Ideas: Funding politics the right way

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RECENT reports by The Wall Street Journal alleging that US$700 million was transferred to Prime Minister Datuk Seri Najib Razak’s personal bank accounts only unveiled the fundamental problem at the heart of political patronage in Malaysia — the messy, disorganised way political parties and election campaigns are financed.

This also came on the back of an earlier report claiming that US$10 million was donated by Genting Plantations to the Yayasan Rakyat 1Malaysia charity, money that was then used during the election campaign.

Calls for transparency in political funding are not new. In 2010, Transparency International Malaysia (TI) published a report with recommendations, amongst which was the need for a Political Parties Act to monitor parties’ electoral spending and transparent publication of all donations to them.

Two years later in 2012, Najib himself announced that the government would soon regulate political financing where funds would be channelled into an official party account. These proposals have not seen the light of day.

In response to the unfolding crisis, GIAT (Governance, Integrity, Accountability and Transparency) — a new coalition that includes the Institute for Democracy and Economic Affairs (IDEAS), TI, the Centre to Combat Corruption and Cronyism (C4) and several other non-governmental organisations — in a statement last week called for the formulation of an Asset Declaration Act. This is to ensure that political funds can be independently audited and publicly disclosed, and for the Election Commission to autonomously and independently regulate all political parties.

These suggestions are well and good coming from civil society but just how seriously will parties on either side of the political divide take them?

The reality is that political parties need funds to operate, carry out their election campaigns, distribute funds to their grassroots personnel and perhaps more importantly, give donations themselves to the hundreds of constituents who come knocking at their door incessantly. From where then, political parties may ask, will they get their money if not from willing and well-oiled corporate donors?

The intricate nexus between corporations and political parties will likely always exist as long as there is a shortage of funds. Unless they enter politics as millionaires, it is likely that politicians eventually become susceptible to the generous donations of companies.

There is nothing essentially wrong with corporate funding since contributors may donate to political parties because they believe in their ideologies and belief systems, but companies have an incentive to do so — to obtain certain favours like contracts or licences or simply to establish access if they were to form the government. This leads to all sorts of potential corrupt deals between buyers and suppliers.

To solve this conundrum where parties need money to survive, what needs to happen simultaneously to the demand for transparent disclosure of political funding is perhaps an alternative source of financing for parties and campaigns.

In more advanced democracies, parties get their funds from various sources. Apart from the usual sources of income like membership fees and donations, state funding is an option in some countries. Germany practises state funding of parties, where the amount received is determined by the parties’ performance in elections and the level of individual contributions obtained.

Of course, a criticism of state political funding is that taxpayers’ money should not be used to support parties that they may not have individually supported nor voted for in the elections. A strong alternative would be for the state to increase lawmakers’ salaries or fund the basic operational costs needed to run an office.

The UK practises this system, where the state provides an allowance to only opposition parties in Parliament to help them with their office, research and travel costs. This is called “Short Money” in the House of Commons and “Cranborne” money in the House of Lords. Apart from this, public funds are also available to any party via Policy Development Grants to help parties develop their policies. These grants are professionally applied for and approved by the Electoral Commission.

Both countries practise transparent disclosure of all funds received by their political parties. A quick search on the UK Electoral Commission website reveals lists of donors’ names classified by individuals and corporations, the amounts contributed to each party and the corresponding date of each transaction.

An overhaul of the political financing system is needed in this country, and promptly too. Without reforming the system, any coalition replacing the current one would face the same challenges of funding their parties and election campaigns, and possibly slide into the mess the latter has landed itself in.  

In short, governance and oversight mechanisms must be put in place to monitor how political parties receive and spend their money. At the same time, the government could consider allocating state funds to especially opposition parties for operational purposes. Members of Parliament should also be paid well and provided sufficient resources, so they are not forced to obtain unreasonable amounts of funds from elsewhere.

The system of regulating political financing needs to be dealt with now and in time before the next general election.


Tricia Yeoh is chief operating officer of the Institute for Democracy and Economic Affairs (IDEAS)

This article first appeared in Forum, The Edge Malaysia Weekly, on July 13 - 19, 2015.