Islamic states spurn world currencies
2002-08-19 13:57
Kuala Lumpur - Malaysia and a handful of other Islamic countries plan to bypass western currencies and use gold to settle bilateral trade from 2003, a senior Malaysian government official said on Monday.
Prime Minister Mahathir Mohamad's economic adviser, Nor Mohamed Yakcop, told an international conference on the proposed trade system - based on an electronic unit of value called a gold dinar - would foster trade among the world's 1.3 billion Muslims.
"The gold dinar could be an important facilitating mechanism...to move away from an inherently unstable and ultimately unjust global monetary system," he said.
Currently most world trade is settled using major currencies such as US dollar or the euro, transacted through money markets that have in the past been sharply criticised by Mahathir.
Mahathir blamed western currency speculators for the Asian financial crisis of 1997/98, which spurred him to impose capital controls and fix the ringgit's exchange rate against the dollar.
Some Islamic countries, at odds with the United States particularly over its support for Israel, have expressed their dislike of the super-power's dominance in world affairs.
Nor Mohamed said the system would help Muslim nations bypass Western intermediaries as conduits for settling trade accounts.
"We find ourselves today trading through Europe or through some third non-Muslim country," he said, adding that Islamic nations' trade with non-Islamic countries were now worth eight times the size of trade among Islamic nations.
Under Islamic law the gold dinar is equivalent to 4.3 grams gold content. Although its value would be derived from the international bullion market it could be equivalent to one ounce of gold.
Under the system, central banks in member countries would settle dinar trade balances every three months by transferring the beneficial ownership of gold held in a custodian bank, such as the Bank of England.
The Malaysian central Bank Negara would pay Malaysian exporters in the local ringgit currency, while importers would pay the central bank in ringgit.
Nor Mohamed said Malaysia hoped to start using the gold dinar system in the middle of 2003 - just before Mahathir retires after 22 years as prime minister, and just before he hosts an Organisation of the Islamic Conference summit.