School of Law

 

 

October 15, 2004

 

 

 

LAW & FINANCE INSTITUTIONAL PARTNERSHIP

 

FINAL PERFORMANCE REPORT

 

 

This is the final report for the period July 22, 2002 – July 18, 2004 under the terms of Cooperative Agreement No. CA 497-A-00-02-00031-00 with the University of South Carolina for the Law & Finance Institutional Partnership (LFIP), under Program Director Prof. David Linnan.  Reference is made to our periodic reports for a full listing of activities.  This final report is intended only to be a summary review of general activities and progress by category.

 

 

Background

 


During the period 2002-04, LFIP was a joint undertaking of the Graduate Law Program of the University of Indonesia (UI), the Jakarta Stock Exchange (BEJ), the University of South Carolina (USC), the Graduate Program in Business and Public Law of Gadjah Mada University (UGM), the Asian Law Program of the University of Washington-Seattle (UW), the Asian Law Centre of the University of Melbourne-Australia (UniMelb), the Centre for Asia-Pacific Initiatives of the University of Victoria-Canada (CAPI) and Lehrstuhl II of the Kriminalisches Institut, University of Cologne-Germany (UniKoeln).   Diponegoro University  (UNDIP), Northern Sumatra University (USU), and Airlangga University (UNAIR) also participated, but without management roles within LFIP.  We worked in two distinct areas, (1) on financial sector and  general economic law reform matters, involving cooperation among lawyers, economists, university & government personnel and capital market professionals, and (2) operating a networked  graduate legal and professional  education distance and presence education operation linking ten institutions of higher education in five countries on four continents via videoconferencing and web-based work such as streaming video, both within Indonesia and from abroad.  LFIP’s general objectives included:

 

In the capital markets/financial sector area

 

·         To pursue improvements in Indonesian corporate governance,

·         To improve Indonesian capital markets’ suitability from a regulatory viewpoint for large scale privatisations and divestitures of enterprises currently owned or controlled by the Government of Indonesia,

·         To support on-going regulatory and legislative initiatives to revise and/or reorder financial sector supervision, which may recast the role of the Indonesian Capital Markets Supervisory Agency (BAPEPAM) at the core of a new financial sector regulatory structure,

·         To support on-going regulatory and SRO initiatives to establish and run a capital markets arbitration body (Badan Arbitrase Pasar Modal Indonesia or Bapmi) and related alternative dispute resolution approaches,

·         To support BAPEPAM and the Bursa Efek Jakarta in on-going plans concerning consolidation of the securities industry (reducing number of securities companies),

·         To support on-going efforts to demutualise and improve Indonesian securities exchanges, and

·         To pursue continuing cooperation with other donors and industry groupings generally on the economic and legal reform side

 

In the distance education/professional education area

 

·         To pursue distance education in law and related disciplines at the graduate level as a rapid and cost-effective way of multiplying scarce Indonesian human resources in the ministries, universities and private sector as a crucial component of a conducive legal and regulatory framework,

·         To pursue distance education in law as a rapid and cost-effective way of multiplying scarce Indonesian human resources throughout Indonesia, thereby supporting decentralisation and similar efforts since trained personnel are a critical need in the provinces,

·         To transfer distance education know-how to key Indonesian institutions and personnel in the process of establishing sustainable distance education networks in Indonesia to be operated over the longer term chiefly by and for Indonesians,

·         Beyond distance education, to develop and strengthen a core of  Indonesian law faculty in more modern and multidisciplinary courses and approaches, by demonstrating their effectiveness chiefly via distance education, as select Indonesian universities review and reform their core missions and approaches pursuant to university autonomy plans, and

·         To develop and strengthen lasting, longer term contacts with Indonesian universities and key personnel in support of both globalisation efforts in Indonesian eyes and US foreign policy efforts to fully integrate a prosperous and democratic Indonesia into the broader international community on a lasting basis

 

 

Policy Impacts and Highlights

 

            To properly understand LFIP’s activities, please keep in mind that it worked in parallel in the private sector doing financial sector/capital markets and policy work, in the public sector doing economic law reform work, and otherwise operated a full graduate legal and professional distance and presence educational program employing videoconferencing and the internet.  LFIP tried to listen carefully in Indonesian terms to what was happening on a near term time horizon in the sectors in which it worked, then sought to be proactive in pursuing goals particularly by means that resonated with its Indonesian partners.

 

            On the financial sector side LFIP’s most significant impacts include:

 

·         Organizational work with BAPEPAM and the BEJ setting priorities covering corporate governance, demutualization, securities company consolidation, capital markets arbitration, reorganization of financial sector, among others which merged in the longer term under the RUU OJK.

