Day: April 13, 2022

You’ve probably heard politicians mention the influence of money in politics, but how does it actually?

A recent study conducted in 2020 found that there is a strong correlation between campaign spending and election performance, thus illustrating how candidate spending indeed significantly impacts the decisions of voters. 

In perspective of how money can take precedence…

During the 1993 UMNO party election between Anwar Ibrahim and Tun Ghafar for the Deputy President post, it was alleged that “RM200-300 million” had been spent by one faction. In 1995, one candidate allegedly spent RM6 million to secure the post of division chairman. Following this, Tun Dr Mahathir, the then President of UMNO in 1996, banned campaigning for party posts. 

In the context of elections

According to Rafizi Ramli, the former MP of Pandan, the costs of campaigning as a member of parliament may start at a minimum of RM250,000. The basics include:

• T-Shirts
• Flags
• Advertisements
• Field workers’ salary 

Other costs may include gifts, advisors, poll monitors, survey institutes, travel expenses, remuneration for attending meetings, and more.

When Candidates want to double down

Aside from the bare minimum costs, candidates can go beyond by spending on;

Advertising

• Political advertising, such as street banners, is a powerful way to reach and influence voters. 
• Unlike previous campaigns, social media technology has allowed candidates to reach target voter groups with little physical effort.

Communication cost

• Unlike advertising, communication is two-way and requires more physical effort. 
• Strategies may include holding press conferences, rallies, and events

Market research

• Research allows a greater understanding of the behaviour, needs, and wants of key voter groups. 
• It informs strategic decisions on communication and advertising to educate, persuade, and reinforce existing views.

When cash is king:

Given the strong correlation between campaign spending and election performance, politicians may resort to the wealthy elites to fund their campaigns. 

When Politicians rely on wealthy individuals or corporations to fund their campaigns, patronage may occur, where political parties provide business favours in exchange for funding. The favour could include access to contracts, speedy government approvals, etc When candidates win elections, their donors expect that they are to be compensated. This may result in policy capture, where public policy decisions are repeatedly oriented away from the public interest and towards a specific interest, thereby worsening democratic principles..

If we were to talk about 1MDB…

1MDB was initially established by former Prime Minister Dato Seri Najib Razak in 2009 under the pretence of promoting Malaysia’s economic development and improving people’s well-being through global partnerships and foreign direct investment. 1MDB instead became a massive political financing source for the 13th general election campaign. The Malaysian Anti-Corruption Commission also revealed that RM 212 million of 1MDB funds had been transferred to his political party, UMNO.  Among the sources of these funds were from foreign nations, such as a donation from the King of Saudi Arabia of $800 Million. 

Money provided from a foreign nation allows them to influence the decisions made by those elected. This raises the question: why are their wants prioritised over the rakyat?

The Limits: As they exist now

• According to the Election Offences Act 1954, candidates for a parliamentary seat are permitted election expenses up to RM200,000 each, while the maximum amount allowed for a candidate contesting a state seat is RM100,000.
• However, as we’ve established, electoral campaigns are costly and politicians are tempted to spend far more than the spending limits allow to achieve victory.

The law, contradicts as former MP, Rafizi Ramli puts it, an “ open secret” that a parliamentary seat campaign at minimum could cost RM250,000 . When money takes precedence in our elections, it may undermine our democratic processes. It begs a reflection on what we want our politics to be. Do we want our leaders to be elected on the merit of their policy proposals and principles, or based on the wealth they’ve accumulated?

Money and Politics going forward

Though money is a necessary expense in elections, if unregulated, could get out of hand. As established, it may create problems of money based factionalism, policy capture and patronage. Going forwards, how our politics is conducted largely depends on what you think is important. Do you think it should be policy based or who has the largest pockets?

But one thing is certain, if money indeed takes precedence, politicians who have little resources may be forced to find funding from nefarious sources, and the cycle of money politics continues.

References

Azmi, K. S. A., & Zainudin, R. (2020). Money in politics: a recipe for corruption in Malaysia. Journal of Financial Crime, 28(2), 593-606.

Falguera, E., Jones, S., & Ohman, M. (2014). Funding of Political Parties and Election Campaigns: A Handbook on Political Finance. International IDEA.

Schuster, S. S. (2020). Does Campaign Spending Affect Election Outcomes? New Evidence from Transaction-Level Disbursement Data. The Journal of Politics, 82(4), 1502-1515. doi:10.1086/708646

OECD (2017). Preventing Policy Capture: Integrity in Public Decision Making. OECD Public Governance Reviews. doi:10.1787/9789264065239-en

Vaswani, K. (2018, May 11). Corruption, money and Malaysia’s election. BBC News

Office of Public Affairs (2021, August 5). Over $1 Billion in Misappropriated 1MDB Funds Now Repatriated to Malaysia. The United States Department of Justice.

