Malaysia faces anxious succession as top banker Zeti calls it quits: The Star columnist

Malaysia's Bank Negara Governor Zeti Akhtar Aziz at an event announcing revisions to the fiscal budget in Malaysia, on Jan 28, 2016.
Malaysia's Bank Negara Governor Zeti Akhtar Aziz at an event announcing revisions to the fiscal budget in Malaysia, on Jan 28, 2016.PHOTO: REUTERS

(The Star/ Asia News Network) - After 16 years at the helm of Malaysia's central bank, Zeti Akhtar Aziz will punch out for the final time next month.

Her tenure as governor is decorated with accolades, including Euromoney's 2015 Central Bank Governor of the Year.

In 2011, she was named as a possible candidate to head the International Monetary Fund.

Ms Zeti will be remembered as the governor who piloted Malaysia through two international crises, while injecting much-needed discipline into the banking system with a financial-sector master plan that has strengthened and deepened the industry.

But change is at hand and the question of who will replace the 68-year-old at the top is generating much debate.

That there has been no official word on the new central bank chief has already caused unease in the business and investment communities.

Insiders reckon that Ms Zeti's choice is the central bank's second-in-command, Datuk Muhammad Ibrahim.

Economist Prof Mohamed Ariff Abdul Kareem points out that any perception of political influence in the choice of new bank chief could erode our efforts to rebuild investor confidence.

"This is especially so at a time when our ringgit has been unfairly punished not because of economic fundamentals, but perception surrounding domestic issues like 1Malaysia Development Bhd (1MDB)," says Ariff of the International Centre for Education in Islamic Finance.

"The central bank under Zeti's leadership has remained autonomous and she is internationally respected for her ethics and expertise. It is only expected that the market will be looking for her replacement to have similar experience and credibility."

Bank Negara is acknowledged to be one of the best-run institutions in Malaysia, a rarity in a country facing serious corruption issues in bureaucracy and government.

A promotion from within would calm the markets, sending a signal of consistency in policy-making and a lack of political interference.

Besides Mr Muhammad Ibrahim, two other deputy governors -Shamsiah Mohd Yunus and Sukhdave Singh - are reportedly in the running for the job.

Ms Zeti has faced many tests in her 16 years at the helm, but it is perhaps her professionalism over the sovereign wealth fund 1MDB controversy and probe that has caught the eye.

During this testing time the ringgit has tumbled to a 17-year low of below 4.50 to the US dollar, emerging as the worst performer among regional currencies.

Aberdeen Islamic Asset Management Sdn Bhd CEO Gerald Ambrose says the immediate challenge for the new head will be maintaining investor confidence, containing ringgit volatility and supporting growth while keeping inflation under control.

As a person, Ms Zeti comes across as demure and soft-spoken, albeit with a sharp sense of humour. But heading the country's financial and monetary powerhouse "requires nerves of steel", she once noted.

In 1998, then-assistant governor Zeti was dragged into a controversial plan for capital controls to pull Malaysia out of the "Tom Yam Goong crisis" created by Thailand's baht devaluation, which set regional currencies plunging.

Her boss Ahmad Don balked at capital controls and took the drastic step of resigning in protest at the government's decision, which left Zeti in charge as acting governor.

By successfully implementing capital controls and pegging the ringgit at 3.80 to the dollar, she defied conventional free-market wisdom and etched her name on the international banking scene.

Two years later in May 2000, Ms Zeti was made the country's seventh and first woman governor.

She is credited with having successfully steered the economy through the global financial crisis in 2007 with policies that accommodated growth by, for example, keeping interest rates stable, while at the same time having to deal with strong personalities like ex-premier Mahathir Mohamad.

Under her stewardship, the country's finance industry was consolidated to 10 banks and is now on a much stronger footing.

She played a key role in formulating and implementing the financial sector master plan, aimed at boosting competitiveness, plus the development of Islamic finance.

Banking insiders point to Ms Zeti's inclination to speak her mind without fear or favour as a guiding principle for her success as a central banker.

In November, Bank Negara took the unprecedented decision to slap a 53.7 million ringgit penalty on AMMB Holdings Bhd for "non-compliance with regulations".

It reportedly believed that the breaches had to do with transactions linked to 1MDB.

Ms Zeti's successor has big shoes to fill. And with the Malaysian economy slowing, he will need to begin filling them fast.