at the front of the class and taught, preferring instead to have students work in groups on open-ended tasks.  Competitive assessment disappeared.  Learning relied more and more on strong verbal skills and self-directed learning.

As noted in the report, while there may have been some justification for the above changes, an unintended consequence is that boys come out second best.

This is primarily because boys tend to respond better to structured activity, clearly defined objectives and instructions, short-term challenging tasks and visual, logical and analytical approaches to learning.  They tend not to respond as well as girls to verbal, linguistic approaches.

While not directly related to schools, a third reason why boys are at risk educationally is because of their low self-esteem and often negative self-image.

Under Attack: the Market Forces that Have Served Electricity Well

Across the world, very significantly lower electricity prices have resulted from replacing the monopoly supply of electricity with independent competing firms.  Competition in electricity supply is doing the job it is supposed to do.  It brings cost reductions as firms try to steal a march on their competitors followed by price reductions as the competitors catch up.  In many cases the competitive process has resulted in the suppliers "finding" more capacity as a result of achieving higher levels of reliability.  Its price outcomes have also encouraged firms to build new capacity where it is most needed -- in Victoria's case to supply peak demand.

But the shift from government to market control has brought many anxieties.  Will new power stations be built to avoid shortages?  Will new power line extensions be built as and when needed?  How will we prevent power stations colluding to drive up prices when some concentration of ownership is inevitable?

In addition, governments have overlaid on the industry a raft of social and environmental policies -- designed to reduce greenhouse gas emissions, ensure lower rural prices, ensure speedy rectification of faults, and so on.

Many government interventions, including those addressing the anxieties about the responsiveness of the market, give rise to consequential problems.  For example, government requirements to keep prices down will reduce the incentive for new power plant construction.

There are myriad such concerns and, as a result, a seemingly endless series of inquiries and reviews into the industry.  Even so, the potency of market-based approaches for improving electricity supply and keeping down prices is almost universally accepted.  Where they have failed, as in California, the consensus is that this is as a result of poor market design and factors unrelated to the market itself, like NIMBY objections to new plant and power lines.

One area that gives rise to considerable tension concerns transmission -- the long distance transport of electricity from power station s to users.  Transmission is expensive, especially in geographically disbursed markets like Australia and North America, where delivering power over long distances can entail costs similar to building a local new power station.

As with highways, there are debates about whether transport of electricity should be paid for out of some general revenue pool or directly by the users, rather like a toll system.  However, transport of electricity is more complicated than the transport of people and goods by road.

First off, electricity is not easily controlled.  Once it is generated and put into wires, it obeys the laws of physics and moves along paths of least resistance rather than along paths that users want it to travel.  This makes for great difficulties in setting a transport price in line with costs.

Secondly, electricity transmission lines can dramatically affect electricity supply costs.  Businesses will locate new power stations to take advantage of the cheapest combination of transport and production costs.  A transmission charge on users or suppliers that does not fully account for the different location costs means some users and suppliers are subsidized.  Such a subsidy might, to use an extreme example, encourage a firm to site a power station at Moomba to take advantage of local gas supplies with inadequate regard for the cost of building a transmission line to get the electricity to Sydney, Adelaide or Melbourne.

By the same token, a new line may lower the costs of a more remote power source thereby disadvantaging a rival supplier and disincentivising anyone from building plant close to the market even though that might be the least cost solution.

Ensuring the full costs are placed on the beneficiaries becomes crucial to avoid wasteful over-building of transmission lines.

Means of achieving this have brought lively debate across a great many countries.  One promising approach is to treat new transmission in a similar way to new generation -- requiring it to find commercial parties who will finance it.  Some greater possibilities of this have been offered by Direct Current (DC) technology.  Unlike conventional Alternating Current technology, DC allows the power to be controlled so that electricity can be supplied to the buyer from the seller only if the two parties agree on terms.  Such a transmission facility becomes like a power station that buys in electricity from an area where it is cheap and sells it to a higher priced area.  It also may offer a remotely located generator guaranteed access to a market, a very valuable service for electricity where prices can suddenly rise due to demand surges or production outages.

TransEnergie, a subsidiary of Quebec Hydro, has built a DC interlink between Victoria and South Australia, which relies on sales of capacity to those wanting to export or import between the two areas.  Naturally, this could not earn income in competition with ample "free" capacity paid for by charges smeared across all users.  But NSW government owned transmission business, Transgrid wants to build such a rival link.  That link, financed by a compulsory charge, would destroy the capability of TransEnergie's "entrepreneurial" link to find paying customers.

The matter has already seen a five year regulatory battle with the latest round in Transgrid's favour.  If allowed to stand, the present decision will mean that all future links will rely on regulatory judgements, not those of the market place.  Not only would this spell the end of market-driven transmission developments, but it will also mean that proposals for new power stations would face a risk that new transmission links would undermine their profitability.

Departing from a market-based outcome might well bring short term benefits to the consumer by bringing on a new supply source.  But when this imposes risks on the viability of future developments it undermines the conditions for a stable and self regulated industry development.  Finding an accommodation between the market-based provision of new transmission and transmission financed by mandatory customer charges is therefore one of the most pressing issues facing the electricity industry.

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Greens' Policy Lacking Proper Scrutiny

Of course, the concerns people have about environmental degradation are both understandable and justified.  Many of our most difficult problems emanate from our misuse of the natural environment and, as we become wealthier, we value the environment and its attributes highly.  The problem lies not with concerns about the environment, but with the downright silly policies that groups like the Greens put forward to deal with it.

For example, according to their website (www.green.org.au), the leading economic policy of the Greens in the last election was "the abandonment of economic growth (as conventionally measured)".

Of course, most people who voted for the Greens did not read the policy documents.

Moreover, they voted Green with the knowledge that the Greens would not win government.  They probably assumed, too, that a successful Greens party would, as leader Bob Brown recently admitted, be more "realistic" than promised.

The confidence in the impotence of the Greens is, however, misplaced.

The Greens mean what they say.  Their policies are being implemented, if not by them, then by erstwhile more sensible governments seeking the green vote.  And the damage they are doing is large and highly visible.

Young people are fleeing Tasmania -- the home base of the Greens -- for a reason.

