According to an economist, the financial markets may respond negatively if Tan Sri Dr Mohd Irwan Serigar Abdullah is made Bank Negara Malaysia governor. ― File pic

KUALA LUMPUR, March 18 ― The financial markets may respond adversely if Treasury secretary-general Tan Sri Dr Mohd Irwan Serigar Abdullah, who sits on 1Malaysia Development Berhad’s (1MDB) board of advisers, is made Bank Negara Malaysia (BNM) governor, an economist said.

The central bank was among several agencies that was part of a now-discontinued task force that had investigated the state-owned investment firm, and had openly accused it of violating local financial laws.

Its actions led to BNM and its outgoing governor, Tan Sri Dr Zeti Akhtar Aziz, being viewed as among the few willing to pursue the state-owned investment firm amid allegations of a whitewash against others.

“With 1MDB’s governance standards being questioned, Bank Negara’s independence and credibility could be tarnished with the appointment,” Dr Chua Hak Bin, former head of Asean Economics with Bank of America Merrill Lynch, told Malay Mail Online.

Dr Oh Ei Sun, a senior fellow at S. Rajaratnam School of International Studies at Singapore’s Nanyang Technological University, said the independence of the central bank was crucial to a country’s monetary policy and that it would instill confidence in foreign investors, especially in a developing country.

“And Zeti has done a good job in these respects, having won various international accolades. It is therefore paramount that her successor would possess a similar reputation, especially in not being associated with controversial events or entities,” Oh told Malay Mail Online.

The political analyst said a longstanding BNM technocrat or an outsider with “impeccable” credentials would be preferred as Zeti’s replacement, especially during the current economic and political turbulence.

International business paper the Wall Street Journal reported last week that Irwan, who sits on the board of advisers in state investment firm 1MDB that is under investigation by foreign authorities, was expected to replace Zeti, who retires next month.

Singapore’s Straits Times, however, reported that Malaysia’s ambassador to the United States Datuk Dr Awang Adek Hussin, Minister in the Prime Minister’s Department in charge of economic affairs Datuk Seri Abdul Wahid Omar and Bank Negara deputy governor Datuk Muhammad Ibrahim, were shortlisted as Zeti’s replacement.

Zeti, the first woman to head the central bank, said last month that she should not be succeeded by a politician.

She was appointed the seventh governor of BNM in 2000 and had once been touted as a possible choice to lead the International Monetary Fund (IMF).