Yeoh, T. (2019, July 13). Following the money: Political financing in Malaysia. Asia Research Institute

Saravanamuttu, J. & Mohamad, M. (2020). The Monetisation of Consent and its Limits: Explaining Political Dominance and Decline in Malaysia. Journal of Contemporary Asia, vol. 50, https://doi.org/10.1080/00472336.2019.1569710

The Electoral Commission. (n.d.). Election campaign spending. The Electoral Commission.

The University of Auckland (n.d.). Political Market Research. The University of Auckland.

Detrow, S. (2018, March 20). What Did Cambridge Analytica Do During The 2016 Election? National Public Radio. 

Ivy, JA. & Puyok, A. (2021). Political patronage In election: Impacts of the coalition change in Malaysian federal government on Sarawak’s politics. 8th International Conference On Public Policy And Social Science (ICoPS).

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Researchers : Jia Rou, Lua Yun Xin (Kelly)

Reviewers: Muhammad Bahari, Jie Yee Ku, Faith Tan

Editors : Chanel Ng, Siva Nagappan, Kartika Zayad, Wan Nabil Ikram

Constituency Development Funds (CDFs) are an MP/ ADUN allocation to support grass-root level projects in constituencies.

Our last post provided an overview on what political financing is, but did you know that MPs have been receiving unequal CDF allocation despite having similar roles? Continue reading to unpack how much an MP earns and how CDF funds are allocated

How much does an MP earn? 

An elected official’s salary is determined by the sum of monthly salary and the monthly allowances that the official is entitled to. This amount is then decided by the positions that they hold within the government.

Members of Parliament (MP), monthly allowances

• Senate (Dewan Negara): RM11,000
• House of Representatives (Dewan Rakyat): RM16,000

A Malaysian parliamentarian would also earn a monthly salary based on the administrative or executive government position that they hold;

Monthly Salary of Members of the Administration:

• Prime Minister: RM22,826.65
• Deputy Prime Minister: RM18,170.20
• Minister: RM14,907.20
• Deputy Minister: RM8,847.65

Overall, there is a direct correlation between income and the position of power a Parliamentarian holds. If an MP holds two or more administrative offices within the government, the official would then only be entitled to the highest salary and allowances payable for the position that they hold. 

The salary and allowances for a State Legislative Assembly (ADUN) member are controlled and governed by each individual state.

Malaysian MPs are also entitled to a host of other allowances and claims. Which include:

• Meeting allowances
• Entertainment allowances
• Special payment allowances
• Monthly travelling allowances
• Driver allowances
• Meal allowances
• Daily living allowances

An MP’s income, further explained

In Budget 2022, RM148 Million has been allocated to the “running of parliament”. 

As a result of amendments brought on in 2015;

• An MP would earn RM16,000 a month
• If the MP was a minister, the lawmaker would get an additional RM13,400

That’s not all! MP’s get paid on top of their monthly salary, for coming in to work;

• For showing up to parliament, they can collect RM400
• For showing up to government “meetings or workshops”, they can collect RM300

MP’s also need not use their monthly salary to purchase their “wants” as most leisurely expenses are taken care of through allowances:

• MP’s can collect RM2500 in “entertainment allowances”. 
• MP’s can purchase the latest iPhone or Macbooks, if they collect the RM2000 in handphone allowance or the RM6000 computer allowances

MP’s also can look their best, with their purchases of dress wear being subsidised up to RM1000. 

CDF: Another income for MP 

Constituency Development Funds (CDFs) is an MP/ ADUN allocation to support grass-root level projects in constituencies 

Examples include:

• Repairing basic schools and community centres
• Providing back-to-school assistance
• Assisting with sports and healthy lifestyle projects.

This policy aims to help fill in the important gaps in government services in constituencies that have not been addressed in the government’s large, comprehensive policy programs. 

However, the allocation has attracted intense debate in Malaysia. 

• Due to the unequal distribution of CDF between MP/ ADUN from opposition parties and the ruling party. The CDFs have also been condemned as a political tool to buy political support.
• Critics claimed that this abuse is an unfair advantage of the incumbent government.

Here are a few examples, during the BN administration

• The allocation for each BN MP ranged between RM5,000,000 to RM10,000,00 
• Opposition MPs did not receive any allocation. 

During the PH administration

• equal distribution of CDFs also was not realised.
• PH MPs received RM1,500,000
• Opposition MPs received RM200,000. 

Continuing our discussion on MP’s income…

A member of parliament in Malaysia may be the only profession where they themselves can decide on what wage to receive. The last time MP’s gave themselves a raise was in 2015. The minister in the Prime Minister’s Department at the time, Shahidan Kassim justified the raise as “the duty of the Members of Parliament is getting heavier in carrying out the high hopes of the people, and this will boost the spirit of the elected representatives to work with more commitment and dedication” [1]

However, MP’s in Malaysia sit far less than their counterparts, for instance: 

• US congress members sat for 145 days in 2017
• UK MPs sat for 158 days, during the 2015-2016 session [2]

Our parliamentarians, in contrast, are slated to only meet for 60 days this year, according to the parliamentary schedule.  Furthermore, there should be a greater discussion on the disparity between the average Malaysian and their representative.

