(Bloomberg) -- Malaysian Prime Minister Mahathir Mohamad named Lim Guan Eng as finance minister and set up an advisory board that includes a billionaire and a former central bank governor to carry out his economic plan.
Mahathir, 92, is forming a council of five elders including palm oil tycoon Robert Kuok, former Finance Minister Daim Zainuddin and Zeti Akhtar Aziz, who led Bank Negara Malaysia for 16 years. The people will be tasked with advising the cabinet and probing government personnel.
“We need to do investigations on a lot of things,” Mahathir said on Saturday in Kuala Lumpur. “Some of these things may involve the ministries and the personnel themselves, so we need people who are not involved to be getting and studying reports made either by ministries or by certain bodies which we will consult.”
Mahathir plans to have a small cabinet of up to 25 members, with at least 10 of the posts filled by next week. He has asked leaders of the four parties in his coalition to submit three names each, with him reserving the right to decide on ministerial appointments.
The setting up of the advisory council underlines Mahathir’s preference for old hands and his focus on 1MDB, on which he said there was enough evidence to reopen a probe. Meanwhile, the cabinet line-up shows his need to satisfy leaders in his coalition. Lim hails from the mostly ethnic Chinese Democratic Action Party, while his pick for defense minister Mohamad Sabu is from a group that broke away from the Islamic party known as PAS.
Already, rifts are beginning to show. Deputy Prime Minister Wan Azizah Wan Ismail, who is also president of the People’s Justice Party known as PKR, was notably absent from the briefing. PKR sees the ministerial appointments as not final as they should be agreed upon by all four parties, Rafizi Ramli, the party’s vice president, said in a statement.
Mahathir is expected to serve as interim prime minister and hand over power to de facto opposition leader Anwar Ibrahim once he is eligible to take the post.
Mahathir’s coalition won a shock victory in Wednesday’s election, partly by winning over voters unhappy with rising living costs, which they blamed on a 6 percent goods and services tax. The prime minister has pledged to scrap the tax within 100 days, reintroduce fuel subsidies and raise minimum wages, as well as review large-scale projects including the high-speed rail to connect the capital Kuala Lumpur with Singapore.
“We want to review all contracts that are not in favor or do not benefit Malaysia,” Lim said in a briefing in Kuala Lumpur, referring to big-ticket projects conceived by the previous government. “We are all Malaysians here. Our focus is to help Malaysians.”
Those spending plans will undermine efforts to curb the budget deficit. The former administration under Najib Razak had narrowed the deficit over time to 3 percent of gross domestic product, while pledging to keep debt under 55 percent of GDP.
Lim was chief minister of the northern Penang state before the latest election. Penang, the country’s second-smallest state, is one of the country’s largest contributors to GDP and home to foreign electronics companies including Intel Corp.
Lim pledged to form an economic policy that will restore investor confidence in Malaysia following the 1MDB scandal, while adding that he will defer to the expertise of the council of elders. In a briefing in Penang’s capital of George Town on Sunday he declined to give details on the policy, and repeatedly cautioned that he can’t make promises, including on scrapping the GST within 100 days, until after he’s sworn in as finance minister.
Mahathir has sought to reassure investors he’ll run a business-friendly administration, focusing on growing the economy and reducing debt. Financial markets had been betting on Najib remaining in power, and the currency and stocks are set for more volatility when markets reopen on Monday. Mahathir will monitor the market and take necessary action to address volatility, he said at the briefing.
Moody’s Investors Service said some of the spending pledges would be “credit negative” for Malaysia, such as the GST move. Fitch Ratings also flagged risks to the budget if the tax is abolished.
The council of elders bring back familiar names to investors.
Zeti, 70, became the first female Bank Negara Malaysia governor when Mahathir picked her in 2000, after she served a two-year stint as acting governor amid a controversial move to peg the ringgit to stem capital outflows. The central bank under her had urged criminal proceedings at least twice against the troubled state fund, before slapping a fine of an undisclosed amount on 1MDB, days before she left the position.
Meanwhile, Daim served as finance minister under Mahathir twice already. He completed his first term in 1984 to 1992 early into Mahathir’s tenure, before being called back in the middle of the financial crisis in 1997 to helm a council tasked with spearheading Malaysia’s economic recovery. He then became finance minister for a few months in 1999. Daim spends part of his time in Africa “engaging African governments on economy and planning,” according to his website.
Economist Jomo Kwame Sundaram and Hassan Marican, former president at state oil company Petroliam Nasional Bhd., will serve on the council of elders along with Robert Kuok, whose fortune is valued at $19.9 billion, according to Bloomberg calculations.
Mahathir named Muhyiddin Yassin as home affairs minister. Muhyiddin was Najib’s deputy prime minister until 2015, when he was fired after calling for better transparency on the probe into 1MDB.
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