Friday 29 Mar 2024
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KUALA LUMPUR (Oct 24): There is a need to reform the check and balance on government linked agencies (GLCs) to enhance their corporate governance, says the Institute for Democracy and Economic Affairs (IDEAS).  

The think tank said oversight bodies such as the Public Accounts Committee (PAC) should play a stronger role in overseeing GLCs, to avoid cases similar to the 1Malaysia Development Bhd (1MDB) scandal from occurring.
 
In releasing a study authored by Rama Ramanathan of The Society for the Promotion of Human Rights (Proham), IDEAS recommended that the auditor-general be given the mandate to conduct regular in-depth audits of GLCs.

"The audits should look into matters such as adherence to the stated aims of the business, due diligence prior to making investment decisions, and missing financial reporting dates," the organisation added.  

IDEAS noted that the country's economy is highly dependent on GLCs, but yet, the public does not know how many GLCs are in operation and how they are performing.

"This is why we need to create a registry of GLCs that ranks GLC performance according to established measures of business success. 1MDB for example, was not noticed until it got into trouble," it said.  

IDEA stressed the need for parliamentary approval, prior to the issuance of letters of guarantees to support loans.

"In the case of 1MDB, RM13.6 billion in letters of support were issued for its borrowings in 2015. Laws must also be put in place to prohibit GLCs' funding of political parties or individual politicians," IDEAS said.

"Non-compliances to laws must be treated as a crime, in order to deter the mismanagement of GLCs," it added.  

Ideas also called on the government to make public, the quantum of fines imposed on GLCs that flout regulations.  

"Unlike the Swiss and Singaporean authorities, Bank Negara Malaysia (BNM) did not reveal the specifics of 1MDB's offence, or the quantum of the fine.

"We recommend that all charges brought and penalties imposed by regulators, including BNM, be made public to establish Malaysia as a financial centre of international repute," it said.  

IDEAS also called on the government to stop appointing public officials to GLC boards, as well as establish rules to curb profiteering by selling state-owned assets.  

"Although international guidelines such as the Organisation for Economic Co-operation and Development (OECD) guidelines on corporate governance of GLCs do not prohibit members of the state administration from being board members, they have strict guidelines to prevent potential conflicts of interest," IDEAS pointed out.

It said the steps that can be taken include the creation of a registry of public officials serving as board members in GLCs, with a specific timeline to replace them.

"The list should include both those who are elected to public office and those who are appointed," it added.  

IDEAS highlighted that there should also be legal prohibitions against GLCs funding political parties or individual politicians, to avoid the potential abuse of GLCs by public officials.

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