Written by: Averroes
(1.0) Introduction
Political financing law is extremely crucial as to protect and ensure smooth functioning of the political processes and institutions under a democratic system. If there is no proper regulation for funding involved in politics, it may lead to corruption which undermines virtues of democracy.
According to article 7.3 of the United Nations Convention Against Corruption (UNCAC), it calls upon States to enhance transparency in the funding of candidates for elected public officer and where applicable, the funding of political parties.
Malaysia as of 2020, is ranked 57 out of 180 countries for its Corruption Perceptions Index (CPI) as per the International Idea Political Finance Database and Transparency International.
(1.1) The Challenges
Number 1: Monitoring Process
In most countries, there are hurdles when it comes to monitoring and evaluating their respective political finance systems. In Malaysia, we have the Malaysian Electoral Commission (EC) and the Registrar of Societies (ROS).
There must be a regular and sufficient reporting mechanism or body as to enforce rules and laws on donation, spending and donation limits. They would have to be independent and impartial. ROS is not necessarily independent, since the Home Minister has significant powers exerted to make decisions, raise questions and to receive reports from political parties.
Political parties in Malaysia are required to submit their annual audited account to the ROS within 60 days from the Annual General Meeting (AGM). If no AGM, then 60 days from the end of the calendar year. Though, it is not mandatory for the reports to be made publicly available.
However, political parties are not required to submit campaign finance reports, but candidates must do so within 30 days of publication of results of an election in the Gazette. The problem here is that, there is no standard form that candidates would have to fill and the lack of enforcement (Tan & Ooi, 2021).
In addition, any finance reports should also be made available to the public and expeditiously. If not, transparency would be harder to be achieved.
Number 2: Non-regulation
Usage and receiving contributions:
In Malaysia, we do not have a unified or proper financing law for political purposes and how political parties manage their funding operations (Tayeb & Ragu, 2021). If there are, they are scattered and among them would be the Election Offences Act 1954 (EO), Societies Act 1966 and the Malaysian Anti-Corruption Commission Act 2009.
For example, 25.6% of countries globally bans corporations from channeling funds to political parties. If they are allowed, then there is susceptibility of corruption as politicians would return large favours back to corporate sectors, especially among those that they have a contract with.
Also, if the corporate sectors are or partially owned by the government (GLCs), then it would affect the political playing field and reduces competition in elections. There are many political appointments and interferences within certain companies and have been abused to reward party members who win elections and consolidate power.
This has made businesses and corporations supporting the ruling government with wider access to government grants and contracts, known as black box. Black box decisions are made with minimal objectives and no clarifications. Hence, corporations are merely piggy banks for the government to maintain their political survivability.
Third-parties
Third-parties are vaguely considered as part of the equation. In fact, third-parties, which are supposedly seen as independent foundations and interest groups, may actually invoke more corruption if not fully defined as who they are how do they and their conducts.
Third-parties or TPAs includes non-partisans or non-candidate electoral actors from political action committees, non-profits, union campaign funds, foundations, think tanks, and more alike.
Sanctions:
In addition, to have an effective enforcement of embodied rules, there needs to be meaningful, clear, realistic, dissuasive and proportionate sanctions. This may be inclusive of small fines and warning for breaching the laws.
Declaration:
In Malaysia, we also do not have a system or law for asset declaration at the Federal Level. Without it, there is opacity of the amount of assets kept by elected representatives. The only asset declaration law is in Penang, but it is not as comprehensive.
Number 3: No Public Funding
In Malaysia, we do not have laws for public funding, while 70% of countries have a direct public funding law. Public funding is sustainable and is a way of institutionalising political parties to shun away from their dependence on private funding. Public funding can either be both direct and indirect.
With public funding, it can be withdrawn, reduced for non-conformity, attached with political finance regulations, punctual reporting, and a way to incentivise political parties and candidates as to adhere to existing regulations.
Some requirements of public funding may be that they need representation in parliament and a certain number of votes in an election, so that a political party with proven prospects may have access to funding.
Direct funding is usually spent for general election campaigns, duties of parliamentary group to conduct legislative research, administrative staff and publications, policy research and development, training of political party members or candidates, activities to support minority groups, voters and civic education.
Indirect funding may also be accessible as it allows political parties and candidates to utilise incentives from access to media, tax relief, premises for campaign meetings and postage costs. It also includes transportation and free printing, communications interest-free loans.
Lastly, the law may also specify how and to whom the money are spent. For instances, this may include empowering women in politics and other groups in the community. By setting up how the monies are spent, it ensures that the interests of the public are afforded.
Number 4: Private Funding
Private funding is defined as a form of donations that is sourced from 'permissible' sources and it forms part of a party's campaign income. When it is not regulated, personal interests would be involved. In Malaysia, there is no legislation that sets the contribution limits on donations to political parties and candidates by any individuals or corporations.
Larger political parties that garners more resources have greater expenditure and stomp down smaller political parties. In addition, they are also able to buy support from the people and is one bargaining power as to manipulate them not to vote for others.