The average salary of a Malaysian citizen in 2019, was RM3224. The individual would be expected to work 20 days a month, for about six hours per day.  Assuming the Malaysian citizen works year round, the yearly salary would be RM38,688 with about 1440 hours clocked in. Compare that, with an MP who, in theory doesn’t attend parliament, could still receive an annual salary of RM192,000 (without collecting any allowances).

Moving Forward 

“Ministers get a luxurious house in Putrajaya, cars, drivers and even expenses for their daily meals can be claimed back from the government.” Syed Saddiq Syed Abdul Rahman, MP of Muar. 

At the end of the day, their salaries come from the taxes collected. Hence, as their employers it’s worth reflecting whether MPs truly adding RM192,000 worth of value yearly into the economy, compared to the average Malaysian? If not, does this mean MP’s are being paid too much, or is the rakyat not compensated fairly? Furthermore, are members of the dewan rakyat the best individuals to decide on their respective wages?

Potential Ideas for a more equitable wage

There has been progress, for one 

• YB Datuk Mastura Mohd Yazid from the Minister in the Prime Minister’s Department announced equal allocations to be provided to government and opposition MPs over the period of September to December 2021. 

But perhaps:

• MPs who are absent during parliamentary votes may have to repay their salary as the Swedish parliament did. 
• The government should give priority to asset declaration laws. Currently, no one is penalised for not declaring their assets and MACC’s website on asset declarations does not have detailed information. 
• Equitable CDFs should be implemented over a longer-term, not just 4 months during a “Memorandum of Understanding”. 

References :

CDF Law Needed to Prevent Abuse of Power and Ensure Equitable Allocation. (2021, March 30). Retrieved March 2, 2022, from IDEAS website: https://www.ideas.org.my/cdf-law-needed-to-prevent-abuse-of-power-and-ensure-equitable-allocation/

Constituency Development Fund – Office of the Prime Minister. (n.d.). Retrieved March 2, 2022, from https://opm.gov.jm/opm_agency/constituency-development-fund/

Dzulkifly, D. (n.d.). How much do Pakatan ministers and MPs actually earn? Saifuddin Nasution explains | Malay Mail. Retrieved March 2, 2022, from www.malaymail.com website: https://www.malaymail.com/news/malaysia/2019/12/27/how-much-do-pakatan-ministers-and-mps-actually-earn-saifuddin-nasution-expl/1822606

Hakim, A. (n.d.). Just How Much Do Malaysian Parliamentarians Get Paid? | TRP. Retrieved March 2, 2022, from https://www.therakyatpost.com/ website: https://www.therakyatpost.com/news/malaysia/2019/12/27/just-how-much-do-malaysian-lawmakers-earn/

IDEAS welcomes equal allocation for all members of parliament. (2021, September 28). Retrieved March 2, 2022, from IDEAS website: https://www.ideas.org.my/ideas-welcomes-equal-allocation-for-all-members-of-parliament/

Malaysian Anti-Corruption Commission Act amended to provide for corporate liability for corruption offences. (n.d.). Retrieved March 2, 2022, from Allen & Gledhill website: https://www.allenandgledhill.com/vn/publication/articles/15447/malaysian-anti-corruption-commission-act-amended-to-provide-for-corporate-liability-for-corruption-offences

Othman, A. F., Ariff, S. U., & Yusof, T. A. (2019, July 1). Dewan Rakyat passes special motion on asset declaration | New Straits Times. Retrieved March 2, 2022, from NST Online website: https://www.nst.com.my/news/nation/2019/07/500680/dewan-rakyat-passes-special-motion-asset-declaration

Removal or Reform: Charting the Way Forward for Malaysia’s Constituency Development Funds (Peruntukan Ahli Parlimen dan ADUN). (n.d.). Retrieved March 2, 2022, from IDEAS website: https://www.ideas.org.my/publications-item/removal-or-reform-charting-the-way-forward-for-malaysias-constituency-development-funds-peruntukan-ahli-parlimen-dan-adun/

Sweden: Parliament Decides Absent Members Must Repay Salary. (n.d.). Retrieved March 2, 2022, from Library of Congress, Washington, D.C. 20540 USA website: https://www.loc.gov/item/global-legal-monitor/2021-11-30/sweden-parliament-decides-absent-members-must-repay-salary/

Syed Saddiq: Some politicians may be getting RM100,000 in monthly pension. (2021, September 29). Retrieved from The Edge Markets website: https://www.theedgemarkets.com/article/syed-saddiq-some-politicians-may-be-getting-rm100000-monthly-pension

