From Stalemate to Reform: Why Malaysia Still Cannot Pass a Political Financing Law

Prepared byFairus Fauzi

1 September 2026

On 8 May 2026, a reporter asked Malaysia's law minister, Azalina Othman Said, whether the long-promised Political Funding Bill would be ready before the next general election. Her answer was disarmingly honest: “I honestly do not know.”

That single line says more about Malaysian politics than most policy papers manage in pages. The bill has been “under discussion” since 2009. Four prime ministers have held office since then. Not one draft has ever reached Parliament.

It would be easy to file this away as just another stalled bill in a country with no shortage of them. However, political financing law decides something more basic than most legislation, it decides who gets to buy political influence in Malaysia and how much accountability comes attached to that money. Right now, the answer is almost nobody is asked to account for anything.

Why this is not just background noise

Malaysia has already seen what an unregulated system can produce. US investigators traced roughly USD681 million from the 1Malaysia Development Berhad (1MDB) fund into the personal bank accounts of then-Prime Minister Najib Razak, a figure first laid out in a 2016 civil forfeiture filing by the US Department of Justice. Malaysian courts have since separately convicted Najib on multiple criminal charges tied to 1MDB, including a 2025 ruling that found he played a direct role in syphoning RM2.3 billion, roughly USD568 million, from the fund. The exact figures differ across these proceedings, but the pattern they confirm is the same; enormous, undisclosed sums moved in and out of a sitting prime minister’s accounts, and no law required him to explain where any of it came from.

That is the part people tend to miss, that 1MDB was not a failure of enforcement. It was a system working exactly as designed, because nothing in Malaysian law said it could not happen. As of 2026, the only relevant rules are the Election Offences Act 1954, which caps candidate spending but only during campaign periods, and the Societies Act 1966, which makes parties file accounts that the public never gets to see. Outside an election cycle, anyone can give a party or a politician any amount of money, with no disclosure required at all.

Malaysia’s own corruption scores tell the same story in slower motion. Transparency International’s Corruption Perceptions Index put the country at 53 out of 100 in 2019, its best showing on record, then watched that number slide to 47 by 2022 as three prime ministers cycled through office in under three years. It has since recovered to 52, but Prime Minister Anwar Ibrahim’s own target, a top-25 global ranking by 2033, is not reachable through incremental fixes. Of every structural gap analysts point to, the missing financing law is consistently named as the most obvious one still sitting untouched.

Source: Transparency International, Corruption Perceptions Index, 2013-2026. Three times, Malaysia almost got this law. Three times, it did not.

This is not a story about apathy, as reform has had real moments of momentum, and each one collapsed for a different but related reason.

After the 2008 election rattled Barisan Nasional’s grip on power, the ruling coalition calculated that more transparency meant less electoral advantage and shelved the bill before the next contest. After the 1MDB scandal broke in 2015, civil society and international pressure pushed harder than ever, and the Najib government simply absorbed the pressure and moved on. After Pakatan Harapan’s historic 2018 win, the new government had arguably the strongest reform mandate in the country’s history and was actually drafting the bill until the Sheraton Move collapsed the coalition just 22 months later, and the draft died with it.

Three governments, three different sets of winners and losers, one identical outcome. That is not a coincidence but a structural problem.

The reform that defeats itself

Here is the uncomfortable logic at the centre of this issue: a political financing law has to be passed by the very politicians whose advantage depends on the current system staying opaque. Asking Parliament to legislate against its own financial habits is, by design, an uphill climb before a single clause is drafted.

A bigger, more diverse coalition should, in theory, make this easier. More parties means more competing interests pushing for change. In Malaysia’s case, the opposite has happened. The Madani government is the broadest coalition the country has had, but breadth has multiplied the number of actors with something to lose, not strengthened the case for reform. Barisan Nasional still carries six decades of accumulated ties to government-linked companies (GLCs). Sarawak’s GPS and Sabah’s GRS have long benefited from generous, discretionary federal funding that a transparent, rules-based formula would almost certainly shrink. Asking either bloc to vote for a law that narrows its own advantage is asking a lot.

That tension is already visible inside the coalition. In April 2026, Pasir Gudang MP Hassan Karim of PKR publicly questioned whether the government was serious about the bill at all, while Amanah’s Faiz Fadzil insisted it would still be tabled before the next election. Two coalition partners, two completely different reads on the same commitment. That gap is the stalemate, in miniature.

There is a second, quieter version of the same problem at the state level. States like Perlis, Kedah, Perak and Negeri Sembilan depend on federal transfers for more than 70% of their revenue; Kelantan and Terengganu raise less than half of what they spend on their own. For these states, pushing for financial transparency risks disrupting the very channel of federal goodwill they depend on to function. A donation cap that leaves discretionary transfers untouched closes one door while leaving another wide open.

