ICNL logo

The International Journal
of Not-for-Profit Law

Volume 7, Issue 2, February 2005

A publication of the International Center for Not-for-Profit Law

Table of Contents

Letter from the Editor

Latin America

The Promise and Peril of Democracy (Full Text of Speech)
Jimmy Carter

The Promise and Peril of Democracy (Summary)
Joseph Proietti

Threat Resurges for Venezuelan NGOs [Spanish Translation]
Antonio L. Itriago and Miguel Ángel Itriago

Transparency Versus Government Supervision in Peru [Spanish Translation]
Beatriz Parodi Luna

Federal Law for the Promotion of Civil Society Organizations in Mexico
Consuelo Castro

Active Without Recognition: Obstacles to Development of the Colombian Third Sector
Adriana Ruiz-Restrepo

The Role of the Media in the Consolidation of Democracy in Latin America
The Latin American Program of the Woodrow Wilson Center for International Scholars

Articles

Philanthropy and Law in South Asia: Key Themes and Key Choices
Mark Sidel and Iftekhar Zaman

The Role of a National Donor Association: A U.S. Perspective
Robert Buchanan

California’s Nonprofit Integrity Act of 2004
Thomas Silk and Rosemary Fei

Progress on Civil Society Legislation in Turkey
Filiz Bikmen

Taxation of Grants in Russia
Yulia Checkmaryova

Reviews

Civil Society
By Michael Edwards
Reviewed by Stephan Klingelhofer

The Law of Charities
By Peter Luxton
Reviewed by Richard Fries

Does Civil Society Matter?: Governance in Contemporary India
Edited by Rajesh Tandon & Ranjita Mohanty
Reviewed by Bindu Sharma

Governing Nonprofit Organizations: Federal and State Law and Regulation
By Marion R. Fremont-Smith
Reviewed by Michael Bisesi

Balkan Identities: Nation and Memory
Edited by Maria Todorova
Reviewed by Gerald M. Easter

Something to Believe In: Politics, Professionalism and Cause Lawyering
By Stuart A. Scheingold and Austin Sarat
Reviewed by Patricia Lyons

- - - - - - - - - -

Download this issue (PDF) | Editorial Board

Philanthropy and Law in South Asia: Key Themes and Key Choices

By Mark Sidel and Iftekhar Zaman*  

Philanthropy and Law in South Asia – the project and the book – provides an important window into the com­plex relationship between philanthropy and the state in five key countries of South Asia: Bangladesh, India, Nepal, Pakistan, and Sri Lanka. In South Asia, governments seek, sometimes actively and sometimes perfunctorily, to facilitate giving and the work of the nonprofit sector, for this “third sector” does much that the state cannot or will not do. But governments also seek to control and manage philanthropy and the nonprofit sector, concerned about the sector’s rise to national influence and political authority as an increasingly important factor in development and social change, often with political implications. 

Law is a crucial force for the state’s control and facilitation of nonprofit and philanthropic activity, a key crucible for the complex relationship between national governments and nonprofit work. Commentators in and beyond South Asia have often portrayed law as the mechanism for control and management of philanthropy and the nonprofit sector in the subcontinent.[1] And there is, of course, a rich literature on law in Bangladesh, India, Nepal, Pakistan, and Sri Lanka.[2] But among the many findings and features of our project is that law, and the legal regulation of philanthropy and the nonprofit sector in South Asia, fulfills a considerably more com­plex and contradictory role than perhaps earlier thought. A conflicting and fascinating picture emerges from these studies: law controls and manages; law also facilitates and encourages. Law restricts the space and autonomy of the nonprofit sector; and simultaneously law may provide legitimate means for nonprofit flexibility in organization, governance, accountability, and programmatic activities. The studies focus on the complex and even contradictory roles played by the law and the key choices that they imply for the countries of South Asia.  

This overview has two primary goals. We will briefly review some of the major findings of the research and writing so ably carried out by the scholars, lawyers, and activists who gathered as the proj­ect team for Philanthropy and Law in South Asia (PALISA). This will not be a review in great detail, for the fine country chapters in the volume itself do that job in far more detail and with far more contextual sensitivity than we can muster here. Instead, we will focus on discussing and analyzing some of the complex choices, even dilemmas, that the country chapters have brought to the surface and that the societies of South Asia face as their rul­ing states seek to use law both to control and to facilitate the increasing activities of the philanthropic and nonprofit sectors – choices made con­siderably more complicated by a changing domestic and international environment.  

Background and Legal Context: Paths Toward Reform in the “Complex Tapestry” of South Asian Legal Systems 

The essays prepared for our volume present the true complexity of the roots of the state’s regulation – through law – of philanthropy and the nonprofit sector in Bangladesh, India, Nepal, Pakistan, and Sri Lanka. The laws and regulations that govern the sector in each of these five countries come from multiple origins. They are not merely (as has sometimes been portrayed) the modern applications of colonial law in which indigenous masters replaced colonial masters in the use of legal regulation to control, restrain, and limit the growth and activities of philanthropy and the non­profit sector. Rather, they arise out of complicated indigenous and colonial strains of control and facilitation, mixed with significant religious and cul­tural influences in each country.  

If the history of legal regulation of philanthropy and the nonprofit sector in South Asia were merely one of state control, passed along from colonial to indigenous hands, we would be hard pressed to explain the vitality of the nonprofit sector in each of the South Asian countries today. It may be that the original balance, in colonial hands, was in the direction of control and management. But even if that were true, along the way to the early 21st century some change has occurred. Legal regulation of the nonprofit sector continues to provide, and even to emphasize, control and manage­ment. But it has adapted, as our country authors show, to facilitate growth and influence rather than merely constraining it, in the process providing an opening for diverse groups to become active and enabling a wide range of organizations to operate with reasonable autonomy under a sometimes bewildering array of legal structures and documents.  

Arittha Wikramanayake puts this particularly well in the Sri Lankan con­text, for example:

The fabric of the law in Sri Lanka … has a rich texture, not only incorporating principles of various customary and religious laws but also being deeply influenced by the principles of two great legal tradi­tions – ... civil and common law…. During this process, the focus of the law has taken many forms … influenced by various diverse factors, cir­cumstances and events; resulting in a complex tapestry [that consists] not only of principles of different legal systems, but also of customs and reli­gious principles originating from … different sources….[3]  

After independence, law adapted as state policy changed — from encouraging growth in the sector in the 1950s and 1960s, to a considerably more suspi­cious attitude in the 1970s and 1980s, and back to a more facilitative role in more recent years.  

The situation is similar in Bangladesh, where, as Sumaiya Khair and Saira Rahman Khan confirm, philanthropy is “rooted in custom, tradition and religion … transcend[ing] generations and spanning] communities.”[4] Colonial rule and colonial law played a substantial role in the early regula­tory system for the Bangladeshi nonprofit sector, a structure that has been carried down to the present day with adaptation. And, as the authors point out clearly, the social organizations developed under the colonial structure of control and facilitation transformed themselves in the struggle for inde­pendence, in turn also transforming that struggle too. “Social organisations … were galvanized into taking a political stand vis-à-vis the struggle for independence, and that struggle also resulted in the emergence of new organisations.”[5]  

The Indian system of nonprofit regulation is, as the Indian chapter authors make clear, similarly rooted in complex religious, cultural, eco­nomic, social, and political factors, including the strong influence of British colonial law. The Nepalese system of nonprofit regulation also finds its ori­gins in religious, cultural, economic, social, and political roots, though for many years after 1960 the state played a highly restrictive role, and since 1990 nonprofits have gained some measure of rights in the changing Nepalese political system. And so too the Pakistani system, as Zafar Ismail and Qadeer Baig explain well and in detail.[6]  

Several important themes emerge here. One is the constant tension between old law — often dating back to the 1850s or 1860s — and the adaptation of that law for modern contexts. This has proved difficult in each of the countries we have studied, and no South Asian country has a monopoly on effective approaches to what, in an earlier era, might have been called the “modernization” of law. When various interest groups are added to the mix, including bureaucracies that have grown dependent on a “raj” system of licenses and approvals, change is even more difficult. In recent years, indigenous actors in Pakistan have moved assertively to avoid the traditional problems of “modernizing” colonial law by proposing new legislative solutions to issues facing parts of the Pakistani nonprofit and philanthropic sector that do not rely on the piecemeal tinkering and amendment of century-old statutes (e.g., registration, status, governance, accountability, and finances). It remains unclear whether that broader approach will succeed, but it is most certainly worth careful attention.  