After 15 years of Green NIMBYism, the competitive base of the state is in tatters.  Not satisfied, the Greens are now working to stop Basslink -- the $200 million investment that will connect Tasmania to the national electricity grid.

They are also campaigning to shut down Gunns -- the timber and plantation firm -- which is the State's largest private employer.

The forest fires which recently encircled Sydney are also, in part, the handywork of the Greens.  The Greens have induced successive governments to limit controlled burning, curtail logging and prevent the management of private forests.

This has turned woodlands into woodpiles ready to be ignited by arsonists, lightning strikes and other unavoidable causes.  The kangaroo plague that is currently destroying vast tracts of farmland is also the product of our green crusaders.  Thanks to the Greens, the States make ownership claims to kangaroo populations, but exercise little responsibility over them.

This has led to unchecked growth, mass starvation and the destruction of the environment and the livelihood of farmers.

It is within the informal political processes of civil society that the problem is most severe.  People seem too ready to accept the simplest pronouncements of activists claiming to represent consumers, the poor or the environment.  They do not question their bona fides, values or actions.  They seem willing to allow these self-appointed guardians of virtue a greater role in collective action than they merit.  Faced with competition and pressure from unelected activists, our elected political agents and their public servants are increasingly embracing them and their approach.

Witness the recent proposal to appoint Louise Sylvan of the Australia Consumers Association to the ACCC.

The solution lies with holding political activism in so-called civil society to the same standards of transparency, scrutiny and robust debate that takes place within our formal institutions.

Super Problem with Super Industry

The Australian superannuation industry is in for a shake-up.  The catalyst for reform will be the recent dismal returns and the flight of discretionary investors.

Superannuation funds are on track to report their third straight negative performance in 2002-03.  Average returns in calendar year 2002 were a depressing -7.3 per cent and median fund returns over the last three years has been a measly -2.7 per cent after inflation.  What is worse, these returns are before-tax and before-management fees.

Rationally, people are to the extent possible not putting their nest-eggs in super.  In 2001, investors placed into managed funds $16 billion in excess of mandatory contributions.  In 2002, the flow went into reverse, recording a net decline in discretionary investment of $5 billion.

Of course, when returns improve in the equity markets and as returns decline in housing and cash, funds will begin to flow back into super.  But the inflow is unlikely to match expectations, unless the super industry's reputation "as a gravy train feeding off the $20 billion-plus per annum compulsory superannuation scheme" is changed

The flight from super has a number of serious ramifications.  First, it will undermine the government's ability to ween people from the pension.  Super funds are the key replacement for the pension.  While non-super assets may yield good returns, they allow too many avenues for double dipping, i.e.  owning assets while drawing the pension.  Moreover, all the evidence shows that a 9 per cent mandatory contribution is not enough to meet most people's aspirations for retirement income.  Second, it will reduce national savings.  As illustrated this year, a portion of the funds that would otherwise be invested in super will be consumed and not saved.

While the government can not do much about returns in the equity market, there are a host of reforms available that would go a long way to improving the reputation and performance of the industry.

First, it could greatly simplify the regulatory burden that is driving up management costs and protecting inefficient providers.  It could start with replacing the Financial Services Reform Act passed in September 2002.

Second, it could give more power to individual policy holders such as allowing choice of fund and full portability.  To be fair the Government has repeatedly tried to achieve these changes over the last six years, but have been thwarted by the industry super funds using their political muscle among the ALP and minor parties to protect their gravy train.

Finally, they should simplify and reduce the tax burden.  Australia is the only country which taxes super three times:  on receipt, on earnings and on payments.  And the tax arrangements do not provide enough incentive to people to lock-away savings in a vehicle that is subject to vagaries of government control.

One thing, the government should be wary of increasing the mandatory contribution requirement.  While the current mandatory contribution rate is insufficient to cover future needs, the problem lies with the over-regulation and taxation of super and a reluctance to save.  Free choice rather than force is the best way to improve savings.

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US Foundation Funding in Malaysia

Occasional Paper

Introduction and Summary

Non-government organisations (NGOs) play an increasingly pivotal role in the public life of many countries.  They not only provide essential health, welfare and education services and are a vital source of research, but are increasingly major players in the political process.

The NGO sector is also increasingly a large, global industry with many NGOs operating as part of global networks, pursuing common issues and campaigns with funding globally derived.

Despite the growing influence of the NGO sector, little is known about its structure, funding and performance.  The standards of transparency and accountability in the sector are poor, with many prominent organisations providing little if any information about their governance structure, funding or performance.  Only limited data is available on the sector or individual organisations from official or other sources.  Regulations governing disclosure and the behaviour of NGOs are lax in most countries.

The lack of transparency and scrutiny seriously undermines the credibility of the NGO sector.  The lack of accountability is of particular concern with respect to NGOs that focus on political or advocacy activity and that are foreign funded.  While there is nothing intrinsically wrong with NGOs receiving foreign funding, there is a valid concern that the scale, nature and lack of disclosure of the funding may induce NGOs to pursue the values and priorities of foreign interests while claiming to act in local interests.

In an effort to improve the understanding of the NGO sector and its transparency, we have begun the NGO Project which, amongst other things, explores the global funding arrangements of NGOs in the Asia-Pacific region.

This study examines the funding links between US philanthropic foundations and Malaysian NGOs.

WHY US FOUNDATIONS?

The US foundations were chosen as a focus for this study for a number of reasons.  First, they are one of the largest sources of global funding of NGOs. ⁽¹⁾  Second, US foundations tend to set the trend in funding priorities.  Third, US foundations provide a unique database.  Under US tax law, US-based foundations are required to report in their tax returns details of all grants provided, including information on recipients, purpose, condition, duration, and level of funding.  This data set has been compiled and is available from the US Internal Revenue Service (IRS), ⁽²⁾ the Foundation Center, ⁽³⁾ Guidestar ⁽⁴⁾ as well as some individual foundations.  No other set of global donors disclose such details of grants.  Indeed most global donors publicly disclose little about their grant-making activity.

