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[KUALA LUMPUR] For 16 years, Malaysia's internationally-lauded central bank governor bolstered the economic credibility of a country otherwise facing a slew of emerging market challenges, ranging from currency crises to a commodities markets crash.
As Zeti Akhtar Aziz prepares to step down as head of Bank Negara Malaysia in April, questions about succession are framed by uncertainties clouding the Southeast Asian economy, notably a collapse in commodity prices and a political scandal that has drawn international scrutiny, according to market participants.
They say their angst centres on three key risks: the future of the central bank's current independence, policy continuity and the competence of Ms Zeti's replacement. If the central bank cuts rates too early or too fast, it could spur capital outflows from Malaysian debt. On the other hand, a rate rise to defend the currency could hurt the economy.
"People are hoping that the successor will be as credible as Ms Zeti has been," said Brian Tan, an economist with Nomura. "But we don't know who is on the list and some people worry the replacement will be politically motivated."
Neither the central bank nor the government responded to Reuters' requests for comment on potential successors or concerns around succession.
So far this year, Malaysia's currency and bond markets have enjoyed a degree of calm after being battered in 2015. Similarly, forward markets in the ringgit, Asia's worst performing currency last year, don't appear to be pricing in rough weather post April.
Some of the issues hounding Malaysia in 2015 have faded, notably the political scandal around allegations of graft at the debt-laden state fund 1Malaysia Development Berhad (1MDB) and a revelation that about US$681 million was deposited into Mr Najib's personal bank account.
While an ongoing Swiss probe into 1MDB's activities shows wider concerns around the fund are yet to be resolved, some say more immediate domestic political risks for the economy have retreated after Malaysia's attorney-general last week cleared Mr Najib of corruption.
Foreign capital has also returned to the ringgit bond markets while Malaysian exports have remained robust.
Another comforting factor is that BNM's independence is sanctified by the law, which institutionalises the bank's autonomy for the formulation of monetary policy.
"The independence issue would not be an institutional one because some of the institutional anchoring has been done. It will be more to do with coziness between the government and the central banker," said Vishnu Varathan, an economist with Mizuho Bank.
He noted a lack of clarity around succession could impact sentiment in broader markets as Ms Zeti's term draws to a close.
BIG SHOES TO FILL
There's been no official word on who could replace Ms Zeti.
Among names of contenders floating around in local media are those of deputy central bank governor Muhammad Ibrahim, the minister in the Prime Minister's Department in charge of Economic Planning Abdul Wahid Omar, the Malaysian ambassador to the US Awang Adek Hussin and the Secretary General of Treasury at the ministry of finance Mohd Irwan Serigar Abdullah. None of them commented on the matter when approached by Reuters.
Ms Zeti said in November she expects the new BNM leadership after her would be "excellent" because of the various processes existing to evaluate successors. She added there were internal candidates for the job but did not name specific individuals.
When approached by Reuters last week, Ms Zeti declined to comment on potential successors, but said she had no immediate plans to take up any new role.
"I will not take on any new assignments. I will focus on writing," she told Reuters on Friday.
The central bank governor is formally appointed by the King of Malaysia, who has a symbolic role in the constitutional monarchy. The tenure of the governor is for five years.
The appointment is made on the advice of the federal cabinet, ostensibly the Prime Minister.
A source close to the government said the economy is Mr Najib's biggest concern and that would guide the search for the next governor. The source said a significant number of strong candidates have already been lined up, both within the central bank and outside.
Still, investors are worried about whether Ms Zeti's competence can be matched.
"It's very hard to distinguish Ms Zeti from the BNM. We're sort of delving into uncharted territory here in terms of her successor," said Frederic Neumann, co-head of Asian economics research at HSBC in Hong Kong.
"But the BNM seems to be fairly cautious. Malaysia has fared quite well by keeping interest rates stable over time and rarely moving, and I suspect the successor will want to maintain that winning formula."
The daughter of celebrated Malaysian academic Ungku Aziz Ungku Abdul Hamid, Ms Zeti was handed the reins of the central bank at the peak of the Asian financial crisis in 1998.
She was appointed governor in May 2000, becoming Malaysia's first woman central bank governor.
She steered the economy through the years when the ringgit was pegged, even dealing with former Prime Minister Mahathir Mohamed who dismissed the idea of an independent central bank, and through the global financial crisis in 2007.
Under Mr Najib, she was able to push for more autonomy for the central bank, winning Bank Negara plaudits from the international financial community for being one of Asia's most independent central banks.