This article first appeared in The Edge Financial Daily on September 20, 2017 - September 26, 2017

KUALA LUMPUR: Tan Sri Nor Mohamed Yakcop, who was one of the witnesses called by the Royal Commission of Inquiry (RCI) into Bank Negara Malaysia’s (BNM) 1990s foreign exchange (forex) scandal, has quit as deputy chairman of Khazanah Nasional Bhd.

In a statement, Khazanah said Nor Mohamed submitted his resignation during a meeting yesterday, and will effectively relinquish his post and exit the sovereign wealth fund’s board of directors on Sept 30. No successor was named.

Nor Mohamed, 70, a former second finance minister who was adviser to BNM from September 1998 to April 2000, told the RCI when he was called as witness on Sept 6 that he made a mistake of hedging 100% against certain foreign currencies in the 1990s.

Nor Mohamed was the 17th of 25 witnesses called by the RCI. Prior to his role as BNM adviser, he served as the bank’s banking department manager between 1986 and 1994, and was responsible for external reserves management.

During his testimony, Nor Mohamed said there was a large inflow of US dollars in the late 1980s and early 1990s.

At the time, he said there was speculation that Europe, including the UK, would overtake the US, whose dollar was weakening, as the strongest economy in the world. “We subscribed to this view and bought European currencies, including pound sterling,” he said. But the European currencies crashed afterwards.

“If I did not hedge it by the time the money [US dollars] came in, we would be buying Deutsche mark at an expensive rate. Then the bank and everyone would accuse me of not hedging.

“Anyway, now I am clearly wrong [for hedging], but at that time if I didn’t hedge and the US dollar crashed, I would be accused of not executing my responsibility as the manager. It was part of my job to hedge,” he added.

The central bank allegedly suffered billions of ringgit of losses from forex trading between 1990 and 1994. The inquiry was concluded yesterday and the RCI panel is now expected to submit its findings to the Yang di-Pertuan Agong on Oct 13.

Nor Mohamed, said Khazanah, has served on Khazanah’s board of directors for 15 years, making him its longest-serving board member and the only deputy chairman in its 23-year history.

“Nor Mohamed has been instrumental to the success of numerous initiatives, including the revamp and transformation of Khazanah from 2004 to the present day,” the statement read.

This includes the 10-year Government-Linked Companies Transformation Programme from 2004 to 2015, the development of various economic corridors including Iskandar Malaysia, as well as the formation of Yayasan Hasanah and the Khazanah Research Institute, it said.

“These initiatives and others were executed in his capacity as a Khazanah board member, and in various capacities in public service, including as economic adviser to the prime minister from 2000 to 2003, minister of finance II between 2004 and 2009, and [as] minister in the prime minister’s department, Economic Planning Unit, from 2009 to 2013,” it added.

Prime Minister Datuk Seri Najib Razak, who is also Khazanah chairman, said Khazanah’s board of directors “accepts his decision” and “we wish him well”, while thanking him for his contribution to the sovereign fund.