International Law

Three ways for your business to be implicated by the new Indonesian freedom of information law

I discussed this in detail, in my recent op-ed.

Business implications of the freedom of information law

Mohamad Mova Al Afghani, Dundee, UK | Mon, 04/26/2010 9:02 AM | Opinion

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The entry into force of the Freedom of Information (FoI) Law in Indonesia will have significant impact not only on government operation but also business. Business could either benefit, or in another circumstances, be harmed, by information disclosure through the FoI regime.

FoI?s initial intention is in creating transparency of government. The reasoning was mainly political, that is, that transparency is one of the central prerequisits of democracy. Recent findings in the economics of information added the justifications for transparency.

The transparency framework may help reduce the risk of market failure by lowering information asymmetry between market actors. Development in the economics of corruption also strengthened the arguments for transparency.

Transparency, the research suggests, not only increases the likelihood of corruption detection but also the cost for the perpetrators to conceal their corruption, thereby deterring them from corrupt behavior.

Business can benefit from FoI. Information behind allegedly unfair tenders, project opportunities or government policies that otherwise cannot be obtained unless a person has a close connection to government officials can now be retrieved through formal procedures.

Thus, FoI, to a certain extent, can contribute to the creation of a level playing field between businesses, which is crucial for efficient market competition to exist.

However, FoI could also mean that businesses are more exposed than before.

Government was the central theme for every FoI regime around the world. But today, this is not entirely true. The spread of the ?new public management ideology? gave way to public-private partnership, private finance initiative, outsourcing and other arrangements involving the participation of the private sector in public services. Thus, if in the past it is the state and its government who holds real power ? and therefore must be held accountable ? today, in many respects, it is the private sector that does.

Hence, the focus of FoI around the world is shifting, not only scrutinizing the state and its government as it were in the past, but also the private sector.

There are three ways in which business information can be revealed through the Indonesian FoI. First, is through the definition of the ?public body?, second is through submission to government agencies and third, through a contractual relation with the government.

In other countries, the FoI holds the private sector accountable through several legislative techniques. One of the techniques refrain from defining ?public bodies? (entities in which the FoI regime would be applicable) in the FoI Act, but provide it through a list in a secondary or tertiary legislation instead. Corporations which deal with the government in public services could be included in the list.

With this technique, it is much easier to modify the list according to the needs. For example, if tomorrow a water company is privatized, the government can include the company into the list for a period of time as long as they engage in public services.

Our FoI does not follow such scheme but chooses to define ?public bodies? instead. Under the FoI law ?public bodies? are defined, as either a government entity or other entities in which its primary task is related to the management of the state and is funded through the state or regional budgets or, an NGO receiving full or partial amounts of the state budget, public contribution or foreign funds. It is clear that state owned enterprises is a public body for the purpose of the FoI.

What is not really clear is the definition of NGOs under the last category. Since there is no requirement that restricts the understanding of an NGO to a non-profit entity, business entities can also be defined as ?non-governmental?.

Other than being defined as a ?public body? as discussed above, there are two other ways for a business to fall under an FoI regime. The second is through government contracts.

The FoI law mandates that any contracts between the government and a third party should be published. ?Contracts with third parties? is a broad formulation.

So far, there is no clarity if all details of a contract including its annexes should also be published, although one could argue that the exemption clauses could apply.

Third is through the submission of reports to government agencies. Businesses regularly submit compliance reports. As soon as the data is transferred to the government, the information will fall under the FoI regime.

The government agents will be obliged to disclose any information after a request is made, unless the exemption clause under the FoI law applies.

Data with such environmental information can generally be disclosed, while data related to company financials submitted to capital market supervisory agencies or the tax office can be exempted by other legislation.

It is important to note however, that this exemption is not absolute. This data can still be disclosed if there is public interest.

The protection given to businesses under the FoI law is not clear, so far. In other countries, there is generally, an exemption clause for ?commercial information?.

This type of clause protects all sorts of commercial interests which may be harmed through FoI disclosure.

Some FoI legislations around the world also impose an obligation on public bodies to consult third parties that are affected before a disclosure is made, and create a legal standing for them in disclosure cases before information commissions or the courts.

In common law jurisdictions, normally there is a clause in its FoIs, exempting information provided ?in confidence? from disclosure. This is the sort of information submitted to public bodies on a trust-basis, such as those protecting the relation between a lawyer and its clients or a doctor with its patient, or a company with a regulator. Our FoI does not have these kinds of exemptions.

Our FoI law does contain a clause which protects information related to intellectual property rights and information in which disclosure would undermine ?fair business competition?.

For the business society however, this clause can be vague. Most intellectual property rights (IPR) such as patents and copyrights follow transparency principles. Only a minority of the IPRs such as trade secrets are designed to thrive under an opaque environment.

The prevention of disclosure for the purpose of protecting ?fair business competition? can be founded in theory, but may be difficult in practice. It is difficult to be practiced because it requires public bodies and information commissions to evaluate if a certain disclosure will distort competition.

Such case may require the determination of market segments where such information is the commodity. I am not confident that public bodies, information commissions and the courts are up to the task.

Due to these vague clauses under the FoI law, the guidelines and implementing regulation by which these clauses are to be interpreted and applied, must be drafted openly with a participatory approach, taking into account the views of the civil society and the business community altogether.

The writer is the founder of the Center for Law Information.

Full post as published by Indonesian Law Reporter (ILR) on April 26, 2010 (boomark / email).