Who watches GLCs, statutory bodies' finances?

This story is supported by Pulitzer Centre

Year after year, the auditor-general’s certificate on Tabung Haji’s accounts carried an important caveat about the scope of its audit: “Not every company beneath the pilgrims' fund had been audited by the auditor-general.”

Tabung Haji sat at the top of a sprawling corporate family spanning plantations, property, hotels, construction, marine businesses, and investments overseas.

Those companies’ accounts fed into the group’s financial statements, but an audit of the group did not necessarily mean the auditor-general examined every company beneath it.

That distinction would prove significant years later.

A royal commission of inquiry into Tabung Haji's operations from 2014 to 2020 identified problems involving investments, accounting, and companies within the fund’s wider ecosystem, and recommended forensic audits into 14 investments.

Audits not comprehensive

The RCI also questioned aspects of the Auditor-General’s scrutiny of Tabung Haji’s accounts between 2014 and 2017.

Former auditor-general Madinah Mohamad has disputed the commission’s assessment, including its criticism of the audit opinions issued during her tenure.

The controversy raised a broader question: how far could Malaysia’s public auditor follow public money once it moved beyond a statutory body and into the companies beneath it?

Malaysia has since changed the law.

In 2024, Parliament amended the Audit Act 1957, expanding the auditor-general’s powers to audit other bodies, including registered companies receiving government financial guarantees.

The amendments also introduced an approach with a particularly fitting name: “Follow The Public Money Audit.”

The reach has expanded considerably. From 2025, the National Audit Department said it would use its new eSelfAudit system to audit 1,856 gazetted government companies annually.

However, an auditor empowered to follow the money is only one part of public scrutiny.

When the public can't follow the money

Transparency International global chair François Valérian said that when public borrowing takes place outside normal budget scrutiny, Parliament and citizens struggle to see the full picture.

He argued that governments have a responsibility to clearly disclose public spending, revenue, and borrowing, particularly the amount borrowed and the obligations created.

“It is extremely important for the public to know how much money is being borrowed,” Valérian (above) said.

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Drawing an analogy with a company board overseeing major transactions, Valérian said citizens and their elected representatives should have similar visibility over commitments made on their behalf.

“We, the citizens and the electors, are the board,” he said, arguing that keeping such commitments outside public scrutiny risks “undermining democracy”.

However, following public money in Malaysia means tracing it through a particularly complex corporate landscape.

GLC ecosystem

Political economist Edmund Terence Gomez explained that statutory bodies and government-owned companies sit under different legal structures, a distinction he considers essential to mapping the GLC ecosystem.

“Now the statutory bodies are created by law. Every statutory body has a law behind it. But a GLC is a company. It falls under the company set-up,” Gomez (below) said.

That distinction matters because public money does not necessarily stop at the statutory body or government institution that first receives it.

Public money can move through companies, subsidiaries, associates, and joint ventures, with each layer adding another entity to trace.

READ MORE: Who decides on government guarantee for billion-ringgit off-budget loans?

To understand how such an extensive network of state-controlled enterprises emerged, Gomez pointed to the New Economic Policy (NEP), under which the government intervened heavily in the economy and established numerous public enterprises as part of efforts to redistribute wealth and tackle poverty.

He said complications emerged later as the economic model shifted from state intervention towards privatisation.

Gomez alleged that public assets were channelled to well-connected individuals, fostering cronyism and nepotism.

When the 1997 Asian financial crisis struck, the government was forced to bail out and, in some cases, re-nationalise many of the privatised companies.

“When they privatised it, they converted a public enterprise into a company which could then function as a company.

“Now that's when the process of abuse really started,” said Gomez, author of Misgovernance: Grand Corruption in Malaysia, published in 2024, which examines how political control over Malaysia’s extensive GLC ecosystem can facilitate abuses of power, including cronyism, patronage, and other forms of grand corruption.

Systemic issue

Gomez argued that the problem extends beyond corporate governance to the broader question of public governance, particularly who ultimately controls GLCs and their decisions.

He alleged that political actors can draw on resources within the GLC ecosystem to advance political interests, creating an incentive to retain control over these institutions rather than reform them.

One mechanism, he said, is the appointment of politicians and party members to GLC boards.

Such positions can come with substantial director fees which, according to Gomez, have in some cases been used to fund political activities. He characterises this as effectively using public resources to finance politics.

Gomez said this political-economic nexus is not confined to the federal government.

Similar GLC structures exist at the state level under governments controlled by different political parties, making the issue, in his analysis, systemic rather than the preserve of any one party.

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