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Monday, September 7, 1998 Published at 06:23 GMT 07:23 UK

Business: The Economy

Malaysian Prime Minister tightens economic grip

Traders have been watching Malaysian share prices nervously

Malaysia has appointed a new central bank governor as Prime Minister Mahathir Mohamad seeks to implement a sweeping shake-up of the country's economy.

The new governor is Ali Abul Hassan Sulaiman, the head of the prime minister's powerful economic planning unit.

The move consolidates Dr Mahathir's dominance over the country and its economy as he moves to protect Malaysia's embattled currency, the ringgit, from international speculators.

Analysts believe Ali Abul Hassan appointment will help ensure that the central bank does whatever the government wants it to do.

[ image: Former finance minister Anwar Ibrahim]
Former finance minister Anwar Ibrahim
Shares on the Malaysian stock market soared by more than a quarter in morning trading on Monday.

However international investors remain wary about the outlook for the Malaysian economy and Dr Mahathir's reforms and buying has so far been confined to domestic retail investors.

The prime minister has chosen to isolate Malaysia's economy, banning trading of the ringgit overseas and fixing its exchange rate.

But his decision has caused a rift at the pinnacle of Malaysia's political system.

The new appointment of the central bank governor follows the sacking last week of the deputy prime minister and finance minister, Anwar Ibrahim, who opposed the prime minister's decision to impose strict currency controls.

Both the former governor and his deputy resigned last month citing policy differences with Dr Mahathir.

Mr Anwar faces a series of charges ranging from sexual misconduct to endangering national security.

He has vigorously denied any wrongdoing, describing the charges as politically motivated.

Mr Anwar has announced plans for a nationwide tour in favour of economic reforms, a move which correspondents say will put him on a collision course with the Prime Minister.

Malaysian police are reported to have arrested Siukam Sukma Darmawam, an adopted brother of Mr Anwar Ibrahim, as the political crisis escalates.

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