Area of law : Political Finance System

1. Introduction
Political financing refers to the funding and expenditure of parties and electoral campaigns 1,
yet it also encompasses a plethora of activities that advances a candidate’s or party’s
campaign2. The source of funding can shape public policies and legislation and in many ways
this is important as how the politics of a nation is finance (expenditure) can contribute to
political corruption3. Political corruption is defined as the use of public office for
unauthorized private gains4.

2. Current law
The current legal framework which governs election comprises are regulated by the
Election Commission (EC) and the Registrar of Societies (ROS).

The EC is an independent body responsible for the administration of the election process 5
Limitations of the EC in regulating political financing covers the campaign period and
concerns expenditure made by the candidate, not that made by their parties.
The law is silent on the issue on the limits on party expenditure during a campaign.
Besides that It cannot interfere with or inspect party finances and has no authority to
prosecute any person who violates election-related regulations. 6

The ROS is responsible for inspecting the annual activities and operation (financial records
and administration) of all registered societies. Parties registered with ROS must submit a
report after each AGM, which must include the accounts of the last financial year.
However, they cannot compel parties to publicize these accounts. It has no authority to
disclose their list of donors. There is also no limit placed on the amount of donation or
contribution a society obtains from a local or foreign individual or organisation.

Under the Election Offences Act, Electoral expenditure is limited to RM 200,000 for a
parliamentary seat and Rm100,000 for a state assembly seat, but, often it is alleged that
weak enforcement allows the amount spent far exceeds what is permitted.

3. Arguments for reform

o In terms of expenditure, this framework is described as ‘fairly weak and
enforcement [that] is less than rigorous’7 which has allowed ‘Money politics’ to
thrive particularly in the corrupt practice of political financing(expenditure) of
buying votes amidst intra and inter party elections. A common practice that
1 Michael Pinto-Duschinsky, ‘Financing Politics: A Global View’ Journal of Democracy 13(4)
pp 69-86
2 Cost of maintaining permanent offices, carrying out policy research, conducting polls and
political education, mounting public campaigns and mobilizing voters.
3 Pp1373
4 Transparency international, ‘ Political Finance Regulation: Bridging the Enforcement Gap’
Policy Position #02, berlin: Transparency International.
5 Article 114, 113, Malaysian Constitution.
6 Pp 1376-1377
7 Money, Politics and Transparency , ‘Malaysia’ (2014)
https://data.moneypoliticstransparency.org/countries/MY/ [accessed on 30th July 2016]
 remains unregulated by external bodies and is difficult to control internally 8
despite legislation prohibiting bribery9.

o This dislodges the mainstay factor of ideology and policy as a crucial factor in
elections to that of party leaders who has the most money to spend on winning
grassroots support10.

o Persisting this problem are ‘political business’,(contribution) a term used to

describe the links between politics and business, specifically ownership and or
control of companies by politicians and party11. Access to these corporate funds
ensure retention of political power12, persist an unfair advantage through the
concentration of corporate wealth which enables selective distribution of
government rent and resources, corruption scandals and conflicts of interest,
highlighting the need for greater transparency and accountability.13

o Independence of institutional bodies oversight. Since 1962 the EC has lost its
anonymity due to the participation of the executive in selecting its composition
as the chairman is nominated by the Prime Minister14.

o Without any regulation on foreign contribution, potential compromise of national

economic interest and the control of government and policies.15

4. Arguments against reform

o Intrusive disclosure, will affect the accessibility of political finance. Political
parties need these fund, but currently with both the opposition and government
being privy to huge funding, they are entrenched position for the need to alter
the status quo16.
o With oppressive/authoritative government, likelihood that donor’s anonymity
will lead to goodwill donors to be persecuted by the government. - coercion and
death threats17.

5. Cost-benefit analysis
o Costly monitoring operation; in which will have to be funded by tax payer’s
money

8 pp1373-4.
9 National institute for Electoral Integrity ‘Poll Watchdog Howls Foul Over “vote-buying”’
http;//www.niei.orng.my/?p=78, [accessed 30 July 2016]
10 Pg1371
11 Pg1374
12 ppg 1372
13 pp1374
14 . Article 114 MC.
15 ppg 1381
16 bfm podcast
17 Far Eastern Economic Review, 19 July 1984.
 o With disclosure, Donors contributing to parties lacking in political power could be
to be political targets, these reforms are able to balance the protection from
political persecution (from those in power) while also promoting transparency
and accountability amongst parties which are in need of public scrutiny.
o Ultimately; reform is needed to promote democratic maturity in Malaysia; . This
is only achieve with effective enforcement with legislative ad institutional reform.

6. How to reform
 Legislative reform
Reforming the laws which oversee the political parties; i.e registration, source of
income, contributions and expenditure, and all other methods pertaining to the
conduct of political parties during campaign.
o The objective of legislative reforms to monitor the financing of politics is to
enhance transparency and accountability of parties and candidates.
o Legislative reforms would need to contain provision for limits on expenditure;
caps on donation from individuals, corporations and trade union; and
disclosure of the source of funds, including the need to regulate or ban
foreign funding of domestic politics.

 Institutional reform
o The Election commission and the registrars of societies hindered from
independently acting to ensure fair oversight of the running of parties and
elections. The executive arm’s influence should be removed and that
investigative and prosecution powers should be conferred18.

7. Conclusion
With the advent of alternative access of information, it is increasingly the case that the
effects from the shortcoming of election laws are apparent to the Malaysian public. It
would seem that responsible bodies are powerless, amidst selective prosecution and with
the rampant corruption amongst political financing necessitate the need to reinvigorate
election law to meet the challenges of a new political landscape of the 21 st century.

18 ppg 1396