Najib Razak: finance minister/PM faces poll pressure

We continue our ranking of the region's finance ministers with Malaysia's Najib Razak. The taint of scandal claims, high public debt and slowing export growth all weigh against him.

In our criteria for FinanceAsia's Finance Minister of the Year study, we made clear that we would penalise finance ministers when they, through their actions or speeches, detracted from the credibility and prestige of the institutions they represent.

The next entry on our list provides a prime example.


Attention is shifting towards Malaysia’s general election due in mid-2018 and the opposition party has picked former premier Mahathir Mohamad, the country’s longest-serving leader, as its prime ministerial candidate. So the pressure is on Najib Razak, the scandal-hit incumbent, who also happens to head the country’s finance ministry.

Aged 92, Mahathir has come out of retirement to lead the campaign against his former protégé Najib, having been reconciled with former rival and jailed opposition leader, Anwar Ibrahim.

The move by Mahathir will offer the country’s 15 million voters an opportunity to oust Najib, who was named Asia’s worst finance minister in our 2016 survey due to the administration’s poor governance and the 1MDB corruption scandal, which has led to money laundering investigations in the US, Singapore, and elsewhere. Najib has denied any wrongdoing. 

A boon for Najib ahead of the elections that must be held before August is Malaysia’s improved economic health. After a stronger-than-expected final quarter, Southeast Asia’s third-largest economy grew by 5.9% over the full course of 2017 – its fastest pace in three years and up from 4.2% in the prior year. That has helped to underpin the Malaysian ringgit, which has appreciated by 10% against the US dollar since the start of last year, making it the top performer in emerging Asia.

In December the International Monetary Fund forecast the country’s economic output to expand by 5 to 5.5% in 2018, driven by a strong domestic demand and continued strength in global trade.

“Risks to the near–term outlook are balanced,” the IMF said. “Strong global demand for electronics, which has benefited Malaysia’s exports, could last longer than anticipated,”

To tackle a high debt-servicing burden and assuage voters ahead of the elections, Najib has worked to pull in foreign investment, with Beijing in particular pumping billions of renminbi into Malaysia in the last two years. Government borrowings in mid-June last year stood at RM685.1 billion ($175.7 billion), which at 50% of GDP is relatively modest. However, 12.5% of its 2016 income was on interest payments, double the ratio of neighboring Singapore, which has a higher debt-to-GDP ratio. 

To be sure, the Najib government said it is committed to ensuring its government debt doesn’t exceed 55% of its GDP. The ratio peaked at 54.46% in 2015, and slowed to 52.72% in 2016. 

On a brighter note, the fiscal deficit has narrowed for the past eight consecutive years, moderating from 6.7% in 2009 to 3% last year. Malaysia projects the ratio could further ease to 2.8% in 2018. However, the government also acknowledged that it is unlikely to meet its original target of a balanced budget by 2020.

As head of government Najib also promotes infrastructure investment as central to his plan to revive the economy. The government handed a $13 billion rail project to China last year that links peninsular Malaysia’s east and west. In a further push, the Malaysian leader signed a joint venture agreement to build a high-speed railway to Singapore by December 2024, the first cross-border one of its kind in Southeast Asia. 

For all that, Malaysian export growth is expected to slow in 2018 after outbound shipments expanded by 20% year-on-year at their peak last year, according to economist estimates. Price pressures are also creeping higher. Taking a cautious note, the country’s central bank raised its benchmark interest rate by 25bp to 3.25% in January, the first hike since 2014.

Only Taiwan's Sheu Yu-jer ranks lower.

TOMORROW: New minister, some familiar flaws

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