The data used in this study cover grants provided over the three-year period 1998-2001.  They include grants provided directly to Malaysian organisations.  Grants provided indirectly to Malaysian organisations (for example, through non-Malaysian registered NGOs, foundations or bank accounts) are not included.  They also do not include US foundation funding to large global organisations such as Greenpeace and World Wildlife Fund which operate in Malaysia.

Of course, the data do not include information on grants received from funding sources other than US foundations.  In particular they do not include funding from European Governments which are reportedly the largest funders of international non-government organisations and non-government organisations in Asia. ⁽⁵⁾

Although the NGO Project will ultimately trace the US foundation funding for all countries in the Asia-Pacific region, Malaysia was chosen as the initial focus because it is increasingly becoming the home base for regional and multinational NGOs operating throughout the Asia-Pacific region, including Australia.

BACKGROUND ON US FOUNDATIONS

The United States has a long history of private philanthropy through individuals and charitable foundations.  In 2000, there were over 10,000 philanthropic foundations registered with the IRS, which collectively controlled assets of around US$385 billion.  In order to retain their charity status, US foundations must pay out a minimum of 5 per cent of their assets base each year in grants.  At least until the recent decline in world stock markets, many foundations exceeded the minimum pay-out requirement.  In 2000, US foundations gave grants totalling US$28 billion. ⁽⁶⁾  While most grants were given to North American organisations, around US$2billion in grants were disbursed to organisations outside the US. ⁽⁷⁾  International giving by US foundations has been growing rapidly, with grants to international or non-North American organisations increasing by 57 per cent over the 1990s and by 86 per cent in 2000 alone. ⁽⁸⁾

The US foundation sector comprises three types of foundations:  independent, company affiliated and community based. ⁽⁹⁾

Independent foundations are the most numerous type of foundation and include many of the wealthiest and most generous foundations.  As the name suggests, these foundations are governed and operated independently of the company or businesses that gave rise to them.  While the founder or his/her progeny frequently have a major say in the operation of the foundations via a board, many -- particularly the larger foundations -- have very limited contact with their originating family.  For example, the Ford Foundation is totally independent of the Ford Motor Company in terms of objectives, function and governance;  it no longer even owns stock in the company and does not have a member of the Ford family on its board. ⁽¹⁰⁾

While these foundations vary greatly in terms of size, priorities and approach, they tend to have a wider and more flexible mandate than the other types of foundations.

The independent sector contains the largest foundations in terms of asset bases, including the Ford Foundation (US$12 billion), Packard Foundation (US$9.8 billion), MacArthur Foundation (US$4.6 billion), Charles Stewart Mott Foundation (US$2.8 billion), Rockefeller Foundation (US$1.4 billion) and Rockefeller Brothers (US$753 million), all of which gave grants to Malaysian organisations during the 1998-2001 period.

These independent foundations have generally been created or endowed with the wealth of a long-dead industrialist.  Also, many of the foundations are major forces in the US stock market and this has greatly enhanced their original endowments.  As such, they are very much scions of the US capitalist system.

Despite their origins, many independent foundations have strayed far from their roots, with some becoming the largest supporters of the anti-globalisation movement. ⁽¹¹⁾  Indeed Henry Clay Ford -- grandson of Henry Ford -- resigned from the board of the Ford Foundation in the 1977, stating that although "the Foundation is a creature of capitalism;  it is hard to discern recognition of this fact in anything the foundation does". ⁽¹²⁾

New-money foundations are an emerging force in US and global philanthropy.  Although they are generally smaller in terms of assets than the old-money foundations, they are larger in number and growing rapidly.  These foundations are generally founded by people or families that have made fortunes during the last two decades, with much of the wealth originating from the dotcom boom of the 1990s.  While these foundations vary greatly in terms of focus, approach and priorities, they tend to be more closely aligned to the values and priorities of their founders (who often are still alive and in control of the foundation), are more activist in approach and tend to seek operational input to use of the grants.  The Foundation for Deep Ecology, which is a major donor to select Malaysian organisations, fits this mould.

Corporate foundations are, as the name implies, foundations which are funded and controlled by corporations.  While these foundations are not allowed by law to fund activities which provide a direct commercial gain to the controlling corporation, most corporate foundations do align their donations with the general interest of the firm.  For example, firms which rely heavily on the use of university-based engineering research tend to fund university research.  Although corporate foundations tend to be smaller in terms of asset base than the independent foundations, they tend to give a much higher proportion of their assets in grants each year. ⁽¹³⁾  As such, their influence is disproportionate to their asset base.  Most large US corporations operate a foundation and these foundations are, in tandem with the activities of their controlling corporation, increasingly active outside the US.  A total of seven corporate foundations gave grants to Malaysian organisations during the three years to 2001.

The third type of US foundation is community foundations.  These foundations are characteristically funded by a variety of sources, including individuals, businesses and governments and tend to focus exclusively on their community.  While this class of foundation is growing in number, they are currently not significant donors to non-US organisations and no Malaysian organisation received funding from them during 1998-2001.

GIVING IN MALAYSIA

NUMBER AND SIZE OF GRANTS

As shown in Table 1, between 1998 and 2001, 30 organisations received grants from US-based foundations worth, in aggregate, US$4.9 million or ringgit 17.2 million.

Table 1:  Malaysia-US Foundation Grants

Number of grants	59
Number of recipients	30
Donors	15
Funding (US$)	$4,939,143

While this is a small proportion of the total foreign grant giving by US foundations, it is a sizeable sum, particularly in the context of the budgets of many of the recipient organisations.

US FOUNDATION DONORS

Table 2 lists US foundation donors to Malaysian organisations.  It includes many large philanthropic foundations, some of the newer, more radical foundations as well as foundations run on behalf of corporations.  No community foundation gave to a Malaysian organisation during this period.