Hence, with a law that bans or limit certain sources of donations and capping a donation limit, those incidents may be abated. Setting a limit may reduce excessive influence in politics and instead, political parties and candidates could reach out to more number of smaller donours to increase larger support base.
However, Malaysia does have a law for spending limits by candidates, but not political parties. This implies that political parties could spend on behalf of the candidate which circumvents the law for candidates.
Section 19 of the Election Offences Act 1954 (EO) only sets out expenses capped for the following;
(i) RM200,000 for Dewan Rakyat election,
(ii) RM100,000 for Legislative Assembly election,
(iii) RM10,000 for Local Authority election,
(iv) RM300,000 for Local Council election,
In reality, even with these limits, they are rarely complied with and often times, the EC does not check for the breaches, if at all. These limits should be reviewed due to inflation and the economic environment of the country. It should be more realistic.
The enforcement of this provision needs to be watertight, systematically documented and overspending would result in harsh punishment.
(2.0) Legal Recommendations
It is advocated that there should be a Political Funding Act as it outlines the rules and procedures for a party to raise money, how it would be kept and spent. The following would be the proposed provisions that would be incorporated into the statute.
Number 1: Oversight, monitoring mechanisms and reporting
There should be a requirement for party accounts to be audited and financial report be available to the public, perhaps online. The EO needs to be amended as to allow party election expenses to be independently audited by certified auditors before submitting to the EC.
In addition, the Elections Act 1958 should also be amended as to empower the EC to carry out investigations and verify financial reports, submitted by political parties and candidates. There should also be a law that requires internal party elections to be monitored as well.
For the EC to be independent some requirements may be observed to disqualify his membership, such as if he is a member of a registered political party, holds any officer or employee of any political party or holds any relevant office.
Provisions within the Companies Act 2016 (CA) should be implemented as to compel disclosure of political donations by corporations. Section 56 of the CA and the Companies Commission of Malaysia guidelines could be enforced onto owners of businesses by political parties.
Number 2: Regulating corporations and businesses/ Private Funding
Spending and receiving contribtions
As a suggestion, donations from foreign corporations or individuals and GLCs must be prohibited. Local corporations should also be banned from making donations, but there may be certain exceptions since it may ignite disagreements.
There needs to be capping of spending and donation limits as well from Malaysian individuals, companies or organisations who contribute to political parties and candidates. This is to quash any preferential treatment, project tenders, favouritism, cronyism and corruption that may transpire between political parties and corporations.
Without this ban, then in reality, Malaysia is under the proxy rule of giant conglomerates with politicians being their puppets. Candidates and political parties should also produce receipts from any contributions or spending made.
Declaration
When there is a significant amount of monies being donated, political parties and candidates should disclose who are the donours and the amount received. This is to gain public trust and confidence in the political institutions as to allay any doubts or suspicion on abuse of power in corporations or any corrupt practices.
These contributions may also include cryptocurrency, among others, loans, cash, sponsorship of goods, venues or services. If the political parties have businesses owned by them they should also disclose them. However, some parties may be unwilling to do so.
Hence, there may be proper categorisation of what businesses are allowed to be operated and those not allowed, such as proxies and cronies being enriched and profits used to reward allegiance and maintain grassroot support.
Hence, the Societies Act 1966 should be amended for public disclosure of the audited financial reports to ROS as to allow voters to exercise their rights and that the civil society could serve as watchdogs on political corruption.
Sanctions
The needs to be clear and coherent punishments for those who violate the laws.
Number 3: Public Funding
As stated earlier, we should support for a public funding as it is more sustainable and reduces political parties and candidates reliance on private funding. This public funding improves transparency and leverages more on the playing field.
If there is a proper framework as to where the funds would be channeled into, then it would be used solely for public interests only or which are earmarked for political participation of women, young people, other minority groups and research.
(3.0) Conclusion
To conclude, there needs to be the Political Funding Act as to regulate the election atmosphere and the channeling of funds from parties to parties as to allow a more competitive, transparent and accountable political climate in Malaysia. Hence, Malaysia would be a more democratic nation, upholding the tenets of the Rule of Law.
(4.0) References;
Hamada, Y. & Agrawal, K. (n.d) Comparative Overview of Political Finance Systems in Indonesia, Malaysia, the Philippines and Timor Leste: The regional context and the way forward. International IDEA.
Iman Amran & Aira Azhari. (2021) Political Funding in Malaysia: Starting from the Ground Up. Working Paper Series: System of Political Finance Across Asian Democracies.
Transparency International - Malaysia. (n.d) Memorandum on Reform of Political Financing in Malaysia.
(n.d) Political Financing Reforms: Reforms for transparent & accountable political funding in Malaysia.
Aira Azhari & Tricia Yeoh. (October 2021) Political financing in Malaysia: Recent developments and plugging potential gaps. Brief Ideas No. 33.
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