In its latest study, the Institute for Democracy and Economic Affairs (Ideas) recommends that government-linked firms be kept on a shorter leash to avoid weaknesses in corporate governance, such as those that plagued 1MDB.

"The weaknesses in the governance framework of GLCs are currently not addressed," reads the executive summary of the study.

Ideas said 1MDB - which amassed unsustainable debts of up to RM42 billion in 2014, amounting to 2.5 percent of Malaysia's GDP - is the poster child of how an unregulated GLC can cause problems for the country.

Even though the authorities did move to address issues with 1MDB after public outcry, the study noted that the elephant in the room still remains: weak oversight and laxness.

It pointed out that 1MDB suffered from excessive borrowings at high interest rates, leading to the risk of loan defaults and its adverse impact on sovereign credit ratings.

Oversight and regulatory bodies such as the Public Accounts Committee (PAC) must play a stronger role in overseeing GLCs to avoid similar problems in the future, Ideas said.

The study proposed that GLC's billions and debt issuance be kept under parliamentary lock and key.

"It is recommended that parliamentary approval must be sought prior to the issuance of letters of guarantees to support loans.”

It also called for laws to be put in place to prohibit GLCs from funding political parties or individual politicians, following allegations that 1MDB funds had been misappropriated to fund elections.

The study also recommended the following steps to be taken:

  • Establishing a registry of all GLCs currently in operation, as at present the total tally is not known, to track and measure their performance;
     
  • Setting clear debt-to-equity ratios for GLCs, and a limit on how much each can borrow, as well as criminalising non-compliance;
     
  • To bar public officials and regulators from GLC boards to curb conflict of interest;
     
  • To establish rules to curb profiteering from state-owned assets, such as when 1MDB sold land to Tabung Haji at 42 times its initial price; and
     
  • To empower regulating authorities, and give the auditor-general the mandate to conduct regular in-depth GLC audits.

The study, authored by Rama Ramanathan from the Society for the Promotion of Human Rights, is aimed at coming up with recommendations on how to regulate GLCs.

Malaysia’s economy depends heavily on GLCs, which contribute as much as five percent to the national workforce and account for approximately 36 percent and 54 percent respectively of the market capitalisation of Bursa Malaysia and the benchmark Kuala Lumpur Composite Index.