Times, N. S. (2021, October 5). C4 calls for asset declaration law to be given priority | New Straits Times. Retrieved March 2, 2022, from NST Online website: https://www.nst.com.my/news/nation/2021/10/733879/c4-calls-asset-declaration-law-be-given-priority

What is a former prime minister entitled to? | The Malaysian Insight. (n.d.). Retrieved from www.themalaysianinsight.com website: https://www.themalaysianinsight.com/s/351954#:~:text=THE%20Members%20of%20Parliament%20

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Researchers: Lee Kah Kei, Jie Yee Ku, Muhammad Bahari

Reviewers: Jie Yee Ku, Muhammad Bahari, Faith Tan

Editor: Natalie Eng

What is “Political Financing” (FLY x YPol : Part 1)

In light of the recent number of state elections in Malaysia, this series, brought to you by FLY:Malaysia and YPolitics explores the role money plays within Malaysia’s political system.

But first, let’s break down the basics to political financing. How are parties financed and what forms of political financing are there?

With Malaysian news headlines constantly being flooded by corruption cases and calls for reform, political financing is a term that has been raised on multiple occasions.

What is political financing?

Political financing is how political parties source and fund for party activities during and outside of election campaign season.

Why do parties need money?

Money is a necessary component to keeping the party operations running. Ideally, these funds enable political participation, campaigning, and representation. Uses of money in politics include:

• Maintaining permanent offices
• Running the party 
• Conducting policy research
• Political education and campaigns
• Mobilising voters
• Paying staff like assistants
• Advertisement campaigns on policy

The two types of political financing:

• Private financing 

Sources of funds include membership fees, donations, personal wealth and business

• Public financing 

Directly or indirectly transferred from the government,  which include the allocation from the national budget and from taxpayer funds

What are the potential issues when it comes to political financing?

• Currently, political parties have a hand in the business world

Barisan Nasional component parties UMNO, MCA, and MIC own large assets and businesses:

• UMNO owns Putra World Trade Centre, Seri Pacific Hotel, and 18.17% of Utusan Melayu, a newspaper 
• MCA owns 43% of The Star Media Group Bhd, which publishes the newspaper The Star
• MIC is affiliated with AIMST University

While owning a business isn’t illegal, the lack of framework leads to various issues:

1. We are unsure of how much they truly own due to indirect ownership. 
   1. This could be through layers of private companies, proxies and trustees. 

1. As these networks have become more complicated, a haphazard policy that outright bans parties owning businesses may lead to the situation worsening, as these activities are conducted even more covertly.

While the internal party elections are the main concern of political parties, money playing a dominant role could lead to:

Money – Based Factionalism: The political process is not carried out on the basis of improving the welfare of the rakyat, but instead a popularity contest determined by money rather than ideas.

Rent-Seeking and Patronage: Rent seeking is when excess returns are made by businesses, which would not exist in competitive markets . 

These excess profits come from patronage where connections are rewarded due to loyalty. 

To illustrate this, say the true costs to supply a box with relief aid is RM7. 

• The job is given to a connection who assisted the politician with funding during the election, and charges RM14 to the government.
• The connection doesn’t add any value, and inflates the cost for his/her personal profit. 

The problem with political patronage is : Connections are rewarded with contracts not based on merit, which could lead to economic inefficiencies. An overinflated budget that serves corporate interest could lead to needless inflation. 

Not only has the political sphere been tainted, but economic inefficiencies are created within the corporate sectors.

Why should you care about political financing?

Currently, money is a necessary component of the political process: Political parties require it to carry out their activities, such as representing and connecting with you, the people.

• If not effectively regulated, it can:
  • Undermine the integrity of the political process
  • Jeopardise the quality of our democracy

• Which could:
  • Corrupt the overall flow of Malaysia’s economy, disincentivising investment and leading to brain drain
  • Prevent Malaysia from advancing to where it should and can be

Stay tuned for the other three chapters in our series on political financing, which focuses on how much money is involved, the issues that have stemmed from the lack of framework, and the way forward.

References

Azhari, A., & Tricia, Y. 2021. Political financing in Malaysia: Recent developments and plugging potential gaps. Institute For Democracy and Economic Affairs.

Fraser, D., Zhang, H. and Derashid, C., 2006. Capital structure and political patronage: The case of 

Malaysia. Journal of Banking & Finance, 30(4), pp.1291-1308.

Tan, J. and Weiss, M., 2014. Routledge Handbook of Contemporary Malaysia. 1st ed. Taylor & Francis Group, p.200.

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Researcher: Lee Jih Yih, Vincent Henendra Tandry, Matsurah

Reviewer: Muhammad Bahari, Jie Yee Ku, Faith Tan

Editor: Johanna Lok