Reforms needed for campaign financing

THE 13th general election (GE13) since our independence is finally happening, after Datuk Seri Najib Razak announced that Parliament has been dissolved on 3rd April 2013, exactly four years after he took over as prime minister. This takes place after an extensive guessing game lasting over a period of close to two years.

What the delay has meant for political parties is that first, both the Barisan Nasional (BN) and Pakatan Rakyat (PR) coalitions were kept on their toes in getting themselves fully prepared for the election campaign and messaging strategy early, since polls could have taken place any time. For instance, the PR manifesto is said to have been drafted as early as May 2012 although it was only launched early this year.

Second and more importantly, the campaigning period effectively began early, both online and face-to-face, with nightly ceramah taking place in towns all over the country. Such a long-drawn-out intense campaign means the need for a massive amount of financial resources in order to sustain related activities. Money is needed to fund the printing of leaflets, banners and newspapers; pay election workers and campaigners; put out media advertisements; organise rallies and forums; conduct training and research; and other miscellaneous requirements.

On a much larger scale, the BN federal government has spent billions of ringgit in the months leading up to the election. Although Article 10(3) of the Election Offences Act 1954 essentially prohibits vote-buying, this has not stopped our prime minister from announcing one-off bonuses to more than 40,000 employees of Telekom Malaysia and Pos Malaysia, RM1,000 in ‘token of appreciation’ to more than 40,000 employees of Petronas, on top of the latest RM500 handouts in the form of BR1M 2.0 to seven million low-income households and individuals. In these cases, government funds were used, and they do not technically contravene any laws despite it being clear that BN is seeking support through these handouts.

Funding Political Campaigns

How exactly political parties and politicians fund their campaigns remains shrouded in secrecy. PR parties like the Democratic Action Party (DAP), Parti Keadilan Rakyat (PKR) and Parti Islam Se-Malaysia (PAS) have over the years resorted to donations by private individuals, fundraising dinners, publications, membership fees and contributions collected at events or forums. In the PR-led states, it has been possible for the state governments to hold functions that would recognise the state’s achievements. Although the line between the two is often blurred, the distinction must be clearly made between state and political party: state funds should not be used to directly fund election campaigns.

In Transparency International’s (TI) research, it was found that where Umno traditionally relied on membership fees and private donations, this changed when it started to own corporations and shares, thereby reaping profits from its business interests. Amongst the BN component parties, this model is employed by Umno and MCA most prominently.

It is almost impossible to fully trace the parties’ ownership of companies and shares, and especially difficult when individual proxies are used on behalf of their political masters. Umno, for example, is said to have either direct or indirect corporate ownership of Media Prima, Pharmaniaga, UEM Builders and Realmild, amongst various other companies.

Here’s an example of how Umno would benefit lucratively from such an arrangement: say an Umno-linked company is a majority shareholder of a certain government-linked company (GLC), and the GLC is then given a government contract, which results in profits for the Umno-linked company. These funds can then be used where necessary to contribute to election campaign funds.

The unhealthy relationship between politics and business creates an intricate nexus that benefits well-connected individuals. In the context of an election, this results in an extremely unequal situation. Where individuals and cronies of BN component parties would more likely benefit by obtaining licences, concessions, government subsidies and other forms of government protection, their corporations would also most likely donate generously either voluntarily or through coercion to the hand that feeds them.

It is clear that when comparing the ruling and opposition coalitions’ financial prowess, BN has the winning advantage — a combination of friendly donations from the private sector wanting to gain in the future, profits reaped from predominantly Umno- and MCA-owned companies, as well as imposed favours on corporations.

A democratic election means that all parties have a right to contest in a level playing field. When either side has unequal access to a gross amount of funds, this puts the other players at a severe disadvantage. Voters are less likely to access information on the opposing parties, which makes the freedom of choice a very lopsided one indeed.

