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This is the finale of our 4 part series on Political Financing in Malaysia, if you missed out the last posts, feel free to check them out here:

Post 1 : Defining Political Financing

Post 2 : How much do our Members of Parliament Earn? (and CDF’s)

Post 3 : Money Politics Explained Through the Context of Elections

As we’ve highlighted in the past episodes, the influence of money in politics can lead to issues like patronage and policy capture, which may stray away from our idealised version of the political process (depending on how we define it). Another vehicle for political financing that was kept in the dark until recently, it’s also worth exploring “Yayasan’s” and how they’re also a source of political financing. 

Demystifying Foundations, or “Yayasans”

Former deputy minister, Zahid Hamidi is undergoing court trials for misappropriating funds from Yayasan Akalbudi, a foundation he established in 1997 to “eradicate poverty”. Yayasan may serve as a vehicle for politicians to collect donations from business interests, under the motive of contributing to a worthy cause.

The issues with foundations is currently:

There is no legislation to ensure donations are publicly disclosed, the laws only concern campaign financing and not the flow of funds to foundations and there is no disclosure regarding the sponsors of these foundations.

The information and donors we know about certain foundations include; Tan Sri Muhyddin’s Charity Golf Foundation, which has received donations from; Genting Malaysia BHD, Tropicana Corporation Bhd and the Top Glove Corporation. According to Muhyiddin, the foundation has collected RM27 million in donations and has channelled RM24 Million to charitable projects. Yayasan Permata, founded by Datin Seri Rosmah Mansor, had donors such as: Khazanah Nasional, PNB, and the Berjaya Corporation.

Furthermore, there’s a larger discussion to be had regarding what we don’t know about foundations. Yayasan Aman established in 1993, linked to Dr Wan Azizah and Anwar Ibrahim, has no known donors and its annual report is unavailable on its website, yayasanaman.com. Highlighted by Lalitha Kunaratham, Yayasan Aman claims cash donations are tax-exempt, but in order to achieve tax-exemption status, its reports must be submitted to the Inland Revenue Board. 

The issue with foundations

In addition to the lack of transparency, it also calls into question why policy makers who have been in power in the legislature choose to channel energy towards foundations, over actual policy making.

When a lack of transparency creates issues

The lack of transparency regarding political financing is detrimental to our political environment, as citizens are unsure where the loyalties lie. This is particularly vital during a crisis, such as the Covid-19 pandemic as curbing any form of political corruption is of crucial importance in ensuring the effective use of resources, especially.

Such a case is best exemplified with what was dubbed the 2021 “Randox Scandal”, in the UK, where an MP, Owen Paterson, resigned after breaching lobbying rules. This was due a lack of transparency over his relationship with Randox, a health and toxicology company, which called into question whether Paterson’s relationship with Randox was influential in winning contracts related to COVID-19 testing (worth £133 million and £347 million)

The call for Political Financing reform isn’t new…

During the Pakatan Harapan Government, former Prime Minister Mahathir Mohamad announced that the government “will draw up a political funding law”. While there has been little movement since the announcement, the MACC chief, Tan Sri Azam Baki, claims that it was “on the cards” in 2021.  However, without much political will, it appears to be stuck in limbo despite some politicians calling for its implementation. 

 

What a political funding reform may look like, if passed.

One nation with a ‘political financing act’ is Norway.  The law was passed in 2005, after complaints of the difficulties in keeping track of the finances of parties, before and after elections. 

What does The Political Financing Act in Norway look like?

  • Their Political Parties Act Committee, an independent body whose senior members are appointed by the monarch for a six-year term, has the power to regulate the financing of political parties in the country. [2]
  • Bans on donations from foreign interests, unknown donors, and corporations that are partly owned by the government are implemented. [2]
  • Parties are required to report and publicise their finances. The report must disclose finances related to the election campaign and donor identities. [2]
  • Public funding for political parties is available and allocated based on the share of votes in previous elections and the representation in the elected body. 

In conclusion of this series

The First Post : Money is a necessary part of our political reality, required by parties to conduct their day to day activities. But if unregulated, it undermines the political process. The Second Post: MP’s have some of the highest paying jobs in Malaysia, yet allocations across the political spectrum are largely inequitable. The Third Post: Elections are a costly endeavour, which may lead politicians to scavenge for more money, occasionally from wealthy elites. This post: Established how yayasans, a pseudo-charity organisation are misused and putting forth ideas towards a regulatory framework.

Without a proper framework in place, it’s hard to hold our politicians accountable. But even if a “political financing act” was passed, the rakyat should be just as vigilant as those in power may still circumvent the checks and balances in place. 

How you can support the issue of political financing in Malaysia:

  1. Check out some reading recommendations by the team
    1. The Center to Combat Corruption and Cronyism’s reports on Foundations and Donations: https://c4center.org/foundations-and-donations-political-financing-corruption-and-the-pursuit-of-power/
    2. This infographic by New Naratif on political financing: https://newnaratif.com/fix-malaysian-political-financing/
  2. Support the works of various think tanks, such as IDEAS, that have advocated for political financing reform
  3. Write to your MP’s. If you need some guidance, we have a template (here), on how to reach out to them

 

References 

Transparency International. (n.d.).  RECOMMENDATIONS ON POLITICAL FINANCING FOR OGP ACTION PLANS. Transparency International.

Reuters. (2022, January 13). Ministry: Recovered 1MDB funds only enough to pay debt principal for 2022. Malaysiakini.

Rashid, F. (2022, April 15).The importance of governance transparency in dealing with the Covid-19 pandemic. Malay Mail. 

Transparency International. (2021). What Is Corruption? Transparency International.

The Center to Combat Corruption and Cronyism. (2021). Foundations and Donations: Political Financing, Corruption, and the Pursuit of Power. The C4 Centre

The Ministry of Government Adminstration And Reform. (2004). On the Act relating to certain circumstances concerning political parties (Party Act). (Arms of the Norweigan State)

EuroPAM.(n.d.). Norway Public Accountability Index. EuroPAM.

Graphics, W. com N. (n.d.). Malaysia’s 1MDB Decoded: How Millions Went Missing. The Wall Street Journal.

IDEAS .(n.d.).Brief IDEAS No. 33 – Political financing in Malaysia: Recent developments and plugging potential gaps. IDEAS.

Kong, C. Y. (2019, September 1). Be a transparent, accountable and clean government. Malaysiakini.

OECD.(n.d.). Financing Democracy: Funding of Political Parties and Election Campaigns and the Risk of Policy Capture. OECD.


Researchers: Shahril Azhar, Elizabeth Lajawai

Reviewers: Muhammad Bahari, Jie Yee Ku, Faith Tan

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

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