A second major theme, often underemphasized in accounts of non­profit regulation in South Asia, is the crucial role of religion and religious practice in the development of South Asian nonprofit legal systems. Each of the country chapters discusses the religious heritage of modern nonprofit regulation in some detail. One of the primary contributions of the country chapters, it seems to us, is that they bring religion back into the process of understanding the roots and modern legacies of nonprofit law in South Asia. The authors here are not the only ones to do that; in recent years, the religious roots of nonprofit activity in South Asia and the influences of religion on the nonprofit world have received extensive attention from Sampradaan/Indian Centre for Philanthropy and other researchers, policy-makers, and activists in South Asia.[7]  

This process of change and some adaptation has implications for reform of the legal structures and mechanisms by which the state regulates philan­thropy and the nonprofit sector in each of the countries we have studied. If law is more complex than originally understood, and has undergone some adaptation and change, then it may be neither feasible nor, frankly, desirable to engage in wholesale substitution of new legal arrangements, particularly from foreign models – though harmonization, simplification, and making the process of nonprofit registration and operation easier and more friendly to citizens in South Asia, while increasing accountability, is certainly desirable.  

In particular, given the complexity of the roots and development of the South Asian systems governing philanthropy and law, solutions that empha­size any particular “model,” or “best practices” from abroad that seek to replace current regulatory systems, may not be the answer. That is not to deny that comparative perspectives are useful in the struggles for reform of the legal framework for philanthropy and the nonprofit sector in the countries of South Asia – of course they are, and the country authors recognize that. But they also recognize that the very complexity of each country’s cultural, political, religious, economic, and social situation must be taken fully into account in the reform process, and that any assumption that the current legal framework is merely the “hand-me-down” of colonial rule seriously oversimplifies the struggles underway in South Asia.  

Several other themes emerge from the country chapters, though they may not be as explicitly stated as the process of adaptation of older law and the role of religion and religious practice. South Asian states have long been concerned about the role of powerful external donors in their countries. In the 1950s and 1960s, foreign donors focused on working with the state (especially with central government ministries) on social development, services, and policy issues. Many of these donors became frustrated with weak, technically inefficient, and sometimes corrupt government ministries and other state institutions.  

As a result, in the 1970s and 1980s, foreign donors emphasized supporting and building indigenous nongovernmental organizations as service providers and, increasingly, as policy advocates and participants. In turn, governments throughout Asia have sought to restrain the influence of external donors and, where possible, to re-channel their con­tributions to and through state institutions – an arduous and often unsuccessful process for many Asian states. Re-channeling those funds through the state has often failed, and states in South Asia and beyond continue to rely upon controlling flows to indigenous nonprofits as a weak but still troublesome substitute for bringing those funds back “onshore” to the state while seeking to maintain the flow of much-needed donations.[8]  

The Foreign Contributions (Regulation) Act (FCRA) in India is the best-known mechanism for controlling the flow of foreign funds and pre­venting donations to anti-government institutions. But, as the country chapters on Bangladesh and Pakistan also make clear, FCRA is not the only regulatory response to state anxiety about foreign donor influence.  

Along with concern about the power of foreign donors, a new anxiety has arisen for South Asian states: the growth of large and powerful domestic nonprofit organizations. The emergence of Grameen Bank and BRAC in Bangladesh, and certain smaller but still influential organizations in India, are perhaps the most prominent examples of this trend in the region. The state’s concern about the growth of such powerful indigenous nonprofits is reflected in regulatory action that seeks to limit domestic nonprofits’ access not only to foreign capital, but also to commercial opportunities at home as well.  

A recent example in Bangladesh illustrates these tensions: Several years ago, the attempt by BRAC, one of Bangladesh’s largest and most powerful nonprofit organizations, to establish a commercial bank in com­petition with the traditional private banking industry proved controversial and provoked opposition by some government regulators as well as some private banks and activists concerned about the expansion of nonprofit activity into the defiantly large profit-making sphere. Eventually, after action by the Supreme Court of Bangladesh, BRAC Bank was authorized to begin business, and it has now become one of Bangladesh’s most effi­cient and profitable commercial banks. But the controversy reflects the state, private, and nonprofit anxiety over the transformation of nonprofits into large, powerful institutions that function as important economic actors as well as fulfilling their traditional nonprofit and charitable roles.[9]  
 

The Status and Registration of Philanthropic and Nonprofit Organizations: Enhancing the Facilitative Role of Law 

Philanthropic and nonprofit organizations are registered and regulated through multiple channels in each of the countries studied by the PALISA project team. Most of these are adapted legacies of colonial and indigenous mechanisms. In Sri Lanka, for example, nonprofit institutions can be organized as companies, trusts, societies, and cooperatives, and can be estab­lished through acts of Parliament. Similarly, in Bangladesh, nonprofits may be organized as societies, trusts, waqf (the Islamic analogue of trusts), social welfare associations, nonprofit companies, cooperatives, and endowments.  

With some permutations, the situation is similar in Nepal, India, and Pakistan. In India, we see public, charitable, and religious trusts of various sorts, along with societies, companies, and cooperatives. In Pakistan, the chapter authors provide extensive detail on voluntary social welfare agencies, societies, trusts, companies, various forms of endowment, cooperatives, and other organizational forms. In Nepal, a similar range exists: societies, various forms of trusts (both formed and statutory), and cooperatives.  

In each country, we thus see a wide diversity of nonprofit forms and mul­tiple options for the formation and registration of nonprofit and philan­thropic institutions. The formation of nonprofit organizations and their registration under these various options can be easy or cumbersome – but one key point for our discussion is that there are multiple options, and that the sheer availability of options may often be an advantage for non­profit organizations in their relations with the state. But it is also clear in each country surveyed that every form of organization has its own vertical structure of government monitoring and regulation. This “silo” structure gives nonprofits organizational options, but it also leads to exten­sive regulation based on restriction rather than facilitation, significant bureaucracy, and difficulty in effecting change.  

One of the authors, Arittha Wikramanayake, provides one interpretation of the results of that structure of options:
 

[T]here are no uniform criteria or procedures [for formation and registration]. Though the existing frame­work provides a wide choice, flexibility and freedom … it also has signifi­cant drawbacks that tend to undermine the growth of the sector. These drawbacks include the multiplicity of regulators, the overlapping of laws and regulations and lack of common standards by which … performance … can be measured. These also lead to the creation of considerable opportunities for “regulatory arbitrage” that even extend as far as non-regulation. The end result is rather unsatisfactory, with such organizations being permitted to operate under varying degrees of regulatory conformity, and the growth of “fly-by-night” operations whose unethical activities tar­nish the credibility of the entire sector.[10]  

In his comments we have the crux of the problem: the multiple channels and options for formation and registration provide opportunities for non-profits to escape heavy-handed state control and management – but they also provide more unsavory organizations with ways to evade state man­agement, and they make accountability more problematic because of the “lack of common standards by which … performance … can be measured.”  

The authors of the Bangladesh chapter make similar comments. Khair and Khan write that the lack of uniformity among organizational forms and the legislation that governs them results in a system “plagued by administrative and procedural bottlenecks” and exceptionally difficult to administer. “[T]he slackness and lethargy of implementing authorities makes processes convoluted and time consuming,” leading in turn to the “corrupt manipulations of these officials,” which in turn results, as our Bangladeshi colleagues put it dryly, in processes that are “expensive as well as tedious.”[11] But the organizational options for formation also provide nonprofits with “a wide choice of laws,” leading to the sort of organiza­tional “regulatory arbitrage” of which Arittha Wikramanayake spoke. In the Bangladeshi case, the authors note that “the current practice of incorporat­ing under different laws albeit for similar purposes and with similar objec­tives actually encourages organisations to take advantage of the diverse legal arrangements available, and engage in non-transparent operations.”[12]  

In the Bangladeshi case, choice and flexibility are mixed not only with bureaucracy and corruption, but also, inevitably, with significant govern­ment discretion. Security officials check for “anti-state or anti-social activities,” according to the chapter authors, but
 

[t]here is no indication whatsoever as to what constitutes such activities…. Instances are common where these investigative bodies willfully withhold reports and “sit on the files” until some payment, in cash or kind, is proffered… Therefore, although the text of the law is clear on … registration, the implementing agencies manipulate the provisions by using their discretionary powers....[13]  

A similar diversity of types of organization leads to a range of registration options in India, Pakistan, and Nepal, with similar “arbitrage” flexibility for the sector and similar “silo”-type discretionary regulation by the state – and difficulties in reform.  

