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Political party finance

Muzaffer Ahmad

Political parties are organisations. Any organisation to be effective is resource dependent. Such resources include human resource, financial resource, material resource and technological resource. With advancement of time and technology the combinations of such resources have varied over time. Political parties are no exception. In earlier days it was the voluntary manpower resource that provided the basic strength to any political organisation. Though volunteerism is not dead even in highly monetised economies, the organisation of volunteers and making them work need supplementary resources including finance. This is the primary cause of decline in voluntary organisation.

Amran Hossain

Political parties to be effective need visibility and require to be heeded. Political parties by their very nature would like to influence policy decisions of the state. In order to do so it is imperative to create a large enough support base. Creating such support base requires organising activities that attract public and media attention. It has to make its mission and vision known. These objectives need be cogently articulated and perceptively argued to sound a sympathetic chord in the minds of many. This requires organising discussions, rallies, campaigns and events that will be broadly grouped as work related to political education.

Political parties compete for political power. Competing for power in a democratic system requires sustained work to convince people of this intention and capability. Even when the party is in the seat of power, this is easy as well as difficult. Easy because it is easily accessible to resources, and difficult because the activities undertaken with those resources are under scrutiny in a politically conscious society. Any society has many interest groups, which vie for the attention of the party in the seat of power. These groups want access to state resources and dispensations and at the same time hold promise to provide resources for the party and personalities. The clash of interest can create problems but appear to hold keys to opportunities for future. This is the apple in the heaven that helped to cause the original sin and the fall of Adam and Eve.

If the party is not in the seat of power then it has to prepare for the next round of competition. Such competition plays include critiquing the polities, exposing the vested interest groups and political economy of the support base, re-organising the support base through positive activism, looking for future personnel that have the potential to tip the balance, making their governance and policy alternatives clear and always undertake activities at various levels to enlarge the support base. These require resource, which is more difficult to come while in opposition. But ability to create an impression of better alternative is key to effective competition for power.

Having said that political parties in power and in opposition need resources, the focus of the discussion is limited to financial resources as it is assumed that availability of finance can access the other resources easily. I personally do not endorse that simplistic idea. The other point to be noted is that in the discussion of political party finance attention is given disproportionately to electoral finance as at that time the need for resources is at its peak. However, any effective organisation, which keeps its identity separate from the state, requires an even flow of resources. Inability to keep separate state functions and resources while in power from party functions and resources, has often led to accusation of misuse of power and position at times leading to allegation of corruption, distortion of democratic political competition and influencing the electoral process. Research studies on political finance show that spending on where the finance comes from and with what motivation; how the finances, particularly state finance, are distributed on political considerations; what they are spent on and through which intermediaries and consequential benefits that accrue to party functionaries -- most often disrupt efficiency of state functionaries, distort good democratic practices and breed corrupt electoral practices as well as political activism.

allegation of corruption, distortion of democratic political competition and influencing the electoral process. Research studies on political finance show that spending on where the finance comes from and with what motivation; how the finances, particularly state finance, are distributed on political considerations; what they are spent on and through which intermediaries and consequential benefits that accrue to party functionaries -- most often disrupt efficiency of state functionaries, distort good democratic practices and breed corrupt electoral practices as well as political activism.

The sources of political party finance are many. Contributions of members and registered supporters are considered to be basic as this creates a support base and a sense of becoming stakeholders. This has received in recent years very little attention from our political parties. The reason being small amounts are contributed by individuals of small means in a poverty stricken country. But the value of regular support of small amount lies in reconfirmation of support and creating a reservoir of volunteers at times of peak activity. The other reason is taking people for granted is risky as high dependence on the charisma of hereditary leaders at all levels in the feudalistic political culture that we have nurtured, even when we vow in the name of democracy, is problematic. Last US presidential election has shown the power of the grassroots populace if it is garnered properly. The third reason is the culture of state patronage. The party in power believes that such patronage is more effective in creating support base, while the party in opposition believes that promises of state patronage if put in power are equally effective. Thus the competition is in pronouncing promises and not in creation of support base through collection of contribution and undertaking small party activities to respond to local needs as against state intervention through bureaucracy and members of Parliament or local bodies. Our political culture is not people-oriented to understand the importance of small contribution and of timely actions at local level. The top down party hierarchy is possibly the root cause of this gravely undemocratic distortion.

