Islamic gold dinar move sparks debate about legitimacy of dollar

By MUSHTAK PARKER | ARAB NEWS

Published: Aug 16, 2010 00:19 Updated: Aug 16, 2010 00:19

The announcement last week by the Kelantan state government in Malaysia that it is introducing gold dinars and silver dirhams as legal tender alongside the Malaysian ringgit, is a damp squib of a failed attempt at financial UDI (unilateral declaration of independence).

Perhaps more importantly, it betrays the financial and monetary policy illiteracy which has been symptomatic of the ruling PAS administration since it won power at the state level in 1990. PAS is the Islamic Party of Malaysia which has a running battle with UMNO (United Malays National Organization), over who really represents the Muslims in the southeast Asian country. UMNO is the dominant party in Barisan Nasional, the coalition that has ruled Malaysia since independence.

The fact that PAS announced the introduction of the coins at the onset of the Muslim holy month of fasting, Ramadan, smacks of cheap political opportunism trying to ride on the emotional and religious sympathies of Muslims. Talk about a "Shariah currency" is as misinformed as it is inaccurate.

PAS would have had much more credibility had it tried to introduce the coins say in the immediate aftermath of the global financial crisis and its attendant credit crunch in 2008.

But then PAS like most Islamic parties including the National Salvation Party of Necmettin Erbakan and the party of Hassan Al-Turabi in Sudan have proven to be disastrous in power, partly because of an outdated and inflexible authoritarian and patriarchal view of the state and the dominance of men in power. PAS is the party that introduced religious apartheid in Kelantan where women have separate check-outs at supermarkets or Muslim women are spot-fined RM50 if they do not wear the hijab in public.

It is in the economic and financial policy sphere that Islamic parties, especially PAS, are so naïve that a so-called Islamic gold dinar or Islamic finance is a panacea and would solve the problems of the world simply because of its faith-based philosophy and ethos.

However, it would be equally naïve to suggest that PAS is the only party in Malaysia involved in the exploitation of Islam as a political tool, especially in the economic and financial space. UMNO itself is a past master in this.

The question of an Islamic currency is not new. In fact, there is already a functioning Islamic currency in place - the Islamic Dinar (ID), which is the unit of accounting of the Islamic Development Bank (IDB), the multilateral development bank (MDB) of the Muslim world. The ID is equivalent to one SDR (Special Drawing Right), the unit of accounting of the International Monetary Fund (IMF). The ID has successfully served the Muslim MDB since its establishment in 1975.

If Muslim countries want a unified currency, the ID of the IDB would be an ideal one to consider. However, as the problems related to the proposed monetary union of the GCC countries and the euro zone suggest, unified currency, whether a fiat paper based on gold or silver, is a highly complex issue especially in a globalized economy and financial system where the disparities in individual economies only serve to exacerbate these complexities. In the 57 countries this could be more true. Of the 56 IDB member countries, over 21 are classified as LDC (least developed countries) and, according to UN definitions, are some of the poorest countries on earth.

In the Malaysian context it is also not new. The governments of both Prime Ministers Mahathir Mohamed and Abdullah Badawi did toy with the concept of the Islamic Gold Dinar (IGD) to be used to settle accounts between participating Muslim central banks. One of the architects of the IGD concept, which is effectively a metallized version of the Bilateral Payments Arrangement (BPA) pioneered by Malaysia, is Nor Mohamed Yakcop, former Minister of Finance II and currently a Minister in Prime Minister Mohd Najib Abdul Razak's Office.

The BPA is a unique bilateral payments and trade settlement arrangement between Malaysia and developing countries which at the time bypassed the need for costly correspondent banking in London, New York and Frankfurt.

Under the IGD, there would be an IGD exchange which uses the gold dinar as the accounting unit for trade between Malaysia and her trading partners. Malaysia even set up a company promoting the gold dinar, IGD Practice (Labuan) Sdn Bhd, which even took a 34 percent stake in the Kazakhstan Gold Mining Corporation, which in turn owns the Artul Trud Closed Joint Stock Company, which operates the Bolshevik Gold Mine, said to be one of the largest in the world.

Despite Nor Yakcop's assertion that the IGD concept is workable, it never saw the light of day because it was ill-thought out, limited in scope and failed to attract the support of most of the Muslim countries, who cannot deal with a concept of ceding sovereignty, albeit in this case partially, because of the nature of their governance systems which range from absolute monarchies to military industrial dictatorships.

The Kelantan state move may be a reaction to the above failed initiative. At the same time it could also be a riposte to the 1 Malaysia policy of Prime Minister Mohd Najib Abdul Razak. The inculcation of a single Malaysian identity as the 1 Malaysia policy seems to suggest, according to many Malaysian Muslims is far too premature, insubstantive and politically immature. This especially at a time when the Malay Muslim ownership of Malaysian economic GDP is still low (less than 30 percent) in terms of per capita per population. Hence also a growing underlying unease at any suggestion that the Najib government would abolish the New Economic Policy (NEP) which is Kuala Lumpur's affirmative action policy or (Bumiputra Empowerment Policy) in favor of the majority Malays.

The Islamic gold dinar move has also resulted in an unintended debate in some of the most unexpected circles about the legitimacy of the US dollar as the international currency. This is a legitimate and pertinent debate which has attracted the likes of Nobel laureates to the bleary-eyed barefoot economists to some of the delusional Islamist economists.

There is a case for the replacement of the US dollar as the new international currency. But whether it will be a going back to the Gold standard pre-Bretton Woods must remain a moot point. The Chinese, the world's largest capital owners today, have long argued for this. But for the moment they are a hostage to their massive holdings of US Treasury bonds which together with the Japanese holdings effectively underwrite the obscene US budget deficit, which in reality is not fully payable.

As for the Kelantan government move, no sooner had the Kelantan Chief Minister Nik Abdul Aziz Nik Mat announced the launch of the currency, his Economic and Finance Minister Husam Musa was forced to issue a humiliating retraction that the gold dinar is not a currency but an alternative to barter trade in the state.

Earlier he had stressed that the state would strive to expand the use of the gold dinar and silver dirham in all transactions, including paying civil servants' remuneration. "We have over 1,000 shops that have signed up to our campaign and agreed to accept the dinar and dirham for the purchase of goods," he told local reporters at the launch.

The Najib government let loose Deputy Finance Minister Awang Adek Hussin to remind Kelantan that under Malaysian law, currency matters came under the purview of the federal government and Bank Negara Malaysia (BNM), the central bank, which earlier already issued a rebuke to the Kelantan state government in this respect.

Hussin even suggested that the federal government may take some punitive measures against Kelantan, which have had long-time grudges (some of which may be legitimate especially pertaining to the distribution of oil and gas revenues to the state government) against the ruling Barisan Nasional Coalition.

The Kelantan authorities are bemused by the furore their action has caused. "Several news report about the dinar being Kelantan's second currency are not accurate and have caused confusion. I do not see why this issue has to be blown up following Kelantan introducing the use of the dinar, as it has been around since the beginning of Islam," Hussam Musa stressed. However, he added that there were still many technicalities that had to be addressed by the state government over the use of the currency.

Malaysian state launches Islamic currency

A Malaysian state on Thursday launched the Islamic dinar and dirham as an alternative currency, allowing the golden and silver coins to be used as legal tender alongside conventional banknotes.

Authorities in northern Kelantan state, which is ruled by the Islamic opposition party PAS, said the Islamic currencies would be used in many shops in the state in addition to the national currency, the ringgit.

"We have over 1,000 shops that have signed up to our campaign and agreed to accept the dinar and dirham for the purchase of goods," state cabinet minister Husam Musa told AFP.

He said signboards have been erected in the main market in the state capital Kota Bharu to show the conversion table between the dinar and ringgit, and participating shops will display stickers to encourage people to use the coins.

"The response has been very positive and all the coins which were worth a total of 2.0 million ringgit (629,000 dollars) have been sold out at the launch today," said Husam, who is in charge of economic and finance planning.

According to Islamic law, the dinar measures 4.25 grams of gold, while the dirham is 3.0 grams of pure silver.

A golden coin is equivalent to about 582 ringgit (183 dollars) while the silver coin is worth around 13 ringgit but their values fluctuate according to market prices.

Husam said the dinar and dirham currencies can also be used dealings with state goverment agencies, such as paying "zakat", or alms for the poor.

There has been a long debate in Malaysia, a Muslim-majority country with large ethnic Chinese and Indian communities, to introduce the coins as legal tender nationally.

Former premier Abdullah Ahmad Badawi, whose administration promoted a moderate form of Islam that emphasised economic and scientific development, shot down the proposal to use the Islamic currencies.

But his predecessor, Mahathir Mohamad, was an advocate of the dinar system and urged Muslim countries to use it as a trade instrument.

The debate has died down since current Prime Minister Najib Razak came to power last year.

Widening income inequality: A challenge to 1 Malaysia

Dr Chandra Muzaffar

August 09, 2010

AUG 9 — Widening income inequality is a major obstacle to the unity and solidarity that 1Malaysia envisions.

Since Merdeka (Independence) in 1957, the top 20 per cent of income earners in Malaysia have benefited much more from economic growth than the bottom 40 per cent. It is significant that the report of the National Economic Advisory Council (NEAC) on the New Economic Model (NEM) admits that, “The bottom 40 per cent of households have experienced the slowest growth of average income, earning less than RM 1,500 per month in 2008.” 

