Financing Development in Southeast Asia

The Synergos Institute
endowments
How can foundations in Southeast Asia increase their financial financial sustainability
viability and in turn meet their critical missions to alleviate
poverty, conserve natural resources, and create social change?
How can international funders and aid agencies contribute to
Thailand
increasing resource flows to local foundations in the region?
What are the benefits of such partnerships? earned income
The case studies and perspectives collected in this book set out
to provide answers to these questions as well as to spark dia- official development assistance
logue on what are sometimes contentious issues. The authors
speak to the dynamics of the foundation movement in
Indonesia, the Philippines, and Thailand; the historical rela- debt swaps
tionships between international aid agencies and local founda-
tions in these countries and future possibilities to enhance such Indonesia
relationships; and the opportunities to mobilize funding for
long-term development.
This book will be of value and interest to foundation profes-

sionals, international donors, policymakers, and all who are
Financing corporate philanthropy
interested in understanding the complex dynamics of financing

development in Southeast Asia and other regions of the world.
Development social investment
in Southeast Asia civil society
Synergos Opportunities for the Philippines
Collaboration
The Synergos Institute Southeast Asia Regional Office
Main Office Rm. 207 - Center for Social Policy & Public Affairs
foundations
and Sustainability
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www.globalphilanthropy.info gvelasco@synergos.org
lending
Financing Development
in Southeast Asia
Financing Development
in Southeast Asia
Opportunities for Collaboration
and Sustainability
With contributions from
Ernesto Garilao
Eugenio M. Gonzales
Ismid Hadad
Rustam Ibrahim
Consuelo Katrina A. Lopa
Sarah Maxim
Suzanty Sitorus
Gary Suwannarat
Gil Tuparan
David Winder
Edited by Natasha Amott
Produced by The Synergos Institute with support

from The Sasakawa Peace Foundation
© 2003 The Synergos Institute
9 East 69th Street, New York, NY 10021 USA
Tel +1 (212) 517-4900, Fax +1 (212) 517-4815
synergos@synergos.org, www.synergos.org
Permission is given to copy and/or distribute material from book in

print for non-commercial purposes provided that Synergos is sent a
copy of the material, appropriate credit is given on the material to
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notice is included on all copies:
Excerpted from Financing Development in Southeast Asia:

Opportunities for Collaboration and Sustainability
© 2003 The Synergos Institute – www.synergos.org
Synergos reserves the right to revoke such permission to copy and/or

distribute material from this book at any time, and any such use shall
be discontinued immediately upon notice from Synergos.
Commercial use or reproduction of any part of this book is prohibited

without written permission from Synergos.
Book design and typesetting by John Tomlinson. Printed in the

Philippines by Art Angel Printshop.
ISBN 0-9747097-0-0
Contents
List of Acronyms vii
Preface ix
1 Introduction: The Quest for Financial

Sustainability, Natasha Amott 1
2 Options for Financial Sustainability: Collaboration Between

Civil Society and Development Agencies in Southeast Asia,
David Winder 19
3 Unfinished Business: ODA-Civil Society Partnerships

in Thailand, Gary Suwannarat 57
4 The Rise of Philippine NGOs in Managing Development

Assistance, Consuelo Katrina A. Lopa 81
5 Building and Managing Endowments: Lessons from

Southeast Asia, Eugenio M. Gonzales 99
6 Corporate Resources for Local Development in the

Philippines: The Jaime V. Ongpin Foundation, Inc.,
Ernesto Garilao & Gil Tuparan 125
7 Building an Endowment for Biodiversity Conservation

in Indonesia: The Case of KEHATI, Sarah Maxim,
Ismid Hadad & Suzanty Sitorus 151
8 Earned Income for Financial Sustainability in Indonesia:

The Dian Desa Foundation, Rustam Ibrahim 175
Author Biographies 197
Profiles of Foundations in Case Studies 205
About Synergos 211

FINANCING DEVELOPMENT IN SOUTHEAST ASIA
List of Acronyms
AusAID Australian Agency for International Development

BC Benguet Corporation
CEP Community Empowerment Program
CIDA Canadian International Development Agency
CODE-NGO Caucus of Development NGO Networks
DCF Development Cooperation Foundation
DOH Department of Health
FSSI Foundation for a Sustainable Society, Inc.
FPE Foundation for the Philippine Environment
GAGRP Grant Assistance for Grassroots Projects
JICA Japan International Cooperation Agency
JVOFI Jaime V. Ongpin Foundation, Inc.
KEHATI Indonesian Biodiversity Foundation (Yayasan
Keanekaragaman Hayati Indonesia)
KIAsia Kenan Institute Asia
LDI Local Development Institute
NGO non-governmental organization
ODA official development assistance
PDAP Philippine Development Assistance Programme
PO people’s organization
SDC Swiss Agency for Development and Cooperation
USAID United States Agency for International
Development
vii
viii
Preface
As a native and resident of Southeast Asia, I am proud of my heritage.

As I think those who have lived or worked here would agree, the
region is singularly unique for its tremendous diversity reflected in
the people, cultures, religions, environments, and political systems.
This diversity has contributed to a rich collection of human, natural,
and socio-cultural resources. However, these resources are facing the
threat of unsustainable use and eventual depletion. Far too many chil-
dren and families are living in poverty. It is a poverty that manifests
itself in different ways – from meager livelihoods to natural habitat
destruction to weakened chances for democratization.
In this context, The Synergos Institute began working in
Southeast Asia in 1997. We initially set out to understand the oppor-
tunities within civil society to mobilize resources for community and
national development. Since then, we have moved from research to
action by forming partnerships with emerging and existing indige-
nous foundations to strengthen their capacities and together catalyze
new opportunities to bring about social change. This reflects
Synergos’ mission to develop effective, sustainable, and locally rooted
solutions to poverty in which we believe local foundations are critical.
The activities we conduct with our partners in Southeast Asia draw
on both experience and knowledge from within the region as well as
expertise from over a decade of work strengthening foundations in
Africa and Latin America. Our hope is that over time these partner-
ships will realize increased human, financial, and social resources to
put toward decreasing poverty and increasing equity in the region.
ix
This book represents the culmination of many of these efforts and

we owe its production to the support of the Sasakawa Peace
Foundation, especially the support of Akira Iriyama, Takahiro Nanri,
Kaori Kobayashi, and Yayoi Tanaka. Synergos has had the great priv-
ilege of collaborating with the Sasakawa Peace Foundation since we
first began working in Southeast Asia. The foundation’s generous
support has helped further understanding of the dynamics of local
civil society organizations and their quest for financial sustainability
during a time characterized by economic crisis but also flourishing
ideas and changes that ring of great promise.
I hope that our efforts, and this book particularly, provide not only
insights but spark dialogue among local foundations, aid agencies, and
others to develop more ideas on how to successfully finance develop-
ment in the region.
In addition to the staff of the Sasakawa Peace Foundation, several
other individuals and organizations need thanking for their generos-
ity of time and spirit with which they dedicated themselves to this
project. These include all the authors (Ernie Garilao, Eugene
Gonzales, Ismid Hadad, Rustam Ibrahim, Consuelo Katrina Lopa,
Sarah Maxim, Suzanty Sitorus, Gary Suwannarat, and Gil Tuparan);
staff of KEHATI, the Jamie V. Ongpin Foundation, Dian Desa,
Foundation for a Sustainable Society, Inc., Foundation for the
Philippine Environment, the Local Development Institute,
Philippine Development Assistance in the Philippines, the Japanese
Embassy in Manila, the Japan International Cooperation Agency in
Jakarta, the Canadian International Development Agency in Ottawa,
Manila, Bangkok, and Jakarta, and the United States Agency for
International Development in Manila; and my colleagues at Synergos,
David Winder, Natasha Amott, John Tomlinson, and John Heller, for
their dedication and unwavering vision in compiling, reviewing and
designing this book.
Thanks also to LP3ES in Jakarta and the Center for Philanthropy
and Civil Society in Bangkok for their translation efforts and the
authors of previous research for Synergos who originally surfaced
many of the themes in some of the chapters (Alan Alegre, Milo Casals,
Angelita Gregorio-Medel, Antonio Quizon, and Dr. Pimjai
Surintaraseree).
Each of the chapters is available as individual papers. In Indonesia,
LP3ES has produced versions of Chapters Two and Five in Bahasa
x
Indonesia, and in Thailand, the Center for Philanthropy and Civil
Society has produced versions of Chapters Two, Three, and Five in
Thai language.
– Ma. Gisela T. Velasco, Regional Director, Southeast Asia
The Synergos Institute, Manila
xi
xii
THE QUEST FOR FINANCIAL SUSTAINABILITY
Chapter 1
Introduction: The Quest for
Financial Sustainability
By Natasha Amott
1
Foundations in Southeast Asia
Slowly, a portrait of Southeast Asia’s organized philanthropic sector is

emerging. And the numbers behind this picture are very enlightening.
Surveys conducted by The Synergos Institute of the small number of
foundations in the Philippines, Thailand, and Indonesia reveal that a
significant sum of funds is in fact being channeled through such
organizations. In the Philippines, 56 indigenous foundations made
approximately US $10.5 million in grants and loans to non-govern-
mental organizations (NGOs), community-based organizations, and
individuals in 2000. In that same year, 30 local Thai foundations
generated a total of approximately US $3 million in financial assis-
tance and some 25 foundations in Indonesia disbursed about US $8
million.
While these surveys highlight the significant contributions that
foundations are making to the development of the region, further
information gleaned from the surveys reveal the fragile nature of the
foundation sector there. Investigation reveals that organized philan-
thropy in Southeast Asia is still in its infancy and foundations face
long-term fundraising challenges. One major challenge is to increase
the flow of funds from local sources, while still taking advantage of
opportunities to partner with international organizations in mutually
beneficial funding arrangements. Another challenge is to build long
term financial sustainability of foundations, regardless of funding
source. The 2000 surveys referred to above indicate that a majority of
funds received by indigenous foundations come from overseas
sources, namely official development assistance (ODA) agencies. In
Indonesia and the Philippines, 65 and 57 percent of funds, respec-
tively, were from international sources. Domestic revenues in the
three countries are largely derived from government contracts, corpo-
rations, and some earned income.
2
Within this context, this volume explores a range of strategies for

increasing the flow of resources to the foundation sector, with partic-
ular reference to the Philippines, Indonesia, and Thailand (although
much of what is presented here is applicable to other Southern coun-
tries with a still developing foundation sector). The current develop-
ment milieu is ripe for innovation as many foundations in the region
seek out new opportunities to increase their resources and impact.
Foundations are beginning to build permanent endowments and are
exploring market-driven mechanisms to cover the costs of carrying
out their social missions. They are also beginning to realize multiple
ways of engaging with ODA agencies to leverage their assets.
With this collection of essays and case studies, Synergos is chal-
lenging all support organizations including private donors and ODA
agencies, to focus attention on how we can significantly increase the
financial resource flows to civil society organizations (and foundations
in particular) fighting poverty and inequality. The challenge also goes
out to foundations to explore how they can take advantage of the
experiences described in this volume to enhance their own financial
viability and potential impact. The following chapters offer a glimpse
of what’s possible should sufficient commitment and creativity be
harnessed.
Overview
In this introductory chapter I will briefly explore six themes that cut
across the authors’ work and that may be focal points for ensuing
discussions. Before doing that, however, a brief overview of the chap-
ters is required.
Chapter Two, by David Winder, proposes a range of options for
ODA agencies seeking to engage more effectively with a range of civil
society organizations in addressing development challenges. It pres-
ents a strong argument for ODA agencies to channel more resources
to development activity through existing or new local development or
environmental foundations.
In Chapter Three, Gary Suwannarat takes the reader to the specific
case of Thailand’s experience with ODA-civil society collaboration.
She explores the potential for further ODA flows to NGOs and foun-
dations in the country in the context of diminishing ODA supply.
3
Chapter Four, by Consuelo Katrina A. Lopa, explores the rise of

Philippine NGOs in managing ODA and considers new challenges
and opportunities for NGOs and ODA agencies moving forward.
The focus of the remaining chapters is on exploring additional
mechanisms that foundations can apply to raise financial assets. In
Chapter Five, Eugene Gonzales presents a general overview of the use
of endowments for achieving sustainability based on case studies of
four foundations in the region.
Chapter Six by Ernie Garilao and Gil Tuparan presents the endow-
ment-building experience of the Jaime V. Ongpin Foundation, Inc.
(JVOFI), a foundation formed with corporate resources in the
Philippines. It discusses how this organization created, expanded, and
managed its endowment fund, including the challenges it continues to
address and the success factors that other foundations could poten-
tially incorporate into their fundraising strategies. Chapter Seven by
Sarah Maxim, Ismid Hadad, and Suzanty Sitorus presents a different
experience in endowment building through the story of the
Indonesian Biodiversity Foundation, or KEHATI, which was estab-
lished with an initial endowment of US $16.5 million, provided as a
grant by the United States Agency for International Development
(USAID).
And finally, Chapter Eight by Rustam Ibrahim turns to the strategy
of earned income, examining how the Dian Desa foundation in
Indonesia has been generating nearly 40 percent of its annual budget
through a for-profit business in order to support its social mission.
Lessons Learned
Several issues cut across the following chapters and I would like to
highlight six of these that together form a framework for thinking
about options for financing development in Southeast Asia.
First – and this is an assumption that the book admittedly began
with – of all the types of civil society organizations, indigenous foun-
dations are thought to be a highly effective vehicle for building long-
term financial assets for development. Second, building permanent
financial assets in the form of an endowment may be advantageous for
achieving long-term growth and sustainability. Third, while the over-
all volume of development assistance from ODA agencies may be
4
falling in the region, there may still be a range of opportunities for

continued ODA-civil society collaboration. Fourth, the value of
earned income in building sustainability needs to be considered and
tapped more, where appropriate. Fifth, there may be opportunities to
leverage the financial assets of foundations in more creative ways.
While much more thinking needs to be done in the area, some initial
ideas are proposed here. Finally, the ability of foundations in the three
focus countries to build long term financial sustainability may be
hindered by a number of factors, including complex decision-making
processes at ODA agencies, weak enabling environments for organ-
ized philanthropy, lingering mistrust of NGOs and foundations, and Indigenous foundations
questions of adequate capacity within civil society organizations
have the potential to
generally.
bridge divides between
1. Foundations as Effective Bridging Institutions communities and finan-

cial, intellectual, human,
A premise of this book is that indigenous foundations are appropriate and other resources
vehicles to build assets, financial and otherwise, for development.
When The Synergos Institute began conducting research on this
topic in Southeast Asia in 1997 with the support of the Sasakawa
Peace Foundation, the indigenous foundation was an obscure
concept. Today, there is much greater familiarity with the idea.
Like their counterparts in countries as far widespread as Latin
America, Canada, and Eastern Europe, foundations in Southeast Asia
have shown the capacity to successfully bridge divides between
communities and resources (financial, intellectual, human, and other).
Although the number of such bridging organizations remains small,
they are nevertheless helping to support, strengthen, and sustain
thousands of small and large civil society initiatives. These organiza-
tions are distinct from NGOs because, as bridging organizations, they
tend to share the following characteristics:
First, they mobilize and facilitate the transfer of financial resources
from both local and international sources to NGOs and community-
based organizations in their country or region. These organizations in
turn are directly working to effect positive change in pressing areas
such as rural development, economic inequality, women’s reproduc-
tive health, and environmental conservation.
Second, by building permanent endowments and executing strong
grantmaking or lending programs, foundations can become a self-
5
sustaining and long-term domestic funding resource for development

activities.
Third, foundations often provide community leadership in impor-
tant community and national dialogue, often by advocating on behalf
of those who are more marginalized.
Fourth, foundations assist in testing and scaling up poverty-
focused strategies.
Achieving a common name for such organizations across countries
and multiple contexts and languages has not yet been achieved
(although these characteristics are emblematic of foundations in other
parts of the world too; see Schearer 1997 for more on their roles
generally.) Most often, and in this book, they are referred to as “foun-
dations” or “community development foundations” in recognition of
the roles they have in common with foundations in the United States,
Canada, and parts of Europe. In Southeast Asia, the term “civil soci-
ety resource organization” – or “CSRO” – has also been used. The
lack of an adequate “label” notwithstanding, the functions detailed
1 Of course, this is not to above do exist in organizations across several countries and makes
suggest that operating
NGOs and foundations their experiences all the more important to understand further.1 The
are the only two kinds of growing universe of such organizations in Southeast Asia is only
organizations that repre-
sent civil society. In fact,
beginning to be systematically studied.2 (In Chapters Two through
civil society in Southeast Four, the term “NGO-managed funding mechanisms” is used to refer
Asia tends toward a rich
to NGOs or foundations managing ODA funds.)
array of institutions that
include media, academia,
and other types of organi- 2. Sustaining Permanent Assets
zations.
2 In February 2002, The Throughout this volume we present diverse examples of endowment
Synergos Institute and
creation and management. An endowment is a collection of funds
Philippine Business for
Social Progress co-hosted managed by an organization for the charitable purposes specified by
a conference for Southeast that organization’s governing body and donors. The funds are
Asian CSROs in Patthaya,
Thailand. The two major expected to remain intact either in perpetuity, for a defined period of
themes of this event were time, or until sufficient assets have been accumulated to achieve a
foundation accountability
and sustainability. In many
designated purpose. It is expected that the size of the endowment will
ways, the discussion that increase over time and that it will provide regular income over the
ensued there is reflected lifetime of the organization.3
in the chapters collected
herein. An increasing number of civil society leaders in Asia are now gain-
ing direct experience in the creation, management, and growing of
3 The Ford Foundation has
produced an excellent
endowments. In the Philippines, most endowments have been
primer on endowments. sourced from corporate contributions or ODA funds; a smaller
6
number have been built from earned income and the levying of fees
for services. Comparatively fewer organizations in Indonesia and
Thailand have formed endowments.
Depending on an endowment’s size and skills with which it is
invested, the interest earned on an endowment can enhance the
autonomy and security of a foundation, thus freeing up more staff
time to focus on long-term planning and program development. For
example, while JVOFI (Chapter Six) existed for 11 years before its
endowment was established, the foundation’s management prudently
chose to establish one because the corporation could not guarantee
that it would always be able to transfer funds to the foundation.
Moreover, the presence of an endowment has meant that JVOFI has
been viewed as a credible actor by other international donors and has
enabled it to leverage resources. In Indonesia, KEHATI’s sizable
endowment (Chapter Seven) has enabled it to focus on developing
strong institutional systems and strategic programs without having to
be overly consumed by fundraising activities.
At the same time the chapters reveal three critical lessons. First, as Planning for financial
the case study on KEHATI argues, it may not always be easy to find sustainability can
donors willing to give to an endowment, especially in developing
include sustaining
countries. It is difficult to convince donors that it is more prudent to
permanent assets
invest for tomorrow when there is still a significant poverty gap to fill
today. KEHATI has learned that communicating about its endow- through the building of
ment needs to be fundamentally linked to the potential impact to be an endowment
gained by the foundation’s efforts. As Gonzales reminds the reader in
Chapter Five, “endowments will be measured not in financial or proj-
ect terms but in terms of their impact on a society’s environment,
health, poverty, and overall development."
On the flipside, the cases suggest that foundations need to decide
how much priority to give to building an endowment at a given
moment in time. They have to consider the opportunity costs
involved and recognize that it is likely to take many years before the
endowment is large enough to cover a significant proportion of insti-
tutional costs.
Finally, these chapters remind us that an endowment is not a
panacea for everything financial. In fact, as these chapters demon-
strate, fundraising is ongoing and a strategic plan needs to be in place
to not only manage the fund’s investment portfolio but also to bring
in new funds. KEHATI withstood a fall in its investment portfolio of
7
US $5 million in market value between 2000 and 2002. This experi-

ence taught KEHATI staff that a broad interpretation of financial
sustainability is important, as an endowment itself cannot necessarily
provide for all existing or future needs.
3. Collaborating with Official Development Assistance
As argued by Winder in Chapter Two, in recent efforts to increase the

impact of bilateral aid on poverty, inequality, and injustice in
Southeast Asia, ODA agencies have sought ways to directly support
community level initiatives. In part, this has been a result of dissatis-
faction with the failure of many governments to effectively allocate
ODA. Winder describes the ODA-civil society collaborative
approaches adopted in Southeast Asia as ranging “from ad hoc small
grants programs directly managed by ODA agency staff in country to
carefully crafted strategies that seek to build strong civil society-
Channeling ODA managed funding institutions that are sustainable…” Based on cases
funds through local he explores, he argues that more impact has been achieved through
the latter vehicle because it is under this scenario that the greatest
foundations may be a
level of decision-making and financial sustainability passes to a civil
rewarding investment
society organization (most commonly to a foundation via an endow-
for foreign governments ment).
In early 2003, The Synergos Institute hired an outside evaluator to
assess the impact of earlier work we had been doing to promote
increased ODA flows to civil society in Southeast Asia. Among the
responses was one from an ODA agency official who argued that
supporting indigenous foundations may not be an appropriate vehicle
through which to channel ODA because it adds an additional layer of
administration that in the end increases the costs of reaching commu-
nities. As pointed out in a recent article in Alliance by Kingman (June
2003), however, this may be the case if intermediary organizations like
foundations are only seen as adding value for the purpose of transfer-
ring funds. If, however, they are seen as adding value in other areas,
such as providing capacity building services to grassroots organiza-
tions, speaking out on behalf of small NGOs and community based
organizations, or engaging the private and public sectors in the work
of civil society, then channeling funds to local foundations is not an
unrewarding investment.
8
It is critical to ensure, however, that foundations have sufficient

capacity to absorb and channel these funds in the most strategic ways.
The importance to development agencies and others of working
increasingly with intermediary organizations that are able to bridge
between the demand coming from initiatives on the ground and the
supply of development finance is increasingly a topic of international
development fora (see, for example, the International Institute of
Environment and Development’s collection of essays prepared for the
World Summit on Sustainable Development and UN Conference on
Financing for Development, both held in 2002).
While Chapters Three and Four present somewhat contrasting
realities of ODA-civil society collaboration in Thailand and the
Philippines, an underlying recommendation in both is that civil soci-
ety (and I would argue foundations in particular) and ODA agencies
need to be in an ongoing dialogue with the goal of creating strategic
partnerships. On the part of NGOs and foundations, this necessitates
creating a research capacity to demonstrate to recipient and donor
country governments that endowed foundations serve the public
good. In the case of potential debt swaps, one strategy is to form an
NGO or civil society task force to explore debt swap or debt forgive-
ness options and work with creditors and debtors to develop concrete
proposals. International NGOs can play a helpful role in mobilizing
public support for debt swaps and even raising the foreign exchange
required for debt buy-back.4 4 Both Indonesia and the
Philippines are on the list
As the first section argues, in order to pursue the debt swap option of 78 debtor countries
successfully or to work with ODA agencies in any capacity, the follow- that signed an agreement
with Paris Club creditors
ing areas of research and action are important to resolve: identifying (www.parisclub.com). The
a high-priority field of interest to a donor government and ODA Paris Club is an informal
agency; ensuring a favorable policy environment (in both donor and group of official creditors
whose role is to find co-
creditor countries); having “champions” on both sides to rally support ordinated and sustainable
for the idea; having a legal entity that can receive and manage funds solutions to the payment
difficulties experienced by
and is acceptable to the donor; and ensuring that there is a significant debtor nations.
source of funds available (either “one-off” funds or contributions over
time). In addition, a high-level mandate on the donor side needs to
exist in order to channel funds to a particular issue. Often this may
happen after an international treaty or declaration has been signed,
such as the Tokyo Declaration, which set the scene for US-Japan
intergovernmental cooperation on the environment in Indonesia (and
in turn led to the formation of KEHATI’s endowment).
9
4. Earned Income Potential
Clearly, foundations that receive funds from a single donor, especially

when they’re not in the form of an endowment, can leave a founda-
tion highly vulnerable. Foundations and NGOs are increasingly
recognizing that earned income from the sale of products, services, or
intellectual property can be an additional source of operational fund-
ing that complements other fundraising tactics while helping to build
organizational sustainability. Having discretionary funds from earned
income allows a foundation to invest in programs for which it is
otherwise difficult to raise donor funds. These may be activities that
potential donors perceive to be higher risk.
The surveys referred to earlier reveal the following statistics on
earned income revenues. In the Philippines, earned income accounted
for an average of 22 percent of all income from domestic sources in
2000; in Thailand, it was approximately 10 percent; and in Indonesia
it averaged about 33 percent. In the case of JVOFI (Chapter Six), the
sale of training and consulting services to government agencies and
NGOs generates earned income and the foundation charges a
management fee for implementing projects for Benguet Corporation,
the company that created the foundation.
Foundations and NGOs Chapter Eight reveals the most on earned income, however, by
are increasingly providing a case on Dian Desa’s experience in generating income for
recognizing that earned its own programs in Indonesia. One of its most successful projects to
date has been the manufacture of leather goods made from the skins
income from the sale of
of stingray fish, formerly considered a waste product. This case
products, services, or
provides a glimpse of what is possible through social entrepreneur-
intellectual property can ship. In recent years, Dian Desa has consistently raised 35 to 40
be an additional source percent of its US $1.3-1.4 million annual budget from earned income
of operational funding activities. The social mission of the foundation is fundamentally
that complements other assisted and supported by its profit generating work as evidenced by
the fact that fishermen’s incomes have increased from selling stingray
fundraising tactics while
skins to Dian Desa. What’s more, Dian Mandala, the for-profit entity
helping to build organi- created by Dian Desa to manage the business, now provides employ-
zational sustainability ment to over 50 people and gives priority to hiring and training
people with disabilities who might not be able to find employment
elsewhere.
Of course, foundations may be taking a gamble in trying to gener-
ate earned income. A significant investment of capital, time, and effort
10
must be made in order to identify an important market niche in which

an organization can be competitive. It requires drawing on private-
sector expertise within the organization’s network of board, staff, and
volunteers in order to identify and implement an appropriate business
plan. At the same time, carrying out earned income activities can also
mean directing scarce resources away from the pressing social agenda
of the organization. Moreover, simply earning income does not guar-
antee financial sustainability for an organization. It is perhaps not
surprising then that few foundations around the world have taken
significant advantage of market approaches to earning income
(Morales, Jr., 1997, provides an excellent overview of the considera-
tions involved in practicing earned income as a fundraising strategy.)
In Dian Desa’s case, several critical elements were pursued by the
foundation in order to realize profits. These included: identifying an
as yet untapped market niche for products made from stingray skins,
a raw material that had been discarded as waste previously; fully
understanding how to market the products; maintaining two organi-
zations, one for profit-generating activities and one for nonprofit
activities in order to avoid conflicts in business plans and remunera-
tion scales; and investing the foundation’s savings in order to conduct
initial experiments in skin-processing technology and product design.
In great part, Dian Desa’s success in earned income is owed to the fact
that these activities mirror the core competencies, or comparative
advantage, of its nonprofit work, which are two-fold. First, it develops
community development programs by working closely with target
populations in the process. Any income generating activity should
have a direct link to this process. Second, all activities should rely on
the application of “appropriate technology,” meaning technology that
is easy to develop, maintain, and replicate, both for Dian Desa’s staff
and its target populations.
5. Leveraging Assets
A number of the chapters implicitly draw attention to the fact that

foundations need to think more creatively about how to leverage
additional funds for projects and organizations they want to support.
The case study on JVOFI (Chapter Six) and the endowment analysis
paper (Chapter Five) suggest some strategies that other foundations
may be able to apply in leveraging the assets of their current endow-
11
ment. In the Philippines, JVOFI officials believe that they have been
able to “virtually” leverage the value of the foundation’s endowment
Foundation staff can use by ten times over the course of the last ten years by establishing fund-
existing funds as a lever ing partnerships with government, NGOs, other donors, and people’s
organizations. By putting some of its own savings on the table, JVOFI
to secure additional
has had the clout to approach other donors to form funding partner-
programmatic funds
ships. In Chapter Five, Eugene Gonzales argues that foundation staff
from other donors needs to focus on more than just increasing the size of endowments.
Efforts need to be directed toward using existing funds as a lever to
secure other programmatic funds that can go directly to groups or
projects.
In cases of foundations with existing endowments, Chapters Five
and Six speak to other options that foundations have to leverage these
assets. Loan programs, for example, can be used to support income
generation activities on a full cost-recovery basis in order to ensure
that interest payments can be an additional source of funds for an
endowment. In JVOFI’s case, the transfer of some loan repayment
income into the endowment doubled the fund and it jumped from US
$220,000 in 1994 to US $520,000 in 1995. Initially, however, JVOFI
had a very poor rate of loan collections which staff attributes to being
a result of not focusing on this as a strategy to add to its permanent
assets. An increasing number of foundations are looking to loan
programs as a way of increasing their impact and generating addi-
tional income. As Lopa writes in Chapter 3, “Earlier funding mecha-
nisms [from ODA agencies] focused on providing grant assistance,
which limited the potential beneficiaries as well as the life of the
mechanism. Increasingly, there has been a real demand for loans,
credit facilities, loan guarantees, equity investments, which can
increase the number of potential beneficiaries and even increase the
value of the fund."
6. A Complex Reality
While the following chapters contain advice and examples for strate-
gies to adopt and opportunities to take advantage of, they also high-
light challenges to be aware of in developing a diverse and effective
fundraising strategy.
One challenge is that decisions made regarding the allocation of
ODA funds, traditionally an important income source for foundations
12
in the region, are influenced by a range of considerations, only some

of which pertain directly to the perceived capacity of an organization
to use ODA funds efficiently. Donor country policies factor in issues
such as the status of current political relations with creditor countries,
peace and security concerns, creditor government negotiation strate-
gies on debt swaps, and global economic trends. Foundations seeking
ODA funds need to be fully aware of the range of interests and moti-
vations affecting ODA aid policies.
A second challenge lies in the fact that while the enabling envi-
ronment for giving has improved in some countries in Southeast Asia 5 Despite the fact that
in recent years, a culture of giving to organizations beyond religious poverty levels remain high
in Indonesia (after hover-
institutions is little developed.5 What’s more, with tax avoidance still ing around 25 per cent of
a problem in some countries, tax incentives do little to influence the the population in 2001,
decisions of the wealthy on their philanthropic contributions. following on the heels of
the Asian financial crisis),
Third, NGOs and foundations are neither fully understood nor there are organizations
entirely trusted by the government and business sectors in Southeast meeting with some
success in raising funds
Asia. In Chapter Three, Gary Suwannarat argues that there is a chal- from the public. Dompet
lenge as yet unmet by Thai civil society to strengthen public under- Dhuafa (www.dompetd-
huafa.or.id) is one such
standing and acceptance of NGOs (and by association, foundations)
organization that raises
and their roles in society. A recent survey in Bangkok pointed out the money via zakat (obliga-
low opinion that society generally holds of NGOs, ranking as they did tory donations on
monthly earnings), direct
at the low end of the spectrum just above the police and media. While mail, media campaigns,
some political manipulation to thwart the best intentions of NGOs and other means. In 2001,
it raised nearly Rp
may be responsible for the survey’s results, Suwannarat argues that
18,000,000,000 (approxi-
there is an undeniable pressure on civil society to demonstrate that mately US $2.1 million).
they do not exist solely to advocate against government but in fact
desire to create more economic opportunities for the masses, amongst
other needed actions. She writes that, “the state of civil society in
Thailand appears less robust than it did during the same period
surrounding the 1997 promulgation of the constitution.” She goes on
to argue that most civil society efforts are addressing village level
needs and not taking advantage of opportunities to bring about
national policy and regulatory change. In Indonesia, foundations are
still figuring out how best to position themselves given that the term
yayasan (“foundation” in Indonesian) became somewhat tainted in the
public’s eyes under the rule of former dictator, Suharto, who, along
with his family and cronies, has been accused of using foundations to
launder money.
13
Finally, in as much as foundations – and the NGOs they support –

need the partnership and support of other sectors and international
donors to help build their financial sustainability, they also need to
achieve strong organizational capacity. This includes enhancing skills
to reach out effectively to donors, manage funds well, communicate
with the public, and establish long term funding partnerships with
donors, including ODA agencies. Although there are many different
kinds of foundations now operating in Southeast Asia, most are quite
small, with limited assets and little capacity to manage endowments.
What is really critical is that foundations have opportunities as well as
support to engage in capacity building of their own systems and insti-
tutions.
In the Philippines, the work of the Philippine Council on NGO
Certification (PCNC) has been instrumental in setting NGO and
foundation professional standards, thus improving the capacity of
local foundations’ ability to manage their business with prudence and
good judgment. To date, PCNC has evaluated 445 organizations; 357
have been certified so far and a number are taking the necessary steps
to comply. With the flourishing of organized civil society in Indonesia
in the wake of Suharto’s fall from power, efforts have now been devel-
oped to build a similar set of rigorous standards for enhanced
accountability and transparency.
International donors can support capacity building by allocating
part of their resources to institutional development of the foundations
they’re seeking to support or channel funds through. McCarthy
(2002) makes a plea for this in Indonesia, arguing for donors to
“support the building of both management and delivery capacities of
civil society organizations, but in a judicious and targeted manner.”
He also argues for donors, particularly international donors, to coor-
dinate their supportive efforts as much as is feasible.
The result of this complex reality is that emerging and existing
indigenous foundations in developing countries will have to continue
exploring new paths to building financial sustainability. While the
original intention of this book was to create a sourcebook of resource
mobilization techniques, the final output is, we hope, much richer. As
a set of stories and experiences, it is crafted to help spark dialogue
amongst staff and peers within foundations, donor agencies, and other
support organizations. The new thinking that we are confident will
emerge from such dialogue will undoubtedly mean incurring some
14
risks along the way, as the chapters within demonstrate. Ultimately,

however, new ideas in the field will enable civil society in Southeast
Asia to tap into more innovative means for financing development.
15
References
Association of Foundations and The Synergos Institute. National

Directory of Civil Socieyt Resource Organizations: The Philippines. The
Synergos Institute Series on Foundation Building, 2001. (Online at
www.synergos.org/globalphilanthropy/02/seasiacsrodirectories.htm)
Center for Philanthropy and Civil Society and The Synergos

Institute. National Directory of Civil Society Resource Organizations:
Thailand. The Synergos Institute Series on Foundation Building,
2002. (Online at www.synergos.org/globalphilanthropy/02/
seasiacsrodirectories.htm)
Gaberman, Barry D. A Primer for Endowment Grantmakers:

Endowment Strategies to Assist and Enhance the Work of Nonprofit
Organizations. The Ford Foundation, 2001.
Ibrahim, Rustam. National Directory of Civil Society Resource

Organizations: Indonesia. The Synergos Institute Series on Foundation
Building, 2001. (Online at www.synergos.org/
globalphilanthropy/02/seasiacsrodirectories.htm)
International Institute for Environment and Development (IIED).

Financing for Sustainable Development. A report prepared for the World
Summit on Sustainable Development and UN Conference on
Financing for Development. Stevenage, UK, January 2002.
Kingman, Andrew. “Grantmaking At A Distance: What Role for

Intermediaries?” Alliance June 2003 (pp.17-20).
16
McCarthy, Paul. A Thousand Flowers Blooming: Indonesian Civil Society

in the Post-New Order Era. Ottawa/Jakarta, 2002.
Morales, Jr. Horacio R. “Earning Income Through Trade and

Exchange” in Leslie M. Fox and S. Bruce Schearer (eds.), Sustaining
Civil Society: Strategies for Resource Mobilization, pp.21-44.
Washington, DC: CIVICUS, 1997.
Schearer, S. Bruce. “Building Indigenous Foundations That Support

Civil Society” in Leslie M. Fox and S. Bruce Schearer (eds.),
Sustaining Civil Society: Strategies for Resource Mobilization, pp.305-326.
Washington, DC: CIVICUS, 1997.
17
18
COLLABORATION BETWEEN CIVIL SOCIETY AND DEVELOPMENT AGENCIES
Chapter Two
Options for Financial
Sustainability: Collaboration
Between Civil Society and
Development Agencies in
Southeast Asia
By David Winder
19
Introduction
In their recent efforts to increase the impact of bilateral aid on

poverty, inequality, and injustice, official development assistance
(ODA) agencies have sought ways to directly support community
level initiatives. This search for more effective ways of delivering
financial and technical assistance has been driven by increasing dissat-
isfaction with the failure of many governments to provide adequate
opportunities for the poor. In some cases it has also been initiated in
response to pressures from constituencies in the home countries,
particularly from non-governmental organizations (NGOs). The
result has been the creation of a diversity of new funding channels,
many of them involving NGOs, both in the host and donor countries.
The approaches range from ad hoc small grants programs directly
managed by ODA agency staff in country to carefully crafted strate-
gies that seek to build strong civil society-managed funding institu-
tions that are sustainable and act as a buttress against arbitrary and
authoritarian governments. As awareness of the complexities of deliv-
ering resources directly to communities has increased, ODA agencies
1 Consensus over the termi-
nology for such organiza- have come to appreciate the role that local independent intermediary
tions has not yet been organizations in civil society can play. In their most advanced form,
reached, though they are
often referred to as “foun- such organizations have been given endowments through debt swaps
dations” or “community and other mechanisms and have become institutions with capacity to
development foundations”
have a lasting impact in a given field. Specifically, these are local
in recognition of the role
they have in common with organizations that can successfully bridge between communities and
foundations of the United resources (financial, intellectual, human, and other) and are thus
States, Canada, and parts
of Europe. In Southeast distinct from any NGO. As a bridging organization, they mobilize
Asia, the term “civil soci- and facilitate the transfer of financial resources to NGOs and other
ety resource organization”
– or CSRO – has also
more informal associations while also convening stakeholders around
been used. critical issues and building the capacity of civil society.1
20
ODA agencies have learned much from these varying approaches 2 An exception has been the
attempts by CODE-NGO
to working with civil society. Little analysis has been conducted, in the Philippines to
however, of what worked, including the how and why, and few assess the effectiveness of
ODA strategies for
attempts have been made to share the balance sheet more widely.2
engaging the NGO sector
This study addresses this lack of analysis by examining a range of in aid delivery. The
different ways ODA agencies and civil society have collaborated in Synergos Institute also
commissioned a study in
Southeast Asia and specifically in Thailand, Indonesia, and the 1999 (unpublished) by
Philippines. ODA agencies have been active in this region for more Draimin and Smillie of
the effectiveness of coop-
than a decade. In the wake of the Asian economic crisis, several eration between ODA
increased their commitments to these countries, established unique agencies and Southern
partnerships with emerging organizations, and some even seeded the foundations. It drew on
six case studies of
start of new organizations. For its analysis, Synergos selected six ODA Southern grantmaking
programs and assessed the degree of decision-making autonomy on foundations and question-
naire responses from 49
funding matters delegated to the NGO or NGO community by the foundations.
ODA agency as well as the sustainability of the funding mechanisms
3 We are grateful to the
developed between the ODA agency and NGO(s) involved.3 Out of
following agencies for
this analysis, three broad categories – or options – emerged for how their cooperation in
ODA agencies and civil society can collaborate. In addition to laying agreeing to the prepara-
tion of the cases: the
out each option, the challenges and advantages of each are explored. Canadian International
Suggestions are made to ODA agencies and civil society to inform Development Agency, the
Japanese Ministry of
current dialogue on further strengthening the impact of aid programs.
Foreign Affairs, the Japan
International Cooperation
Agency, the United States
Agency for International
Development, and the
Swiss Agency for
Development and
Cooperation.
21
Three Policy Options
The collaborative processes between ODA agencies and civil society

analyzed for this study fall into three broad policy options, each of
which can be seen along a spectrum of degrees of engagement and
collaboration. Options one and two possess a number of variants.
Option 1 resides at one end of the spectrum representing a policy
in which funds are delivered to civil society organizations through
mechanisms controlled by the ODA agency and are characterized by
short-term funding arrangements.
Option 2 occupies an intermediary position in which a significant
degree of sharing of decision-making with civil society organizations
over the allocation of resources occurs. Some sustainability in the
form of permanent organizations may be achieved but these stop
short of creating endowments.
Option 3 results in the creation of autonomous endowed organi-
zations and therefore the maximum amount of delegation of decision-
making control to civil society and the greatest degree of financial
sustainability.
Following a brief overview of the three options, short case studies
with conclusions are provided.
Option 1 – Creation of a Small Grants Program Managed by the

ODA agency
This is the most common approach used to channel ODA funds to

civil society organizations in the three countries studied. These small
grants programs seek to respond to local needs and usually fund
micro-projects within specific regional and thematic priority areas
determined by the ODA agency. Some of these programs include
22
mechanisms for consultation with civil society representatives on the

choice of priorities and selection of beneficiaries.
The first variant of this option is one in which the program is
managed directly by ODA staff but where, on a selective basis, local
organizations are involved in selecting the beneficiary NGOs and
providing technical assistance. This variant is represented by the
Japanese Embassy Grassroots Grants Program in the Philippines.
A second variant is where an advisory board, with a majority of its
members drawn from civil society and with regional representation,
selects grantees and recommends them for approval. This variant is
represented by the Philippine Australia Community Assistance
Program funded by AusAID.
The third variant involves some delegation of decision-making to
local NGOs. The ODA agency passes funds to one or more large
NGOs that manage the resources and together implement a mutually
agreed program that can include sub-granting to smaller NGOs and
community-based organizations. An example of this approach is the
Community Empowerment Program funded by JICA (Japan
International Cooperation Agency) in Indonesia.
Option 2 – Creation of an NGO-managed funding mechanism
Under this option, a development assistance program is implemented

in partnership with a local NGO or consortium of NGOs. Over time,
it may result in the creation of an endowed organization with the
capacity to continue to pursue the goals of the original program in
perpetuity, although this may not be the initial design for the initia-
tive. This approach is represented by the two Canadian International
Development Agency (CIDA) cases – PDAP (The Philippine
Development Assistance Program) and LDI (Local Development
Institute) in Thailand. A similar case is Yayasan Penguatan Partisipasi
Inisiatif dan Kemitraan Masyarakat Indonesia (YAPPIKA –
Foundation for Strengthening People’s Participation, Partnership and
Initiatives). It began as a CIDA-supported NGO-managed funding
mechanism and became a permanent organization, though without an
endowment.
Other cases fitting this option that have not yet evolved into
permanent independent institutions are CACEDI (Canada Assisted
23
Community Enterprise Development, Inc. – now Community Arts

and Crafts Enterprise Development), also funded by CIDA, and
NIPA (NGO for Protected Areas, Inc.) funded by the World Bank’s
Global Environment Facility.
A variant of Option 2 involves the creation of a new national fund
to which ODA agencies contribute on a multi-year basis. The
Community Recovery Program (CRP) or Program Pemulihan
Keberdayaan Masyarakat (PKM) in Indonesia is the one case that falls
into this category. Under this option, funds from four ODA agencies
– the UK Department for International Development and the
governments of the Netherlands, Sweden, and New Zealand – are
managed by the United Nations Development Programme through
the mechanism of a trust fund. Disbursement of these funds is made
in accordance with guidelines established by the donors in consulta-
tion with the NGO sector and government. Beneficiaries are selected
by a board whose members are drawn in their majority from civil soci-
ety.
Option 3 – Creation of an Independent, Endowed Organization
Under this option, a donor government decides to negotiate the

creation of a new permanent endowed fund in a beneficiary country
in order to channel grants or loans to civil society organizations in
pursuit of specific program goals. This usually occurs as part of a debt
swap or debt forgiveness program between the two countries. The
endowment fund is invested, and only the earnings are used to fund
grants and loans and cover core institutional costs. This is distinct
from Option 2 in that the decision is made upfront that this form of
endowed organization will be created.
This option is represented by the Foundation for the Philippine
Environment (FPE), created with support of the US Agency for
International Development (USAID), and the Foundation for a
Sustainable Society, Inc. (FSSI) in the Philippines, created with funds
from the Swiss government.
24
Case Studies of Policy Option 1
Case 1A: Grant Assistance for Grassroots Projects in the

Philippines4 4 This summary is derived
from a case study on
Background Japan’s Grant Assistance
for Grass Roots Projects
in the Philippines, written
The Grant Assistance for Grassroots Projects (GAGRP) was created by Angelita Gregorio-
in 1989 to enable the Japanese Ministry of Foreign Affairs to respond Medel.
to requests for support to small-scale initiatives at the local level. This
decision reflected the government’s recognition of the increased role
that NGOs in Japan and other countries were coming to play in
development assistance. This decision was also influenced by the
success of small-scale grant assistance schemes operated by donor
countries such as Canada and the UK.
Each diplomatic mission was given full autonomy in handling
GAGRP resources and deciding on program priorities, grantees, and
size of grants. Responsibility was usually vested with a career diplomat
who handled this program in addition to other responsibilities. It was
rare to have anyone with development expertise managing the
program on a full-time basis.
The case of the Philippines is particularly worthy of analysis as the
program has evolved from one with limited visibility to one that is
now recognized by civil society leaders as playing an important role in
supporting grassroots initiatives. In great part, this is a consequence
of hiring the right person to run the program – a specialist with a
strong background in the nonprofit sector and international develop-
ment as well as prior knowledge of the country and its NGO sector.
Since 1999, when program priority areas were agreed on with the
Philippines government, grants have focused on poverty alleviation,
human resource development, disaster management, environmental
25
conservation, and on issues particular to Mindanao in the southern

Philippines. Between 1998 and 2001, the percentage of grants made
to NGOs increased from 53.6 percent of all grants made to 90 percent
of all grants made. Demand for small grants (up to US $60,000 each)
far exceeds the resources available. (In 1999, for example, 700 appli-
cations were received and only 36 approved.)
GAGRP officials in the Philippines have supported very practical
projects involving infrastructure development, small-scale construc-
tion, and the acquisition of equipment. Grants are usually designed to
complement larger funding from other donors including JICA and
JBIC (Japan Bank for International Cooperation). In a few cases,
GAGRP actually worked in partnership with Filipino organizations in
order to identify projects and provide assistance.
Impact
GAGRP has channeled US $5.5 million to 173 projects in the past

five years. While this only constitutes .01 percent of Japanese ODA to
the Philippines, responses from 20 NGO leaders interviewed indicate
that this has been a good investment. They said that the program
provides important counterpart or supplemental funding for NGOs,
often enabling them to leverage other resources. They also expressed
the view that the GAGRP coordinator for the past few years has given
the Embassy of Japan a “human face” and inspired trust and confi-
dence.
Synergos was especially interested in identifying cases where
GAGRP staff had used a local intermediary organization to identify
projects and provide support in project implementation. We wanted
to test the assumption that these intermediaries could enhance the
effectiveness of the program. Other ODA agencies we have inter-
viewed have realized how difficult and expensive it is to give small
grants directly to grassroots organizations and have come to rely
heavily on such intermediaries or created new intermediaries to assist
in this task. Two cases of this nature were examined.
Philippine Business for Social Progress

Philippine Business for Social Progress (PBSP), one of the oldest
foundations in the country with a strong track record, channels
contributions from more than 150 companies to community self-help
26
programs and directly manages community development programs.

