Parties spend millions on elections, facilitating corruption and criminalisation, experts say

March 10, 2020

Prithivi Man Shrestha, The Kathmandu Post, March 10, 2020

The Election Commission plans to institute software to track party finances but officials themselves are skeptical if it will do any good.

The finances of Nepal’s political parties have always been murky. The public largely tends to assume that there are billions in dealings, primarily because the parties tend to be exceedingly opaque when it comes to their finances and how they are mobilised, especially during elections.

Three years after the last elections, there is a persistent perception that ‘honest people’ cannot contest elections, given the massive sums of money that are spent.

In the last election, despite the Election Commission placing a ceiling of Rs2.5 million on election expenditure, parties’ spending is believed to have run into the billions.

Confronted with this massive mobilisation of funds in order to contest polls, the Election Commission is now planning to introduce a special software to ensure transparency in the resource mobilisation of political parties. But officials themselves are sceptical if the software will do any good.

“We are preparing a software to record the incomes and expenditures of every political party registered with the commission,” Chief Election Commissioner Dinesh Thapaliya told the Post. “All the political parties will have to update their resource mobilisation on a monthly basis.”

Experts and anti-corruption campaigners say that a failure to ensure financial transparency when it comes to the political parties has not just facilitated corruption but is also allowing the criminalisation of politics. If political parties and their candidates spend disproportionate amounts of money while campaigning, they are more inclined to recoup the money after winning the elections, which leads to a vicious cycle of corruption.

And if large amounts of cash are required to adequately contest the elections, candidates are likely to turn to criminal elements to finance their campaigns, which in turn leads to corruption later on.

According to Shree Hari Aryal, a senior lawyer and anti-corruption activist, the growing cost of elections has given rise to policy corruption as elected officials are in debt to the interest groups that fund their campaigns.

A 2017 study conducted by the Election Observation Committee Nepal, a poll monitoring body, in 2017 had revealed that each candidate winning the federal parliament elections under the first-past-the-post system spent an average of Rs21.3 million. The runners-up spent an average of Rs14.9 million and the remaining candidates spent Rs8.5 million.

The Election Commission had set a cap of just Rs2.5 million for each candidate directly contesting a seat in the House of Representatives.

Likewise, a winning candidate for provincial elections under the first-past-the-post system was found to have spent Rs12.5 million, while runners-up spent Rs11.7 million and others spent Rs7.1 million, according to the study. The election body had set a cap of Rs1.5 million.

Overall, candidates from local, provincial and federal candidates spent Rs96.91 billion, according to the report.

In light of these figures, Bhojraj Pokharel, a former chief election commissioner who is credited with successfully holding the 2008 Constituent Assembly elections, recently told the Post that honest people cannot contest the elections anymore.

According to commission officials, political parties, however, had, in their reports submitted to the Election Commission, said that their candidates spent “within the limits”.

But no one knows where the money came from, as the parties are not obligated to reveal the sources of all their income. The law on political parties states that a party should ensure that the donor reveals the source of income only if the donated amount is above a certain threshold.

Haribol Gajurel, chief of fund and finance management department of the ruling Nepal Communist Party, concedes that political party financing is not transparent.

“It is because political parties don’t get donations as an institution,” he said. “Certain factions in a political party or a few influential leaders get funding from interest groups, which are not made public.”

According to Gajurel, such funding is not provided through banking channels, which makes the dealings even shadier.

As per the law on political parties, parties are required to conduct transactions of any amount above Rs25,000 through banks.

“If the donation is given to a party institutionally, it can ensure transparency because different factions will know about it,” said Gajurel.

Gajurel’s statement holds true because political parties have shown relatively low annual income and expenditure in their audit reports submitted to the Election Commission, despite the fact that their candidates spent large amounts during the elections.

The CPN-UML, one of the constituents of the Nepal Communist Party, made earnings of just Rs64.67 million in fiscal year 2016-17, followed by the CPN (Maoist Centre), the other constituent, whose earnings were shown to be Rs33.4 million, according to the audit reports they submitted. The Nepali Congress showed its income at Rs30.76 million.

Their candidates, however, employed helicopters on the campaign trail and spent lavish amounts, blatantly ignoring the Election Commission threshold.

“Leaders pay hefty amounts on helicopter travel but such expenses are missing from the parties’ audit reports,” said Aryal, also the former president of Transparency International-Nepal, an anti-corruption watchdog. “So who is financing their extensive travels?”

As per Section 25 (5) of the Law on Political Parties, a party should not receive donations on the condition that the donors will benefit in return.

The Election Commision Act allows the commission to impose a fine on a candidate or a party that spends more than the threshold or fails to submit a report in time. The commission, however, has never imposed fines on any candidate or party. As per the law, those who do not pay the fine could be disqualified from participating in any elections for up to six years. The commission has not yet taken such a step, which anti-corruption activists say “is understandable.”

“As office bearers at the commission are appointed based on political power-sharing, we cannot expect the commission to take such a drastic step against their masters,” said Surendra Bhandari, a senior lawyer, who is also a good governance advocate.

With measures to prevent high spending in elections not forthcoming, the expenditure pattern is on the rise. And, the parties are also increasingly picking the wealthy, businesspeople and contractors to contest elections.

“After being elected, what will be their priority? Their first priority will be to work to serve their own business interests,” said Bhandari. “Thus, the voiceless are deprived of participating in the lawmaking process. This erodes people’s faith in democracy.”

That the political parties and leaders should be clean is not something that is being discussed just today. After the restoration of democracy in 1990, the then interim government had also raised the issue. But no substantial efforts have been made to ensure clean and corruption-free politics.

One of the ways to bring transparency to political party financing, which has long been considered, is state funding for political parties.

In 2003-04, then finance minister Prakash Chandra Lohani in his fiscal budget had introduced state funding for political parties. As per his proposal, the government would provide grants to the national political parties two months before the elections based on votes they received in the recent elections for the House of Representatives.

As per the proposal, each vote would earn Rs20. The proposal, however, also allowed the parties to raise money via donations from enterprises, but such donations needed to be transparent.

The issue of providing state funding was also under discussion at different levels before the 2017 elections.

In its five-year strategic plan, introduced last week, the Election Commission has also proposed state funding for political parties based on the votes they obtained in the last elections. A law to this effect was also being considered. Commission officials, however, said that they are not sure whether the state should provide funds to the parties based on their votes or their representation in Parliament.

Raj Kumar Shrestha, spokesperson for the Election Commission, said that if the political parties’ transactions are audited by the Auditor General’s Office, that could ensure more transparency.

“The Auditor General’s Office can make its audit reports and findings public, which can then become a subject of discussion in Parliament,” Shrestha told the Post. “It will also help smaller parties that cannot raise donations.”

As far as state funding for political parties is concerned, there, however, are still divergent views.

Gajurel of the ruling Nepal Communist Party said that state funding for parties will have no meaning as long as the parties are allowed to collect donations.

“It will be a waste of state resources,” Gajurel told the Post.

The parties are not only loath to the idea of bringing transparency to their finance; the registered parties even don’t submit their audit reports to the election body, according to officials.

As per Section 25 of the Election Commission Act, the parties and the candidates should submit their poll expenditure within 30 days after the commission publishes final results of the polls.

“In the last fiscal year, of the 131 registered political parties, only 65 submitted their audit reports,” said Shrestha, the commission spokesperson. “Likewise, all the candidates who contested the 2017 elections have not submitted their expenditure details either.”