Table 2:  Malyasia-US Foundation Funding

Granting foundation	No. of grants	Funding US$	Share of total funding (%)
Ford Foundation	5	993,630	20.1
Packard Foundation	3	972,731	19.7
Charles Stewart Mott Foundation	1	600,000	12.1
Foundation for Deep Ecology	8	555,000	11.2
Rockefeller Foundation	4	536,640	10.9
Rockefeller Brothers Fund	6	365,000	7.4
MacArthur Foundation	1	310,000	6.3
AT&T Foundation	2	200,000	4.0
Motorola Foundation	4	147,000	3.0
Levi Strauss Foundation	1	100,000	2.0
Global Green Grants	17	56,645	1.1
J.P. Morgan Chase Foundation	3	34,000	0.7
Lucent Technologies Foundation	1	28,500	0.6
BP Amoco Foundation	2	20,000	0.4
The UPS Foundation	1	19,997	0.4
Total	59	4,939,143	100.0

The largest donor to Malaysian NGOs is the well known and very wealthy Ford Foundation.  The Ford Foundation provided grants totalling US$993,630, with all of its grants going to the promotion of women's rights.

The second largest donor was the Packard Foundation, which is another off-shoot of a rich industrialist (in its case the co-founder of the Hewlett-Packard company).  The Packard Foundation provided US$972,731 to Malaysian organisations -- all grants going to promoting population control in the Asia-Pacific region.

The third largest donor was the Charles Stewart Mott Foundation.  This foundation, which was established by one of the original investors in the General Motors Company, gave a single Malaysian-based organisation -- The Third World Network -- $600,000 for maintenance of its international activist network.  This was the largest single grant provided to any organisation.

The Foundation for Deep Ecology is the fourth largest US foundation donor.  This Foundation was established in the 1990s by the founder of the Espirit and Patagonia clothing chains.  The Foundation is a self-proclaimed radical organisation whose mission "is to support education, advocacy, and legal action on behalf of wild Nature and in opposition to the technologies and developments that are destroying the natural world".  This foundation has a particular interest in opposing agricultural biotechnology and funds most of the leading anti-biotechnology campaigners around the world, including in Malaysia.  The Foundation for Deep Ecology concentrates its resources on a limited number of activist networks around the world.  One such network with which it maintains close relations is the Third World Network whose headquarters are in Malaysia.  Mr Martin Khor, the Executive Director of the Third World Network is on the "shadow management board" of the Foundation for Deep Ecology.  All grants from the Foundation, totalling US$555,000, were given to the Consumer's Association of Penang/Third World Network.

Global Green Grants, which gave the largest number of grants (17), is a programme of the Tides Foundation.  The grants are provided for grass-roots, anti-development organisations.

Tides Foundation is not typical in that it does not donate its own monies.  Instead, funds for the Tides Foundation come from others foundations, firms and individuals which it, in turn, on-passes for a fee to organisations or causes specified by the donor.  Its main function is to obscure the source of grants from public scrutiny.  Tides Foundation also acts as an "incubator" for activist groups.  That is, if a foundation or firm wants to put money into a specific cause but no group exists to carry out the action, Tides Foundation will start an organisation from scratch to undertake the task.  At least 30 of the Tides Foundation's current "projects" were created in response to the needs of one foundation or another. ⁽¹⁴⁾

The Tides Foundation's Global Green Grants in Malaysia went to small local organisations (with the exception of Sahabat Alam Malaysia which is the local branch of the large multinational network Friends of the Earth).  The grants were provided primarily for campaigning against dams, including the Bakun dam in Sarawak.  As with most funding from the Tides Foundation, the original source of the Green Grant funding is not disclosed, nor is it clear whether the funding was initiated locally or by off-shore interests.

The Rockefeller Foundation, which is a scion of the Rockefeller wealth, provided four grants totalling US$536,640 to promote population control in the Asian region and to undertake university research.

The Rockefeller Brother Fund, another offshoot of the Rockefeller wealth, provided six grants totalling US$365,000.  The bulk (US$275,000) of its funding went to the Consumers Association of Penang/Third World Network for their anti-development campaigns and organisational development.  The remainder went to Wetlands International Asia-Pacific for research into wetlands management in the region.

The Macarthur Foundation, another larger foundation derived from a banking tycoon, gave a single large grant to ICLARM (now called The World Fish Center) to fund fisheries development in the region.

The remainder of the grants (11.1 per cent by value) given to Malaysian organisations came from corporate foundations, including foundations associated with AT&T, Motorola, Levi Strauss, J.P. Morgan Chase (the investment bank), Lucent Technologies, BP Amoco and United Parcel Post.  These grants were all given for traditional functions, including university research, scholarships and training, and to provide health, welfare and medical services to the poor and the disadvantaged.

GRANT RECIPIENTS

As itemised in Table 3, 30 organisations received grants from US foundations during 1998-2001.

Table 3:  Malaysia-US Foundation Funding -- Grant Recipients

Grant recipient	No. of grants	Funding US$	Share of total funding (%)
International Council on Management of Population Programmes	5	1,209,030	24.5
Third World Network	5	1,155,000	23.4
International Center for Living Aquatic Resources Management	3	630,341	12.8
Malaysian AIDS Council	1	380,630	7.7
Consumers Association of Penang	6	260,000	5.3
SIS Forum Berhad	1	233,000	4.7
Malaysian-American Commission on Educational Exchange	2	200,000	4.0
Asian-Pacific Resource and Research Center for Women	1	200,000	4.0
International Women's Rights Action Watch (IWRAW)	2	180,000	3.6
Malaysian AIDS Foundation	1	100,000	2.0
Multimedia University	2	87,000	1.8
Wetlands International Asia-Pacific	2	60,000	1.2
University of Malaysia	1	50,000	1.0
Desa Amal Jireh	2	40,500	0.8
Universiti Sains Malaysia	2	20,000	0.4
National Autistic Society of Malaysia	1	19,997	0.4
Suaram	1	15,000	0.3
Sahabat Alam Malaysia (Friends of the Earth Malaysia)	3	14,000	0.3
Indigenous Peoples Development Center	3	12,000	0.2
Persatuan Guru Dharma	1	12,000	0.2
Pahang Buddhist Association Hemodialysis Center	1	10,000	0.2
Saint John Ambulance, Pahang	1	10,000	0.2
Society for the Severely Mentally Handicapped	1	10,000	0.2
Uma Residents' Association	3	7,400	0.1
KERUAN	2	6,500	0.1
Save Our Sungai Selangor	2	6,500	0.1
Coalition of Concerned NGOs on Bakun	1	3,000	0.1
Penang Inshore Fisherman Welfare Association	1	3,000	0.1
Sustainable Development Network Malaysia	1	2,745	0.1
The Borneo Project	1	1,500	0.0
Total	59	4,939,143	100.0

The International Council on Management of Population Programmes received the most grants by value.  It received five grants over the period from two foundations -- the Rockefeller Foundation and the Packard Foundation -- totalling $1,209,030.  All funds were used to assist activists and academics in the Asian region to promote birth control and other aspects of limiting population growth.