As membership contribution is not given much importance, the parties have become dependent on donor contributions. The donations have come from primarily businessmen. This has seen the rise of politician businessman in the political hierarchy of the parties. These businessmen in turn had enjoyed and continue to enjoy state patronage in various forms and receive protection when they confront legal process. The businessman often built in such contribution as business cost in getting the allocation of contracts. In ultimate analysis it is the poor tax payer who unknowingly pays the money but the benefit is reaped by businessman and through him the party. Many examples galore. One is the monopoly in mobile phone, the other is syndication in import trade, third is coalescing for tendering of government contract and so on. Such practices have now overflowed into local bodies, private undertakings, and adopted by labour organisations, student organisations and even professional organisations. The business transaction costs are often paid abroad and recycled as donations from overseas supporters. The donation disclosure is not legally regulated nor is it transparent. But international connectivity has not only created distortion in our business finance but also has resulted in undue influence of such donation organisers and lobby groups in party functions.

As there is no accountability with respect to finance within parties, the clear picture is difficult to emerge. The election commission has asked for the audited balance sheets from political parties, which will be available, a year from now. Knowing the quality of the audit and also the capacity of election commission to undertake examination of such reports, one remains apprehensive of the impact of such donations on the functioning of the political parties. It is necessary to mention that political party finance has never been subject to civil society audit. The practice of disclosure is in infancy and culture of secrecy is supreme.

finance has never been subject to civil society audit. The practice of disclosure is in infancy and culture of secrecy is supreme.

This brings us to the issue of state funding of political parties. To avoid corruption related party finance, to protect the integrity, authority and neutrality of the government under multiparty system, and to create environment in which reputation and legacy of statesmen can be upheld in the interest of democratic development, there have been suggestions to provide state finance for political parties. Such provision has also been argued on the ground of allocative and distributive distortions inherent in the donations by individuals and companies leading to inequities and often injustices. It is also agreed that such donations resulting in state patronage lead to indirect taxation of indeterminate nature. The substitution of donation by state funding of political parties would help enforce regulation of attitudes, conduct and activities that are promotive of democratic competitiveness and public disclosures of sources of income and expenditure leading to transparency. Accountability is absolutely necessary for building a culture of civility and cooperation to avoid extremism and confrontational situation.

There is universal agreement that for political activity money has become essential as it compensates for a lack of volunteers and their services and it has become a surrogate for commitment. This stride in value system requires transferable and convertible resource to buy access, favours, skills, goods and services so difficult to obtain otherwise in a highly monetised free market economy. In other words, politics has become an increasingly money driven activity. But such monetisation involving political party funding has resulted in scandals of diverse proportions. This has called for reforms. The contexts of reform impulse are (a) a lack of transparency, (b) ineffective or inadequate regulation, (c) high correlation between large contribution and influence on party leadership etc. The basic concern is unregulated, nontransparent party finance corrupts the political process and embedded corruption leads to unjust governance. The research on party finance has provided many bimodal paradigms i.e. public versus private, domestic versus foreign, institutional versus individual, overt versus covert, large versus small and legal versus illegal etc. These draw attention to key issues despite overlaps.

This study seems to indicate that membership fees have become increasingly inadequate to meet organisational and campaign cost. To meet such inadequacies party members in executive, legislative branches (MPs) as well as in local bodies are required to pay a percentage of their salaries (income) to their parties as in Germany. In the United States there is a levy on members who are employed in local, state and federal government. The justification seems to be that such positions owe much to party functions and images. The externalities of such a compulsion lead to politicisation of executive functionaries and an encouragement to recoup such costs through various non-transparent means. In the final analysis, a party is an organisation of the individuals and in a democratic system it is accountable to its members. Then legitimate contribution, such as, levy from individual members even when exclusionist to some extent, is considered necessary to create a sense of belonging and ownership. The debate on membership levy is longstanding but the distortive effect of levy and inherent patronisation are real. The ultimate impact is on the taxpayer through inefficiency impact even when such levy is termed as additional contribution.

Fund raising through events such as rallies, sale of mementoes, publications etc., though advocated, it is often considered a threat to party image, if done on a large business scale, which requires organisational format of a different nature. Such activities have often been undertaken at the peak of political activities e.g. election as a source of supplementary finance. The issue of voluntary regulation to protect legitimacy of finance has been raised as in the west arms traders and drug peddlers often found a way into political processes through such event related finance as in the case with donations. Therefore transparency is essential with respect to such sources as donations and peri-business activities.

