Corruption Risk: Political Financing and Accountability

Corruption Risk: Political Financing and Accountability
©   Photo by Joakim Honkasalo on Unsplash 

INPUMA (International Institute of Public Policy and Management) is back with their INPUMA Policy Talk Series 3: Corruption Risk: Political Financing and Accountability

Speakers for this discussion include:

  1. Datuk Seri Akhbar Satar (President, Malaysian association of certified fraud examiners),
  2. Professor. Dr. Edmund Terence Gomez (Dean, Faculty of Economic and Administration, University of Malaya),
  3. Puan Farah Adura Binti Hamidi (Deputy Director General, National Centre for Governance, Integrity & Anti-Corruption (GIACC))

And Datuk Dr Anis Yusal Yusoff (Principal Fellow, Institute of Ethnic Studies, Universiti Kebangsaan Malaysia) as Moderator.

Summary of the discussion:

Puan Farah Adura Binti Hamidi (Deputy Director General, National Centre for Governance, Integrity & Anti-Corruption (GIACC))

Political party financing refers to financial resources or money that is provided to political parties, in between or during election periods, to cover different political activities such as electoral campaign costs and day-to-day functioning.

In Malaysia there is no law, that regulate on political financing which mean that there will be risk of corruption and it could lead to accountability issues such as illegal expenditure including vote buying, funding from infamous sources, selling appointments, honours, or access to information, personal enrichment, activities disobeying political finance regulations, political contribution for favours, contracts or policy change, and forcing private sector to pay protection money.

The laws today on political financing:

1. There is no federal constitution on political financing.

2. Election offences act 1954, prohibition of treating and bribery during campaign period, to punishment for corrupt practices to the processes to submit records of campaign expenditure.

Covers spending by the candidate during the official campaigning period, between nomination day and polling day. it does not cover financial activities from outside.

3. Societies Act 1960, all political parties to submit their annual report and audited financial statement to the registrar of societies (RoS). This is the only financial reporting obligation.

The reform efforts on political donation by GIACC since 2010 - 2019 are:

1. NKRA Against corruption: government transformation programme (political financing is one of the 27 Anti-Corruption NKRA initiatives under GTP 1.0

2. (Dec 2010), new economic model, establishing a monitoring mechanism on lobbying and political financing activities was also emphasized in the 2010'2 New Economic Model,

3. (August 2015), National Consulvative Committee on Political Financing (JKNMPP), political system reform strategy has been listed under priority area A, through pillar 1.

4. (July 2018), Special cabinet committee on Anti-Corruption, special cabinet committee on Anti-Corruption series 2 on 18 July 2018 had agreed with recommendations on mechanism to govern political financing.

5. (Oct 2018), Mid-term review 11 Malaysia Plan (2016-2020), political system reform strategy has been listed under priority area A, through pillar 1.

6. (Jan 2019), National Anti-Corruption Plan (NACP) 2019 - 2023, Priority Area 1: Political Governance (initiative 1.2.5)

Datuk Seri Akhbar Satar (President, Malaysian association of certified fraud examiners)

Money and politics is the biggest thread in democracy and political donation is the mother of all corruption.

On his presentation Datuk Seri Akhbar Satar, present the new survey conducted by Transparency International (TI) called General Corruption Barometer (GCB), is a public opinion survey that offer views of the general public on corruption and its impact on their lives, including personal experience with bribes.

Nearly 20.000 citizens interviews and 17 countries surveyed including Malaysia, the result shows that 71% think government corruption is a big problem, 13% paid a bribe for public services in the previous 12 months (based on people who used these public services in the previous 12 months), 15% used personal connections for public services in the previous 12, 7% offered bribes in exchange for votes, and 12% experienced sextortion or know someone who has.

Percentage who think that most or all people in these institutions are corrupt. President/ Prime Minister (25%), Members of parliament (36%), Govermemtn official (28%) , Local government officials (18%) and so on read more here

The weakness of election offences Act 1954 (EOA)

  • Election campaign are expensive require large sums of money to run their political activities and this raises serious integrity concerns.
  • The election commission (EC) is powerless especially provisions under the election offences Act (EOA 1954)
  • No enforcement powers to investigate or prosecute for any violation of election law
  • Section 8 (treating), 9 (undue influence), 10 (bribery) of the EOA
  • Election offences committed PD sungei, Kardis,Semenyeh, Kimanis, etc
  • Limit RM 100.000 for state and RM 200.000 federal election.
  • It is not be practical today, until and unless this change


The recommendations by the Consultative Committee on Political Financing

  • The consultative committe on political financing was launched on 2015 included members of the civil society to discuss ways to improve the transperancy, accountability and integrity compliance of political parties and politicians in the securing of funds for the purpose of political activities.
  • A new political donation and expenditure act - a cabinet minister objected
  • A parliamentary standing committee and an office of the controller on political financing should be created.
  • State owned enterprises of all types, be it at federal, stte or local (if any) level, and all their subsidiaries, are banned from making direct, indirect or in-kind contributions to politicians or political parties.
  • Limits on party or candidate spending should be removed.
  • There shall be no cap on the amount that can be donated to a party or a politician.
  • All donations to a party or politician that are (a) above RM3.000 or (b) cumulatively above RM3.000 pr annum from the same source or (c) indirect or in-kind donation valued at above RM3.000, must be reported to the controller with details of the donor(s) within 30 days of receiving the support.
  • Money from unknown sources must be confiscated

And many more.

Professor. Dr. Edmund Terence Gomez (Dean, Faculty of Economic and Administration, University of Malaya)

When we had money politics in the 1980s and 1990s, it was within the parties. The rise of GLCs began in 1997. In 2013, the prime minister at the time stated that he would reform political financing, but he did not follow through. And he said we couldn't because we'd lose power. We saw the consequences of not enacting those reforms; in 2013, when the General Election (GE) occurred and we expected more money, where did all this money come from? And we only found out later in 2015 it came from 1MDB (1 Malaysia Development Berhad). So money politics have been gone from within the parties, into the general election and money come from abroad. 

The entire system is in shambles because we failed to address the political system reforms that have been discussed since 2008. That is why this discussion is so important, and we must now move forward on how we resolved this issue.

It cannot be done by politicians, but it is up to the civil society movement to discipline politicians and ensure that the institution can reform.

Watch the full discussion below:

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