The Third World Network (TWN) was the second most highly funded organisation, receiving five grants totalling US$1,155,000.  The TWN, however, should not be viewed in isolation.  It has close funding and organisational links with the Consumers Association of Penang (CAP).  For example, two grants valued at US$255,000 from the Foundation for Deep Ecology were paid to CAP on the condition that they were passed on to the TWN.  In addition, the two organisations share board members, staff, office facilities and campaigns.

The TWN/CAP network together was the largest recipient of US foundation funding, having received 11 grants totalling US$1.41 million.  The Foundation for Deep Ecology was the largest donor to these organisations, followed by the Charles Mott Foundation and the Rockefeller Brothers Foundation.  The grants to TWN/CAP were provided primarily to assist their existing campaigns and network.

The irony is that CAP and TWN are two of the most high-profile and strident critics of the US political and economic system, yet they receive more funding from US capitalism than any other Malaysian organisation.

ICLARM, which is a world-class international fisheries research and development organisation based in Penang, received US$630,341 from US foundations.  All grants were provided to fund the organisation's work on small-scale fisheries and aquaculture development.

Interestingly, ICLARM was the only organisation which received grants from US foundations for agricultural and fisheries development activities.  In the past, these areas were a major focus of US foundation funding to Malaysia.

SIS Forum received a grant of US$233,000 from the Ford Foundation to promote women's rights.  Asian-Pacific Resource and Research Center and the International Women's Rights Action Watch also received large grants (US$200,000 each) from the Ford Foundation to promote women's rights.

The Malaysian AIDS Council received a grant (US$380,630) from the Ford Foundation and its sister organisation, the Malaysian AIDS Foundation, received grants of US$100,000 from the Levi Straus Foundation.  Both these grants were earmarked for a regional conference on HIV/AIDS.

Three universities received US foundation funding.  The Multimedia University received a couple of grants for research purposes from the Motorola Foundation.  The University of Malaysia also received a grant of US$50,000 from the Motorola Foundation.  The Universiti Sains Malaysia received two grants of US$10,000;  one from the Motorola Foundation and the other from the Rockefeller Foundation.

Wetlands International received two grants totalling US$60,000 to assist with its research into wetlands management in and around the Gulf of Thailand.

A number of welfare groups received funding, including National Autistic Society of Malaysia (US$19,997), Persatuan Guru Dharma (US$12,000), Pahang Buddhist Association Hemodialysis Center (US$10,000), Saint John Ambulance Pahang (US$10,000) and the Society for the Severely Mentally Handicapped (US$10,000).  All the grants to the welfare groups came from corporate foundations including J.P. Morgan Chase Foundation, BP Amoco Foundation, and The UPS Foundation.  A number of environmental organisations received relatively small grants, primarily in the form of Global Green Grants from the Tides Foundation.  These included Suaram (US$15,000), Sahabat Alam Malaysia (US$14,000), Indigenous Peoples Development Center (US$12,000), Uma Residents' Association (US$7,400), KERUAN (US$6,500), Save Our Sungai Selangor (US$6,500), Coalition of Concerned NGOs on Bakun (US$3,000), Penang Inshore Fisherman Welfare Association (US$3,000), Sustainable Development Network Malaysia (US$2,745) and The Borneo Project (US$1,500).

CAUSES

As identified in Table 4, US foundations were primarily interested in environmentalism and population control;  these two causes together receiving 50 per cent of total funding.

Table 4:  Malaysia-US Foundation Funding by Cause

Cause	No. of grants	Funding US$	Share of total funding (%)
Environmentalism	25	1,266,645	25.6
Population Control	5	1,209,030	24.5
Fisheries Development	3	630,341	12.8
Women's Rights	4	613,000	12.4
HIV/AIDS	2	480,630	9.7
Education	11	429,497	8.7
Consumer Activism	6	280,000	5.7
Health & Welfare Services	3	30,000	0.6
All	59	4,939,143	100.0

As mentioned above, the only funding for development purposes was provided to ICLARM for fisheries development.  Although few in number, ICLARM's grants represented 12.8 per cent of the all funding and was the third highest level of funding by cause.

Other causes to receive funding include:  women's rights (US$613,000 or 12.4 per cent), HIV/AIDS (US$480,630 or 9.7 per cent), education (US$429,497 or 8.7 per cent), consumer activism (US$280,000 or 5.7 per cent) and health and welfare services (US$30,000 or 0.6 per cent).

In reality, the funding for environmentalism was higher than indicated.  All the funding for consumer activism went to the Consumers Association of Penang which, in tandem with its Third World Network partner, pursued many environmental causes or based its lobbying on an environmental agenda.

The priorities identified in Table 4 correspond generally with the overall funding priorities of US foundations ⁽¹⁵⁾ and to a great extent represent the values and priorities of Americans.  The extent to which the funding priorities represent the priorities of Malaysians is not clear.

ENVIRONMENTAL CAUSES

While most (92 per cent by value) of the environmental grants were provided for general or unspecified purposes, there were a number of specific targets.  Wetland management received the most funding, with US$63,000 going to Wetlands International for research into wetland management.  Anti-dam protests received substantial funding, all from the Global Green Grants of the Tides Foundation.  Anti-logging and anti-pesticide campaigns also received funding, again mostly from the Tides Foundation.  Although not specified, a substantial reason for the Foundation for Deep Ecology's support of US$555,000 to the TWN/CAP network was its hard anti-biotechnology line.