·         Early and continuing efforts in the good corporate governance area including detailed work through BAPEPAM,  the  BEJ, the National Committee on Good Corporate Governance (KNKGCG) and the Indonesian Institute for Independent Directors and Commissioners (LKDI).

·         Continuing work with Bapepam and the Jakarta Stock Exchange on amendments to the 1995 capital markets law, as it alternated between stand alone and component status under the RUU OJK, plus consultation with Assosiasi Emiten Indonesia (Indonesian Listed Company Association) on their competing draft presented through the DPR as an internally generated draft, to ensure substantive quality regardless which draft eventually succeeded, to secure neutral, expert in-put in a process highly politicized in terms of tensions on the government side between the executive and legislative branches and on the private sector side between SROs and the private sector industry group represented the regulated parties and SROs’ ultimate beneficial owners.

·         Continuing work on reorganizing financial sector supervision, including moving prudential banking supervision from Bank Indonesia, with leadership of the interministerial drafting committee originally for the RUU LPJK, which became the RUU OJK now to be implemented under new President's administration, particularly as it would affect the capital markets, to secure neutral, expert in-put in a process highly politicized in bureaucratic terms due to subject matter.

·         Cooperative work in detail with BEJ research department and generally with BEJ management plus consultation with BAPEPAM on syariah & capital market products.

·         Organized via regulators and SROs nationwide videoconferenced course (10 sessions x  2 hours) by  senior Indonesian leadership of private and public sector capital markets institutions in Indonesian on good capital market practices and arbitration to train arbitrators for BAPMI as Indonesian Capital  Markets Arbitration Body, fix acceptable industry standards on the private sector side, and promote sophisticated capital market understanding outside Jakarta.

·         Consultation with BAPMI during its formative period regarding planning and choices available in its desire to become the preeminent capital markets arbitration institution in Indonesia.

·         Informal consultation with interested Indonesian parties over an extended period in conjunction with the desired scope and content of amendments to the 1998 Bankruptcy Law.

 

 

On the general law and economic reform side LFIP’s most significant impacts include:

 

·         Advisory work at the ministry, agency and SRO levels on cross-over aspects of the more important draft economic laws being created by the executive branch, particularly affecting financial sector institutions and financial markets.

·         In international trade area, socialization and planning work with business, government and educators regarding on-going Doha Round, AFTA plus the textile sector post-2004 quota phase-out under the Multifibre Agreement.

·         Cooperation with two non-US bi-national donor agencies covering projects in the competition law and intellectual property areas.

·         On human trafficking, commissioned research via Sentra HAM UI and regional universities to establish more reliably scope and understanding of Indonesia's problem.

·         On human trafficking, academic and socialization work via videoconferenced course connecting two  foreign and three Indonesian universities plus mid-level Jakarta-based law enforcement officials with regional NGOs matching Asian, European & North American experiences.

 

 

In terms of distance, online and and higher education reform work LFIP’s most significant impacts include:

 

·         Successful build out of Indonesian legal education videoconferencing model & on-line graduate legal distance education and videoconferenced nationwide seminars including shift to university consortium model within Indonesia and abroad.

·         For longer term sustainability, movement of university-based videoconferencing to include sponsorships and fee-based programs for cross-subsidy of regular academic videoconferencing programs.

·         Addition of equipment, lines and personnel training for UNAIR, UGM and UNDIP to join domestic videoconferencing network for graduate legal education joining UI and USU as initial, earlier period LFIP participants.

·         Assisted major Indonesian foundation plus three non-US  binational development agencies in building their understanding of various aspects of videoconferencing and graduate legal  & business education in Indonesia at their program planning stage.

·         Advice to Indonesian higher education institutions navigating change from traditional centralized ministry to longer-term independent, self-financing status. 

·         Creation of videoconferenced and online and streaming education resources via LFIP website (http://www.lfip.org/), including classes covering

 

                  international financial system law (http://www.lfip.org/laws817/index.htm)

                  human trafficking (http://www.lfip.org/laws822/index.htm)

                  marine law, policy & resources (http://www.lfip.org/laws666/index.htm)

                  public international law (http://www.lfip.org/laws783/index.htm)

                  business crime (http://www.lfip.org/laws607/index.htm)

                  intellectual property survey (http://www.lfip.org/lawe567/index.htm)

                  Asian & comparative law (http://www.lfip.org/laws827/index.htm)

                  contract law in Asia (http://www.lfip.org/lawe506/index.htm)

                  international trade law (http://www.lfip.org/laws665/index.htm)

 

suitable for both live class use and self-study on a nationwide basis, as well as a variety of recorded seminars, practical courses and conferences in English and Bahasa Indonesia (see http://www.lfip.org/english/otheract.htm).

