MAY 6 — In Malaysia, our political and, by extension and inclusion, economic system has been largely driven by and over-reliant on patronage, especially in the form of "money politics” (within the party concerned) and cronyism (in government). Money politics, in the form of cash or in kind (eg, government contracts), are the embodiment and personification of how corruption is so embedded and "enshrined” within our society — as the "tentacles” and nexuses (ie, linkages) spread throughout the complex networks of the inter-dependent political and economic relations of the actors and stakeholders.

One particular area, however, that has not received adequate coverage and attention is in the relationship between charitable bodies or social entities otherwise also known as trusts, namely foundations, and their political patrons.

Foundations are supposed to be not-for-profit in nature and hence should be managed as such even if registered as a company/corporate entity under the Companies Commission of Malaysia (CCM) instead of typically under the Registrar of Societies (RoS).

The C4 (Centre to Combat Corruption & Cronyism) in its report on the specific nexus between foundations and political financing/funding — "Foundations and Donations: Political Financing, Corruption, and the Pursuit of Power” (Prof E Terence Gomez & Lalitha Kunaratnam) — has revealed the "shocking” extent to which such arrangements run deep in our political culture and system.

The 57-page report is replete with damning evidence of the complete lack of transparency and accountability in the source, use and purpose of the funds that flow into the foundations set up by the political elite concerned.

We need to move towards a more transparent political funding culture even as we cannot expect to, realistically, eradicate the practice and culture of 'business donating to politics". — Picture by Hari Anggara

Due to the lack of constraint, the misuse of such funds is an "open season”. As the media release/press statement of C4 states, "[the intersection between foundations and political donations [results in murky waters] as the vulnerability for quid pro quo [something for something] arrangements exist, meaning the system itself is vulnerable to corruption by those in power”. And these, of course, include foundations or trusts set up by the federal government for the purpose of the Bumiputera empowerment agenda.

And there’s the direct and straightforward cases involving criminal breach of trust (CBT). For example, the prosecution of Nasharuddin Mat Isa (former Deputy President of Pas and former Member of Parliament for Yan in Kedah as well as Bachok in Kelantan) has proceeded with 17 counts of CBT and three money laundering charges even as he was given a discharge not amounting to acquittal (DNAA) for the other 16 counts of CBT. 

The report traces back the origins of foundations as vehicles for "slush funds” (particularly for a party’s war chest to be activated for electoral campaigning) to the 1980s when patronage politics had begun to emerge under the guise of corporatisation and privatisation as part of the overall policy to expedite the nation’s industrialisation and ensure the creation of a Bumiputera commercial and industrial community (BCIC).

For example, concessions (ie, government awards) were directly given to selected private proxies of which the ultimate beneficiary or owner was the then ruling party of Umno — the household names in those days were Renong and UEM (now merged into the UEM Group controlled by Khazanah, our "sovereign wealth fund”).

To be sure, Malaysia isn’t unique in this as Prof Terence Gomez has highlighted in the book, Political Business in East Asia (Routledge, 2002). See also China in Malaysia: State-business relations and the new order of investment flows (Palgrave MacMillan, 2020) in relation to the nexus between politics or, more precisely, the State (government) with business, including GLCs/state-owned enterprises (from both Malaysia and China).

Hence, just as there are government-linked companies (GLCs) that are deployed to funnel low-key donations, there are Umno-linked companies ("ULCs”) which also served as conduits for the party’s source of secret slush funds. It’s from these practices involving the nexus between politics and business (corporate) that foundations too became entangled in the orbit of political patronage.

As a quick summary, according to the report, the lessons learnt from the current or on-going court cases involving prominent erstwhile ruling elites are, among others: