Political spotlight shifts to Bank Negara

In the high-stakes chess game that is Malaysian politics, all eyes are now on who will succeed Tan Sri Zeti Akhtar Aziz as the country's powerful central bank governor.

Prime Minister Najib Razak is leaning heavily on two of his allies in government, a move close advisers say is part of a wider campaign by the premier to quell a months-long revolt against his administration among powerful sections of the civil service.

Dr Zeti, 68, is set to retire at the end of next month after heading the central bank for 16 years.

For the moment, close aides to the premier say that the toss-up is between former assistant central bank governor Awang Adek Hussin, who is now Malaysia's ambassador to the United States, and Mr Abdul Wahid Omar, who is minister in the Prime Minister's Department in charge of economic affairs.

A third person in the running for the post is the current deputy governor, Datuk Muhammad Ibrahim, who is the central bank's preferred internal candidate.

Government officials say how the premier deals with the succession at Bank Negara Malaysia will provide clues on how he intends to instil greater discipline and loyalty among the roughly 1.6 million civil servants who have long been a key support base for the ruling Umno, which is the linchpin of the Barisan Nasional government.

The developments are also being closely watched because they represent part of Datuk Seri Najib's campaign to consolidate power after nearly being forced out of office in late July last year.

He successfully turned the tables on his political foes by seizing on the raw power of an incumbent premier in Malaysia. In rapid succession last July, he sacked his No. 2, Tan Sri Muhyiddin Yassin, from the Cabinet, and replaced Tan Sri Abdul Gani Patail, the country's long-serving attorney-general.

Mr Najib's position today is unassailable. Just days ago, he demonstrated his widening political clout by removing political strongman Mahathir Mohamad, who has been heading the campaign against him, of the prestigious post as adviser of national oil corporation Petronas.

Last Saturday, the chiefs of 148 Umno divisions - more than three-quarters its 191 divisions - declared their loyalty to Mr Najib. They condemned Tun Dr Mahathir for working with opposition leaders in the Save Malaysia campaign to topple Mr Najib.

But Mr Najib, who also holds the finance minister portfolio, has moved very cautiously with Bank Negara.

"The PM believes that it is not about personalities but the institution," said a Finance Ministry official.

Relations between the Najib administration and the Zeti-run central bank have been less than cordial over the past one year, largely because of the financial debacle at state-owned 1Malaysia Development Berhad and the controversy surrounding the flow of about US$700 million (S$960 million) into the premier's personal accounts in October 2013.

Close aides to Mr Najib say that he has been upset with Bank Negara for failing to come to the government's defence to clear up the issue of the deposits into his account, especially when the flows of such large amounts of funds would have required the necessary approvals from the central bank.

Bank Negara was one of the government agencies that was later roped in to probe the 1MDB fund flows.

The 68-year-old Dr Zeti enjoys a strong following in the international investment community for her steady stewardship of the Malaysian banking system and monetary policy, which have been crucial in ensuring a stable domestic economy.

The financial markets will be looking for a replacement that will continue that tradition.

For some time, the well-spoken and media-savvy Datuk Awang - who has a PhD in economics from Dr Zeti's alma mater, the University of Pennsylvania's Wharton School - has been the front runner for the job. But close aides to the premier say that Mr Awang had indicated last month that he would prefer to stay out of the race.

"You cannot say 'no' to the PM and, at this point, he is the preferred choice," said a government official who is familiar with Mr Najib's plans for top-level changes at the civil service.

Dr Awang is considered to be a very close ally of Mr Najib.

Proponents of Dr Awang's appointment say that his stint as ambassador to the US has made him a known entity with the international financial and diplomatic community. He also worked at Bank Negara for over a decade from 1985, handling banking supervision before becoming an assistant governor. "Awang knows the culture (at Bank Negara) and he is considered one of them," said a senior aide to the premier.

With Dr Awang less than enthusiastic for the job, Mr Najib's close aides say that former banker Datuk Seri Abdul Wahid has emerged as a back-up candidate.

Mr Abdul Wahid, who at one-time served as the chief executive officer of Maybank, the country's largest financial institution, also enjoys high regard among the international investing community. The only drawback with Mr Abdul Wahid is that he has little experience in monetary policy, say bankers.

Close aides to the premier say that Mr Muhammad Ibrahim, who is Bank Negara's preferred candidate to replace Dr Zeti, is in the shortlist because Mr Najib is concerned about reactions from the international community.

"Bottom line, the PM will decide on who he thinks will be a set of safe hands and make sure that the thinking at Bank Negara is in line with his administration," said a senior government official close to Mr Najib.

ljlopez@sph.com.sg

This article was first published on March 14, 2016.
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