THE business and investment community must be very happy to read the bold and candid statement by outgoing central bank governor Tan Sri Dr Zeti Akhtar Aziz that politicians should not head this important independent institution.
“Every country needs an organisation like the central bank that does not have any political agenda. It should remain focused on ensuring macroeconomic, financial and economic stability,” Dr Zeti reportedly said after launching the Investment Account Platform on Wednesday.
The Bank Negara Malaysia chief said the next Governor must have the relevant background and ability, and she stressed that the bank should continue to adopt policies “in the best interest of the nation”.
Malaysians will be most relieved if Prime Minister Datuk Seri Najib Razak could take a hint from Dr Zeti’s statement and appoint someone credible and respectable to manage the central bank professionally and independently like past governors have done.
“Bank Negara has at this moment been perceived to be independent. It is hopeful that Bank Negara continues with its competent stewardship of the economy. Dr Zeti’s successor has to be competent and credible,” says Ian Yoong Kah Yin, former investment banker at CIMB and current director of Red Sena Bhd.
“Dr Zeti has spent 16 years building Bank Negara as a highly respected institution. If there is a single quality of Dr Zeti that I admire tremendously, it is her fearlessness of the consequences,” observes Yoong.
An economist by training, Dr Zeti was appointed Governor in May 2000 as Malaysia was recovering from the 1997/1998 Asian financial crisis sparked by offshore currency speculation.
I began to actively cover and write about Bank Negara as a journalist in the late 1980s when I was with the foreign media. Since the collapse of several banks in the 1980s, I have seen positive changes taking place in the local financial scene.
In the years under Dr Zeti, Bank Negara had been nurtured into a strong central bank with timely and effective monetary policies to help weather economic storms, control inflation, curb property speculation, among other things. Due to these achievements, Dr Zeti has won many international awards.
She was named one of the world’s best central bankers in 2009 by Global Finance Magazine. In 2013, she was accorded “Grade A” among the heads of central banks for the 10th time by the same influential magazine.
Confidence in her from the investing community goes beyond words. This was evident several times in the recent past. On several occasions, the ringgit rebounded after she stated that the currency was undervalued. To be sure, not many in Malaysia could command such respect in the market.
Though known to be circumspect in her statements at times, Dr Zeti is not in denial while safeguarding the national economy. She has admitted domestic issues, apart from international economic policy uncertainties, had caused the ringgit plunge. This is in stark contrast with some ministers who insisted that the ringgit fall was unrelated to local issues.
The country’s longest serving central banker is also instrumental in transforming the local financial and banking industry into a resilient sector with solid footing after the 1997/98 crisis. Politicians are barred from managing financial institutions to avoid handing out political loans, which had caused the collapse of banks in the past. Unlike the 1980s and 1990s, there is no politician banker now.
This explains why the local banking sector was unshaken by economic crises after 1998 – including economic downturns caused by the Sept 11 terrorist attacks on the United States in 2001 and collapse of the Lehman Brothers in 2008.
The 69-year-old Bank Negara chief is also instrumental in developing Malaysia’s Islamic banking into the most vibrant in the world. Malaysia ranks top in the issuance of sukuks (Islamic bonds) and it is now the best training centre for Islamic finance. For this reason, HSBC moved its headquarters for Islamic banking to Kuala Lumpur several years ago.
As Bank Negara impresses as a professionally run body, its economic and financial data are seen as reliable and credible. Factual data are important for businessmen to make investment decisions.
But since late last year, Dr Zeti’s independence in dealing with issues relating to 1Malaysia Development Bhd (1MDB) and the RM2.6bil political donation has caused discomfort to some.
To let Dr Zeti go is a big loss to the nation, particularly at this juncture when the GDP growth is slowing, the ringgit is under pressure, capital markets are volatile and global uncertainties persist.
But as Dr Zeti’s determination to retire is firm, Malaysia will have to find a suitable professional to continue her legacy of independence in steering the economy forward and safeguarding the financial system.
At this juncture, it is natural that Malaysians do not want to see Bank Negara, the bank of last resort, become one of those institutions hit by allegations of political interference now.
“The independence of our central bank is very important to sustain investor confidence, which is now affected by the ringgit’s depreciation and the 1MDB issue,” says Lee Cherng Wee, senior analyst at JF Apex Securities Sdn Bhd.
“The new governor must ensure that the banking and financial system, which has been a pillar of the country’s growth, is being run independently to support the economy.”
But for Yoong, Dr Zeti’s legacy in the past 16 years will not be easily destroyed.
Indeed, scrutiny of the new Governor by the whole nation and international investing community will make sure the central bank’s independence and legacy will stay – at least in the near future.