Table 5:  Malaysia-US Foundation Environment Funding by Cause

Target	No. of grants	Funding US$	Share of total funding (%)
General	9	1,153,400	92
Wetlands	3	63,000	5
Dams	7	36,500	2
Forestry	5	11,000	1
Pesticide	1	2,745	0
Total	25	1,266,645	100

While the causes funded under the general category are unspecified, The Foundation for Deep Ecology focuses its funding on a limited number of causes, including undermining the use and development of biotechnology in agriculture.  All the organisations receiving funding from this foundation campaign against agricultural biotechnology, including TWN/CAP.

FUNCTIONS

In the past, philanthropic foundations in the US concentrated their efforts on subsidising education, scientific research and the provision of health and welfare services.  That is, they focused on directly helping people get access to basic services and to advance knowledge.  As illustrated by Table 6, their priorities have changed.  In Malaysia, US foundation funding is now focused on supporting lobbying or political activities rather than providing services.  The most highly funded function is capacity-building.  This entails funding organisations to develop networks, organise conferences and to plan strategies.  The second highest funding priority was campaigning.  Both capacity-building and campaigning are fundamentally about lobbying either the general public or governments.  The usual aim of these activities is to get governments to do something, for example, to fund a birth control programme, or not to build a dam or to ban the use of a pesticide.

Table 6:  Malaysia-US Foundation Funding by Function

Function	No. of grants	Funding US$	Share of total funding (%)
Capacity-building	14	2,543,805	51.5
Campaigning	25	1,045,500	21.2
Research	8	977,341	19.8
Training	9	342,497	6.9
Services Provision	3	30,000	0.6
Total	59	4,939,143	100.0

Research received only 19.8 per cent of the grant funding, while training and services provisioning received just 6.9 per cent and 0.6 per cent respectively.

In short, US foundations now concentrate not on providing services but rather in lobbying the Malaysian Government through third parties to provide the type of services which they (the foundations) desire.

DEVELOPMENT VERSUS ANTI-DEVELOPMENT

In the past, US foundations, most notably the Rockefeller Foundations and Ford Foundation, placed a high priority on economic development.  That is, they funded -- as a priority -- research, training, and extension activities which aimed to promote economic growth.  This has now changed;  indeed most US foundations have a distinct anti-development focus.

Table 7:  Malaysia-US Foundation Grants for Anti-Development Purposes

	No. of grants	US Funding
Anti-development	28	$1,848,245
Share of Total (%)	51%	38%

A total of 28 grants valued at more than US$1.8 were provided expressly to stop or slow economic development.  Most of these grants were provided for various environmental causes and for lobbying purposes.

This trend highlights a major source of potential tension.  Many US foundations whose wealth is derived from the pursuit of economic growth in the West -- developments which, in turn, had a significant impact on the environment -- are lobbying to stop similar wealth-creating activities in Malaysia.

GEOGRAPHY

One of the reasons prompting our study of NGO funding in Malaysia was evidence that Malaysia was becoming a centre for regional NGOs.  This is borne out in Table 8.  Approximately 70 per cent of US foundation grants to Malaysian organisations were given for work in the Asia-Pacific Region.  Another 12.2 per cent of grants (by value) went to international/worldwide activities.  As such, 82 per cent, or just over US$4 million, of grants were provided for regional and international activities.  Conversely, only 16.8 per cent of grant funding was for national activities and 1.4 per cent for local (sub-national) activities.

Table 8:  Malaysia-US Foundation Funding by Geographical Focus

Focus	No. of grants	Funding US$	Share of total funding (%)
Regional	21	3,438,001	69.6
National	21	828,497	16.8
International	2	602,745	12.2
Local	15	69,900	1.4
Total	59	4,939,143	100.0

TRANSPARENCY

Of course there is nothing wrong in principle with foreign funding.  Indeed, it is essential for many agencies and causes.  While Malaysia is a rapidly developing country, it still does not have the wealth, the philanthropic institutions or the philanthropic ethic that exists in the US.  (Strangely, no funding was provided to develop local philanthropy.) Moreover, many of the causes and organisations considered in this study are regional and international in nature, requiring input and funding from around the world.

The issue is rather one of governance, disclosure and purpose.  The questions are:

• Does the organisation have in place a system of governance that ensures independence from funders;  accountability to members and the communities served;  and consistency with the organisation's objectives?
• Does the organisation disclose to the public, in an accessible format, the level and source of its funding?

The Malaysian Government does require all registered societies to submit their annual accounts to the Registrar of Societies.  While this is an appropriate requirement and provides the basis for improving disclosure, as it is currently structured, the process falls short of what is required.

First, the information is not accessible.  There are nearly 100,000 registered societies in Malaysia.  The information collected by the Registrar of Societies is available only at the Registrar's offices.  The information is not computerised and the data on any one organisation are very difficult to find.

Second, the information is incomplete, with only one-third of registered societies submitting the required data in 2001.

Third, there is no oversight function.  The Registrar's hands are full simply collecting the information.  It does not scrutinise the data with the intention of monitoring funding and behaviour, or informing the Malaysian public about the activities of registered societies. ⁽¹⁶⁾

Currently, therefore, the disclosure is effectively left up to individual organisations -- as it really should be.

The questions are:  how transparent are the organisations which received US foundation funding?  Do they have appropriate systems of governance and disclosure in place?

We are only in a position to survey the material provided on the Internet by the organisations themselves.  Given the growing reliance on Internet communication, the low-cost nature of providing and disseminating information via the Internet and the fact that most NGOs have Websites and use the Internet extensively, the World Wide Web is the appropriate place for disclosure for most of these organisations.  Indeed, if they have a Website, then there is really no good excuse for their not disclosing information of relevance to members, supporters and people affected by the activities of the organisation.

Table 9 assesses the level of disclosure on the Websites of organisations in receipt of US foundation funding.