·         Trained in newer media desktop production Indonesian personnel to a level of self-sufficiency at our leading university partners.

·         Employment of multidisciplinary approach and methodology concepts to modernize traditional Indonesian graduate legal education, including both economics (for international economic law) and social sciences (for human trafficking).

·         Dissertation supervision and similar academic participation at elite Indonesian state universities engaged in accelerated faculty development to replace older law professoriate.                                            

 

 

 

Achievements Compared to Plan

 

LFIP July 22, 2002-July 18, 2004 Outputs

Policy Workshops, Conferences, Regional For a, classes Press Articles on Relevant Economic Issues Policy Dialogues with GOI, Parlia. or SROs/industry groupings Collaboration Activities with Other Donors

Policy Studies, Analytical Memoranda, Reports, Draft

Laws

Additional

Non-USAID Funding Leveraged

Actual

103
96
73
17
18
$ 46,500
Plan
78
35
27
9
18
$ 48,000

 

            Concerning LFIP’s July 22, 2002-July 18, 2004 outputs, LFIP’s actual outputs exceeded planned outputs, often substantially.  For example, under the category for policy workshops/conferences and courses, planned outputs over 24 months were 78 while actual  outputs in this category were 103 (132% of planned outputs).   The overachievement reflects LFIP activities in the form of more videoconferenced courses and seminars, in part made possible via Indonesian private sector support in terms of general event sponsorship and financial contributions to defray line charges.  As our experience increased with the videoconferencing and newer streaming media, LFIP generally changed its own plans to better take advantage of substantial cost and time savings over traditional approaches to program operation.

 

            There is a further hidden program multiplier involved to the extent many of the workshops, seminars and courses were videoconferenced within Indonesia on a national basis.  Take as example a July 24, 2003 nationwide multi-site videoconferenced half-day seminar entitled Indonesia dan Perdagangan Internasional:  Seri I (covering Indonesian perspectives on the Doha Round and AFTA in Indonesian).  It combined private, educational and government sector audiences and was originated from Jakarta with videoconferenced participation from LFIP member university videoconferencing sites in leading Indonesian commercial centers (Surabaya, Semarang, Medan and Yogyakarta).  This appears as one event in the statistics, but because it was a nationwide videoconferenced event its geographic coverage extended to five major urban areas.  Beyond time and cost savings in not staging a roadshow-style seminar traveling to five different locations nationwide, in Indonesian eyes simultaneous nationwide participation has a special attraction in ideological terms given deep-rooted concerns about national unity.   Thus, beyond the 132% overachievement, on a qualitative level the coverage is arguably several times that amount to the extent nationwide coverage is taken into account, while the statistics do not include analysis of the nature of traditional events, versus the heightened impact of LFIP's augmented by newer media or instructional technologies.

 

            Concerning press articles, planned outputs were 35 while actual outputs were 96 (274% of planned outputs).  This substantial overachievement reflects the idea that LFIP's chosen program areas increased in prominence beyond expectation over the 24 months.  It also reflects the idea that there was broad based Indonesian interest in our project areas.

 

            Concerning policy dialogues with the GOI, Parliament, or SROs/industry groupings, planned outputs were 27 while actual outputs were 73 (270% of planned output).  This very substantial overachievement chiefly reflects more LFIP engagement with private sector and industry associations in areas like the financial sector, new labor courts and international trade law.  Once LFIP increased its work with private sector and business organizations, we discovered that those same organizations would come back to us for help in other areas.  We had experienced this phenomenon before of being approached by Indonesian institutions as a source of know-how rather than funding, but it was particularly strong with private sector institutions (perhaps because LFIP was already well established in its capital markets work via the BEJ and SROs, hence was already accepted within the sophisticated Indonesian business community).

 

            Concerning donor collaboration, planned outputs over 24 months were were 9 while actual outputs were 17 (189% of planned outputs).  This substantial overachievement resulted from a combination of advisory and coordination work.  By way of example regarding advisory work, a major Indonesian foundation interested in investing substantial funds in the reform of Indonesian higher education approached the Program Director for advice due to our university consortium structure and perceived general success in graduate legal and business education.  Cooperation more typically involved working together with bilateral non-US donor institutions, sometimes involving higher education and sometimes involving substantive areas like economic law.

