Dr M: Look at All Ideas Including Islamic Finance
New Straits Times, November 20, 2008
By Presenna Nambiar
THE world should not dismiss any idea, even that of adopting Islamic banking, in the process of trying to solve the systemic collapse of the global banking system, says former premier Tun Dr Mahathir Mohamad.
“We should examine all ideas, including how Islamic banking can help, not taken fully perhaps, but how it can be adopted and adapted, to create a better, more just system not so open to abuses,” he said.
In his special address to delegates of the two day Islamic insurance conference, Dr Mahathir called the US$700 billion ( RM2.5 trillion) bailout by the US government as mere patchwork and that a new financial system needs to be introduced to replace the current one, which gave so much leeway to banks.
“The world needs another Bretton Woods conference to find new ways of financing businesses and other sectors. Maybe we should introduce Islamic banking. It cannot be rejected. It can be a partial solution … if not there are other ways,” Dr Mahathir said.
The Bretton Woods convention in 1944 saw 730 delegates from 44 Allied nations setting up a system of rules, institutions, and procedures to regulate the international monetary system during World War II.
The chief feature of the Bretton Woods system was an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value, plus or minus one per cent, in terms of gold and the ability of the International Monetary Fund to bridge temporary imbalances of payments.
The system collapsed in 1971, following the US’ suspension of convertibility from dollars to gold.
Dr Mahathir said perhaps it was time to go back to currency backed by gold, maybe even have an international trading currency for the purpose of paying trade debt only.
He said such a currency would need a clearing house to ascertain that payment will be given once there are differences between import and export, and that this payment be made to the central banks of every country.
On whether the country would be able to withstand the onslaught of a global recession, Dr Mahathir said whenever faced with a crisis the important thing is to sit down and learn what the crisis is all about.
“To do that you need to have all the data be brought in for you to evaluate, to know what is happening … that is what we did when we had the crisis in 1997.
“We studied every single data, including how many passengers use the train and how much money is being lent by the bank … all these things indicate the health of the economy and is useful to see whether it is healthy or not, to identify which part is unhealthy and then you can find the solution,” Dr Mahathir said.
(c) 2008 New Straits Times.