KUALA LUMPUR: Malaysia’s new finance minister will need to be cleared of corruption charges before he can take office, with Prime Minister Dr Mahathir Mohamad taking the helm at the ministry for the time being.
While 92-year-old Mahathir moved quickly to name top Cabinet posts at the weekend amid heightened investor concern about the policy outlook, his pick for finance minister, Lim Guan Eng, can’t be sworn in until a pending court case is cleared, the prime minister told reporters yesterday.
Until then the ministry will report directly to Mahathir, who will be supported by an economic advisory council – which includes some old names, like former central bank governor Zeti Akhtar Aziz.
Lim, who is DAP secretary-general, was chief minister of Penang before the election and is a trained accountant. He is seen as a safe pair of hands to guide the economy through uncertain times, and has a solid track record in Penang, one of the largest contributors to the economy despite its small size.
The corruption case was brought against Lim in 2016 under the government of ousted leader Najib Razak and relates to allegations that he abused his position to personally benefit from property deals. Lim pleaded not guilty to the charges, which other opposition leaders had said were part of a campaign to discredit him.
Mahathir is tasked with bringing down government debt while following through with key campaign pledges, including scrapping a 6% consumption tax within 100 days, raising fuel subsidies and boosting minimum wages. He also wants to review large-scale investment projects awarded during Najib’s term.
While Lim’s graft trial complicates matters, it’s not unusual for Malaysia’s prime minister to assume the role of finance minister. Najib held the position during his nine years in office.
Lim’s appointment was greeted with cautious optimism as economists wait for more detailed plans on the budget.
His appointment “is encouraging”, said Julia Goh, an economist at United Overseas Bank Ltd in Kuala Lumpur. “The new government understands the key economic issues and fiscal weaknesses at hand. We hope they can deliver the promises to the people yet ensure economic growth remains stable and the fiscal deficit is manageable.”
Malaysian stocks initially slumped but quickly rebounded after trading resumed yesterday, with the FTSE Bursa Malaysia KLCI Index closing 0.2% higher. The ringgit was little changed at 3.9505 against the dollar as of 6pm in Kuala Lumpur.
Moody’s Investors Service and Fitch Ratings have warned of risks to the budget if the goods and services tax is abolished and not offset by other revenue-raising measures. The previous government had narrowed the deficit over time to 3% of gross domestic product, while pledging to keep debt under 55% of GDP.
Lim’s comments since his appointment have been limited to reassuring Malaysians that the new government will work for all citizens, state contracts will be reviewed and help will be given to the poor. He is the first ethnic Chinese to hold the post in 44 years in a country that has to manage tensions between the majority Malay group and minorities, and where economic advantages are given to ethnic Malays.
“Our primary focus will still be on helping those who find it very hard to make ends meet,” he told reporters on Saturday. “Our focus is to see how we can make their lives a little bit easier, whether in terms of abolishing GST”, maintaining cash handouts or through fuel measures, he said.
On Sunday, he said he won’t make any specific comments on economic plans, including scrapping GST within 100 days, until he is sworn in as finance minister.
“Lim will be seen as a practical choice and a safe pair of hands, but ultimately the market is probably waiting for the fiscal direction,” said Rahul Bajoria, an economist at Barclays Plc in Singapore.
Mahathir also created an advisory council, tapping familiar names who were part of his team when he was previously prime minister from 1981 to 2003. Zeti, 70, was the first female governor of the central bank, taking the reins in the aftermath of the Asian financial crisis two decades ago. Daim Zainuddin is also a member of the council, and served twice as finance minister under Mahathir, helping spearhead Malaysia’s economic recovery after the Asian crisis.
Others on the council are economist KS Jomo and Hassan Marican, former president at state oil company Petroliam Nasional Bhd, as well as a commodities tycoon Robert Kuok, whose fortune is valued at US$19.9 billion, according to Bloomberg calculations.