PETALING JAYA: The nation must hold former prime minister Tun Dr Mahathir Mohamad accountable for turning Bank Negara Malaysia (BNM) into a casino where he subsequently lost in the gamble of the century, with regard to the central bank’s foreign exchange (forex) scandal that took place in the 90s.
In saying this, former BNM advisor Tunku Abdul Aziz Tunku Ibrahim pointed out that Malaysia cannot reclaim its place at the international top table if for whatever reason, we are not prepared to implement a one-law-for-all principle.
“It was a criminal act and one that greatly diminished BNM’s reputation and standing for integrity, professionalism and dependability among the world’s central banking and financial communities,” Tunku Abdul Aziz said, referring to BNM’s interventions in the forex market which he deemed as “totally reckless without regard to the consequences”.
“Mahathir, the prime minister who cut his financial teeth running a sundry stall at Pekan Rabu in his native Alor Setar, turned BNM into a casino and lost in the gamble of the century,” Tunku Abdul Aziz told reporters at a press conference held at the Eastin Hotel here, today.
While noting that he did not mean BNM should not intervene in the forex market in order to “build reserves, stabilise the exchange rate and to correct misalignments”, Tunku Abdul Aziz said this was a monetary instrument to be used with due care and diligence to minimise the kind of risks that Mexico experienced in its 1994 currency crisis which was sparked by its government’s sudden devaluation of the Peso against the US dollar.
Commenting on the testimonies emerging from the Royal Commission of Inquiry (RCI) into the forex scandal, Tunku Abdul Aziz said that to suggest the central bank’s governor at the time, Tan Sri Jaafar Hussein was the fall guy or scapegoat, does not accord or reconcile with the known facts.
“The witnesses the RCI have heard so far were mere cogs in the wheel, professional technicians, not policy or decision makers, but their accounts give us a good idea of an institution run by a governor who claimed he did not know what was going on under his nose. A likely story.
“The so-called intervention was over an extended period of time, and it was not a flash in the pan, a one-off operation involving a trifling sum of money, but one of the order of magnitude that alarmed the Bank of England, the Bank of Japan and other major monetary authorities around the world,” he remarked.
Tunku Abdul Aziz said that what happened resulted in the proud BNM becoming a rogue central bank overnight, and to suggest the governor at the time was not aware of the state of affairs is disingenous.
Former BNM adviser Tan Sri Nor Mohamed Yakcop emerged as the key witness of the RCI, Tunku Abdul Aziz said, considering the former was at the time, responsible for the country’s foreign exchange management.
While noting that Nor Mohamed served his superiors well, Tunku Abdul Aziz opined that the “ever eager to please and ambitious man served his master too well”, pointing out that despite the heavy losses BNM suffered from the forex scandal, Nor Mohamed went on to become Finance Minister 2 and today sits on the board of Khazanah Nasional Berhad.
“He now seems to suggest that he cannot remember the limits of his own authority. This I find difficult to believe. What Nor Mohamed is apparently doing is to protect Mahathir in a misguided sense of gratitude. It is a quid pro quo for all the promotions after running BNM into the ground,” Tunku Abdul Aziz said, adding that at the time, Nor Mohamed must have been given the fullest possible authority to “intervene” in the market without restraint.
“That authority to break all known rules had to come from the governor as it is inconceivable that Mahathir as prime minister would have given Nor Mohamed a direct order and even so, his instructions had to come from the governor.
“The governor would not have dared to act unilaterally without the tacit approval of the prime minister,” he added.
Elaborating further, Tunku Abdul Aziz reiterated that the issue at hand now pertaining to the inquiry into the forex scandal, is not the amount of the losses suffered by the central bank.
“Far more to the point is to establish who gave absolute power to a departmental head to take the country to the cleaners. Those hidden hands as we have known all belonged to Mahathir, the prime minister of Malaysia and the RCI proceedings are beginning to point in that direction.
“The governor was complicit and he was not a strong enough character to tell Mahathir to get off his back. The prime minister had no power to instruct BNM to deviate from its established rules and practices,” he said, suggesting that at that point, Jaafar should have tendered his resignation in protest.
Tunku Abdul Aziz highlighted an example where this had happened; the resignations of two governors after Jaafar, Tan Sri Abdul Aziz Taha who resigned on principle following what was deemed as clashes with the Finance Ministry, and Tan Sri Ahmad Mohd Don who left the central bank in 1998 when he disagreed with the imposition of capital controls, and pegging the ringgit to the US dollar, among others.
“While we would naturally need to wait for the RCI to conclude its proceedings and submit its findings to His Majesty the King, the information and testimonies emerging from the RCI confirm much that we already know that is well-documented and in the public domain.
“Barry Wain’s thoroughly researched account of the scandal that forms an important chapter in The Malaysian Maverick has never been challenged, or in any way disputed, by Mahathir who cooperated with Wain in the preparation of the best seller,” Tunku Abdul Aziz said in reiterating his call for the former premier to be held accountable for the 90s forex scandal. – MO