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BT EXCLUSIVE: NEWS ANALYSIS

Can Malaysia's new Finance Minister Zafrul Aziz steer country through current economic quagmire?

As nation's distressed economy functions as his acid test, seasoned banker's deep knowledge of region's capital markets should come in handy very quickly

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In a recent interview with CNA, Mr Zafrul has gone on record as saying: "I am not a politician. I hope I will be able to do what I need to do and focus on my immediate challenges."

Singapore

AS Malaysia confronts the blow dealt by Covid-19, which this week drove the country to shutter businesses and schools and curb travels until end-March, the direction of the vulnerable, open economy rests in the hands of newbie Finance Minister Zafrul Aziz.

Mr Zafrul, a well-networked 46-year-old with a knack for corporate dealmaking, was head honcho of Malaysia's second-biggest lender CIMB Group before his debut in government service last week under the leadership of recently-installed Prime Minister Muhyiddin Yassin.

He attended the country's elite boarding school for Malay boys - Malay College Kuala Kangsar - and went on to complete his post-graduate studies in England.

A seasoned banker, he has also gained a reputation for impressive political astuteness.

Such savvy has aided his ascent (and survival) in Malaysia Inc and, now, to one of the country's most powerful portfolios - one that in the past was the entitlement of the top leader.

In the late 1990s and early 2000s, then-prime minister Mahathir Mohamad guarded the finance portfolio during turbulent times. The pattern continued under his predecessors Abdullah Ahmad Badawi and Najib Razak, until an election upset two years ago upended the trend.

Mr Zafrul's uncle is politician Raja Nong Chik Zainal Abidin, the country's former federal territories minister and a current Umno member. He also had tight rapport with another Umno politician and diplomat Jamaluddin Jarjis, who died in a helicopter crash five years ago. Yet, Mr Zafrul has managed to mostly stay above the political fray - in particular the tumult that led to the installation of Mr Muhyiddin's administration.

In a recent interview with CNA, Mr Zafrul said: "I am not a politician. I hope I will be able to do what I need to do and focus on my immediate challenges."

Does the KL-born fitness buff with a penchant for triathlons possess the wherewithal to navigate the country through the current economic quagmire?

"Who does? It's a tough job to begin with, but with all that's happening, even the best finance minister will struggle," said an avid Malaysia- watcher.

Economies are on shutdown mode as they grapple to contain the spread of Covid-19; global supply chains have been thrown out of whack; and consumers have pulled back spending, raising recession risks.

To cushion the fallout, central banks have fired a bazooka of rate cuts and announced various stimulus packages.

Malaysia, an export-oriented economy, was already en route to its slowest growth in more than a decade. The recent "movement control order" to stem the rapidly-rising infection will hurt its macros even more, analysts say.

"Growth drag from Covid-19 is now more likely to be sharper or more prolonged than an earlier expected one-quarter shock," said Citi Research, forecasting Malaysia's GDP to fall below 3 per cent this year from an earlier projection of 4.1 per cent.

But if Malaysia's drastic policies sharply reduce Covid-19 infections, that will be "very positive", said Manu Bhaskaran of Centennial Asia Advisors.

Crude prices have halved since the year's start, on the back of slowing demand as well as a price war between oil majors. And Malaysia is a net oil exporter. A prolonged oil price slump will shrink the government's coffers and raise deficit levels, leaving less wiggle room for fiscal measures.

Meanwhile, the Malaysian ringgit has been hammered. It has crossed the RM4.30 mark against the greenback, and the country's key equity gauge is languishing at a low of more than a decade as foreign outflow intensifies.

"Zafrul's work is indeed cut out for him. The change in government does not make it any easier," said Pankaj Kumar, former head of OSK Research and KSK Group's former investment director.

That is not to say Mr Zafrul has nothing to work with. In late-February, amid political upheaval, then interim prime minister Dr Mahathir had rolled out a RM20 billion (S$6.6 billion) economic stimulus package to support workers and jobs.

As the global outlook darkened, that plan has since been enhanced by a newly set up economic council under Mr Muhyiddin's administration that meets weekly to ensure that all stimulus measures are implemented. CGS-CIMB Research expects the package to "prevent a sharp front-loaded slowdown" in growth.

"The FM needs to be not only bold, but decisive," said Mr Kumar, suggesting that he set up an "equity fund" comprising deep-pocketed government-linked funds to support beaten down and "fundamentally-attractive" blue-chip stocks.

As Malaysia's distressed economy functions as Mr Zafrul's acid test, his deep knowledge of the region's capital markets should come in handy very quickly.

His strongest suit is investment banking (IB), with much of his career spanning boutique firms Kenanga Holdings and ECM Libra Group to bigwigs Maybank and CIMB. At one point, he also headed the IB unit of Citigroup Malaysia.

In between, he also gave entrepreneurialism a shot as co-investor and chief executive of Tune Money - a no-frills online financial services provider that was also owned by tycoon Tony Fernandes of AirAsia. Excepting his role as a judge in a corporate reality TV show The Firm - part of his efforts to market Tune Money - the stint was hardly memorable, and he returned to dealmaking where he clearly shone.

As chief executive of Maybank Investment Bank, he snagged multi-billion dollar mandates. Among them was the initial public offering (IPO) of palm-oil giant Felda Global Ventures - the world's second-largest IPO in 2012 after Facebook.

Another heavyweight listing was of Westports, which operates Malaysia's busiest port and counts Hong Kong tycoon Li Ka-Shing as shareholder.

Mr Zafrul also landed the RM12 billion mega merger of Sapura and Kencana Petroleum, which created one of the world's largest integrated oil and gas services providers. And he played an instrumental role in the merger between Maybank and Singapore's oldest brokerage Kim Eng in 2011.

When he got tired of waiting for Maybank's top post, he joined rival bank CIMB - then led by the country's top dealmaker Nazir Razak. He took over the reins as group chief executive in 2014 from his mentor.

Mr Zafrul is not the first technocrat from the corporate sector to be tapped by the government. Idris Jala, credited for turning around struggling Malaysia Airlines, was handpicked in 2009 to lead then-prime minister Najib's transformation programme. GLC poster boy and ex-chief executive of Maybank and UEM Group Abdul Wahid Omar was appointed as economic planning minister - also by Najib - in 2013.

The duo's public-service careers, however, ended on a less-remarkable note when compared to their corporate achievements - perhaps partly due to the scandal-hit leadership they had served under.

Mr Zafrul, who has measuredly shuffled many jobs over the years and reached this epoch of his career, may want to ponder on that as he navigates Malaysia's oft-volatile political climate.