A new deal for GLCs: Ending Malaysia’s patronage trap

There is deep concern over how political elites are appointed to roles in government-linked companies (GLCs) and statutory bodies.

Speaking on a BFM podcast, Terence Gomez, an emeritus professor from University of Malaya, said GLCs have been prone to systemic corruption.

He argued that state-business relations create an ecosystem of corporate patronage, used to secure funding and maintain political leverage.

Under the administration of Dr Mahathir Mohamad, privatisation and conglomerate-building channelled rent extraction through politically connected ethnic Malay-led firms exposed to market forces.

Under a later prime minister, this became an architecture of naked predation. Shell companies, with no firewall between public and personal interest, saw GLCs allegedly financially exploited for political funding.

Neither model amounts to a developmental state-business relationship in the sense described by economists Peter Evans or Alice Amsden. In that model, the state embeds itself in capital to shift it toward national goals, not to extract rents from it.

A different model

A new approach, away from capital accumulation by rent-seeking elites, is what might be called the compact state model.

It breaks from both previous variants. It does not lean towards privatisation, which simply transfers rent capture to private elites. Nor does it reproduce GLC-centric control under reformed management.

Instead, it restructures the interface between state power and business through three mechanisms: pluralised ownership, mission-oriented mandates, and democratic accountability.

Four pillars underpin this model.

Public ownership compact: Khazanah and PNB would be restructured under multi-stakeholder trust boards.

Seats would be split three ways. A third would go to government nominees subject to parliamentary confirmation. A third would go to labour and civil society nominees. The rest would go to independent directors with a fiduciary duty to national development goals.

The aim is to break the Ministry of Finance’s single-choke-point ownership, without resorting to privatisation.

Mission-oriented GLC charter: Each GLC would operate under a legislated social return mandate alongside its commercial targets.

For example, Tenaga Nasional could be tied to renewable energy benchmarks.

Petronas could legally earmark a share of upstream revenue for a ‘just transition’ fund to support displaced workers.

Prasarana could be measured based on how far it has put in place convenient doorstep connections to boost low-cost public transport, not ridership revenue alone.

Transparency architecture: A public contracts registry would cover all GLC procurement above RM500,000.

An automatic exclusion protocol for politically exposed persons would disqualify politically linked firms for seven years after they leave office.

One option worth considering is an editorially independent Bernama, governed by a press council with a civil society majority, acting as real-time disclosure infrastructure rather than a state mouthpiece.

Co-determination at company level: Worker representation on the boards of GLCs with more than 500 employees should be mandatory.

Sectoral collective bargaining councils would link GLC wage policy to productivity.

A worker cooperative development fund, seeded from GLC dividends, would create a path away from wage dependency towards cooperative ownership.

Why this, why now

The compact state model addresses the problem Gomez identifies, on three grounds.

Structurally, it breaks the rentier-patronage axis. It does this not by withdrawing the state from capital, but by disciplining the interface between them through shared trusteeship, transparency rules and worker co-determination.

Politically, it gives institutional shape to demands already made by Malaysia’s reform movements. These include Bersih’s call for accountability, the socialist party PSM’s labour-capital framework, and Aliran’s focus on justice, freedom and solidarity.

Theoretically, it moves beyond the binary of past prime ministers. It points towards a third type of state-business relationship: accountable-developmental. Here, state capacity is embedded in civil society, rather than captured by political elites. This takes Evans’s idea of embedded autonomy further than the technocratic developmental state, towards genuine stakeholder governance.

Pakatan Harapan’s failure was not one of will. It won power on reform promises. But it reproduced the same patronage relationships, because the underlying ownership structure was never rebuilt. That was a failure of institutional design, not intent.

The compact state model is an attempt to correct that design. Gomez’s original analysis did not treat workers as actors in shaping state-business relations. They appeared only as objects of employment policy.

This is the gap the compact state model tries to close. It offers a people-centred path for everyone in Malaysia, aimed at fostering human dignity and economic empowerment for all.

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