Is the solution here to “rationalize” the legal regulation of philanthropy and the nonprofit sector by integrating nonprofit regulation into a single law and a “one-window” system for formation and registration? This is the solution proposed by some, including some of the PALISA authors, who view “opportunities for regulatory arbitrage” as a negative and who reflect the frustration in the nonprofit sector at being unable to deal effectively with bureaucratic regulators. But real dangers lurk here as well: the ration­alization of the legal regulation of philanthropy may not facilitate its development but merely give the state more control, unfettered by the “opportunities for regulatory arbitrage” that so benefit many nonprofits – good ones as well as the less good – in each of the countries studied in the PALISA project. Single-law rationalization – which currently has not met with approval in any of the South Asian countries surveyed – may prove a fatal pill rather than a panacea for bureaucratic procedures, legal confusion, administrative delay, and corruption.  

Despite discussion in each of the five South Asian countries, there is another reason beyond the value of “regulatory arbitrage” why many coun­tries may not move quickly in the direction of integrated legal and admin­istrative systems for the nonprofit sector: a structure of multiple channels for formation and registration is regulated by (and benefits) multiple strands of a nation’s administrative bureaucracy. In most of the South Asian countries, societies, trusts, companies, cooperatives, and other types of organization are regulated by different parts of the state bureaucracy – each with its own interests, each receiving administrative and other ben­efits usually at both central and local levels, and each having at least some interest in maintaining line control over the entities it regulates and manages. If the various organizational structures are melded through inte­grated legislation, then some parts of the bureaucracy will lose out in the great game of regulation and management (and in the rent-seeking that accompanies it). That alone functions as a substantial constraint on moves to “rationalize” and simplify the regulatory structure for formation and regulation of nonprofits.  

This debate is clearly underway in at least several of the countries analyzed in our volume. In Bangladesh, the authors of the country chapter discuss conflicting views on the prospect for “harmonized” nonprofit legislation. On the one hand, harmonization promises to “facilitate the functions” of nonprofits, “reduce bureaucratic wrangles,” and “cut down on corrupt practices.” Opponents of harmonization contend that it would “place a constraint on non-profit formation, … entail[ing] greater government control … greater concentration of power and broader discretionary power.” The authors’ conclusions emphasize the need for consultation and dialogue, basing any move toward harmonization on “sound policy [that] has more likelihood of success in … implementation.”[14] Interestingly, the Bangladeshi commentators emphasize harmonizing and simplifying administration – through a “one stop service” system at the NGO Affairs Bureau – even in the absence of harmonized formation laws. Such harmonization is critical, in their view, because of “lengthy and often unnecessary scrutiny” and a “conservative approach [that] fails to acknowl­edge … innovative programmes.”[15]  

Although it provides flexibility for the nonprofit community, the diversity of registration options has its disadvantages. As Anil Kumar Sinha and Sapana Pradhan Malla point out in the Nepal context, because “statutory procedures are centralized and the formalities and requirements are neither specific nor time limited, there is extensive misuse of discretionary power and delay in administrative procedures at all stages, resulting in corrupt practices….”[16] And the harmonization debate appears underway in Nepal as well. The PALISA Nepal authors stand with the harmonizers, recom­mending “[a] consolidated legal framework harmonizing the governance, regulation and monitoring of nonprofit organizations, with simplified and one-window procedures.” In Nepal, the authors believe, “regulatory arbi­trage” imposes bureaucratic responsibilities on nonprofits rather than help­ing them: “Nonprofits should not be required to engage with too many regulatory bodies, leaving less time to fulfill their basic objectives.”[17]  

Yet harmonization, even if supported, will take time to come about, as the Nepal chapter authors seem to understand. And thus the first step for them would be “a change in [the] law drafting process and introduction of a competent, efficient, effective and independent Law Drafting or Reform [Commission] that should analyze all aspects of the legal framework” and seek to improve the “self-centered” nature of many enactments presented by government ministries and agencies, which cause extensive focus on “interpretations, procedural clarification, various compliances and dispute settlements, rather than … mission objectives.”[18]  

A powerful effort has been made in recent years to simplify and harmonize the registration and oversight processes in Pakistan, with the strong sup­port of prestigious domestic actors such as the Pakistan Centre for Philanthropy and the NGO Resource Centre, and with the strong finan­cial and political support of the Aga Khan Development Network. The Pakistan Enabling Environment Initiative envisions the establishment of a Charity Commission composed of individuals from government, non­profit, professional, and academic origins, to manage registration and monitoring of a range of nonprofits, as well as improvements in nonprofit governance and a code of conduct. If adopted, these would be major steps in the direction of harmonization and systemic improvement that, in the words of the Pakistan chapter authors, would “mov[e] away from the cur­rent government practice of ‘registration and control.’”[19]  

But harmonization faces substantial obstacles in Pakistan, where the initiative’s proposals would, in effect, “remove the role of the government from actively participating in the process of monitoring and facilitating the non­profit sector…. Because this structure would in essence reduce the government’s role and make it fairly passive, the likelihood of it being accepted is tenuous.”[20] Harmonization and systemic improvements in Pakistan may in fact need to proceed in smaller and more gradual steps – such as evolutionary amendments to laws such as the Voluntary Social Welfare Act, and having the National Council of Social Welfare, rather than the proposed and controversial Charity Commission, assume a broader mandate over the non­profit sector. Finding solutions to improve nonprofit and philanthropic registration, oversight, monitoring, and governance in Pakistan that “satisfy the demands of the sector at large, and also satisfy the government in … continu[ing] to retain oversight” of the Pakistani nonprofit sector remains a complex process.[21]  

Balancing “Regulatory Arbitrage” with State Control  

States may, as a result of history and culture, retain a legal system in which nonprofit organizations have great flexibility to choose their preferred forms and their preferred channels for registration and regulation. Each of the South Asian countries studied by the Philanthropy and Law in South Asia project has chosen to retain that system of flexibility and choice in forma­tion and regulation – a system that benefits nonprofits by providing mul­tiple channels and benefits bureaucracies by creating multiple “empires.” That relatively flexible menu structure may have its disadvantages, but it is supported by a powerful alliance of the regulated and the regulators.  

But this flexibility must have its counterpart in control as well, particularly in systems in which state influence and management of nongovernmental entities has always been vigorous. The counterpart to the flexibility around organizational structure is the state’s retention of control over the purposes for which a nonprofit organization may be formed and registered. The state’s power here has two forms: a broad statement of the purposes and objectives for which a nonprofit may not be formed, and a strong assertion of discretion in interpreting that standard. In India, Agarwal and Dadrawala point out that-

while the legal environment for promoting "charitable purposes"… is quite enabling, one often encounters problems in convincing the registering officers whether objectives like “income genera­tion programs for disadvantaged groups” or “empowerment of women” are charitable. Registering officers are often known to go by the “letter” and not the “spirit” of the law.[22]  
 

And they retain significant control over the interpretation of such restrictions. Some similarities appear to exist to particular forms of organizations in Pakistan as well. In Sri Lanka, the state will not permit registration of a nonprofit if its objectives are “contrary to public policy or the public interest” or contrary to the purposes that the registering law seeks to facilitate. These broad statements of prohibited purpose enable the state to wield authority. And states do so with fairly wide discretion, perhaps formally subject in some cases to judicial review, but in reality with virtually unlimited discretion to judge the purposes of an applying organization.  

