Preferences for financing political parties in a new democracy: A case study of political parties in Indonesia

Abstract

This study examines political parties' attitudes toward funding options. The condition of lack of funding is argued to indirectly impact the political parties’ preferences toward the state as their source of funding. To do so, this study utilises the rationalinstitutionalism approach and compares two main motives of political parties in political financing, namely revenue maximisation and economic electoral motives. Building upon these two funding motivations, scarcity is then understood as a starting point that affects actors' behaviour by affecting the incentives available to them. This thesis suggests two distinct types of funding incentives: economic incentives, such as the financial health of political parties' treasuries, and political incentives, such as political competition among parties and the leverage of public sentiment on political parties' behaviour. These theoretical claims will be demonstrated by an examination of Indonesia's 1999–2019 party funding reform. Based on Indonesia's experience with party finance reform, it is also argued that the private sector has played a prominent role in political financing in Indonesia since the process of political liberalisation began in 1998, both as an external and internal donor. Additionally, based on the discussion on political finance reform following the 2014 election, it appears that political parties' preferences for funding reform are better aligned with the electoral economy than with the revenue maximisation.