Table 9:  Survey -- Websites of Governance and Disclosure Provisions

	Does it have a Website?	Website URL	Disclosure Constitution/ statement of purpose?	Disclose Governing Board?	Provide Annual Report?	Disclose Key Funders?	Disclose US Foundation Grants?
International Council on Management of Population Programmes	yes	www.icomp.org.my	yes	yes	yes	yes	yes
International Center for Living Aquatic Resources Management	yes	www.worldfishcenter.org	yes	yes	yes	yes	yes
Asian-Pacific Resource and Research Center for Women	yes	www.arrow.org.my	yes	yes	yes	yes	yes
Universiti Sains Malaysia	yes	www.usm.my	yes	yes	yes	yes	yes
Wetlands International Asia-Pacific	yes	www.wetlands.agro.nl/ wetlands_icu/ap/ www.wetlands.org	yes	yes	yes	yes	yes
Multimedia University	yes	www.mmu.edu.my	yes	yes	yes	yes	yes
University of Malaysia	yes	www.cc.um.edu.my	yes	yes	yes	yes	yes
Malaysian AIDS Council	yes	www.mac.org.my	yes	yes	yes	yes	yes
Malaysian AIDS Foundation	yes	www.mac.org.my	yes	yes	yes	yes	yes
Malaysian-American Commission on Educational Exchange	yes	www.macee.org.my	yes	yes	no	yes
International Women's Rights Action Watch (IWRAW) Asia Pacific	yes	www.iwraw-ap.org	yes	yes	no	yes	yes
Suaram	yes	www.suaram.org	yes	yes	no	no	no
Third World Network	yes	www.twnside.org.sg	yes	no	no	no	no
SIS Forum Berhad	yes	www.sistersinislam.org.my	yes	no	no	no	no
Sahabat Alam Malaysia (Friends of the Earth Malaysia)	yes	www.surforever.com/sam	yes	no	no	no	no
Save Our Sungai Selangor	yes	www.sos-selangor.org	yes	no	no	no	no
Coalition of Concerned NGOs on Bakun	yes - part of suaram	www.suaram.org/bakun	yes	no	no	no	no
The Borneo Project	yes	www.earthisland.org/ borneo	yes	no:  purposely omitted for security reasons	no	no:  purposely omitted for security reasons	no
National Autistic Society of Malaysia	yes	www.ron.net/ nasom	no	no	no	no	no
Desa Amal Jireh	not working	www.lion-cybercare.org/ homes/faith/default.htm
Consumers Association of Penang	not working	www.capside.org.sg
Indigenous Peoples Development Center	no
Persatuan Guru Dharma	no
Pahang Buddhist Association Hemodialysis Center	no
Saint John Ambulance, Pahang	no
Society for the Severely Mentally Handicapped	no
Uma Resident's Association	no
KERUAN	no
Penang Inshore Fisherman Welfare Association	no
Sustainable Development Network Malaysia	no

First, the majority of these organisations (21 out of 30) have dedicated Websites.  Most of these Websites are extensive, up-to-date and are used to communicate with members, the public and funders.

The organisations without Websites were generally small activist groups or charities.

Two organisations -- Desa Anal Jereh and the Consumers Associations of Penang -- had registered Websites, but during the period of this study the site were inoperative.  While Desa Anal Jereh's -- a children's home -- failure to maintain an operative Website is not surprising and is consistent with the actions of other small organisations, CAP's failure to maintain an active site was a real surprise.  Consumer groups generally have been at the forefront of Internet use.  Moreover, CAP claims to communicate with thousands of people, address a wide range of issues and to publish research -- a task which makes a Website mandatory. ⁽¹⁷⁾

Its failure to maintain an operational Website means that CAP provides no information about itself, including its funding, on-line.  Given its size, the level of overseas funding and its claim to represent all Malaysian consumers, this is not acceptable.

Of the 19 organisations which maintain active Websites, 11 get full marks on disclosure.  That is, they provide ready access to information on their Website about their purpose or constitution, governing board, annual report, and funding sources with specific information about funding from the US foundations.

These organisations include:

• Malaysian AIDS Council;
• Malaysian AIDS Foundation;
• Wetlands International Asia-Pacific;
• International Center for Living Aquatic Resources Management;
• International Council on Management of Population Programmes;
• Malaysian-American Commission on Educational Exchange;
• Multimedia University;
• University of Malaysia;
• Universiti Sains Malaysia;
• Asian-Pacific Resource and Research Center for Women;  and
• International Women's Rights Action Watch (IWRAW) Asia Pacific.

These organisations cover the full range of causes, functions and geographic coverage, with the exception of small, locally focused organisations and anti-development organisations.

None of the remaining eight organisations which maintain active Websites provides access to their annual reports or information about funding on their Website.  While most of these provide a statement of purpose, only one (Suaram) provides information about its governing board.

Importantly, the TWN/CAP network -- the network that received the largest amount of US foundation funding -- provided limited information about their operations and failed to disclose their overseas and other funding.

While it is perhaps understandable for small organisations not to publicise their funding on-line, there is no reason for a multi-million dollar organisation, which claims to be membership-based and involved in local politics, not to disclose its offshore links.

Indeed TWN/CAP and other organisations have shown a tendency to hide their off-shore funding links.

In March 2001, the Institute of Public Affairs released data (which was picked up extensively in the Malaysian press) showing that TWN/CAP received US$350,000 from the Foundation for Deep Ecology between 1997 and 1999. Under pressure from journalists, TWN/CAP officials did admit to receipt of this funding, but they failed to come clean about the much higher -- indeed fourfold higher -- level of funding that they were then receiving from US foundations. ⁽¹⁸⁾  This was despite requests from the Government and the media for NGOs to disclose their off-shore funding. ⁽¹⁹⁾

In May 2002, we released information about US foundation funding to Sahabat Alam Malaysia (SAM) and other organisations for anti-dam campaigns. ⁽²⁰⁾  SAM denied that they, or any other groups, received such funding.21 Indeed, they only came clean about the funding when journalists confronted them with evidence from the donors.22

In summary, a sizeable proportion of the Malaysian organisations considered in this study maintain very high standards of disclosure and fully disclose off-shore and other funding.  They do so on-line and with easy and free access to all interested parties.

Some organisations, however, fall well short of providing adequate standards of disclosure.  These include a number of wealthy advocacy organisations which claim to represent Malaysian values and interests, among them the Third World Network, Consumer's Association of Penang and Sahabat Alam Malaysia.

SUMMARY AND RECOMMENDATIONS

US foundations give generously to many Malaysian organisations.  While this is in general to be welcomed, there are a number of disconcerting aspects to the pattern and nature of this funding.

