Sepupus, whether we like it or not, government policy affects every single one of us. If it is good, government policy presumably can be good, helpful, and desirable for us. But when I see things like this recent move brought forth by Malaysia’s Ministry of Domestic Trade and Cost of Living, I really have to think back to that old Milton Friedman adage.
The government solution to a problem is usually as bad as the problem.
In this case, though, it is actually worse.
Here we have a whole government deciding that all e-commerce listings have to be in Malay and deciding to do it all in blitz regulation announced on June 20th, presumably because some uneducated politician decided that he wanted to become the most Malay, the most heroic, the most nationalist person in the entire world, planet, country, civilization, universe.
Oh, there isn’t a problem, there are multiple problems.
I think that most of you who are reading this are wise and you have a sense of what’s going wrong. But anyway, why don’t we list them?
How about performative woke virtue signaling about language and national identity as if that is going to help people become more nationalistic or loyal because some idiot wants to create a career?
What about introducing regulation and U-turning at the speed of light the moment people get angry?
What about never ever once or even for a single moment of your poorly-researched life considering that anything could go wrong because you are incapable and incompetent, and you are so used to the addiction of what the baptism that you cannot imagine ever just introducing something and then getting it right?
I’m sure that there are some good policies from our government once in a while, but I think that our policymakers need to understand this: Mistakes are costly and they are much more largely and asymmetrically evaluated as disastrous than good things.
In very simple terms that I think that we can all understand, mistakes and turning back indicate a lack of political stability, which in turn directly drops demand for Malaysian currency because people are wary of investing in things that just continually change; under exchange rate determination theory (which clearly you’re not expected to understand in detail or in full but are most welcome to), a drop in demand for currency ceteris paribus (which means ‘all things held equal’, and that we’ll talk more about later) leads to a drop in the exchange rate value – if this were an economics exam for A Levels or IB, you could analyze it like this. (Free membership required)
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Alright, I hope you enjoyed that analysis. More of that to come later, likely as a case study or sample commentary for the International Baccalaureate Economics IA.
Here’s my point.
Pandering to so-called national identity without reference to the market or what would be desirable or beneficial for the market as opposed to meaningless and ultimately useless things is not likely to be beneficial for anyone, whether from a cultural and linguistic perspective or from the perspective of actually making Malaysia a slightly better place. Instead, it will make people think that Malaysia is a basket case – Not that they didn’t already think it was, given its corruption scandals, language policy flip-flops, religious sabre-rattling, and hundreds of different flavors of identity politics and politics combined with religion that reflect an immature political and economic culture.
There is no scenario whereby this would make most people any happier, nor would it actually increase sales from e-commerce; instead, it is likely to decrease them. It would also impose unnecessary costs upon e-commerce sellers and users in the first place. This is the reason why the government had to U-turn – because they had to spend time, money, and effort dealing with this kind of nonsense.
It is shocking to me that there are still politicians in this country who would try this kind of thing without learning from experience.
It is like dying in a video game and then proceeding to die repeatedly in the exact same way without ever learning anything over and over again thinking that somehow you could do the same thing in order to try to claim victory, either because you were unable to read history or you were too stupid to recognize patterns.
Well, here’s a pattern for you, one observed by Albert Einstein himself.
Insanity is doing the same thing over and over again and expecting different results.
Woke policies are not how you redeem the pride of your country. They are the way to destroy it over and over again until there is nothing left, and egotistical politicians with pet projects to try to make their names by so-called being heroes for the country are not a gift to the nation. They are parasites upon it. And if allowed to run high carnival with no questioning from the public, they will casually break the country.
I am sure that some woke politicians would like to take a different tack and would like to celebrate how nationalistic, how patriotic, how wonderful they are in their attempt to assert the identity of this place and somehow prove that we are no longer under colonialism because that is absolutely what they need to do in becoming the heroes of the Global South and heroes for their generation.
To that, I say, rather than taking a page from woke people who were unsuccessful in everything they did, it seems more logical to me to take what Lee Hsien Loong had once suggested or hinted at in his 2015 S Rajaratnam lecture, which is well worth a watch.
