With a decades experience, its little wonder that
Zeti Akhtar Aziz has remained ahead of the curve on monetary
After a decade as governor of Malaysias Bank Negara
(BNM), Zeti Akhtar Aziz can reasonably claim some credit for
the soaring cityscape and throbbing economy beyond her office
Her term has coincided with much drama in Malaysias
too often overlapping political and economic spheres: three
prime ministers, an emboldened opposition railing at a
politicized civil service, and a wind- ing back of
the Malay-advantaged new economic policy.
But over the past year, in the wake of the global crisis,
Malaysia has had to grapple with a new reality for emerging
economies: a sharp rebound in growth and unprecedented capital
flows to the region; and with them, renewed fears of inflation
and asset bubbles in Asia.
Against this, Zeti has been amongst the most proactive
central bankers anywhere. BNM raised its base policy rate three
times this year, marking Zeti out as the only central banker to
have acted pre-emptively and decisively against
Malaysia wisely moved to withdraw the accommodative
stance as economic rebound gathered pace, says Rahul
Bajoria, economist at Barclays Capital, who predicts the
economy will grow 7.5% this year.
A study by Citigroup concludes that the central banks
25bp policy hike in March, May and July soundly anticipated
inflationary pressures and was based on the right estimate of
the countrys output gap.
Indeed, analysts surveyed by Emerging Markets agree that
Zetis proactive monetary loosening at the onset of the
global crisis and sure-footed ahead-of-the-curve tightening
highlights both the sophistication and confidence of the
central bank and should help to anchor medium-term
inflation expectations. This stands in contrast to much of the
rest of Asia, where, despite red-hot regional growth, policy
rates have yet to normalize post-crisis.
Its easy to be wise after the event, but we have
tried very hard to be wise before and during the event,
Zeti came to office in 2000, as the storms of Asias
financial crisis still hung heavy and when mainstream
economists were much divided about the prudence of
Malaysias tactics, then seen as the handiwork of the
countrys feisty long-term leader Mahathir Mohammed. The
argument has swung to Kuala Lumpurs side, with
Malaysias prolonged growth and Mahathirs smooth
retirement in 2003 after 21 years.
That Malaysias economy has continued to expand with
vigour, absent bank failures and major interruption in
investment, is very pleasing, Zeti says. Despite
Malaysia being one of Asias more globalized economies, as
a contract manufacturer in areas such as technology, Zeti says
Malaysia was spared stinging damage from the 2008 crisis
because of well-timed macro-prudential measures beyond the
traditional central bank levers such as interest rates.
She cites portfolio restrictions and a capital gains tax
revision to dampen speculation, and a general flexibility
in policy as keys to limit deeper impact. What paid
off for us [from the experience of 1998] was early
intervention, anticipating that the worst is yet to come, and
taking action to address that.
By way of example, she points out the central bank had
re-activated a dormant corporate debt restructuring committee
to monitor corporates and stem crippling defaults. To
support growth and access to the market of viable companies, we
also activated a credit enhancement entity to help raise funds
in the bond market, supported by a guarantee, she