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NGO REGULATION IN EAST AND SOUTHEAST ASIA:
A COMPARATIVE PERSPECTIVE
Karla W. Simon
Professor of Law
Co-Director Center for
International Social Development
Catholic University of America
In April 2002, the Center for International Social Development and the Law School of the Catholic University of America held a Workshop on the Legal Framework for Civil Society in East and Southeast Asia (hereinafter CUA Workshop). This paper will discuss more theoretically the issues that were raised there. A short report on the CUA Workshop proceedings was published in the International Journal of Not-for-Profit Law1, of which I am Editor-in-Chief, and is attached to this paper for reference (Appendix 1).
The past few decades have seen a tremendous resurgence in the development of civil society in East and Southeast Asia (E-SEA). Dr. Barnett Baron, who made the keynote address at the CUA Workshop, noted two principal reasons for this: first, the increase in international financial support for civil society; and second, the influence of global and domestic forces, such as the inability of many states to meet the social demands of their people.2 As a civil society scholar and practitioner (I am co-founder, with Dr. Leon Irish, and former President of the International Center for Not-for-Profit Law), my sense is that the latter of the two reasons is the more important. In fact, during the time I have worked, both through technical assistance and research, on the legal framework for civil society in the region,3 there have been quite radical changes in many countries. These have all been associated with a lessening of government control over social structures, social service delivery institutions, and individuals seeking to meet common needs. Although developments in countries differ, these social changes have resulted in political changes as well, which signal an opening of the political processes throughout the region.
2. The Comparative Setting4
As many people know, Alexis de Toqueville, who visited the United States from France, wrote with wonder in 1824 about the associational life in the United States.5 He noted that Americans were busily forming associations for all sorts of things - from singing societies to associations for the betterment of local communities to associations for the delivery of social services, such as education, to political associations, formed to advocate for causes, such as banning bars and saloons. Clearly what he experienced in the United States was different from what he knew from his life in France.
This suggests that the experience in European countries with respect to what we now call "civil society" - the life of the non-business, non-government sector -- differs from that of the United States. In Europe, where the laws had permitted the formation of associations and foundations since Roman times, the social context in the early 19th century was such that people did not engage in association with others nearly as much as they did in the United States. Indeed, although singing and other socially oriented societies were prevalent in Europe at that time, there was much less use of associations for politics and advocacy. And the delivery of social services and culture was very much in the hands of the church and the state.
In Asia at that time associations for social purposes were also prevalent. But most Asian states - and, in particular, colonial powers -- had inherent suspicions about political associations, due in part to their prevalence in social and political upheavals. Social services and culture were also not provided by private associations but rather through governmental or religious institutions.
This historical context helps to give a sense of the ways in which an attitude toward the civil society can permeate the manner in which the sector is regulated. If the state views the sector with suspicion and does not wish to permit either social service delivery or advocacy organizations to exist, then the legal environment within which they operate is not an "enabling" one. The state imposes controls that prevent associations and foundations from coming easily into existence, and it watches closely what those organizations it does permit to exist actually do. Indeed, the proper term for government oversight in such settings is "control." Given the historical context described here, it is therefore not surprising that in both Europe and Asia governments have relaxed their legal control over civil society only with reluctance. In Europe strong controls have in many cases continued until recent years. But in the United States the freedom of association remarked on by de Toqueville has held sway to the present day.
3. Structure of the Legal Framework Legislation in East and Southeast Asia.
As suggested in the previous section, governments have traditionally exerted strong legal controls over the establishment6 and oversight of NGOs7 in E-SEA countries. When one looks at selected countries in the region,8 from north to south, this tends to be the case to this day, with the exception of the Philippines. On the other hand, as this brief survey will suggest, a slight trend toward lessening of controls is in fact occurring.
Before embarking on the survey, however, it is important to clarify what kinds of regulation are relevant for NGOs. Throughout the world, there are generally three concerns that a state has with respect to the legal existence of NGOs. The first of these deals with existence itself. If the state is going to permit an entity to obtain status as a legal entity, it must at least check to ensure that the grant of legal entity status, which usually carries with it limited liability, is appropriate. At the same time, however, every state must deal with this issue in the context of not restricting the freedoms of association and expression guaranteed by international agreements (such as the International Covenant on Civil and Political Rights, of which all countries in the survey are States Parties) and most national constitutions. Thus, the way in which any state "controls" the establishment of NGOs must strike a balance between natural concerns about legal entity status and the freedom to associate of the individuals who are setting up the NGO.
