PETALING JAYA: Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz and Malaysian economist Jomo Kwame Sundaram have been appointed members of a high-level United Nations taskforce that would examine possible reforms of the global financial system.

The taskforce was formed as a result of the current global economic turmoil.

The Commission of Experts on Reforms of the International Monetary and Financial System would also look into the possible reform of the International Monetary Fund (IMF) and the World Bank, the United Nations said in a statement.

The commission would also suggest measures which member states could take to secure a more stable global economic order.

Former World Bank chief economist Joseph Stiglitz, who won the Nobel Prize for Economics in 2001, will chair the commission.

Other members include Jean-Paul Fitoussi, professor of economics at the Institute d’Etudes Politiques de Paris in France; Avinash Persaud of Barbados, who is chairman of Intelligence Capital Ltd, and Yaga Venugopal Reddy, former governor of India’s Reserve Bank.

Other members of the panel are Japan’s Eisuke Sakakibara, who is professor at Waseda University in Tokyo; Chukwuma Soludo, the Governor of Nigeria’s Central Bank; and China’s Yu Yongding, the director of the Institute of World Economics and Politics.

Jomo, a former Universiti Malaya lecturer, is currently the UN Department of Economic and Social Affairs’ assistant secretary-general for economic development.

UN General Assembly president Miguel D’Escoto, who announced the formation of the panel last month, had noted that a coordinated effort at the global level was needed to resolve the current turmoil in the financial system.

Zeti and Jomo appointed to
high-level UN taskforce.

Zeti finally getting the credit she deserves

Zeti’s tough stewardship of the central bank and monetary policies help Malaysia withstand the global economic turmoil. — Bernama pic

COMMENTARY

NOV 13 - For 10 years, Bank Negara governor Tan Sri Zeti Akhtar Aziz bristled over the fact that when reporters, economists and pundits praised Malaysia’s brave experiment with currency controls after the Asian financial crisis, her name hardly merited a mention.

Lavish praise seemed to be the reserve of Tun Dr Mahathir Mohamad, the former prime minister who went against convention and pushed through the controls, and Tan Sri Nor Mohamed Yakcop, the man who flew to Argentina in the early days of the crisis to brief Dr Mahathir on the intricacies of the financial world and who went on to become a trusted adviser.

Privately, Zeti told friends and government officials that she too played a role in crafting some of the policies that prevented a complete meltdown in Malaysia, and wondered why she never earned the column inches that others did. Today, she can lay that complaint to rest.

Finally, she is getting the credit she craves and deserves. Politicians, corporate figures, bankers and journalists roundly claim that her tough stewardship of the central bank and monetary policies is the reason why Malaysia’s banks and financial system are in a better position to withstand the shock of the global economic turmoil.

The non-performing loans ratio is low at 2.5 per cent; foreign reserves are high at US$100.2 billion, sufficient to finance more than eight months of retained imports and 4.2 times short-term external debt. The capital account is healthy; there is sufficient liquidity in the system, and loan growth is at 9.5 per cent. Going forward, inflation is expected to moderate at between 3 and 4 per cent next year.

With such statistics to back her, the Wharton alumni has been more than ready to speak to the press and press her case before different audiences that the fundamentals of the Malaysian economy are sound. When confronted with scepticism like she was at a dialogue yesterday with fund managers and the business community, she sticks to the message.

One of the participants wondered if the Malaysian government was painting too rosy a macro picture while underestimating the impact of the global economic slowdown on the average Malaysian. Zeti pointed out that no one could accuse the central bank of being in denial or having its head buried in the sand.

The reason: as early as July this year, Bank Negara cautioned that an economic slowdown was imminent and Malaysians would have to ready themselves for more challenging times. Having sketched that scenario and taken into consideration the strong banking sector, the low external debt and strong savings base here, there was every reason for her and others to have confidence in the system, she explained.

Still, even the optimistic Zeti has to accept that the global economic downturn is more challenging for Malaysia than the economic crisis it faced in 1998, with the risk of slow growth in a high-cost environment.

Datuk Azman Yahya, a member of the Economic Council, was quoted in the New Straits Times as saying that: "From an economist's standpoint this is probably one of the worst positions to be in. More worrying is that this is today a global phenomenon. From a policy response this is tricky - too much stimulus either fiscal or monetary may lead to inflationary pressures, too little may lead to a recession."