This aspect of state control applies far beyond the nonprofit and philan­thropic sphere: In Sri Lanka, “these restrictions and limits are based on public policy and public interest considerations that are generally applica­ble to all entities, whether nonprofit or otherwise.[23] State power also rests in other areas, as we shall see: wide authority to terminate, dissolve, or take over nonprofits on the grounds of nonperformance, unlawful purpose, vio­lation of law, or other broad reasons; and strong authority to dispose of assets when nonprofit organizations of various forms are terminated, dis­solved, or taken over; receipt of foreign funds; and other arenas. But pur­pose control is a key element of this process, always available for use by the state even if not actually often utilized and even though its use is gen­erally accompanied, in each of the countries studied in the PALISA process, by a formal legal right to be heard and to object to governmental action.  

Some might object that we are assuming too much power for the state. In the Sri Lankan case, the chapter author argues that there is no provision “… focused on restricting the rights of philanthropic and nonprofit organizations … by the threat of takeovers…. [And] in any event any [such] ministerial action could be challenged before the courts of law, effectively deterring arbitrary action.”[24] In Bangladesh, where security organizations retain a statutory right to examine registration applicants for “anti-state or anti-social” activities, “[t]here is no indication whatsoever as to what constitutes such activities…. Instances are common where these investigative bodies willfully withhold reports and ‘sit on the files’ until some payment, in cash or kind, is proffered.”[25] At the same time, organi­zations also take advantage of “loopholes” in purpose legislation. The authors’ prescription for these problems is clear and unarguable: “The lan­guage of the law should be clear,” reducing government discretion that may be politicized. At the same time, “strict conformity to the … purposes for which an organisation may be set up should be ensured,” and sanctions imposed where needed.[26]  

In Nepal, purpose disputes seem to have focused on avoiding confusion in the minds of the public. Several types of organization prohibit political and religious activity. And, at least for societies, the government requires (though the relevant statute, the Society Registration Act, does not man­date) that organizations agree to limit activities to “the policies and direc­tions of the government.”[27] These prohibited purposes appear to be enforced as much by discretion as by statute, leading to the strong possi­bility that such prohibitions may be differentially enforced. As the Nepalese country authors note, “[m]ost of the local authorities responsible for registration and monitoring of NGOs use their discretionary power to require applicants to refrain from political association, affiliation and activ­ities,” subject to suspension or dissolution.[28]  

State Discretion in the Termination, Dissolution, or Government Takeover of Nonprofit Organizations 

Throughout the region, governments appear to hold significant discretion in the use or disbursal of the assets of nonprofits that are terminated, dis­solved, or taken over by the government. The levels of discretion differ widely depending on how the organization was dissolved, what type of organization it was, and which country it was in; and they often differ substan­tially between termination, dissolution, and management takeover. The Bangladesh authors are clear on this phenomenon in their country: “Where organisations are terminated, the remaining assets are taken over by the government but there is very little evidence of how they are used or disbursed later. The decision is discretionary… and the government is not accountable....”[29]  

The situation is similar in several of the other countries in the region. In Nepal, for example, the assets of voluntarily or involun­tarily dissolved organizations pass to the government after payment of cer­tain obligations, and the government’s discretion appears to be relatively broad. Judicial remedies appear to be available, but the broad government power and discretion seem to have “discourag[ed] nonprofit organizations from amassing property and discourag[ed] accountability.”[30]  

In India, where termination, dissolution, and management takeover appear to be regulated in particular detail, state discretion in these processes is identified as less of an issue by the country authors.[31] In Pakistan, the vol­untary termination and dissolution processes appear reasonably well con­trolled, but “in the case of management takeover [by the government], … the actions of government are arbitrary more often than not. Even though the laws provide for an opportunity to be heard against such action, in practice … this is denied….What is left is a shell….”[32] In Sri Lanka, where dissolution remains a particularly knotty issue, govern­ment discretion in the process appears to be a less serious problem overall.[33]  

The State and the Dilemmas of Fiscal Policy  

The authors have surveyed with sophistication and in great detail the legal incentives available to philanthropic organizations and the nonprofit sector in their respective countries. These incentives fall into two general cate­gories. The first is the tax treatment of the income and goods that non­profit organizations receive. Generally, those incomes and goods, as well as real property holdings, are advantaged through tax exemptions as well as exemptions on customs duties and other government revenue collection. The second form of tax advantage is an incentive to donors, both individual and corporate, to contribute to the growth of a vibrant nonprofit sector through deductibility of charitable contributions.  

Aspects of both structures exist in each of the five countries studied. They differ impor­tantly in detail and degree, and the country chapters give some specifics for each country. Fiscal incentives for donors, nonprofits, and philanthropic organizations providing nonprofit capital are important throughout the world to encourage giving and nonprofit activity for the public benefit. In each country surveyed in our volume, the structure of tax exemption for nonprofit organizations is stronger and broader than the favorable tax treatment through deductions given to individual and corporate donors. It should be recognized that, in general terms, the structure and scope of nonprofit tax exemption in South Asia is fairly wide.  

Yet even here, in this broader sphere of tax advantage, there are knotty issues. In some countries, exemptions are not statutorily provided but are granted solely as a matter of privilege by the taxing authorities. This is the case, for example, with respect to nonprofit exemption from value added tax and taxes on cooperatives in Nepal, which can lead to problems of delay, favoritism, corruption, and an opaque taxation environment for the sector. In situations where tax exemption is statutorily granted, nonprofits gener­ally must apply for the right to avail themselves of the statutory tax exemptions. Such application procedures for statutory exemptions are required, for example, in India, Pakistan, and Nepal, as well as to some degree in Bangladesh, but not, it appears, in Sri Lanka.  

In those countries where application and registration procedures for tax exemptions remain a significant hurdle, the government’s “retain[ing]… discretionary power,” as the Nepal chapter authors put it, carries with it the danger of delay, abuse of discretion, and corruption. In Nepal, “[t]he law … does not prescribe the extent, procedure, time and limitation of [such] investigations…. In short, tax authority discretion is too high, and uncertainty results.” In sum, the Nepal country authors recommend, “procedural requirements should be reduced … [and] government interference should be minimized.”[34] In Pakistan, exemption procedures “suffer from discretion in interpretation”:

The internal process of central, region­al and local tax authority consultations on [exemption] has caused loud complaint throughout the country, with organisations noting that it takes considerable time and effort and incurs informal costs — for in the absence of a fee, “speed money” is generally expected.[35]  

This is a set of problems not yet resolved through proposed changes in legislation and definitions of organizational scope.

In some countries, such as Nepal, procedures for appeal after denials of exemption are murky. In other countries, such as Bangladesh, exemptions are granted on a case-by-case basis and may be granted or withdrawn by relevant government agencies for reasons that are not entirely transparent; and it can be difficult to challenge such decisions. Or tax can be levied by revenue agencies through notices even where the exemptions are still in place. And in India, “the trend appears to be one of a narrowing window of tax exemptions for nonprofits....” The India chapter authors argue that “this is contrary to the sector’s expanding role and diversification into non­traditional methods of fundraising.”[36]  

Deductibility of donations is available to donors in each of the South Asian countries in certain circumstances, but it tends to be more circum­scribed than the basic organizational exemption. In certain countries, such as Bangladesh, deductions for donations are only available for donations to a very limited set of organizations, while nonprofits enjoy a wider array of tax exemptions on income and goods.[37] In other countries, such as Nepal, deductibility may be limited. In India, deductibility for religious donations is a particularly problematic issue. The country authors provide a cogent explanation:

Religious giving does not appear to be prompted by the motive of monetary rewards such as tax benefits. Still, denial of tax-deductible status for [religious] donations … is a thorny issue … [S]uch denial is contrary to current international practice, and a major disability for reli­gious philanthropy for Indian religious sects…. This approach ... fails to recognize the philanthropic power of religious charity … fuels public senti­ment against sects which do not depend on Indian charity … [and] creates an underground “economy” in religious charity … result[ing] in reduced accountability….[38]  

What is overlooked in these discussions is that tax exemptions and deduc­tions are often beside the point, particularly to donors, and particularly at lower levels of giving in most if not all of the countries of South Asia. The chapter author for Sri Lanka makes this point powerfully: “The extremely high level of tax evasion, amply evidenced by the fact that there are no more than 150,000 registered tax payers out of a total population of more than eighteen million, makes the fiscal regime practically irrelevant…. This is important to keep firmly in mind in evaluating the impact of the fiscal regime, in order to prevent a distorted perception of its role….”[39] And, in more detail,

it is … doubtful whether the law provides any meaningful incentives that can motivate the public to contribute to nonprofit and charitable activities…. [T]he law limits the exemptions to a sum of 25,000 rupees or a third of a person’s assessable income, whichever is less. In prac­tice, this does not have much impact in motivating any person to factor in such contributions into tax planning. Hence, it is important that these thresholds are critically examined and revised to reflect reality. We must also question whether the tax law itself would be sufficient to make any real impact on public participation in philanthropic and nonprofit activity…. [T]he level of chronic tax evasion makes the whole system of taxes the subject of ridicule. In such an environment, it would be wishful think­ing to expect any increase in public participation even if such thresholds are revised, unless tax compliance is also improved.[40]  

But it is important to recognize that the virtual irrelevance of taxation to charitable decision making (and regulation) goes far beyond the Sri Lankan case to encompass most of South Asia. In Pakistan, to cite just one other example, the number of taxpayers remains very limited, and most agricul­tural land is excluded from the tax base. In the countries where taxation retains some relevance, however marginal, and where tax filing duties may be slightly more widespread, taxation still functions largely as a method of government regulation and control rather than as a real impetus for charitable giving.  