A second concern is the need to ensure that the NGO carries out its purposes, as stated in its governing documents. In addition, if the NGO is engaging in an activity that primarily affects the public or a substantial portion of it, then the state has a legitimate interest in ensuring that the NGO carries out its activities in a way that will not harm the public. For example, if a group of physicians wants to establish a community clinic to treat people living with HIV/AIDS, the state will want to ensure that the care is properly provided, in a setting that is conducive to health, etc. Thus, substantive oversight of some kinds of NGOs is appropriate and commonly accepted.
A third concern of the state concerns any grant of special tax status to NGOs. Although states around the world frequently are loath to give up tax revenues, most of them grant at least some special tax privileges to NGOs - in the form of tax exemptions or special treatment of donations to them or both. Thus, the tax authorities have a legitimate interest in ensuring that only entities that meet the legal criteria established in the legislation are allowed the privileges. Otherwise NGOs can become havens for tax evasion.
In the survey that follows, this paper briefly describes the ways in which the first two of these concerns are addressed in E-SEA countries. In the next section it addresses the tax issues.
Japan. The legal framework for NGOs in Japan is complex - there are many types of NGOs, as the attached table (Appendix 2) demonstrates.9 There are 8 separate types of organizations, and many of these are required to obtain government permission (kyoka) or approval (ninka) in order to be established. Only recently, with the adoption of the "Approved Community-Based Organization Law" in 1991 and the "Special Nonprofit Activities Legal Persons Law" (the NPO Law) in 1998, has the government been willing to loosen the controls on the approval process. NPOs -- nonprofit entities established under the NPO Law whose activities include those for promotion of health, welfare, education, community development, arts, culture, sports, disaster relief, international cooperation, administration of organizations engaging in these activities -- may be established without approval by the government. So long as legally sufficient documents are presented to the establishment agency, the Economic Planning Agency (EPA), an NPO must be established. There is no administrative discretion with regard to establishment, nor is permission from or prior consultation with a relevant ministry required. The EPA must issue a certificate confirming the establishment of the NPO.
Under the NPO Law there is also a loosening of government supervision and oversight. Under older legislation dealing with PILPs (public interest legal persons), NGOs are subject to "administrative guidance" by the relevant ministry. For NPOs, that sort of intervention is no longer permitted. On the other hand, all types of Japanese NGOs are required to file annual reports with the relevant ministry or oversight body. In the case of NPOs this is the EPA. The NPO Law makes clear, however, that the ability of this agency to intervene in an NPO's affairs is much more limited than the ability of, for example, the Ministry of Health and Welfare, to intervene in the activities of a "Social Welfare Legal Person."
Republic of Korea. In Korea government approval is needed to establish an NGO despite the apparent guarantee of freedom of association in Korea's Constitution. Article 4 of the "Nonprofit Act," promulgated on 31 December 1975, requires an organization to seek approval of a relevant ministry. This ministry may grant such approval only when an organization can prove that it will be able to achieve its purposes. The relevant ministry is the establishment agency, and it oversees the NGO's operations; annual reports are required on finances and activities. Oversight of NGOs by the relevant ministries is quite intrusive.
China. China has yet to enact legislation dealing with most NGOs. Prior to 1998 the regulatory structure for NGOs in China was limited to regulations on "Social Organizations" and "Foundations," and the regulations, promulgated in the late 1980's, were confusing and inconsistent. In 1998 this situation changed dramatically when two new regulations were put into effect. These regulate not only social organizations but also "non-commercial institutions" (e.g., schools, hospitals, etc.), which are being removed from the state budget and put into the non-government sector. New regulations have yet to be promulgated for foundations; and there are also no regulations for foreign NGOs operating in China.10
The current regulations in China do not greatly relax the controls over NGOs that had been established in the earlier regulations. A Chinese NGO, whether it is a more traditional social organization or foundation or the newly defined "non-commercial institution," cannot be established without the consent of both a supervising entity (the so-called "mother-in-law") and the registering body, the central Ministry of Civil Affairs (MOCA) or one of its local branches (depending on the scope of the NGO's activity). This two-track structure causes Chinese NGOs to conform closely to government policy and, together with other provisions in the regulations, would seem not adequately to satisfy the guarantee in the Chinese Constitution of freedom of association.11
Supervision of NGOs is also subject to the same two-track structure. The supervisory entity is concerned with assuring that the NGO conforms to government policies in the field of activity in which it is operating. MOCA, on the other hand, supervises the NGO's management practices, ensuring that it appropriately spends its money and pays its personnel. There has been talk in China for several years about the development of an "NGO Law" to deal with all types of organizations in a unified way, but that step has yet to be taken.