PBSP staff also helps link community organizations with which they
work to complementary funding. In the case selected, PBSP officials
had recommended that a rural cooperative it supported (KAMA-
HARI) apply to GAGRP for a grant to purchase a farm tractor and
implements. GAGRP approved the proposal largely on the basis of
PBSP’s endorsement.
For GAGRP, the fact that KAMAHARI was receiving PBSP’s
support was a guarantee that their resources would be well-managed,
that the financial reporting would be in order, and that systems would
be in place to ensure that equipment was properly used and main-
tained. (GAGRP also knew that the grant would have a positive
impact because it was part of a long-term program with a strong train-
ing component.) PBSP and GAGRP agreed that the KAMAHARI
staff would deal directly with GAGRP staff in order to strengthen the
organization’s feeling of ownership of and responsibility for this rela-
tionship.
Foundation for a Sustainable Society, Inc.

The Foundation for a Sustainable Society, Inc. (FSSI) is an endowed Working in partnership
private organization created with the support of Swiss ODA. It with a strong local inter-
provides loans and grants to ecologically sound community enter- mediary organization
prises. It also links its partners to other sources of funding and tech-
such as a foundation can
nical advice.
In the case we looked at, FSSI was supporting the NGO IDEAS significantly enhance the
(Institute for the Development of Ecological and Educational efficiency and impact of
Alternatives, Inc.) to develop a municipal waste management program an ODA agency’s small
for the town of Silang. It involved the creation of a corporation jointly grants program
owned by IDEAS, FSSI, and local stakeholders. FSSI suggested that
IDEAS apply to GAGRP for complementary funds to build a ware-
house and purchase additional equipment. According to GAGRP, the
fact that IDEAS was already receiving support from FSSI weighed
heavily in GAGRP’s decision to approve the project. As the case
writer argues, FSSI’s reputation for selecting and working with part-
ners very rigorously, including close monitoring and technical
support, meant that IDEAS immediately received a “stamp of
approval.” GAGRP figured that because their grant was also part of a
much larger whole, its potential impact was greater.
27
Lessons Learned from GAGRP in the Philippines
A responsive small grants program can be tailored to meet local needs and fill
critical funding gaps.
The experience in the Philippines demonstrates that the small grants
program can play a very useful role in complementing other donor
programs in critical areas such as infrastructure development. It can
also assist NGOs in leveraging other resources.
By working in partnership with a strong local intermediary organ-
ization to identify grassroots projects, the efficiency and impact of the
program can be enhanced in the following ways:
• A local intermediary organization can identify grassroots
groups and assist them in designing project proposals that
optimize ODA funds.
• A local intermediary organization can ensure that necessary
technical assistance and training inputs are provided in order to
ensure maximum impact.
• A local intermediary organization can ensure that the small
grant complements other funds appropriately.
• A local intermediary organization is able to help mobilize addi-
tional support from other sectors.
• A local intermediary organization can assist with project moni-
toring and evaluation.
5 This summary is derived Case 1B: The Community Empowerment Program in Indonesia5
from a case study on
JICA’s Community Background
Empowerment Program
in Indonesia by Sarah
Maxim.
In the early 1990s as Japan’s economy began to stumble, Japanese
voters and its small NGO community increasingly demanded more
transparency and accountability in ODA spending. At the same time,
ODA agencies from other countries were recommending that Japan
review its long-accepted policies that emphasized the construction of
infrastructure projects funded by loans largely.
The combination of domestic and international pressure led to a
re-examination of Japan’s ODA and resulted in a decision by the
Ministry of Foreign Affairs to develop new policy guidelines that
would increase aid efficiency and impact. The policy included a
greater emphasis on the implementation of projects through NGOs.
28
JICA responded to the new ODA policies by giving attention to

“people-centered development” and self-help approaches to meeting
basic needs. As a reflection of this new emphasis, JICA developed its
Community Empowerment Program (CEP) in 1997.
In Indonesia, CEP was launched in 1999 and grew out of work
JICA had undertaken with NGOs as part of an emergency humani-
tarian assistance program designed to respond to the economic crisis
in 1998. The aim of CEP is to provide support for long-term devel-
opment, including institutional development and capacity building. A
key strategy to achieve this is to develop partnerships with NGO
intermediaries. All programs should emphasize community empower-
ment and poverty reduction. As of 2001, CEP had partnerships with
three local NGOs and plans to expand to 20 NGOs.
Impact
At this time, the initiatives of CEP are still new enough that impacts
can only be surmised. A decision was made at the outset to focus on
support for projects in Eastern Indonesia. This reflected the
Indonesian government’s regional priority and enabled JICA to build
on the contacts and information generated in its emergency relief
work. By concentrating on training, technical assistance, and small-
scale infrastructure development, CEP was designed to complement
other JICA programs in the region.
CEP established three NGO partners in the region, each of which
redistributes resources and technical assistance to other civil society
organizations. As partners, they offer CEP useful information on local
needs and access to a wide range of community based organizations
and small NGOs in remote areas not reached by other programs.
The case study indicates that the relationship of these partners to
JICA is more like that of a program contractor rather than a grantee.
Partners agree to a technical assistance program with clear goals and
activities and a detailed set of procedures for monitoring and evalua-
tion.
Under current leadership, CEP has incorporated two broader
goals beyond community empowerment in the selected localities. The
first is opening up better communication between CEP partners and
local and provincial governments for the exchange of information and
experience with an aim to have a more participatory planning system.
29
The second is documenting the CEP experience and sharing the

learning with government and other ODA agencies.
Lessons Learned from the Community Empowerment Program in Indonesia
The strategy of partnering with large intermediary organizations in the

delivery of the program offers a number of benefits.
Such organizations can provide JICA staff with reliable information
on local needs and how community based organizations and local
NGOs address those needs. It can save JICA staff the time and cost of
visiting remote areas. It is important, however, to select strong inter-
mediaries with sufficient vision and management skills. Given the
complexity of bringing about change at the local level, CEP could
consider how it might delegate more decision-making power to local
intermediary organizations and allow for greater flexibility needed to
respond to changing situations. This necessitates the agency having a
high level of trust in the intermediary selected.
The skills and experience of local JICA staff are critical in achieving success.
Between 1998 and 2002, the Indonesia program benefited from
having a director with experience in working with NGOs, local
language skills, commitment, and vision for the program. He
succeeded in gaining the trust and confidence of Indonesian NGOs
and helped build bridges between NGOs and the government.
30
Case 2A: The Local Development Assistance Project

of Thailand6 6 This summary is derived
from a case study on the
Background Local Development
Institute in Thailand,
written by Dr. Pimjai
CIDA has had a presence in Thailand since 1981. With a strong inter- Surintaraseree.
est in community development and poverty alleviation and an aware-
ness of the limitations of government agencies, CIDA officials made
efforts in the early 1980s to reach out to the NGO community.
Officials at the time became convinced that NGOs had significant,
though untapped, potential to engage in effective work at the
community level. One outstanding local NGO leader, Anek
Nakabatura, was able to capitalize on this interest and craft a proposal
to create a Thai organization with broad representation from a range
of stakeholders, to channel grants to community level initiatives. This
proposal was the starting point for a negotiation involving the
Canadian and Thailand governments that resulted in the creation of
the Local Development Assistance Project (LDAP).
Phase 1 (1985-90) – The Local Development Assistance Project

LDAP was launched in 1985 as a five-year program to channel small
grants to local development initiatives. It contained the following
innovative features:
• a Project Review Committee (PRC) representative of major
stakeholders that reviewed project proposals and gave general
guidance and direction to the program
• revolving loan funds and collateral for commercial bank loans
for the poor, in addition to grants
31
• use of 15 monitoring and evaluation teams from academic

institutions and NGOs that assisted grantees in project imple-
mentation and promoted learning among stakeholders.
An evaluation of LDAP in 1990 demonstrated a number of gains as a
result of the program, including an increase in NGO capacity in proj-
ect management and the creation of NGO coordinating committees
at regional and national levels to engage in dialogue with government.
Faced with strong requests from the Thai NGO community for a
continuation of LDAP, CIDA staff entered into negotiations with the
PRC. A limitation of LDAP recognized by the group was its insuffi-
cient attention paid to NGO sustainability. The negotiations resulted
in the creation of two joint organizations that would have the capac-
ity to develop long-term programs to strengthen the role of the NGO
sector, not only in supporting micro-projects at the grassroots level
but also in helping to shape government social policies.
Phase 2 (1991-98) – Creation of the Local Development Foundation and

Local Development Institute
Due to laws in Thailand that don’t permit operating NGOs to also act
as grant- or loan-making organizations, two entities were created in
1991 with the financial support of CIDA. The Local Development
Foundation (LDF) is the legal entity receiving funds. It is a registered
Thai foundation under the patronage of Her Royal Highness Princess
Sirindhorn. Royal patronage helped the organization gain credibility
within all sectors of society. All funds raised by LDF are managed by
its sister organization called the Local Development Institute. LDI is
an operating and grantmaking nonprofit organization with its own
board of directors, executive board, and professional staff. While
CIDA could not legally grant an endowment to either organization, it
allowed LDI to retain approximately US $660,000 from the repay-
ment of loans to small-scale enterprises as a “quasi” endowment. In
addition to handling the small grants program, LDI was given
responsibility for conducting policy research related to participatory
social development, provision of support to NGO networks (both
regional and thematic), and development of links between community
and commercial enterprises.
A review carried out soon after the start of Phase Two led to a
number of organizational changes. The principal one was the delega-
tion of responsibility for the approval of grants and loans to regional
32
committees. As a condition for the change in grant approval proce-

dures, each regional committee was required to produce a regional
plan identifying priorities for which grants were to be given. This
resulted in a sharper focus on specific local needs and the provision of
additional opportunities for learning between grantees. Another
change was the decision that LDI, in addition to grants and loans,
would provide NGOs with increased support for capacity building by
establishing partnerships with specialized training institutions. It was
also decided that LDI would provide financial support to 13 thematic
NGO networks (including children, women, hill tribes, and human
rights). This was seen as a way of sharing, learning, and increasing
coordination in dialogue with the government.
Impact
An evaluation showed that CIDA’s investment of US $6 million

between 1991 and 1998 achieved significant impact on a number of
levels. Overall, a total of US $3 million was channeled in grants to 117
community projects at the grassroots level. The final project evalua-
tion concluded that the regional grant approval mechanism proved to
be a strong model for distributing and managing project grants.
Evidence of this is the fact that other donors such as the Canada
Fund, UNICEF, and the Danish Cooperation for Environment and
Development now channel funds through these regional committees.
LDI used CIDA funds and leveraged other resources to conduct
groundbreaking research into the underlying causes of poverty and
has been successful in ensuring that research results influence the
formulation of new national policies. LDI also played an important
convening role around public policy issues affecting rural and urban
communities. It also ensured community rights over resource
management made its way into the country’s Eighth National
Economic and Social Development Plan. In addition, LDI played an
important role in strengthening links between NGOs on regional and
thematic levels as well as increasing civil society’s ability to identify
and learn from best practices.
Internal and external evaluations conclude that CIDA’s strategy of
supporting LDAP and LDF/LDI has had a positive impact on the
development of civil society organizations, contributed to building
bridges between civil society and government, and resulted in public
33
policies that are more responsive to the needs of the poor. What is
more, the program wisely invested in building a strong professional
organization and regional infrastructure with the capacity to continue
supporting micro projects, policy research, and public dialogue for
years to come.
With the onset of the Asian economic crisis and no significant
endowment, LDI has been unable to continue its small grants
program and forced to seek other revenue to cover its core costs. It
has managed to do this through a combination of selling publications,
rental income, using donated office space, and acting as a secretariat
for projects implemented by other agencies. Thanks to its solid track
record for program management, it has succeeded in attracting suffi-
cient funding from a range of sources including Thai government
agencies, other ODA bilateral and multilateral agencies, and organi-
zations such as the ASIA University Network. Its major challenge
now is to raise an endowment and more immediate program funds.
7 This summary is derived Case 2B: The Philippine Development Assistance Program7
from research conducted
by Milo Casals.
Background
CIDA has had a presence in the Philippines since the early 1980s. In
the last years of the Marcos dictatorship, CIDA entered into discus-
sions with Canadian and Philippine NGOs in order to create a mech-
anism for channeling aid funds from its Partnership Branch directly
to Philippine NGOs. The main purpose was to tackle the issue of
increasing poverty, particularly in rural areas.
These discussions were successful in many ways. First, a number
of leaders of key NGO consortia were willing to work together to
prepare a funding proposal to CIDA. Second, the most prestigious
business school (the Asian Institute of Management) and a leading
auditing firm were prepared to be involved in the program and
provide support for capacity-building activities for Philippine NGOs.
Third, many Canadian NGOs were willing to raise counterpart funds
for programs in the Philippines (a requirement of the CIDA
Partnership Branch).
Before negotiations were concluded, Marcos was removed from
power and Corazon Aquino became President. With the return to
democracy, CIDA saw an opportunity to bring the government into
34
the negotiations. The outcome was the creation of PDAP, which over
the past 14 years has constituted CIDA’s main effort to reduce poverty
and inequity in the Philippines. The program has evolved through
three phases.
Phase 1 (1986-89) – PDAP

The purpose of the program was to assist the Filipino poor in their
efforts to address poverty, inequity, and structural injustice. This was
to be achieved by providing small grants to NGOs and POs (people’s
organizations) for community-based projects, capacity building, and
development education. CIDA provided CAD $5 million in grant
funds.
PDAP’s Philippines Secretariat, which played a facilitating role in
the project, had 5 founding members: the Philippine Business for
Social Progress; the Association of Foundations (representing over
100 NGOs and grantmaking foundations); Assisi (a large private
foundation); ANGOC (a regional support organization for NGOs
based in the Philippines); and PhilDHRRA, a NGO network. These
members had the responsibility of endorsing and forwarding propos-
als for support by Canadian NGO partners. Overall responsibility for
governing PDAP was vested in two boards: PDAP Philippines and
PDAP Canada. A Joint Philippines-Canada Program Committee
annually reviewed the program and undertook strategic planning.
CIDA had observer status on the Joint Committee.
The externally conducted evaluation of Phase 1 indicated that
while PDAP was extremely successful in linking Philippine and
Canadian organizations, it acknowledged that given the wide diversity
of micro-projects supported, it had proven difficult to develop a cohe-
sive and comprehensive program and measure overall impact. The
outcome of this evaluation and a CIDA partners’ meeting led to the
decision to move to a more proactive and focused strategy in Phase 2.
Phase 2 (1989-96)
Officials decided to focus on a limited number of program areas in
order to increase impact under the theme of agricultural sustainabil-
ity. To complement the project grants, a Technical Support Group
was created to promote and train PDAP NGO partners in organic
agricultural practices. Institutions were also set up with the capacity
to support micro-economic projects following the end of CIDA fund-
35
ing. This program resulted in the creation of a Marketing Assistance

Program in 1991 and a Central Loan Fund Program in 1994,
managed by PDAP.
External evaluations for Phase 2 indicated that the move towards
a greater focus on sustainable agriculture and the creation of a Central
Loan Fund proved an effective strategy. It helped to build the capac-
ity of NGOs, strengthened community self-help initiatives, and built
on the strengths of PDAP partners.
Other indicators of positive program impact were:
• PDAP enhanced the capacities of Philippine organizations to
act as networks for policy advocacy and service providers.
• PDAP was well managed and enjoyed high credibility among
its members, NGO partners, and participating communities.
• Case study research showed measurable economic impact, both
on direct beneficiaries and the larger community.
• PDAP provided a training ground for NGO leadership devel-
opment.
• PDAP proved an efficient way of administering ODA funds.
The presence of the PDAP secretariat reduced CIDA adminis-
trative costs.
Phase 3 (1996-present)
In designing the third and final phase of PDAP, CIDA introduced a
new programmatic focus in response to changing priorities at CIDA
Headquarters and the outcome of both the Country Program Review
and external program evaluations. The main change was to sharpen
the sectoral and geographic focus of the program under the title
Promoting Participation through Sustainable Enterprises. While the
emphasis continued to be on poverty reduction through sustainable
agriculture, the focus shifted to be on the creation of sustainable
enterprises for the rural poor with credit, rather than grants, playing
an important role.
Instead of responding to project proposals from around the coun-
try, CIDA decided PDAP would concentrate on ten pre-selected sites.
In each site, PDAP facilitated the creation of an Area Development
Plan by all stakeholders. Continuing effort was placed on capacity
building for NGOs and POs.
A mid-term program review recorded achievements at three levels.
At the household level, the program noted modest increases in
36
productivity, a decrease in production costs, and a diversification of

income sources. The evaluation also noted that the program had
succeeded in transforming agricultural workers into owner-cultiva-
tors.
At the organizational level, participating organizations improved
their operations, established contacts with other institutions, and
increased women’s participation in leadership positions and project
implementation.
At the policy level, Area Development Coordinating Committees
were formed to coordinate policy advocacy and the networking of
PDAP, NGOs, POs, and other local stakeholders at each site through
the organization of development forums.
One indication of success is that PDAP has been able to generate
additional resources from other ODA sources to increase program Through CIDA’s support
reach and impact. for building local
foundations, the agency
Impact
has demonstrated a
The PDAP case is an excellent example of how aid programs might capacity to learn from
need to change over time. It is also a good example of how a focus on experience, to work
institutional development does not mean that expertise in grantmak- closely with partners in
ing and lending has to be lost. As early as the second phase, CIDA and both countries, and to
program partners were considering strategies to ensure program
adapt to changing
continuity on completion of program funding. As a result, PDAP
realities over time to
continues to be a valuable resource for the management of CIDA
funds and other ODA and government funds. Moreover, CIDA was achieve greater impact
able to leverage additional resources for the program by engaging
Canadian NGOs with Filipino NGOs.
CIDA selected strong partners in the Philippines with the ability
to develop an efficient PDAP Secretariat. CIDA had the vision to
invest in the institutional development of the Secretariat to the point
that it became a strong permanent intermediary with the capacity to
manage projects for other ODA agencies and government depart-
ments. The investment in the development of operations and systems
for monitoring and auditing projects generated confidence in PDAP
and made it attractive to other donors.
CIDA’s strategy of moving towards increasing thematic and
geographical focus enabled it to increase its impact at both the micro
and policy levels. For example, the focus on sustainable agriculture
37
produced results that influenced policies of the Department of

Agriculture (DAR). The DAR has adopted the PDAP approach to
sustainable development, thereby greatly increasing the impact of
CIDA’s investment. PDAP has also proven to be an effective partner
for CIDA in working in areas of conflict in Mindanao where govern-
ment institutions are weak.
CIDA showed a capacity to learn from experience, to work in close
consultation with partners in both countries, and to modify the
strategies of the initiative in order to achieve greater impact.
Lessons Learned from the CIDA Experience with LDI and PDAP
In designing a program to strengthen civil society and impact on poverty, it

is important to build on the leadership and experience of existing NGOs in
the country.
In both cases, CIDA staff based in the country developed relation-
ships with the leaders of key NGOs. In the case of PDAP, the bi-
national consortium of NGOs could have been unwieldy, but by
selecting strong partners at the outset they avoided complications.
CIDA then consulted at length with them in designing the program
to ensure it responded to the needs of civil society and built institu-
tional capacity for the long term.
In creating a new organization to manage ODA funds, priority has to be

given to the following aspects of organizational development:
• Well-qualified professional and administrative staff should be
recruited.
• Respected leaders for the board and program committees
should be recruited (where there is close involvement of NGOs
in both the donor and host countries parallel boards could be
created). In cases where the program seeks to build bridges
between civil society and government (as in the case of
Thailand) government representatives can serve on governing
bodies.
• Reasonable overhead rates need to be determined in order to
ensure that a professional but lean operation is maintained and
ODA funds used in a cost-effective manner.
38
Periodic participatory program evaluations permit the adjustment of prior-

ities, goals, and objectives.
Initial program priorities were determined in consultation with NGO
partners and other stakeholders such as the government. The
programs established clear goals and targets related to the volume of
grants or loans to be disbursed and the expected impact on the reduc-
tion of poverty.
Both cases incorporated periodic program reviews involving all
stakeholders; sometimes they involved external evaluation teams.
These strategic reviews proved invaluable in guiding the programs
towards greater programmatic focus and ensuring the input of partic-
ipant NGOs. It also meant that it was possible to incorporate chang-
ing concerns in ODA policy at the headquarters or the country level.
In the case of the Philippines, the program incorporated new regional
priorities such as conflict-torn Mindanao.
These reviews provide guidance to ODA agencies interested in phasing out

funding while ensuring that the critical work of supporting civil society in
the fight against poverty continues.
In the case of Thailand, the review after the first phase of the program
helped to clarify the need for a permanent funding mechanism to
ensure that work could continue beyond the current funding cycle. In
the Philippines, it led to the proposal for PDAP to create a Central
Loan Fund to provide micro loans. This organization was eventually
spun off as a new permanent organization, the Federation of People’s
Sustainable Development Cooperative, and has proven to be a very
effective institution in leveraging additional resources.
In both cases, learning from experience led to increasing emphasis
being placed on providing support for NGO capacity building. In the
Philippines, this led to the creation of a Technical Support Group to
train grantee-NGOs in organic agricultural practices. In Thailand,
LDI provided increasing support for capacity building through the
development of partnerships with existing specialized training insti-
tutes.
The organizations created with ODA funds play a critical role in building
partnerships between civil society and government, and enable citizens to
influence public policy.
In Thailand, LDI has given increasing emphasis to research on the
impact of public policy on the poor and the design of new policies to
39
support initiatives of the poor. This work has enabled the program to
build on the experience learnt through the small grants activity and
significantly increases its impact on poverty at the national level. Its
support for thematic NGO networks has helped to articulate and clar-
ify the need for national policy changes. Thus, we find that CIDA’s
investment in building the capacity of LDI and supporting its policy
research and convening agenda has produced handsome dividends.
In the Philippines, the encouragement of partnerships between
PDAP and the Departments of Agriculture and Agrarian Reform
meant that a number of the innovations developed at the micro-level
and through NGO training programs were scaled up. For example,
the Department of Agriculture took the sustainable agriculture strat-
egy, tested by PDAP, and adopted it on the national level.
Support for the creation of a permanent organization produces long-term

impact on a number of levels.
The creation of a permanent national funding mechanism (in the case
of Thailand with active committees at the regional level) constitutes a
permanent institutional resource for the efficient transfer of funds and
expertise to the community level. With the financial support of
CIDA, the two organizations in question, LDI and PDAP, have been
able to achieve a transition to permanent legal organizations. They
have developed expertise in grantmaking and lending at the commu-
nity level, in policy research and the convening of interested parties to
influence policy, and in the building of bridges between civil society
and government. Evidence of this is their continuing ability to lever-
age funds from government departments and other bilateral donors
that are looking for trusted and tried intermediaries.
40
Case 3A: The Foundation for the Philippine Environment8 8 This summary is derived
from a case study on the
Background Foundation for
Philippine Environment,
written by Antonio
The socio-political situation in the Philippines following Corazon
Quizon.
Aquino’s rise to power in 1986 provided an excellent enabling envi-
ronment for ODA involvement with the NGO sector. At that time,
USAID provided resources to endow a new organization dedicated to
supporting sustainable development. This was the birth of the
Foundation for the Philippine Environment (FPE).
At this time, USAID Manila staff was open to discussing a range
of options for managing funds assigned to the Philippines under a
global Natural Resource Management Program. The Philippine
Development Forum, a Washington-based organization of US
NGOs, assisted by Green Forum, an environmental NGO in the
Philippines, lobbied the US Congress for ODA to be allocated
directly to Philippine NGOs for environmental protection activities.
The Aquino administration was open to this arrangement thereby
opening the door for negotiations with USAID.
Of critical importance was the presence of senior officials in the
Philippine Department of Energy and Natural Resources and USAID
Manila Office committed to creating a permanent funding mecha-
nism for environmental programs that would be free from political
interference and that would draw on existing talents in the NGO
sector. Together, they devised a strategy whereby USAID grant
money was to be used to purchase Philippine debt in the secondary
market, to be redeemed at favorable rates at the Central Bank of the
Philippines. The resulting capital was to be managed by a private
Philippine foundation. Until the foundation was created, the fund was
entrusted to a US-based NGO – the World Wildlife Fund – which
41
was selected because of its long presence in the Philippines, experi-

ence in working with NGOs, strong track record, and influence in
Washington. Senior officials of the agencies hired a well-respected
Philippine NGO to facilitate the creation of the new foundation and
to create the necessary administrative and grantmaking systems. Once
a professional staff was in place and an active board elected, USAID
staff transferred funds to the new foundation.
Impact
Endowment Management
FPE staff and board have sought to increase the value of the endow-
ment while maintaining low risk. After two years in which the
endowment was invested solely in Central Bank treasury bills with
low returns, the board decided to invest 20 percent of the endowment
in equities. This improved earnings. In 1996 the board recommended
taking the entire endowment out of the Central Bank and investing it
in higher-yielding instruments. USAID agreed to turn over the
management of the endowment to three local fund managers and an
offshore bank, provided there were strict guidelines to reduce risk. In
preparing the guidelines, the foundation was careful to avoid conflict
of interest. The Trust Agreement between FPE and fund managers
forbade investment in securities of a company owned or managed by
an FPE board member or officer or his/her relative unless FPE was
informed in advance.
In early 1997, just before the Asian currency crisis, the board
decided to invest half of the endowment in Swiss bonds earning 14
percent interest. A general policy of the board investment committee
to keep investments, “conservative, diversified and multi-currency,” in
the words of former chairperson Fr. Lucas, helped prevent a precipi-
tous decline in the endowment’s earnings during the crisis. Not all
investments are thoroughly screened, however, to ensure investments
are socially and environmentally sound.
As of 2002, foundation officials have not yet secured new endow-
ment contributions, but they have been able to increase the size of
their grant portfolio by co-financing projects with other donors,
including the Ford and MacArthur Foundations in the US and the
Nature Conservation Fund of Keidanren (Japan Federation of
Economic Organizations) in Japan. They also signed memoranda of
42
understanding with FSSI, the Global Environment Facility’s Small

Grants Program, CIDA, NGOs for Integrated Protected Areas, Inc.,
and the Asian Institute of Management for joint investments in
specific sites. As the foundation establishes a record in sound financial
management and effective grantmaking, more opportunities for co-
financing are expected.
Impact of Grant Program

One of the usual concerns of an environmental trust is how to strike
a balance between its defined priorities and responsiveness to NGO
proposals. FPE has countered this by designating four different types
of grants – site-focus, proactive, responsive, and action grants.
Currently, about 80 percent of FPE’s annual volume of grants (repre-
senting the combined amounts of site-focus and proactive grants) is
allocated for projects developed or sought out by FPE, rather than
based on proposals it receives. Since its inception, FPE has taken a
clear stance in support of site-focused interventions, founded on a
community-based natural resources management approach. FPE sees
its role as complementary to that of the government’s in designated
protected areas.
Looking back, board and staff members have acknowledged that
FPE’s main concern in its early years was to move funds, eager to
establish a track record. They also mention that FPE had mainly
emphasized its role as grantmaker, which overshadowed its other roles
as catalyst for cooperation and fund-facilitator. Feedback from FPE’s
site-focused projects and project partners has yielded valuable
insights, however, for reshaping FPE’s future operations and assis-
tance approach.
Building the Capacity of Community Organizations

By running training courses for local NGO staff and providing one-
on-one technical assistance to local NGOs and community organiza-
tions, FPE has recognized the capacity of local organizations to
implement and manage biodiversity conservation and sustainable
development programs in their own communities. In the words of Fr.
Lucas, “We are working to ensure that communities with which the
foundation partners will be able to run the programs and projects
sustainably, even after FPE has pulled out. We fund [the communi-
43
ties], empower them, and then we withdraw and watch the communi-
ties bloom.”
Supporting the Efforts of Partner Grantees in Environmental Advocacy

While FPE has made a conscious decision not to play a direct advo-
cacy role, it makes grants to organizations engaged in policy advocacy
work. For example, it has given grants to organizations engaged in
environmental legal defense.
Case 3B: The Foundation for a Sustainable Society, Inc. of the

9 This summary is derived Philippines9
from the case study on the
Foundation for a Background
Sustainable Society, Inc.,
written by Alan Alegre.
The experience of the Philippine NGO community in engaging in
collaborative efforts with ODA agencies proved valuable when it
came to negotiating a debt swap between the Swiss and Philippine
governments in order to establish FSSI.
In Switzerland, the Swiss Coalition of Development
Organizations, which is a very active group of development NGOs
with a long history of solidarity and funding relationships with
Philippine NGOs, initiated a campaign for debt relief. It organized a
petition, signed by 250,000 citizens, requesting a program of creative
debt relief.
In response, the Swiss parliament approved a bill establishing the
Swiss Debt Reduction Facility. The success can be attributed to the
strong unity of the NGO sector, the high level of informed political
discussion among the population, and the strength of the Swiss econ-
omy. The bill gave responsibility for implementation to the Swiss
Federal Office of Foreign Economic Affairs (FOFEA) and the Swiss
Agency for Development and Cooperation (SDC). NGOs were given
representation in an extra-parliamentary consultative commission to
advise the government on implementation issues. Importantly, the
Swiss Coalition was formally commissioned by the government to
address and operationalize the “creative” dimension of the debt relief
initiative including the detailed preparation of the pre-negotiation
phase.
The coalition formed a Debt for Development Unit (DDU) to
assess experiences on previous debt swaps and counterpart funds;
44
conduct fact-finding missions to identify partners, programs, and

projects; and serve as partners in preparing, monitoring, and evaluat-
ing programs.
Establishing Cooperation
The process leading to the creation of the organization was essentially
driven by NGOs in both countries. SDC pushed its government to
accept the Philippines in the debt swap program and then selected
CODE-NGO (Caucus of Development NGO Networks) in the
Philippines as its partner to move the initiative forward.
CODE-NGO was commissioned to do the background research
necessary for negotiating the debt swap and creating a counterpart
fund. CODE-NGO requested Eugene Gonzales undertake this work
given his experience in development finance, high credibility with
Philippine NGOs, and previous involvement with two other ODA
funded mechanisms, including FPE.
Following background research into the Philippine debt policy
and other NGO-managed funding mechanisms, CODE-NGO
convened a series of consultations with major civil society and NGO
networks and coalitions. These consultations produced a set of
recommendations useful in informing the negotiation process. These
included:
• that the fund be in the form of an endowment, with interest on
the income to be used to fund multi-year projects via grants
and loans
• suggested criteria for project selection (e.g. environmentally
sound, economically strategic and viable, gender-based)
• that the fund have proactive and responsive elements and some
initial funding policies
• that a Program Committee be formed to define the scope,
criteria, and structure for fund management in more detail.
Building on these consultations, a DDU delegation visited the
Philippines and prepared its own recommendations, including
confirming the readiness of the debtor government to provide local
currency for debt relief and the expected size of the fund.
To maintain momentum, CODE-NGO was given a new consul-
tancy to build on the earlier consultations and prepare more detailed
proposals for the proposed funding mechanism. A working group was
created that decided to form a program committee to manage the
45
initiative during a transition period. After initially discussing the

possibility of an existing organization, FPE, being the legal holder of
the fund, the group decided to create an entirely new organization.
The proposals of the program committee became the basis for talks
with the Swiss Government.
Government-NGO Negotiations
The DDU presented its proposal on the funding mechanism to the
Swiss Federal Economic Office of Foreign Affairs, which had been
appointed the lead agency for the Swiss Government in negotiations
(SDC did not have a program in the Philippines). The DDU
persuaded FOFEA that the proposed mechanism would meet both
financial and development goals, and the DDU endorsed the proposal
with only minor modifications.
The negotiations in the Philippines were more protracted. The
government had reservations to handing over the proceeds from debt
forgiveness to a civil society-managed foundation. Some of the offi-
cials in the Department of Finance would have preferred to see these
funds channeled directly to a government department as had been the
case with recent French and German debt swaps. The Philippine
NGOs eventually won the government over to their proposals. This
prepared the ground for brief formal negotiations and a final agree-
ment.
Formal bilateral negotiations agreed that the Philippine govern-
ment would have an ex-officio non-voting seat while the Swiss
government would have observer status. The Philippine Government
also requested that the endowment income be used for economic
activities and not for advocacy activities. The government officials
signed the agreement in August 1995 and legally incorporated FSSI
in September of that year. After a short build-up phase, it commenced
operations in April 1996.
Impact
Particularly innovative features of this organization include the

following:
• It invests in sustainable production activities that provide social
and economic benefits for poor urban and rural communities.
46
• It is primarily a lending institution. This enables FSSI to

provide support to more organizations than if only grants were
used. In the first four years of operation, FSSI supported 65
organizations. The foundation staff takes great care to identify
viable projects and ensure they have the necessary financial and
technical assistance to be successful.
• FSSI has realized the need to be more proactive, both in iden-
tifying viable industries and sectors and then in selecting part-
ners. In the words of the former Executive Director:
[Many] thought that [FSSI] would just passively be

involved in financing. But we have gone into joint
ventures – a major unanticipated consequence – and we
are now offering very specific services apart from financ-
ing. Enterprise development services have to be provided
– technology, markets…We have to tap outside resources,
experienced individuals, and link them with our project
proponents.
• FSSI identifies specific sectors and industries that offer signifi-

cant prospects for community enterprises. It is then actively
involved in working with a strategic partner to prepare a busi-
ness plan and identify business partners.
• Less than five percent of its “payout” is in the form of grants
for activities such as technical assistance, feasibility studies, and
market research that complement the loan facility. In the first
four years of operation, 155 small grants were made.
• By providing a combination of loans and small grants, FSSI
ensures that organizations are efficient in their use of
resources. The emphasis on institutional development and
linking partners to technical assistance and information has led
to the development of sustainable organizations.
• FSSI primarily adopts a proactive strategy whereby it identifies
potential eco-enterprises in four major ecosystems. These are
enterprises that are ecologically sound, financially viable, and
community-rooted.
• FSSI identifies other organizations and entrepreneurs who can
provide technical assistance to community enterprises in areas
47
such as marketing. This reduces overhead costs and makes full

use of existing resources.
• FSSI aims to keep its operating expenses at less than 15 percent
of total income.
• FSSI has created a number of policies to ensure the careful and
prudent investment of its endowment. These policies include:
a bidding system to select the fund manager, a list of companies
in which it will not invest, and, most interestingly, a develop-
ment portfolio of investments in local development financial
institutions which are often supporting the very individuals and
small enterprises that FSSI itself wants to see become success-
ful.
• FSSI has an active board consisting of a wide range of leaders
from the NGO sector with links to the private sector and the
cooperative movement. It exercises close monitoring to ensure
that financial targets are reached.
• FSSI has shown a capacity to engage in strategic thinking in
order to adapt the organization to the demands of the external
environment. The organization’s emphasis on research and
documentation has contributed to the development of this
strategic planning.
• FSSI has developed strong systems of monitoring and evalua-
tion to ensure that recipients of funds are accountable. These
include quarterly reports, staff monitoring visits, and annual
external audits of each project.
Lessons Learned from the USAID and SDC Experience with FPE and FSSI
A prerequisite to considering this option is that the debtor and creditor

countries are open to the possibility of debt swaps that benefit of civil society.
In the case of the Philippine, US, and Swiss governments, all saw this
option as being in their own interests. The policy environment in
Washington was supportive of the initiative, in part because of
successful lobbying by US NGOs. The US Congress endorsed the
idea and USAID staff in Manila was looking for highly visible actions
to demonstrate the clear commitment of their government to the
Philippines.
The Philippine government at the time had recently returned to
the fold of democratic regimes and was interested in working with
48
NGOs. Former NGO leaders who had moved into government posi-
tions were keen to support civil society organizations by creating an
organization independent of government that could represent the
public interest.
The Swiss NGO community had persuaded the Swiss government
that a debt swap initiative in a number of countries would be a popu-
lar gesture, especially because it would coincide with commemora-
tions of the country’s 600th anniversary of independence.
It is an advantage to have active NGO involvement on both sides of the

negotiations to lobby their respective governments to support a debt swap
and to hand over the management of the resulting funds to a private
organization.
In the United States and Switzerland, NGO coalitions were very
interested in mobilizing additional resources for Philippine civil
society organizations. Public support played an important role in
ensuring a positive outcome to the negotiations. They had able coun-
terparts in the strong Philippine NGO community too. In the case of
the Swiss negotiations, DDU’s counterpart was CODE-NGO, a
strong consortium of Philippine NGO networks that could draw on
the previous experience of the creation of FPE. Together they
spearheaded all the preparatory work for the official negotiations, Where open, the debt
including the drafting of a final proposal. This involved preparatory swap window may be an
consultations and the organization of a working group and program effective means for
committee to refine the recommendations for government consider-
foreign governments to
ation.
participate in financing
In the case of the DDU, their lobbying was so successful that the
Swiss government contracted them to conduct all the bilateral discus- development in
sions and prepare a proposal for its consideration. The heavy involve- Southeast Asia
ment by networks representing the two NGO communities meant
that the recommendations they made for the structure, aims, and
objectives of the new organization were widely endorsed and proved
workable.
Key committed individuals in the respective government and NGO sectors

can play a critical role in ensuring successful negotiations.
In the case of FPE, senior officials in both USAID and the Philippine
Department of Environment and Natural Resources were committed
to creating a permanent funding mechanism for environmental
49
programs that would be free from political interference and draw on

the skills and experience of environment and development NGOs.
Highly respected and experienced civil society leaders facilitated the
negotiations.
In the case of negotiations between the Swiss and Philippine
governments, the Swiss were fortunate to have Alfred Gugler as head
of the DDU. He was committed to the process and had the trust of
CODE-NGO.
It is helpful to have a planning grant in order to ensure the serious involve-

ment of civil society representatives in the design of the organization that
will be the beneficiary of the debt swap.
Given the existence of an active and articulate NGO sector in the
Philippines, it was important to include them in the process of design-
ing the foundations’ vision, mission, and program guidelines.
In the case of FSSI, the DDU, with SDC funds, was able to hire
in-country consultants to conduct consultations with the Philippine
NGO sector; research the debt conversion policies, procedures, and
previous experiences; and prepare the articles and by-laws of the new
organization. This preparatory work proved essential in enabling it to
start activities almost immediately after the two-year negotiations
were completed.
In addition, Helvetas (a Swiss NGO) and PBSP, a local grantmak-
ing organization supported by the corporate sector, advanced funds to
cover administrative expenses and meetings of the prospective board
in order to advance the process and ensure that the basic systems
would be in place by the time formal negotiations were concluded.
Experienced civil society leaders need to assist in training the staff and
board of the new organization and put in place administrative, accounting,
and grant management systems.
In the case of FPE, USAID contracted with PBSP to provide all the
necessary institutional development support in the start-up phase.
FSSI had the advantage of having as its first Executive Director,
Eugene Gonzales, who was closely involved in the start-up of FPE
and was able to draw on that experience. He had the full support of
CODE-NGO that had also been involved in creating the system of
governance and by-laws for FPE.
50
During the negotiation phase, it is important to reach consensus on the

program priorities of the new organization, criteria for fund disburse-
ments, and broad institutional policies such as overhead costs.
This negotiation stage provides the ODA agency with the opportu-
nity to shape the agenda of the new organization. Once the funds are
formally transferred, the donor has little further direct influence.
Critical issues to be resolved are: the balance between proactive and
responsive grantmaking, balance between loans and grants, size of
grants and loans, length of grant period, and guidelines regarding
overhead in order to ensure that the organization does not spend too
much in this area.
It is critically important to put in place clear guidelines for the management

of the endowment before the funds are entrusted to the new organization.
A major concern of both donor and host governments is the prudent
management of resources under a wise and active board. It requires
effective oversight from a board committee whose members have
considerable prior experience in asset management.
In both cases, it has proven effective to entrust the funds to a
number of the best fund managers available in the country under a
competitive process. These fund managers are then given clear guide-
lines on portfolio management and their performance is closely moni-
tored.
Ideally, organizations concerned with environmental protection
and poverty alleviation should ensure that investments are with
companies that are environmentally and socially responsible. FSSI
attempts to do this by issuing fund managers with a “blacklist,” but
the necessary information on which to make sound judgments can
sometimes be difficult to obtain.
One option worth considering is to entrust part of the portfolio to
the organizations’ own professional staff to invest in viable commu-
nity enterprises. This has been attempted by FSSI with some success;
this strategy has increased the value of its portfolio by producing posi-
tive returns and at the same time contributed to achieving its social
mission.
51
Conclusions Drawn from the Cases
Option 1 – Creation of a Small Grants Program Managed by the

