Mahathir proposes gold dinar as currency for international trade

  • From: "Muslim News" <editor@xxxxxxxxxxxxxxx>
  • To: <submit@xxxxxxxxxxxxxxx>
  • Date: Thu, 28 Mar 2002 08:10:32 -0000

KUALA LUMPUR: Prime Minister Mahathir Mohamad proposed Tuesday that the
gold dinar be used for international trade to prevent a repeat of the
currency crisis which devastated Asia in 1997-98. The Malaysian premier,
who blames greedy currency traders for Asia's downfall in the crisis,
said paper currency had no intrinsic value, making the exchange rate
"arbitrary and subject to manipulation as we saw during the Asian
financial crisis." 

In comparison, the gold dinar had a definite value based on world demand
for gold and any fluctuations were minimal, he said. According to
Islamic law, the dinar is a specific weight of gold equivalent to 4.3
grams. "The proposal is to make this dinar a currency for international
trade only. It is not meant to replace the currency of any country," he
said when launching a two-day conference on Islamic capital markets. 

"The risk of speculation can be reduced to almost nothing. World trade
can actually expand because the cost of business will be much reduced as
the need to hedge will practically disappear." Outlining details,
Mahathir, who is also finance minister, said local gold prices would
determine the exchange rate for the local currency against the dinar. 

"The dinar can be held as central bank reserve. Trade need not be paid
in actual dinar but the imports and exports of a pair of trading nations
can be balanced and only the difference paid in dinar," he said. To
further minimise the need to move the dinar, he said trade surplus or
deficit can be credited or debited against future imports or exports.
Southeast Asia's longest-serving leader urged developing nations to
press for more balanced globalisation and "a check on economic bullying
practices" made in the name of free markets and portfolio flows. 

Mahathir said Islamic countries, which were left behind in the
industrial revolution, must now "move with the tide into the information
age" to keep pace with advanced nations. "Islam is not and has never
been synonymous with conservatism. Islam does not call for rejection of
technology or modernity," he said. 

In Malaysia, the premier said, deposits in the Islamic banking sector
had surged to 35.9 billion ringgit (9.5 billion dollars) in 1999, from
only 4.9 billion in 1995. Islamic banking assets accounted for only 6.9
per cent of total banking assets in 2000 but the sector was targeted to
capture at least 20 per cent of the banking market share by 2010. 

Mahathir said Islamic capital markets must introduce indigenous
financial products to remain competitive, and not only imitate and adapt
from the conventional financial system. He also called for more Islamic
financial portals to broaden online trading to keep up with the new
economy. Securities Commission chairman Ali Abdul Kadir earlier told the
conference that there was a need to woo more investment from more than
100 Islamic equity funds operating globally. 

Global Islamic investment was estimated to be expanding by 12-15 per
cent annually, with some one trillion dollars of Middle East funds
presently invested in banks worldwide, he added. Predominantly Muslim
Malaysia aims to be the key Islamic financial centre in Asia and has
drawn up plans to develop the Islamic system under a 10-year capital
market blueprint unveiled last year. 

Source:  The News

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