With only two
days to go before Malaysia's long-serving central banker Zeti Akthar
Aziz steps down, a new governor has been named. Zeti's deputy, Muhammad
Ibrahim, will take over effective 1 May and his appointment by the king,
on the advice of Prime Minister Najib Razak, is for a five-year term.
But his appointment has sparked further
controversy. The war of words between the Wall Street Journal (WSJ) and
the prime minister's office, which started over the coverage of state
fund 1Malaysia Development (1MDB), has now spilled over the appointment
of the new governor.
The WSJ, which first broke the 1MDB story
alleging that monies have been diverted from the fund and implicating
Najib, has stuck to its series of stories on the state fund, much to the
chagrin of Najib. The story – which has resulted in investigations into
alleged money laundering, and bribery, among others, being launched by
several jurisdictions in different countries, has so far resulted in one person being charged in Singapore. The other investigations are still on-going.
So far however, Najib has not been mentioned or implicated in any of the investigations. Najib's
press secretary, Tengku Sariffuddin Tengku Ahmad, in a statement to
local media, highlighted the fact that the appointment of Muhammad
"clearly refuted WSJ's claims that a technocrat close to the
administration would be named to the role".
He said: "The WSJ reported as fact multiple
times, including by Ken Brown on 20 April and Tom Wright on 11 March,
that the prime minister had appointed Tan Sri Irwan Serigar Abdullah to
be the new governor of Bank Negara Malaysia and that he was linked to
1MDB. This was despite no announcement having been made, and based on
anonymous sources."
Tengku Sariffuddin continued: "Unfortunately,
many believe the WSJ's Malaysia reporting, because they don't realise
that the WSJ are allowing themselves to be used as the willing vehicle
of [former prime minister] Tun Mahathir Mohamed's Anti Najib Campaign,
just for the sake of sensational headlines."
He reiterated earlier claims that the
newspaper failed its basic duty to verity its facts and that the
appointment of Muhammad showed WSJ's reporting could not be trusted.
This is not the first time that Tengku Sariffuddin has issued a
statement slamming the WSJ.
In retaliation, the WSJ on 27 April insisted that
the government had made a U-turn in its decision on the successor to
Zeti. Quoting a person familiar with the matter, the newspaper said that
a veteran central banker was chosen following pressure from the
long-serving governor to appoint someone from within the bank to succeed
her.
WSJ said according to the source, the
government had initially decided to appoint Irwan, a close ally of Najib
and the Treasury secretary-general. Najib, in addition to his role as
premier, is also the finance minister.
It said that Zeti was asked to extend her
tenure as governor but that she had declined, according to the source.
Zeti has served as the governor of Bank Negara Malaysia for 16 years,
having seen Malaysia through the 1997 Asian financial crisis, the
imposition of capital controls by Mahathir, among others. She has served
under several prime ministers as well.
So who is the new governor?
Muhammad has held the post of deputy governor
since 2010. A graduate of Harvard University, he made his first policy
statement as the soon-to-be-governor: "It is important for the central
bank to maintain monetary and financial stability, remain focused on its
strategic agenda and work towards contributing to a better future for
all Malaysians."
News of his appointment did not come as a
surprise to the market. Nomura Global Markets Research said that his
appointment was "in line with expectations and will be interpreted as
such." It said that he is the most qualified candidate and will require a
shorter transition period than any of the other candidate."
"While we will closely watch Muhammad for any
statements or comments that reveal his policy biases, we believe he is
unlikely to dramatically alter the direction of monetary policy.
Overall, we remain comfortable with our view that Bank Negara will keep
its policy rate unchanged this year
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