Indonesia – Indicators of International Philanthropy from Asia

Indonesia – Indicators of International Philanthropy from Asia

This is the eleventh in a series of twelve articles looking at factors influencing international philanthropy across ten Asian countries, paying particular attention to giving in the areas of international aid and education.

The study identifies nine country specific factors affecting the propensity of people to give offshore funds to these two causes. By using nine general indicators and adding the aid or education indicator, organisations working in either sector can assess background issues determining their ability to raise philanthropic gifts in a particular country. For a full explanation of indicators used, please refer to Article 1: Introduction to the series.

 

Assessment of international philanthropy from Indonesia

Political & Economic Security

Rating: 2

Comments: Indonesia has a steadily growing economy which is highly dependent on the manufacturing sector. The manufacturing sector contributes 26.38% to GDP. Indonesia has experienced high rates of unemployment over recent years, peaking at 11.24% in 2005. Unemployment has declined from 11.24% to 7.14% from November 2005 to August 2010. The political system in Indonesia is a democratic republic form of government, headed by a President. Indonesia has very high levels of corruption, and is considered one of the most corrupt nations in the world. [1]Euromoney Country Risk.

Capital Accumulation

Rating: 2.5

Comments: Indonesia is ranked 9th in the Asia-Pacific region for wealth accumulation. There are 725 ultra-high net worth individuals in the country with an accumulated wealth of US $85 billion. [2]Wealth-X. 2011. World Ultra Wealth Report 2011: Uncovering Pockets of Opportunities

Incentives

Rating: 2

Comments: Incentives to help grow the non-profit sector in Indonesia, such as tax deductions and exemptions, have only recently been introduced, following the fall of the former New Order Regime. During the New Order regime, the government did not provide any incentives, such as tax deductions or exemptions, for donations to non-profit organisations. Under this regime, all foundations that provided social services in the fields of religion, education, health and culture, were theoretically eligible for tax exemptions, but few received them. Additional laws stated that tax exemptions were restricted to grants, donations, presents, government subsidies and inheritance. Reforms on these laws were made with the introduction of the Abdurrahman Wahid government, which now allows certain social spending to be considered a taxable income deduction. The introduction of tax incentives has significantly helped the growth of the non-profit sector in Indonesia. [3]Public Interest Research and Advocacy Center. 2002. Investing in Ourselves: Giving and Fundraising in Indonesia.

Trust in NGOs

Rating: 3

Comments: There is some level of distrust of NGOs in Indonesia. There has particularly been tension between the private sector and NGOs, which often view each other with suspicion because of the past regulatory policy of the New Order regime. Community trust and support for NGOs tends to be higher than the private sector. NGOs have played a critical role in the delivery of social services in the country as it has developed, which has afforded them strong community support. [4]Public Interest Research and Advocacy Center. 2002. Investing in Ourselves: Giving and Fundraising in Indonesia.

Priority of Human Development

Rating: 2

Comments: There is a low level of giving to human development in Indonesia. Research has shown The tradition of giving is part of Indonesian culture, although this mostly translates into individual contributions to traditional religious institutions.[5]Public Interest Research and Advocacy Center. 2002. Investing in Ourselves: Giving and Fundraising in Indonesia.

Propensity to Give Internationally

Rating: 1

Comments: Research suggests a very low level of giving to international causes in Indonesia, with only 5% of giving for 2010 going to non-domestic causes. [6]UBS Insead. 2011. Study on Family Philanthropy in Asia

Overall Level of Philanthropy

Rating: 3.5

Comments: There is a moderate to high overall level of philanthropy in Indonesia. There has been a long history of philanthropic giving to charitable organisations in the country. Philanthropic giving in Indonesia is particularly focused on religious causes. As the largest Muslim country, the Islamic giving practices of Zakat, Infak and Sadaqah are commonly practiced. The practice of Zakat, requires individuals of a certain income level to contribute as much as 2.5 percent of his or her annual net savings, as a religious tax. Similarly, all Muslims regardless of income level are encouraged to give through other forms of almsgiving such as the Infak and Sadaqah. Indonesia was ranked 50 out of 153 in the World Giving Index report for 2010, with 45% of the population donating to charity. [7]Public Interest Research and Advocacy Center. 2002. Investing in Ourselves: Giving and Fundraising in Indonesia. [8]Charities Aid Foundation. 2010. The World Giving Index: 2010.

Fundraising Practice

Rating: 3

Comments: A report published by the Public Research and Advocacy Center on fundraising in Indonesia, suggests there is a moderate level of fundraising practice in the country, with many organisations actively running fundraising schemes including selling products, direct mail, special events and capital campaigns.[9]Public Interest Research and Advocacy Center. 2002. Investing in Ourselves: Giving and Fundraising in Indonesia.

Development of Giving Foundations

Rating: 2

Comments: There is a low level of giving foundations in Indonesia. While philanthropy in the country is now increasing, the policies of the former government have severely stunted the growth of giving foundations in the country. [10]Jung, Ky-Hyun. 1994. Evolving Patterns of Asia Pacific Philanthropy. Institute of East and West Studies. Korea. Seoul Press [11]Public Interest Research and Advocacy Center. 2002. Investing in Ourselves: Giving and Fundraising in Indonesia.

Financial Openness

Rating: 4.5

Comments: Indonesia received a score of +1.17 in the Chinn-Ito (KAOPEN) index for financial openness, indicating a relatively high degree of capital account openness and low level of controls on cross-border transfers. The highest score in the index is +2.5 and the lowest is -1.83. [12]Chinn, Menzie D and Hiro Ito. 2008. “A New Measure of Financial Openness.” Journal of Comparative Policy Analysis: Research and Practice 10 (3): 309-322. [13]Chinn, Menzie D and Hiro Ito. 2010. “Notes on the Chinn-Ito Financial Openness Index 2008 Update.

Giving to Education

Rating: 3

Comments: There is a moderate focus on giving to education in Indonesia. A study by UBS-Insead showed that 32% of giving from family philanthropies in 2010 was directed towards education. [14]UBS Insead. 2011. Study on Family Philanthropy in Asia

 

The total scores for Indonesia are:

  • Index of International philanthropy for aid from Asia 25.5

  • Index of international philanthropy for education from Asia 26.5

 

Jacqueline Cameron

Jacqueline Cameron

Consultant & Research Manager at AskRIGHT
Jacqueline is a dedicated, motivated and results oriented fundraising professional. She enjoys the variety in fundraising, and brings broad experience to clients on all aspects: from identifying prospects to liaising with donors, advising on collateral, writing case statements and bequest brochures, data mining and analytics, and developing fundraising strategies.

To find out how Jacqueline can help your organisation, email j.cameron@AskRIGHT.com.
Jacqueline Cameron
Dr Daniel McDiarmid

Dr Daniel McDiarmid

Principal Consultant at AskRIGHT
Daniel is a highly experienced and innovative fundraising professional with more than 30 years of success raising funds for higher education, research, religious and other organisations in Australia and New Zealand.

To find out how Daniel can help your organisation, contact d.mcdiarmid@AskRIGHT.com.
Dr Daniel McDiarmid

 

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