THROUGHOUT Malaysia’s economic history since attaining independence, we have been unable to fully detach from race-based affirmative action and political patronage. 

When these two mix together they morph into selective patronage-affirmative action. Money politics always come into play in elections, as well as exchanges or deals for government rent and concessions pre- and post-election.

Regulating political financing matters significantly to Malaysia as we are already in a kleptocracy state, prominently due to the recent 1Malaysia Development Bhd scandal, a corruption nexus among sovereign wealth funds, government-linked investment companies, political parties, bankers and businessmen.

In short, the bill aims to reduce the degree of political patronage and selective patronage-affirmative action in the nexus between politics and business.

Bipartisan lawmakers and civil society organisations continue to work with the government to draft the bill, with the recent setting up of the All-Party Parliamentary Group on Political Financing.

In this article, I would like to raise a few important considerations for drafting a political financing bill.

Funding matters and privacy concerns

Public funding will be a viable option for all political parties, since political activities normally involve large amounts of money. Hopefully these will discourage political parties from getting involved in business or political patronage-related activities. 

Political parties need to pass a certain threshold to get public funding for an election term. 

The average global threshold is 3.5% while think tanks such as IDEAS once proposed a 2.0% threshold in at least one region of Peninsular Malaysia, Sarawak and Sabah. 

Bersih also proposed that public funding to political parties have a proportion of 0.05% derived from the Election Commission’s (EC) annual budget. 

Multiplying 0.05% to the EC’s annual federal budget from year 2011 to 2020, the median amount would be RM133 million per year allocated to all political parties whose votes pass the minimum threshold.

Besides a vote-based threshold, one can also consider seat-based threshold depending on a certain minimum number of seats won. 

Apart from direct public funding from EC, indirect public funding can be also offered to all political parties, such as free political advertisement on television, free use of public venues such as in government schools or local council halls for political gathering.

On top of public financing, private funding is still an important financial source to political parties.

Regulation on private funding can determine who (either individual or organisation) is allowed and not allowed to donate. Typically, targeted individuals or organisations not allowed to contribute to political financing are non-citizens, foreign organisations and government-linked companies, due to sovereignty reasons and conflict of interest. 

Besides the aforementioned regulatory restriction, private political financing needs to have a reporting mechanism and public disclosure. 

All transactions have to be cashless, enabling authorities to trace the source of funds, and all political parties shall report to the truly independent EC and make a public disclosure every year. 

The political financing bill shall allow the institutions such as EC, Bank Negara Malaysia (BNM), Malaysian Anti-Corruption Commission (MACC) and public prosecutors to have greater independence pursuing non-compliance issues related to political funding. 

One concern is this: will the public disclosure of political financing bring harm to the individuals and organisations who support the opposition parties?

Other than the issue of autonomy, do regulators such as EC, BNM, MACC or public prosecutors answer inquiries raised in Parliament through special committees? Will the court be able to overturn an unfair decision made by such institutions?

Party elections and parties engaged in business

Currently there is no regulation on party elections and parties involved in business. 

Political parties involve themselves in business or political patronage for businessmen in exchange for party revenue, so as to run the party as well as generate more income for the party. 

The parties’ top leadership typically control the fund, and utilise it to garner internal political support to their own advantage. There we can see vote-buying activities within the party, and the existence of incompetent warlords appointing their own election candidates.

Party factionalism and the establishment of a new splinter parties due to money politics are the current political reality. 

Regulation of party elections and businesses can be more than just a reporting mechanism and public disclosure on financial aspects. It should focus on prohibiting certain industries from being involved. 

The sources of funds for individuals contesting in party elections should also be disclosed to the regulators, while an individual candidate’s expenditure should also be capped.

On the other hand, certain industries should not be allowed to fund political parties – media, legal and higher education institutions – for they will compromise or undermine freedom of expression, academic freedom and fairness of justice. 

In conclusion, designing the mechanism to reduce or eliminate political corruption takes more than just drafting a political financing bill. It involves careful institutional design and reform as well.

Institutional independence and autonomy aside, checks and balances need to be applied to various regulators on political financing, more so with parliamentary and judicial scrutiny, so that the new measures could be seen as fair and reasonable. – May 10, 2022.

* Nick Tan Beng Teong graduated with Bachelor of Economics at University of Malaya. A member of Agora Society, Tan believes in policy reforms in order to build a better nation.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.