External funding i.e. funding from organisations and individuals from abroad has been subject to terse criticism as it is said that money talks. Election commission has taken note of it when they raised issue with foreign soil based support organisations of political parties which justify such units as a natural consequence of globalisation and emergence of non-resident communities. The basic issue is not contributions by NRBs but legitimacy and colour of such finances. It is known history how foreign interest peddlers make their way through such finance to domestic politics. In developing economies such contributions often bring the MNCs in contact with such efforts. The basic issue is protection of the country's interest, particularly economic interest that must be upheld. In order to do so, legitimacy, transparency and accountability with respect to such finance are basic like in all other sources of finance in order to avoid corrupting influence.

Electoral finance has been discussed in recent years as a source that often involves corruption risk and distorts impact on political competition and electoral process. Even though highly desirable, the political competition is far from perfect and in an imperfect competition it is necessary to create 'level playing field' as far as possible to protect multiparty democracy itself. Such intent obviously calls for regulation with respect to electoral process so as to limit the need for electoral finance. One such area is to define the limit, the time and space for electoral activities. In order to reduce the need for electoral finance, election commissions often have defined the time duration. But experience in developing countries shows that most often this is not heeded by candidates and parties. The election commissions have also defined the nature of legitimate activities and those, which are considered non-legitimate. Again the experiences show that these have been observed in breaches. Even then a cap on electoral funding, indicating the sources of legitimate finance, enumeration of time, space and limits of legitimate activities-- helps to set standards and the commissions can improvise on the legitimacy tests. In this context it has been suggested whether there should be public subsidies on the basis of known support base (e.g. votes secured in elections) to curb undesirable influence and promote political competition. But this has found little support in economies, which have limited finance for developmental activities. In this context it has been argued that political development is as necessary as socio-economic development. The alternative to public subsidy to parties and candidates is for the commission to organise campaign activities on their behalf (e.g. projection meeting, publication of information on candidates and parties etc). But there is a limit to which election commission can undertake such activity and it cannot substitute campaign by candidates and parties.

This brings in the issue of control of such activities and regulation of sources and amounts of finance. But legislation for accountability within parties and accountability to the state and the electorate are necessary to ensure transparency and legitimacy. But this is not sufficient. This is necessary to restrain influence of many but not sufficient to ensure transparent political competition.

The sufficiency is provided by a perceptive citizenry that upholds democratic norms in political activities including elections. Such a citizen can form oversight group to empower electorate to demand disclosure about finance and other related issues from parties and candidates before and after elections. Such disclosures must be evaluated for legitimacy and completeness. Association with media and investigative reporting on parties and candidates including their activities inclusive of cost of such activities will help. Such citizen groups need to work to make political competition feasible. Disclosure and apparent transparency may not always ensure legitimacy and appropriate accountability. But disclosures without political freedom, freedom of press and independence of election commission and judiciary are again not much helpful. Thus political environment ensured by fundamental rights must precede legitimacy and accountability issues. The nation must be made aware of ethical standards in political activities which are difficult to legislate but is a necessary condition of accountable political party activities. However, the political finance rules must be un-ambiguous and realistic while the regulatory bodies must be independent in its activities. But only rule of law makes this possible and effective. Thus political finance is a broad issue about which steps must be taken with care and in the interest of the electorate and democracy.

To conclude, political party finance in Bangladesh is not transparent, as is the case with electoral finance. Sources of political party finance can only be inferred as no audited balance sheets are available and till now the reporting on finance within the party or to election commission is weak. Such reports when submitted are far from being comprehensive and depth is missing. Disclosure by parties or the candidates in election is flawed and thus not reliable. Sanctions as contained in RPO are hardly applied. The state oversight and civil society oversight are yet to become functional. The progress made in the last election is limited but an initiative is noticeable. If and when the data now available with the election commission is analysed we can have a better insight with respect to political party finance. But till date it is a dark area that is waiting for light. It is the work of civil society organisations and the media that has created an awareness leading to demand for disclosure, accountability and transparency in this regard. We have miles to go from here.

We carry this re-print of an article that late Prof Muzaffer Ahmad had contributed to the 19th Anniversary issue of The Daily Star.