Privatizing democracy: A timely concept

Democracy is priceless, but it has a cost. Expenses incurred by electoral campaigns and political parties are the normal costs incurred by a functioning democracy.
If political financing appears to be a necessary means to a democratic end, one cannot deny that the incursion of money into politics has raised concerns over its impact on democratic consolidation.
We know that this is the main source of optimism for Indonesia’s fight against corruption. But corruption itself still hampers democratic consolidation, as it tends to direct political accountability towards clientelism, and vote buying, a phenomenon popularly known as “money politics”.
Trying to explore the link between political financing, democratic consolidation and corruption, raises a critically important question: Who should finance political parties?
In his essays on party financing in Indonesia, Marcus Mietzner said the government provided lucrative public funding to political parties between 2001 and 2005, before it cut support by nearly 90 percent in 2006. This substantial reduction created a problem given the government’s new legislative seat funding formula.
Parties are now increasingly encouraged to seek their own funding, which they do by intensifying internal and external fund-raising. These efforts include exploiting alternative state funds and selling nominations for public office to affluent non-party figures.
They are also asking legislators to increase their contributions. For example, before the cut, party boards were asked to contribute from 10 to 20 percent of their salaries. After 2005, however, this figure reached up to 40 percent. In addition, House legislators have asked to help pay for party functions and other activities, further reducing their take-home salaries. For most legislators, these kinds of demands will force them to raise more money through corrupt practices and illicit fund-raising.
In a recently passed amendment to the Law on Political Parties, limits on private donations to political parties has been increased from Rp 4 billion (US$444,000) to Rp 7.5 billion annually. We believe that not only the limit on private donations should be reconsidered, but also the reliance on the private sector to finance political parties.
Such a move was justified by economic and democratic arguments, calling for a drastic reduction of public spending on political parties to put state resources to a better use and to force political parties to develop and consolidate their supporters. Recent experience has however proven that advocates of such a policy were sorely mistaken on two accounts.
First, the impact of such policy on budget efficiency is highly questionable. Indeed, the drying up of previously generous state subsidies has left political parties in dire need of alternative sources of funding such as “indirect state subsidies”. For instance, shortly after the government regulation went into effect, the House responded quickly with an increase of more than 80 percent in take-home-pay for each legislator.
Political parties also tried to benefit from participation in the government. Ministers, who represent particular political parties in the Cabinet, and regional heads were pressured to divert state funds by accommodating businesses and individual closely associated with their parties through arranged tenders. Thus, it is no coincidence that since 2005, as many as 150 regents and mayors have been charged with corruption, mostly related to public procurement.
Second, the role of external donations is not solely limited to the usual lobbyism and influence-seeking by interested donors. More importantly, Indonesian parties have effectively begun to surrender some of their core political functions in exchange for vital financial assistance.
As financing becomes more important, affiliated people tend to play a bigger role in securing party nominations. Generally, political parties sell the nominations for legislative and executive office to wealthy individuals who have no particular connection with the party. Thus, in 2005 local elections, only 22 percent of party nominees were party officials. The large majority were bureaucrats and entrepreneurs, followed by groups of former security officers, civil society leaders and media figures.
Bidding for party leadership by affluent business figures tends to increase volatility in leadership and mobility between parties, thus blurring political lines of demarcation and making it increasingly difficult for voters to read the political and ideological positioning and consistency of political parties.
The absence of political accountability and the presence of strong figures with charisma and popularity has contributed to a drastic increase in the cost of electoral campaigns, when bidding wars takes place to buy votes.
Adjustments in political financing regulations are desperately needed to curb money politics and rebuild political accountability towards party constituencies. Amending the Law on Political Parties should be the first step in turning things around. However, House Commission II’s decision to almost double the limit imposed on private donations in the draft amendment has been widely criticized by many as a move to strengthen the control of affluent businessmen on political parties and state institutions.
Thus, institutional reforms should be focused on reducing the financial vulnerability of political parties. An increase in state subsidies will not solve all the problems by itself, but will foster the institutionalization of political parties, the consolidation of their leadership and positioning at both national and local levels.
A ban or at least less dependence on private sector contributions will decrease the leverage of dominant firms and interest groups to influence policy making and get state resources. By doing so, we can promote fair political competition and development of cohesive constituencies.


Kumba Digdowiseiso is an economic policy researcher and Vidya Dyasanti is a program manager at Transparency International Indonesia.      

Opini The Jakarta Pos 29 Desember 2010