ODA agency
These cases demonstrate that ODA-managed small grants programs

can play a useful complementary role to other aid programs that
concentrate on effecting change at other levels, such as policy. Grant
programs that provide support for capacity building of staff of NGOs
and funds for organizational development, in addition to infrastruc-
ture development, will contribute to building social capital and
producing lasting change. Programs that have a clear focus, are
managed by development specialists, and draw on local expertise in
project selection and evaluation are most likely to have the greatest
impact.
An effective means to accomplish this is in supporting the
exchange of experiences between grantees in specific thematic areas,
which can disseminate successful strategies for attacking poverty at
the community level. Through the small grants program, agencies
can encourage partnerships and cooperation between NGOs and
local government units.
Option 2 – Creation of an NGO-managed Funding Mechanism
CIDA’s parallel experience in Thailand and the Philippines from the

mid-1980s to the present provides useful insights into the option of
channeling ODA funds to local development through an NGO-
managed intermediary and assisting this organization in becoming an
independent funding organization. As CIDA was legally unable to
52
provide endowment grants to organizations, it was forced to develop

creative ways of providing start-up funds to each organization to set
them on the pathway to independence. Fortunately, key CIDA staff
involved in both these initiatives has understood the need for flexibil-
ity. The lack of a permanent endowment fund has obliged each organ-
ization to seek funds from a variety of sources in order to continue to
impact on problems of poverty in their respective societies. Both have
been successful in doing so thanks in large part to the track record
they have been able to build up with CIDA funds. As a result, LDI in
Thailand and PDAP in the Philippines are continuing to mobilize and
deliver financial resources and other services to a range of NGOs
fifteen years after the initial receipt of ODA funds.
While this option does require a significant investment of
resources over a long period (15 years in the case of LDI and PDAP)
and a commitment to the development of a strong local civil society
organization, this option provides an ODA agency with a cost-effec-
tive and efficient way of supporting a number of complementary
programs at different levels from the micro to the macro. If the right
kind of intermediary is created and resources put into building a
strong board and professional staff, it can manage a small but strong
grants program, thus freeing the ODA agency of the labor-intensive
process of reviewing proposals. It can also manage a capacity building
program for NGOs, build bridges between sectors, and convene
sectors to develop new national policies. The impact of these
combined programs can outlive the funding cycle of the program and
contribute to the creation of social and human capital in the country.
Option 3 – Creation of an Independent Endowed Organization
The experience of USAID and the Swiss Government in the two cases
provide insights into the benefits of creating endowed organizations
to help achieve some of the objectives of their bilateral aid programs.
It also sheds light on the conditions that need to be satisfied to
produce a successful debt swap agreement and the challenges posed in
the negotiation process. Both FSSI and FPE have been successful in
developing grantmaking and lending programs that are having an
impact on peoples’ lives in poor communities. Equally importantly,
they have both succeeded in increasing the value of their endowments
53
despite the financial crisis in the late 1990s. All three governments can
demonstrate, at least on the evidence available to date, that their trust
in transferring significant resources to private organizations
controlled principally by civil society leaders has been justified.
This approach clearly carries risk for the ODA agency as it is
entrusting the control of sizable resources to a new organization with
no track record. The Philippines had the advantage of having a strong
NGO sector led by CODE-NGO and its experienced Executive
Director prepared to invest time and human resources into develop-
ing a strong system of governance for both organizations that guar-
anteed accountability and effective leadership. High priority was
given to creating safe and prudent financial instruments for fund
management. Indeed, time has shown that FPE and FSSI have been
competently managed, applying clear standards of performance,
transparency, and accountability to their work. What’s more, assis-
tance has reached groups and communities that have not traditionally
had access to credit and other funds.
More ODA agencies Both USAID and SDC have undoubtedly received a good return
should explore the possi- on their investment. It can be considered a win-win situation for both
bility of creating finan- the creditor and debtor countries. The viability of this option,
however, depends to some extent on the value of debt papers. When
cially sustainable organi-
the debt swap to create FSSI was negotiated, the debt papers were at
zations able to continue 50 percent of the value of the debt. By allowing both organizations to
implementing their experiment with the use of loans, loan guarantees, and partnerships
mandate in perpetuity. with other financial intermediaries, in addition to the provision of
grants, the ODA agencies ensured that benefits from their endow-
ment grants were multiplied.
This is clearly the policy option that is going to produce the most
lasting impact by the sustainability it promotes. The model could be
adapted to enable ODA funds resulting from debt swaps or debt
forgiveness agreements to support the creation of local organizations.
They could also support community foundations that could poten-
tially leverage more resources from the private sector and local
government.
The author recommends that all ODA agencies explore the possi-
bility of creating financially sustainable organizations able to continue
implementing their mandate in perpetuity. In most countries, the
problems that governments are seeking to address are increasing, as
are the demands for their services. Many of them are unable to effec-
54
tively manage the ODA funds committed. With professional staff in

place and guaranteed resources which they can use to leverage other
funds, independent organizations are able to focus on developing
innovative solutions to those problems and on building social capital.
This option of endowing local organizations is attractive to ODA
agencies wishing to support lasting change through strengthening
civil society. These case studies show that the organizations created
are having an impact beyond the simple transfer of funds to civil soci-
ety organizations. They play critical roles in building strategic
alliances between sectors, strengthening civil society’s institutional
and financial capacity, and influencing government policy.
55
References
Alegre, Alan. A Case Study of the Foundation for a Sustainable Society,

Inc. New York: The Synergos Institute, 2001.
Gregorio-Medel, Angelita. Optimizing Japanese ODA: The GAGRP

Partnership with Philippine CSROs. New York: The Synergos
Institute, 2001.
Maxim, Sarah. A Case Study on Optimizing ODA Funding in Southeast

Asia: The Japan International Cooperation Agency’s Community
Empowerment Program (Indonesia). New York: The Synergos
Institute, 2001.
Quizon, Antonio. A Case Study on the Foundation for the Philippine

Environment. New York: The Synergos Institute, 2001.
Surintaraseree, Pimjai. A Case Study on Optimizing ODA Funding in

Southeast Asia: The Local Development Institute and Foundation
(Thailand). New York: The Synergos Institute, 2001.
56
ODA-CIVIL SOCIETY PARTNERSHIPS IN THAILAND
Chapter Three
Unfinished Business: ODA-Civil
Society Partnerships in
Thailand
By Gary Suwannarat
57
Introduction
This chapter examines the experience of foreign donor phase-out in

Thailand and explores the possible role of official development assis-
tance (ODA) in providing lasting support for civil society through
1 This paper builds on
endowments or other funding mechanisms.1 The views of three Thai
follows on the general
overview of ODA-NGO grantmaking and operating foundations and various bilateral and
collaboration in Southeast multilateral agencies were solicited as background research to this
Asia presented in Winder
(2003). study. The foundations examined in this chapter work at the interme-
diary level and mobilize domestic and international resources in order
2 The Synergos Institute
to make grants or other financing mechanisms available to civil soci-
has previously character-
ized these organizations as ety groups.2 Although ODA agency representatives acknowledge the
“civil society resource importance of civil society, a number of constraints limit the extent of
organizations,” or
CSROs. They are not ODA support at this time. In particular, the Thai government is
unlike the “foundations” focused on accelerating government restructuring and addressing the
of North America.
lingering impacts of the 1997 economic and financial crisis as well as
the general global economic slowdown. It has thus assigned low prior-
ity to supporting civil society other than for instrumental uses, such as
health campaigns. Faced with these constraints, Thai civil society
organizations therefore need to articulate clear and compelling plans
for the future in order to generate support from the Thai govern-
ment, ODA partners, and the Thai public.
Thailand preceded a number of its Southeast Asian neighbors in
graduating from external donor funding. As the economy boomed in
the late 1980s, a number of ODA agencies instituted discussions and
plans to phase out official assistance programs, including some
arrangements that left permanent funding for ongoing civil society
initiatives. Although some donors put phase-out plans on hold in
response to the 1997 financial and economic crisis, most donors left
their exit strategies in place. Before reviewing the history of ODA-
civil society partnerships in Thailand, the first section examines
58
current challenges to Thai civil society. The final section examines

current prospects for further partnerships between ODA agencies and
civil society, and implications for the future of Thai civil society.
The Rise of Thai Civil Society
The rise of the middle class and civil society – defined broadly to
include NGOs, foundations, people’s organizations (POs), labor
unions, and the media – are among the most fundamental recent shifts
in Thai society (Girling 1996). During the 1990s, NGOs gained
increasing prominence in shaping the social agenda, including that of
the government. The most important cases that illustrated this are
NGO involvement in developing Thailand’s Eighth National
Economic and Social Development Plan and the drafting of the 1997
3 Subsequent civil society
Constitution.3 A number of NGOs and social visionaries have focused
involvement in preparing
on linking civil society to the defense of human rights, grassroots poli- Thailand's Ninth Plan
tics, people’s participation, and enhancing the self-reliance of commu- was much less broad-
based due to budgetary
nities. and time constraints.
The peak of civil society’s influence thus far was perhaps its role in
seeing through the country’s 1997 “People’s Constitution,” which
allowed for structural changes that enhance the position of non-elites
in Thai society. A number of NGOs played central roles in conceptu-
alizing and implementing a process to develop a national consensus
regarding Thailand’s goals. The resulting “People’s Constitution” was
a revolutionary document enshrining both unprecedented human,
social, and economic rights (including universal access to education
and quality health care) and community rights to manage natural
resources. The 1997 Constitution provides for the establishment of a
number of independent organizations, including the Human Rights
Commission, Election Commission, Office of the Ombudsman, a
revamped National Counter Corruption Commission, National
Audit Commission, and an independent telecommunications regula-
tory body. The importance of these bodies in redressing historical
patterns of corruption, abuse of power, and official disregard of the
public is best illustrated by the lengths to which politicians go to
undermine them. Politicians, including current Prime Minister
Taksin Shinawatra, have called for a rollback in powers of independ-
ent organizations. (After running on a platform of corruption busting,
59
Shinawatra was himself subsequently cleared by the Constitutional

Court of a National Counter Corruption Commission indictment, a
decision shrouded in controversy.)
Significantly, a number of these independent organizations see
civil society as critical to accomplishing their mandates. The chair of
Thailand’s Human Rights Commission states the challenge as how to
create a “mutual sense of belonging …between itself and the public at
large.” The commission also outlined a multi-tiered system involving
civil society in the protection and promotion of human rights
(Chamarik 2002). Creating public demand for transparency, account-
ability, straightforward government procurement, open information,
and protection of human rights is fundamental to the principles
underlying the independent organizations.
Civil society was also greatly responsible for gains – protected by
the 1997 Constitution – regarding women’s issues and community
rights (particularly regarding management of local natural resources,
consumer rights, and AIDS).
Decentralization, enshrined in the 1997 Constitution, is an inte-
gral part of political changes occurring in Thailand. New local
responsibilities and capacity supported by a complex system of trans-
fers from central budgets to local Tambon Administrative
Organizations (Por Tor in Thai) considerably alter relationships with
national government agencies. These local administrations now
receive some 25 percent of national budgets, an amount scheduled to
reach 35 percent by 2006. A recent study indicates that some 140
government funds provide loans or grants for which civil society can
compete, amounting to a total of US $575 million (Local
Development Administration 2000).
At the same time, in a variety of thematic areas, organizations and
networks of groups are institutionalizing themselves to differing
degrees. Women’s groups have relied to a large extent on university-
based women’s studies centers and on linkages with the old-line
National Commission on Women. Some networks of women leaders,
however, are demonstrating capacity for action on their own, as exem-
plified by the Women’s Paralegal Volunteers Network (a largely
Northern Thai network of village women who work to create a better
understanding of the Constitution and rights issues at the local level).
The Consumer Protection Association prints a high-quality
monthly magazine, boasts strong nationwide readership, seeks redress
60
of violation of individual consumer rights, and, by networking with

other NGOs, addresses structural issues such as universal health care.
Health-related NGOs have played crucial roles, not only in
achieving universal health care but in unmasking extensive corruption
in the Ministry of Public Health procurement procedures. NGOs and
groups of people living with HIV/AIDS have established strong
regional and national networks and work closely with public health
officials to address AIDS prevention, reduce stigmatization, ensure
equitable access to care, and promote home and community-based
care. Over 100 NGOs and several hundred informal groups network
through the Thai NGO Coalition on AIDS and the Thai Network of
People Living with HIV and AIDS.
Environmental NGOs appear to have the least institutionalized
linkages of these issue-oriented groups. No single national coordinat-
ing body represents environmental groups and their diverse agendas
and perspectives of urban versus rural groups and preservation versus
sustainable human development approaches. Despite this, significant
networking among the numerous organizations addressing environ-
mental concerns throughout Thailand is occurring. Many are
members of the NGO Coordinating Committee on Development
whose environmental arm is large and active, having hosted annual
reviews of the environment during the 1990s. Environmental NGOs
have actively protested dam and power plant construction and have
worked at the local level to promote environmentally sustainable agri-
culture in a number of settings, from mountains to rice fields to
mangrove forests.
Nonetheless, certain weaknesses – including factionalism, gaps in
coordination, limited funding and capacity, and incomplete institu-
tionalization of linkages between the largely urban middle class and
other, often rural and poor, communities – continue to hamper civil
society’s progress. Although important gains have been achieved in
developing such linkages, NGO activists rate them as relatively weak
and therefore deserving of support. Some argue that the support
needed is largely non-monetary and press for greater voluntarism in
Thai society (Nakabatura 2002).
In a period of declining external support, domestic Thai NGOs
have found themselves increasingly under pressure to work at the
Southeast Asian regional level as a survival strategy. While this shift
may provide new opportunities to network at increasingly broader
61
levels on issues with regional and global dimensions, in some cases it

is clear that NGOs are simply following the money. As a consequence,
Thai NGOs have fewer resources to devote to local needs and issues.
The Shape of Thai Civil Society Organizations
Until recent years, those intermediary NGOs in a position to mobi-

lize and transfer resources have been dominated by government-
established and government-funded institutions, such as the National
Council of Social Welfare, the National Council of Women, and the
4 Such organizations are
Thai Red Cross.4 Although the 1960s brought a wave of activism and
detailed more in the
National Directory of the emergence of independent nonprofit organizations, the mid- to
Civil Society Resource late-1970s conservative backlash and severe restrictions on any organ-
Organizations: Thailand,
2002, by the Center for ization not supported by government resulted in a period of stagna-
Philanthropy and Civil tion for civil society. It was not until the mid-1980s that nonprofits re-
Society and the Synergos
Institute.
emerged as a social force. It is largely the organizations and leadership
that emerged during that period which continue to shape Thai civil
society today.
Given declining external funding for civil society, many organiza-
tions that have played key roles in promoting civil society have turned
to the Thai government for support. In the government’s view,
however, civil society is often seen as a means to a short-term end,
such as improved community health or reduced drug use, rather than
as a worthwhile goal itself which might encourage communities to
become more self-reliant and develop local solutions. At the same
time, NGOs are becoming increasingly compartmentalized in
response to declining funds. The institutionalization of civil society is
neglected and perhaps even eroded as civil society is exploited for its
instrumental value.
As a result, the promise of the 1997 constitution of increased
community control and self-determination remains at best only
partially fulfilled. Aside from some notable exceptions, community
activities look very much the same as they did a decade ago: they
respond narrowly to mandates established in Bangkok and are shaped
by the constraints of annual government budget cycles. At the same
time, the media faces heavy pressure to report only what the govern-
ment wants. All told, the state of civil society in Thailand appears less
robust than it did during the period surrounding the 1997 promulga-
tion of the constitution.
62
Outstanding Challenges
Thailand’s principal local funding organizations tend to have a devel-

opment focus that is lodged in a framework challenging underlying
structural issues, which allow for great disparities in income and in
access to the rights of citizenship, including education and other
social services. While this framework remains relevant, their funding
focuses on addressing these challenges at the lowest level – the village
– rather than fully exploiting opportunities to effect national policy
and regulatory change consistent with the constitution.
The absence of broader-based aims which would support human
rights watchdog organizations as well as organizations monitoring the
process of government and constitutional reforms has resulted in an
ad hoc funding process and contributed to periodic disruptions in
activity. In a sense, civil society has not kept up with the changes
which civil society itself fostered in the development of the 1997
“People’s Constitution.”
Thai decentralization and presumed increase in local control
provide an opportunity for a major shift in the roles of NGOs (many
of which have in the past characterized their relationship to commu-
nities as one of pii liang, or “nanny”), in anticipation of the day when
communities might have more power. That day has now come. The
challenge is to develop a new sense of direction and an enhanced sense
of the nature of the relationship between NGOs and communities
which takes into account new local powers.
In this context, several outstanding challenges to civil society
deserve reiteration. These include:
• Institutionalization of civil society linkages from the local to
national levels and across sectoral lines. Such linkages could
support the efforts of Thailand’s new independent organiza-
tions by creating public awareness and strengthening local
capacities for effective communication with these agencies, as
5 In a quixotic legal twist,
well as the broader range of government institutions.
existing regulations
• Broadening civil society development in communities yet remain in force regardless
untouched by prior efforts and developing new ways of work- of inconsistency with the
constitution until success-
ing to advance constitutional guarantees which remain limited fully challenged in a court
by existing laws.5 of law.
63
• Support for key provisions of the 1997 constitution including

community resource management, human rights, and free-
doms of speech and the press.
• Strengthening public understanding and acceptance of NGOs
and their roles in society.
Regarding the latter challenge, an earlier study of Thailand’s
nonprofit sector found the private sector unlikely to support civil
society because of trust issues (Pongsapich 1997). These relate both to
concerns regarding perceived radicalism of NGOs, Bangkok frustra-
tion with street protests (resulting in snarled traffic) seen as linked to
NGO activism, and the lack of social accountability of many NGOs –
a factor conceded by NGOs themselves. A recent survey by the King
Prajadhipok Institute confirms the low opinion society holds of
NGOs, ranking them at the low end of the spectrum just above the
police and media. Public sentiment toward NGOs has also been
shaped by larger political events: driven by fears of Communism,
right wing government officials of the 1970s banned organizations
such as NGOs because they were not created by the government. As
the ban was relaxed during the 1980s, politicians allegedly manipu-
lated civil society – particularly labor unions – for their own purposes.
Subsequent government interest in maintaining a favorable climate
for foreign direct investment, presumably buttressed by concerns
regarding political manipulation of labor, led to the Anand
Government’s action to ban labor unions in the early 1990s. Although
this ban has been rescinded recently, many government officials still
perceive NGOs to be supported by a “Third Hand” of ominous
outsiders, intent on destroying Thailand. Thai civil society therefore
needs to improve public understanding of and sustained support for
itself. This aim might be of potential relevance to the donor commu-
nity.
The Road Once Traveled
As Thailand’s boom began in the late 1980s, several major ODA play-
ers developed plans for the phase-out of their development assistance.
As those plans were implemented during the 1990s, the country
suffered a major economic and financial crisis starting in 1997.
64
Thailand went from a model of successful development to one of what

can go wrong.
While the collaboration between Thai ODA and civil society
during this phase-out planning period had some successes, the expe-
rience reveals several common problems in developing sustainable
funding arrangements. These problems provide clear entry points for
both the international community and Thai public looking to support
civil society. Four organizations are detailed in the appendix; because
several raise important issues for sustainable financing, three of them
are discussed briefly here.
Local Development Institute

Foremost among ODA-civil society partnerships is the work of the
Canadian International Development Agency (CIDA) with the Local
Development Institute (LDI) and its funding arm, the Local
Development Foundation. This partnership is synonymous with the
Thai NGO movement having fostered nation-wide action and capac-
ity through both resources and a focus on process that created strong
linkages between local communities and development issues. Owing
to a legal framework in Thailand that does not permit an operating
organization to also extend grants or loans, two institutions were set
up: the foundation which holds and transfers the monies accrued and
the institute which operates programs and projects. For the purposes
of this chapter, the name LDI will be the name used. LDI was never
technically endowed by CIDA owing to regulations not allowing
CIDA to participate in such an arrangement. The agency did,
however, transfer loan savings to LDI in the amount of approximately
US $660,000 when it terminated its project funding in 1998.6 6 All conversions are at the
rate of Baht 40 = US $1.
Development Cooperation Foundation 7 Counterpart funds refer to

those that come from a
A one-time injection of Thai counterpart funds from US government local proponent (often the
operations in Thailand, managed by the Thai Department of government) in the coun-
Technical and Economic Cooperation and complemented by a grant try where the project is
occurring and is usually
of Canadian funds channeled through CIDA, established a second contributed in local
institution, the Development Cooperation Foundation (DCF).7 The currency.
combined inputs established an endowment of US $952,000. During
its early years, interest earned on this endowment enabled DCF to
support a number of activities that fostered one of its principal aims:
to promote Thailand’s philanthropic and civil society movement.
65
DCF has utilized its permanent funding base and linkages of promi-
nent Thai Board members to mobilize international and Thai private
sector support for its agricultural water shortages project.
Kenan Institute Asia

A third foundation needs mention in this context. The Kenan
Institute Asia (KIAsia), registered in 1996 as a private Thai nonprofit
foundation, aims to continue a Thai-US development partnership
following termination of the bilateral US Agency for International
Development (USAID) program in Thailand. USAID, the Royal
Thai Government, and the William R. Kenan Charitable Trust
(including the Frank Hawkins Kenan Institute of Private Enterprise)
contributed to the KIAsia endowment. The original partners
continue to support the foundation through funding projects and by
board membership.
While KIAsia focuses largely on business practices, environmental
management, human resource development, and information and
communications technology, it emphasizes the importance of civil
society in all its work. KIAsia also funds NGO and community proj-
ects that contribute to improved understanding and monitoring of
environmental issues at the community level and better environmen-
8 Funds come from the US- tal management practices.8
Asia Environmental
Partnership (US-AEP) Kenan views its US $12.1 million endowment as conferring finan-
Community Participation cial stability and funding flexibility, which Kenan has successfully used
Initiative.
to attract additional funding. KIAsia continues to draw new USAID
funding and has actively and successfully sought US and Thai private
sector contributions, the latter amounting to near US $0.5 million for
activities (largely in skills training and general education) during 2001
to 2004.
Constrained Financial Capacity
As bank interest rates plummeted in the late 1990s, both LDI and
DCF faced a choice: continue grantmaking at the expense of person-
nel cuts or meet operating expenses by cutting grantmaking. Both
chose the latter route. The inadequacy of their endowments for
sustained grant support to civil society is buttressed by a recent study
that indicates an endowment in the billions of Baht would be required
to meet current development needs (Pongsapich 2001). While one
66
can argue about the assumptions used in estimating need, the

combined assets of DCF and LDI amount to less than one tenth of
this estimate.
This situation contrasts with that of KIAsia’s assertive and success-
ful efforts to maintain continued donor support and generate new
sources of funding to continue its grantmaking. While DCF and LDI
have also successfully attracted additional funding, that funding has
largely been used for direct project implementation and the instru-
mental use of civil society as a mechanism to achieve government
goals. Indeed, LDI in particular has received monies from the govern-
ment. This has meant a shift in priorities and approaches from earlier
grantmaking roles played by these organizations. The critical impor-
tance of developing an adequate endowment and having diverse fund-
ing sources is highlighted by the different experiences of KIAsia
versus the less generously endowed DCF and LDI. Nonetheless,
KIAsia’s favorable financial position has not guaranteed it a coherent
and consistent programming approach, relying as it does on external
funding to cover the majority of its projects’ costs.
Fund Management
With Thai bank interest rates hovering between one and two percent,
some NGOs took advantage of a mid-2002 issue of government
bonds offering returns of five percent and more, depending upon
bond maturity. Neither DCF nor LDI purchased these bonds. In the
case of one of these organizations, the penalty on breaking a longer-
term certificate of deposit would have resulted in a financial loss for a
switch to bonds. In the other case, the organization’s management
didn’t realize the opportunity. Counterpart funds held in the name of
KIAsia are restricted by the initial agreement to certificates of deposit
in a government-linked bank; their low yields are offset to some
extent by the dollar portion of the KIAsia endowment. KIAsia’s US
fund manager is credited by KIAsia management with having main-
tained the value of the fund in a difficult financial environment.
Thailand’s experience to date with ODA-civil society collabora-
tion demonstrates the importance of addressing financial sustainabil-
ity issues, namely: having an endowment sizable enough to withstand
drops in interest or other income; management alacrity and flexibility
in financial management; and consistent board and management
67
focus on the organization’s aims, including exploring innovative ways

of sustaining those in the face of changing conditions.
Institutional Issues
While an extensive evaluation of institution building within the three

organizations highlighted is beyond the scope of this review, the
contrasting experiences of the three raise interesting issues for
funders and others interested in the fate of civil society in Thailand.
The two smaller, and still struggling, organizations are fully Thai
operations, largely overseen by boards drawn from academia, retired
and current government officers, and activists. It is perhaps not coin-
cidental that KIAsia, the largest of the three (whose endowment is
significantly larger than the funds of the other two), draws its board
from the highest levels of Thai and US government and business
echelons, and includes a decidedly bicultural staff allowing it access to
US funds much more readily. The role of boards in providing strate-
gic guidance, engaging with potential partners, and providing focus to
operations appears to be critical.
KIAsia also differs from DCF and LDI in the technical focus of
much of its work, though it also emphasizes civil society in many of
its efforts. For example, KIAsia’s endowment enables it to provide
longer term program funding to organizations and issues in the health
sector relative to LDI at this time. Longer term funding offers the
potential for deeper and more permanent engagement than an annual
fundraising plan.
Not unlike the experience of many new organizations in their early
stages, by the time Canadian funding was terminated LDI’s evaluators
concluded that the organization had focused too much on internal
management issues and not enough on its own strategic institution
building. Although comparable evaluations have not been conducted
for the other two organizations reviewed above, the phrase resonates
as one with considerable implications for Thai civil society.
ODA Exit Strategies
Several bilateral assistance agencies developed their plans for phase-

out of Thailand during the late 1980s. Australia, Canada, Japan, and
68
the United States all entered discussions with the Thai Department of
Technical and Economic Co-operation, as the government aid coor-
dination agency, regarding future support. These discussions led to
the emergence of the three Thai organizations referred to above.
Assuming that Thailand’s economic growth was strong, Canada
signaled changes in its priorities and plans for phase-out of assistance
by the mid-1990s (Posgate 1998). The new strategy, aiming to estab-
lish more commercially oriented partnerships, prioritized assistance
to the commercial and industrial sectors, including human resource
and technology transfer.
The Canadian assessment reflected a view common among
Bangkok’s diplomatic corps that things were going well on all fronts
in Thailand. It also responded to increasing pressure, emanating from
the capitals of the respective bilateral agencies, to harness ODA in
order to facilitate home country commercial interests taking advan-
tage of Thailand’s high-growth opportunities.
Thailand’s 1991 coup d’état and the deadly clashes of May 1992
(preutsapa phmin, or “Black May,” as it is referred to) may have jolted
ODA agencies, but there is scant evidence that these events materially
changed plans already in place for phase-out of development assis-
tance. The 1997 financial and economic crisis, however, did result in
the continuation of assistance from several bilateral donors, some of
which are now again focused on terminating their programming in
Thailand.
Transition Plans
Canada and Australia have substantially redirected their focus toward

private sector programs, as had the United States prior to its closure
of the USAID Mission to Thailand in 1995. USAID has nonetheless
programmed substantial funding through KIAsia and is preparing to
open a Bangkok-based USAID Regional Mission in 2003. The
Delegation of the European Commission has a regional mandate, and
a number of EU member countries including Belgium and the
Netherlands are no longer actively providing development assistance
to Thailand.
Although both the importance of civil society and the opportuni-
ties created by the 1997 constitution are generally acknowledged by
donors, none indicates a strong interest in permanent unrestricted
69
funding for civil society efforts. Some embassies, such as that of the
Netherlands, indicate that their governments have no policy to
support such funding arrangements. Others, including the Australian
Embassy, express interest and indicate that the constraints faced are
neither policy nor home-country law but having sufficient human and
financial resources to develop plans for such alternatives as debt swaps
or use of counterpart funds to permanently support organizations. As
one ODA representative indicated, counterpart funds managed by the
Thai government are generally used for training and scholarships
consistent with the original program objectives. Any request for other
uses must originate with the Thai government.
In several cases, while ODA focus has shifted to the use of
Thailand as a base for regional activities and support of regional work
by Thai institutions, foreign donors indicate that they are continuing
to provide considerable support for Thai activities. They perceive
their programming to be satisfactorily engaged with Thai civil soci-
ety, and hence see little reason to consider debt swaps or other
arrangements to permanently endow Thai organizations.
Table 1 summarizes the status of assistance transition plans of
several of Thailand’s development partners. The table is based on
information from agency websites augmented by discussions with
officials of the relevant funding agencies, reflecting the status as of
late 2002. Annual assistance levels reflect a mix of the most recent
year or of average annual funding levels for a program cycle. The final
two columns in the table indicate the status of consideration of the
types of innovative funding options which are the focus of this study
and include additional comments that are intended to provide further
insight into the prospects for the development of endowments
through either the use of counterpart funds or debt swap arrange-
ments.
Australia
Although Australia developed plans in the 1990s to phase out its bilat-
9 See the Thailand Country
eral assistance to Thailand by 2001 because it characterized
information sheet online Thailand’s economic growth through 1996 as rapid and sustained, it
at www.ausaid.gov.au/ no longer has a deadline for “graduation” of Thailand. Following
country/country.cfm?Cou
ntryId=32 for more infor- Thailand’s 1997 economic crisis, Australia agreed to extend the dura-
mation. tion of its support.9 Post-crisis assistance focused on government
capacity building, specifically regarding good governance, economic
70
TABLE 1
ODA Exit Strategies (as of 2002)
Annual Availability of Non-Grant Funding

Planned Assistance Counterpart Fund Debt Swap Option
Country Exit Date Program Components (US$) Option
Australia None · Enabling Thailand’s effective regional $9.6 m Possible, but Possible, but
engagement through strengthening constrained by constrained by funding
of foreign affairs, trade and finance funding and and personnel limits
capacities personnel limits
· Limited community focus to develop
skills to communicate with govern-
ment
· Linkages with Australian counterparts
Canada 2006 · Trilateral cooperation with Thailand in Counterpart funds Not considered, nor
neighboring countries used to create DCF likely to be
· Continuation of on-going community but similar arrange-
development, good governance, and ments not under
poverty reduction programming consideration
European Union Regional · Environmental protection, stimulating $15 m Not applicable No outstanding loans to
Delegation rural economy, HIV/AIDS, refugee the Thai government.
and migrant issues
Japan · Small grants to grassroots organiza- No information

tions available
Netherlands · Private sector Modest Not applicable No policy in support of

debt swaps and no
outstanding loans
New Zealand Contingent · Currently reviewing strategies Modest Not applicable No outstanding loans
on outcome · Graduate scholarships and small
of planned projects funds (principally NGOs and
review community organizations) available
· Other traditional bilateral aid has
ended
United States Mission · Regional issues, including HIV/AIDS, $25 m Counterpart funds Attempted forestry-
closed in human trafficking, migrants, good jointly created DCF related debt forgive-
1995; governance, economic reform and KIAsia but simi- ness; abandoned
regional to lar arrangements because of complexity
open 2003 not under consider-
ation
and financial reform, and mitigating economic crisis impacts on the

poor, amounting to US $9.5 million annually.
Thailand’s relatively high level of development and its important
position in the Mekong sub-region, both geographically and econom-
ically, provide the basis for the evolution of the aid relationship from
71
donor/recipient to development partnership in the region. Under a

recently agreed trilateral aid partnership, Australia and Thailand will
jointly undertake activities that benefit third countries in the region.
A three-year strategy is currently being developed that would focus on
capacity building to position Thailand to better engage in the Asian
region. Indeed, Australia’s current assistance is primarily focused on
building Thailand’s capacity to address economic and public sector
governance issues. The new Thailand-Australia Government Sector
Linkages Program will promote institutional strengthening and
capacity building in Thai Government agencies. The program utilizes
a partnership approach, with joint activities planned and implemented
by Australian and Thai Government agencies. Direct assistance to the
poor and disadvantaged will continue through grants to local NGOs,
available in the past as the Australian Community Assistance Scheme,
a quick-disbursing grants mechanism managed by the Embassy and
focusing on five areas: environment, sustainable agriculture, health,
education, and good governance.
The Australian government also provides some A $11 million (US
$6.8 million) over a three-year period for the development of
improved skills at the community level to communicate with govern-
ment. While acknowledging the importance of civil society support
and the theoretical possibility of innovative financing to provide such
support, budget and staff realities combined with the political climate
are not conducive to such efforts.
Canada
Canada is currently embarking on a transition plan that would end its
bilateral program in March 2006. During the transition period, CIDA
will continue to work with the Department of Technical and
Economic Co-operation in support of Thai training and education
needs, research programs of the Thailand Development Research
Institute pursuant to the Canadian emphasis on poverty reduction,
and good governance programming with DCF. Through the founda-
tion, CIDA has been helping to strengthen the Office of the
Ombudsman, Administrative Court, Human Rights Commission,
Secretariat of Parliament, and Office of Official Information. In addi-
tion, DCF funding will support the Parliament Secretariat, the Thai
chapter of Transparency International, and the King Prajadhipok
Institute, a research institute focused on politics and democracy.
72
As part of its transition plan, Canada will also reduce support levels
for the Canada Fund, although the extent of that reduction has yet to
be determined. The Canada Fund is designed to be responsive to
proposals relevant to its focus on poverty reduction and sustainable
development. The fund currently supports the Thai Fund
Foundation, profiled in the appendix. Generally, it makes one to two-
year grants to both registered and non-registered development organ-
izations and grassroots groups, but not individuals. Grants average
US $5,900 to $8,300 annually. CIDA sources indicate that the
outlines of the transition are well in place, and that debt swaps, coun-
terpart funding, or other alternatives to provide long-term funding
support through NGOs has not been considered and nor is their
future consideration likely.
European Union
At the time of Thailand’s rapid development in the mid-nineties,
Thailand and the European Community agreed to re-focus coopera-
tion activities on increasing their economic links in order to build
closer relations in the long-term between the EU and Thailand.10 EU 10 For more information,
see the Delegation of the
support focuses on strengthening the cooperation framework and on European Commission
making an effective contribution, through institutional dialogue, to Thailand website at
www.deltha.cec.eu.int/en
economic and financial cooperation, to sustainable development, /index.htm.
social and economic stability, and democracy. Activities are developed
and funded on a project basis under the framework of the EU
Commission, focusing on trade and investment and public health
reform (EC-Thailand Country Strategy Paper).
A number of bilateral EC-supported projects/programs operate in
Thailand in sectors such as energy, public health, environment, rural
development, narcotics, and humanitarian assistance. Ongoing
programs are valued at some US $60 million, and include support to
civil society efforts to address HIV/AIDS and migrant/refugee
concerns (see Table 2 on the following page).
Japan
The Japanese International Cooperation Agency (JICA) administers a
technical assistance program within the broad JICA framework of
transfer of technology and knowledge, as part of its nation-building
objective. JICA provides five broad categories of assistance (social
development, health and medical care, agricultural development,
73
Table 2 Annual
EU Member States: Country Program Components Assistance (US $)
Assistance to Thailand
(as of 2002) United Kingdom · Education, human rights, good governance, HIV/AIDS, $2.5 million
peacekeeping, health, refugees, landmines.
The countries included here
are the main sources of Germany · Economic reform and development of a market economy $5 to 7 million
foreign development and specifically the strengthening of Thai small/medium
assistance to Thailand. enterprise competitiveness.
· Private-public partnerships, advisory services for indus-
try, cooperation with German political foundations and
Source: EC-Thailand Country
scholarships.
Strategy Paper, 2002-2006.
Denmark · Gives to Mekong River Commission and Asian Institute of $8 million
Technology in Bangkok.
· Mixed credit schemes are being explored.
Finland · Mostly regional programs funded. $1.7 to $3.4 million

· Poverty alleviation and improvement of environment in
the Mekong River Region.
· Some support for small-scale projects, especially through
local NGOs.
· A financial technical assistance program for industrial
joint ventures exists through FInnfund, a Finnish invest-
ment company.
Sweden · Burmese refugee concerns. $ 2.2 million

· Contributes to Asian Institute of Technology, Mekong
River Commission, and UN Environmental Programme for
Thailand.
· Awards soft loans for technical cooperation and 50 Thais
participate annually in training courses in Sweden.
forest and nature conservation, and development of mining and

manufacturing industries), although not all are represented in
Thailand. The program is explicitly bilateral – therefore working
principally with government agencies – and viewed as technical assis-
tance rather than as a funding resource.
Japan stands as Thailand’s main creditor, having pledged more
than US $2 billion under the regional Miyazawa Initiative. Even prior
to the 1997 crisis, Japan’s bilateral program was the largest one in
Thailand, at about US $1 billion annually (principally loans). Japanese
assistance focuses on export finance, agricultural credit, industrial
training, central markets and co-operatives, the environment, and
social development. Those close to the JICA program indicate that
while JICA in principle supports the strengthening of civil society,
existing financial regulations are not NGO-friendly, even for Japanese
NGOs. Assistance to civil society largely takes the form of small
grants for grassroots organizations, provided both by JICA and the
Embassy of Japan.
74
United States
Anticipating the 1995 closure of USAID’s Thailand mission, the
agency and the Thai government agreed to the release of counterpart
funds to support the DCF and KIAsia. Since that time, USAID has
supported the regional work of organizations based in Thailand.
Regional funding now amounts to some US $30 to $25 million annu-
ally. While a large share of this amount is spent in Thailand, officials
emphasize there is no intent to re-launch a bilateral program. The US
is currently developing a strategy to work through the Thai govern-
ment as part of the 2003 opening of a Regional Mission, based in
Bangkok. Tentative plans include support for the Office of the Civil
Service Commission and Ministry of Public Health as well as training
and scholarships. USAID works with a few key civil society partners:
The Asia Foundation, KIAsia, and the American Center for
International Labor Solidarity.
USAID sources indicate that funding from counterpart funds is
not currently on the table, but that any such request would have to be
initiated by the Thai government, which now uses remaining coun-
terpart funds principally for training consistent with earlier USAID
bilateral programming. USAID and the Thai government recently
worked to develop a forestry-related debt forgiveness scheme but
found it to be so complicated that the effort was terminated, accord-
ing to US sources. One such complication was the development of the
debt swap plans with limited indigenous input, resulting in NGO
protests shortly before the agreement was finalized.
What’s Next?
The 1997 constitution set in place reforms of fundamental impor-

tance to Thailand’s ability to achieve equitable and sustainable devel-
opment. Ensuring that the promise of the constitution is realized
requires sustained public attention; civil society, including NGOs,
labor unions, business groups, the media, and POs all have important
roles to play in this process. Neither the process nor the outcomes are
inconsequential to Thailand’s international partners.
The development planning process varies in complexity and dura-
tion among the ODA agencies surveyed in connection with this
report. In most, it involves three- to five-year lead times, political
75
priorities of the home government, some weighing of the relative

urgency of need in Thailand versus other countries, and an attempt to
balance the relative importance of various sectors in Thailand. As
resources become increasingly scarce among Thailand’s development
assistance partners, the challenge to civil society becomes more
intense, especially as the case for long-term support really has to be
made to politicians in a distant capital. Clearly, it is easier for ODA
agencies to continue established project modes than to seek out
support of distant bureaucrats and politicians to support a strategy of
building endowments.
The progressively For civil society organizations, the development officers within
embassies or assistance agencies along with the ambassadors represent
smaller and more
the points of entry in any effort to secure long-term support. Given
narrowly targeted pool
the bilateral nature of development assistance, the importance of
of external funding securing political support from Thai leadership is crucial to any effort.
requires that Thai Perhaps the greatest challenge for Thai civil society in obtaining
organizations become permanent financial support from development agencies lies within
increasingly resourceful Thailand’s own bureaucracy, including, but not limited to, the
Department of Technical and Economic Co-operation. While this
in how they tap resources
department has historically looked upon official development assis-
tance as a resource for public agencies, there are precedents of
support being extended to civil society, both through time-bound
grants and in permanent arrangements such as those referred to above
– LDI, DCF, and KIAsia. Funding arrangements involving debt swaps
or debt forgiveness would involve other actors, including the Ministry
of Finance and possibly the central bank. Nonetheless, current
government reforms intended to reduce the role of central govern-
ment agencies may offer civil society organizations a rare opportunity
to make the case that they produce important public goods and
deserve consideration in programming of ever-scarcer development
assistance budgets (or through the less conventional alternatives of
debt swaps and debt forgiveness schemes).
While it is not the intent of this chapter to paint a gloomy picture
of the prospects for ODA-civil society partnerships in Thailand, the
realities are clear:
• Most ODA programs have already embarked on transition
plans, as outlined previously.
76
• No ODA programs canvassed in connection with this chapter

have plans to augment its support for civil society through
permanent unrestricted funding in the form of an endowment.
• Thai civil society faces major public education challenges to
overcome public antipathy toward the sector.
Maintaining civil society programming appears likely to become a
greater financial challenge in Thailand, requiring increasing
resourcefulness on the part of Thai organizations to access the
progressively smaller and more narrowly targeted pool of external
funding and tap domestic resources. Should civil society become
more reliant on government as a funding source, maintaining an inde-
pendent, critical voice will require great political acumen to avoid
simply being cast as service providers.
While no ODA agencies indicated specific plans to augment their
support to civil society, it is perhaps premature to rule out this possi-
bility. To date, civil society organizations have not come together to
develop and present a strong rationale for more ODA support. Given
general donor acknowledgment of the importance of continued
development of civil society, a concerted joint effort on the part of
civil society leaders might yet meet with donor support.
77
References
Publications
Saneh Chamarik. The Role of the National Human Rights Commission,

Thailand. 2002. (Presented at the Conference on National and
Regional Systems for the Promotion and Protection of Human Rights
organized by the Friedrich Neumann Stiftung, France, October 7-11,
2002.)
The EC-Thailand Country Strategy Paper. 2002-2006. Online at:

europa.eu.int/comm/external_relations/thailand/csp/index.htm
Girling, J.L.S. Interpreting Development: Capitalism, Democracy and the

Middle Class in Thailand. New York: Cornell University Press, 1996.
Local Development Administration. Mechanisms and Administration

for Civil Society Development Fund. Supported by the World Bank,
2000.
Pongsapich, Amara and Nitaya Kataleeradabhan. Rabob lae golgai pua

gan borihan gong toon pua gan pattana. Bangkok: Chulalongkorn
University Social Research Institute, 2001.
––––. Thailand Nonprofit Sector and Social Development. Bangkok:

Chulalongkorn University Printing House, 1997.
Posgate, Dale and Paul A. Turcot. Local Development Foundation Project

(906/14437): End of Project Report. Submitted to the Canadian
78
International Development Agency, September 1998 (including

March 1999 addendum).
Center for Philanthropy and Civil Society and The Synergos

Institute. National Directory of Civil Society Resource Organizations:
Thailand. New York: The Synergos Institute, 2002. Online at:
www.synergos.org/globalphilanthropy/02/seasiacsrodirectories.htm
Winder, David. Options for Financial Sustainability: Collaboration

between Civil Society and Development Agencies in Southeast Asia. New
York: The Synergos Institute, 2003.
Interviews
Personal interview with Anek Nakabatura, November 2002.
79
80
THE RISE OF PHILIPPINE NGOS IN MANAGING DEVELOPMENT ASSISTANCE
Chapter Four
The Rise of Philippine NGOs
in Managing Development
Assistance
By Consuelo Katrina A. Lopa
81
Introduction
In recent years, official development assistance (ODA) agencies have

been increasingly exploring avenues for supporting community devel-
opment initiatives more directly. The result has been the creation of
a diversity of new funding channels, many of them involving NGOs,
both in the host and donor countries. Little analysis has been
conducted, however, of what has been working, including the how
and why, and few attempts have been made to share examples more
widely. This chapter seeks to address this gap by looking at the case of
the Philippines in detail and follows on the general overview of ODA-
NGO collaboration presented by David Winder in Chapter Two.
Various stakeholders in the Philippine development community
have warmly received the practice of NGO management of ODA.
NGO management of ODA funds transfers traditional decision-
making powers over allocation and use of funds, from donor repre-
sentatives and host government agencies to collegial bodies
comprised of or influenced by NGO representatives. This chapter
explores this rise of Philippine NGOs in managing ODA, looking at
the different forms of NGO-managed mechanisms and challenges
and opportunities for NGOs and ODA agencies moving forward.
Background
NGO management of ODA has existed since Corazon Aquino’s

assumption of power in 1986. In fact, policy direction for this is
outlined in the National Economic Development Authority’s
(NEDA) 1989 guidelines for government-NGO collaboration. The
guidelines state that NGOs may directly negotiate with foreign
governments for ODA.
82
Aside from the policy directive issued under the Aquino govern-
ment, several factors have contributed to an environment conducive
to NGO management of ODA:
• Due to the fifteen-year imposition of Martial Law between
1972 and 1986 by President Marcos, the Philippine govern-
ment has a history of graft, corruption, mismanagement, and in
some cases, participation in the suppression or violation of
civil, political, and human rights. In areas where the govern-
ment bureaucracy could not deliver necessary social services,
other development stakeholders had to step into that role.
• Philippine NGOs have successfully advocated for a greater role
in the delivery of social services as well as in attaining asset
reform. They stress their strong relationships in local, poor
communities, a commitment which grew out of working with
poor communities under the Marcos dictatorship.
• The impacts of development NGOs in community develop-
ment and community economic development have demon-
strated the capacity of these NGOs to be flexible, adaptable,
and capable of innovative approaches to development chal-
lenges.
• NGOs have typically incurred lower costs under less bureau-
cratic project implementation measures than government has
typically due to government graft and bureaucratic misman-
agement.
NGOs thus presented another means by which ODA could be
directed towards the poorest communities at a time when foreign
governments wished to demonstrate their support and commitment
to the newly installed democratic government.
On the other hand, government performance in the area of
managing ODA has also been sadly lacking. A report by the
Presidential Task Force on the 20/20 Initiative entitled, “ODA
Performance within the 20/20 Initiative Framework,” came to the
following conclusions:
• Only 8-11 percent of the Philippines ODA portfolio has been
allocated to basic social services between about 1994 and 2001.
Over 50 percent has been devoted to infrastructure support.
• Within ODA spending on basic social services, extended
implementation periods have happened due to delays in right-
of-way acquisitions, relocation issues with squatter families,
83
peace and order problems, social acceptability, and access to

financing.
• The rate of utilization of ODA for basic social services by the
Philippine government has been decreasing – from 76.2
percent in 1995, to 74.3 percent in 1997, to 62 percent in 1999.
Declining numbers in requests have also reflected a lack of
absorptive capacity by the government. The sectors showing
serious declines have been basic education, basic health proj-
1 The 20/20 Initiative is a ects, water, and sanitation.1
compact between develop-
ing and developed coun- Thus, while NGO management of ODA has shown promising
tries that calls for the allo- results on one hand, government performance has been somewhat
cation of, on average, 20
dismal on the other.
percent of the budget in
developing countries and
20 percent of official
development assistance to
basic social services. Types of NGO-managed mechanisms
From 1986 to the present, there have been several different types of
NGO-managed mechanisms involving ODA arrangements. Among
these mechanisms are:
NGO-managed Mechanisms whose Principal Funding Source is a Co-financed

Project Grant by a Foreign NGO and Its Government
Examples of these would be the now closed PhinCORD (Philippine

NGO Consortium for Rural Development) co-financed by a Dutch
church organization and the Dutch government; PHILGERFUND
(Philippine-German Development Foundation) co-financed by the
Deutsche Welthungerhilfe/German Agro Action and the German
government; and SEDCOP, funded by the CCA/Canadian
Cooperative Association with the Développement International
Desjardins (DID) and the Canadian government. While
PHINCORD’s project grant was run out of an existing Philippine
NGO, the Philippine Peasant Institute, and managed by an NGO
board representing different Philippine NGOs, both PHILGER-
FUND and SEDCOP set up institutions managed by a professional
staff and governed by a mixed board of donors and Philippine NGO
representatives.
84
Donor-funded and -managed NGO assistance program
A shining example of the donor-funded and donor-managed NGO

program is PACAP (Philippine Australian Community Assistance
Program). Though PACAP is a continuing NGO program run by a
foreign government agency, the Australian Agency for International
Development, a majority of PACAP’s Program Advisory Board are
members of civil society, academia, and cooperatives.
NGO-managed Mechanisms Set Up for Specific ODA Programs with a Specific NGO management of
Time Frame ODA funds has shown
promising results at the
Examples of these mechanisms in the early stages would be PDAP
same time that govern-
(Philippine Development Assistance Program), PCHRD (Philippines
Canada Human Resource Development Program), and the Diwata ment performance has
gender and development facility, all supported by the Canadian been relatively weak
International Development Agency (CIDA). The United States
Agency for International Development (USAID) similarly supported
the establishment of Project Shelter. Current examples of this type
would be the Community Arts & Crafts Enterprise Development
(CACEDI) and the World Bank’s NGOs for Protected Areas (NIPA).
At the outset, all the mechanisms mentioned did set up institutions –
whether as foundations or NGO facilities – to manage the ODA
programs. The lifelines of a number of these mechanisms corre-
sponded with the duration of project assistance only, but later ones
have either evolved into or continue to function as independent insti-
tutions, having successfully diversified their funding sources.
NGO-managed Mechanisms Endowed through Debt-for-Development Swaps
The Foundation for the Philippine Environment (FPE), endowed

with a debt-for-environment swap facilitated by USAID and the US-
based Philippine Development Forum, and the Foundation for a
Sustainable Society, Inc. (FSSI), endowed with a debt-for-develop-
ment swap facilitated by the Swiss government and Swiss develop-
ment NGOs, are examples of this mechanism. Both mechanisms
immediately incorporated as foundations in order to manage the
endowments and specific development programs supported with the
funds.
85
All four configurations, examples of which have been set up over

the last 15 years, have sought to include direct NGO participation in
the management or co-management of ODA. These mechanisms all
illustrate varying degrees of: control and commitment practiced by
different donor governments; financial sustainability enabled; and
impact potential.
A dominant trend among most NGO facilities – whether they
started out as co-financed projects, one-time ODA projects, or debt
swap facilities – has been the transformation of NGO-managed fund
facilities into financially sustainable institutions with the capacity to
continue their mandates.
Important Venues for Strategizing on ODA Options
While ODA options are being examined for future country interven-
tions, ODA options for the Philippines have also been discussed in the
following fora:
In 1999, a strategic sharing and planning workshop of Philippine
NGO fund facilities took place at the invitation of CODE-NGO
(Caucus of Development NGO Networks). It represented the culmi-
nation of a series of sharing sessions among various fund facilities –
both NGO-managed and donor-managed – and became an opportu-
nity to gain an overall picture of NGO fund facility programs, map
out commonalities and gaps, and explore ways of working together,
including planning for policy change advocacy with the Philippine
government.
As a result of the 1999 workshop, periodic meetings of donor-
managed NGO programs have also been taking place to explore
better ways of doing things, including sharing information (databases)
on partners, projects, formats, and procedures, and actually embark-
ing on joint cooperation/complementation projects. Hosted on a
rotating basis and with NEDA’s participation, the meetings have been
joined by the United Nations Development Programme and govern-
ments of Australia, Japan, Canada, Germany, France, Switzerland,
and the European Community (the United States, World Bank, and
Asian Development Bank have yet to join these meetings).
The Consultative Group, composed of all donor agencies operat-
ing in the Philippines and chaired by the World Bank Resident
86
Mission in the Philippines, convenes annual meetings with the

Philippine Government in the hope of reaching a consensus on devel-
opment assistance priorities.
The International NGO Consortium represents the gathering of
international NGOs operating in the Philippines. Most, if not all,
members of the Consortium are receiving funding support for their
projects from their respective governments and thus would fall under
the mechanism of co-financed projects. The Consortium comes
together for information and resource sharing on strategic concerns
as well.
Challenges and Lessons Learned
Over the last 15 years during which the Philippines has witnessed the
formation of various NGO-managed mechanisms of development
assistant, a number of challenges, dilemmas, and innovations have
been experienced. These are described below:
Defining Thematic and Geographic Priorities
At the outset, an NGO-managed mechanism must clearly define its

strategic and programmatic priorities and focus its resources appro-
priately. Based on experience, having broad mandates can make it
unwieldy for the mechanism to manage effectively and achieve long-
lasting impact.
Varying the Forms of Assistance
Earlier funding mechanisms focused on providing grant assistance,

which limited the potential beneficiaries as well as the life of the
mechanism. Increasingly, there has been a real demand for loans,
credit facilities, loan guarantees, equity investments, which can
increase the number of potential beneficiaries and even increase the
value of the fund. These have been made possible, in part, through
partnerships with other financial intermediaries such as rural banks,
commercial banks, cooperatives, and savings and loan associations,
among others. In setting project assistance ceilings, it has also been
helpful to keep in mind the absorptive capacities demonstrated by
87
proponents, as well as possibilities for funding programmatic initia-

tives as opposed to activity or project-focused initiatives.
Strategic Partnerships
In the case of USAID’s Project Shelter, the project departed from the
usual pilot area approach where a single project is implemented in one
area with a single partner and later possibly replicated. Instead,
Project Shelter sought to establish strategic partnerships with three
regional-based coalitions of NGOs and people’s organizations (POs)
in order to simultaneously implement a set of common programs and
achieve a scaling-up effect.
Importance of Birthing Processes
Earlier Philippine NGO-managed mechanisms experienced a host of

problems relating to representation and operationalization. Among
these were difficulties of working with NGOs with definite political
agendas; strategically defining the thematic mandate of the mecha-
nism as well as its sectoral and geographical priorities; developing a
strong representative board; and hiring professional staff. Later
NGO-managed mechanisms have experienced birthing processes that
specifically tried to avoid these problems. Independent bodies or
reference groups, such as CODE-NGO, have been important in this
process. Such groups help brainstorm on the specifics of the structure
of the mechanism from a neutral position.
Governing Boards
A variety of arrangements have been implemented to ensure repre-

sentation of POs, member organizations, individuals, and regional
and political affiliations. Some have resulted in tokenism – when
members are not adequately prepared to meaningfully participate in
board discussions. Some have arrived at conflict-of-interest situations
– when members only represent their own institutions or political
affiliations. Having learned from the experiences of earlier NGO-
managed mechanisms, a combination of carefully selected individuals
representing various perspectives and competencies, with clear terms
of service, has worked for most NGO-managed mechanisms.
88
Empowering Local/Regional Entities and Marginal Groups
Institutionalizing decision-making by local/regional entities and

marginal groups helps jumpstart capacity and skills building among
people and entities that would otherwise have no opportunity to hone
these. In the experience of PCHRD, FPE, and Project Shelter, exer-
cises in democratic governance, decision-making, and allocating
resources are critical skills areas because they help empower groups
(not to mention help prevent tokenism).
Professional Staff/Secretariat
Staff of NGO-managed mechanisms needs to be professional, with

appropriate technological knowledge and skills. As much as possible,
they need to be shielded from unhealthy political dynamics. On a day-
to-day level, the staff needs to be empowered and not micro-managed
by their boards.
Defining Measurable Impacts
At the outset, a challenge for an NGO-managed mechanism is to

define the measurable impacts it wishes to address. While an organi-
zation should carve out its niche, it needs to be open to changes in the
environment that possibly demand new approaches.
Management Information Systems and Monitoring and Evaluation Processes
Management information systems with corresponding training and

information kits must be available for developing learning databases
as well as feeding into project monitoring and evaluation. The
systems must also reflect accountability measures adopted.
Relationships with Donor Publics
Donor publics are NGOs, churches, communities, and lobby groups

in the foreign donor country. In the negotiation phase of granting
ODA funding to NGO-managed mechanisms, a strong role for donor
publics needs to be emphasized because they have a role to play in
influencing their government on ODA policy and priorities.
89
Throughout the life of an NGO-managed mechanism, there needs to

be congruence in the direction of stakeholders and donor publics; that
ensures full support can be given to the mechanism and unnecessary
tensions avoided. In the experience of PCHRD, for example, differ-
ing views between Canadian and Philippine NGOs on the necessity
of engagement with government led to major differences in gauging
and appreciating the success of the program.
Convergence of Stakeholder Agendas
The convergence of political agendas among stakeholders is vital to

the process of setting up a successful NGO-managed mechanism.
The donor needs to consider its government’s foreign policy, priori-
ties of the ODA agency, and their embassy in the host country. To be
taken into consideration as well are lobby groups, NGOs, and the
public in their country. To be taken into consideration in the host
country are the Philippine government, NEDA (tasked with oversee-
ing all ODA), and the support of Philippine civil society.
Financial Sustainability of NGO-managed Fund Mechanisms
Dependence on a single donor or single grant leaves an NGO-

managed mechanism and its beneficiaries vulnerable to foreign policy
shifts. Thus the need to diversify sources, as has been concluded and
acted upon by PDAP and CACEDI. In some cases, building an
endowment has been essential in helping NGOs achieve a significant
degree of independence. Various other financial sustainability meas-
ures must be addressed at the outset, including the use of safe and
prudent financial instruments for fund management, government-
private sector revenue sharing, and government-NGO co-manage-
ment funding schemes.
ODA Options and Opportunities

For Co-financed Projects
An option available for co-financed projects is to set up organizations

that function as NGO-managed mechanisms whose principal funding
source is a co-financed project grant or an endowment by a foreign
90
NGO and its government. Such an arrangement makes it possible for

project appraisals and approvals to be devolved from the donor coun-
try to the Philippine organization. The arrangement frees the donor
from project concerns, allowing it to focus on more strategic concerns
such as the program’s strategic direction, complementary advocacy
concerns, development education, and the donor publics in the donor
country. This was the option adopted by PHILGERFUND, the
German church agency Brot fur die Welt together with Consulting
Team, Inc., and the Dutch NGO Novib with Asset (the German
church agency Misereor has been aiming for such an arrangement in
the Philippines).
For Donor-funded and -managed NGO Assistance Programs
An option for donors that requires greater control and management,

either at the embassy or ODA level, is to institute significant partici-
pation by civil society at the program advisory board level. As in the
case of PACAP, direct participation has been ensured at the
island/regional level and civil society representation via NGOs,
academia, and cooperatives. There has also been experimentation
with other mechanisms involving direct participation on boards by
representatives of POs.
For NGO-managed Mechanisms for Specific ODA Programs
An option for NGO-managed mechanisms set up for specific ODA

programs with limited time frames and limited funding assistance is to
provide assistance for an end-program evolutionary phase that
includes 1) ensuring a legal/institutional entity for the mechanism and
2) diversification of funding sources through a resource mobilization
campaign for the mechanism. PDAP has taken this track with success,
and CACEDI has just begun to do this as well.
For NGO-managed Mechanisms Endowed through Debt Swaps
Of all possible options, that of an endowment through a debt swap

arrangement can go a long ways to ensuring the financial sustainabil-
ity of the funding mechanism. Earlier mechanisms that failed to
address their own financial sustainability could only respond to devel-
91
opment needs momentarily and contributed to the donors’ feeling of

development fatigue. This option is the most sustainable of all
models.
On Thematic Areas
Based on the planning workshop of Philippines-based NGO fund

facilities, it was observed that the following thematic areas have so far
remained unsupported by ODA: land tenure access (both agricultural
and urban); indigenous peoples and their claims for ancestral domain;
the urban poor and delivery of social services; environmental rehabil-
itation; entrepreneurship and enterprise development; and integrated
area planning and development in cooperation with local govern-
ments. It was further suggested that investment and co-financing
schemes could be explored among different NGO-managed facilities
for joint ventures with the private sector, civil society, and govern-
ment.
On Geographical Areas
Geographical areas that have so far remained underserved are the

following: generally, the island provinces; politically unstable
provinces such as those in Mindanao; very low income-classed munic-
ipalities (classed by the national statistics bureau); and regions II in
Luzon, VIII in the Visayas, and CARAGA in Mindanao (regions are
also categorically ranked). In the case of Mindanao where the consor-
tium approach was adopted by several donor agencies, it was
suggested that this could be replicated in areas that have so far been
underserved and could entail the joining of different mechanisms on
the basis of integrated area development or joint economic ventures.
On the Debt Swap/Debt Forgiveness Options
Does debt swap or debt forgiveness remain an option in the

Philippine context and, if so, under what conditions?
According to economist Maitet Diokno-Pascual, President of the
Freedom from Debt Coalition, the debt-for-development swap
remains a viable option for the Philippine government as it would
have no inflationary impact and would result in debt reduction for the
92
government. As of the first quarter of 2001, the Bangko Sentral ng

Pilipinas has reported the Philippine foreign debt at US $49.949
billion, with the public sector accounting for two-thirds or US
$37.461 billion, and the balance of US $12.487 billion by the private
sector.
The strategy of debt-for-development swaps could also be a way of
enhancing the Philippine government’s capacity to comply with inter-
national standards for social sector spending. While the Philippine
Government devotes a significant share of its budget to debt servic-
ing, the social sector and asset reform share of the budget does
approximate the United Nations standard of 40 percent of the
national budget for the social sector. Philippine compliance to the
20/20 compact, however, only approximates 50 percent of the set
standard.
The 1997 Asian crisis (compounded by the September 11, 2001
terrorist attacks on the United States and ensuing bombings in
Afghanistan) and the economic downturn which ensued in the
Philippines, caused the government to face questions regarding its
capacity to provide counterpart funding to ODA and counterpart
Peso proceeds for debt swaps. Significant political will on the part of
the Philippine government will be needed for further debt swap or
debt forgiveness schemes.2 2 As mentioned in the next
chapter, a debt-for-nature
An additional and yet untapped resource is contributions from swap worth US $8.24
overseas Filipino workers as well as Philippine migrants. Counterpart million was signed
between the US and
monies mobilized for regional development from these populations Philippine governments in
through internet technology may well be used by the Philippine September 2002 under the
government to leverage debt-for-development swaps. US Tropical Forest
Conservation Act. Ed.
On the part of donors, those wishing to make long lasting contri-
butions to Philippine development look to the establishment of
endowed organizations as the most concrete manifestation of their
country’s long-term commitment to and faith in the Philippines. An
endowment to an organization sourced from debt swaps or debt
forgiveness enables a donor country to make a permanent and contin-
uing contribution to the Philippines. The endowment is assured
despite shifts in foreign policy in the home country, downturns and
economic recessions on the national, regional, or global levels, and
changes in political regimes.
Such arrangements do entail openness to entrusting these sizable
resources to a private organization rather than the government. The
93
experience of the last 15 years has demonstrated the competent and

accountable management of such organizations. Moreover, endowed
organizations have succeeded in reaching those groups and commu-
nities that have traditionally not had access to credit. On the part of
NGOs and POs, they have appreciated the value of endowed founda-
tions, have met the challenge of managing such organizations, and
hope to replicate such models on various levels.
This may be an option that may be taken by donor countries that
have figured prominently in prior ODA funding for NGOs and devel-
opment in the Philippines, including the Netherlands, the European
Union, Australia, the United States, and Canada.
If meaningful development assistance is to be pursued in the
Philippines, the establishment of localized NGO-managed facilities
would be a step in the right direction. Local NGO-managed facilities,
if established initially on the level of the three main island groups of
Luzon, Visayas, and Mindanao – and jointly managed by local NGOs
and POs, representatives of local governments, and the private sector
– could pave the way for genuine and sustainable area-focused inte-
grated development. In addition, there are many communities and
areas for development that are yet not served in a strategic way and
can be the focus of new organizations that become established.
Recommendations
In view of the above ODA options and opportunities, the following

general recommendations made by CODE-NGO to the donor
community need to be seriously considered:
Pursuit of a continuing dialogue between NGOs and donors, the subject
of which should be the following: identification of strategic partner-
ships with competent and trustworthy Philippine NGOs; advocacy
for increased allocations of ODA funds for social services; and nego-
tiation for increased allocations of ODA funds for Philippine NGOs.
Prioritization by donors for NGO capacity building and building of social
capital that can come in the form of support for NGO initiatives on
transparency and accountability. Examples of initiatives that could be
supported include the Philippine Council for NGO Certification,
which certifies NGOs that meet established minimum criteria for
financial management and accountability; the Successor Generation
94
project, which seeks to ensure the future human resource of the

Philippine NGO community; endowment building opportunities;
debt conversion facilities; and the replication of the PEACE Bonds
initiative, which used the capital market to sell bonds, the profits on
which are being used to issue grants for poverty alleviation and erad-
ication. In addition to this, donors could also help enhance the capac-
ity of NGOs through training opportunities in areas such as resource
mobilization.
Support for research, documentation, and monitoring activities pertain-
ing to key NGO concerns, such as subcontracting relationships with
governments, the “demand and supply” of development funds for
poverty-reduction programs, and the monitoring of ongoing projects
funded by the World Bank, ADB, and others.
95
References
Publications
Community Arts & Crafts Enterprise Development, Inc. Information

brochure and accomplishment reports.
CODE-NGO. Increasing Results. Maximizing NGO Fund Facility

Resources. A Strategic Sharing and Planning Workshop of Philippine NGO
Fund Facilities. Quezon City: Caucus of Development NGO
Networks/CODE-NGO, 1999.
–––––. NGOs in a New Arena: Initial Reflections on Managing Fund

Mechanisms for Development. Quezon City: Caucus of Development
NGO Networks/ CODE-NGO, 1997.
CODE-NGO, Helvetas, Swiss Coalition of Development

Organizations. Building the Foundations of a Sustainable Society – The
Philippine Experience at Creative Debt Relief. Quezon City: Caucus of
Development NGO Networks/CODE-NGO, 1996.
Gonzales, Raul. Official Development Assistance in the Philippines (1986-

1996). Quezon City: Caucus of Development NGO
Networks/CODE-NGO, 1998.
–––––. Trends in Official Development Assistance (ODA) for Philippine

NGOs: A Follow-Up Study. Quezon City: Caucus of Development
NGO Networks/CODE-NGO, 2000.
96
Igaya, Gregorio Luis. ODA Performance within the 20/20 Initiative

Framework. Presidential Task Force on the 20/20 Initiative, May
2001. (Draft presented to the Multi-Sectoral Committee on
International Human Development Commitments, NEDA.)
PACAP. Sustaining Strong Partnership Toward a Better Future –

Accomplishment Report. Makati: Philippine Australian Community
Assistance Program, AusAID, 2001.
–––––. Sustaining Strong Partnership Toward a Better Future – Twelve

Case Studies. Makati: Philippine Australian Community Assistance
Program, AusAID, 2001.
PCHRD. PCHRD Accountability Exposition. Quezon City: Philippines-

Canada Human Resource Development Program/PCHRD, 1996.
PHILSSA. Project Shelter Summing-Up Activity. Quezon City:

Partnership of Philippine Support Service Agencies/ PHILSSA, 2000.
PHILSSA. Terminal Report on Project Shelter (1998-2000). Quezon

City: Partnership of Philippine Support Service Agencies/ PHILSSA.
2000.
Racelis, Mary. From Struggle and Consolidation to New Visions: Civil

Society and Civil Society Assistance in the Philippines. 1999. (Presented at
the Carnegie Endowment for International Peace Workshop on
Rethinking Civil Society Assistance, March 1999, Virginia, United
States.)
SEDCOP, Information Sheet.
Winder, David. Options for Financial Sustainability: Collaboration

between Civil Society and Development Assistance in Southeast Asia. New
York: The Synergos Institute. 2003.
World Bank. Poverty to Rise in Wake of Terrorist Attacks in US. News

Release No. 2002/093/S, 2001.
97
Interviews
Ana Teresa de Leon-Yuson, Secretary General, PHILSSA/

Partnership of Philippine Support Service Agencies, a partner in
USAID/Mondragon Foundation’s Project Shelter, 8 October 2001.
Mercy Montales, Project Coordinator, CACEDI, Community Arts

and Crafts Enterprise Development, Inc., 8 October 2001.
Maria Anna de Rosas-Ignacio, former Secretary General, PHILSSA,

and member of PCHRD/Philippines-Canada Human Resource
Development Program Executive Trustee, 9 October 2001.
Milo Casals, Project Coordinator, SEDCOP, Socio-Economic

Development through Cooperatives in the Philippines, 9 October
2001.
Patricia Georgina Domingo, Program Director, PACAP, Philippine

Australian Community Assistance Program, 11 October 2001.
Ma. Teresa Diokno-Pascual, President, Freedom from Debt

Coalition, 24 October 2001, via e-mail.
98
BUILDING AND MANAGING ENDOWMENTS
Chapter Five
Building and Managing
Endowments:
Lessons from Southeast Asia
By Eugenio M. Gonzales
99
Introduction
This chapter provides an analysis of the experiences of organizations

in Southeast Asia in creating, building, and managing endowments as
mechanisms for their financial sustainability. The organizations stud-
ied are:
• Foundation for the Philippine Environment (FPE)
• Foundation for a Sustainable Society, Inc. (FSSI), Philippines
• Jaime V. Ongpin Foundation, Inc. (JVOFI), Philippines
• Yayasan Keanekaragaman Hayati Indonesia (KEHATI), the
Indonesian Biodiversity Foundation.
The basis for this chapter’s analysis comes from case studies writ-
ten on each organization as well as interviews with staff and trustees
of each foundation. While each case study presents details on the
history, mandate, and programs of the foundations studied, this chap-
ter draws lessons on the financial policy and strategic aspects of
endowment building across all four cases. It also makes recommenda-
tions useful for organizations and official and private donors in simi-
lar circumstances. This study does not intend to compare and assess
the performance of the four foundations’ endowments.
In the first section, endowments are generally described, defined,
and illustrated according to the basic flow of funds and components.
Summary information on the four case studies is then presented in the
second section. The main body of the study analyzes the basic
requirements as well as the influencing factors involved in setting up
an endowment. Lessons and insights are drawn from the analysis,
particularly those related to success factors and challenges. Finally,
the chapter makes recommendations and conclusions on the potential
role of private and government donors in building the financial
sustainability of such organizations.
100
Endowments for Financial Sustainability
With the decrease in worldwide official development assistance

(ODA) starting in 1993-94 and the Asian financial crisis in 1997,
Asian nongovernmental organizations (NGOs) have had to look for
more creative ways of generating resources to sustain their mission.
While governments and donors recognize civil society’s increasing
importance in development, this has not been matched by a commen-
surate increase in financial support for civil society organizations.
Endowment building is a strategy that more and more organizations
have thus been exploring as a long-term financing strategy.
Winder (1998) defines endowments as “permanent assets – money,
securities, or property – that are invested to earn income that is used
to support an organization’s activities.” Horkan and Jordan (1996)
clarify that the terms “trust,” “capital fund,” “sinking fund,” and
“endowment” describe similar financial arrangements. For the
purposes of this paper, an endowment refers to a capital fund
managed by an organization for the purpose of supporting activities
that help achieve its mandate.
In 1997, The Synergos Institute conducted a survey of 77 organi-
zations from Indonesia, Singapore, Malaysia, and the Philippines.
This survey demonstrated that about half of the respondents have
created endowments. Sixty-four percent of the endowments were less
than US $1 million in size. The largest of these were established by
grants from ODA agencies and are among the cases discussed in this
paper: KEHATI, FPE, and FSSI.
Endowments have historically been set up to provide a continuing
stream of funding for a specific purpose or activity. In universities,
professorial chairs are supported by individual or corporate donors to
honor selected professors or to enable them to conduct academic
work in a specified field. Research endowments provide grants for
applicants to conduct specific studies. Some of the largest private
grantmaking institutions have their own endowments that provide
funds for their grants and operating expenses.
In an endowment, a definite amount of funds (or assets) is invested
for the purpose of generating income that is later given to a recipient.
The recipient may be a grantee (such as an NGO, or people’s organ-
ization, PO), an honoree, an awardee, or, in some cases, a borrower.
The approval and release of funds to a recipient are usually governed
101
by guidelines or programs adopted by a body, often a Board of

Trustees, to whom the endowment is legally entrusted. Laws, rules,
and regulations governing endowments may differ from country to
country. In most cases, however, the board is legally responsible for
the endowment.
Part of the income from an endowment is also used for adminis-
trative activities to ensure that programs and guidelines are imple-
mented properly and that the endowment’s finances are accounted
for. Sometimes, the income can fund program activities implemented
by an endowed organization’s own staff. This is the case with operat-
ing organizations that provide services in addition to grants or credit.
The initial contribution that establishes an endowment usually
comes from external sources. Bilateral donors, private foundations,
corporations, wealthy individuals, and the general public can donate
to endowments (Winder 2000). ODA donors can potentially get more
long-term public relations mileage from contributing to an endow-
ment than to a finite project. Not only are the donors forever a part
of the endowment’s history but they are also contributing to every
project that the endowment supports, in effect. While these external
sources are often emphasized in the literature on endowments, inter-
nally generated savings and repayments from previously disbursed
loans to beneficiaries may also serve as initial capital for an endow-
ment. For organizations engaged in investing and lending, especially
through microfinance programs, these repayments can be substantial.
In this paper, repayments will be called reflows.
Figure 1 is a simplified diagram of the flow of funds in an endowed
organization:
Figure 1
Fund Flow in
an Endowment
External Grants,
Donors Programs, or
Endowment Services
Administration
Internal
Savings and
Reflows
102
Beyond Sustainability
In addition to enabling grantmaking, an endowment allows for:

• autonomy: an endowment can increase an organization’s inde-
pendence from funding trends outside of its control
• leveraging: an endowment can be used as a basis for acquiring
additional funding (Winder 2000).
The empowerment that an organization feels as a result of these
realities springs from the fact that an endowment serves as a substan-
tial and tangible financial asset from which additional resources can
be generated.
Organizations in Southeast Asia have historically been funded by
grants specifically for delivering services to their beneficiaries. This
meant that they were not allowed to set aside any funds to start build-
ing their own reserve of financial assets. Moreover, when the grants
dry up, the organizations may be forced to shut down. With a prop-
erly managed endowment, however, organizations can sustain their
services even after their donors stop funding them. In the context of
declining ODA, the four cases demonstrate how their endowments
can carry them through hard times and even increase funds available
to their beneficiaries through leveraging. This would have been
impossible if they did not have such a financial asset. They have
become legitimate co-financiers through the income created by their
endowment assets.
Dependence on grants can also threaten the autonomy of any
organization as grants are not reliable long-term sources of funding.
All four foundations studied in this paper can deal with donors from
a strong and independent position precisely because they have an
endowment. One changed its long-standing investment advisor that
its donor had selected, for example. Another stipulated that its
endowment donors cannot hold voting positions on their board.
Because they have an asset to fall back on, these organizations are not
forced to give up their autonomy to donors just to access funds. Of
course, dealing with the original donors required more skill and
caution during the negotiations.
Weatherly emphasizes that endowments are empowering even as
they build local capacity (1996). Through them, stakeholders are
provided a means to participate in the management and decision-
making over significant funds intended for their society’s develop-
103
ment. He also envisions strategic roles for organizations with endow-

ments; acting as conveners of participatory dialogue on critical prior-
ities and as policy advocates at the national level. This is consistent
with what we shall see later as the long-term nature and mandate of
endowments. The performance of these roles, however, depends ulti-
mately on the financial, technical, and social resources that an endow-
ment is able to marshal.
The Four Foundations
All four foundations analyzed in this paper set up their endowments

in the first half of the 1990s. The context of their establishment was
the first major decline in global ODA that occurred in 1993-94,
including in Southeast Asia. It can be said that the endowments were
established at least partly in response to that decline.
Foundation for the Philippine Environment
In 1992-93, FPE was created and endowed through debt-for-nature

swaps that raised US $21.8 million in local currency. Of the total
amount, the United States Agency for International Development
(USAID) contributed US $21.7 million while the Bank of Tokyo
contributed US $119,590. These amounts have since declined
substantially because the bulk of the endowment was invested in local
currency, the Philippine Peso (PHP), which lost half of its value
against that of the US dollar.
According to it Articles of Incorporation, FPE’s stated purpose is
“to contribute, encourage, assist, and provide technical, managerial,
and financial support to non-governmental organizations, people’s
organizations, communities, and others for environmental protection,
natural resource conservation and management, and sustainable
development.” It provides grants to NGO and POs to strengthen
their capacities for natural resource management in general and
biodiversity conservation in particular.
Thirty-four percent of its endowment is now invested in foreign
currency and the remainder in Philippine pesos. While its endow-
ment’s peso value has steadily increased since its inception, growth has
not been enough to offset inflation. From 1994 to 2001, the endow-
104
ment grew from PHP 566 million (US $10.67 million) to PHP 719
million (US $13.56 million) for an average annual growth rate of 3.86
percent.
Given these constraints, the foundation officials decided to lever-
age the endowment to raise around US $400,000 in additional funds
for its grantees.
Foundation for a Sustainable Society, Inc.
FSSI was created and endowed in August 1995 through a bilateral Experience shows that
debt conversion agreement between the Swiss and Philippine govern- while endowments
ments. Approximately US $17 million in local currency was deposited enable grantmaking,
by the Philippine government into the foundation. In exchange, the
they can also increase
Swiss government cancelled US $34 million worth of Philippine
government debt. Similar to FPE’s case, the US dollar equivalent of funding autonomy
FSSI’s endowment in Philippine pesos has declined due to devalua- and act as a leverage to
tion. acquire additional
The organization provides loans, equity, grants, special deposits, funding
and guarantees to NGOs, POs, and small entrepreneurs engaged in
sustainable enterprise – ecologically sound, economically viable,
community-oriented projects. Special deposits are made into cooper-
atives or small banks to enable them to lend out more funds.
Guarantees are given to organizations to enable them to borrow from
commercial banks, even if they have limited collateral. Around 90
percent of FSSI’s assistance is in the form of loans. This has enabled
it to increase its endowment more than if it provides grants alone. It
has also leveraged more than US$ 300,000 worth of grants from other
donors.
From August 1995 to December 2001, the foundation’s endow-
ment grew from PHP 454 million (US $8.56 million) to PHP 622
million (US $11.73 million) for an average growth rate of 7 percent
per year. This was barely enough to offset inflation, which was at
roughly the same level then. Around 18 percent of FSSI’s endowment
is invested in foreign currency.
Jaime V. Ongpin Foundation, Inc.
The Benguetcorp Foundation, Inc. was established in December 1980

as the corporate foundation of the Benguet Corporation – one of the
105
largest mining companies in the Philippines. In 1987, it was renamed

the Jaime V. Ongpin Foundation, Inc. in honor of the first Filipino
president of the mining company. In the 1980s, JVOFI mainly served
the communities surrounding the mine sites of the mother company.
In the 1990s, the foundation gradually became independent of the
corporation. Now, all of its projects are in communities that are not
related to Benguet’s mining activities.
Consistent with its original vision to build “self-reliant communi-
ties capable of harnessing resources for equitable development”
(Garilao and Tuparan 2003), JVOFI implements microfinance and
environmental projects and provides training and consultancy services
to communities and local governments in the northern regions of the
Philippines.
The organization established its endowment in 1991 by setting
aside PHP 3.4 million (US $64,150) in savings to a restricted account.
Through interest earnings, annual transfers of savings and reflows
from earlier loan projects, the account grew to a peak of PHP 17.1
million (US $322,641) in 1997. In that same year, however, JVOFI’s
major grants (from USAID, the Philippine Department of Health,
and Benguet Corporation) ended. This necessitated withdrawals from
the endowment to cover program expenses bringing it to its lowest
value in 2000 at PHP 12.1 million (US $228,301). As of October
2002, the fund had grown back to PHP 13.4 million (US $252,830),
all of which is in local currency.
From 1991 to 2000, JVOFI leveraged PHP 140.6 million (US
$2.65 million) from local and foreign donors. This is more than ten
times the value of its endowment.
KEHATI, the Indonesian Biodiversity Foundation
KEHATI was established in 1994 and endowed in 1995 through a US

