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Monetizing Politics: Financing Parties and Elections in Malaysia


This paper assesses the patterns of financing of political parties and elections in Malaysia. The poor regulation of the activities of parties and of all forms of political elections has contributed to allegations of covert funding of politicians, from both Malaysian and foreign sources. Since parties have grossly unequal access to funds, this has led to unfairness in federal and state elections. This paper also deals with two fundamental issues in the financing of politics. First, Malaysia is one of very few countries where parties own corporate enterprises, a trend known as ‘political business’. Second, money-based factionalism, known as ‘money politics’, is threatening the existence of parties and undermining public confidence in government leaders. Party factionalism is based not on ideological differences but on which political leader has the greatest capacity to distribute funds to capture grassroots-level support. Two core issues contribute to the extensive monetization of politics. First, existing disclosure requirements do not adequately restrict the covert funding of politics or ensure electoral fair play. Second, public institutions that oversee electoral competition are not sufficiently autonomous to act without favour. Finally, this paper reviews the levels of transparency built into current legislation, the pattern of financing of parties and electoral campaigns, and the relevant regulatory bodies’ institutional capacity to ensure fairness and accountability during elections. The paper proposes legislative and institutional reforms to ensure electoral fairness, within and between parties.

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1 See, for example Gomez, Edmund Terence (1990), Politics in Business: UMNO's Corporate Investments, Kuala Lumpur: Forum; Gomez, Edmund Terence (1994), Political Business: Corporate Involvement of Malaysian Political Parties, Cairns: James Cook University; Gomez, Edmund Terence (ed.) (2002), Political Business in East Asia, London: Routledge. See also Gomez, Edmund Terence and Jomo, K. S. (1999), Malaysia's Political Economy: Politics, Patronage and Profits. Cambridge: Cambridge University Press.

2 Gomez, Edmund Terence (1996), ‘Electoral Funding of General, State and Party Elections in Malaysia’, Journal of Contemporary Asia 26 (1): pp. 8199; Wain, Barry (2009), Malaysian Maverick: Mahathir Mohamad in Turbulent Times. Basingstoke: Palgrave-Macmillan.

3 See Milne, R. S. (1986), ‘Malaysia—Beyond the New Economic Policy’. Asian Survey XXVI (12): pp. 13661382; Clad, James (1989), Behind the Myth: Business, Money and Power in South East Asia, London: Unwin Hyman Ltd; Gomez, Politics in Business; Gomez, Political Business; Gomez and Jomo, Malaysia's Political Economy; Searle, Peter (1999), The Riddle of Malaysian Capitalism: Rent-Seekers or Real Capitalists, Honolulu: University of Hawai'i Press; Wain, Malaysian Maverick.

4 In-Won, Hwang (2003), Personalized Politics: The Malaysian State under Mahathir, Singapore: Institute of Southeast Asian Studies.

5 Marcin Walecki (2004), ‘Political Money and Corruption’, IFES Political Finance White Paper Series.

6 Pinto-Duschinsky, Michael (2002), ‘Financing Politics: A Global View’, Journal of Democracy 13 (4) October: pp. 6986.

7 Austin, Reginald and Tjernström, Maja (eds) (2003), Funding of Political Parties and Election Campaigns, Stockholm: International Institute for Democracy and Electoral Assistance.

8 Pareto, cited in Walecki, ‘Political Money and Corruption’: pp. 2–3.

9 Transparency International (2009), ‘Political Finance Regulations: Bridging the Enforcement Gap’, Policy Position #02, Berlin: Transparency International.

10 Walecki, ‘Political Money and Corruption’: pp. 1–3.

11 The Star 12 November 2009.

12 Hofnung, Menachem (2006), ‘Financing Internal Party Races in Non-Majoritarian Political Systems: Lessons from the Israeli Experience’, Election Law Journal 5 (4): pp. 372383.

13 Gomez, Politics in Business; Gomez, Political Business in East Asia, pp. 1–33.

14 Gomez, Political Business in East Asia, pp. 2–6.

15 The Malaysian Anti-Corruption Commission (MACC) is responsible for investigating allegations of corruption involving the abuse of money during party and federal elections. However, the MACC normally only begins an investigation when a complaint is lodged with them.

16 The Prime Minister has concurrently served as Minister of Home Affairs on numerous occasions. The current Minister of Home Affairs is the cousin of the Prime Minister.