But he and others in the business community are convinced that Malaysia would be staring at a much more gloomy picture had it not been for the role of Bank Negara and Zeti, in particular.

"The tsunami did not avoid our shores by design," said banker Datuk Nazir Razak recently, giving praise to Zeti’s strict stewardship of the financial system.

An investment banker told The Malaysian Insider: "Bank Negara under Zeti has been quite conservative. It was very suspicious of allowing banks to get involved in certain high-risk instruments. That is why the US sub-prime crisis did not impact our banks in a big way.''

It may be 10 years late, but Zeti is finally snaring the headlines and column inches she deserves.

Malaysia's Zeti Says Soaring Prices May Damp Growth (Update2)

By Nipa Piboontanasawat
June 30 (Bloomberg)

-- Malaysia's central bank Governor ZetiAkhtar Aziz said soaring food and energy prices may hurt household spending and damp economic growth, slowing expansion in 2008 to below its March forecast.
``The important consideration in this scenario is to sustain domestic demand,'' Zeti said in an interview yesterday in Basel, Switzerland. The economy may grow between 4.5 percent and 5 percent this year, she said, citing ``preliminary'' estimates. The central bank in March forecast expansion of 5 percent to 6 percent.
Slowing growth may make it harder for Malaysia to follow Vietnam, Indonesia and the Philippines in raising borrowing costs this year to tame inflation, even as oil doubled to a record $142.99 a barrel on June 27 and rice and wheat reached unprecedented levels.
``Bank Negara Malaysia does not want to be trigger-happy cowboys shooting straight from the hip at the very first sign of danger,'' said Suhaimi Ilias, an economist at Aseambankers Malaysia Bhd. who expects the central bank to hold rates steady until year-end. ``They want to carefully assess the impact on growth and inflation.''
Bank Negara, which kept its overnight policy rate at 3.5 percent for a 17th straight meeting in May, isn't scheduled to review borrowing costs until the end of July.
Ringgit Falls
Malaysia's ringgit fell today, heading for its first quarterly loss since September 2006, on concern that higher oil prices will stoke inflation and restrain growth.
Surging prices amid slowing expansion is complicating economic management for Prime Minister Abdullah Ahmad Badawi as he faces calls to step down after leading the ruling coalition to its worst election result in March general elections.
Malaysia may revise its 2008 budget deficit estimate, Second Finance Minister Nor Mohamed Yakcop said today, after the government last week announced a 15 percent increase in its development spending amid soaring costs. The government will announce its forecasts for growth on August 29, he said.
``Malaysia's major exports are electronics and electrical goods and global demand has been waning,'' said Joanna Tan, an economist at Forecast Singapore Pte. ``We expect some support from the commodities sector and that will help buffer to a certain extent. It is possible for them to meet their growth forecast.''
`Necessary Response'
Malaysia's inflation may reach a nine-year high of 5 percent this month after the government lifted retail gasoline and diesel prices to trim subsidies used to keep domestic costs low, Zeti has said.
``What we have to monitor very closely is what is the impact on wages and to what extent these prices, increasing costs, are passed on to consumers,'' Zeti said in Basel, where she's attending a meeting of central bankers at the Bank for International Settlements. ``When that becomes clear, a necessary response will be based on these considerations.''
Malaysia won't use the exchange rate to counter inflation, because the currency market is ``too volatile,'' Zeti said.
The central bank this month raised its 2008 average inflation forecast to 4.2 percent from a March estimate of as much as 3 percent, causing some economists to predict a rate increase in July or earlier.
``Malaysia needs to get a grip on inflation after the price hikes,'' said Tan at Forecast, who expects the central bank to raise rates next month. ``There's also concern that investor sentiment will be weighed by the ongoing political developments and that is another challenge.''
`Careful Balance'
Second Finance Minister Nor said June 24 that inflation in Malaysia is being driven by rising costs rather than demand, so higher interest rates won't necessarily cool price pressures.
A ``careful balance will be made in determining the interest-rate policy,'' Zeti said. While rising prices will have a ``significant'' impact on inflation in the short term, ``this does not mean that it's going to result in significant, persistent price increases going forward.''
Higher prices will reduce household purchasing power, and may have a ``moderating impact'' on prices, she added.
To contact the reporter on this story: Nipa Piboontanasawat in Basel at npiboontanas@bloomberg.net Last Updated: June 30, 2008 01:23 EDT