What the rest of the region can teach us

Malaysia is not unique in struggling with this, and looking at neighbours who have tried different approaches is useful, mostly for what it rules out.

Indonesia shows that the law on paper matters less than who enforces it. Its Corruption Eradication Commission (KPK) built a genuinely strong track record of holding politicians accountable, right up until Parliament moved to weaken its independence in 2019. The lesson is not to write a tougher law but to protect the body that enforces it.

The Philippines shows the opposite failure mode, that is, disclosure without consequences. Candidates file post-election spending reports with the Commission on Elections, but violations rarely carry any real penalty, so the filings have not moved the needle on corruption at all.

Thailand offers a warning of its own. Its National Anti-Corruption Commission and Constitutional Court have the power to dissolve political parties over financing violations, but that power has increasingly been used as a tool in political fights rather than a check on corruption.

Put together, these three cases point to one design requirement Malaysia cannot afford to skip: an enforcement body that answers to neither the executive nor the courts of political convenience. That has to be built into any bill from day one. Bolting it on later will not work.

It is also worth noting how far behind the region Malaysia actually is on the basics. Thailand caps donations and publishes party accounts annually through its Election Commission. Indonesia provides state subsidies to parties proportional to their seat share. Even the Philippines, despite its enforcement gaps, at least requires post-election spending disclosures. Malaysia currently has none of these: no caps, no disclosure, no public funding, and no firewall between government-linked companies and party coffers. On paper, Malaysia is not behind its neighbours on one or two technical details. It is behind on the entire framework.

So what would an actual law look like?

Strip away the technical language, and a workable Malaysian political financing law needs to do a handful of things.

The easiest part has to go first, which is by making donations visible in real time, capping how much anyone can give, banning anonymous giving outright, and cutting government-linked companies out of party financing entirely. Civil society groups have agreed on versions of all three for over a decade, and there is little technical reason they could not pass in a single parliamentary sitting.

The harder, more important changes are structural, and they are where the real test lies.

The Election Commission needs to be pulled out from under the Prime Minister’s Department and given real audit powers over party accounts, the way the Constitution always intended but practice never delivered. Indonesia’s KPK, before Parliament clipped its wings, is a useful template for what that independence should look like in practice.

Public funding tied to vote share would shrink every party’s reliance on private donors and narrow the resource gap between government and opposition, the same model BERSIH 2.0 has been proposing for years.

Internal party elections, currently a black hole of undisclosed spending where party warlordism thrives precisely because nobody’s watching, need the same caps and disclosure rules as general elections.

Federal transfers to states need to move on to a needs-based formula so that loyalty to Putrajaya stops being a financial necessity for poorer states. This last one rarely gets discussed alongside political financing reform, but it should, as a donation cap that leaves the transfer system untouched only closes one of two doors money can walk through.

Why this should matter to you

It is easy to treat political financing as an insider’s issue, abstract and procedural, the kind of thing that belongs in a policy brief and not a dinner conversation, but it should not be that way.

Every contract awarded to a politically connected company instead of the better bidder, every state government too financially dependent on Putrajaya to push back on anything, every internal party election decided by whoever can spend the most, traces back to the same unregulated flow of money this bill is supposed to fix. It shapes who gets elected, what gets built, and whose interests get protected when those decisions are made, whether or not you ever notice the connection.

This is closer to home than it sounds. It is the flood mitigation project in a fiscally dependent state that gets pushed back another year because the state government would rather not be seen lobbying Putrajaya too hard. It is the highway or water concession that goes to a politically connected operator and shows up later as a toll hike or a tariff increase you pay without ever knowing why. It is the clinic upgrade or rural road that stalls because the federal allocation behind it was never really about need in the first place. None of these moments come with a label that says “this happened because there is no political financing law,” but the absence of that law is precisely what lets money move first and accountability come later, if it comes at all.

This is not about taking sides between political parties. Every coalition currently in or near power has benefited from the status quo at some point, which is precisely the problem, which sees the system rewards whoever is currently winning, regardless of their colour. The stalemate is not a Pakatan Harapan failure or a Barisan Nasional failure. It is a structural one, and it will keep producing the same outcome under whichever coalition holds power next, unless something about the underlying incentives changes.

Three reform windows have already closed: 2009, 2015, and 2018. A fourth is closing now, in roughly the same shape as the previous three. The minister’s “I honestly do not know” was not an evasive answer. It was an accurate one. Whether that changes before the next election depends less on whether good proposals exist, they already do, than on whether enough of the people who would have to pass this law are willing to vote against their own short-term advantage. History suggests that is the hardest reform of all. References

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13. US Department of Justice. (2016). United States files civil action to recover approximately $1 billion obtained from corruption of Malaysian sovereign wealth fund [Press release]. https://www.justice.gov/opa/pr/united-states-files-civil-action-recover-approximately-1-billion-obtained-corruption-malaysian