In October 2001 a new Trusts Law came into effect in China. This new law provides for both private trusts and public benefit or charitable trusts. For the latter it establishes a non-exhaustive list of charitable purposes, which include relief of poverty, assisting victims of natural disasters, supporting disabled persons, developing education, science, technology, culture, the arts, and sport, developing medical and public health care, developing environmental protection and conservations, and "other charitable purposes." Establishment of a charitable trust requires the advance approval of a relevant governmental or party organ, which has the authority to appoint an inspector to oversee the activities of the trust. Annual reports must be provided to the public as well as the appropriate government agency.12
(1) See Regional Report -- Conference on Legal Enabling Environment for NPOs in East and Southeast Asia, 4 Int'l J. Not-for-Profit L. 4 (June 2002), at http://www.icnl.org/journal/vol4iss4/cr_ap.htm#Regional.
(2) See Barnett F. Baron, THE LEGAL FRAMEWORK FOR CIVIL SOCIETY IN EAST AND SOUTHEAST ASIA, Opening Remarks for a workshop held at the Catholic University of America, Washington, April 12, 2002; published in 4 Int'l J. Not-for-Profit L. 4 (June 2002), at http://www.icnl.org/journal/vol4iss4/ar_baron1.htm.
(3) The author has worked on technical assistance and research projects with reference to the legal framework for civil society in the following countries in the region: Cambodia, China, Indonesia, Japan, Laos, Malaysia, Philippines, Taiwan, Thailand, and Vietnam. I have considerable experience in South Asia, as well, including both India and Pakistan. I am extremely grateful to Dr. Leon Irish, ICNL's co-founder and my husband, for all his help with these the other projects.
(4) This paper intentionally takes a broad-brush approach to what the author knows is a complex subject. This is not meant to be a scholarly paper. It is intended merely to set the stage for a discussion of reform of the legal environment for civil society E-SEA.
(5) See Alexis de Toqueville, Democracy in America.
(6) This paper uses the term "establishment" to encompass terms such as "registration" under the civil law and "incorporation" under the common law. Cf., Robert Kushen, Leon E. Irish, and Karla W. Simon, Guidelines for Laws Affecting Civic Organizations (New York: Open Society Institute 1997, and 2002 (forthcoming)) (hereinafter Guidelines).
(7) The term "NGO" will be used in this paper to designate all domestic organizations that are nongovernmental and not-for-profit and that may be referred to as associations, foundations, social organizations, not-for-profit companies, and NPOs (a term of art in Japan, as will be seen). Although this may not be the most felicitous term, it is at least generally understood.
(8) This paper does not analyze Malaysia, but interested readers may wish to consult a recent article on the legal framework for NGOs by Mary George, An Overview Of Issues In Charity Litigation In Malaysia - 2001, in 4 Int'l J. Not-for-Profit L. 1 (2001), at http://www.icnl.org/journal/vol4iss1/george.htm.
(9) See Robert Pekkanen and Karla W. Simon: The Legal Framework for Voluntary and Not-for-Profit Activity in The Voluntary and Nonprofit Sector in Japan (Stephen Osborne, ed.) (London: Routledge, 2003 (forthcoming)).
(10) The author understands that these have been under preparation, but that a draft was withdrawn due to China's joining the World Trade Organization.
(11) For instance, the social organization regulation requires that 50 persons or 30 groups be members before an organization can be formed. That severely restricts the ability of ordinary Chinese citizens to form associations for their private purposes (such as growing chrysanthemums or observing a tea ceremony).
(12) See the 28 April 2001 issue of the English journal Trust Law.