17 This Commission comprises a Chairman and six members appointed by the King, after consultation at the Conference of Rulers constituting the rulers of the nine states of Perlis, Kedah, Perak, Selangor, Negeri Sembilan, Johor, Pahang, Terengganu and Kelantan, and the governors of Malacca, Penang, Sabah and Sarawak.

18 Hai, Lim Hong (2005), ‘Making the system work: the Election Commission’, in Puthucheary, Mavis and Othman, Norani (eds), Elections and Democracy in Malaysia, Bangi: Universiti Kebangsaan Malaysia Press: pp. 249251.

19 Article 114 of the Constitution of Malaysia.

20 United Malays’ National Organization (UMNO), established 11 May 1946, is the largest local party with an estimated three million members, while its bastion of support is primarily rural Malays. See Funston, N.J. (1980), Malay Politics in Malaysia: A Study of the United Malays National Organisation and Party Islam, Kuala Lumpur: Heinemann Educational Books.

21 The Malaysian Chinese Association (MCA), formed in February 1949, was originally led by Chinese business leaders. See Koon, Heng Pek (1988), Chinese Politics in Malaysia: A History of the Malaysian Chinese Association, Singapore: Oxford University Press.

22 The Malaysian Indian Congress (MIC) was set up in 1946. See Arasaratnam, S. (1980), Indians in Malaysia and Singapore, Kuala Lumpur: Oxford University Press.

23 For an in-depth history of the Barisan Nasional, see Mauzy, Diane K. (1983), Barisan Nasional: Coalition Government in Malaysia, Kuala Lumpur: Marican and Sons; Mauzy, Diane K. (1993), ‘Malaysia: Malay Political Hegemony and ‘Coercive Consociationalism’’, in McGarry, John and O'Leary, Brendan (eds), The Politics of Ethnic Conflict Regulation, London: Routledge, pp. 106127.

24 The Perak government fell to the Barisan Nasional in February 2009, following the defection of three state assembly members from the Pakatan Rakyat.

25 For detailed history of the Parti Islam SeMalaysia (PAS, Malaysian Islamic Party) see Noor, Farish A. (2004), Islam Embedded: The Historical Development of the Pan-Malaysian Islamic Party PAS (1951–2003), Volumes 1 and 2, Kuala Lumpur: Malaysian Sociological Research Institute.

26 See Gomez, Edmund Terence (ed.) (2004), The State of Malaysia: Ethnicity, Equity and Reform, London: Routledge for a discussion on the reformasi that led to the formation of the party comprising Anwar's supporters in UMNO and NGO activists.

27 See Table 1 for details on the maximum amount that can be spent in electoral contests for parliamentary and state seats.

28 Rahman, Abdul Rashid (1994), The Conduct of Election in Malaysia, Kuala Lumpur: Berita Publishing: pp. 78, 64–67, 125–32.

29 See, for example, National Institute for Electoral Integrity: ‘Poll watchdog howls foul over “vote-buying”’, [accessed 7 March 2012].

30 Gomez, Edmund Terence (1996), The 1995 Malaysian General Election: A Report and Commentary, Singapore: Institute of Southeast Asian Studies, pp. 1524.

31 Information obtained during meeting with parliamentarians on 27 October 2009.

32 An allegation of foreign funding of a prominent politician was made by a former Bank Negara (Central Bank) assistant governor, Abdul Murad Khalid, in a statutory declaration in 1999. He had alleged that PKR leader Anwar, while UMNO's Deputy President, had obtained substantial foreign funding. This allegation was investigated by the relevant agency, which found no evidence to corroborate Abdul Murad's claim. See The Star, 12 November 2009. Anwar also sued a journalist from the UMNO-linked New Straits Times for claiming that he had obtained funds from abroad. The court found in favour of Anwar, awarding him damages for defamation. See The Star 25 November 2009.

33 The MCA needed UMNO to win seats as Malays were heavily over‑represented in the electorate. Even though Malays then comprised only 49 per cent of the population, they constituted more than 80 per cent of the electorate. See Heng, Chinese Politics in Malaysia: pp. 108–109.

34 Muzaffar, Chandra (1979), Protector?: An Analysis of the Concept and Practice of Loyalty in Leader-led Relationships within Malay Society, Penang: Aliran: p. 127.

35 The racial conflagration that followed this election led to the demise of the Alliance and the formation of the Barisan Nasional. See Mauzy, Barisan Nasional.