$16.5 million grant from USAID. In addition to the endowment
grant, USAID also pledged an additional US $2.5 million to cover the
foundation’s operating costs and any technical assistance or consul-
tancies needed to help it establish effective operations between 1995
and 2000 (Maxim et al. 2003). While in its early years KEHATI
focused on funding research on biodiversity, it now emphasizes fund-
ing community groups and NGOs that conserve and use local
resources in a sustainable manner. It has adopted a long-term vision
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that emphasizes multi-stakeholders and multi-year budgeting, and a

focus that integrates community with conservation. Community
empowerment is at the core of this approach.
The entire endowment fund is in foreign currency and managed
by financial institutions in the United States. In this case, because of
the devaluation of the Indonesian Rupiah, the endowment’s value in
local monies has increased by more than three times. From 1995 to
1999, the endowment’s US Dollar value grew at 12.8 percent per year
peaking at around US $25 million in 1999. It has since decreased,
however, to settle at approximately US $19 million in late 2002.
KEHATI has launched a fundraising strategy to meet its commit-
ment to contribute US $4.7 million to the endowment by 2005. It has
also leveraged a significant amount of funds from philanthropic,
corporate, and government donors. At present, it is exploring the
possibility of using debt-for-nature swaps to augment its endowment.
Endowment Creation: Basic Requirements and Influencing

Factors
In this section, the basic requirements needed to establish and grow

an endowment are assessed based on the experience of the four case
endowments and writings by Weatherly (1996) and Horkan (1996).
Factors that affect the final shape and form of the endowment are also
identified.
Basic Requirements
Five requirements for establishing and growing an endowment may

be identified:
Long-Term Purpose
Endowments are meant to last because they serve a long-term
purpose. There are no such things as short-term endowments.
Environmental rehabilitation, curing AIDS, or poverty reduction are
all long-term goals that require long-term financial support. All four
endowments studied in this paper have goals that are long-term in
nature.
107
High-Priority Item
Given a particular society’s (or donor’s) many concerns, an organiza-
tion needs to determine priorities and allocate its resources accord-
ingly. Ideally, endowments begin with a large initial contribution; this
isn’t possible if its purpose is not a high priority item in the donor’s or
recipient’s agenda, of course. The three foundations that received a
large initial contribution – FPE, FSSI, and KEHATI – have been
addressing environmental concerns; two – FPE and KEHATI – have
been focusing on biodiversity conservation. These are high priority
issues for donors and countries in Southeast Asia especially.
Policy Openness
Policy that is conducive, or at least not averse, to building an endow-
ment is another important prerequisite. The programs of USAID and
the Swiss government did not specifically intend to establish endow-
ments for FPE, KEHATI, and FSSI. But they did not prevent them
either. USAID commissioned a number of studies in the 1990s that
were supportive of endowments, some of which are cited in this paper.
In JVOFI, even though the mother company did not explicitly make
a donation to set up an endowment, the company (which was repre-
sented in the foundation’s board) did not object to the establishment
of the fund.
Legal Vehicle
If there is a donor, there must be an entity that is legally accountable
and politically acceptable to the donor to receive and manage the
funds. In three of the four cases, the donor was a member of the board
of trustees, albeit with varying levels of power. In the fourth case, even
though USAID is not on KEHATI’s board, the terms of the
Cooperative Agreement state that all funds selected for investment be
formally registered with the US Securities & Exchange Commission.
Fund Availability
A significant amount of funds needs to be available to establish an
endowment. In the three relatively large endowments studied (FPE,
FSSI, and KEHATI) at least US $16.5 million had to be available as a
single grant. Of course, this need not always be the case. JVOFI
needed only PHP 3.4 million (US $64,150) to start up its endowment.
108
Significant annual contributions were necessary, however, to increase

this to PHP 17.1 million (US $322,641) over six years.
The above items are by no means mutually exclusive. Funds are
not usually available if a program is not high in the priorities of the
donor. It is the appropriate combination of all of the above require-
ments that makes the creation of an endowment feasible.
Influencing Factors
In addition to these requirements, there are a number of influencing

factors that can help create appropriate conditions for realizing an
endowment. Not all of the above requirements may be in place when
the creation of an endowment is being sought. In such contexts,
however, there are a number of influencing factors that may be real-
ized to create the conditions conducive to attaining these require-
ments.
Socio-Political Pressure from the Recipient Side

Donors (usually government bureaucrats) are constantly under pres-
sure from social groups, politicians, NGOs, and others to deliver
assistance in a high-profile, high priority area (for example, the envi-
ronment, AIDS, or poverty). This was the context behind the creation
of FPE, FSSI, and KEHATI. In FPE’s case, both the Philippine
Department of Environment & Natural Resources and Philippine
environmental NGOs were lobbying the US Congress and USAID to
set up an environmental endowment from 1989 to 91. In Indonesia,
Emil Salim (who had just stepped down as Minister of the State
Ministry of Population & the Environment) and a group of promi-
nent citizens from business and civil society set up KEHATI and
negotiated with USAID for its endowment. In FSSI’s case, the
Philippine’s largest NGO coalition, CODE-NGO, facilitated the
consultations that resulted in the proposal to the Swiss and Philippine
governments to set up the endowment.
Socio-Political Pressure from the Donor Side

In the case of FPE and FSSI, an NGO coalition in the donor country
supported the NGO constituencies that campaigned for the endow-
ments in the recipient country. The Philippine Development Forum,
based in Washington, DC, provided crucial support to the environ-
109
mental NGOs lobbying the US Congress. Similarly, the Swiss

Coalition of Development Organizations backed CODE-NGO’s
endowment proposal for FSSI through representations and commu-
nications with the Swiss Federal Office of Foreign Economic Affairs.
High-Level Mandate from the Donor Side

KEHATI’s endowment was a direct result of the Tokyo Declaration
signed by US President George H.W. Bush and Japanese Prime
Minister Kiichi Miyazawa in 1992. Indonesia was chosen as a pilot site
for US-Japan intergovernmental cooperation on the environment and
KEHATI was selected to receive a USAID endowment for biodiver-
sity conservation. The mandate for FPE’s endowment had its origins
in the 1988 Philippine Assistance Plan supported by the United States
and other donors in order to bolster the fledgling Aquino government
in its transition from dictatorship to democracy. Part of its plan was
the Natural Resource Management Program that was later funded
with US $125 million by USAID in 1990. FSSI’s endowment came
from the Swiss Debt Relief Facility of 1991. Swiss churches and
NGOs and their partners from the global south campaigned for the
passage of this measure starting in 1989. The Swiss government allo-
cated US $300 million to it.
A similar set of influencing factors was present in JVOFI’s case.
The foundation’s board included both donor and recipient interests,
both of which agreed to the proposal for an endowment. The top
management of the corporation was active on the board and backed
the foundation’s efforts with corporate support.
Collectively, these influencing factors help tip the scales in favor of
an endowment.
The Endowment Process
Once the proponents have succeeded in using such influencing factors

to put the basic requirements in place, three distinct stages follow:
• creating the endowment
• endowment-building: growth
• endowment-building: use and reflows.
110
Creating the Endowment
Endowments are established through one major donation or several

donations. Three of the four cases – FPE, FSSI, and KEHATI – were
set up with one major donation from a bilateral donor (USAID) to
FPE and KEHATI and the Swiss and Philippine governments to
FSSI. JVOFI built its endowment over time from internal sources.
In the three cases in which bilateral donors funded the endow-
ments, local NGOs and coalitions were involved in convincing their
governments and donors that the endowments would serve the public
good. All three conduct grantmaking, although FSSI is a largely lend-
ing institution. The NGOs and coalitions who worked for their estab-
lishment did not necessarily directly benefit from them afterward,
although some have participated in their governance.
The amounts involved were quite significant and due diligence
was therefore required. Studies, planning missions, and consultations
were conducted. Intense negotiations involving NGO coalitions and
recipient and donor governments on the legal documents to govern
the three endowments preceded the actual provision of funds. For
FPE and FSSI, negotiations on debt redemption discounts were
further required. In all cases, donors needed to be convinced that the
endowments would not dissipate. Systems of reporting, transparency,
accounting, and accountability were incorporated into the founda-
tions' by-laws and agreements covering the donations. Although the
boards are dominated by NGO personalities, a few government
representatives and independent individuals are included.
Building the Endowment: Growth
Although the initial donations establishing the endowments were

significant in the case of three foundations studied here, these cases
and JVOFI nevertheless emphasize that efforts must be made to
ensure the fund’s continued growth. Given the enormous need for
funding environmental conservation and management, FPE and
KEHATI are actively trying to increase their endowments. KEHATI
is also fundraising from the corporate sector. While both are having
some success in leveraging funds from private foundations and
government donors to increase the resources available to their
grantees, staff indicate that it is generally difficult for them to get
111
donations to increase their endowment. Donors usually want to make

a direct contribution to, and have a direct impact on, a specific proj-
ect.
As a lending institution, FSSI expects repayments from its borrow-
ers. Its continuing challenge is to move an increasing portion of its
corpus directly into sustainable enterprises rather than having it in the
hands of its fund managers. It has not specifically raised funds to build
its endowment. The foundation has leveraged funds, however, from
private foundations interested in co-financing some FSSI projects.
JVOFI staff is focused on improving its delivery of services and
encouraging its beneficiaries and partners to raise counterpart funds.
They are not actively asking for contributions to their endowment.
With the effective delivery of services, however, the organization is
contributing to building its track record and attracting more funders.
In each year of the 1990s, JVOFI generated program and operating
funds equal to the amount of its endowment, on average. They prob-
ably would not have attracted the same amount if they had simply
asked donors to contribute to their endowment.
Efficiency in operations also generates savings that JVOFI is then
able to channel into the endowment. Projects with repayments, such
as microfinance, are another important contributor. Interestingly,
JVOFI’s microfinance projects have a higher rate of return than their
investments in banks. For JVOFI, focus, good management, and
effective delivery of services form its endowment-building strategy.
Each of the four foundations has appointed external fund
managers to manage their endowment assets; in each case these are
mainly in cash or cash equivalents. They all have committees or indi-
viduals, however, who monitor the performance of the fund
managers. In each case, the fund managers make decisions on the
detailed investment of the foundation’s assets based on the investment
policy laid out by the Board of Trustees. Usually, the foundation staff
directly invests only a small portion of their assets in short-term
instruments.
JVOFI maintains a restricted fund that is mainly invested by its
lone fund manager. A small portion is for cash flow and is managed by
staff. The foundation also relies on experienced and respected finan-
cial experts that sit on its Board of Trustees.
KEHATI, FPE, and FSSI have Investment Committees that are
advisory in nature. Their boards ultimately make the major invest-
112
ment decisions at the policy level (e.g. investment mix) and opera-
tional level (e.g. choice of fund managers and advisors). While
KEHATI was initially linked by USAID to a US-based investment
advisor, its Investment Committee is now recommending working
with an advisor who is based in Asia and therefore able to be more
responsive to market changes. Neither KEHATI’s board nor
Investment Committee can change the stipulation in the cooperative
agreement, however, that the endowment should be invested in funds
registered with the US Securities & Exchange Commission. This has
enabled KEHATI to maintain the highest foreign currency valuation
of its endowment among the four cases. FPE, FSSI, and JVOFI have
local fund managers handling mainly local currency investments;
devaluation has decreased the dollar value of their endowments.
The four foundations are growing their endowments (at least in
local currency terms) using fund managers who are seen as relatively
large financial institutions in the local and international context.
Investment policies, particularly those regarding asset allocation
among fixed income instruments and equities, are well documented
and strictly followed. Only a very small, if any, portion of the endow-
ments was put into real estate. There is very little room for specula-
tion in the foundations' investment policy.
None of the foundations have been able to obtain donations to
significantly augment their endowments yet. They have been more
successful in leveraging their endowment funds to attract more
program and operating resources for grantees and beneficiaries.
Leveraging can have a larger and more immediate financial impact on
grantees/beneficiaries, however, than trying to directly augment the
endowment. Leveraging is an important point to consider in evaluat-
ing an endowment’s performance and will be discussed in a later
section.
Indeed, KEHATI’s strong fundraising efforts demonstrate that an
endowment is not a complete answer to having financial sustainabil-
ity. KEHATI is seeking to diversify its donors while also developing
alternative and innovative funding mechanisms. The organization’s
staff is also considering how funding instruments can be modified to
help build its endowment.
After establishment, endowments need to grow to keep up with
inflation and the demands of grantees and beneficiaries. Sound
113
management, focus, and building a track record of effective delivery

of grants or services are key to attracting more donors and co-funders.
Building the Endowment: Use and Reflows
FPE and KEHATI use their endowments by making grants to NGOs

and community organizations. FSSI and JVOFI are mainly lending
institutions that require significant counterpart funds or equity from
their partners. This assures the latter two organizations of reflows
that are an additional source of funds for their respective endow-
ments. Both are also involved in microfinance projects that are
producing returns that are sometimes better than those on the invest-
ments made by their fund managers. FSSI and JVOFI are still prudent
enough, though, to work with fund managers to invest their endow-
ment assets.
FPE has co-financed one FSSI loan. FPE hoped to fund more
projects in a lending mode, but appropriate projects were difficult to
find. According to KEHATI’s fundraising strategy, the organization
seeks to “develop non-grant instruments and a social entrepreneur-
ship approach in program planning and implementation.” Another
direction is “to promote income generation through the sale of goods
and services, program-related investments, and through establishing
businesses related to KEHATI’s specific mission.” Like FPE,
however, it prefers to work with and through organizations that are
more familiar with enterprise-type projects where financial returns
need to be monitored more closely than in environmental conserva-
tion projects.
For FPE and KEHATI, directly managing financial risk instead of
leaving it to fund managers is a new challenge. Grantmaking and
investing require different skills and mindsets that are important to
learn before a foundation decides to be involved in both.
Insights
Following are various insights drawn from the case studies on the
creation and building stages associated with endowments.
114
Creation
In all the cases studied, the primary motivation to create the endow-
ments came from within the foundations or NGO constituencies
upon which the foundations were built. There was a conscious
process of convincing donors and, fortunately, an availability of funds
and policy openness to the establishment of these endowments.
NGOs can always try to convince funders to set up endowments, but
if the funds are simply not there or if donor policies do not allow them
to set up endowments, these efforts will not succeed.
It must be emphasized that large, one-time endowment grants are
rare. Rarer still are donors who will donate directly to augment an
existing endowment.
The possibility of setting up endowments exists when the follow-
ing factors are present:
Funding Opportunity
Funds may be suddenly available in large or small but consistently
flowing amounts from donors. In the cases studied here, funds were
available around the time the endowments were set up. In the cases of
FPE, FSSI, and KEHATI, funds were available only for a limited
amount of time. Had the NGO constituencies not worked hard for
these funds when they were available, they would have lost the oppor-
tunity completely. The donors – USAID and the Swiss government –
ended their related programs a few years after providing funds for the
three foundations.
It is also important to note that debt swaps played a major role in
setting up two of the endowments: FPE and FSSI. Although there was
no similar debt swap in the Philippines from 1996 to 2001, there are
new opportunities now. A debt-for-nature swap worth US $8.24
million was signed between the US and Philippine governments on
September 19, 2002 under the provisions of the US Tropical Forestry
Conservation Act. FPE and KEHATI are also currently actively
exploring debt swap opportunities.
In the case of JVOFI, the corporation provided an annual grant to
the foundation until 1997 and the foundation’s Board of Trustees
made the decision to allocate a portion of these funds into a restricted
account which effectively became the endowment.
115
Champions
Champions for establishing and building an endowment are needed
on both the recipient and donor sides. These champions need a
constituency to support the difficult task. The KEHATI Chair, his
colleagues on the board, and sympathetic individuals in USAID were
the champions for KEHATI at the time of negotiations. Philippine
environment and development NGO coalitions and their counter-
parts in the United States relentlessly campaigned for FPE to be born.
The outgoing Philippine Secretary for the Environment and the
USAID Country Director were the champions on the government
side. In JVOFI, the foundation president, who was also an officer in
Benguet Corporation, made the strategic decision to actually set aside
funds for an endowment. For FSSI, the partnership and coordination
between the Philippine and Swiss NGO Coalitions were crucial in
convincing their governments to agree to an endowment.
Endowment Management
As emphasized earlier, donors put funds into an endowment not

because they want to support the endowment but because they want
to support the beneficiaries of the endowment fund (most often, the
grantees or recipients of credit). The more an endowment provides
benefits to its grantees the more donors will be willing to support it.
This support can be in the form of co-financing of projects, program
funds, or direct contributions to the endowment. The last type of
support is the most difficult to get from ODA agencies possibly
because of the diminishing supply of aid funds combined with an
increasing need to show immediate and significant results from aid
programs.
To attract support from donors, organizations need to focus on
two inter-related areas of management: program and financial
management. Program management deals with strategy, planning,
monitoring, and evaluation. Financial management encompasses
accounting, accountability, controls, financial analysis, and sound
investment policies and practices.
The four cases demonstrate the importance of strategic program
management. Substantial board and staff time are devoted to strate-
gizing, planning, monitoring, and evaluating outputs and impact.
Significant resources are also devoted to communicating accomplish-
116
ments. Without these, it is doubtful that the foundations can maintain

their credibility and leverage additional funds. Achieving targeted
outputs and impacts depend on a foundation’s capacity to manage its
resources efficiently and effectively. Beneficiaries, donors, and the
public as a whole will judge the endowment’s ability to deliver on its
mandate. Strong program management is needed to deliver and to
prove that the organization is delivering.
Regular, externally audited financial reports are a basic require-
ment of endowments. These reports should reflect high quality in
financial management. Perhaps more basic is the investment strategy.
There is nothing worse than an endowment that is wasted because of
poor investment decisions. Fortunately, the four foundations have
clear investment policies that prevented the dissipation of their funds
even with the occurrence of the Asian financial crisis that hit in 1997
to 1998 and the meltdown of the US economy in the last couple of
years.
Leveraging as Strategy
As was discussed earlier, a common strategy used by the four founda-

tions to maximize their resources is to leverage their funds. This often
means using their endowment or its income as counterpart funds to
obtain grants from donors. This has enabled them to increase their
grantmaking and implement more programs than if they depended
solely on their endowments’ income. Donors usually prefer to give
grants to or through foundations that have counterpart funds. Some
private donors, especially those in Europe, are able to access and pass
on government funds if they can produce matching or co-financing
funds. Organizations with endowments are in a good position to
receive these additional donor funds and conduct leveraging.
The value of leveraging is often underestimated. In reality, lever-
aged funds can have a more immediate impact on beneficiaries than
donations to an endowment. For example, if we assume 10 percent as
a reasonable return on an endowment, getting US $10,000 in lever-
aged funds is like getting an additional US $100,000 into the endow-
ment. Although it is desirable to build up endowments for the long
term, the ability to leverage funds should be recognized as an impor-
tant achievement of these foundations. This is especially true when
117
there are other donors who are only too willing to co-finance certain
projects.
In addition, leveraging can occur through international or foreign
donors that are seeking to pass through funds to local foundations to
do grantmaking on their behalf or who can co-finance projects with
them. It is simply an easier, cheaper, and more effective means to
accomplish their goals. Examples are already in place: the Global
Environment Facility is a major potential source of leveraged funds,
especially in biodiversity conservation. Novib (Oxfam Netherlands
and a Dutch NGO), set up a US $100,000 co-financing fund within
FSSI in 2001.
It is important to define the organization’s specific role within the
leveraging strategy. As KEHATI begins to explore supporting
community enterprise development, it is discovering that there are
NGOs that have more expertise in this area and that there are many
funds available from government corporations and programs.
KEHATI is thus focusing more on business incubation – linking
grantees with technical experts and financial institutions. Even
though the funds of the government programs do not pass through
the foundation, the linkage they provide virtually leverages funds for
their grantees.
Leveraging can also be done at the level of beneficiaries. Aside
from using its endowment as a counterpart fund, JVOFI requires its
partner-communities to raise their own counterpart funds. This
lessens the burden on the foundation and builds community owner-
ship of the projects.
The End-Goal: Outputs and Impact
Ultimately, an endowment’s value will be measured by the public and

donors in terms of an organization’s outputs and impact. This is
regardless of whether the money came from the endowment, lever-
aged funds, or operating funds. The bottom line question is: How
well did the foundation invest all its funds to deliver the targeted
outputs and achieve the desired impact? Without good management
systems and performance, the answer will never be satisfactory. If an
organization consistently delivers its intended outputs (i.e. services to
beneficiaries) and attains its targeted impact, it will attract donors and
sustain its beneficiaries.
118
The diagram in Figure 1 may now be refined to reflect the fore-

going analysis.
Figure 2
Overall Endowment
Leveraged Funds Management is Essential
Strong Endowment
External Donors Management Outputs: Grants Impacts on:
(not simply or Services Environment
“administration”) Poverty
Internal Savings
and Reflows
Lessons and Recommendations
The following lessons and recommendations are based on the experi-

ences of the four foundations studied in this paper and are intended
to be helpful to foundations, NGOs, and donors alike.
Endowment Creation
Bilateral donors and large private philanthropic foundations in the

North remain the main source of large one-time grants for endow-
ments. Their smaller grants can also be the source of savings and
reflows that can slowly build endowments for organizations in
Southeast Asia. The latter track can be maximized if donors allowed
grant savings instead of requiring grantees to either use up all funds
or return savings.
Debt swap opportunities in the Philippines and Indonesia are
available again after the relative lull of the late 1990s. This could
provide organizations in these countries a chance to access larger
amounts of funds that can be used to start or augment endowments.
Donor-creditors should publicize the mechanics of these programs so
that more organizations can avail of the benefits.
Constituencies and motivations are critical though. Organizations
need to identify and develop their champions in endowment-creation
and debt swaps. These champions need to work with champions on
119
the donor side to successfully design and conclude endowment or

debt swap agreements.
It must also be emphasized that organizations should take a proac-
tive stance on policy issues. When there is a policy averse to endow-
ments, they should try to change this through dialogue, lobbying, and
generally challenging donors to seriously contribute to long-term
financial sustainability strategies by setting up endowments. This, of
course, presumes that a track record and transparent management
systems exist within the advocating foundation.
Endowment Building
Endowments, and funds received in general, are inputs. Management

transforms these and other inputs into tangible outputs and impacts.
Sound management is therefore critical. It can even produce internal
sources (savings and reflows) of funds for an endowment.
Leveraging is a basic strategy for endowments. Donors and foun-
dations should search for, coordinate with, and leverage the funds of
other donors, foundations, and financial as well as relevant technical
institutions. Cases on leveraging can be documented and shared with
donors, NGOs, and foundations.
Clear and specific investment policies are essential. Guided by
such policies, all four endowments grew, at least in local currency
terms. Still, there are pressures from devaluation and inflation that
have to be addressed in the long-term by an endowment-building
plan.
An ongoing fundraising strategy like KEHATI’s is needed even if
a foundation already has what seems to be a substantial endowment.
The needs of grantees and beneficiaries cannot be underestimated.
Courses in fundraising may be useful for staff.
Financial experts, investment committees, and asset/fund
managers are essential, but their functions have to be clearly defined.
In-house and direct management of asset investment alone is not
advisable. Even the largest foundations that hire staff to take charge
of their investments still hire external fund managers to do day-to-day
or detailed tasks associated with investment management. Therefore,
it is important to build an in-house capacity to understand and moni-
tor the performance of investment managers (boards should never
condone poor performance of investment managers).
120
Foundations should invest in measuring, monitoring, and evaluat-

ing their outputs and impact. This will enable them to prove to
donors and the public if they deserve support or not. Quantitative
measures of output and impact per unit of input will be very useful not
just for management but also for reporting to, and convincing, donors Foundations should
and the public of their good work. invest in measuring,
Donors and foundations should always maintain a significant focus monitoring, and
on outputs and impact as a result of their funding. While it can be
evaluating their outputs
easy to focus on bringing in funds, it can distort the actual picture and
and impact – this will
underestimate a foundation’s achievements, especially in the matter of
leveraging. Again, measurement and monitoring are needed to evalu- enable them to prove
ate the effects of leveraging on outputs and impact. to donors and the public
if they deserve support
or not
Conclusion
Endowments are by no means a panacea to organizations’ financial

challenges. They do provide a sustaining and empowering asset,
however, for societal development. Endowments go beyond financial
sustainability. This is probably why they cannot be created and built
only through financial means. Social constituencies, champions,
timing, negotiations, not to mention political and funding commit-
ments, are needed to create an endowment. Growing an endowment
needs more of the same plus sound program and financial manage-
ment. In the end, however, endowments will be measured not in
financial or project terms but in terms of their impact on a society’s
environment, health, poverty, and overall development.
121
References
Publications
Alegre, Alan. Sustaining Life After Debt – A Case Study on the

Foundation for a Sustainable Society, Inc. New York: The Synergos
Institute, 2001.
Foundation for the Philippine Environment. Financial Statements,

1994.
––––––. Financial Statements, 1995 and 1996.
––––––. Endowment Fund Analysis. PowerPoint Presentation. 2002.
Foundation for a Sustainable Society, Inc. Annual Report, 1996.
––––––. Annual Report, 1997.
122
Garilao, Ernesto D. and Gil R. Tuparan. Corporate Resources for Local

Development in the Philippines: The Jaime V. Ongpin Foundation, Inc.
New York: The Synergos Institute, 2003.
Horkan, Kathleen M. and Patricia L. Jordan. Endowments as a Tool for

Sustainable Development. USAID Working Paper No. 221, PN-ABY-
616. Washington DC: USAID Center for Development Information
and Evaluation, July 1996.
Indonesian Biodiversity Foundation (Yayasan KEHATI). Annual

Report, 1997.
––––––. Business Incubator – A Preliminary Concept. PowerPoint

Presentation, Undated.
––––––. Investment Committee Terms of Reference, 2000.
––––––. Investment Policy Guidelines, 1995.
––––––. Principles and Guidelines for Partnership with Business

Enterprises, 2002.
Maxim, Sarah, Ismid Hadad and Suzanty Sitorus. Building an

Endowment for Biodiversity Conservation in Indonesia: The Case of
KEHATI. New York: The Synergos Institute, 2003.
Quizon, Antonio, A Case Study on the Foundation for the Philippine

Environment. New York: The Synergos Institute, 2001.
123
USAID Cooperative Agreement No. 497-0384-A-OO-5011-00.
Weatherly, Paul. Endowments in Africa – A Discussion of Issues for Using

Alternative Funding Mechanisms to Support Agricultural and Natural
Resources Management Programs. USAID Technical Paper No. 24, PN-
698-0478. Washington DC: USAID Office of Sustainable
Development, Bureau for Africa, August 1996.
Winder, David. Civil Society Resource Organizations in Southeast Asia.

New York: The Synergos Institute, 1998.
_________. Endowment Fund Activities and Investment. Paper presented

at the Workshop on Financial Sustainability for Civil Society
Resource Organizations in Indonesia. Yogyakarta, Indonesia, 7-9
November 2000.
Interviews
Personal interview with Julio Tan, Executive Director, Foundation for

the Philippine Environment, September 2002.
Personal interview with Ismid Hadad, Executive Director, Indonesian

Biodiversity Foundation (Yayasan KEHATI), October 2002.
Group interview with Gustaaf Lumiu, Director of Finance and

Adminstration, Andreas Yasakasih, Finance Manager, Irfan Nasution,
Research Analyst for Fund Management, and Dr. B. Setiawan and
Okkie Adhika Monterie, Members of the Investment Committee,
Indonesian Biodiversity Foundation (Yayasan KEHATI), October
2002.
Personal interview with Ma. Rosario Lopez, Executive Director,

Jaime V. Ongpin Foundation, Inc., November 2002.
Group interview with Helen Grace Baldo, Finance Manager, Salvador

Pabalan, Treasurer, and Emily Pimentel, Trustee, Jaime V. Ongpin
Foundation, Inc., November 2002.
124
THE JAIME V. ONGPIN FOUNDATION, INC.
Chapter Six
Corporate Resources for Local
Development in the Philippines:
The Jaime V. Ongpin
Foundation, Inc.
By Ernesto Garilao & Gil Tuparan
125
Introduction
The Benguetcorp Foundation was established in December 1980 as

the vehicle to carry out the corporate social responsibility of the
Benguet Corporation (BC). At almost 100 years old, BC is the
Philippines’ oldest and leading natural resource company; it
pioneered the mining of gold in 1903. While BC’s mining operations
ceased in 1997, the company has gone on to invest in water resource
projects, real estate development, eco-tourism, forest management,
trucking and warehousing, construction and engineering services,
steel casting, and trading.
Creation of the Foundation
The late Jaime V. Ongpin, who was the first Filipino president of BC,
established the foundation. Envisioning “the development of self-
reliant communities in the countryside,” he created a corporate social
arm that would promote the welfare of BC employees and their
dependents and the residents living near the company’s mining and
other operations.
The idea for the foundation sprung from the perception that the
corporation needed to address the basic service requirements of resi-
dents within BC’s mining camps. In the 1960s, a camp checker in the
course of his daily inspections took note of the residents' problems of
congestion in bunkhouses, illnesses, and decaying facilities. He
relayed these to his immediate superior, the Chief of Security, who in
turn reported the problems to the Vice President for Personnel.
In the 1970s, Ongpin required the mine superintendents to set
aside one day a week to go around the camp, talk with the residents
and check on their needs. BC’s Personnel Department was soon
126
saddled with numerous problems pertaining not only to the BC

employees but also to their families. The dependents’ concerns were
mostly the lack of livelihood opportunities for housewives, malnutri-
tion among children, and the high incidence of unskilled out-of-
school youth.
In 1980, a boom year for the gold mining industry, Ongpin
thought of establishing a group that would focus on the needs of the
communities, particularly in terms of generating livelihood opportu-
nities. Such a group would also relieve the camp administrators of
tasks not related to productivity and profitability. Out of this decision
the BenguetCorp Foundation, Inc. was born. In 1987, it was renamed
the Jaime V. Ongpin Foundation, Inc. after its founder. For the
purposes of simplicity, the foundation will be referred to only by its
current name in this chapter. (See back of this book for a profile of the
foundation.)
Foundation Years 1981-1985
The foundation was not born with an endowment. In fact, it was not
until 1991 that the endowment was actually created. In these early
years, almost all of its funding requirements were covered by its
parent corporation, which provided a grant that averaged US $80,000
(PHP 1.04 million) per year.
During these early years, under the direction of Ongpin through
the BC Vice President for Personnel, the foundation carried out
socio-economic projects for the welfare of BC employees and their
dependents. The foundation implemented four core programs in the
corporate campsites in the provinces of Benguet and Zambales. The
Community Development program focused on setting up livelihood
projects for women and children; Social Services provided day care
and nutrition services as well as assistance to disabled employees;
Education and Training covered trade skills development, scholarship
programs, and support to company-run elementary schools; and
Research and Information developed information, education and
communication materials, and conducted feasibility studies.
127
Foundation Years 1986-1990
Between 1986 and 1990, concern for the financial sustainability of the
foundation coupled with the desire to take advantage of the many
opportunities to serve other constituencies propelled it to expand its
operations and income sources. In so doing, JVOFI rapidly built its
capabilities and reputation as a leading NGO in the area.
Under Ongpin’s pressure, BC adopted a broader concept of corpo-
rate social responsibility despite the decline of the mining industry.
Well aware of the limits of BC’s mining reserves, Ongpin directed in
1985 that the corporation’s Public Affairs Program be focused on
community relations and guided by BC’s Personnel Strategy No. 5
which called for “the transformation of company dependent mining
camps into administratively autonomous, self-governing communi-
ties.” The strategy also required that BC should “promote viable
economic alternatives for those who may wish to remain in these
communities after cessation of mining operations.”
Ongpin’s directive translated to the expansion of JVOFI opera-
tions to areas neighboring the BC mine sites in Benguet, Zambales,
Camarines Sur, and other provinces. For its old and new constituen-
cies, JVOFI worked with organized groups and intensified its proto-
type development, especially for group-based income-generating
projects. The foundation, in coordination with the corporation,
provided direct services and technical and financial support through
four major programs then in existence: Livelihood Development,
Social Development, Institutional Development, and Support
Facilities.
At the same time, JVOFI’s clients were growing increasingly
diverse. The original clients were BC employees and their depend-
ents. Then there were the people in the adjacent non-mining commu-
nities, for which JVOFI implemented development projects financed
by BC, the US Agency for International Development (USAID), and
other fund sources. In 1991, JVOFI became a principal player in the
relief and rehabilitation efforts following the July 1990 earthquake
and the June 1991 Mt. Pinatubo eruption that devastated Northern
and Central Luzon. The interventions were undertaken in coopera-
tion with various donor institutions, local and foreign NGOs, private
firms, and government agencies. This expansion in the beneficiaries
of the foundation somehow strained BC-JVOFI relations. BC area
128
managers and community development coordinators increasingly

complained about what they saw as a shift in attention and decreased
participation in BC areas.
During this period, JVOFI operations were supported by BC at an
average of US $160,000 (PHP 3.59 million) per year. In 1985,
however, with the price of gold falling to only US $285 per ounce, the
foundation’s board expressed its concern about the need to generate
the foundation’s own income other than the annual grant coming
from its principal. Training programs for outside entities and non-
mining companies were initially identified as possible sources of fund-
ing.
In 1986, Ongpin resigned as president of BC to join the Cabinet While corporate
of President Corazon Aquino as Minister of Finance. Delfin Lazaro resources seeded the
succeeded him and served as BC President until 1991. Lazaro subse- beginnings of the
quently retired from BC to join the Cabinet of President Fidel Ramos
foundation, an
as Secretary of Energy and was succeeded by Dennis Belmonte.
Belmonte retired in 1997 from that post and is currently the expanding group of
Chairman of JVOFI. beneficiaries and desire
According to available records, concern about the need to diversify for greater financial
fund sources to ensure the financial sustainability of the foundation independence from the
was officially brought up again in the Third Annual BC-JVOFI
corporation prompted
Operations Review held in August 1988. Then JVOFI President
the establishment of
Narcisa Escaler presented the foundation’s plan to raise its own funds
since most of its money was “restricted” to programs and areas spec- JVOFI’s endowment
ified in the partnership agreements with donor institutions. In
response, two major decisions were made. First, Lazaro approved the
foundation charging management fees for the implementation of BC
projects. The income earned here was to be a major source of funds
for JVOFI in succeeding years. Second, Lazaro directed the submis-
sion of a proposal to the parent company whereby US $190,000 (PHP
4 million) would be donated annually by BC to the foundation for its
endowment over a period of 10 years. Nothing came out of this direc-
tive, however, until 1991.
The board took up the matter again in its meeting of November
1988 where it was suggested that the foundation develop its expertise
in generating its own funds since it still had no corpus fund. A
proposal was accepted to have JVOFI act as a conduit of external
funds, mainly from donor agencies and government institutions, and
that the foundation charge a 30 percent fee against the total cost of
129
projects it was to manage (this was the ceiling rate allowed for over-
head for foundations registered with the Department of Science and
Technology).
It was further pointed out that aside from funds from Benguet
Corporation for administrative and operating expenses, no other
direct funds intended for JVOFI operations would be available after
the current funds were expended. Upon this recommendation, the
board resolved that “an endowment fund be established for the Jaime
V. Ongpin Foundation, Inc. to sustain its operations even after the
current funds and grants [are] exhausted.” The source of funds,
however, was not immediately identified then.
At the same time, JVOFI began to access co-financing from donor
agencies for new projects. Its application for accreditation with
USAID was approved in 1985 and its first USAID-assisted project,
the US $340,000 (PHP 7.01 million) Benguet Community
Development Program, initiated in 1986. Meanwhile, a US $2.19
million (PHP 45 million) Collaboration Project with the Philippine
Department of Health was launched in 1987. These two projects
required that funds be expended mostly for communities outside the
BC camps.
Towards the end of this period, the foundation redirected its serv-
ices from projects to programs and promoted cooperatives and
municipal and provincial federations as structures to spearhead a
wider range of development in its areas of operations. It also
enhanced its networking, forging partnerships and working agree-
ments with various government agencies and non-governmental enti-
ties.
Creation of the Endowment

Actions of Emily Pimentel
Emily Pimentel, a Certified Public Accountant, was assigned by