If your country does not have itself together, if its things are not in order, if it is not doing well, it can say a million different things but nobody will ever listen. It is nice to preach justice and talk about how beautiful, wonderful, and amazing you are, but at the end of the day, if you cannot even handle simple and basic things, then there is no point in your talking because people will not listen to you.
It is natural and understandable that that is so.
After all, you cannot give what you do not have, and if what you do not have is the basic common sense to be able to realise that you should not be dealing with this kind of woke policy, it beggars belief as to how it is that you could ever proclaim that you are a hero for justice, or anything worthy of emulation for anything other than a coincidence of geography and the good fortune of natural resources.
How lucky Malaysia is to have these. With these kinds of leaders, if they had inherited Singapore instead, it is incomprehensible how they could have ever survived.
I will be writing a series of IB Diploma sample IA commentaries soon, and this will be one of the many case studies. Please look forward to it and make sure to bookmark this page, RSS feed it, or track it by signing up for our newsletter to make sure that you don’t miss out on everything that’s going on. Of course, signing up for a premium membership if you don’t have one already is a great idea.
Thank you for reading, and I look forward to seeing you in the next one!
Economics is not finance, finance is not economics.
We know this to be true.
Yet we see how they rhyme with one another in interesting, subtle and layered ways.
In this piece, we will dive into the very first of our institution reports – an institution that is extremely important to Malaysia, both its present and its future.
Let’s go!
The Architecture of Financial Statecraft: Bank Negara’s Holistic Role
Bank Negara Malaysia (BNM) – Malaysia’s central bank – stands at the intersection of economics and finance, exercising a form of financial statecraft that has been instrumental in the nation’s development.
Established on January 26, 1959, just over a year after independence, BNM was created to issue Malaysia’s currency and to safeguard monetary and financial stability.[1]
Over the decades, its mandate has expanded into a comprehensive stewardship of the country’s financial system. Unlike a narrow focus on inflation or interest rates alone, Malaysia’s central bank operates with a broad toolkit that bridges macroeconomic policy and financial sector development.
At its core, BNM’s primary objectives are to promote monetary stability (keeping prices stable and inflation low) and financial stability (ensuring a safe, sound banking system), both of which are seen as prerequisites for sustainable economic growth.[2] But the “architecture” of Malaysia’s financial statecraft involves much more than setting the overnight policy interest rate. The central bank wears multiple hats in orchestrating the financial system:
Monetary Authority: BNM sets the nation’s key interest rate (the Overnight Policy Rate) to influence borrowing costs, credit expansion, and economic activity. Through open market operations and other tools, it manages liquidity and guides inflation expectations. For instance, since the adoption of an explicit policy rate framework in 2004, BNM has adjusted rates in response to economic conditions (e.g. cutting rates aggressively during the 2008–09 global financial crisis and the 2020 pandemic, then raising them as recovery took hold).[3] Its record of maintaining moderate inflation (typically in the low single digits) underscores a commitment to price stability on par with advanced peers.
Banker, Advisor, and Debt Manager to Government: By law, Bank Negara is the banker and financial adviser to the Malaysian government.[1] It manages the issuance of government securities and helps coordinate fiscal and monetary policy. When Malaysia funds development projects or runs deficits, BNM plays a crucial role in ensuring those financing needs are met in an orderly fashion. In practice, this means conducting auctions of Malaysian Government Securities, advising on debt strategies, and sometimes purchasing government bonds in secondary markets to ensure market stability (as it did briefly during periods of stress).
Regulator and Supervisor of the Financial System: BNM acts as the chief regulatory architect of Malaysia’s financial sector. It licenses and supervises commercial banks, Islamic banks, insurance companies, and other financial institutions, enforcing prudential standards to maintain solvency and integrity. The bank is empowered by comprehensive legislation – such as the Financial Services Act 2013 and Islamic Financial Services Act 2013 – to set the rules of the game for finance.[4] This includes prescribing capital adequacy ratios for banks, curbing excessive risk-taking, and protecting consumers. For example, in the mid-2010s BNM imposed macroprudential limits (like a cap on loan-to-value ratios for multiple home mortgages) to rein in surging household debt and speculative property lending.[5] These measures, alongside responsible lending guidelines, reflect BNM’s proactive use of regulatory levers to preempt financial instability.