 

            Otherwise, planned outputs over 24 months compared to actual outputs were not greatly out of line.  Policy studies, analytical memoranda, draft laws and the like had planned and actual outputs of 18 (100% of planned outputs).  What is not visible in the bare statistics is that many of these were book-length works in Indonesian, arising out of Bahasa Indonesia dissertation supervision work in graduate legal education, which would appear under the aegis of Indonesian partner universities rather than as designated LFIP project literature.  Planned outputs over 24 months for additional funding leveraged were $48,000, while actual outputs were $46,500 or 97%.  Most of the additional funding came from the Indonesian private sector in terms of cash contributions for event sponsorship and to defray videoconferencing costs, and made a substantial contribution indirectly to increased numbers and effectiveness of events and policy dialogues.

 

 

Continuing Work on Objectives

 

            Work continues in several areas, for example distance education, as a function of sustainability and continuing relationships particularly at the university to university level.  Early July 2004 was spent meeting with a variety of Indonesian university officials, financial sector companies and business leaders exploring the feasibility and financing of a follow-on tuition-supported English-language masters level degree program for financial sector law to be offered cooperatively by one or more LFIP-member US universities in conjunction with one or both of UI and UGM.  The model is not for open enrollment with students paying fees, but rather for private sector entities financially sponsoring select mid-level management candidates for circa 12 months of study carried out within Indonesia via instructional technology & distance education (streaming material and videoconferencing) plus 2-3 months presence in the US.  We were surprised at the very positive response of the Indonesian business community, who were more sensitive to quality rather than price concerns.

 

            Similarly, we continue to teach via videoconferencing in Fall 2004 a shared corporate/project finance course between USC, UI and UGM to a mixture of graduate law students and working financial sector personnel in anticipation of Indonesia's significant near term infrastructure needs (which probably require drawing upon private sector capital via project finance approaches).  LFIP considers the concept of a university consortium or network continuing with distance education within Indonesia and across international borders as one of its legacies with the greatest potential for longer term human resource and institutional improvements in Indonesia.  LFIP effectively birthed networked videoconferencing among leading Indonesian state universities in a prior period, and we observe that at least three of the five Indonesian LFIP members now regularly originate instruction among themselves via videoconferencing.  We believe LFIP collaborative advisory work with a variety of donors interested in improving Indonesian legal and business education will also continue to bear fruit long into the future.

 

            LFIP has accumulated an archive of several hundred hours of technical programming in the form of digital video recordings, consisting of financial sector, economic and international law seminars and courses taught in Bahasa Indonesia and English.  Assuming sufficient financial resources, we intend to convert some of this digital program archive into streaming material for the LFIP website (http://www.lfip.org).  As examples, priorities would include the Eighth Quadrennial National Law Reform Seminar of July 14-18, 2003 (in Bahasa Indonesia), and two financial sector programs covering stock exchange demutualization and cross-border capital markets cooperation in the ASEAN region following European models like Euronext (in English), plus reform of Indonesian financial sector regulation (OJK law, in Bahasa Indonesia and English).  Our LFIP website remains open, and we are constantly adding new material such as a fully revised Fall 2004 public international law course with streaming video.  Website materials are available for continued individual study, plus are used as internet-based adjuncts for continuing shared videoconferenced courses.

 

 

Challenges for US-Sponsored Work in the Islamic World

 

            LFIP represents an established institutional network among Indonesian and foreign academics and professionals which, by virtue of substantive expertise, has worked successfully over an extended period to the mutual benefit of US and Indonesian partners during a period of acknowledged tension between the US and the Islamic world (post-9/11, Iraq and Afghanistan).  This included an extended ordered evacuation of the US Embassy, bombings targeting foreigners, record low approval among the Indonesian public of the United States according to US-commissioned public opinion polls, etc.  Just as needs have soared on the Indonesian side, serious engagement on the US side has become more difficult absent sophisticated understanding of issues like Indonesian and Islamic politics.  The problem is matching "hard" substantive skills like law or economics with "soft" understanding otherwise more typical in scholars of Islam or Asian studies (who correspondingly lack the necessary hard skills for the technical exercise of discussing anti-dumping and countervailing duties law, financial sector regulation, etc.).  However, LFIP worked successfully in this environment given project staffing by Asian law scholars with the necessary hard substantive skills.

