KL central bank governor in the eye of the storm

Tan Sri Zeti Akhtar Aziz had been able to steer clear of political controversy, until now, during her 17-year leadership of Bank Negara Malaysia.
PHOTO: Reuters

Malaysian central bank chief Zeti Akhtar Aziz's regular quarterly media conference to announce the country's economic performance earlier this month was anything but regular, with more than 100 journalists of various stripes crowding a room that is usually the domain of business reporters.

"This must be a record turnout, and we hope we will live up to your expectations," she joked, before asking reporters to stick to queries about the economy first.

This was a reminder she had to offer thrice before finally fielding burning questions the press had for the Bank Negara Malaysia (BNM) governor who had uncharacteristically found herself sucked into a political crisis.

Tan Sri Zeti had been able to steer clear of political controversy, until now - in a country where institutions have been tainted by allegations of favouring the ruling establishment - during her 17-year leadership of the central bank.

During this time, the country transitioned successfully from a commodities-reliant export economy to a diversified services-based market after the hammer blow of the 1997 Asian financial crisis.

While it has been a steady ship throughout her term in charge (including two years as acting governor before assuming the role fully in 2000), two contrarian stances raised her profile.

In 1998, Malaysia was one of several Asian economies sinking from investor flight. Despite the ringgit's value shrinking by half, it refused aid from the World Bank and International Monetary Fund (IMF) which came with strict reform conditions.

Instead, the central bank imposed a currency peg and capital controls - largely criticised then, but now acknowledged as strokes of genius which provided a stable foundation for increased liquidity.

The 2008 global financial crisis also saw Malaysia follow others into recession. But again, Ms Zeti picked liquidity as the vital lever, ensuring that funds were available to businesses to promote growth and stave off a prolonged downturn.

It resulted in strong domestic demand that has continued to propel the economy up to now, despite external shocks.

In all that time, she received accolades as one of the world's best monetary policy chiefs, and was named central banker of 2005 by finance magazine Euromoney.

Her success in such a high-profile job and her ability to keep clear of controversy could be attributed in part to her upbringing as the daughter of Royal Professor Ungku Aziz Ungku Abdul Hamid, a former vice- chancellor of the University of Malaya (UM) and one of Malaysia's leading intellectuals.

She studied economics at UM before earning a master's and PhD from the University of Pennsylvania, an Ivy League school, specialising in monetary and international economics.

Ms Zeti, who is married with two children, started her career as a research economist in 1979 at the South-east Asian Central Bank Research and Training Centre, an affiliate of the IMF and World Bank.

She joined Malaysia's central bank in 1985 as deputy manager in the economics department.

Besides heading BNM, she has also served as chairman of the Asian Consultative Council at the Bank for International Settlements, from October 2008 to 2010, and chairs the executive committee of the International Islamic Liquidity Management Corporation.

The latter role befits her standing as one of the key people behind the global growth of Islamic finance in the past decade.

In 2002, Ms Zeti oversaw the launch of Malaysia's sukuk, the world's first Islamic bond to be issued by a sovereign state, and chaired the Inauguration Committee for the establishment of the Islamic Financial Services Board (IFSB) in Kuala Lumpur, which has continued to be a hub for the industry.

Islamic banking now accounts for over 11 per cent of Malaysia's financial system.

But now she finds herself being pulled into a political storm, with Prime Minister Najib Razak facing fierce criticism over his role in the troubled state investor 1Malaysia Development Berhad (1MDB) that is struggling to shed RM42 billion (S$14 billion) in debt.

At the press conference, Ms Zeti, who turns 68 this week, denied rumours of her resignation, saying instead that she would see out her contract which ends next year.

She also dismissed allegations of corruption that had begun to circulate online, as well as a purported conspiracy by her officers - who had in June begun a formal investigation into 1MDB - to topple the embattled Prime Minister.

The rumours began to circulate strongly after Datuk Seri Najib reshuffled his Cabinet to stifle dissent among his ministers and replaced the attorney-general, who was heading a powerful task force - which included officials from the central bank - that was looking into graft allegations against 1MDB.

The attorney-general's removal was followed by several arrests and questioning of members of the task force that led to speculation that Ms Zeti was next in the firing line.

Indeed, she revealed at the press briefing that seven of her officers had been questioned regarding the leak of banking documents that led to the July media reports that US$700 million (S$986 million) linked to 1MDB had been deposited into the Prime Minister's private bank accounts.

But she said she had yet to be hauled up by police herself and clearly did not plan to get hauled up. When quizzed on Mr Najib's accounts, she said "the moment I step out of this door, I will face arrest for talking about individuals' accounts.

I am sure you do not want that to happen".


This article was first published on August 24, 2015. Get a copy of The Straits Times or go to straitstimes.com for more stories.