First, while many of the largest recipients of grants from US foundations maintain high levels of accountability, others do not.  Indeed some grantees maintain very low standards of transparency and some try to obscure the existence and purpose of these donations.  Moreover, the organisations with poor standards of disclosure are invariably involved in domestic political activity and this gives rise to concerns about undisclosed foreign influence on domestic politics.

Second, donations from US foundations represent the priorities of the US liberal establishment and not necessarily those of Malaysians.

Third, the US foundations are moving away from funding services and research to funding advocacy activity.

Fourth, US foundations largely fund regional and international organisations based in Malaysia.  And Malaysia is increasingly becoming the centre in Asia for regional offices of international NGOs.

Fifth, a number of the more radical US foundations, including the Foundation for Deep Ecology and the Tides Foundation, are major donors to a number of Malaysian organisations.  These foundations only fund strident, anti-development, political activity.  The actions of the Tides Foundation, in particular, both as distributors of grants and in controlling the activities of grantees, seek to undermine transparency.

There are a number of policies which Malaysian NGOs should consider.

• First, Malaysian NGOs, particularly the larger, more accountable organisations, should establish an association of non-profit organisations with the task of setting adequate standards of disclosure.
• Second, a NGO (or association of NGOs) should take on the function of the US-based Foundation Center and provide an on-line, searchable database of Malaysian organisation which includes the sources of foreign funding and the uses to which they are put.

There are a number of policy reforms which the Malaysian Government should consider:

• Review the lodgement requirement and processes for non-profit NGOs with the Registrar of Societies.  While it is appropriate that all such organisations provide the government with information about their governance structure and funding, the current lodgement process is not effective.
• Consider coordinating the disclosure regime and requirements for non-profit NGOs with its fellow ASEAN countries.
• Require all organisations with revenue above a select amount (say, RM$ 1 million) to maintain a Website which discloses their governance and funding details.
• Begin dialogue with overseas donors about priorities and needs.

ENDNOTES

1.  Pinter, Francis, "Funding Global Civil Society Organisations" in H. Anheier, M. Glasius, M. Kaldor (eds) Global Civil Society 2001, Oxford:  Oxford University Press, 2001.  For the chapter by Francis Pinter, go to [390K PDF file]:  http://www.lse.ac.uk/Depts/global/Yearbook/PDF/ch8.pdf For details of the complete publication, go to:  http://www.lse.ac.uk/Depts/global/Yearbook/GCS2001.htm

2.  www.irs.gov

3.  www.fdncenter.org

4.  www.guidestar.org

5.  Pinter, op cit.

6.  Lawrence, Steven, Carlos Camposesce and John Kendzior, (eds) Foundation Yearbook:  Fact and Figures on Private and Community Foundations, New York:  The Foundation Center, 2000.

7.  Ibid.

8.  Pinter, op cit.

9.  This is the division made by the Foundation Center.

10.  http://www.activistcash.com

11.  http://www.truthabouttrade.org/1071/wrapper.jsp?PID=1071-8

12.  "Nation's Leading Foundations Violate Donor Intent:  Foundations Funding America's Left Have Conservative Origins", Foundation Watch, Capital Research, October 2002.

13.  http://fdncenter.org/research/trends_analysis/top100assets.html.

14.  See http://www.activistcash.com/.

15.  Pinter, op. cit.

16.  "62,000 Societies yet to submit annual accounts:  Its vital to know where funds for NGOs come from", New Sunday Times, 16 June 2002.

17.  "NGOs defend foreign funding", New Straits Times, 2 June 2002.

18.  "CAP confirms receiving funds from foundation", The Star, 14 March 2001.

19.  "Local funding woes forcing NGOs to source abroad", Malaysiakini, 25 July 2001.

20.  "US groups funding disinformation campaign in Malaysia", Bernama, 13 May 2002.

21.  "Governments decline comment on NGO report", New Straits Times, 21 May 2002.

22.  "Sahabat Alam Malaysia accused of lying about US funding", Bernama, 23 May 2002.

Aged Care

Few issues occupy the minds of baby boomers more than ageing.

The concern is not just with our own mortality and retirement, but also about what to do with Mum and Dad as they become increasingly dependent on us.

Of course, we are hardly the first or last generation to confront this dilemma.  It's just that there is so many of us;  our expectations are so high and so many of us are unprepared.  Also our parents, thanks to the wonders of modern medicine, live decades in retirement rather than the few years experienced by their parents.

While advances have been made in some policy areas notably retirement incomes, other policy areas in particular residential aged care has floundered.  Hopefully a series of studies launched this week by the Myer Foundation will spur debate and reform in this area.

One thing the studies make clear is that the status quo is not sustainable.  Unless thing change there simply will not be enough money available to maintain an acceptable level and quality of aged care services.  Moreover, while the studies are exploratory;  they make it clear that while governments should remain the dominate funders of age care, individuals need to make a greater contribution were they can.

More specifically the studies will rekindle debate about the need to use the family home to fund residential care.

Back in 1997 the Federal Government developed wide ranging reform to residential care including higher standards, greater investment and a rigorous accreditation process.  The Government had proposed that individuals in high level care aged homes be charged an asset tested capital bond and that the family home being included asset test.  A huge protest ensued lead in large part by the babyboomers who stood to inherit the home.  The reforms are now being implemented without the funding and providers are now exiting high level residential care.  The government has made up some of the short fall in funding but not all.

The studies show that many elderly have the capacity to contribute.  The average wealth of people over 65 years of age is around $225,000 per person and $400,000 per couple.  Most (71 per cent) owned their own home and the home is easily their most valuable asset.  Other studies show that people entering retirement home seldom return to the family residency and most sell, rent or give the home over to others.

The studies indicate that there are various mechanisms available to extract value from the family home to fund the capital bond without forcing the complete sale of the home.  The bond would not take all or even the majority of the retiree assets.

The study also highlights the need for long term incentives to save.  If people think that the states will pick up the bill, they will not save.  It is important therefore to send a signal to the pre-retirement population that they will be called on to contribute to their retirement cost.  Given that real estate is also the most importance investment vehicle for the young, it should be considered in the funding of their post retirement spending.

This will dismay many babyboomers, but its logic and fairness is overwhelming.

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