 

            LFIP is unusual in working simultaneously in the private, educational and government sectors.  LFIP employed a university-based strategy.  We approached matters generally by organizing our efforts via elite academic institutions in Indonesian terms.  There were five elements to the strategy.   First, in terms of institution building in Indonesian eyes, the elite educational institutions are tasked with developing human resources and for public discourse concerning competing ideas (like think tanks, in US terms).  They have strong links with NGOs and civil society, but have more official status in Indonesian terms.  Second, because of their academic nature, it is possible to carry on robust public discussions and dialogues within a framework acceptable to the Indonesian public.  That kind of process is freighted with political overtones when pursued by foreign experts working within regular Indonesian government agencies, because whenever such foreign experts acting within Indonesian government appear in public, they run into serious political problems if they appear to challenge policy within government agencies.  By opposition, in Indonesian eyes the same conduct is appropriate when carried out in an exchange of views within leading higher education institutions.  Third, the Indonesian government views as its own leading experts, those law and economics faculty teaching within the elite higher education state institutions.  Meanwhile, as witnessed by LFIP's own Indonesian partners, senior Indonesian academics often have a parallel senior government position.  Beyond old school tie, working within the elite universities provides a ready path into policy levels of government because the two merge personnel in the Indonesian context.  Fourth, the elite educational institutions are still viewed favorably by the Indonesian public since they are not perceived to suffer the same corruption problems as ordinary government.

 

            Fifth and finally, outside Jakarta the leading academic institutions are typically the most significant source of local expertise and more sophisticated human resources.  Indonesia has been engaged in a relatively rapid, broad-based decentralization process for the past several years, and the further the process advances, the greater the need for sophisticated expertise on the local level.  LFIP on the academic side is modeled on something approaching a cascade in which the most active Indonesian partners (UI and UGM as the Indonesian equivalent of Harvard and Yale) are the leading elite institutions, who then reach out via videoconferenced programming to the next level of state universities (USU, UNDIP and UNAIR as the Indonesian equivalent of Georgetown, Berkley and Texas).  LFIP believes the best way to achieve improvement in human resource and similar terms at the provincial government and decentralized private sector levels is via the better state universities.  However, this requires a detailed understanding both of Indonesian higher education generally and a realistic view of capacity at the level of individual institutions to manage the cascade process.

 

            LFIP traditionally has an entree into the Indonesian business community via financial sector work at the BEJ, through which we also reach into listed companies at the senior management level.  In parallel, we stepped up our efforts to interact more with private sector business groups like APINDO (Indonesian equivalent of the Business Roundtable), plus financial sector industry associations and SROs.  We melded our efforts through organizations like APINDO, financial sector SROs, and the elite educational institutions to organize events with senior private sector, government and academic participation in economic law and policy areas (e.g., financial sector, or international trade and AFTA).  LFIP also took advantage of financial contributions/sponsorships from the Indonesian private sector as a way to increase resources for a variety of activities.  We viewed funding contributions as confirmation that LFIP programs responded to actual needs on the Indonesian side, given that the local private sector was willing to help pay for them.  We believe such a public-private partnership approach working out of the universities has succeeded, and will succeed in the future, where others lag given current circumstances in the Islamic world.

 

            All approaches to "Indonesianizing" LFIP's work at several levels required greater effort than simply working within the Jakarta bureaucracy or even civil society as commonly understood (meaning NGOs).  However, we believe the more demanding approach in the short run to be the more promising one in the longer run in terms both of institutional development and immediate effectiveness as Indonesia becomes a more democratic, complex environment in which authority is decentralized and more reliance is placed on private sector leadership.

 

Indonesia remained a challenging work environment 2002-2004, particularly from mid-2002 through mid-2003 during the ordered evacuation of the US Embassy.  LFIP had moved at period's beginning for unrelated reasons from operating with a fulltime Program Director present in Jakarta mixing economic law and financial sector reform plus distance education work between UI and USC, to operation in university consortium form of a videoconferenced and internet-based distance education program at the graduate law level alongside financial sector work on periodic visits to Indonesia (with the Program Director commuting for three weeks every 2-3 months to Indonesia).

 

LFIP simply refocused and shifted its work to adjust to changing circumstances in terms of putting more emphasis on videoconferencing and similar educational work, even while, with USAID EGT Jakarta's encouragement, we did not completely disengage from our earlier law and economic reform work based upon requests from the Indonesian side and our reach across the Indonesian government, educational and private sectors.  LFIP was present and dealing with our partners in Indonesia on a weekly basis during the entire period, whether physically or by means such as videoconferencing and web-based materials to conduct courses.

 

 
Respectfully submitted,
 
 
David K. Linnan
 
Program Director

 

 

 

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