Party finances in HK
7 March 2011
Which is the best-funded political party in Hong Kong? Is it the big-business Liberal Party (LP)? The barrister-led Civic Party (CP)? The party of the poor and grass roots, the Democratic Alliance for the Betterment and Progress of Hong Kong (DAB), or the Democratic Party (DP)?
All of these 4 parties, which between them won 30 of the 60 seats in the 2008 Legislative Council election, are actually incorporated as companies limited by guarantee (in other words, they have no share capital and are not-for-profit). That means that they have to file their accounts at the Companies Registry. The accounts are then made available to the public on a pay-per-document basis. We think the public interest is served by bringing this to a wider audience. Most of the parties do not put their accounts on their web sites, so today Webb-site is publishing them, in the interests of transparency. You will find the accounts on the individual pages in our database for each party, at these links:
- Civic Party
- Democratic Alliance for the Betterment and Progress of Hong Kong
- Democratic Party
- Liberal Party
The legal requirements
Under Section 107(1) of the Companies Ordinance, each company limited by guarantee has to file an annual return each calendar year. Under Section 109, the annual return shall be filed within 42 days after the AGM for the year, together with the accounts. Under Section 122(1A), the accounts must be laid at the Annual General Meeting and must not be more than 9 months old at that time.
Three of the parties have 31-Mar year-ends, and the LP has a 31-Dec year-end. None of the parties wins any prizes for the speed of accounting to its members or the public. For the latest year, the LP filed its 31-Dec-2009 accounts on 9-Sep-2010, and for the three with 31-Mar-2010 year-ends, the DAB filed on 31-Dec-2010, the DP filed on 10-Jan-2011, and the CP trailed in last on 20-Jan-2011, having held its AGM on 8-Jan, which means the accounts were 8 days too old at the AGM.
Now here's the interesting part. We looked at the last 2 financial years of each party. As closely as possible, we have harmonised the accounting of the income statements, which use slightly different line items. The first year includes the LegCo elections of 9-Sep-2008, while the second year does not. Naturally enough, the expenditure during the election year was a bit higher.
Election year ended Dec-2008/Mar-2009
As the table shows, the DAB raises more and spends more than the other 3 parties combined, accounting for 55% of all expenditure. It had staff costs of $33.8m, or 4 times its nearest rival, the LP. The party of the grass-roots poor is the best-funded party. This is 89% funded by donations, in line with all the parties. We will leave our readers to speculate on the source of donations to the DAB, but presumably they are Beijing-friendly businessmen rather than poor people in public housing estates. This funding enables the DAB to finance grass-roots campaigns aimed at building electoral support. It is notable that it runs a substantial deficit on its branch activities and project expenses, amounting to $12.97m in the election year.
The pro-democracy CP and DP, by comparison, have no big business support and struggle to find enough resources to do more than run a lean head office. Fragmentation of the pro-democracy camp is incentivised by HK's particular twist on proportional representation electoral maths. The PR voting system incentivises short lists of one-person parties and fringe parties rather than consolidation of parties with similar policy positions. So the available resources are divided. That problem will be worse with the likely addition of a new seat to each of the 5 geographic super-constituencies in the 2012 election. In New Territories West, for example, there will probably be 9 seats, and the first candidate on each list will only require 10% of the vote to be absolutely certain of election, and very probably less. In 2008, for example, LSD legislator Albert Chan Wai Yip was elected with 8.1% of the vote in an 8-seat election.
Meanwhile the LP, largely discredited in the election, knows that money can't buy you electoral love when you continue to defend the dysfunctional constituencies and the small-circle elections that go with them.
The DAB also had the largest net assets by far, at a modest $35.3m, mainly because it owned premises with a book value of $36.75m.
We should note that in 2008 the LP received $26.6m of its funding, being almost all of its income, from the "Liberal Party Trust Fund", the accounts of which are not available. LP also acted as the trustee of the "Liberal Party Caring Foundation" which was established in 2005 "for the purpose of appealing to the Hong Kong public to raise funds for helping the poor in Hong Kong". That fund had assets of $6.362m at the end of 2008, and $6.183m at the end of 2009. As LP is only the trustee, the foundation's accounts are not included in the LP's accounts, so we can't tell you how much it raised from donations or spent on the poor during the year. It would be more transparent if the LP, like the DAB, were to run these activities through its own accounts rather than in an off-balance-sheet foundation.
The accounts of political parties do not of course include the separate fund-raising by individual candidates in elections. These candidates are subject to caps on campaign expenditure.
Non-election year Dec-2009/Mar-2010
Here are the figures for the latest financial year, with no general elections:
As you can see, even in a non-election year, the pro-Beijing DAB funding machine keeps rolling, accounting for 65% of the donations to the 4 parties and outspending the other 3 parties combined by a margin of 2 to 1. Notably, the LP, after its drubbing in the 2008 elections and the loss of some of its billionaire backers, cut its 2009 spending way back to less than half what it spent in 2008.
Overall, the take-away observation must be how little the pro-democracy camp has to work with, and how party financing remains in its infancy. On these modest budgets, the parties cannot possibly hope to run meaningful internal think tanks or research units to support their decisions on policies, so the vacuum has to be filled by outside think tanks. These think tanks struggle to gain the attention of stretched pro-democracy legislators, who spend their time lurching from one short-term issue to the next in knee-jerk fashion rather than coming up with principle-based proposals and well-researched criticism of Government policies. Meanwhile, the tycoon-funded Bauhinia Foundation continues, at least with the current administration of Donald lame-Duck Tsang, to inject its proposals directly into the Government, largely by-passing the parties.
Incidentally, in case you are wondering, the extremist but 3-legislator League of Social Democrats is not set up as a company, so there are no accounts available for that, but you would probably need a microscope to see them anyway.
© Webb-site.com, 2011
Organisations in this story
- Civic Party Limited (The)
- DEMOCRATIC ALLIANCE FOR THE BETTERMENT AND PROGRESS OF HONG KONG
- DEMOCRATIC PARTY (THE)
- LIBERAL PARTY