So the fiscal regime is more likely to be important not for deductibility for donors – though this may become a more important issue in the years ahead – but for the flexibility it provides for a wide range of nonprofits to operate without paying revenue to the government. That importance, outlined by the PALISA authors, is of course balanced by the state’s power to give or to refuse such exemptions, another means of retaining some control over nonprofit and philanthropic institutions. That revenue authorities retain substantial discretion in these decisions is also under­standable (though in some countries, Sri Lanka for example, state discre­tion may be subject to higher-level and judicial review). 

And, of course, the continued vitality of an exemption system provides at least two other important sectors of a state’s government and administrative bureaucracy — tax collectors and customs collectors — with a hand in the management and control over nonprofit organizations. To the degree that rent-seeking takes place in the process of exempting nonprofits from the formal pay­ment of taxes, nonprofits are contributing directly (rather than indirectly and more fairly) to the maintenance of the state apparatus and its person­nel, often at both local and central levels. That structure of support is enhanced by exemption or deduction procedures that are perhaps not entirely transparent, as several of the country chapters make fully clear.  

In several countries in the region, the complexity of fiscal policies toward the nonprofit sector and the difficulty of enforcing them leads PALISA authors in the direction of corporatization – the increasing tendency to seek to adopt corporate legal models for the nonprofit sector. Thus in Bangladesh, the country authors write, “[t]he … approach towards the NGO sector needs to be consistent with reform measures chalked out and implemented by the government for the private sector,” in terms of clarity of the law and limitation of state discretion.[41] In Sri Lanka, private companies have become a preferred route for working in the non­profit sector:

Private companies offer many advantages. Firstly, like most other companies, they enjoy limited liability. Private companies also have the right to control the composition of their members [through the Board of Directors]. Additionally, the law also offers a substantial degree of confi­dentiality over the accounts of the company, as well as flexibility with regard to internal management procedures, disclosure requirements, as well as member meetings.[42]  

There is a similar sense in India:

In Maharashtra and Gujarat, for example, a Section 25 company [a company with limited liability which may be formed for “promoting commerce, art, science, reli­gion, charity or any other useful object,” provided no profits (if any) or other income in promoting the objects is distributed by way of dividend, etc., to its members] enjoys certain advantages over a public charitable trust or society. Being outside the purview and jurisdiction of the charity commissioner, the company enjoys more operational freedom….[43]  

A different perspective is provided for Pakistan, emphasizing both the advantages and problems of the corporatization trend:

Charitable compa­nies under … the Companies Ordinance of 1984 exist in a regulatory framework primarily geared towards protection of the investment expecta­tions of corporate shareholders. This results in a degree of regulation and compliance with regulatory procedures that is infeasible for most civil soci­ety organisations. Thus there is a need for a not-for-profit law that enables incorporation on less onerous terms, while granting the benefits of limited liability and the status of an artificial juridical person. On the other hand, the high level of regulatory control to which charitable companies are subjected can be said to enhance the credibility of such companies. This signaling effect is of value to the best organised (and funded) civil society organisations that can afford the compliance costs of the Ordinance of 1984.[44]  

Resource Mobilization, Capital Formation, and the Drive Toward Flexibility in Development and Investment Options for Nonprofits 

In each of the countries studied here, there is a history of state controls on the permissible investments that nonprofit organizations can make with their funds. These controls have traditionally limited nonprofit invest­ments in state bonds and securities and interest-bearing bank accounts. In some countries, however, some forms of nonprofit organization enjoy more flexibility in investment regulation, enhancing the “regulatory arbi­trage” discussed earlier.  

Perhaps the key point here is to view the issue of “permissible investments” from a longer-term perspective. Over a period of several decades, it is clear that detailed state controls on nonprofit investments are gradually being reduced as nonprofits seek better returns and capital markets seek funds. In effect, of the panoply of state controls on the nonprofit sector in South Asia, permissible investments is an aspect of control that appears to be gradually lifting.

A detailed study of the reasons for this shift was not within the scope of the PALISA project and volume. The authors do an admirable job identifying the remaining restrictions on nonprofit investment and explaining the incon­sistent treatment meted out to societies, trusts, nonprofit companies, and other nonprofit entities and the “regulatory arbitrage” that can result. It is appropriate, nevertheless, to mention here some of the reasons that restric­tions on “permissible investments” are lifting. They include the rise of markets in each of the South Asian countries, the retreat from the state in certain areas of commerce, the growth of capital markets and their need for investments, and the rising pressures of globalization. Each of these forces and trends affects the South Asian nonprofit sector in the area of permissible investments and well beyond.  

State Control and the Knotty Problem of Foreign Funding  

Foreign funding is an issue to a greater or lesser degree in most of the countries of the region. In India, the national government retains control of a strict and complex regulatory process involving registration and moni­toring of groups receiving foreign funding, or case-by-case approval of individual foreign funding projects. The Indian central government’s strict control of foreign funding regulation is a major arena of conflict between the state and the nonprofit sector, and perhaps the key fault line between larger progressive NGOs and the national government. That conflict is well described in the India country chapter and in other recent work on the Indian nonprofit sector.[45]  

In Bangladesh, “although the regulatory frameworks were ostensibly adopted to facilitate NGOs operations, in effect they…hinder activities and restrict the scope of work.” Government approvals are required to receive foreign funds, then for every project undertaken with foreign dona­tions, and then again for the actual disbursement of funds.[46] In Nepal, foreign funding is allowed but recipient nonprofits must apply for approval from the Social Welfare Council to receive foreign funding for projects over Rs. 200,000 (about US$2,500). The Council then coordinates with rele­vant government ministries on the application.  

The authors from Nepal note that there are few criteria prescribed for such coordination, caus­ing “confusion for donors, non-governmental organizations and govern­mental authorities alike.”[47] In Pakistan, where there has traditionally been less regulation of foreign donations, the government is now “concerned” about
 

the substantial unreported donations received by organisations promoting militancy, ter­rorism, sectarianism and creating ethnic strife…. As a consequence, the government has legislated that all madaris [religious schools] and other religious institutions must be registered, and that all funds received from outside Pakistan be reported.[48]  

In Sri Lanka, on the other hand, foreign funding is not generally subject to government approval or monitoring.  

The debate over foreign funding and its regulation in India – and to a lesser degree in several of the other South Asian countries – reflects the state’s continuing suspicion that NGOs may intervene in politics or be used by external forces, and the state’s continuing concern for maintaining control over the NGO sector, particularly in its relations with external actors. But the debate, along with the continuing conflict over moving this debate forward toward some sort of peaceable resolution, also reflects the increasing corporatization of nonprofit affairs in South Asia.  

