Prestigious Publication Lends Support to Embattled Malaysian Central Banker

In a clear message of support for Malaysia’s embattled central bank governor Zeti Akhtar Aziz, the London-based, Central Banking Publications has given her its third Lifetime Achievement Award, previously given only to former US Central Bank Governor Paul Volcker and to Jacques de Larosiere de Champfeu, former managing director of the International Monetary Fund, among other posts.

Zeti is a 30-year veteran of Bank Negara Malaysia and has been the central bank’s governor since 2000. In October, the bank issued a statement saying it had requested a criminal investigation into the affairs of the scandal-plagued 1Malaysia Development Bhd., only to be turned down by Attorney General Mohamad Apandi Ali, who said there was no reason for prosecution.

Bank Negara, however, responded with a statement contradicting the attorney general’s office and saying 1MDB had secured permits for investment abroad based on inaccurate or incomplete disclosure of information, breaching banking regulations, and added that it had revoked three permits granted to 1MDB for investments abroad totaling US$1.83 billion (RM7.53 billion) and ordered the state fund to repatriate the funds to Malaysia.

The general bank governor has been rumored under fire for months, with the government pressuring her not to ask for an investigation. Top bank officials have been under government on suspicion of leaking documents that became the basis for sensational stories about Najib’s personal finances and the 1MDB scandal.

Sources in Kuala Lumpur said Zeti, one of the world’s most respected central bankers, was under pressure for what amounted to blackmail by forces aligned with Najib into previously burying the investigation over concerns that the government might prosecute her husband, Tawfik Ayman, because of secret overseas accounts. Rosmah Mansor, the prime minister’s wife, was reportedly involved in a campaign to drive Zeti from her position. Blogs aligned with the prime minister sprouted stories questioning Tawfik’s business dealings during the period.

For nearly two years Najib and his allies have been involved in what appears to have been a successful wide-ranging campaign to stifle dissent over allegations of massive corruption, both personal and through UMNO. The government has used the loosely-worded sedition act or the “Security Offences (Special Measures Act (SOSMA),” passed in 2012 as a substitute to the colonial-era Internal Security Act, and other laws to arrest 138 government opponents.

In an effort to forestall domestic probes, Najib has fired his deputy prime minister, the attorney general and the head of the police special branch investigative unit and stalled or terminated investigations by the Malaysian Anti-Crime Commission, the central bank and a special parliamentary committee.

Despite what looks like overwhelming evidence of financial irregularities, covert ownership of expensive properties overseas, the passage of US$681 million through his personal accounts in 2013 and other misdoings, Najib seems to be solidly secure in his position. A stage-managed annual general meeting of the United Malays National Organization in December saw him keep his party enemies including former Prime Minister Mahathir Mohamad and his fired deputy premier Muhyiddin Yassin firmly in their place and neutralized.

Central Bank Publications, which publishes the Central Banking Journal and other publications, lists on its editorial advisory board such luminaries as Donald Branch, former governor of the Reserve Bank of New Zealand, Lars Heikensten, former governor of Sveriges Riksbank, Robert A. Mundell, professor of economics at Columbia University, Guillermo Ortiz, former governor of the Bank of Mexico, Kenneth Rogoff, professor of economics, Andre Sheng, former chairman of the Hong Kong Securities and Futures Commission, and many others.

In its announcement of its award to Zeti, the central banking publication didn’t mention the controversy in Malaysia. Instead, it said she “has played a crucial role in efforts to modernize Malaysia’s financial system and make the country’s economy more developed, fair and stable. Gaining household name recognition for her unorthodox and decisive efforts to extricate Malaysia from the Asian financial crisis in the late 1990s, Zeti has also led the charge on Islamic finance, worked tirelessly to expand financial inclusion and helped spearhead deeper financial integration in South-east Asia.

Christopher Jeffery, Chairman of the Central Banking Awards Committee and Editor of Central Banking, said Zeti “first drew international attention for introducing exchange controls in Malaysia at the height of the Asian financial crisis, earning rebukes from officials at hedge fund and official institutions alike.

History looks set to judge her more favorably than her critics and, over time, the IMF has moved closer to Zeti’s way of thinking. She is also the leading role model for middle-income country central banks and has played an important part in improving governance, financial inclusion and Islamic finance in Southeast Asia and beyond. She is deeply respected among her global central banking peers.”

Zeti is scheduled to receive the award at a ceremony in London on March 3rd.