The wage trend in Malaysia recorded only an annual 2.6 per cent growth during the past 10 years, compared to the escalating cost of living during the same period. It explains why almost 34 per cent of about 1.3 million workers earn less than RM700 a month, below the poverty line of RM 720 per month — a point emphasised by the Minister of Human Resources, Datuk Dr. S. Subramaniam, recently.

It is not difficult to fathom why workers earn so little and why income disparities are so glaring.  The huge influx of unskilled, lowly paid foreign labour into the country since the late eighties has played a big part in depressing wage levels at one end of the spectrum. At the same time, the liberalisation of the financial sector and the privatisation of public enterprises in Malaysia as in so many other countries have led to the elevation of incomes at the other end of the spectrum, thus contributing to widening inequalities.

The government is attempting to respond to the challenge by reducing our dependence upon foreign workers and by improving wage levels and working conditions in certain sectors of the economy. It plans to increase the per centage of the bottom 40 per cent households with SPM qualification and above, from 30 per cent in 2009 to 45 per cent in 2015.  Both government and private companies are expected to help workers garner new skills that will enable them to earn better incomes.

While there is a degree of support for these measures, many private employers, it appears, are against one of the fundamental demands of workers unions for ameliorating the plight of the poor--- namely, a basic minimum wage for all workers. 90 per cent of countries have laws that provide for a minimum wage in one form or another. In most cases, various criteria are taken into account, including the needs of the workers and their families, the prevailing economic situation, and the social environment. 

Many economists and sociologists today feel that the term “minimum wage” itself, which is the product of an earlier era, should be replaced with the term “living income” and linked to the dignity of the human being. A living income is a minimum level of income by which all human beings can provide for themselves and their dependents the five basic material human needs — food, housing, clothing, health care and education. These needs are vital for protecting human dignity.

It is because governments, the owners of capital, and other powerful elements in the upper strata of society have failed to protect the dignity of the masses that there is  growing alienation and discontent in many parts of the world.  China is an example of a country whose phenomenal growth rates since the early nineties have benefited a minority, rather than the majority, which is why social unrest is on the rise, as the respected Chinese Academy of Social Sciences acknowledges. Similarly, India’s much lauded economic success has not transformed the lives of its teeming millions. A recent United Nations study has shown that one-third of the world’s poor live in conditions of utter destitution in that country. It is one of the reasons for the rapid spread of the Naxalite rebellion in various districts in India. Even the “red shirt” protest movement in Thailand that galvanised a huge segment of the rural poor has been described by some analysts as an expression of the anger and disillusionment of the marginalised.    

The bottom 40 per cent in Malaysian society is nowhere as desperate as the poor of China or India or Thailand. Nonetheless, there is alienation. Some of this alienation manifested itself through the ballot-box in the March 2008 General Election. The tremendous increase in crime rates, and numerous cases of social delinquency that surfaced between 2006 and 2008 may also have been the consequences of alienation and marginalisation. It is also quite possible that a segment of those at the bottom of the heap — especially the youths — feel marginalised by a society which they perceive panders more to the glitz and glitter of the elite than to their yearning for recognition and respect. How the alienation of the poor and those who are struggling to make ends meet will express itself in the next few years, no one knows.

This is why it is imperative that the government continues to address the challenge of low incomes and widening inequalities in society. It should not be distracted by a small group motivated by self-interest and blinded by a myopic notion of “market forces determining wages.”  If 1Malaysia is premised upon inclusiveness, it must not only ensure a living income for the bottom 40 per cent but also reduce the yawning economic and social disparities that are an affront to human dignity.  

* Author is the chairman of 1 Malaysia Foundation Board of Trustees 

Policeman dies while fleeing sex raid in Malaysia

An off-duty policeman trying to flee religious police carrying out a raid on illicit sex died after falling from a hotel room in northern Malaysia's Kelantan state, police confirmed Sunday.

"The 33-year-old lance-corporal climbed out of his hotel room window when religious affairs department officials raided his room in the early hours of Saturday," a senior police official, who declined to be named, told AFP.

He said the man was believed to have jumped or fallen from the third-storey window and "all the religious officials found in the room was a woman by herself and a pair of men's trousers.

"The officer was still alive when he was found on the hotel grounds but died in hospital later," he added.

The woman was released after questioning, and investigations into the incident were continuing, he said.

State police chief Abdul Rahim Hanafi confirmed to AFP that one of his men had died in the incident but refused further comment.

