Najib mulling campaign finance reforms, including ban on foreign donations

Malaysian Prime Minister Najib Razak speaks during a Barisan Nasional party election event at a mosque in Sungai Besar, Selangor, Malaysia on June 9, 2016.
Malaysian Prime Minister Najib Razak speaks during a Barisan Nasional party election event at a mosque in Sungai Besar, Selangor, Malaysia on June 9, 2016. PHOTO: BLOOMBERG

KUALA LUMPUR (BLOOMBERG) - Malaysian Prime Minister Najib Razak will consider a ban on foreign political donations that would potentially prevent a repeat of the funding scandal that has shadowed his administration for more than a year.

Other proposed reforms include allowing unlimited donations from Malaysian citizens or companies, and mandatory identity disclosure for donations above RM3,000 (S$1,004.66) a year.

The changes were recommended by a committee set up last year by Mr Najib.

"The laws that are in existence in governing political activities in the area of expenditure and financing are very lax," said committee chairman Paul Low, who is also minister in charge of governance, integrity and human rights. Mr Low added that if such rules were in place a few years earlier, it would have prevented the political furore surrounding past donations to Mr Najib.

"Straight away, foreign funds are not allowed," Mr Low said in an interview last week in his office.

Mr Najib has said he received a "personal contribution" of US$681 million (S$946.08 million) from the Saudi Arabian royal family in his bank accounts before the 2013 general election. Cleared by Malaysian investigators earlier this year of any wrongdoing, Mr Najib said he later returned US$620 million.

US investigators allege at least US$700 million was siphoned from Malaysian state fund 1Malaysia Development Bhd into accounts controlled by a top Malaysian official whose description fits Mr Najib.

The push to overhaul Malaysia's campaign finance laws has gained momentum since 2008, when Mr Najib's Barisan Nasional coalition lost its two-thirds parliamentary majority for the first time after more than five decades of uninterrupted rule.

Mr Low had proposed a similar regulatory framework for donations when he was president of Transparency International Malaysia and was appointed by Mr Najib to the Senate following the 2013 election.

"Because it's unregulated, money politics becomes quite pervasive, both in terms of election as well as party politics and you hear of so many abuses," Mr Low said. "When money becomes the pervasive factor in determining who get elected and who not get elected, then you might not get the right candidate."

"The status of the report is very straightforward: it depends on whether the prime minister wants to do it or not," said Mr Wan Saiful Wan Jan, the head of the Institute for Democracy and Economic Affairs, who also sat on the committee that produced the report.

A spokesman for Mr Najib, who has consistently denied any wrongdoing over donations, said the premier first proposed detailed reforms of political funding in 2010, shortly after taking office, but those changes were blocked.

"The opposition's allegations on political funding are therefore misleading and hypocritical, as it was they who prevented reforms in the first place," Mr Najib's press secretary, Mr Tengku Sariffuddin, said in an e-mail.

He said Mr Najib had instructed the government to revisit the issue to ensure a regulatory framework is in place. "The committee's recommendations will be presented to Parliament for transparent cross-party debate."

Mr Low said if the committee's recommendations were accepted, then government-linked corporations and beneficiaries of government contracts would be barred from making campaign contributions and politicians would be required to deposit all donations in a special account.

Political parties and politicians would have to submit detailed expenditure reports to an independent controller.

He said the framework would extend beyond campaign periods. He added he expected a proposal to disclose the identity of those giving more than 3,000 ringgit would lead the opposition to say it could deter potential donors for fear of retribution from the government of the day.

"I think there are some good elements, but there are also some major shortcomings," said opposition Democratic Action Party lawmaker Ong Kian Ming, citing a proposal to allow unlimited donations as one area of concern.

"Even in most developed countries like the US and other places they have a limit on how much one person or company can donate," Mr Ong said. "Obviously the party that's in power would be able to attract much more donations compared to opposition parties," Mr Ong said, adding it could be subject to abuse.