By corporatization we mean, in part, the tendency to look toward corpo­rate models for solutions to problems facing the South Asian nonprofit sector. In the foreign funding arena, we see this at work in the attempts by the NGO sector (and occasional allies in the Ministry of Finance and the for-profit sector) to bring the NGO foreign funding regulatory scheme within the modernized Foreign Exchange Management Act (FEMA) umbrella. FEMA is an example of India’s new globalized legislation, an attempt to modernize and liberalize the legislative framework for foreign exchange transactions to suit the international environment in which India’s indigenous providers of goods and services must now operate. One can call this the transition from state administration to state monitoring, from transaction-by-transaction approvals to more general licensing. It is underway in India and elsewhere in the region, though in fits and starts given the sensitivity of foreign funding and, in India, the more than 20-year-old debate over it. But that trend is a historical one, and its power can already be seen.[49]  

A number of other examples of corporate modeling are described in the PALISA volume. Throughout the region, the nonprofit community, the accounting community and the government look to commercial accounting standards to provide models for the modernization of nonprofit accounting. States around the region look to corporate law models to try to rationalize, make uniform, and simplify the diverse, complex, and overlapping traditional models of nonprofit formation, registration, and governance. In one sense the attraction of corporate models reflects the nonprofit community’s belief that the corporate community has been more successful in persuading the government to move toward a liberalized regulatory environment. In another sense, the new successful corporations in South Asia increasingly seem to be useful institutional models for a nonprofit world that is strug­gling with the need to mobilize resources from private and public and local and international sources, and to work with government in an environment that is increasingly contractual rather than welfare-based. 

An overabundance of government control and management is an issue in each of the South Asian countries and a source of continuing conflict between states and the nonprofit world. On the other hand, in the view of many of the PALISA authors, the state is also under-involved, under-manag­ing and under-regulating certain aspects of the nonprofit sector. In Sri Lanka, for example, the author notes that the government imposes no regulatory or monitoring restrictions on the receipt of foreign funds for those indigenous NGOs not tied to the Tamil Tigers, nor does it effective­ly monitor and enforce statutory restrictions on permissible investments by nonprofits. The result is a structure of insufficient protection that provokes doubts about nonprofit integrity and weakens nonprofit accountability.  

The Struggle to Transform Nonprofit Governance and Accountability  

Several important aspects of nonprofit governance, accountability, and self-regulation emerge from the five country studies. The news is not particu­larly optimistic in any of the cases, but the developments are highly inter­esting in terms of comparative analysis of nonprofit regulatory systems. They are of particular interest given the recent conference on nonprofit governance, accountability, and self-regulation facilitated by the Asia Pacific Philanthropy Consortium, which produced very useful data for comparative analysis of the situation in South Asia.[50]  

Governance 

The first theme to emerge from the PALISA studies is the lack of consis­tency in the statutory norms, monitoring, and enforcement of rules for the governance of nonprofit institutions. In South Asia, statutory governance requirements are generally different for each form of nonprofit organiza­tion – societies, trusts, associations, nonprofit companies, cooperatives – within each country. Some statutes mandate detailed governance procedures for specific types of nonprofit (as in the case of trusts, for example, in several countries surveyed), while other, considerably weaker statutes allow the organizations themselves to prescribe governance norms through bylaws and other internal documents. And in several countries, like Sri Lanka, some governance requirements are embedded in case law that is even more difficult for nonprofits and their members to access than the legislation itself — which is not easy to find and understand.  

Regardless of whether a nonprofit begins from a base of detailed statutory governance or weak legal governance, the result seems similar: there is little effective government-based, member-based, or public monitoring or accountability for nonprofit governance. And that has key effects. In gov­ernance terms, the result is almost invariably weak boards, strong founder or successor executives, organizations dependent upon personality, and weak accountability. The weak board/strong executive dynamic is identified as a significant issue by each of the country chapter authors at differ­ent points in their analyses. The power of donors only exacerbates this problem. As Zafar Ismail and Qadeer Baig put it in the Pakistani context, “because of resource dependence, in Pakistan power lies with the donors. In reality, therefore, it is the senior management of nonprofit organisations and the donors who actually run these organisations, and the governing bodies are largely cosmetic.”[51]  

The authors of the PALISA chapters present a number of possible solu­tions to this linked problem of governance and accountability. Some sug­gest revamping the laws, a process now underway in Pakistan. Others call for training and awareness-building well before the complex and highly difficult process of legislative revamping begins. Still others would go beyond the process of overhauling different organizational streams of legis­lation (covering societies, associations, trusts, etc.) and seek to move, sooner or later, toward an “umbrella” or “comprehensive” system of non­profit regulation. But strengthened governance is higher on the agenda of both the state and at least some nonprofits than ever before in South Asia.  

Accountability

The second theme that emerges in the chapters, and one that is closely linked to the weaknesses of nonprofit governance, is the essential weakness in the accountability of nonprofits in every country surveyed. Accountability to the government exists more on paper than in any real sub­stance, accountability to members and other specific constituencies is weak, and accountability to the public is almost nil. Accountability within the fiscal and tax realms is weak, as is audit accountability to government and organizational members.

Yet it is important to differentiate the forms and levels of accountability. A study of India, for example,

may give an impression that Indian NGOs are not very serious about accountability, [but] this is not quite correct…. [W]e need to distinguish between accountability and public disclosure. Nonprofits naturally feel accountable to their donors…. But the sense of accountability to the general public is not an automatic response.  

But recent developments indicate that as donations rise within India, accountability to the Indian public may also improve.[52] A similar point is made for Pakistan: “[T]he weakest link in the accountability chain – in essence, the missing link – is that between nonprofits and their beneficiaries….”[53]  

In Sri Lanka, few nonprofits (and few citizens) file tax returns, and the government does not enforce audit requirements effectively. In Bangladesh, where most nonprofits need not even file a tax return, audit integrity may be compromised, and public disclosure or annual report requirements are little more than ritualistic. The result is stark: “The laws ensuring accountability and transparency are not sufficient to curb corrupt practices…. [C]orruption has become the norm and honesty the exception.”[54] All of this is exacerbated in countries, like Bangladesh, where the nonprofit sector has become a “booming business” and some organizations have become political “powerhouses.”[55]

This is sometimes a problem of loose and general law governing nonprofit accountability, as the Sri Lankan authors note. But even where the law governing nonprofit accountability – tax returns, nonprofit audits, annual reports, public disclosure – is reasonably strong, the provisions lack uniformity and consistency across organizational forms. The lack of uniformity and consistency enhances the “regulatory arbitrage” of which Wikramanayake writes. And even where legal provisions are strong, detailed, and clear, monitoring and enforcement is weak and inconsistent.  

And, of course, legal provisions may be absent or insufficiently detailed. That, according to the country com­mentators, appears to be the case in Bangladesh, where accountability rules do not generally require public dis­closure, and where accounting and audit standards are weak.[56] In such cases, the first step is often the elaboration of detailed, strict legal norms, well before implementation and enforcement issues can be tackled.  

Where government-organized umbrella or monitoring organizations are involved, as in Nepal through the Social Welfare Council, they also seem to have substantial difficulties in enforcing sufficient accountability. The Nepal authors note that such bodies “have not been satisfactorily able to monitor organizational activities and their financial sources in a proper, systematic and coordinated manner.” And “political influences and interference” remains a substantial problem.[57]  

Weak accountability systems for nonprofit institutions are a particular problem because of the essential ambivalence of the nonprofit sector toward strengthening its accountability. This ambivalence may be noted in countries far removed from South Asia as well as within the region. This is not to say that all or even most nonprofits in South Asia are ambivalent about accountability norms and their enforcement. But enough are, as the PALISA authors make clear, to cause a problem.  

Where the government is unable to effectively monitor and enforce accountability rules, and at least some organizations within the sector are ambivalent about either strengthened legal provisions or strengthened enforcement, accountability is perhaps destined to remain weak. This is a major ongoing dilemma for the South Asian nonprofit sector.  

Self-Regulation  

If governance norms are inconsistent, under-monitored, and under-enforced, and if accountability norms are inconsistent, weak, and under-enforced, then self-regulation naturally emerges as a potential solution. But it is a solution with its own deep problems. For the third theme that emerges in our book is the difficulty of formulating and enforcing self-regulatory norms within the nonprofit sector of each of the South Asian countries.  

