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.