Under Islamic law, which operates alongside the civil code in multicultural Malaysia, "khalwat" -- close proximity between a man and a woman who are not married -- is forbidden.

Teams from the state religious departments routinely carry out raids in the country's hotels, entertainment facilities and parks in a bid to catch unmarried couples canoodling or having casual sex.

PKR first family split on Khalid

Sunday June 27, 2010

Analysis

By JOCELINE TAN

Tan Sri Khalid Ibrahim has been damaged by the criticism against him but he will probably survive as Mentri Besar after the PKR retreat ends today.

SOMETHING intriguing is happening in Datuk Seri Anwar Ibrahim’s family.

It looks like the three politicians in the family are on different paths regarding the crisis over Tan Sri Khalid Ibrahim’s leadership of Selangor.

Anwar has not uttered a word since the issue exploded. As PKR’s ketua umum or supreme leader, he is trying to remain statesman-like and stay above the fray.

But the Permatang Pauh MP is also torn between the two men at the centre of the crisis. He had personally brought Khalid into PKR and made him party treasurer before Khalid found fame as Selangor Mentri Besar. On the other hand, he and party vice-president Azmin Ali go back a long way and their ties are quite unshakable.

PKR president Datuk Seri Dr Wan Azizah Wan Ismail, on the other hand, seems inclined towards Khalid particularly after her long-time political secretary Faekah Hussin quit to become Khalid’s political secretary. The move had her blessings and is seen as Khalid’s way of telling his detractors that the party president is on his side.

But their daughter Nurul Izzah, who is Lembah Pantai MP, is clearly among the MPs critical of Khalid going by her comments that Khalid’s good intentions are not always in line with the thinking of party leaders.

If this powerful political family can be so divergent on the issue of Khalid’s future, what more those at the PKR retreat in Shah Alam where the issue of Khalid is expected to take centrestage today.

But Khalid’s political future will not be decided by the end of today because a retreat of this nature does not have the power to replace a mentri besar.

The ultimate decision on Khalid will have to be made by the PKR supreme council although some say that it is basically Anwar’s call.

But the discussion at the retreat will enable the leadership to weigh the political cost and benefit of Khalid staying or going.

He is digging his heels in and has tried to rally forces in the state behind him. Selangor Youth chief Khairul Annuar has issued a series of press statements supporting Khalid.

On Thursday night, representatives from 17 Selangor divisions met in the official residence of the Mentri Besar where the consensus was that although Khalid had his flaws, now was not the time for him to go.

Ordinary people in Selangor were quite taken aback when the issue broke. They had no idea that elements in PKR had issues with Khalid.

He enjoys a good public image and has been fairly competent. He is a nice man, uncontroversial and as his supporters often say, at least he is clean.

They say he is trying to get rid of the Umno way of doing things by separating politics from the running of the state.

But as those in his party say, it is not a compliment to be told you are doing a better job than Datuk Seri Dr Mohd Khir Toyo. Anyone, they say, can do a better job than Khir. They say Khalid’s most outstanding achievement so far is issuing free water and that is not enough.

Selangor is to PKR what Penang is to DAP and Kelantan is to PAS. These are the Pakatan Rakyat exhibition states, their so-called “Pakatan Zone” and their means of showing the people that they have what it takes to do a bigger job.

Pakatan politicians are of the view that Kelantan is in cruise mode and Penang is meeting expectations. Selangor is not doing any worse or better than before.

“In sports, we call it running on the spot,” said a party insider.

The group of MPs petitioning for the replacement of Khalid has been slammed and told that they do not have the locus standi to ask Khalid to go because they are not from Selangor.

But Selangor is crucial to PKR and Pakatan’s quest to capture Putrajaya. Selangor is Pakatan’s frontline state. It has to shine and sparkle in order for Pakatan to break through to the next level.

As such, said the disgruntled MPs, they have the right to question how Khalid is managing Selangor.

Pakatan will not lose Selangor even if Khalid continues in his current I-know-best style. But neither will the coalition advance to Putrajaya.

“The question is whether we are here just to retain our market share of the seats or to take Putrajaya. DAP and PAS will go on whether or not we win Putrajaya, the next general election is not a zero sum game for them. But for PKR, it is a zero sum game. We win the Federal Government or we are finished,” said the political insider.

If Khalid survives, he will not be able to continue in his I-know-best style. A hint of what may follow from the retreat lies in the interview that Nurul Izzah gave to a Pakatan-friendly news portal.

She has called for a development masterplan for Selangor drawn up with input from party leaders and which the mentri besar and his team will implement according to a time frame. The aim of the plan is to make Selangor a model PKR state. Khalid will no longer be allowed to act on his personal belief but according to a defined blueprint.

In the meantime, Khalid’s long week in politics will continue today.