Guardian of the Payment System: In today’s economy, the plumbing of finance – payment networks, clearing and settlement systems – is critical. BNM oversees both traditional payment systems (like the Real-time Electronic Transfer of Funds and Securities, RENTAS) and fosters innovation in digital payments. It formulates regulatory frameworks and standards for electronic payments, ensuring they are efficient and secure.[6] Under BNM’s watch, Malaysia has developed one of Southeast Asia’s most advanced payment infrastructures, including a national QR code standard (DuitNow) that enables instant fund transfers and e-wallet interoperability. The central bank’s oversight gives the public and businesses confidence that they can transact smoothly, a linchpin for commerce.
Manager of the Nation’s Reserves and Currency Value: BNM manages Malaysia’s international reserves – which stood at about US$118 billion as of early 2025 – to ensure adequate buffers against external shocks and to support the value of the Malaysian ringgit.[7] Through interventions in the foreign exchange market, the central bank can smooth excessive volatility in the ringgit’s exchange rate. Notably, BNM has used both orthodox and unorthodox tactics in different eras to defend the currency. It maintains a managed float exchange rate regime today, where the ringgit’s value is market-determined but the bank may intervene during disruptive swings. This role has been crucial in maintaining investor confidence and external stability, especially for a trade-dependent nation like Malaysia.
Lender of Last Resort: A less visible but vital function, BNM serves as the lender of last resort to the banking system. In times of crisis or bank runs, it can extend emergency liquidity to banks to prevent a collapse of confidence. This backstop underpins public trust that their deposits are safe. For example, during the Asian Financial Crisis and the Global Financial Crisis, BNM’s readiness to inject liquidity (and the establishment of blanket deposit guarantees in 1998) helped stabilize the system when panic could have taken hold.[8]
Together, these roles illustrate how Bank Negara acts not just as an economic policymaker but as the architect of Malaysia’s financial system, shaping the rules, norms, and structures within which financial activity unfolds. This is financial statecraft in action: using financial policy instruments strategically to achieve national objectives. Under BNM’s guidance, Malaysia’s financial landscape has grown from rudimentary beginnings to a diversified, modern system encompassing conventional and Islamic finance, large domestic banks with regional footprints, and vibrant capital markets. Crucially, the central bank’s approach has always been “holistic” – recognizing that interest rates, banking regulations, payment networks, and human capital development in finance are interconnected pieces of the puzzle. By aligning these elements, Bank Negara Malaysia has sought to harmonize the rhythms of economics and finance, as the opening lines allude, in the service of the nation’s progress.
An Institution at the Heart of Malaysia’s Development
Beyond its statutory duties, Bank Negara has long seen itself as an instrument of national development. Malaysia’s post-colonial leaders understood that building a robust financial system was essential to economic growth and the wellbeing of its citizens. Thus, BNM’s mission has extended into nurturing the financial sector and talent pool in ways that few central banks globally attempt, blurring the line between financial policy and developmental economics.
One major area is talent development and knowledge-building. BNM not only employs and trains a large cadre of its own economists, bankers, and supervisors; it has also invested in educating the broader ecosystem of financial professionals and future leaders. The bank offers prestigious scholarships each year to high-achieving young Malaysians to pursue studies in economics, finance, and related fields at top universities, on the condition that they return and serve with the Bank or contribute to the nation.[9] This scholarship programme – dating back decades – has quietly shaped a generation of policy makers and financial industry leaders. Many of its scholars have gone on to influential roles within BNM and other key institutions, ensuring a continuous infusion of expertise into Malaysia’s financial governance.
Perhaps the most ambitious example of BNM’s commitment to human capital is the establishment of the Asia School of Business (ASB) in Kuala Lumpur.
