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This paper is part of the collection Financing Development in Southeast Asia: Opportunities for Collaboration and Sustainability produced with support from the Sasakawa Peace Foundation.
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Over the past several years, Indonesia has experienced drastic changes in its economic and political fields that have directly affected civil society's opportunity to bring about change in the country. In the economic sector, Indonesia has been enduring a very serious monetary and economic crisis that began in mid-1997. The crisis started with the dramatic fall of the rupiah's value against that of the US dollar, falling from Rp 2,250 per US $1 to about Rp 10,500 per US $1 at the end of 2001. It suffered a drop of more than 350 percent within a period of less than five years and, in early 2003, stands at about Rp 8,500 per US $1.
A Time of Political and Economic Change
The crisis had a very serious impact on the life of millions of Indonesians. Between 1996 and 2001, the number of Indonesians living below the poverty line increased from an already high figure of 22.5 million people, or 17 percent of the total population, to about 45 million people, some 25 percent of Indonesia's total population in 2001. Open unemployment reached 6.2 million people during the crisis; combined with the percentage of the population underemployed, approximately 35 million people were seeking work at the turn of the millennium.
In the political field, the fall in May 1998 of the military-backed New Order regime under Suharto marked a turning point in the country -- one that began a transitional process toward democracy. The democratic government formed in 1999 began to restore basic freedoms of citizens, such as freedom of association, assembly, and expression.
Civil Society Takes Root
Indonesian civil society has been a part of this transition process in many ways. Hundreds, even thousands, of new organizations have come into existence since 1998. Moreover, a significant number have been providing education on democracy and human rights. Others have been asserting the right of citizens to participate in the decision-making process, to fight corruption, and to struggle for law enforcement. At the same time, Indonesian organizations have been providing food security, basic social services, job creation help, and other assistance in income generation for the urban and rural poor.
Like many of these organizations, Dian Desa was established as a yayasan, which literatally translates into foundation in English. For many years, the legal requirements to establish a yayasan were minimal, requiring only a notarized document listing the founders, structure, and composition of the board, location, and assets. Recognizing the lack of accountability that laws permitted within yayasan, the Indonesian government drafted a new, stricter law governing yayasan operations. It was issued in 2001 and allows existing organizations to make adjustments within five years from the time of the act's issuance in order to meet these new standards of accountability.
Although there are many different kinds of yayasan now operating in the country, most are quite small, with limited assets and little capacity to manage endowments. In fact, a high dependence on external sources for funding is one of the main challenges confronting local NGOs and funding organizations alike. Similar to the organizations that they assist, Indonesia's foundations obtain the greatest portion of their funds from foreign sources. A survey conducted of over 25 local funding organizations in Indonesia in 2000 indicates that 65 percent of their funds were obtained from overseas sources, namely official development assistance agencies, international foundations, and NGOs. Other funding sources were in the form of contracts with government agencies and consultancy services, but this portion of funds accounted for only 12 percent of revenues. Meanwhile, funding sources in the form of endowments and contributions from the private sector accounted for only 6 percent. The remaining 9 percent was from other sources, including public donations (Ibrahim 2000). The continuing decline of foreign aid promises to mount an even greater challenge to Indonesian organizations seeking to sustain themselves as well as their impact on critical societal issues.
Nevertheless, yayasan like Dian Desa are playing a critical role in Indonesia. According to a survey conducted in 2000, some 25 indigenous foundations in the country disbursed about US $8 million in grants and loans in that year alone (Ibrahim 2000). As this case study will illuminate, Dian Desa's work underscores the value of developing indigenous organizations that reflect local needs and strategies but that can also provide the financial and capacity building means to strengthen civil society. Moreover, it exemplifies how a profit-generating business can reap positive social benefits at the same time. Earned income opportunities like those pursued by Dian Desa now demand greater attention and consideration.