Political money needs more than a law

Malaysia aims to regulate political financing through more than just crafting legislation; it seeks a comprehensive system that funds political parties legitimately while safeguarding public interest. The country can draw inspiration from political financing models implemented in countries like Canada, Germany, Denmark, and Sweden.

However, it is important to note that there isn't a perfect solution. Democracies employ various combinations of public funding, private donations, spending caps, disclosure requirements, and independent oversight, all varying in their implementation. Canada, for instance, offers a mixed model of political financing, blending public and private funding with stringent financial disclosure provisions.

The country limits donations from foreign entities, bans contributions from public enterprises, sets campaign expenditure limits, and mandates the public disclosure of financial reports by political parties, overseen by an independent electoral authority. According to the Organisation for Economic Cooperation and Development (OECD), Canada achieves 90% of its regulatory criteria for political finance and meets 86% of those criteria in practice.

Denmark and Sweden, on the other hand, provide an alternative approach. Both nations offer public funding to political parties while permitting private contributions. Denmark requires parties to publish financial reports, though it still permits certain anonymous donations and has some gaps in campaign reporting. Sweden, similarly, mandates public disclosure of political party finances, including contributions exceeding a specified threshold, via an online platform.

Despite these measures, the OECD has identified weaknesses, such as inadequate restrictions on anonymous and foreign donations, which may expose political decisions to undue influence from foreign sources or organized crime. Germany adopts a mixed model as well, combining public support for political parties with the allowance of private donations.

Parties in the Bundestag must file financial reports, which are made public after review, and violations can result in financial penalties. Countries implementing a mixed model of political funding generally perform well in the Corruption Perception Index (CPI). For example, Denmark secured the top spot and Sweden claimed the sixth position in the 2025 CPI, earning scores of 89 and 80, respectively.

Malaysia is presently reforming its political financing landscape through entities such as the Institute for Democracy and Economic Affairs and the All-Party Parliamentary Group, aiming to curb corruption and enhance transparency. The proposed model for Malaysia primarily reflects the State Funding Model, also referred to as the Public Funding Model.

However, merely relying on public funding is insufficient to ensure political integrity, as evidenced by Uzbekistan's transparency concerns and Tunisia's abandonment of public funding after just two years, both of which maintain relatively low CPI scores. Transparency International Malaysia has been advocating for a Political Financing Act that mandates financial disclosure, prohibits anonymous and foreign donations, and establishes an independent regulatory body.

In 2016, the National Consultative Committee on Political Financing proposed 32 reforms, encompassing bans on foreign donations, restrictions on funding from state-owned enterprises, and the introduction of a Political Donations and Expenditure Act. The most crucial takeaway is that Malaysia should not simply replicate a model from another country wholesale; rather, it should develop a hybrid model grounded in five key principles.

Firstly, reasonable public funding should be provided to political parties that meet transparent criteria, such as the number of votes or parliamentary seats obtained, thus reducing reliance on substantial private donations. Secondly, private donations should be regulated. Individuals and legitimate organizations should be allowed to contribute, but there must be clear limits and strict rules governing prohibited sources of funding.

Thirdly, full transparency is essential. Significant donations should be publicly disclosed, including real-time reporting of donations and the enforcement of campaign spending caps. Anonymous political contributions should be strictly limited. Fourthly, an independent oversight mechanism is vital. Political financing should be overseen by an institution separate from the government and political parties, with the authority to audit financial records, investigate violations, and impose appropriate penalties.

Finally, continuous reporting throughout the political cycle is necessary, not just during election periods. Political parties raise and spend funds throughout the year, and the public has the right to know the origins and destinations of this money, thereby fostering greater accountability. This serves as a cautionary note: merely enacting a Political Funding Act will not resolve the underlying problem.

The core issue lies in trust. Receiving political donations should not engender an invisible indebtedness between donors and politicians. Citizens should be able to ask four fundamental questions: who provided the money, how much did they contribute, how was it utilized, and whether any political favors were expected in return? While political parties require funding to operate, democracy necessitates robust rules to ensure that money serves the political process rather than being used to manipulate politics. The writer is the president of the Malaysian Integrity and Governance Society.