In 2015, under the leadership of Governor Zeti Akhtar Aziz, Bank Negara Malaysia partnered with the MIT Sloan School of Management to found ASB, a new world-class business school.[10] The Asia School of Business, which welcomed its first MBA students in 2016, combines MIT’s rigor with hands-on exposure to Asian markets. It was conceived as a response to the need for top-tier managerial talent in Malaysia and the region – effectively a “central bank’s business school” aimed at producing future CEOs, entrepreneurs, and policy shapers. Not only did BNM provide the initial endowment and campus (even locating it next to the central bank’s Sasana Kijang learning center), but Governor Zeti herself became co-chair of ASB’s board after retiring from the bank.[11] This unusual venture reflects BNM’s view that a sophisticated financial system ultimately depends on a pipeline of skilled, innovative people. ASB’s curriculum places heavy emphasis on action learning with companies in ASEAN, aligning with BNM’s vision to bridge academic theory and real-world practice in finance and business.[10]
BNM has also set up or supported a host of other institutions for capacity-building in finance. In 2003 it created the ICLIF Leadership and Governance Centre, dedicated to training corporate and public-sector leaders in good governance and strategic management. In 2006, it established the International Centre for Education in Islamic Finance (INCEIF), now a university that develops specialists in Islamic banking and finance – an area where Malaysia has become a global leader (more on this shortly). These centers, alongside BNM’s own training academy and regular seminars, have turned Kuala Lumpur into something of an intellectual hub for central banking and finance in the region.
Another developmental thrust has been financial inclusion and literacy. Bank Negara has worked to broaden access to financial services for Malaysians from all walks of life, under the principle that an inclusive financial system supports socioeconomic development. In practice, this meant encouraging the expansion of bank branches and services beyond urban centers, and when brick-and-mortar banking reached its limits, enabling agent banking and digital finance solutions. By the 2010s, BNM introduced frameworks allowing banks to appoint local retail shops or post offices as agents to offer basic banking (deposits, withdrawals, bill payments) in rural areas. The results have been striking: Malaysia’s financial inclusion metrics – such as the percentage of adults with a bank account – are among the highest in emerging Asia (well over 90%).[12] Through initiatives like the National Strategy for Financial Literacy 2019-2023, co-led by BNM, the bank has also promoted public understanding of finance, from teaching schoolchildren the importance of saving to running a state-of-the-art Money Museum and Financial Gallery at its headquarters. All these efforts are part of crafting an ecosystem where ordinary citizens can participate in and benefit from the financial system safely.
Bank Negara’s developmental role also involves market development and innovation. The bank has been pivotal in building Malaysia’s domestic capital markets – for example, helping to launch the local bond market in the 1980s and 90s, and supporting the creation of institutions like the Securities Commission in 1993 to regulate those markets. In the 2000s, BNM championed Islamic finance as a dual system alongside conventional finance. It granted licenses to Islamic banks and takaful (Islamic insurance) operators, developed Shariah governance standards, and pushed for Islamic financial instruments. Thanks in large part to these policies, Malaysia today has the world’s largest sukuk (Islamic bond) market and a thriving Islamic banking sector capturing around 30% of total banking assets. This is a clear example of Bank Negara using financial statecraft to achieve a strategic national goal: positioning Malaysia as a global Islamic finance center, which diversifies the financial sector and reinforces the country’s Muslim-majority identity in the economic sphere.[13]
Crucially, BNM’s influence extends into the broader policy sphere. The central bank often works in concert with the government’s economic plans, while maintaining an arm’s-length independence in its core decisions.
It has been said that Bank Negara provides the “long-term memory” in Malaysian economic management – its leaders, armed with data and analysis, have not shied from advising government leaders on what needs to be done for sustainable growth, even if politically difficult. For example, BNM has periodically sounded the alarm on issues like high household debt and housing affordability, prompting fiscal authorities to adjust policies (such as tightening mortgage lending rules or introducing housing schemes).
During the height of the COVID-19 pandemic in 2020, BNM moved swiftly to mitigate economic damage by slashing interest rates to historic lows and coordinating an automatic six-month loan moratorium with the banking industry to give relief to borrowers.[14] While unorthodox, this massive moratorium (which was later extended in targeted ways) helped tide over households and small businesses, and was credited with preventing a sharper economic collapse. It exemplified how BNM’s actions intersected with social policy, as the bank recognized the extraordinary shock to livelihoods and crafted a financial solution to cushion it.
In sum, Bank Negara Malaysia is not a cloistered central bank concerned only with charts and rates; it is a central institution in Malaysia’s business, political, and social ecosystem. Its policies on banking and credit affect the day-to-day life of entrepreneurs trying to get loans, families buying homes, students seeking scholarships, and investors domestic or foreign. The bank’s leadership has often been drawn into national conversations on economic direction, from industrialization strategies in earlier decades to today’s debates on digital economy and climate change. And because of its reputation for professionalism, BNM has at times been one of the most trusted public institutions in Malaysia – perceived as relatively technocratic and insulated from politics, even as it works closely with politicians in formulating policy. This trust was hard-earned and has been tested occasionally (as we will see in historical episodes), but it remains a key asset: people generally believe that Bank Negara “has Malaysia’s back” when it comes to financial matters.