Delfin Lazaro to help manage JVOFI as Assistant Treasurer in 1990
and as Vice President for Planning and Development in 1991. She was
appointed JVOFI President in 1992, a position she held until she
retired from BC towards the close of 1996. Since 1993 and up to the
present, she has been a member of the board.
130
When she joined the foundation, Pimentel was concurrently a

ranking BC officer serving as Assistant to the President. Like Lazaro,
she came from the Benguet Management Corporation, a wholly
owned subsidiary created in 1980 to handle all non-mining operations
of BC. Informed of the limits of BC’s mining reserves, Ongpin had
pushed for diversification into other businesses, including real estate
development, forest management, trucking, warehousing, agricultural
production, and shipping. Pimentel was a pioneer in developing and
managing these business ventures of Benguet Corporation.
Notwithstanding the JVOFI board resolution on the subject, no
endowment fund had been established when Pimentel was assigned to
the foundation in 1990. She had the forethought to see the limits to
BC’s assistance and the clout to push for what she felt were necessary
reforms in the foundation’s financial management. Among her early
initiatives was the decision to direct the management staff to set aside
US $120,000 (PHP 3.43 million) as the initial “endowment fund” of
the foundation.
Pimentel had several reasons to take these steps. The corporation
had earlier been placed under government sequestration1 and was 1 With the downfall of the
Marcos dictatorship in
undergoing internal turmoil in its management and ownership. It was 1986 and Corazon
likewise suffering heavy losses in its mining operations. On the other Aquino's assumption of
power, efforts were made
hand, with funding from donor agencies, JVOFI was servicing many to recover the alleged ill-
communities other than those covered by the mining, logging, and gotten wealth of the
former dictator.
agricultural operations of its mother company. Pimentel thought it
Companies suspected of
would be awkward and difficult to withdraw from non-BC communi- being owned by the
ties, should funding from the parent corporation end. Moreover, she Marcos family were
placed under government
wanted to ensure that the vision and pro-poor orientation set by Jaime control pending investiga-
Ongpin, who passed away in 1987, would be sustained regardless of tion. One of BC's major-
ity shareowners was the
any change in BC’s leadership and ownership.
brother of Imelda Marcos.
In addition, the foundation then had a complicated and unpre-
dictable budgeting process that was dependent on what projects the
different BC Vice Presidents for the campsites favored. Planning was
for one year only and sometimes projects were downscaled or discon-
tinued due to insufficient releases from BC operations.
“We wanted Benguet Corporation to shift to longer term planning
and to commit a percentage of its budget to social development,”
Pimentel said. But BC did not then have enough resources to agree to
that. JVOFI tried several times to convince its mother company to
provide an endowment fund that would help ensure the foundation’s
131
financial sustainability. BC, however, was having its own financial

problems at that time, making its annual grants to the foundation
difficult. It could support only its identified programs and projects.
Creating an endowment fund was thus a strategy to ensure the
continuity of projects and rationalize the foundation’s planning and
budgeting. With an endowment fund, Pimentel believed that the
foundation could better plan and pursue projects in accordance with
the JVOFI mission and development objectives.
Meanwhile, USAID and other foreign aid agencies had poured
significant funds into the Philippines in support of the Aquino admin-
istration. Pimentel was well aware of USAID’s plan to substantially
reduce its levels of assistance to the country and Southeast Asia gener-
ally by the early 1990s, which would mean losing the foundation’s
major source of funds. Indeed, USAID had been advising its local
NGO partners to not continue to depend on it for funding support.
This development added pressure to the perceived need within the
foundation to establish an endowment fund.
Origins of the Endowment Fund
Upon the recommendation of Pimentel and with the approval of the

board, JVOFI set aside US $120,000 (PHP 3.43 million) in 1991 as its
initial endowment fund. The amount came in part from savings accu-
mulated from the annual grants received for BC programs, realized
through loan collections and raising of counterpart funds. The other
sources were the savings and reflows from a collaborative project with
the Philippine Department of Health (DOH) and interest and other
income on projects initiated before the endowment fund was actually
realized. Pimentel then proceeded to build up the endowment fund
mainly from earned income, fund surpluses from operations, and,
most important, loan reflows from donor-assisted projects. These
strategies are each described below.
Strategies for Building the Endowment Fund
Collectively, the following three strategies have been important

mechanisms in the building of JVOFI’s endowment. More detailed
132
examples of these mechanisms can be found in Appendix 1: Strategies

for Building JVOFI’s Endowment.
(a) Using Loan Reflows

Pimentel recognized the importance of loan reflows from previous
JVOFI projects. For example, USAID projects had loan collections
accruing to the fund of the foundation after a three-year period from
the project’s completion date. “Yes, that really interested us,”
Pimentel said, referring to the possible reflows from USAID and the
DOH-JVOFI Collaboration Project on social and livelihood develop-
ment. “This was one of the reasons why the board demanded better
performance in loan collections of past and ongoing projects.”
The endowment fund substantially increased through the transfer
of loan reflows from projects after completion of grant holding peri-
ods of USAID and other projects. The transfer of some of the reflows
caused the endowment fund to jump from US $220,000 (PHP 6.02
million) in 1994 to US $520,000 (PHP 13.75 million) in 1995.
(b) Generating a Fund Surplus

For the longer term, Pimentel emphasized the need for the founda-
tion to generate income and savings that it could save for a rainy day.
The foundation earned management fees on the implementation of
different BC programs, the DOH-JVOFI Collaboration Project, and
others. Pimentel also pushed JVOFI to take on additional projects in
order to spread its overhead costs over various income sources.
Moreover, under the BC-JVOFI zero-based annual budgeting
worked out by JVOFI Chair, Dennis Belmonte, it was agreed that any
savings realized by the foundation should accrue to its growing
endowment fund. This encouraged JVOFI to generate savings by
improving efficiency in its operations and raising counterpart support
from community or partner implementers.
(c) Implementing New Projects with Resource Organizations

Under Pimentel’s leadership, the foundation put together and secured
funding for new development projects with loan assistance compo-
nents in collaboration with USAID, the Australian Agency for
International Development and the Canadian International
Development Agency. Of particular importance was the use of lever-
aging the foundation’s existing funds to secure additional grants.
133
As part of its desire to leverage foreign donor funding using its

own corpus, Pimentel worked out a technical increase in BC’s annual
grant to JVOFI. BC funds already earmarked for community relations
and social development were consolidated and released to the foun-
dation. These included funds for various community activities, refor-
estation, livelihood projects, and other activities initiated by BC oper-
ations staff. Consolidating the funds under JVOFI for social develop-
ment would help coordinate and rationalize the use of the funds, she
reasoned. As a result, BC released funds to JVOFI at a much higher
rate than previously, averaging US $410,000 (PHP 10.51 million)
annually from 1991 to 1996. (As a result of tough economic condi-
tions in the mining sector and in the country generally in 1997, BC
officials stopped making the annual grant to the foundation at that
time.)
Pimentel then leveraged the BC funds to secure a USAID grant
for an Integrated Area Development Assistance Project. “It was
creative packaging and financial maneuvering, actually,” she disclosed.
JVOFI received about US $560,000 (PHP 16 million) from USAID
under this project, of which there were reflows in the amount of
approximately US $150,000 (PHP 4.6 million). These reflows later
became part of the foundation’s fund.
These new co-financing partnerships were to yield more income
and loan reflows that would later find their way into the endowment
fund of the foundation. These allowed JVOFI to become less depend-
ent on the mother company in terms of annual operations and long-
term financial sustainability. Moreover, JVOFI’s high profile network-
ing and ties with resource organizations established its solid reputa-
tion in Northern Luzon and created linkages that were to prove bene-
ficial in securing other projects in the coming years.
Managing and Using the Endowment Fund

Endowment Fund vs. General Fund
On its financial books, JVOFI has a Total Fund Balance that is broken
down into a Restricted Fund and a General Fund. The Restricted
Fund represents amounts received by the foundation for purposes
specified by its partnership agreements with granters and donor insti-
134
tutions. The General Fund represents amounts already under the full
control of the foundation.
Under the General Fund, which is free from the claims and
restrictions of donors, certain amounts have been identified as consti-
tuting JVOFI’s endowment fund. Set aside and accumulated to ensure
financial sustainability, these amounts are usually those general funds
deemed not needed for the immediate future. The residual balance
constitutes Other General Funds.
Although the foundation has had no clear-cut policies or guide-
lines on how the endowment fund should be built, there have been
some general rules adopted, as Pimentel recalled. “First, we estimated
based on historical figures that we would need to earn from a corpus
of at least US $380,000 (PHP 10 million) to sustain our administra-
tive expenses. We then transferred to the endowment fund those
reflows that we were sure were beyond the holding period of USAID.
We also transferred only those funds we believed would not be needed
in the near future.”
After a waiting period of about three years, loan collections are
moved from the Restricted Fund to the General Fund. Depending on
the results of the Finance Committee’s periodic reviews of the finan-
cial needs of the foundation and its earning capacity, loan reflows are
transferred to the endowment fund.
Use of the Endowment Fund
The endowment fund has been used mainly to cover the general and
administrative expenses of the foundation. Pimentel observed that the
endowment fund was particularly useful in 1997 and 1998 after the
Benguet Corporation stopped providing its annual grant to the foun-
dation. Total Funds Received plummeted from approximately US
$930,000 (PHP 24.31 million) in 1996 to a little under US $100,000
(PHP 2.85 million) in 1997 to just over US $40,000 (PHP 1.64
million) in 1999. in 1997, JVOFI lost its 30 percent management fee
on BC programs and had fewer projects against which it could charge
its overhead. The availability of the endowment fund cushioned the
dislocation that could have happened with the decision of BC’s new
leadership to stop its financial support to the foundation.
The endowment was likewise tapped for expenses incurred in
1997-1999 to develop, market, and deliver JVOFI’s services in micro
135
finance, training, and consultancy. These services continue to be

groomed to become major income earners for the foundation.
The endowment fund is now tapped largely to maintain a core
staff that the foundation can leverage to obtain other funds accessed
from donors. The personnel expenses charged against the endowment
often serve as the JVOFI counterpart in the projects it manages.
Composition of the Endowment Fund
In its first five years and under Pimentels’ leadership, the endowment
was invested primarily in money market placements and a condo-
minium unit in Metro Manila. After she left BC and resigned as
JVOFI President in 1996, the board decided to buy golf club shares
and invest in marketable securities upon the recommendation of the
JVOFI Treasurer (though the bulk of the endowment fund has
remained in banks as money market placements or trust accounts). At
that time, the Philippines was being hailed as “Asia’s New Tiger” and
the economy was purring at a growth rate of 7.1 percent.
Unfortunately, the Asian financial crisis struck in mid-1997 resulting
in a marked decline not only in the yields in interest income but also
in the value of the investments. The turbulent political climate under
the successor government of Estrada did not help either. Thus, in
2001, the securities and shares were valued at less than 50 percent of
their purchase price in 1997.
Management of the Endowment Fund
When Pimentel was appointed president of the foundation, she was

given wide latitude to reshape and redirect JVOFI. “Our Chairman
had his hands full running Benguet Corporation. It was, therefore, up
to management to present proposals for consideration,” Pimentel
recalled. “The trustees fully supported such proposals. Thus, it was
not that difficult for us to set aside funds and build up the endowment
fund.”
Ma. Rosario Lopez, current JVOFI Executive Director, agreed.
“In fact, the creation and management of the endowment fund was
generally left to our president, Emily Pimentel. The board used to
monitor only the consolidated General Fund, leaving most of the
financial details to the Finance Committee. When money became
136
tight, however, the board as a whole began to require reports and

updates on the status of the endowment fund and the overall financial
sustainability of the foundation.”
When the endowment fund dipped to US $530,000 (PHP 12
million) in 2000, the board instructed the management staff to ensure
that the endowment fund not drop any further. The foundation as a
whole has rallied to preserve its corpus.
In 2000, in view of the mergers, acquisitions, and closures happen-
ing in the banking industry, JVOFI’s board issued a list of accredited
banks that the foundation should deal with. These banks offered
lower returns but were chosen because their stability provided secu-
rity for JVOFI investments. The executive director and management
staff are guided by this list in their day-to-day management of the
foundation’s bank accounts.
Status of JVOFI Corpus
Through the transfer of loan reflows and savings from operations and
interest income, the JVOFI endowment fund quickly increased,
reaching a peak of US $650,000 (PHP 17.16 million) in 1997. A
combination of factors, however, caused the fund to shrink annually
to only US $530,000 (PHP 12.12 million) by 2000. These factors
included a decrease in the number of projects against which overhead
expenses could be charged as well as lower yields in bank investments
brought about by the Asian economic crisis.
In 1997, with the closure of the Dizon Copper Mines and the
cessation of its Masinloc Chromite Operations, BC stopped providing
its annual grant to the foundation. The following year, USAID,
JVOFI’s major resource partner for more than a decade, released the
last of its remittances with the conclusion of the Integrated Area
Development Assistance Program.
Based on the instructions of the board, the foundation thus imple-
mented a number of measures to arrest the decline of its endowment
fund. These included a retrenchment of personnel in 1998 and the
promotion of new income-generating services in micro finance, train-
ing, research, and consultancy.
Despite low yields in bank investments (interest rates hovered at
only 5 percent per annum), the endowment improved modestly to
reach US $540,000 (PHP 12.96 million) in 2001. The growth,
137
however, came from the transfer of loan reflows previously under

Other General Funds to the Endowment Fund. Meanwhile, the total
General Fund increased by 10 percent from US $780,000 (PHP 23.12
million) in 2000 to US $850,000 (PHP 28.70 million) in 2001. Again
this was due to the reclassification of loan collections, this time from
Restricted to Other General Funds.
More recently, JVOFI stepped up its fund sourcing and generated
a total of US $630,000 (PHP 3.21 million) in grants in 2001. This was
more than double the US $250,000 (PHP 1.11 million) raised in the
previous year. Expenses, however, continued to outstrip support and
revenues such that the Total Fund Balance decreased for the fifth
consecutive year. Apparently as a result of the aggressive fund sourc-
ing and reduction in expenses, however, the decline was reduced from
9 percent in 1999-2000 to only 2 percent in 2000-2001.
In light of these developments, the foundation came up with a new
strategic plan for 1999-2003. While the same vision and mission
statements were adopted, the four core programs became Enterprise
Development, Ecological Enhancement, Internal Capacity Building,
and Resource Generation and Management.
Under its strategic plan in place since 1999, JVOFI operations
have been focused on Baguio City. The foundation has been leverag-
ing its expertise and experience in developing and managing projects
involving micro finance, watershed development, and solid waste
management, among others. More recently, the foundation intensi-
fied its training, research, and consultancy engagements, including a
few in the Northern Luzon provinces of Ilocos Norte and La Union.
Challenges in Building and Managing the Endowment

Preserving the Corpus
“At this point, it is unlikely that we could enlarge the endowment

fund. The challenge is how to manage what we have, how to preserve
our corpus. To do that, our strategy is to break even using our earn-
ings to fund our administrative costs. Until things get better, we are
in a cost-recovery mode.”
This is how Maribel Ongpin summed up the foundation’s sustain-
ability strategy while grant funds are scarce and the Philippine econ-
omy is sluggish. Maribel Ongpin, the widow of Jaime Ongpin, was
138
appointed President of the foundation in April 2002. She has been an

active and vocal member of the Board of Trustees ever since she
joined in 1988.
Emily Pimentel elaborated that, “Our objective on a year to year
basis when we approve the budget is just to try to break even in terms
of administrative costs. That is, our administrative costs should be
equal to our expected earnings for the year. If we make more, well and
good as that would add to our endowment fund. Unfortunately, we
are not yet there; we are hitting maybe only 60 to 70 percent cost
recovery. Hence, our resource mobilization efforts do not translate
yet to a fund surplus.”
“Protecting the corpus also means getting contracts that would
allow our qualified staff to pay for itself,” Pimentel added. “It would
be a waste to lose them because these are the same people we will need
when the projects come in. That is why we have to do cost-recovery
in the meantime.”
According to Executive Director Lopez, another strategy they
have adopted to conserve JVOFI’s funds is to maximize counterpart
arrangements with communities, local government units, and partner
implementers. As was done in the more recent solid waste and refor-
estation projects, resources are pooled by the foundation to come up
with the amount necessary to access an identified grant. Alternatively,
the foundation may determine the total budget requirements and
then approach several donors to collect the required amount.
In addition, training, research, and consultancy services are deliv-
ered, even for small engagements, to help cover general and adminis-
trative expenses. Maribel Ongpin said, “When funding dried up, as it
had in the past few years, we started pulling our bootstraps. We have
been doing work like facilitation, trainings, and seminars. We also
take in work from other NGOs or government agencies. We try to
make these projects contribute a little to our overhead.”
Managing Income Opportunities
In building up the corpus, Pimentel readily saw the importance of

loan reflows as a major source of growth in the endowment. “But our
bad debt figure was so high; our rate of loan collections was awful. I
found out that not enough efforts were going to collections. What a
waste of resources!” she recounted. The Finance Committee,
139
composed then of Salvador Pabalan as Chairman, Cora de la Paz, and

Pimentel, therefore introduced a number of reforms to improve the
monitoring and recovery of loan funds.
At the same time, the foundation has endeavored to do well in the
execution of its partnerships with resource organizations. Maribel
Ongpin explained, “We try to instill a culture of responsibility and
service. Likewise, financial accountability is an institutional value. For
example, the grants we got from USAID were pretty big at that time.
And we were able to deliver the objectives and discharge the respon-
sibility, including the financial accounting. Knowing how difficult and
exacting USAID could be, we could not have gotten five major grants
from them over 12 years if we had not managed the projects well.”
Diversifying Competencies
“To ensure our sustain- “We have a history of adapting to our environment to ensure our rele-
ability, we have to vance to our partners and communities,” Lopez pointed out. “We
have been reinventing ourselves, adjusting our roles, strategies, and
continue to be creative,
programs in accordance with the needs and opportunities of the
innovative and rele-
times. We have shifted from being a direct implementer and service
vant. To do that, we deliverer to being an enabler and mobilizer. To adjust and adapt, we
must be attuned and underwent a reengineering in 1995 and a restructuring in 1999.”
up-to-date with what is She emphasized, “To ensure our sustainability, we have to
happening externally in continue to be creative, innovative and relevant. To do that, we must
be attuned and up-to-date with what is happening externally in the
the social development
social development scene. Networking and linkaging are very impor-
scene. Networking and
tant. We have to establish and maintain good working relationships
linkaging are very with other actors in the development sector – NGOs, POs, donor
important.” institutions, and government agencies – particularly in Baguio City,
Benguet province, and Northern Luzon. We have to be aware of what
they need. If that is consistent with our mission and goals, then maybe
we can put together something.”
Looking for Co-financing Partners
Maribel Ongpin explained, “Our donors have helped in more ways

than one. In a sense, they were also the sources of our endowment
fund. That is why we ensure that they are happy with our perform-
140
ance. We always look at our relationships with them on a long-term

basis.”
"Part of our sustainability strategy was to look for partners who
could give us funds that later on we could add to our endowment.
That used to be mainly USAID for us. Unfortunately, they decided to
focus on democratization, governance, and other issues in the politi-
cal scene.”
“CIDA [Canadian International Development Agency] and
UNDP [United Nations Development Programme] came in with
small grants that were very useful during the crunch time in the late
1990s. After USAID left the picture, we concentrated more on these
smaller funds. We were able to revive our partnership with AusAID
first established during the relief and rehabilitation efforts for the
Aetas (indigenous peoples) affected by Mt. Pinatubo’s eruption. The
Japanese Embassy recently gave us a largish grant for a garbage-recy-
cling project in Baguio City.”
“We maintain our good relations with these donor partners. Our
next step will be maybe to acquaint ourselves with European funding
institutions which have access to European Union funds. Maybe we
can start with Spanish grants. We want to find out what their interests
are and see if our programs could fit.”
Success and Limiting Factors

Good Track Record
“I would say our success in getting projects and grants essentially

comes from our track record. We really don’t have to sell ourselves,”
Maribel Ongpin asserted. “We have established our track record;
people know that we have the experience and expertise in our areas of
concentration,” she clarified. “And we have highly committed and
dedicated staff who do good work and come up with creative ideas.
These are strengths that attract our clients and donor partners. Our
networking merely facilitates the linking of interests and resources.”
Active Board
Lopez observed that the Board of Trustees now more actively partic-
ipates in the affairs of the foundation. “Before, when we had more
141
money, the board as a whole was not too keen on getting details of
financial reports and fund balances. They just relied on Emily
Pimentel and others in the Finance Committee like Cora de la Paz
and Salvador Pabalan. Now, they actually visit projects, they probe us
on the financial performance of the foundation, they want to know
not just the outputs but also the impact of what management is
doing.”
“We have a good mix of people on our board,” said Maribel
Ongpin. “I know many foundations fail because of their inability to
manage their finances. But we had Emily who took care of that for us.
Then there is Cora de la Paz who is also very perceptive when it
comes to numbers. She was a big help in straightening out our prob-
lems with our micro finance program.”
She continued, “We also have people who are well-versed in
management and we have experts who are very much into NGO and
community work. Recently, Norberto Viera, who is the Managing
Director of Texas Instruments in the Philippines, joined our board.
He has been very helpful in looking for linkages and partners.”
Aggressive Resource Mobilization
According to Pimentel, resource mobilization, which she calls “fund

sourcing,” has been built into the culture of the foundation. When
JVOFI still had enough personnel, it had a Fund Sourcing Group
whose job was to secure co-financing partners that could provide
financial and technical resources for the foundation. Later, they just
had Fund Sourcing Specialists. “But fund sourcing is a responsibility
of all the managers. They have to go out and look for projects and
resources to sustain their operations. It is really a conscious effort on
the part of the managers and on the part of the board,” Pimentel said.
Champions
“The endowment fund would not have been created had Emily
Pimentel not championed it,” Lopez pointed out. “The board wanted
it but was not doing much about it. She made it happen. She trans-
lated financial sustainability into operating terms.”
“Similarly, we had our Chair, Mr. Dennis Belmonte, advocating
our causes and concerns in Benguet Corporation,” said Lopez. As
142
concurrent BC President and JVOFI Chair from 1992 to 1997,

Belmonte approved the zero-based budgeting system that allowed the
foundation to retain whatever savings it could generate from the
implementation of BC projects. He also agreed to Pimentel’s propos-
als to increase BC releases to JVOFI in order to avail itself of USAID’s
Enterprise and Community Development grant, which was the
biggest project ever handled by the foundation.
According to Pimentel, since Maribel Ongpin joined the board she
has been a leading force in moving the foundation forward effectively.
“She provides the inspiration and guidance in ensuring that JVOFI
would pursue the vision of her late husband for the development of
self-reliant communities,” Pimentel noted. “She is the keeper of the
vision and core values of the organization.”
BC-JVOFI Relations
From the time that JVOFI began accessing funds from sources other
than BC, the mother company and its corporate foundation have
steadily drifted apart. “Today we are nominally still connected
because according to our bylaws, we remain a corporate foundation of
BC. Operationally, however, we have been independent, especially
after 1997,” said Maribel Ongpin. “We do not want to rock the boat
by changing our bylaws and formally declaring our independence.
Anyway, they let us be. The new owners, which took over in 1998,
have their hands full managing their debts and trying to stay afloat.”
The divergence has been both a success and a limiting factor in the
creation and management of the endowment fund. On the one hand,
building the corpus could have been expedited by a seed fund from
Benguet Corporation. “For maybe 12 years now we have been hoping
that they could give us an exit grant that they can consider an endow-
ment. And then we could work from there and build it up,” Maribel
Ongpin said. “Louie Lagdameo [former Treasurer] worked for that
and Dennis Belmonte is still trying to do it.”
On the other hand, the absence of such an endowment from BC
spurred JVOFI to create its own corpus from its savings and opera-
tions. Pimentel remarked, “It forced us to work harder, to develop our
capacity in fund sourcing, to be creative and innovative. We have
learned a lot along the way.”
143
Key Lessons Learned
The following can be seen as key lessons learned regarding how the
building and growth of an endowment can be a successful approach to
building a foundation’s financial sustainability (and particularly a
corporate foundation’s sustainability).
Lesson: Ensure some independence from the mother company
Pimentel observed, “Many corporate foundations that receive an

endowment from their mother company exist for the interests of the
corporation. In our case, we did not get an endowment and we had to
depend on our operations to create a corpus. Increasingly, however,
we existed for the communities we served rather than for BC.
Eventually we became aligned with, but independent of, Benguet
Corporation. We programmed our funds according to our mission
and goals.”
“If we had not been independent, we could have gone down when
our mother company was hit by hard times. I think that for a corpo-
rate foundation to survive it should have financial independence at
least in the form of a corpus that can sustain the organization, no
matter what happens to the corporation.”
“And if you are dependent for funds on the performance of your
mother company, you have to know what is happening in the corpo-
ration itself – what are the plans and projects, how is the corporation
being run, what are the major problems and critical concerns…things
like that. You have to be able to predict what to expect of the
company. In my case, I had the advantage of knowing what was
happening in the corporate context and JVOFI could plan accord-
ingly.”
Lesson: Adopt a business approach to social development
“Although we have our social development goals, we have adopted a

business approach and we are very conscious of the amounts that we
have to deliver to ensure that we will be able to sustain our opera-
tions,” Lopez noted. “This is particularly true in our microfinance
project. We are always looking for ways to improve it so that it will
144
not just be money going down the drain like what happened before
when we wrote off some US $495,000 (PHP 12 million) in loans.”
The microfinance project was launched in August 1996 to provide
affordable credit and encourage savings among the enterprising poor
of Baguio City. Capitalizing on the learnings gleaned from the foun-
dation’s previous lending programs, however, the project incorporates
full cost recovery mechanisms to preserve the JVOFI corpus and
ensure that funds will be available to sustain other core programs.
“Now we emphasize to the community groups that they have to pay
their loans as well as the full cost to deliver the credit,” Lopez said.
Out of the US $890,000 (PHP 32.02 million) due in 1996-2000, total
collection amounted to US $870,000 (PHP 31.49 million) for a 98.3
percent repayment rate.
Lopez likewise observed a marked difference in the thinking of the
board when considering funding requests and project proposals.
“Before, it was easy for the board to give grants and donations or
assent to dole-out projects. Now because we are all concerned not to
deplete the General Fund, the board always asks for counterpart
contributions. It is also very conscious now of both social and finan-
cial returns.”
Lesson: Leverage limited resources with co-financing resource partners
Pimentel pointed out, “We did not start with money coming out of
our ears. We just had modest sums. I think the learning here is that
you do not have to have hundreds of millions to pursue your vision.
By creatively packaging your projects and leveraging your funds, you
can actually do a lot even with a little. There are a lot of resources
outside the organization that can be tapped to attain common goals.”
“That is one of our strengths, actually,” Maribel Ongpin
remarked. “We go to possible donor institutions with our track record
and creative ideas. To make our proposal more attractive, we then put
our corpus to play by offering to cover part of the costs of the venture.
On our side, however, we do not shoulder the entire counterpart. We
ask the community, local government unit, and other stakeholders to
co-finance the project. Thus, our limited funds go a longer way in
getting development projects implemented on the ground.”
Pimentel stressed, “The key here of course is to deliver effective
programs and services. You have to develop the institutional capacity,
145
credibility, and track record. Especially now, nobody gives large

chunks of money the way USAID used to do. Thus, it is important to
present many options to resource organizations before, during, and
after a project.”
Lesson: Organizational sustainability should be an institutional value
“It goes beyond the “The foundation has to be sustainable, this is what we inculcate,”
financial. We do good Maribel Ongpin emphasized. “I see many NGOs living a hand-to-
work, we innovate, and mouth existence because they do not think of the future. In our case,
everyone from the board to the rank-and-file is aware of the need to
we adjust to our envi-
ensure our sustainability.”
ronment. We made our
“For example, we have been very prudent with our funds. We were
mistakes but we made never extravagant; we have always been frugal. We promote trans-
sure that we learned parency and financial accountability in our dealings with our clients
from them.” and co-financing partners. We have also worked hard to build our
endowment fund.”
“It goes beyond the financial. We do good work, we innovate, and
we adjust to our environment. We made our mistakes but we made
sure that we learned from them. Where necessary we even got
resource persons to help us process the learnings and do the reforms.
The concern for sustainability has also guided us in our selection of
trustees and managers, in the motivation of our staff, in our conduct
of strategic planning exercises, in the capacity building in training and
consultancy, and in many other aspects of the foundation’s opera-
tions.”
“Because of this value, this culture, we are very enthusiastic about
the future. We understand that we just have to endure the financial
crunch that everybody is suffering from. But it will not always be like
this; things will improve. And when they do, the foundation will be
prepared to meet all the challenges and opportunities the future has
to offer.”
146
Appendix 1
Strategies for Building
JVOFI’s Endowment
Important strategies to build the endowment fund may be traced from

two key moves made in 1985 to 1987 to ensure the financial sustain-
ability of the foundation. These were the implementation of the
Philippines Department of Health-JVOFI Collaboration Project and
the development of partnerships with resource organizations, partic-
ularly the long-term relationship with USAID.
DOH-JVOFI Collaboration Project
Through the initiative of Ongpin, BC donated US $2.06 million

(PHP 45 million) to the government for the implementation of devel-
opment projects in the provinces where BC was operating. The
donated amount was held in trust by the foundation and jointly
administered by BC, JVOFI, and the Department of Health, the part-
ner government agency. Formally called the DOH-JVOFI Integrated
Livelihood and Primary Health Project, the pioneering government-
NGO-business sector collaboration had four components. The DOH
was responsible for the Primary Health Care component, which was
the biggest, while JVOFI handled the Livelihood Development,
Social Development, and Institutional Development components.
The project facilitated the rapid growth of the foundation as an
organization providing grants, loans, and technical assistance across
different projects in Benguet, Zambales, and Camarines Sur. JVOFI
acquired the experience and expertise in managing development proj-
ects in partnership with people’s organizations (POs) and other
NGOs. The projects included the development of potable water
systems, integrated swine breeding, cattle dispersal, day care centers,
scholarships, loans for cooperatives, and assistance to various schools
and private volunteer organizations.
The US $2.06 million (PHP 45 million) grant was released to
JVOFI in three equal tranches in 1987, 1988, and 1990. Significantly,
147
although the bulk of funds eventually went to the primary health care
component managed by DOH, the release of the grant to the foun-
dation provided JVOFI with funds that it could leverage to secure
other projects with donor institutions, particularly USAID.
For example, in 1989, BC and JVOFI secured USAID funds for
the Zambales Integrated Development Program (ZIDP) using the
DOH-JVOFI Collaboration Project funds as counterpart. The
USAID grant was notably used for a credit program for livelihood
projects in Masinloc and San Marcelino. Meanwhile, part of the
Collaboration Project funds was used for project management train-
ings.
The ZIDP subsequently yielded loan reflows amounting to US
$90,000 (PHP 2.44 million), of which US $60,000 (PHP 1.61 million)
was classified in 1995 as part of the JVOFI endowment fund. The
DOH-JVOFI Collaboration Project itself had credit programs that
brought in substantial loan reflows that later formed part of the
General Funds of the foundation.
Partnership with Resource Organizations
In the late 1980s, donor agencies started pouring official development

assistance into the Philippines in support of the Aquino
Administration. The new government also adopted a policy to
promote countryside development in collaboration with POs and
NGOs. To take advantage of the opportunities under this favorable
climate and in view of the growing difficulties of its mother company,
the foundation actively secured financial assistance from USAID and
other donor entities. Here are some examples of such partnerships.
USAID PVO Program
The first JVOFI-USAID partnership was the Benguet Community

Development Project (BCDP) implemented from 1986 to 1989 under
the donor agency’s program to assist NGOs (what the Bank often
refers to as private voluntary organizations, or PVOs). The BCDP
involved a US $210,000 (PHP 4.34 million) total grant from USAID
and a US $130,000 (PHP 2.67 million) counterpart contribution in
cash or in kind from JVOFI and its co-sponsors. The BCDP was
followed by the first cycle of the Benguet Livelihood Development
148
Project from 1988 to 1991 and the second BLDP cycle from 1991 to
1994.
USAID ECD Program
Under USAID’s Enterprise and Community Development Program

(ECD), BC became part of the ZIDP, which was implemented in 1989
to 1992. It involved a US $200,000 (PHP 4.7 million) grant from the
donor agency matched by a US $200,000 (PHP 4.7 million) counter-
part from BC-JVOFI. The ECD, which provided grants to for-profit
organizations to encourage the use of their philanthropic funds to
support more sustainable community development projects, called for
a 50-50 sharing of expenses between USAID and the grantee-corpo-
ration.
The last USAID-assisted project that JVOFI participated in was
the Integrated Area Development Assistance Project carried out from
1994 to 1998. The USAID grant totaling P18 million was likewise
secured by BC under the ECD Program with JVOFI as the sub-
granter of funds.
According to Pimentel, USAID was interested in working with the
foundation because there were not too many corporate foundations
that could come up with the counterpart funds. “We were among the
first to avail of their ECD because we had funds coming from our
collaboration project with the DOH,” she said.
Other Fund Sources
As a leading NGO in the area at that time, JVOFI was well positioned
to collaborate with resource organizations to carry out credit for
micro-entrepreneurs, construction of school buildings and, later,
relief and rehabilitation programs. Among the partnerships estab-
lished by the foundation were the loan assistance programs with the
Department of Trade and Industry and the Philippine Business for
Social Progress. In 1993, JVOFI also obtained a small grant from the
Australian Embassy for crop and livestock projects for indigenous
people in Mt. Pinatubo resettlement sites (the Aeta).
149
150
THE CASE OF KEHATI
Chapter Seven
Building an Endowment for
Biodiversity Conservation
in Indonesia:
The Case of KEHATI
By Sarah Maxim, Ismid Hadad
& Suzanty Sitorus
151
Introduction
Indonesia is one of the world’s three mega-diverse countries for the

1 The other two mega- range and breadth of its biological resources.1 In recent decades,
diverse countries are
Brazil and the Democratic however, this biodiversity has come under threat. Growth-oriented
Republic of Congo development policies have led to unsustainable pressures being placed
(formerly Zaire).
on natural resources and a dramatic reduction in habitat areas for
2 The ministry became the endangered species. Compounded problems of pollution, deforesta-
State Ministry for the
tion, erosion, and the disruption of watersheds are severely impacting
Environment after Dr.
Emil Salim ended his the environment. Moreover, a history of corruption and inconsistency
term as minister. in the application of the rule of law have limited the government’s
3 This international treaty ability to adhere to acceptable guidelines, or common principles, in
was drawn up in 1992 to the sustainable management of Indonesia’s natural resources.
promote three goals:
This marked decline in the quality of Indonesia’s environment by
biodiversity conservation,
sustainable use of the the mid-1980s pushed the subject to the forefront of the agenda of the
earth's biological country’s nascent community of non-governmental organizations
resources, and the “fair
and equitable” sharing (NGOs) as well as some government sectors, particularly the State
of the benefits from the Ministry of Population & the Environment.2 Between 1983 and
use of natural genetic
materials. The treaty
1993, Dr. Emil Salim, a Berkeley-trained economist, directed this
has 182 parties. See ministry. It was during his tenure as minister that Indonesia developed
www.biodiv.org. a strategic plan to promote biodiversity conservation, participated in
4 This situation has contin- the 1992 Rio Summit, and signed and ratified the International
ued to the present day Convention on Biological Diversity.3
under the State Ministry
for the Environment. For Although the State Ministry of Population & the Environment
example, the ministry does was an effective voice in calling for the country to pay more attention
not have direct supervi-
to sustainable development, its status as a state ministry meant it had
sion of the country’s many
natural parks and conser- little implementing or enforcement authority, and only a limited
vation areas; these areas budget.4 Local NGOs also lacked sufficient resources to spearhead
are instead coordinated by
a department in the the kind of initiatives that would have substantive impact in address-
Ministry of Forestry. ing the degradation of the natural environment.
152
THE CASE OF KEHATI
Amidst these developments, two contiguous events collided to give

birth to KEHATI’s endowment. First, a 1992 summit meeting in
Tokyo between US President George H.W. Bush and Japanese Prime
Minister Kiichi Miyazawa resulted in the governments of Japan and
the United States agreeing to a common agenda for the environment
with Indonesia selected as a pilot country. Called the “Tokyo
Declaration,” funds provided by the two countries were allocated to
support the implementation of Indonesia’s biodiversity strategy.
The second event occurred with Salim’s departure from his post as
minister in 1993. At this time, he established a plan for a national
organization devoted to environmental sustainability. Yayasan
Keanekaragaman Hayati Indonesia, abbreviated to KEHATI, was
officially formed in January 1994 and came under the direction of a
board of prominent Indonesians chaired by Salim.5 5 An amendment was made
to the foundation's
At the same time, officials of the US Agency for International Articles of Association in
Development (USAID) charged with following through on the US August 1995, but other-
wise the formal terms for
government’s commitment under the Tokyo Declaration to support
establishing KEHATI
biodiversity conservation in Indonesia, decided to fund an endow- remain as stated in 1994.
ment managed by an independent national Indonesian organization.
6 The interest of USAID
Funds derived from interest earned on the endowment would be used staff in endowments as a
for grantmaking activities focused on conservation objectives. While funding strategy, includ-
ing descriptions of endow-
USAID officials believed in endowments as a means to generate long- ments funded by the
term support for sustainable development, they also recognized the agency in the 1980s and
endowment’s role in building financial sustainability within local early 1990s, are covered in
detail in Kathleen M.
organizations and empowering civil society. Other examples of envi- Horkan and Patricia L.
ronmental organizations supported by USAID-funded endowments Jordan’s USAID working
paper “Endowments as a
during this same period include the Foundation for the Philippine Tool for Sustainable
Environment, established in 1992, and the Mexican Nature Development.” The
authors also note that new
Conservation Fund (Fondo Mexicano para la Conservación de la
laws and guidelines issued
Naturaleza), established in 1996.6 in the early 1990s made it
USAID officials determined that KEHATI was the organization possible for USAID to set
up dollar-based endow-
best suited to manage the endowment in Indonesia. They believed ments using congression-
that KEHATI would be able to command the requisite international ally appropriated funds.
Endowments established
profile because of its highly esteemed board, and that it would be the
prior to 1990 could only
most appropriate organization to meet the criteria of the US govern- be funded with local
ment and Congress that would be disbursing the funds. The final currency, and not with US
dollars.
terms for how the endowment would be transferred and managed
were drawn up through the mechanism of a Cooperative Agreement,
153
7 While the US govern- which covers a ten-year period from 1995 to 2005.7 (See the back of
ment's contribution
ensured it met its commit- this book for a profile of KEHATI’s mission.)
ment to the Tokyo
Declaration, the US
government also counted
it as a contribution to the Establishing the Endowment
Global Environment
Facility, a trust fund
managed by the United Under the terms of the Cooperative Agreement with USAID,
Nations Development KEHATI received US $16.5 million for its endowment to support
Programme, the United
Nations Environment
grantmaking in the field of biodiversity conservation in Indonesia.
Programme, and the USAID also pledged an additional US $2.5 million to KEHATI to
World Bank. The Facility cover its operating costs for the first five years of the Cooperative
provides grants and other
funding for environmental Agreement (1995-2000) as well as any technical assistance or consul-
programs in countries tancies needed to help it establish effective operations at the outset.
around the world. Under
the Tokyo Declaration,
The total grant was therefore equal to US $19 million, with the terms
Japanese government offi- of the agreement in effect for ten years, from 1995 to 2005. The
cials supported biodiver-
Cooperative Agreement stipulates that KEHATI must raise an addi-
sity conservation in
Indonesia by adding funds tional US $6.5 million from its own sources. Of that amount, US $4.7
to existing grants it was million should be contributed to its endowment and the remaining
already making in
Indonesia. Specifically, a amount, US $1.8 million, should be contributed as cost-sharing for
national biodiversity operational and program expenses (see Table 1). While the agreement
research center and
leaves design of KEHATI’s programmatic approach to KEHATI’s
Indonesia’s national parks
received the additional board and staff, it states that the objectives are to be achieved through
grants. As the funds from two main strategies: grantmaking first, and consultation, collabora-
the two governments were
disbursed according to a tion, and networking second.
strategic plan drawn up by In order to actually receive funds from USAID, KEHATI had to
the State Ministry for
pass a review of grant-worthiness conducted by the agency and meet
Population & the
Environment, the funds’ various requirements set out in the Cooperative Agreement, includ-
use reflected Indonesia’s ing developing an investment strategy for the funds. For example, all
own priorities for its
sustainable development. funds selected for investment have to be formally registered with the
US Securities & Exchange Commission. This requirement is
intended to safeguard the endowment but also means that the endow-
ment is to be invested in the United States. KEHATI also chose to
adopt USAID standards in many areas of its operations, particularly
those for financial administration and personnel management.
In passing the grant-worthiness review, KEHATI was registered as
a nonprofit and tax-exempt organization in the United States. This
status means US corporations or other US-based entities that donate
funds to KEHATI can receive tax benefits if filing in the United
States.
154
THE CASE OF KEHATI
Establishing a Grantmaking Program
KEHATI’s endowment has made possible the development of a

strong grantmaking program and technical assistance fund, but each
executive director has faced different challenges in developing the
foundation and implementing its mandate. As stated earlier, KEHATI
shifted its funding from research initiatives on biodiversity to commu-
nity empowerment with an emphasis on bringing together commu-
nity groups and NGOs to conserve and use local resources in a
sustainable manner.
The changes in KEHATI’s grantmaking have been due primarily
to the need to adapt its mission to realities on the ground. Staff has
had to redefine the concept of biodiversity conservation as well as
clarify its meaning in the Indonesian context in order to make it more
readily accessible to the public. Along with this has been an emphasis
Table 1
USAID KEHATI KEHATI’s Budget Outline,
Endowment 16,500,000 4,700,000 1995-2005 (in US dollars)
Operating costs
Salary 272,558 50,000
Operations 275,040 50,000
Technical assistance 445,500 0
Travel 239,869 0
Sub-total 1,232,967 100,000
Program expenses
Program officers 12,000 0
Staff & trustee travel 7,700 90,000
Public information materials 111,075 0
Meetings & workshops 96,258 60,000
Sub-total 227,033 150,000
Grantmaking support 550,000 950,000
Consultation & networking 265,000 600,000
Evaluation & audit 225,000 0
TOTAL 19,000,000 6,500,000
Source: USAID Cooperative Agreement
155
on generating greater public support for, and involvement in, general

environmental issues. KEHATI’s grantmaking now supports commu-
nity-level programs, public education, and scientific research on
biodiversity. These changes have also prompted necessary organiza-
tional restructuring.
The current executive director, Ismid Hadad, has initiated the
most recent structural changes at KEHATI, including establishing
regional network centers that link local communities with the organ-
Providing grants that ization (see Box). The network centers (usually staffed by a program
generate long-range officer and accountant selected by partner organizations in the
impact through commu- region) reflect the decision of KEHATI officials to shift funding away
from a project-based approach toward one more programmatic. They
nity empowerment
also make KEHATI’s programs more efficient by channeling
means that the endow-
resources to targeted areas and issues.
ment is being used effi- Conservation, in Hadad’s view, has to be approached from multi-
ciently to accomplish ple angles in an integrated manner, and requires long-term planning,
KEHATI’s mission multi-stakeholder involvement, multi-year budgeting, and a strong
role for community. This approach allows local organizations to focus
on developing methods to address biodiversity conservation that are
less driven by short-term considerations and more by a broader
assessment of how conservation can be achieved simultaneously at the
micro- and macro-levels. Providing grants that generate long-range
impact through community empowerment means that the endow-
ment is being used efficiently to accomplish KEHATI’s mission.
KEHATI now actually receives many more proposals than it can
fund. Although proposals are solicited in an open-ended way, since
1999 the organization has established review processes that winnow
out those beyond its priority areas. Between 1995 and 2002, KEHATI
distributed a total of US $4,783,936 in grants (see Graph 1).
Grantmaking priorities for KEHATI include the following:
• Biodiversity awareness and income generation for communities
living near Meru Betiri National Park, East Java.
Box Java/Madura/Bali
Regional Network Alternative food crops, medicinal plants, community-based ecotourism
Centers and
Program Focus Papua
Community-based natural resource management
East & South Kalimantan