The Need for Transparency and Accountability

When taking over in 2009, the prime minister promised to introduce new regulations governing political finance as part of his reforms to transform Malaysia. Initiated by the Malaysian Anti-Corruption Commission (MACC) then, it was to have been taken up by the Government Transformation Plan (GTP)’s National Key Results Area (NKRA) on corruption. Details were even spelt out, where for example politicians would be restrained from illegally using their party’s name to solicit funds and all funding would be channelled to an official party account with the issuance of a receipt.

It was also alluded that there would be limits to the amount of donations to political parties and candidates, and that there would be new requirements for public disclosure of such contributions. However, four years later, there are no follow-up announcements to be found. Searches on either the MACC or GTP websites have been in vain, with no information on any development on the subject.

In an e-mail reply on 8 April 2013, the director in charge of the NKRA on corruption at Pemandu stated that as part of the GTP2.0 initiative, provisions on governing political financing would be included under the Societies Act 1966. More specifically, the amendment would ensure that contributions, donations and any form of funding, would be channelled to societies’ accounts (including political parties), and not to individuals; that proper recording and accounting of such funds would be done to ensure good governance of political financing; and finally there would be mandatory issuance of receipts for any such funds to enhance accountability. This move is a positive one, and if truly implemented, will revolutionise political financing in Malaysia.

However, these changes may not be enough. First, they would only take place after GE13, long after massive amounts of corrupt transactions would have taken place. Second, the transition needed for parties to adapt to a new transparent and accountable environment might take a considerable amount of time, and the body used to regulate and monitor this has not been established. Even if it exists, whether it would have the legitimacy and authority to do so is questionable. Finally, in the long run, even this may not be enough to transform the tight relationship between business and politics. The long list of recommendations still needs to be referred to for a complete revamping, since at the end of the day, parties do require a significant amount of funds for campaigns — and as necessity is the mother of invention, politicians would go to all possible means to circumvent the system for self-benefit.

Najib and his component party leaders did sign the TI-Malaysia Election Integrity Pledge in February 2013, which states in four simple principles that candidates would “observe the principles of truth, integrity, ethical conduct and accountability, including not accepting or giving bribes or being involved in any way in corrupt practices… and practice good governance and transparency”, amongst others. There were no details in the pledge, only general statements. Without any commitment to date that campaign funds would be transparently published for public viewing, such a pledge can only be taken to be rhetorical in nature.

As long as there is no accountability over how political parties, candidates and elections as a whole are funded, corrupt practices are bound to continue. In TI’s book Reforming Political Financing in Malaysia, a series of 22 recommendations was given. Amongst them, to require all political parties to disclose sources of financing and expenditure, limit the amount of money an individual can donate, empower the Election Commission (EC) to truly scrutinise election expenses, and introduce direct state funding for political parties to finance their activities.

The latter proposal is existing practice in countries like Germany, Australia and the United States to a limited degree. In this case, public funding is made available to political parties in proportion to the number of seats won, based on certain conditions.

There have been proposals made that the PR-led state governments ought to adopt this model, but this would be difficult to pass as long as it is not first implemented by the BN at the federal parliamentary level. That said, PR’s Common Policy Platform launched in 2009 commits to “grant political parties campaign expenditures based on the percentages of votes in general elections” as part of its efforts towards a clean, free and fair electoral system.

With very high stakes, Malaysians will witness a hotly contested GE13. However, because political financing reform has not been a priority of the government, it will also be one of the most corrupted campaigns. The lack of transparent reporting on financial contributions to parties and poor EC monitoring over vote-buying and expenditure amounts (which by now have skyrocketed beyond the allowable limits) smacks of a pseudo-democracy.

Whichever coalition wins, it must make reforming campaign financing a priority, lest we continue bumbling along, allowing business interests of a select well-connected few to supercede that of the nation’s.

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Tricia Yeoh is a Research Director at Institut Rakyat, a think tank affiliated with Parti Keadilan Rakyat. She is former Research Officer to the Selangor Menteri Besar under Pakatan Rakyat.