To appreciate how BNM came to assume such a multifaceted and respected role, one must look at the history and evolution of the institution. The bank’s character has been shaped by economic trials by fire – from the turbulent early years of nationhood, through boom and bust cycles, financial crises, and transformations in the global financial landscape.
In the narrative that follows (available to our Premium members), we trace Bank Negara’s journey through time in a historical jaunt through time as we look through the history of the central bank throughout the eras., highlighting how each era and each Governor left a distinct imprint on Malaysia’s financial statecraft.
The History and Legacy of Bank Negara
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Sepupus, most of you who are reading this are probably aware that I am from Malaysia, and a subset of you are probably aware about the traumatic separation between Malaysia and Singapore.
If you have known me over the years, you may also know how I have wrestled with this complexity both in my existence as a Malaysian and in my interactions with Singaporeans, and in my later reading, reflection, and heightened understanding of this event.
In time, and upon reflecting upon the ties of kinship, trauma, and renewed kinship between our two nations, I have come into the realization that Singapore’s story is a story of transformation, renewal, not just of surviving but also of thriving – It is a key case study that any student of economics must be aware of if they wish to understand the importance of institutions, policies, and economic planning for securing the future of a country.
Most of you who know me in person further likely understand very clearly that I am a strong admirer of the Singapore story – not just the story of the country itself as articulated by Lee Kuan Yew, but also his book “The Singapore Story” in itself, which I have read from cover to cover three times by now, even as I now read his “From Third World to First” for the third time for a project that is coming up for Singapore’s Diamond Jubilee, SG60.
But you probably also know that I like to read beneath the surface – At least, I like to tell myself that I read beneath the surface, and therefore, I cannot discuss Singapore’s success without highlighting the role of one of its chief architects: Dr. Goh Keng Swee.
With that in mind, I am very proud to share with you this premium report below, accessible in full by our premium members or purchasable for USD10 over here, about the man behind Lee Kuan Yew and a sine qua non of Singapore’s economic success.
Introduction
When Lee Kuan Yew delivered the eulogy for his old comrade Dr. Goh Keng Swee in 2010, he declared that “of all my Cabinet colleagues, it was Goh Keng Swee who made the greatest difference to the outcome for Singapore” (pmo.gov.sg).
Dr Goh is clearly from Singapore, but the fact that he was one of the chief planners of a nation that so sharply diverged away from Malaysia and became one of the most prosperous countries in the world in per capita terms is something that should give not only Malaysia but the rest of the world pause, as they contemplate the consequences of a grand natural experiment illustrating the consequences of institutions and policy formulation upon the fate of two countries that share in ties of kinship, but prioritize dramatically different things. (More on this in subsequent reports and posts)
Indeed, Dr. Goh was the quiet powerhouse behind many of Singapore’s early triumphs – the economic architect who engineered the nation’s leap from Third World to First, the strategist who built up a credible defence from scratch, and the reformer who overhauled Singapore’s education system.
A man of incisive intellect and steely pragmatism, Goh served as Prime Minister Lee Kuan Yew’s trusted lieutenant, often tasked with the toughest problems of government (pmo.gov.sg), combining scholarly rigor with an unflinching practicality to carry out the bold policies that laid the robust foundations of modern Singapore.
This report explores how Dr. Goh Keng Swee set up Singapore’s economic base and key institutions, his interactions with Lee Kuan Yew (including Lee’s own influence and support), and the unique thinking and vision that Goh brought to the fledgling nation. It is a narrative of how one extraordinary man – perhaps one whom we could dub Lee Kuan Yew’s “hatchet man” for his role in executing difficult policies – systematically planned and built the structures that would support Singapore for generations to come. (Lee once said he intended to see that Singapore “will be here a thousand years from now. And that is your duty and mine” – a vision made attainable by the enduring institutions he and colleagues like Goh created(pmo.gov.sg).)
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