Community-based management/co-management of natural resources
156
THE CASE OF KEHATI
• Community empowerment and natural resource conservation

in the peat swamp ecosystem of Central Kalimantan.
• Promotion of sustainable use of natural resources and alterna-
tive income generation in villages adjoining Laiwanggi-
Wanggameti National Park, Sumba, East Nusa Tenggara
province.
• Capacity building and development of tuber plants as alterna-
tive food sources for communities in Yogyakarta province,
Central Java.
• Development of traditional medicinal plants for local health
practices in Sumenep District, Madura Island, East Java.
• Capacity building in the management of marine resources in
the Padaido Islands, Papua province.
• Community management and alternative income generation in
the Arfak Mountain Nature Reserve, Papua province.
KEHATI also supports policy advocacy efforts that seek govern-
ment recognition for communities’ accomplishments in biodiversity
conservation and the sustainable use of natural resources.
Some of KEHATI’s resources are used to fund technical assistance
and training for its grantees. For example, KEHATI strives to
enhance the transparency of its grantees, including trying to ensure
that its grants are managed appropriately. KEHATI also tries to
improve its grantees’ program management skills. It holds annual
800 Graph 1
Proposals Received and
700 Approved by KEHATI
1995-2002
600
500 Number of
proposals
400 received
300 Number of
proposals
200 approved and
granted
100
0
1995 1996 1997 1998 1999 2000 2001 2002* * as of June, 2002
157
meetings with grantees in each of its regional network center areas

and may meet more frequently with partners in smaller areas of
network centers.
These capacity-building efforts are tied to KEHATI officials’
concern to avoid creating a dependency among local groups on the
organization’s grants. The ultimate goal is for these community and
NGO programs to become self-sustaining. KEHATI’s emphasis on
building sustainability derives also from its recognition that the
endowment itself cannot provide for all existing and future needs.
Managing the Endowment

Investment Management Policy
The management of KEHATI’s endowment fund portfolio is

governed by a set of guidelines on investment policy, endorsed by the
foundation’s Board of Trustees and in accordance with its Cooperative
Agreement with USAID. The guideline covers the objectives of long-
term investment, rules on spending, rate of return goals, and asset
allocation policies.
The two primary objectives guiding the management of the foun-
dation’s endowment fund are to preserve the real value of the assets
over time and to provide a substantial, stable flow of income to
finance the foundation’s activities. Preservation of the real value of the
assets will be achieved by maintaining an investment program that
KEHATI’s emphasis on generates returns, net of all fees, which in real terms at least match the
building sustainability annual rate of spending.
As for spending, the investment policy stipulates that the average
derives also from its
total rate of return goal be equal to a spending rate of five percent of
recognition that the
the average market value of the total portfolio of the year, plus the
endowment itself cannot cost of investment and rate of inflation. Total return is a measure of
provide for all existing current yield plus capital appreciation. The policy also stipulates that
and future needs spending will be a minimum of three percent and a maximum of five
percent of a 12-quarter (three-year) moving average of the fund’s
market value, at least for the initial five years of the endowment.
KEHATI manages its asset allocation based on an assessment of
long-term considerations, such as rate of return, volatility, diversifica-
tion, inflation hedging, and investments in major asset categories,
including stocks, bond, cash, and real estate. In order to maximize the
158
THE CASE OF KEHATI
likelihood of achieving the long-term investment objectives and its

real rate of return goals, KEHATI sets long-term neutral asset alloca-
tion targets of 60 percent equities and 40 percent fixed income secu-
rities. In accordance with the Cooperative Agreement, the foundation
invests exclusively in publicly traded securities offered by investment
firms registered with the US Securities and Exchange Commission
and denominated in US dollars. Private investments, including
venture capital and real estate limited partnership investments, are
prohibited.
Following a mid-term review of KEHATI in the year 2000
(conducted in compliance with the Cooperative Agreement), the
foundation’s investment policy underwent a few significant changes.
Amended were the stipulations on rate of return, performance bench-
marks, spending policies, and guidelines on equity investments. As a
result of this amendment, target return rates are now a function of
market-driven benchmarks. With regard to spending policy, the
amendment stipulates that KEHATI may withdraw its fund up to 6.5
percent of a 13-quarter (three-year) moving average of the fund’s
market value for the initial five years of the endowment. If applied
continuously, however, this stipulation would likely result in the grad-
ual erosion of the real value of the endowment principal.
The original investment policy did not specifically regulate equity
investment. In response to current and future trends in the market,
the amendment included just one sentence on equity investment, as
follows: “In order to achieve an appropriate amount of diversification,
given the limited amount of funds to be invested in various equity KEHATI’s reputation
investments, the foundation will consider purchasing unit shares in and performance as a
passively managed equity funds by an investment management firm
credible and accountable
registered with the Securities and Exchange Commission and denom-
organization has been
inated in US dollars.”
augmented significantly
Governance and Fund Management Structure by the efforts expended
by its governing bodies
KEHATI’s reputation and performance as a credible and accountable
organization has been augmented significantly by the efforts
expended by its governing bodies. Until January 2003, KEHATI had
a Board of Trustees, Executive Board, and three advisory committees.
In compliance with the new law on foundations in Indonesia, the
structure of KEHATI’s governance has been reformed to now consist
159
of a Governing Board, Supervisory Board, and Executive Board. The

three advisory committees remain as non-formal but essential
elements of the organization, assisting the Executive Board in dealing
with policy issues on grantmaking, investment, and resource mobi-
lization.
KEHATI’s Governing Board is now composed of eight senior,
including founding, members of the foundation. It is a policy making
and supervisory body that is required to meet at least once a year but
can meet more frequently at the request of five or more board
members, or at the request of the Executive Board. Members of the
Governing Board serve terms of six years, and these terms can be
extended for an additional three years. The board members are drawn
from diverse backgrounds and various sectors, including NGOs, busi-
ness, and academia. A consistent emphasis has been made to elect
those with professional reputations of the highest caliber and
integrity.
The Executive Board has a maximum of seven members and takes
an active role in implementing policies formulated by the Governing
Board. The Executive Board is required to meet at least three times a
year, with a quorum of at least four members required at each meet-
ing to make any formal decisions. Since its inception, however, the
Executive Board has met monthly and is seen as an integral part of the
organization’s management structure and decision-making processes.
The Executive Board is responsible for appointing the organization’s
Executive Director, who together with his/her full-time professional
staff actually manages the day-to-day functioning of the organization.
The organization’s first Executive Director was Dr. Setijati
D.Sastrapardja, a founding member of the Board of Trustees and one
of Indonesia’s senior scientists in conservation biology. She completed
her term in 1996 at which time Dr. Nengah Wirawan, a scientist with
a background in applied ecology and botany filled the position. Dr.
Wirawan completed his term in 1999 and Ismid Hadad then replaced
him. Hadad remains the Executive Director at this time. In addition
to being a founding member of KEHATI’s board, Hadad has an
economics and environmental management background, was a
pioneer of the NGO movement in Indonesia, and led two national
management consulting firms previously.
KEHATI has three advisory committees currently, focused on
investment, grantmaking, and resource mobilization. They provide
160
THE CASE OF KEHATI
policy advice and technical guidance to the Executive Board. The

governance of these committees is regulated by the organization’s by-
laws. Each committee must consist of three or more members, of
whom at least one must be a member of KEHATI’s board.
The role of the investment committee has been instrumental in
the management of KEHATI’s endowment. Its main responsibilities
are to: recommend investment policies and procedures or their
amendments; oversee the performance of the asset managers and
investment advisor; and monitor overall investment performance.
The committee is required to meet at least four times a year and
report to the foundation’s Executive Board.
Since the beginning, KEHATI has attracted high-caliber profes-
sionals in finance, investment, and banking to its investment commit-
tee. Of the current five members, one is from the foundation’s
Governing Board. Apart from giving policy advice to the board, the
investment committee also assists the Executive Director in financial
management issues and in negotiations with asset managers and the
investment advisor.
Based on committee’s recommendations, the Executive Director
(assisted by the finance department, especially the Finance Director
and Finance Manager) seeks to exercise the highest standard of care
and prudence with respect to their fiduciary responsibilities in manag-
ing the endowment investment. As assets are allocated in a globally
diversified portfolio of equities and fixed income securities traded on
public capital markets, however, the foundation employs professional
asset managers, a custodian bank, and a reputable investment advisor.
The services of the investment advisor fall under six main cate-
gories:
• overall investment policy assistance to the Executive Director
• portfolio construction, including conducting an annual review
of KEHATI’s spending policies and asset allocations
• setting of investment objectives for asset managers and bench-
marks for monitoring investment performance
• advising on the relationship with the custodian bank and asset
managers, including KEHATI’s contractual arrangement with
its asset managers
• performance monitoring, including a monthly evaluation of
investment results and asset allocations, and a quarterly
overview of market trends
161
• and treasury administration, including the withdrawal of funds

for programming and operations, maintenance of tax-free
status with the IRS, and other investment administration
matters as required.
Endowment Performance
KEHATI’s endowment is invested in an international portfolio of

fixed income (bonds) and equity investments, with the asset mix policy
set at 60 percent equities and 40 percent fixed income. KEHATI has
engaged professional asset managers with high international regard,
including TIFF (The Investment Fund for Foundations); Vanguard,
Hochkis & Wiley; and Morgan Stanley. During the first four years of
its operation, KEHATI’s investment, mostly in the US capital market,
enjoyed relatively high rates of return. Since 1996, the four-year
annualized return of KEHATI’s endowment fund has been 13.7
percent. It surpassed the targeted annual objective of 6 percent plus
the cost of investment management and the rate of inflation. This
means that KEHATI’s original endowment fund of US $16.5 million
in 1996 grew significantly, reaching close to US $25 million in
December 1999, after annual withdrawals of US $2,225,000 for
program operations.
With the onset of the Asian financial crisis in late 1997, KEHATI’s
endowment also ballooned in rupiah terms because of the drastic
collapse in the value of this currency against the US dollar. While the
exchange rate when the fund was established in 1995 was approxi-
mately Rp. 2,300 per US $1, this rate has been in a state of flux for the
last few years, and even went over Rp 15,000 in 1998. By early 2003,
it was trading at an approximate value of Rp. 8,500 per US $1. This
initial jump in value of the endowment in local currency in late 1997
meant that KEHATI was suddenly receiving many more rupiahs than
it had been used to. Inflation quickly caught up with the exchange rate
fluctuation, however, causing this sudden increase in rupiahs to be
quickly swallowed up by concomitant increases in operating expenses.
Unfortunately, between 2000 and the present, KEHATI’s portfo-
lio has suffered in the weakening of US capital markets. After enjoy-
ing strong years of growth from 1995 to 1999, the equity asset class
lost approximately US $5,200,000 in market value from 2000 to the
162
THE CASE OF KEHATI
second semester of 2002. Current low interest rates of 2.5 to 3 percent

on KEHATI’s US investment portfolio are not favorable, especially
against the Indonesian financial market, which has been generating
yields of 15 to 18 percent interest rates. While investing in the
Indonesian market could potentially result in larger returns for
KEHATI, this is not allowed under the terms of the Cooperative
Agreement (which stipulates that investment of the endowment capi-
tal and reinvestment of endowment income can only be through
financial instruments offered in the US and through US-based finan-
cial intermediaries.)
As demonstrated in Graph 2, while the overall value of KEHATI’s
portfolio hit a high of nearly US $25 million in 1999, it declined to a
value of US $22,579,980 as of December 31, 2000 and then further
dropped to a value of US $17,361,725 as of December 31, 2002, far
below the endowment’s original market value. At the end of June
2003, after withdrawal and management fees, the market value of
KEHATI’s endowment fund stands at US $18.5 million. The founda-
tion needs to maintain this performance if it wants to capitalize on
current market trends, which are indicating slow but significant
improvement nonetheless.
Although the asset mix policy was set at 60 percent equities and 40
percent fixed income, due to the declining equity values asset alloca-
tion changes occurred. In 2000 the actual mix was 58 percent equities
and 42 percent fixed income; in 2001, it was 55 percent equities and
45 percent fixed income; and in 2002, it was 51 percent equities and
49 percent fixed income. From 2003 and on, the asset mix allocation
25,000,000 24,943,539
Graph 2
24,000,000
Endowment fund
23,000,000 balance in rupiahs
22,000,000
21,000,000
20,000,000
19,000,000
18,126,115
18,000,000
16,701,799
17,000,000
16,500,000
16,000,000
Beginning 2nd –’96 2nd –’97 2nd –’98 2nd –’99 2nd –’00 2nd –’01 2nd –’02 Feb –’03 Apr –’03 Jun –’03
163
policy has included other alternative investments such as preferred

shares, Real Estate Investment Trusts (REITs), and short-term invest-
ments of fixed income in the domestic market.
Strategies for the Future
The compounded effect of unpredictable capital market volatility and

the adoption of a new strategic plan within KEHATI (for 2002 to
2007) resulted in significant changes to the investment perspective
and strategy of the foundation. During the period in which USAID
funds supported KEHATI’s operations, the endowment only needed
to cover program costs. The additional funds for operations therefore
afforded the organization some breathing room during which time it
concentrated on developing its administrative systems and program-
ming strategies. The corresponding end of this grant with the slump
in value of the endowment in 2000, however, forced KEHATI to
A challenge for maximize the use of funds available for operating costs through effi-
KEHATI is to adopt ciency measures, including scaling back expansion plans for regional
network centers and new grants. KEHATI was thus reminded that
a new, more diversified,
while the endowment offers the means to support innovative efforts
investment strategy that
to meet its objectives, the funds derived from the endowment are not
includes attracting funds always constant or consistent.
to its endowment, build- A challenge for KEHATI is thus to adopt a new, more diversified,
ing its long-term investment strategy that includes attracting funds to its endowment,
fundraising capacity, building its long-term fundraising capacity, and therefore diminishing
its reliance on USAID funds. KEHATI has already been successful in
and therefore diminish-
attracting funding from other donors for its programs. In the past two
ing its reliance on
years, the organization has successfully raised additional funds
USAID funds (outside of its endowment) of US $2.1 million, thereby increasing to
about 60 percent the proportion of programs being funded by non-
endowment funds. Like other foundations, especially in developing
countries where immediate needs are so great, it has been a struggle
to get donors to contribute to the endowment fund.
While a priority for KEHATI’s fundraising strategy is to fulfill the
terms of its Cooperative Agreement, KEHATI’s Resource
Mobilization Committee has also adopted the following strategies to
ensure adequacy and sustainability of resources for KEHATI’s
programs and operations between 2002 and 2007:
164
THE CASE OF KEHATI
• diversification of its donor base

• development of alternative and innovative funding mechanisms
and instruments
• development of a program to engage the private sector (for
which KEHATI has an internal policy advising how to select
corporations and actively engage with them as partners)
• management of the endowment fund and its investments more
effectively (such as by changing the investment advisor and
reviewing the range of investment options available to the
organization)
• development of non-grant instruments to support communi-
ties and adoption of a social entrepreneurship approach to
program planning and implementation
• promotion of earned income amongst its beneficiaries through
the sale of goods or services, program-related investments, and
establishment of businesses related to KEHATI’s mission.
In recent months, KEHATI’s management has been particularly
interested in promoting a debt-for-nature swap on behalf of the
Indonesian government with the resulting funds possibly being allo-
cated to either a trust that would be managed by KEHATI (such as
has occurred in the Philippines already) or to KEHATI’s existing
endowment fund.
KEHATI is also currently exploring the potential of a “green
mutual fund.” Apart from being a future revenue-making mechanism
for KEHATI, the fund would give businesses an incentive to act more
environmentally responsible.
KEHATI has also recognized the need to create an enabling fiscal
environment in Indonesia that can encourage charitable giving from
individuals and the private sector. Currently, a culture of philanthropy
exists largely only within Muslim traditions of giving; this rarely
extends to organizations such as KEHATI. Nothing within the tax
framework acts as an incentive for companies to provide donations to
charitable organizations. While KEHATI does not pay taxes in
Indonesia by virtue of a special dispensation secured from the
Ministry of Finance (which will be renegotiated in the coming years),
it cannot provide charitable tax deductions to Indonesian donors.
165
Lessons Learned
An environmental or conservation trust fund in the form of an

endowment is not simply a financial mechanism. Such a fund must be
viewed as a strategic institution that has several roles to play, in addi-
tion to generating and channeling funds. To succeed in building orga-
nizational financial sustainability, endowment funds require more
than strong financial management systems and skills. They need
governance structures, committed board members, dedicated and
competent staff, strategic policies, and technical support that enable
the funds to meet long-term goals.
From KEHATI’s experience with its endowment, one can extract
the following lessons:
Lesson: Establishing an endowment also requires a justification for its exis-

tence
Donor agencies generally prefer to support programs or projects

rather than give to an endowment fund. Therefore, an organization’s
staff and board must present a strong case that they face extraordinary
problems or challenges that cannot be solved by conventional project
funding. In the case of KEHATI, the foundation’s founders were able
to convince USAID that Indonesia is one of three mega-diverse coun-
tries in the world and therefore one of the richest centers of biologi-
cal resources on the globe, but is increasingly threatened by powerful
external factors such as over-exploitation. The gravity of this context
clearly underscored the need for large and sustainable resources to
meet such a long-term challenge.
Lesson: Establishing an endowment with bilateral assistance has associated

restrictions and rules
Organizations endowed initially by foreign donors are likely to be

subject to several restrictions. While the adoption of donor-
mandated, or donor-guided, investment policies and procedures and
financial administration and human resource standards can be
burdensome, they can also help a new organization begin to function
quickly and well. This can be particularly helpful in an environment
166
THE CASE OF KEHATI
where transparent and accountable institutions have not been the

norm.
Lesson: A knowledgeable, engaged Board of Trustees is critical for effective

endowment management
The Board of Trustees or its Executive Board must understand the

organization’s mission, have the time to devote to overseeing its
vision, and be able to contribute positively and actively to the
management of the endowment.
In KEHATI’s case, it was particularly important to have a commit-
ted core group of founders on its Executive Board. This group was
able to oversee the extensive negotiations required to implement the
establishment of the endowment and then be actively involved in
ensuring that the organization began functioning fast and well.
More recently, KEHATI has found it useful to have external
advice channeled through the medium of committees established by
the Executive Board. It has been particularly useful to have an active
and informed Investment Committee to attend to endowment growth
and assess the range of investment vehicles that the organization
might benefit from.
Lesson: Having endowment management skills among staff can be very

beneficial
An organization supported by an endowment requires staff with skills

in endowment management, including an understanding of security
markets, market trends, and investment options. This allows the
organization to respond appropriately to investment advice, including
noting when such advice is not timely or useful.
The novelty of endowment management in many countries means
that local capacity and expertise may be lacking. Specific attention to
such weaknesses can be prepared for at the outset of the organization’s
life by providing targeted technical assistance, using experienced
consultants for specific tasks, or arranging for mentoring.
The unique circumstances of establishing an organization with
funds from a foreign donor also means that it may be important for
some of its staff to have prior experience with bilateral funding agen-
167
cies and an understanding of these agencies’ policies and require-

ments in terms of grantmaking and organizational management.
Lesson: An endowment is only as strong as its investment policy
While an endowment can play a significant role in stabilizing annual

funding, an investment policy that encourages the growth and
strengthening of the endowment at the same time is an absolute
necessity. The fund’s investment strategy must be appropriately broad
in its portfolio mix and be able to access strong markets, whether they
are domestic or international.
Lesson: Ongoing fundraising is critical to help build sustainability
It is important to have a comprehensive and effective fundraising

program to ensure that the endowment continues to grow and in
order to secure the sustainability of the organization. And it is never
too early to put the fundraising plan in place. Fundraising should
anticipate whether local conditions support philanthropic donations
to the endowment or whether funding will have to be secured mainly
from other sources, such as foreign donors, and plan accordingly as
early as possible. In KEHATI’s case, a systematic fundraising drive
began rather late because in the first four years the foundation had a
limited absorptive capacity and more annual funds than it needed. In
addition, KEHATI was (and continues to be in many ways) up against
a domestic scene in which philanthropy for environmental causes is
very limited. At the same time, foreign donors have not been very
interested in contributing to the endowment (although they have
been willing to support KEHATI programs). Regardless, gradually
building an innovative fundraising plan therefore ensures the endow-
ment continues to be a viable source of long-term grantmaking
support.
Lesson: Changes should be anticipated as the organization matures and

evolves
It is expected that an organization will change over time. Senior staff

and board should anticipate re-adjustments, including those on how
the endowment is invested and applied. Although the early years of an
168
THE CASE OF KEHATI
organization’s life will undoubtedly emphasize organizational devel-

opment and refinement of the mission, new concerns will emerge as
it matures. This evolution is not something to avoid, but can instead
be a fruitful and positive experience if anticipated.
Lesson: An endowment’s purpose needs to be rooted in realities of the local

context
Organizations established with support from foreign aid agencies can

retain an aura of being a bilateral development project instead of a
homegrown organization. These organizations need to therefore
ensure that their programs reflect local needs, as KEHATI has done
through its grantmaking at the grassroots level and regional network
centers. In part, achieving this means communicating the right
message to the general public and private sector. KEHATI has found
that the concept of biodiversity has been a difficult sell, either because
the term is unfamiliar to most or because it seems to refer to complex
processes that are not felt to have much direct impact on peoples’
lives. KEHATI’s program work on community empowerment has
been part of its strategy to draw out the explicit links between human
actions and the environment in a way that is easier to communicate to
people. Indeed, if an organization’s mission is perceived as relevant, it
generates goodwill locally and nationally, thereby laying a strong base
for local fundraising and endowment growth.
Conclusion
While this case study of KEHATI demonstrates the importance of

not seeing an endowment as a panacea to all fundraising needs, it also
exemplifies the very positive assets an endowment affords.
Endowments provide organizations with time and flexibility, during
which period the staff can develop its programs and mission while
maintaining attention to ongoing fundraising and endowment
management. More importantly, donor-driven program funding can
be put aside in favor of grantmaking and programming that is thor-
oughly grounded in the genuine needs and requirements of commu-
nities.
169
Although KEHATI’s future depends in part on growing its endow-

ment successfully, its record of managing both its programs and
investments places the organization in a strong position from where it
can succeed at this task and continue to make a positive impact on
public awareness and community empowerment for biodiversity
conservation in Indonesia.
170
THE CASE OF KEHATI
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Interviews by Sarah Maxim
Personal interview with Ismid Hadad, Executive Director,

Indonesian Biodiversity Foundation, November 2001.
172
THE CASE OF KEHATI
Personal interview with Gustaaf Lumiu, Director of Finance and

Administration, Indonesian Biodiversity Foundation, February 2002.
Personal interview with Anida Haryatmo, Program Director; Julia

Kalmirah and Cliff Marlessy, senior program staff, Indonesian
Biodiversity Foundation, February 2002.
Personal interview with Wouter Sahanaya, USAID/Jakarta, March

2002.
Telephone interview with Jerry Bisson, USAID/Manila, March

2002.
E-mail interview with Dave Heesen, USAID/New Delhi, April

2002.
173
174
THE DIAN DESA FOUNDATION
Chapter Eight
Earned Income for Financial
Sustainability in Indonesia:
The Dian Desa Foundation
By Rustam Ibrahim
175
Introduction:
Indonesia’s Path Forward
A Time of Political and Economic Change
Over the past several years, Indonesia has experienced drastic changes
in its economic and political fields which have directly affected civil
society’s opportunity to bring about change in the country. In the
economic sector, Indonesia has been enduring a very serious mone-
tary and economic crisis that began in mid-1997. The crisis started
with the dramatic fall of the rupiah’s value against that of the US
dollar, falling from Rp 2,250 per US $1 to about Rp 10,500 per US $1
at the end of 2001. It suffered a drop of more than 350 percent within
a period of less than five years and, in early 2003, stands at about Rp
8,500 per US $1.
The crisis had a very serious impact on the lives of millions of
Indonesians. Between 1996 and 2001, the number of Indonesians
living below the poverty line increased from an already high figure of
22.5 million people, or 17 percent of the total population, to about 45
million people, some 25 percent of Indonesia’s total population in
2001. Open unemployment reached 6.2 million people during the
crisis; combined with the percentage of the population underem-
ployed, approximately 35 million people were seeking work at the
turn of the millennium.
In the political field, the fall in May 1998 of the military-backed
New Order regime under Suharto marked a turning point in the
country – one that began a transitional process toward democracy.
The basic freedoms of citizens, such as freedom of association, assem-
bly, and expression, were rehabilitated by the democratic government
formed in 1999.
176
Civil Society Takes Root
Indonesian civil society has been a part of this transition process in

many ways. Hundreds, even thousands, of new organizations have
come into existence since 1998. Moreover, a significant number have
been providing education on democracy and human rights. Others
have been asserting the right of citizens to participate in the decision-
making process, to fight corruption, and to struggle for law enforce-
ment. At the same time, Indonesian organizations have been provid-
ing food security, basic social services, job creation help, and other
assistance in income generation for the urban and rural poor.
Like many of these organizations, Dian Desa was established as a Similar to the organiza-
yayasan, which literatally translates into foundation in English. For tions that they assist,
many years, the legal requirements to establish a yayasan were mini- Indonesia’s foundations
mal, requiring only a notarized document listing the founders, struc-
obtain the greatest
ture, and composition of the board, location, and assets. Recognizing
portion of their funds
the lack of accountability that laws permitted within yayasan, the
Indonesian government drafted a new, stricter law governing yayasan from foreign sources
operations. It was issued in 2001 and allows existing organizations to
make adjustments within five years from the time of the act’s issuance
in order to meet these new standards of accountability.
Although there are many different kinds of yayasan now operating
in the country, most are quite small, with limited assets and little
capacity to manage endowments. In fact, a high dependence on exter-
nal sources for funding is one of the main challenges confronting local
NGOs and funding organizations alike. Similar to the organizations
that they assist, Indonesia’s foundations obtain the greatest portion of
their funds from foreign sources. A survey conducted of over 25 local
funding organizations in Indonesia in 2000 indicates that 65 percent
of their funds were obtained from overseas sources, namely official
development assistance agencies, international foundations, and
NGOs. Other funding sources were in the form of contracts with
government agencies and consultancy services, but this portion of
funds accounted for only 12 percent of revenues. Meanwhile, funding
sources in the form of endowments and contributions from the
private sector accounted for only 6 percent. The remaining 9 percent
was from other sources, including public donations (Ibrahim 2001).
The continuing decline of foreign aid promises to mount an even
177
greater challenge to Indonesian organizations seeking to sustain

themselves as well as their impact on critical societal issues.
Nevertheless, yayasan like Dian Desa are playing a critical role in
Indonesia. According to a survey conducted in 2000, some 25 indige-
nous foundations in the country disbursed about US $8 million in
grants and loans in that year alone (Ibrahim 2001). As this case study
will illuminate, Dian Desa’s work underscores the value of developing
indigenous organizations that reflect local needs and strategies but
that can also provide the financial and capacity building means to
strengthen civil society. Moreover, it exemplifies how a profit-gener-
ating business can reap positive social benefits at the same time.
Earned income opportunities like those pursued by Dian Desa now
demand greater attention and consideration.
Dian Desa’s Beginnings
In 1971, a small group of university students led by a young engi-

neering student, Anton Sudjarwo, went to live in the villages of
Mount Merapi, about 50 kilometers north of Yogyakarta, Indonesia.
The students were assigned by their university to engage in a commu-
nity service as a prerequisite to obtaining their university degrees.
The inhabitants of these villages were very poor. Water was a partic-
ularly scarce but critical need; villagers had to travel four kilometers
away just to take home about 20 liters of water. Over the course of the
year in which Anton and the other students worked with these
communities, they collectively succeeded in laying about 80 meters of
piping underground that allowed for villagers to access water for
consumption and irrigation. Approximately 8,500 people gained
access to regular clean water (Bhaskara 1989). The availability of clean
water made it possible for farmers in the villages to harvest rice twice
in a year. With the increase in income this brought, the villages were
transformed.
In 1972, Anton Sudjarwo formed Yayasan Dian Desa in order to
continue helping villages gain improved access to clean water. While
Dian Desa grew to establish support for other technologies in
communities, the organization believed that clean water access was
the basis for supporting other projects, like agriculture or animal
husbandry.
178
A second key philosophy behind the early days of Dian Desa was
the recognition that they needed to work with the villagers them-
selves. According to Anton, the Executive Director of Dian Desa,
“Our philosophy is partnership. Those who are willing to look for
ways to overcome their own problems can get our assistance through
‘appropriate technology’ (Ibid, p.184).” By appropriate technology,
Dian Desa refers to simple equipment that villagers are able to
produce, reproduce, and maintain by themselves using relatively small
funds. The production of appropriate technology most often occurs
between Dian Desa staff and community members in order to ensure
that it grows out of local capacities, knowledge, and needs. Thirty
years later, this philosophy remains a cornerstone of Dian Desa’s
work.
Today, Dian Desa has succeeded in becoming one of the largest
foundations in Indonesia with a staff of about 300 operating projects
all over Indonesia (see the back of this book for a profile of Dian
Desa’s mission). Headquartered in Yogyakarta with branch offices in
East Nusa Tenggara, Dian Desa currently runs six operational depart-
ments, as listed below. Various divisions support these departments,
including a metal workshop, multimedia, a library, and a survey and
analysis laboratory.
Water and Sanitation: This is Dian Desa’s oldest department and is
the trademark of the organization. Through its clean water and sani-
tation programs, Dian Desa works with local communities to plan and
implement clean water projects. Dian Desa provides expertise in
materials and their technological applications while community
members make available their land, labor, and local materials.
Waste Water Treatment: This department was established when
Dian Desa tried to find new technologies to remove skin wastes from
fish processing. Dian Desa has also developed waste treatment tech-
nologies for wastes from different industries, hospitals, and house-
holds. Currently, Dian Desa is building a water treatment technology
center with three years of assistance from the Japanese government.
The assistance includes funds for the construction of buildings,
complete with equipment and a laboratory, funds for seminars and
workshops, the establishment of a website, human resource develop-
ment, and funds for several pilot projects.
Cookstove: Since the early 1980s, Dian Desa has been developing
appropriate technologies based on the idea of using less energy than
179
other conventional methods. In particular, the organization has

concentrated on producing energy efficient cookstoves that produce
less smoke, are less costly, and can be produced easily in large
volumes.
Agriculture and Aquaculture: On the northern coasts of Java, Dian
Desa has been working with communities to overcome a dwindling
shrimp population. Together, they have established shrimp seedlings
that can turn out 3 million shrimp eggs monthly. With communities
in the coastal areas of East Nusa Tenggara, Dian Desa has developed
marine herb farming.
Small-Scale Industry: This department encourages and assists rural
1 Dian Desa does not have villagers with their entrepreneurial capabilities in the area of small
an official or separate
Board of Directors. The industries and handicraft businesses. Skills training and soft loans are
governance of the organi- provided.
zation is very much built
into its management.
In all cases, departments’ technologies reflect the philosophy of
According to Anton appropriate technology.
Sudjarwo, this is a prod-
uct of the organization’s
history that hasn’t evolved
over time. As an informal Exploring Earned Income Opportunities
organization started by
three university students
(Anton Sudjarwo, and Fifteen years ago, in an interview with the prominent Indonesian
Christina and Bambang journal Prisma, Anton Sudjarwo said that in order to survive in a
Purwanto), these became
the decision makers, along sustainable way, NGOs could not, and should not, depend merely on
with other managers hired donor organizations because such assistance would be reduced,
over time. On the initia-
tive of Anton Sudjarwo as
perhaps even terminated, sometime in the future. “In order to sustain
Executive Director, three organizations, we have to raise funds through our own undertakings.
national figures were
One way to do that is to produce and sell goods and services….If they
appointed to be advisory
members eventually. They can generate profits, such activities will reduce Dian Desa’s depend-
were Emil Salim, former ency on donor agencies, and can eventually help increase donors’
State Minister of
Population and confidence in Dian Desa,” says Anton. The Advisory Board of Dian
Environment, Koesnadi Desa supports income-generating projects as a way to maintain inde-
Hardjasumantri, and
pendence from foreign loans.1
Masri Singarimbun who
was then professor at Anton further explained that any business activities to be carried
Yogyakarta’s Gajah Mada out by Dian Desa should take into account two things. First, the activ-
University. In their advi-
sory capacity, they were ities should always be related to community development programs or
invited by Dian Desa staff the needs of target groups. Second, the activities should rely on the
to contribute their ideas
application of appropriate technology, which is the trademark of Dian
and perspectives in an
annual forum. Desa.
180
The Role of Marketing
The first income earning activity initiated by Dian Desa was the
processing of various agricultural commodities grown in communities
engaged in development cooperation projects with Dian Desa. Dian
Desa helped add value to the farmers by assisting in the marketing of
their commodities in the larger cities of Indonesia, including for
export. For example, in Ambarawa, Central Java, a coffee-producing
area, Dian Desa cooperated with coffee farmers. Indonesian coffee
farmers there used to sell coffee beans at very low and also highly fluc-
tuating prices. In order to attract higher and more stable prices, the
coffee beans needed to be ground though. Dian Desa introduced the Early experience taught
villages in this region to the idea of processing coffee beans and pack- Dian Desa that if it
aging coffee grounds as a post-harvest technology. Dian Desa assisted wished to be seriously
in the promotion and marketing of the final products.
involved in earned
In other regions of the country, Dian Desa helped farmers plant-
income activities, it could
ing kecipir bean trees to process the beans into a sauce similar to that
produced by processing soybeans. Dian Desa also tried to help find not be oriented merely to
markets for this product. the products turned out
While these projects have since ended, Dian Desa learned about – it needed to also
the importance of having sufficient knowledge amongst its staff on consider the require-
marketing from these experiences. Dian Desa’s staff found that with-
ments of competing in
out a strong background in the marketing of farm products, they
could not compete with large and highly competent traders. the marketplace
According to Anton Sudjarwo, who still actively manages the founda-
tion, these experiences taught Dian Desa that if it wished to be seri-
ously involved in earned income activities, it could not be oriented
merely to the products turned out, but also to the requirements of
competing in the marketplace. “We eventually became aware that
technology had been our area of expertise up until then, and that
marketing was something else entirely,” says Anton.
Turning Waste Into a Marketable Product
These initial undertakings in earned income as a means to attain

financial sustainability reached a higher level of success only in the
mid 1980s when Dian Desa succeeded in developing stingray skin
leather processing technology. This initiative, which we will now
181
focus on, began with a program coordinated by Dian Desa called the
Coastal Community Development Program. The program began in
1985 and was focused on working with fishermen living on the north
coast of Central Java. The program grew out of the sad and ironic fact
that while Indonesia is a country with thousands of large and small
islands providing rich marine ecosystems for several different species
of fish and other sea creatures, 70 percent of the country’s fishermen,
equivalent to 3.2 million people, lived below the poverty line in 1985.
Of all the country’s fishermen, 500,000 were then living on the north
coast of Central Java. Dian Desa’s program initially focused on shrimp
farming. It targeted shrimp farmers who were experiencing difficul-
ties obtaining shrimp eggs because they were sold at very high prices.
Dian Desa provided them with low-cost shrimp eggs under produc-
tion sharing arrangements.
Aryanto Sudjarwo, a senior staff member of Dian Desa under
Anton Sudjarwo, related how staff felt motivated to find additional
ways to help the fishermen. “We undertook small-scale studies to find
out what we could do for the fishermen. We identified what technical
and financial assistance they had received and from whom. Results
showed that they had often received financial assistance and fishing
equipment from the government and NGOs so their catch had
increased. Unfortunately, they had to face the reality that when their
catch increased, fish prices also dropped. Indeed, fishermen were so
poor that they often had to bequeath their debts to their siblings. We
tried to see which of their catch did not sell; it turned out to be shrimp
skin, jellyfish, marine herbs, and fish skins. It turned out that the fish-
ermen used the stingray fish meat and threw away its skin."
The Creation of Dian Mandala
Aryanto Sudjarwo had witnessed the trading of stingray skin-based

products in Bangkok. While he tried to identify makers of these prod-
ucts, he found that they kept their business strictly secret. Instead, he
observed the use and marketing of such products. “I found that
Thailand was the only country producing such items, meaning the
potential market to capture was still so large. Moreover, at that time
people were prohibited from making foods with reptile skin due to
mounting pressures from environmentalist groups to preserve reptile
populations. I concluded that fish skin could be a substitute for reptile
182
skin. Surprisingly, Thai fishermen bartered with other fishermen for

stingray skins that had been caught in Indonesian waters. They
managed to buy the stingray skin at very low prices. Eventually, I
asked myself why stingray skins were not processed in Indonesia."
Aryanto discussed this matter with Anton who supported setting
up an earned income strategy around the processing of stingray skins.
The fact that the organization saw this as an opportunity to earn
income to support Dian Desa’s other initiatives, however, made it
difficult to subsume the business within the foundation. Therefore,
staff founded another foundation in 1985 called Yayasan Dian
Mandala. Aryanto was appointed its Managing Director. According to
Aryanto, “We imagined that this foundation was like a wheel which
rotates. It can go up and down; it can succeed and fail. Also, it illus-
trates dynamism, trial, and error.”
Although the legal status of Dian Mandala is a foundation, it is
designed and operates as a business by its management. This means
its working approach is based on productivity objectives and is fully
oriented toward earning profits. Dian Mandala requires working
systems that are different from Dian Desa’s, including tight work
schedules, an orientation to product volumes and a more competitive
salary system.
Incorporating Dian Mandala under Dian Desa would have caused
salary distortions and upsets in the lower staffing echelons of the
latter, as some of the Dian Desa staff is remunerated at a relatively low
level in recognition of their willingness to volunteer some of their
services. Aryanto explains that on the whole, the level of salaries
received by Dian Mandala’s workers is relatively higher than in Dian
Desa, notably the salaries of those involved in production. They
receive labor insurance, which is fully in keeping with government
regulations on manpower. “Recruitment at Dian Mandala strongly
stresses certain expertise, while the recruitment of Dian Desa staff
takes into account one’s activist spirit and idealism,” Aryanto says.
While Dian Mandala was set up as a foundation, the idea of setting
it up as a limited liability company had been considered too. The
latter structure was not selected for three main reasons. First, at that
time it was relatively easy to establish a foundation; formation simply
required the presence of a notary in Yogyakarta. Establishing a limited
liability company was then far more difficult, requiring ratification
under the Ministry of Justice in Jakarta. This would have taken a long
183
time and demanded significant amounts of money for processing the

many bureaucratic hurdles involved. Second, in addition to the
opportunity to earn profits on selling processed stingray skins, this
business had the potential to generate social returns related to the
needs of poor fishermen. Third, this was viewed as a strategy to raise
funds for investment and working capital for Dian Desa and therefore
as an opportunity to reduce dependence on donor organizations in
the long run.
In addition, at the time of Dian Mandala’s incorporation there was
neither a law nor regulation determining whether or not a foundation
could be involved in purely economic activities; nor was there any
2 It was only in August of regulation stipulating how a foundation could apply its surpluses.2
2001 that the House of
Representatives passed
into law the Draft Law on Financing the Technology
Foundations (Law No. 16,
Year 2001). The law stipu-
lates, among other things, After the organization received its legal status, the next task was to
that any foundation can invent appropriate technologies for processing stingray skins into
establish business enter-
prises provided that its leather. In particular, the processing needed to address the fact that
stake in them does not the fibers of stingray skin tend to be very tough, making it difficult to
exceed 25 percent of its
soften. While the first five years were therefore very much a trial and
total assets (Article 7,
Section 2). This aims to error period, it was also rich in the innovation of inventing appropri-
support the foundation in ate technology, not only for processing raw materials but for making
achieving its purpose and
objectives. Any surpluses end products. For example, for sewing leathers special sewing
gained by the foundation machines were required because the needles of normal sewing
from its business under-
takings cannot be distrib-
machines would be broken easily if they were used with stingray skins.
uted to its founders, board This led Dian Mandala to reorganize itself into two main divisions,
of directors, or supervi- namely leather processing and leather production.
sory board members. The
founders or board of In the beginning, no donor agency was willing to provide Dian
directors of the founda- Desa with financial assistance for the items produced by Dian
tion are also not allowed
to serve on the board of
Mandala at its experimentation stage. Consequently, Dian Desa had
directors or board of to use its own funds as initial working capital for investments in tech-
commissioners of the nological development. This was made easier by the fact that, as
business enterprise
(Article 7, section 3). Anton Sudjarwo pointed out, Dian Desa was already allocating a
certain amount of money into research and development activities
because it was an organization founded on the development of appro-
priate technology.
During the trial and experimentation period, which covered
several years, Dian Mandala invested approximately US $125,000 in
research and development. The foundation’s revenues from earned
184
income activities in farm product sales, however, only reached approx-

imately US $250,000 in that same period.
Dian Desa was aware that no donor agencies would be willing to
provide financial assistance for Dian Mandala’s activities which were
still at the experimentation stage. But in 1990 when several end prod-
ucts, including wallets and handbags, began to be marketed, Dian
Desa officials decided to submit a project proposal to the Swiss
Agency for Development and Cooperation (SDC), an agency of the
Swiss government for international development assistance. Dian
Desa had been receiving support from SDC since 1988 under the
agency’s Block Grant Project.3 3 Under the Block Grant
Project, Dian Desa chan-
The proposal submitted by Dian Desa was to cover the funds neled funds received from
necessary to help Dian Mandala become a real business entity provid- SDC to a few local, small
NGOs for sustainable
ing long term sustainable income. It was proposed that this could be
income generating
done by improving Dian Mandala’s management systems and devel- programs. Dian Desa
oping an in-country marketing strategy. According to the 1997 Final administered, monitored,
evaluated, and submitted
Report to SDC there were three main targets which Dian Mandala financial and narrative
wanted to achieve with SDC’s assistance: reports to SDC. In effect,
Dian Desa acted as an
• improve the organization’s human resources capacity and intermediary organization
specifically its managerial capability that enabled SDC to
• develop an in-country marketing strategy and launch activity make grants to local
NGOs without having a
related to that strategy presence in Indonesia. In
• provide special working tools and machinery in order to be able addition, however, Dian
Desa provided these
to answer specific quality demands. NGOs with training,
After examining Dian Mandala’s technological capacity, inven- institutional capacity
building, and technologi-
tions, and products, SDC agreed to provide it with funds for a
cal support. For all this,
stingray skin processing project in 1991. Initially, SDC’s support was SDC provided Dian Desa
limited to research and development but in 1996 it was expanded in with an “administrative
fee” for its overhead costs,
order to increase the quality of ready-made goods for commercial use. which accounted for
In line with Dian Mandala’s desire to develop its managerial capa- about 10 percent of the
total funds channeled to
bilities, it hired a production manager in 1996 who had a leather
the foundation.
industry background and was able to manage the relatively large
personnel of Dian Mandala. The staff then also outlined a production
working system and financial system.
With support from SDC, Dian Mandala was able to purchase
additional machinery and tools in order to meet specific quality needs.
Additional machinery purchased included, among others, sewing
machines, leather cutting machines, and leather ovens for final drying
and spraying of the products.
185
Marketing the Products
Being aware of its weaknesses in marketing its products domestically,