Self-regulation emerges, in South Asia and elsewhere, out of a number of different and occasionally contradictory motivations. The state is inca­pable; yet the state is too strong. The nonprofit sector seeks to preempt stricter government regulation; the nonprofit sector seeks to regulate itself because of the absence of any effective government hand; the nonprofit sector seeks to self-regulate to evade “rent-seeking” and other aspects of the political economy of weak but interventionist government regulation. All of these are real motivations for the increasing attention to self-regulation in the South Asian nonprofit community, despite their self-evident contradictions.[58]  

But self-regulation is new on the agenda, and it is slow-going in each of the South Asian countries. The experiments with self-regulation have proceeded with the most vigor and energy in India, as Sanjay Agarwal and Noshir Dadrawala point out, with a number of experiments and initiatives underway: the development of codes of conduct and monitoring or rank­ing or “validation” mechanisms; the formation of a “Credibility Alliance” to strengthen the sector’s understanding of how to improve accountability and the public’s understanding of the nonprofit sector; and other activities. Contradictions abound, and thus one of the more widespread self-regulation efforts has also been supported by the government, through the Planning Commission.  

The lessons of the Indian self-regulation experience thus far appear to be twofold: experimentation with diverse and innovative approaches is useful rather than early choice of a single model for nationwide implementation (a choice that might be impossible to imple­ment in India in any case); and the very diversity and contradictions of the Indian nonprofit sector make the spread and acceptance of self-regulation particularly difficult. It will be a long road.[59]  

In Pakistan, the Pakistan NGO Forum has developed a Code of Conduct aimed at “improved governance and greater accountability,” which may even­tually be able to serve as an initial roadmap to self-regulation. And the recent attempts to promote an Enabling Environment Initiative and a draft law emphasize self-regulation as well, including a code of conduct to be developed by the proposed Charity Commission with the input of the nonprofit sector. But it will be a long road toward self-regulation, and a dangerous one as well. As the Pakistan authors explain, the Pakistani government cracked down on nonprofits in the late 1990s, and “[u]nless self-regulation is introduced and practised either voluntarily or in response to the enactment of the proposed Enabling Environment Initiative law, there is a strong likelihood that a [government] campaign similar” to the earlier repression will recur.[60]  

In Bangladesh, it will be a long road toward self-regulation as well. The Association of Development Agencies of Bangladesh (ADAB) has adopted a Code of Ethics, but institutional observance is spotty. And the politiciza­tion and factionalism of both ADAB and the Bangladeshi nonprofit sector, including formation of the Federation of NGOs in Bangladesh (FNB) as a new umbrella body rivaling ADAB, certainly do not help matters. Self-regulation will remain on the agenda in Bangladesh, at least in general terms, but it does not appear to be faring successfully yet despite the formulation of a national Code of Ethics for the nonprofit sector.[61]  

Some activity is also underway in Nepal, where the NGO Federation has promulgated and is attempting to promote implementation of a fairly detailed Code of Conduct for the nonprofit community.[62] And the road will be long in Sri Lanka as well:
 

The very thought of sector-implemented “self-regulation,” even in the case of large public quoted companies, is unusual in Sri Lanka, and in any event it is viewed with widespread cyni­cism. It is no different within the nonprofit sector, considering that “self­-regulation” generally evolves within an industry, based on its perceptions of common needs for maintaining its integrity and public confidence. This evolution has not yet taken place within the highly diverse Sri Lankan nonprofit sector. Thus there are currently no standards or codes of conduct or best practices within the sector and there appear to be few prospects for the development of such standards in the near future.[63]  

Conclusion  

We have provided but a brief if intentionally provocative summary of the detailed chapters drafted by the committed and enthusiastic authors represented in our volume. Our objective has been to bring into focus a key, overarching theme: In each aspect of the regulation of nonprofit and philanthropy institutions in South Asia – organizational form, status, and registration; permitted and prohibited purposes; fiscal policy, resource mobilization, and capital formation; governance and accountability; and other issues – the state and the nonprofit sector in each country are engaged in long-term and complex battles over the very role of regulation.  

A place on the spectrum between restriction and facilitation is the broad overall parameter of this struggle, and that place will be found differently in various countries and among various nonprofit organizational forms. But restriction and facilitation form the key contours of that great con­tention between the state and the nonprofit and philanthropic sector. The resolution may be significant for just and sustainable economic, political, social, and cultural change in the countries of South Asia, and those struggles will bear close watching in the years ahead.

Notes

* Mark Sidel, www.law.uiowa.edu/faculty/mark-sidel.php, is Associate Professor of Law, University of Iowa College of Law, and Research Scholar, Obermann Center for Advanced Studies, University of Iowa. Professor Sidel served as academic director of the PALISA project. Iftekhar Zaman, http://www.ti-bangladesh.org/about/zaman.htm, is Executive Director, Transparency International Bangladesh, Dhaka, and was formerly Executive Director of the Bangladesh Freedom Foundation in Dhaka. The authors are grateful to Barnett Baron for cogent comments on this essay and his major contributions to the PALISA project, and to Rory Tolentino, Julie Wang, Nancy Kelly, and others for their support and work on the project. 

This essay is adapted from Sidel and Zaman’s introduction to Philanthropy and Law in South Asia (Asia Pacific Philanthropy Consortium, 2004). IJNL readers interested in obtaining the volume should contact Mark Sidel at mark-sidel@uiowa.edu

[1] For other useful work on law and philanthropy and the nonprofit sector in South Asia and elsewhere in Asia, see Noshir Dadrawala, Management of Nonprofit Organisations (Centre for Advancement of Philanthropy [Mumbai], 1996); Noshir Dadrawala, Country Report for NGO Laws and Regulations in India (ICNL, 2001); Zafar Ismail, The Legal Framework for Non-profit Institutions in Pakistan (SPDC and Johns Hopkins Comparative Nonprofit Sector Project, 2001); Pakistan Centre for Philanthropy, Creating an Enabling Legal Framework for Nonprofit Organisations in Pakistan (2002); Thomas Silk, Philanthropy and Law in Asia: A Comparative Study of the Nonprofit Legal Systems in Ten Asia-Pacific Countries (Jossey-Bass, 1999, available at www.asianphilanthropy.org); S.S. Srivastava et al., The Legal Framework for Nonprofit Institutions in India (PRIA and Johns Hopkins Comparative Nonprofit Sector Project, 2001); Voluntary Action Network India, Laws, Rules and Regulations for the Voluntary Sector: Report of the South Asian Conference (1996); the excellent work done at Accountaid (New Delhi) (www.accountaid.net); and the papers presented to the Asia Pacific Philanthropy Consortium's conference on Governance, Organizational Effectiveness, and the Non-Profit Sector (September 2003), available at www.asianphilanthropy.com. Some of those sources and others more numerous than can be listed here are discussed at Sidel, Recent Research on Philanthropy and the Nonprofit Sector in India and South Asia, 12 Voluntas 171-180 (2001). 

[2] The uses of law in South Asia well beyond philanthropy and the nonprofit sector have been well discussed in a range of commentaries; they include Michael Anderson and Sumit Guha (eds.), Changing Concepts of Rights and Justice in South Asia (Oxford, 1998); Muhammad Azam Chaudhary, Justice in Practice: Legal Ethnography of a Pakistani Punjab Village (Oxford, 1999); Rajeev Dhavan, Only the Good News: On the Law of the Press in India (Manohar, 1987); Rajeev Dhavan, R. Sudarshan, and Salman Kurshid, Judges and the Judicial Power: Essays in Honour of Justice V.R. Krishna Iyer (Sweet and Maxwell, 1985); Marc Galanter, Law and Society in India (Oxford, 1989); Marc Galanter, Law and the Backward Classes in India (California, 1984); Savitri Goonesekere, Violence, Law, and Women's Rights in South Asia (Sage, 2004); Sara Hossain, Shahdeen Malik, and Bushra Musa, Public Interest Litigation in South Asia: Rights in Search of Remedies (University Press Limited (Dhaka), 1997); Ratna Kapur and Brenda Cossman, Subversive Sites: Feminist Engagements with Law in India (South Asia Books, 1996); B.N. Kirpal et al., Supreme But Not Infallible: Essays in Honour of the Supreme Court of India (Oxford, 2001); Werner Menski, Public Interest Litigation in Pakistan (Pakistan Law House, 2000); Paula Newburg, Judging the State: Courts and Constitutional Politics in Pakistan (Cambridge, 1995); S.P. Sathe, Judicial Activism in India (Oxford, 2002); S.K. Verma et al., Fifty Years of the Supreme Court of India (Oxford, 2000).  