36 Gomez, Politics in Business, pp. 52–66.

37 Malaysiakini, 28 November 2009, quoting a report in Time magazine. See also Wain, Malaysian Maverick: pp. 114–162, who made a similar allegation.

38 Interview with PAS official on 27 October 2009.

40 Interview with PKR official on 19 November 2009.

41 See, for example, a critique of UMNO's code of ethics in the New Straits Times, 28 December 2008.

43 Milne, R. S. and Mauzy, Diane K. (2002), Malaysian Politics under Mahathir, London: Routledge: p. 25.

44 Ibid., pp. 181–182.

45 Far Eastern Economic Review, 19 July 1984.

46 Milne, ‘Malaysia—Beyond the New Economic Policy’: pp. 1371–1372. According to the currency exchange rate in 2012, 3.06 Ringgit Malaysia (RM) is equivalent to one US dollar.

47 The New Straits Times, 20 October 1994.

48 Gomez and Jomo, Malaysia's Political Economy: p. 128.

49 The Star, 24 January 2009.

50 The Economist, 3 September 2009; The Star, 8 October 2009, and 9 October 2009.

51 See Gomez (ed.) Political Business in East Asia, p. 99.

52 Transparency International, ‘Political Finance Regulations’. See also Kenneth Janda (2005), ‘Political Parties and Democracy in Theoretical and Practical Perspectives: Adopting Party Law’, Washington DC: National Democratic Institute for International Affairs.

53 Ingrid van Biezen (2003), ‘Financing Political Parties and Election Campaigns—Guidelines’, Strasbourg: Council of Europe, pp. 52–53. See also van Biezen, Ingrid (2004), ‘Political Parties as Public Utilities’, Party Politics 10 (6): 701722.

54 van Biezen (2003), ‘Financing Political Parties and Election Campaigns—Guidelines’, pp. 51–52.

55 US Agency for International Development (USAID) (2003), Money in Politics Handbook: A Guide to Increasing Transparency in Emerging Democracies, Washington DC: USAID Technical Publication Series.

58 See The Star 16 October 2009—‘UMNO delegates hit out at GLCs’. This report quotes complaints by UMNO members that GLCs fund opposition parties.

59 Ingrid van Biezen (2003), ‘Financing Political Parties and Election Campaigns—Guidelines’, Strasbourg: Council of Europe, p. 27; Hofnung, ‘Financing Internal Party Races in Non-Majoritarian Political Systems, pp. 375–376.

60 USAID, Money in Politics Handbook.

61 Hofnung, ‘Financing Internal Party Races in Non-Majoritarian Political Systems’, pp. 375–376; see also Janda, ‘Political Parties and Democracy in Theoretical and Practical Perspectives.

62 See Sankaran, R. and Adnan, Mohd Hamdan (1988), Malaysia's 1986 General Election: The Urban-Rural Dichotomy, Singapore: Institute of Southeast Asian Studies; Gomez, The 1995 Malaysian General Election; Puthucheary and Othman (eds), Elections and Democracy in Malaysia.

63 Jason P. Abbott (2004), ‘The Internet and Democratisation’, in Edmund Terence Gomez (ed.), The State of Malaysia: Ethnicity, Equity and Reform, pp. 79–104; Kim, Wang Lay (2001), ‘Media and Democracy in Malaysia’, The Public 8 (2): 6788.

64 Wang, ‘Media and Democracy in Malaysia’: pp. 67–88.

65 Ingrid Van Biezen (2003), ‘Financing Political Parties and Election Campaigns—Guidelines’, Strasbourg: Council of Europe: p. 19.

66 Clift, Ben and Fisher, Justin (2004), ‘Comparative Party Finance Reform: The Case of France and Britain’, Party Politics 10 (6): 677699.

67 Misawa, Mitsuru (2008), ‘An Overview of Problems Concerning Political Donations in Japan’, Columbia Journal of Asian Law 21:2.

68 See The Star 16 October 2009—‘UMNO delegates hit out at GLCs’.

69 Bryan, Shari and Baer, Denise (eds) (2005), Money in Politics: A Study of Party Financing Practices in 22 Countries, Washington DC: National Democratic Institute for International Affairs (NDI).

70 IDEA. 2003. Handbook: Funding of Political Parties and Election Campaigns.

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Modern Asian Studies
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