By G. Sharmila
Ever since Bank Negara Malaysia governor Zeti Akhtar Aziz indicated that she will be retiring come the end of her term as governor in April next year, several names have cropped up as potential replacements. Tiger thinks that not just anyone can and should fill her shoes.
What does it take to be a central bank governor? Since Bank Negara Malaysia’s inception in 1959, the central bank has had seven governors. Zeti Akhtar Aziz has been Malaysia’s central bank governor since May 2000 and now that the end of her term as governor is nearing, speculations have inevitably emerged on who will replace her.
Zeti Akhtar Aziz
Tiger has nothing against speculation by the media (being the gossip-loving Tiger she is), but she would like to remind the speculators and rumour-mongers that the bottom line is that the new governor needs to fill some very big shoes.
Hence, it is imperative that Zeti’s replacement possesses the ideal combination of ethics and expertise that Zeti has been known and respected for. (And no, cloning Zeti is not an option).
Jokes aside, Tiger believes there are two ways the ideal candidate can ascend the coveted central bank “throne”. One way is for the central bank to promote from within, and Zeti has said that there is already a succession plan in place.
There are pros and cons to this type of appointment, however. One advantage is that the person being groomed will know the ins and outs of the job by virtue of being groomed by Zeti and will likely share her values. The disadvantage of promoting someone from within, however, is that the person may be highly insular and lack the exposure Zeti has had outside of the central bank.
A promotion from within is exactly how Zeti came to be governor and some of her predecessors have also been promoted from within the ranks of the central bank.
Ismail Mohamed Ali
If Tiger recalls correctly, the second and third central bank governors, namely Ismail Mohamed Ali and Abdul Aziz Taha, were promoted from within the central bank.
Ismail was central bank governor from 1962 to 1980, while Abdul Aziz served as governor from 1980 to 1985 (he resigned from his position reportedly due to a long-standing dispute with Daim Zainuddin, who was finance minister back then).
Although the above persons worked their way up to become central bank governors, it is also not unheard of for governors to be chosen from outside the central bank.
Abdul Aziz’s replacement Jaffar Hussein came from Maybank and so did his replacement Ahmad Mohd Don. (Jaffar was the fourth central bank governor, deemed responsible for the US$8.5 billion in foreign-exchange losses that the central bank incurred in 1992 and 1993, which led to his resignation in 1994.)
Ahmad Mohd Don
Ahmad, meanwhile, who was also from Maybank, resigned from his position as central bank governor in 1998 after he was edged out of major committees to manage the Asian financial crisis, such as the National Economic Action Council. It was also reported that he disagreed with the decision to impose capital controls to save the ringgit.
Ali Abul Hassan Sulaiman who replaced Ahmad, was also not from the central bank (he was former head of the Economic Planning Unit). His term as governor was relatively uneventful and he was replaced by Zeti, who was promoted from within the central bank.
But Tiger digresses. This commentary is about who should replace Zeti and Tiger firmly believes that the candidate, if selected from a pool of hopefuls outside the central bank, should possess the following criteria:
- Lacks political baggage. Anyone who has been and is a politician should not be chosen to replace Zeti, the candidate should be someone who does not have a political base.
- Willing to assert independence. The last thing the central bank needs is a political lackey who does everything he or she is told without question. What the central bank needs is someone who is willing to do what the central bank needs to do, much has Zeti has done by investigating government self-styled strategic investment fund 1Malaysia Development Bhd.
- Has guts and a level head on his or her shoulders. Much as Tiger would prefer that Zeti be cloned, she will settle for a central bank governor who is bold (and wise) enough to make difficult decisions.
- Is well versed with the intricacies of monetary policy and the banking system. This criterion is a no-brainer and reinforces Tiger’s belief that a political appointee to the position will not do, simply because that person would lack the kind of experience with finance required of Zeti’s replacement.
Zeti’s shoes will be tough to fill. Tiger has faith that as per the usual convention, where the governor is appointed by the Yang di-Pertuan Agong for five years on the advice of the prime minister, there will be no choice but to make the right decision. Otherwise, the consequences for the country and the ringgit will be grave.
The Central Banking Act 2009 specifically provides as follows: “The governor and deputy governors shall be persons of impeccable reputation with proven experience and recognised knowledge in monetary or financial matters.”
There can be no more succinct statement of what is required of a central bank governor. Let’s hope that the right person will be selected for the job, as opposed to the person will the right political allegiances.
GRRRRR!!!
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