Dian Mandala asked for assistance from Kenzo Hani in 1991, a
Japanese consultant. Hani was the previous chairman of the
Yogyakarta-Kyoto Sister City Arrangement who traveled both a lot
outside and within Indonesia. Moreover, he had extensive business
contacts. Kenzo met with Aryanto Sudjarwo at an exhibition and was
attracted by the leather items produced by Dian Mandala; this
prompted him to assist in their marketing.
Hani’s analysis was that Dian Mandala’s leather products were
unique and should be categorized as exotic products catering to
specific market segments, specifically higher income residents and
tourists. Accordingly, Hani recommended that Dian Mandala under-
take direct marketing through certain exclusive stores in tourist desti-
nation cities like Denpasar (Bali), Yogyakarta, and Jakarta. It was also
decided that a portion of processed leathers should not be developed
into final products but instead exported to countries like Japan, South
Korea, and European countries like Switzerland and France. The
ratio was 30 to 40 percent for exports and 60 to 70 percent for the
domestic market. (Admittedly, the buyers of the products on the
domestic market were mostly foreigners like tourists and business
people who later sold the items in foreign countries.)
For overseas promotion, Dian Desa received assistance from the
Indonesian government through the National Export Development
Agency. The agency sponsored many small and medium enterprises
to take part in various exhibitions. Based on a recommendation made
by the Association of Indonesian Handicrafts Industry, Dian Desa
took part in exhibitions in Japan, Switzerland, and Australia.
SDC’s financial assistance was very meaningful to the financial
development of Dian Mandala. In looking at a comparison of Dian
Mandala’s income from the sales of its products to its total expendi-
tures in 1996, the balance sheet was in the deficit position. “The story
would be different if the money all came from Dian Desa’s own pock-
ets,” according to Aryanto. It was only at the end of 2000 that Dian
Mandala recorded a real profit of approximately US $43,000 (Rp
434,500,000).
186
Creating Social Impact
The leather industry developed by Dian Mandala not only generated

profits but also benefited small fishermen who were clients of Dian
Desa’s programs. According to Aryanto, fishermen had for long been
discarding stingray skins as wastes. Even fishermen did not believe
that Dian Desa intended to buy them. It was only after the foundation
gave them a down payment that they believed it. Currently, Dian
Desa takes stingray skins from the north coast of Central Java and
East Java which allows them to produce 4,000 to 5,000 pieces of
leather monthly. Measuring 20 to 80 centimeters on average each, the
leathers are tanned at Dian Mandala’s workshops.
For the development of the leather tanning unit, Dian Desa
received assistance from AusAID to utilize fish waste and natural
cocoons for improving and creating job opportunities for poor
people. The AusAID assistance project, which lasted 18 months from
June 1999 to December 2000, aimed to assist poor people in rural
villages who were hardest hit by Indonesia’s economic crisis by creat-
ing income generating opportunities. Over its duration, the AusAID
project provided US $50,000 of support.
This project had two components. The first was training to
increase farmers’ skills in making fabric and high quality yarn from
silk cocoons. The second was financial assistance to Dian Desa to
conduct several activities for fishermen, namely providing training
and guidance for fishermen groups in urban and rural areas in the
north coast of Central and East Java to increase their knowledge of
stingray skin collection, pretreatment techniques, and preservation
(to in turn ensure a quality product for Dian Mandala to buy). No less
than 2,000 fishermen have attended such courses. The result is that
fish leathers, which had been worthless, are now generating income.
For example, 192 families of poor fishermen succeeded in earning
extra income by selling fish leathers. Extra income per family, based
on year 2000 data, reached US $400 annually. This is very significant
considering that the annual per capita income of poor fishermen in
Indonesia was only about US $450 in 2000 (Dian Desa, 2000).
AusAID also provided Dian Desa with assistance funds to buy
processed fish leathers from fishermen so that the foundation could
further process them under one of its two units – the fish leather
processing unit and the ready-for-use production unit. For the first
187
unit, AusAID provided funds for making tanning drums, dyeing

drums, and waste treatment systems. For the second unit, AusAID
provided the foundation with funds for buying heavy-duty sewing
machines. Training has also been held for young people from poor
families in urban areas. They are trained in fish leather tanning and
the production of ready-for-use items. Some of them have even been
recruited to work at Dian Mandala.
Grants from donors like SDC and AusAID have proven to be vital
funding sources for Dian Mandala’s working capital as it has never
borrowed from banks, individuals, or other institutions. Borrowing
money from banks would have required collateral that Dian Desa did
not have. Its legal status as a foundation has in fact been an obstacle
for borrowing.
The relationship between Dian Mandala and its customers was
maintained mainly through “cash and carry” methods. Customers
were obliged to pay in advance through banks designated by Dian
Mandala before products were sent to them. This of course required
an extraordinarily high level of confidence between Dian Mandala
and potential customers. Similarly, in purchasing goods, Dian
Mandala made cash payments. “This provides a new challenge for
Dian Mandala if it wishes to further advance,” Aryanto says. In the
future, borrowings from banks will be an option. Aryanto is aware
that borrowing from banks means Dian Mandala’s burden will
become even greater. “But, when production has become stronger
and the market has been guaranteed, it could be the right time for
Dian Mandala to borrow from banks and other parties. It is now time
to grow Dian Mandala. It now [owns] 0.75 hectares of land which can
be used as a new location for the leather industry as the present loca-
tion is too small.”
Additional Opportunities for Earned Income
While Dian Desa serves poor communities in largely rural areas of

Indonesia, within this population there are varying needs to address
and opportunities to harness. Dian Desa has tried to meet these vari-
ations with different support programs, not all of which use appropri-
ate technology. One of these programs is its micro finance and soft
loan program, aimed at fulfilling the needs of rural people requiring
access to working capital with relative ease and low cost methods. The
188
program, which began in 1995, provides low interest loans (below

market interest rates) for different groups and individuals involved in
small enterprises like small-scale farming, small industries, the craft
industry, cattle breeding, food stalls, small traders, etc.
The funds channeled to borrowers come from the “revolving
funds” set up in the block grant projects with SDC. These funds were
placed in Dian Desa’s bank accounts and now total US $400,000 (Rp
4 billion). The amount of loans made to an individual borrower aver-
age between US $100 and $3,000. Loans channeled to a group aver-
age between US $500 and $5000. By 2001, Dian Desa was serving no
fewer than 2,800 clients.
The interest earned by Dian Desa reached more than US $4,500
(Rp 45 million) per month, or US $54,000 per year. The amount was
enough to finance all of the organization’s operating and administra-
tive costs, as well as generate some profits. The earnings have been
placed in Dian Desa’s program accounts and are being used to
increase the organization’s available working capital.
Dian Desa’s fish leather business is now going to be followed up
on with the development of a silk making operation, as mentioned
previously. Silk fabrics are potentially profitable commodities but silk
weaving technology is not an industry commonly practiced. With the
assistance of AusAID, Dian Mandala has been able to introduce this
technology to farmers and craftsmen in East Nusa Tenggara, a
province already well-known for its traditional woven products.
These communities have been trained in silkworm raising technology
and silk yarn spinning for making fabrics. Dian Mandala has looked to
Japanese silk making industries for deriving its technology. In coop-
eration with an organization in Japan, Dian Mandala has been teach-
ing this Japanese weaving technology. At present, the products turned
out are still at the experimental level and include items like shawls,
scarves, and sweaters. As of yet, they have not reached sufficient
volume for contract sales. Dian Mandala hopes that, like its fish
leather business, its silk weaving operations will also generate profits
for the organization.
189
Allocating Earned Income
Profits earned by Dian Mandala are transferred to Dian Desa’s bank-

ing accounts and used to support other Dian Desa activities, notably
its experiments and pioneering programs such as those dealing with
waste treatment. Wastes produced from tanning leather require treat-
ment before being disposed but very few clean technologies exist to
do that in Indonesia. Upon testing the waste waters from this specific
production process, results demonstrated that the tanning waste water
could be used for farming various kinds of fish, if cleaned. Developing
waste treatment technologies has thus become a significant focus for
Dian Desa. It is not only handling its own production wastes but also
those produced from other industries and households. Surplus monies
earned on these technologies are invested in part in ongoing research
and development in order to increase its production capacity.
The surpluses gained by Dian Mandala are also being used for
improving the welfare of Dian Desa’s employees. As a private volun-
tary and nonprofit organization, it has been difficult to receive suffi-
cient funds from donors to fully cover the remuneration of Dian Desa
staff.
In addition to the core activities described, Dian Desa also applies
its earned income to running assistance in the following areas: help-
ing university students gain on-the-job training; assisting other
organizations involved in activities to help street children; and allo-
cating funds for emergency needs and charitable activities.
Lessons Learned
The experiences and challenges faced by Dian Desa demonstrate the

following six important lessons regarding earned income as a mecha-
nism to build financial sustainability:
Lesson: Perseverance and leadership are critical
It seems that any success can be achieved only through perseverance

and hard work over a long period of time in which considerable trial
and error is undertaken. According to Aryanto Sudjarwo, the first five
years of Dian Mandala’s existence were full of challenges. While
190
several are detailed below in the other lessons, the question of how to
invent appropriate technologies for processing fish leather was a very
difficult one. At that time, fish leather processing technology was not
yet known in Indonesia. Moreover, the technology could be found
only in Thailand, where it was held secretly. Dian Mandala had to
invent its own technologies, including required machinery for
production.
Lesson: Sufficient seed funding needs to be raised upfront
A second main challenge was related to the availability of funds that

could be used for initial investments and as working capital. As stated
by Aryanto Sudjarwo, it is quite difficult to imagine Dian Desa’s
success in carrying out earned income activities without assistance
from donor agencies. Tireless efforts were needed to produce good
proposals and convince donor agencies that the programs they
supported would be intended not only for the interest of Dian Desa
but also for poor people who had become the target groups for Dian
Desa’s programs. (Unfortunately, borrowing from banks in Indonesia
requires significant collateral which Dian Desa has not had.)
Dian Desa’s experience demonstrates that donor agencies can
provide significant assistance for the development of earned income
activities conducted by locally managed funding organizations. In the
case of Dian Desa, ODA agencies have made significant contributions
to research and development opportunities, especially for leather
tanning technology, waste treatment technology, and the invention of
machines for producing leather products. They have also assisted in
the provision of working capital for starting a micro credit program.
Lesson: Staff need to have marketing skills
A third main challenge was deciding on the market for Dian Desa’s
products and then how to penetrate those markets successfully.
Consumers already knew crocodile leathers and other reptile skins,
but they were not familiar with fish leather when Dian Desa first
introduced their products. Accordingly, a process for introducing fish
leather products was required. It took quite some time to convince the
targeted populations that using fish leather products was no less pres-
tigious than using products made of other leathers. In order to decide
191
and control the market segment, Dian Desa asked for help from a
Japanese consultant (with funds from SDC). As exotic leather of high
value, the product was marketed to medium and high earning buyers.
“The Mercedes car company could produce and sell low-priced cars
but if it does, it commits suicide. Similarly, we [Dian Desa] need to
have our own market segment,” remarked Anton Sudjarwo.
Lesson: The organization’s core competency must be applied
Dian Desa has always been consistent in carrying out its mission and
in maintaining its expertise, or core competencies. Since its inception,
Dian Desa’s philosophy has been to disseminate the application of
appropriate technology, work with communities on community
development activities, and support local earned income activities that
improve the economic conditions of the rural community. Earned
income activities carried out by Dian Desa have never been outside
the realm of the organization’s core competency.
Lesson: Know the community being served
A fifth factor behind its success is Dian Desa’s closeness to the

communities it has been serving, namely fishermen and other rural
poor. Dian Desa developed joint programs together with fishermen –
it collected fish leather from them and also trained them. This
encouraged trust to develop between the fishermen and the organiza-
tion, with the former developing great confidence in the foundation.
In carrying out its micro finance program, Dian Desa entered the
business world of the community that it wanted to serve, and studied
the details of existing businesses in the community. Behind these
achievements, Dian Desa has always strived to have at least adequate
knowledge about the social, economic, and cultural backgrounds of its
clients. Its prudence and care in selecting clients has also not been
removed from macro situations like Indonesia’s national banking
context.
Lesson: Recognize what the enabling environment will and will not allow
Finally, the experiences of Dian Desa illustrate that, depending on the

legal and economic policies in a country, organizations may have to
192
make certain decisions and follow certain rules and actions should
they desire to pursue an earned income strategy. Knowing full well
what this environment will and will not permit is critical to determin-
ing how one makes the most informed decisions possible.
Conclusion
With more than thirty years of experience, Dian Desa has become
accustomed to identifying technological solutions to poverty.
Inventing appropriate technologies has been its greatest contribution
to rural communities in Indonesia. As echoed by Aryanto Sudjarwo:
“In developing businesses, Dian Desa always begins with the logic of
seeing the experience of other people and learning from them. The
most important thing is willingness to try. In my opinion, this is the
essence of Dian Desa’s successes.”
193
References
Publications
Bhaskara, Harry. “Indonesia: Ending the Daily Water Chore” in

Against all Odds: Breaking the Poverty Trap (pp 168-171). London:
The Panos Institute, 1989.
Community Recovery Program. Progress Report: January – December

2000.
De Silva, Donatus, et al. Against all Odds: Breaking the Poverty Trap.
London: The Panos Institute, 1989.
Holloway, Richard. Menuju Kemandirian Keuangan: Buku Panduan

mengenai. Jakarta: Yayasan Obor, 2001.
Ibrahim, Rustam. National Directory of Civil Society Resource

Organizations: Indonesia. Series on Foundation Building in Southeast
Asia. New York: The Synergos Institute, 2001. Online at
www.synergos.org/globalphilanthropy/02/seasiacsrodirectories.htm
Prisma, No. 3, April 1978.
Prisma, No.4, April 1988.
Prisma, No. 4, May 1988.
194
Penggalangan Sumberdaya bagi Organisasi Masyarakat Sipil di Negara-

negara Selatan. Jakarta: Yayasan Obor. 2001.
Yayasan Dian Desa. Appropriate Technology Group Brochure.
Yayasan Dian Desa. Dian Desa-SDC Cooperation: Phase III (1996-

1997). Final Report. December 1997.
Yayasan Dian Desa. Pemanfaatan Limbah Perikanan & Kepompong

Alam: Program dengan Dukungan AusAID untuk Peningkatan
Pendapatan dan Penciptaan Lapangan Kerja Produktif. Final Report.
December 2000.
Yayasan Dian Desa. Utilization of Fish Skin Waste and Natural

Cocoons: Final Report. Program supported by AusAID for “Raising
Income and Creating Productive Employment Opportunities.”
December 2000.
Interviews
Personal interview with Aryanto Sudjarwo, Managing Director,

Dian Mandala Foundation. November 2001.
195
196
AUTHOR BIOGRAPHIES
Author Biographies
197
Natasha Amott
Natasha Amott is an Associate with The Synergos Institute, where her

work focuses on supporting existing and emerging foundations in
Indonesia, the Philippines and Thailand. She is also a consultant at
the Ford Foundation.
Ms. Amott holds a BA in Anthropology from McGill University
and an MA in Environmental Studies from the University of Toronto.
In between her two degrees, she was a teacher for one year in Pusan,
South Korea. In her graduate and post-graduate work, Ms. Amott
worked in northern China on a socio-economic study of land
management issues funded by the Canadian International
Development Agency.
Following her master's work, she worked for a nonprofit organi-
zation in Toronto, first as Outreach Coordinator and then as Project
Manager, where she was responsible for fundraising, strategic devel-
opment and project administration. She has also acted as
Development Coordinator for the University of Toronto and has
been a member of several task forces and steering committees in the
areas of poverty relief, youth empowerment and environmental
improvement. Prior to joining Synergos, Ms. Amott was a Research
Associate with the Center for the Study of Philanthropy at the
Graduate Center of the City University of New York.
Ernesto D. Garilao
Ernesto D. Garilao is a Professor and former Associate Dean of the

Center for Development Management of the Asian Institute of
Management in Manila. He specializes in managing state-civil society
relations, institutional development, social marketing, state reforms,
management of change, and conflict resolution and mediation.
Prior to joining the Institute, Prof. Garilao was the Executive
Director of PBSP. He served as Secretary of the Department of
Agrarian Reform and as Vice-Chairperson of the Social Reform
Council, then the highest policymaking body for the Government of
the Philippines’ anti-poverty program. Presently, he is the Chairman
of the Philippine Development Assistance Program, President of
Bahay ni Angelo King Foundation, Senior Executive Officer of the
198
AUTHOR BIOGRAPHIES
Assisi Development Foundation, and is on the boards of Kabang

Kalikasan ng Pilipinas, Kennedy School of Government Alumni
Foundation, Philippine National Police Foundation, and a member of
the International Advisory Council of the Eisenhower Fellowships.
Prof. Garilao holds a Master in Public Administration from the
Kennedy School of Government, Harvard University (1988), a
Master in Management (with Distinction) from the Asian Institute of
Management (1982), and a Bachelor of Arts in Behavioral Science
from Ateneo de Manila University (1968).
Eugenio M. Gonzales
Eugenio M. Gonzales is an Industrial Engineer with 22 years of expe-

rience in strategic planning, project development and management,
institutional development, and policy analysis. He has participated
extensively in the design and implementation of four grantmaking
mechanisms that have provided over US $18 million to more than
1,000 Philippine non-governmental organizations and people’s
organizations in the last fourteen years. His work has covered entire
project cycles, from design to appraisal, management, monitoring,
and evaluation.
As Executive Director of the Foundation for a Sustainable Society,
Inc. between 1996 and 2002, and as a free-lance consultant now, Mr.
Gonzales has spent the last six years providing technical and financial
assistance to small and medium enterprises that are community-based
and environment-friendly. Mr. Gonzales is a Synergos Senior Fellow.
Before working in civil society, Mr. Gonzales taught for six years
in the Department of Industrial Engineering and Operations
Research at the University of the Philippines in Diliman. Concurrent
with his academic involvement, he was a consultant and lecturer in
various projects and training courses at the National Engineering
Center, the Institute for Small-Scale Industries, and the College of
Social Work and Community Development, all at the University of
the Philippines. Mr. Gonzales lectured on Project Feasibility Analysis,
Methods Engineering, Industrial Organization and Management,
Industrial Quality Control, Industrial Statistics, and Rapid Rural
Systems Appraisal.
199
In 1991, as one of its founding board members, Mr. Gonzales

helped organize the Caucus of Development NGO Networks, the
largest coalition of NGOs in the Philippines. Mr. Gonzales interacts
with and submits policy recommendations to cabinet-level policy-
makers. He also participates in policy discussions with the heads and
officers of bilateral and multilateral development agencies as well as
international organizations.
Ismid Hadad
Ismid Hadad is the Executive Director of KEHATI, the Indonesian

Biodiversity Foundation, and a founding member of the organization.
He currently serves on the Executive Board of the Indonesian Eco-
labeling Institute, the Indonesian Foundation for Sustainable
Development, and the Indonesian Institute for Energy Economics,
three of the leading environmental and developmental NGOs in
Indonesia. He also serves as chair of the national steering committee
for the international Leadership in Environment and Development
(LEAD) Indonesia Program. Mr. Hadad is a Synergos Senior Fellow.
Mr. Hadad is an economist and institutional development expert
with over 25 years of professional experience in the areas of gover-
nance, social communication, capacity building, and environmental
management. Before working with environmental NGOs he spent 16
years in the private sector where he was President and Managing
Director of two leading private consulting companies in Indonesia
providing policy advice and expert consultancy services to private
corporations, government agencies, and international donor & devel-
opment institutions. He was among the leaders in the first generation
of development-oriented NGOs in Indonesia in the early 1970s.
Mr. Hadad holds a BA in Economics from Christian University of
Indonesia in Jakarta and an MPA from the John F. Kennedy School of
Government at Harvard University. He is a Fellow of the Woodrow
Wilson School of Public and International Affairs at Princeton
University and has received professional training at the Institute of
Journalism in Berlin, the East West Center in Hawaii, and through
the Eisenhower Exchange Fellowship Program in Philadelphia.
200
AUTHOR BIOGRAPHIES
Rustam Ibrahim
Rustam Ibrahim started his career in the nonprofit sector at Lembaga

Penelitian, Pendidikan dan Penerangan Ekonomi dan Sosial (LP3ES
– Institute for Economic and Social Research, Education, and
Information) in Jakarta, Indonesia in 1976 as an editorial staff of
Prisma, a journal of social and economic affairs published by LP3ES.
He then held various positions in the organization including
Executive Director (1993 to 1999), Senior Advisor (1999 to 2000),
and Senior Research Associate (2000 to now). He also acts as an inde-
pendent consultant.
He is one of the founders of the Center for the Study of
Democracy, housed in LP3ES, and YAPPIKA (Yayasan
Pengembangan Partisipasi, Inisiatif dan Kemitraan Masyarakat
Indonesia). From 1998 to the present, he has been Board Chairman.
Mr. Ibrahim is a prolific writer and editor on the growing civil
society sector in Indonesia. Publications include: The Indonesian
NGO Agenda Towards the Year 2000 (1994), The New Order
Political Format: Reconsidered (1997), Strategy to Build Civil Society
(1999), The Directory of Civil Society Resource Organizations in
Indonesia (2000). He has also written several articles for Indonesian
newspapers on the subjects of democracy and civil society. As a
consultant, he has conducted evaluations, case studies, and facilitated
public consultations for the World Bank and the Department for
International Development of the United Kingdom.
Mr. Ibrahim holds a degree in Political Science and acquired his
postgraduate diploma on Rural Policy from the Institute of Social
Studies in The Hague, Netherlands (1984).
Consuelo Katrina A. Lopa
Ms. Lopa is currently doing freelance research and writing. She was
Project Coordinator of a Philippine non-governmental organization,
the Gaston Z. Ortigas Peace Institute, working on the Project on the
Legacies of the Marcos Dictatorship from 1999 to 2002. Prior to
working on the Legacies Project, Ms. Lopa was Coordinator of
Philippine Development NGOs for International Concerns
(PHILINK), from August 1990 to June 2000. PHILINK’s programs
201
included information networking, dissemination, organizing of study

tours, and database management on Philippine development. Ms.
Lopa remains actively involved in PHILINK as an Adviser.
While working with PHILINK, Ms. Lopa was also a Consultant
with the Caucus of Development NGO Networks (CODE-NGO)
from April 1996 to April 1999. In that capacity, she had a special focus
on the International Solidarity & Development Finance Advocacy
Programs. This included liaison and advocacy work with international
civil society organizations and multi-lateral, bi-lateral, and regional
development organizations. The programs also looked at facilitating
the organization of NGO-managed funding mechanisms.
Ms. Lopa is a member of various civic organizations and serves on
the board of various development NGOs. She has a Bachelor of Arts
in Interdisciplinary Studies from the Ateneo de Manila University,
Metro Manila, Philippines (1983). Her course work focused on Asian
philosophies, history, and literature.
Sarah Maxim
Sarah Maxim graduated from Yale University with a BA in Southeast

Asian Studies in 1982. She completed her graduate work at Cornell
University, where her PhD was in the field of Southeast Asian
History, with a minor in comparative politics focusing on Indonesia.
Between 1992 and 2003, she lived in Indonesia. For several years
during this time she worked as a program director and consultant for
Indonesian and international civil society organizations focused on
environmental and democratization issues. In 2003, she became Vice-
Chair of the Center for Southeast Asian Studies at University of
California-Berkeley. She is fluent in English and Indonesian.
Suzanty Sitorus
Suzanty Sitorus, has been with KEHATI since 1998 working mainly
in the areas of public awareness, public relations, and recently on the
mobilization of resources both from domestic and international
sources. She has an MA in Mass Communication/Journalism from
Charles Sturt University, Australia and currently is pursuing an
202
AUTHOR BIOGRAPHIES
MPhil/PhD degree from the School of Development Studies,

University of East Anglia, Norwich, UK.
Gary Suwannarat
Gary Suwannarat has several decades of experience in promoting the

development of Thai civil society through positions she has held in
both the foundation world and in development assistance agencies.
An American citizen, she currently resides in Chiangmai, Thailand,
and consults on social policy issues.
Gil R. Tuparan
Gil R. Tuparan, also from the Philippines, is currently a Director of

the Center for Advancement of Societal Transformation, an NGO
engaged in the promotion of public administration and program
management in basic sectors (including indigenous peoples, urban
poor and rural development). He also conducts freelance writing for
the Asian Institute of Management.
Mr. Tuparan has served as Bureau Director in Philippine govern-
ment agencies for agrarian reform and rural development as well as in
various agribusiness and management consulting firms. He holds a
Bachelor of Science in Agriculture from the University of the
Philippines at Los Banos (1979).
David Winder
David Winder is Director, Country Programs of The Synergos

Institute. At Synergos, Dr. Winder has developed a foundation build-
ing program that provides technical assistance to grantmaking foun-
dations, associations of foundations, and philanthropy support centers
in Latin America, Southeast Asia and Southern Africa.
Prior to joining Synergos in 1993, he was a mid-career Fellow at
St. Antony’s College, at Oxford University, conducting research on
the role of non-governmental organizations in Mexico. Dr. Winder
worked with the Ford Foundation for over a decade, as the Ford
203
Foundation Representative for Mexico and Central America and

subsequently Southeast Asia (1987-1992). In these positions he
expanded the size and scope of the Foundation’s programs developing
new areas of work in human rights, civil society strengthening, inter-
national affairs and rural and urban poverty.
Dr. Winder has been affiliated with numerous NGOs, boards of
directors and committees, including: WINGS, IMAG, Global Kids,
Oxfam UK and St. Antony’s College North American Trust. His
extensive list of publications includes research on community devel-
opment, the role of foundations, local philanthropy and NGOs and a
sourcebook on foundation-building, edited and co-authored with
other Synergos staff.
Dr. Winder holds a PhD and a Masters in Education in commu-
nity development from the University of Manchester, UK.
204
PROFILES OF FOUNDATIONS IN CASE STUDIES
Profiles of Foundations
in Case Studies
205
Jaime V. Ongpin Foundation, Inc.
In establishing the Benguetcorp Foundation, Inc. in 1980, the late

Jaime V. Ongpin, the first Filipino president of BC, envisioned “the
development of self-reliant communities in the countryside.” Towards
this vision, he created a corporate social arm that would promote the
welfare of BC employees and their dependents and the residents
living near the company’s mining and other operations.
More than 20 years later and a change in name in 1987 to honor
its founder, the Jaime V. Ongpin Foundation, Inc. is a private, non-
stock, nonprofit organization based in Baguio City and registered
with the Securities and Exchange Commission and the Bureau of
Internal Revenue. The Department of Science & Technology accred-
ited JVOFI from 1980 to 2001. In 2001, the Philippine Council for
NGO Certification certified the institution, and the Internal Revenue
gave it a five-year donee institution status. Its bylaws were amended
in 2002 to be consistent with its character as a social development
foundation. It sits on the board of the Association of Foundations
representing the Luzon network as well as the board of the Cordillera
Network of Development NGOs and POs (people’s organizations). It
is also a member of the Council on Foundations in the United States
and Microcredit Council of Practitioners. It is also accredited with the
US Agency for International Development (USAID).
Since 1995, the organization has stated its vision and mission as
follows:
Vision: JVOFI shall be the leading institution in the formation of

self-reliant communities capable of harnessing resources for
equitable development.
Mission: Guided by the principle of holistic development and
206
with utmost concern for the environment, the foundation shall

uplift the sense of dignity of the Filipino communities it serves.
Since 1999, the foundation’s goals have been to:

• enhance the capability of client communities to implement,
manage and sustain projects
• enable communities to develop and conserve their ecological
resources
• enhance the capability of the foundation to pursue its mandate.
Four core programs are pursued in this regard: Ecological
Enhancement, Enterprise Development, Internal Capacity Building,
and Resource Generation and Management.
For more information, visit www.mozcom.com/~jvofi/.
207
KEHATI
The Indonesian Biodiversity Foundation
In January 1994, a group of prominent Indonesians founded Yayasan

Keanekaragaman Hayati Indonesia (KEHATI), translated in English
to mean the Indonesian Biodiversity Foundation. KEHATI’s mission
is to promote the conservation of biological diversity in the country.
KEHATI was established with an initial endowment of US $16.5
million, provided as a grant by the United States Agency for
International Development (USAID). This endowment was set up
under terms outlined through a Cooperative Agreement between
KEHATI and USAID to be in effect for a period of ten years, from
1995 to 2005.
As outlined in its Articles of Association and Bylaws 1995,
KEHATI’s objectives are to:
• strive for the conservation of natural resources including the
biodiversity thereof comprising among others the diversity of
ecosystems, species and genetics, whether nationally, regionally
and internationally.
• strive for the emergence of policies, programs and efforts for
the conservation, utilization, management, study and develop-
ment of biological resources [and their diversity in Indonesia].
• initiate and promote national, regional and international coop-
eration among non-governmental organizations, scientific,
research and educational institutions, the business community
and governmental agencies to achieve the purposes and objec-
tives of the Foundation.
·• foster and improve the capabilities of society and its institu-
tions to play an active role in efforts for the conservation and
utilization of biodiversity in a fair, equitable and sustainable
manner.
208
• provide contributions to charitable, educational and other

scientific organizations that have the same or similar purposes
and objectives as the Foundation.
For more information, visit www.kehati.or.id.
209
Dian Desa
Based in Yogyakarta on the island of Java, Dian Desa is one of

Indonesia’s largest foundations with a staff of more than 300 people.
Translated into English, Dian Desa means “light of the village.” Its
name underscores the organization’s belief that its role is to work with
people to create a means to lead a better life. Staff often say their
purpose is to help people help themselves.
Since its establishment in 1972, Dian Desa’s philosophy has been
to spread the use of “appropriate technology” to improve living
conditions among poor communities in Indonesia. Working as a cata-
lyst, Dian Desa introduces technological ideas that are relatively
simple and draw on local capacities and knowledge to rural commu-
nities. Making the technology “appropriate” implies that it can be
maintained, refined, and spread by community members themselves.
This means that community members are involved from the begin-
ning and work closely with Dian Desa technicians in the planning and
implementation stages of a project. Dian Desa’s guidance and support
fosters self-confidence within communities to help them meet their
most basic needs while seeking new economic opportunities at the
same time.
Over the past few years, Dian Desa’s earned income activities have
accounted for 35 to 40 percent of the organization’s total annual
budget, itself approximately US $1.3 to $1.4 million.
210
ABOUT SYNERGOS
About Synergos
211
Bridging Social and Economic Divides to Reduce Poverty
The Synergos Institute is an independent nonprofit organization

whose mission is to develop effective, sustainable and locally based
solutions to poverty.
Our foundation building services build and strengthen community
foundations around the world. Synergos has played a critical role in
the formation of over a dozen such foundations, fostering a local
culture of philanthropy, and today provides capacity building services
to over 200 foundations, philanthropic support organizations and
social investment groups in Africa, Asia and Latin America, as well as
more limited services globally.
Synergos’ Senior Fellows are a key part of this work. The Fellows
are a global peer learning and practice network of 50 leading profes-
sionals from the field of organized philanthropy that provides on-site
peer consulting and other services to community foundations. Senior
Fellows come from around the world but especially represent experi-
ence in foundation building from Africa, Asia and Latin America.
Through the Global Philanthropists Circle, we bring leading phil-
anthropic families together to deepen the impact of their social
investments. The Circle is composed of 50 philanthropic families
from over a dozen countries in all regions of the world that convene
globally to learn from each other. Members also visit each other's
countries to gain in-depth knowledge of national initiatives in social
and economic development and strategic philanthropy. A powerful
aspect of this network is its intergenerational nature.
In Africa, Asia and Latin America, Synergos is working to bridge
divides between business, government, civil society, and communities.
We link foundations and philanthropists to these initiatives to create
broader partnerships to address issues such as community develop-
ment, the prevention of HIV/AIDS, and the inclusion of indigenous
peoples.
Synergos was established in 1986. Based in New York with a staff
of 35 drawn from 11 countries and with offices in Rio de Janeiro,
Manila, Capetown, and San Diego, California, we are supported by
private foundations, corporations, international agencies and individ-
ual contributors.
For more information, visit www.synergos.org
212
ABOUT SYNERGOS
Board of Directors
Wanda Engel Aduan

Regional Dialogue Division, Inter-American Development Bank
Valentin von Arnim

Corporate Treasury, Goldman, Sachs & Co.
Bill Bohnett
Partner, Fulbright & Jaworski LLP
Alan Detheridge
Vice President, External Affairs, Exploration & Production,
Shell International Limited
Lance Dublin
President and CEO, Lance Dublin Consulting
Peggy Dulany
Chair, The Synergos Institute
John Michael Forgách

McCluskey Fellow, Yale School of Forestry and
Environmental Studies
Juliette Gimon
Flora Family Foundation
Dorian S. Goldman
President and Trustee, Irving Goldman Foundation
Nadine B. Hack
President,
beCause Global Consulting
Brian Henderson
Vice Chairman, Merrill Lynch Europe Middle East and Africa,
Merrill Lynch
213
Nilufar Hossain
Family Care International
H. Peter Karoff
Chairman and Founder, The Philanthropic Initiative, Inc.
Maria Elena Lagomasino

Chairman & CEO, JPMorgan Private Bank, J.P. Morgan Chase & Co
Cornelio Marchán
President, Esquel Foundation – Ecuador
Marcos Augusto de Moraes

President, Empreendimentos e Participações B4 S.A.
Lucia Moreira-Salles
Riovoluntairo
Kim Samuel Johnson

Director, The Samuel Group of Companies
S. Bruce Schearer
President, The Synergos Institute
Tokyo Sexwale
Executive Chairman, Mvelaphanda Holdings
Adele S. Simmons
Vice Chair, Chicago Metropolis 2020
James Sligar
Partner, Milbank, Tweed, Hadley & McCloy
Michael W. Sonnenfeldt
Managing Member, MUUS & Company, LLC
214
215
216
The Synergos Institute
endowments
How can foundations in Southeast Asia increase their financial financial sustainability
viability and in turn meet their critical missions to alleviate
poverty, conserve natural resources, and create social change?
How can international funders and aid agencies contribute to
Thailand
increasing resource flows to local foundations in the region?
What are the benefits of such partnerships? earned income
The case studies and perspectives collected in this book set out
to provide answers to these questions as well as to spark dia- official development assistance
logue on what are sometimes contentious issues. The authors
speak to the dynamics of the foundation movement in
Indonesia, the Philippines, and Thailand; the historical rela- debt swaps
tionships between international aid agencies and local founda-
tions in these countries and future possibilities to enhance such Indonesia
relationships; and the opportunities to mobilize funding for
long-term development.
This book will be of value and interest to foundation profes-

sionals, international donors, policymakers, and all who are
Financing corporate philanthropy
interested in understanding the complex dynamics of financing

development in Southeast Asia and other regions of the world.
Development social investment
in Southeast Asia civil society
Synergos Opportunities for the Philippines
Collaboration
The Synergos Institute Southeast Asia Regional Office
Main Office Rm. 207 - Center for Social Policy & Public Affairs
foundations
and Sustainability
9 East 69th Street Social Development Complex
New York, NY 10021 USA Ateneo de Manila University
Tel +1 (212) 517-4900 Loyola Heights, Quezon City 1108
Fax +1 (212) 517-4815 The Philippines
synergos@synergos.org Tel +63 (2) 426-6001ext 4647 grantmaking
www.synergos.org Fax +63 (2) 426-5999
www.globalphilanthropy.info gvelasco@synergos.org
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The Synergos Institute

This book will be of value and interest to foundation profes-

interested in understanding the complex dynamics of financing

Produced by The Synergos Institute with support

Permission is given to copy and/or distribute material from book in

Excerpted from Financing Development in Southeast Asia:

Synergos reserves the right to revoke such permission to copy and/or

Commercial use or reproduction of any part of this book is prohibited

Book design and typesetting by John Tomlinson. Printed in the

1 Introduction: The Quest for Financial

2 Options for Financial Sustainability: Collaboration Between

3 Unfinished Business: ODA-Civil Society Partnerships

4 The Rise of Philippine NGOs in Managing Development

5 Building and Managing Endowments: Lessons from

6 Corporate Resources for Local Development in the

7 Building an Endowment for Biodiversity Conservation

8 Earned Income for Financial Sustainability in Indonesia:

Author Biographies 197

Profiles of Foundations in Case Studies 205

About Synergos 211

AusAID Australian Agency for International Development

As a native and resident of Southeast Asia, I am proud of my heritage.

This book represents the culmination of many of these efforts and

Foundations in Southeast Asia

Slowly, a portrait of Southeast Asia’s organized philanthropic sector is

Within this context, this volume explores a range of strategies for

Chapter Four, by Consuelo Katrina A. Lopa, explores the rise of

falling in the region, there may still be a range of opportunities for

1. Foundations as Effective Bridging Institutions communities and finan-

sustaining and long-term domestic funding resource for development

US $5 million in market value between 2000 and 2002. This experi-

3. Collaborating with Official Development Assistance

As argued by Winder in Chapter Two, in recent efforts to increase the

It is critical to ensure, however, that foundations have sufficient

4. Earned Income Potential

Clearly, foundations that receive funds from a single donor, especially

must be made in order to identify an important market niche in which

A number of the chapters implicitly draw attention to the fact that

in the region, are influenced by a range of considerations, only some

Finally, in as much as foundations – and the NGOs they support –

risks along the way, as the chapters within demonstrate. Ultimately,

Association of Foundations and The Synergos Institute. National

Center for Philanthropy and Civil Society and The Synergos

Gaberman, Barry D. A Primer for Endowment Grantmakers:

Ibrahim, Rustam. National Directory of Civil Society Resource

International Institute for Environment and Development (IIED).

Kingman, Andrew. “Grantmaking At A Distance: What Role for

McCarthy, Paul. A Thousand Flowers Blooming: Indonesian Civil Society

Morales, Jr. Horacio R. “Earning Income Through Trade and

Schearer, S. Bruce. “Building Indigenous Foundations That Support

In their recent efforts to increase the impact of bilateral aid on

Three Policy Options

The collaborative processes between ODA agencies and civil society

Option 1 – Creation of a Small Grants Program Managed by the

This is the most common approach used to channel ODA funds to

mechanisms for consultation with civil society representatives on the

Option 2 – Creation of an NGO-managed funding mechanism

Under this option, a development assistance program is implemented

Community Enterprise Development, Inc. – now Community Arts

Option 3 – Creation of an Independent, Endowed Organization

Under this option, a donor government decides to negotiate the

Case Studies of Policy Option 1

Case 1A: Grant Assistance for Grassroots Projects in the

conservation, and on issues particular to Mindanao in the southern