[3] Arittha Wikramanayake, Philanthropy and Law in Sri Lanka, pp. 333, 338. 

[4] Sumaiya Khair and Saira Rahman Khan, Philanthropy and Law in Bangladesh, p. 49. 

[5] Id., p. 50. 

[6] Anil Kumar Sinha and Sapana Pradhan Malla, Philanthropy and Law in Nepal, pp. 185-187; Zafar Ismail and Qadeer Baig, Philanthropy and Law in Pakistan, pp. 245-249. 

[7] See Pushpa Sundar, For God's Sake: Religious Charity and Social Development in India (Indian Centre for Philanthropy/Sampraadaan, 2002); Rakesh Kapoor and Amit Kumar Sharma, Religious Philanthropy and Organised Social Development Efforts in India (2001). More generally on law and religion in South Asia, see Brenda Cossman, Secularism's Last Sigh?: Hindutva and the (Mis)rule of Law (Oxford, 1999); Gary Jacobsohn, The Wheel of Law: India's Secularism in Comparative Constitutional Context (Princeton, 2003); Sultana Kamal, Her Unfearing Mind: Women and Muslim Laws in Bangladesh (Ain o Salish Kendra (Dhaka), 2001); Gerald Larson (ed.), Religion and Personal Law in Secular India: A Call to Judgment (Indiana, 2001); Rubya Mehdi, The Islamization of the Law in Pakistan (Curzon, 1994); Werner Menski, Hindu Law: Beyond Tradition and Modernity (Oxford, 2003).  

[8] Barnett Baron discusses these issues in his important overview, The Legal Framework for Civil Society in East and Southeast Asia, International Journal of Not-for-Profit Law, July 2002 (www.icnl.org).  

[9] Some of these issues are addressed in Mark Sidel, States, Markets, and the Nonprofit Sector in South Asia: Judiciaries and the Struggle for Capital in Comparative Perspective, 78 Tulane Law Review 1611 (2004).  

[10] Arittha Wikramanayake, Philanthropy and Law in Sri Lanka, pp. 347-348.  

[11] Sumaiya Khair and Saira Rahman Khan, Philanthropy and Law in Bangladesh, p. 59. 

[12 ] Id., p. 67.

[13] Id., p. 66.

[14] Id., pp. 67-68. 

[15] Id., p. 68. 

[16] Anil Kumar Sinha and Sapana Pradhan Malla, Philanthropy and Law in Nepal, p. 210. 

[17 ] Id., p. 214. 

[18] See Report of the Nepal PALISA Country Team (2002). 

[19] Zafar Hameed Ismail and Qadeer Bair, Philanthropy and Law in Pakistan, p. 308. 

[20] Id. 

[21] For further information on the Pakistan Enabling Environment Initiative, see David Bonbright (ed.), Philanthropy in Pakistan: A Report of the Initiative on Indigenous Philanthropy (Aga Khan Foundation, 2000); Pakistan Centre for Philanthropy, Creating an Enabling Legal Framework for Nonprofit Organisations in Pakistan: Stakeholder Perspectives (2002); and the Pakistan country chapter in our volume by Zafar Hameed Ismail and Qadeer Baig.  

[22] Sanjay Agarwal and Noshir Dadrawala, Philanthropy and Law in India, p. 137. 

[23] Arittha Wikramanayake, Philanthropy and Law in Sri Lanka, p. 351. 

[24] Id., p. 356. 

[25] Sumaiya Khair and Saira Rahman Khan, Philanthropy and Law in Bangladesh, p. 66. 

[26] Id., p. 75. 

[27] Anil Kumar Sinha and Sapana Pradhan Malla, Philanthropy and Law in Nepal, p. 213.

[28] Id., p. 202. 

[29] Sumaiya Khair and Saira Rahman Khan, Philanthropy and Law in Bangladesh, p. 79.

[30] Anil Kumar Sinha and Sapana Pradhan Malla, Philanthropy and Law in Nepal, p. 214. 

[31] Sanjay Agarwal and Noshir Dadrawala, Philanthropy and Law in India, p. 138-140. 

[32] Zafar Hameed Ismail and Qadeer Baig, Philanthropy and Law in Pakistan, p. 322. 

[33] Arittha Wikramanayake, Philanthropy and Law in Sri Lanka, pp. 352-356. 

[34] Anil Kumar Sinha and Sapana Pradhan Malla, Philanthropy and Law in Nepal, pp. 226, 228. 

[35] Zafar Hameed Ismail and Qadeer Baig, Philanthropy and Law in Pakistan, pp. 286, 288. 

[36] Sanjay Agarwal and Noshir Dadrawala, Philanthropy and Law in India, p. 148. 

[37] Sumaiya Khair and Saira Rahman Khan, Philanthropy and Law in Bangladesh, p. 85-86. 

[38] Sanjay Agarwal and Noshir Dadrawala, Philanthropy and Law in India, p. 153. 

[39] Arittha Wikramanayake, Philanthropy and Law in Sri Lanka, p. 357. 

[40] Id., pp. 363-64. 

[41] Sumaiya Khair and Saira Rahman Khan, Philanthropy and Law in Bangladesh, p. 84.  

[42] Arittha Wikramanayake, Philanthropy and Law in Sri Lanka, p. 340. 

[43] Sanjay Agarwal and Noshir Dadrawala, Philanthropy and Law in India, p. 124. 

[44] Zafar Hameed Ismail and Qadeer Baig, Philanthropy and Law in Pakistan, p. 320. 

[45] Sanjay Agarwal and Noshir Dadrawala, Philanthropy and Law in India. See also the excellent FCRA resources available at www.accountaid.net, and Mark Sidel, States, Markets, and the Nonprofit Sector in South Asia: Judiciaries and the Struggle for Capital in Comparative Perspective, 78 Tulane Law Review 1611 (2004).  

[46] Sumaiya Khair and Saira Rahman Khan, Philanthropy and Law in Bangladesh, p. 59. 

[47] Anil Kumar Sinha and Sapana Pradhan Malla, Philanthropy and Law in Nepal, p. 226. 

[48] Zafar Hameed Ismail and Qadeer Baig, Philanthropy and Law in Pakistan, p. 295. 

[49] For more detailed analysis of these developments, see Sidel, id. 

[50] See the papers presented to the Asia Pacific Philanthropy Consortium's conference on Governance, Organizational Effectiveness, and the Nonprofit Sector (Manila, September 2003), available at www.asianphilanthropy.com.  

[51] Zafar Hameed Ismail and Qadeer Baig, Philanthropy and Law in Pakistan, p. 307. 

[52] Sanjay Agarwal and Noshir Dadrawala, Philanthropy and Law in India, p. 172. 

[53] Zafar Hameed Ismail and Qadeer Baig, Philanthropy and Law in Pakistan, p. 310. 

[54] Sumaiya Khair and Saira Rahman Khan, Philanthropy and Law in Bangladesh, p. 102. 

[55] Id., p. 100. 

[56] Id., pp. 100-102, 105-107. 

[57] Anil Kumar Sinha and Sapana Pradhan Malla, Philanthropy and Law in Nepal, p. 239. 

[58] For a longer discussion of nonprofit self-regulation in South Asia, see Mark Sidel, Trends in Nonprofit Self-regulation in The Asia Pacific Region: Initial Data on Initiatives, Experiments, and Models in Seventeen Countries, report prepared for the Asia Pacific Philanthropy Consortium, August 2003 (www.asianphilanthropy.org). 

[59] Sanjay Agarwal and Noshir Dadrawala, Philanthropy and Law in India, pp. 175-177. 

[60] Zafar Hameed Ismail and Qadeer Baig, Philanthropy and Law in Pakistan, p. 314.  

[61] Sumaiya Khair and Saira Rahman Khan, Philanthropy and Law in Bangladesh, p. 103-106.  

[62] Anil Kumar Sinha and Sapana Pradhan Malla, Philanthropy and Law in Nepal, p. 231-233.  

[63] Arittha Wikramanayake, Philanthropy and Law in Sri Lanka, p. 379.

 

Copyright © 2012 The International Center for Not-for-Profit Law (ICNL)
ISSN: 1556-5157