May 12, 2018 / 1:22 PM / 9 days ago

Malaysia's new finance minister was jailed twice by PM Mahathir

KUALA LUMPUR (Reuters) - Malaysian Prime Minister Mahathir Mohamad’s finance minister, relatively unknown in international financial circles, is a man he threw into prison twice.

Lim Guan Eng waves to journalists as he arrives at the prime minister's office in Putrajaya outside Kuala Lumpur April 3, 2008. REUTERS/Bazuki Muhammad/Files

Mahathir announced three top cabinet posts on Saturday, including Lim Guan Eng, a former banker and chartered accountant, as finance minister. It is for the first time in 44 years that the finance ministry is being headed by a member of the ethnic Chinese community.

In the last administration, the post was held by ousted Prime Minister Najib Razak, who was handed a thumping defeat by Mahathir’s alliance in Wednesday’s general election.

Lim, 58, is best known in Malaysia for being the chief minister of Penang, the second richest state in the country and home to a popular tourist island and industrial port.

But economic analysts say he may need more than that at a time when the country has to make sweeping economic and fiscal reforms and reassure markets that the political change will not have an economic impact.

Malaysian markets have been closed since the election, but overseas investors have been nervous of what lies ahead because of Mahathir’s populist promises.

As finance minister, Lim will be expected to oversee the new government’s plan to repeal a deeply unpopular goods and services tax, which it has promised to do within the first 100 days. He will also have to manage the revenue shortfall that will cause.

“His initial focus will be mostly domestic issues - executing campaign promises and reducing inefficiencies so that the government can still maintain fiscal discipline,” said Hasan Jafri, who heads Singapore-based business consultancy HJ Advisory.

But he added: “He will have to work quickly to broaden ties with the international financial community.”

Lim would likely be guided by the government’s newly appointed five-member advisory team, which includes former Malaysian finance minister Daim Zainuddin and central bank governor Zeti Akhtar Aziz, both of whom are well known overseas.

Some analysts said Lim had built a good reputation as an economic manager in Penang, which recorded the highest GDP per capita among Malaysian states in 2016.

“By almost all accounts... Guan Eng did a stellar job in rebuilding the finances of Penang,” said Oh Ei Sun, senior adviser for international affairs at the Kuala Lumpur-based Asia Strategy & Leadership Institute.

“He has both the expertise as an accountant and the credibility, especially incorruptibility, to run MOF,” he said, using the acronym for the Ministry of Finance.

JAILED TWICE, SMILING NOW

“He’s an excellent and confidence-boosting choice besides fulfilling the ruling coalition’s pledge that the PM shall not be the finance minister,” said Yeah Kim Leng, veteran economist and external member of the central bank’s Monetary Policy Committee.

Mahathir has previously said that separating the two roles was essential to avoid a repeat of the multi-billion-dollar graft scandal at state fund 1Malaysia Development Berhad (1MDB) which has dogged Najib since 2015 and contributed to his electoral defeat.

Lim was a bitter foe of Mahathir during his earlier 22-year stint as prime minister and was thrown in jail twice. Mahathir jailed Lim during a political crackdown in October 1987 that he said was aimed at preventing racial riots, and again in 1998 under the Sedition Act.

On Saturday, a smiling Lim stood by 92-year-old Mahathir as his appointment was announced.

The prime minister also announced a home affairs minister and a defence minister to take the number in his cabinet to five. Mahathir and Deputy Prime Minister Wan Azizah Wan Ismail, the wife of his jailed ally Anwar Ibrahim, make up the rest.

Lim told reporters after his appointment that the government’s plan was to review all contracts to ensure that jobs and business opportunities for Malaysians were made secure, as well as reduce the financial burden on low-income groups.

“The primary focus will be still on helping those who find it very hard to make ends meet,” he told reporters.

“Our focus will be to see how we can make their lives a little easier.”

In its election manifesto, Mahathir’s alliance had also promised to review foreign investments, including major infrastructure projects that are part of China’s Belt and Road initiative, bring back fuel subsidies, and raise minimum wages.

Lim, has spent most of his life as a member of the opposition Democratic Action Party (DAP) fighting against the then ruling Barisan Nasional alliance.

The son of another prominent DAP leader, Lim Kit Siang, he studied economics at Monash University in Australia and was first elected as a member of parliament in 1986.

Lim led the opposition to victory in Penang for the first time in its history in 2008. He was then appointed as the state’s chief minister and has held the position since.

Asked about being an ethnic Chinese finance minister in a Muslim Malay-majority nation, he said: “I don’t consider myself as a Chinese. I am a Malaysian.”

Additional reporting by Tom Westbrook and Raju Gopalakrishnan; Writing by Rozanna Latiff and Praveen Menon; editing by Raju Gopalakrishnan

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