THE 20TH AL BARAKA SYMPOSIUM FOR ISLAMIC ECONOMIES\uff08THE SHERATON IMPERIAL HOTEL, KUALA LUMPUR\uff0f2001\u5e74\uff16\u670825\u65e5\uff09
\nIt is a great pleasure for me to be invited to
\nofficiate the 20th Al Baraka Symposium for Islamic
\nEconomy this morning. I am informed that this is the
\nfirst time this symposium is held outside of the Middle
\nEast. We are indeed honoured that Kuala Lumpur has been
\nchosen as the venue for this year’s symposium. The
\nsignificant number of eminent speakers and Syariah
\nscholars that are gathered here will, I am sure,
\nproduce stimulating and constructive deliberations.
\nConsidering your contributions to the world of Islamic
\nbanking and finance, I’m confident that the symposium
\nwill achieve its noble objectives.<\/p>\n
2. During the height of the great Islamic civilisation,
\ntrade was among the most important activity in wealth
\ncreation. Today in a world that is being rapidly
\nglobalised, trade has become even more important,
\nfacilitated by the advancements in information and
\ncommunication technology and the greater capacity and
\nspeed of transportation. Whereas in the past trade could
\nbe carried out through the barter of goods, today the
\nvolume is such that barter is not practical any more. The
\ngoods and the services are paid for in the currencies of
\nthe world.<\/p>\n
3. But the currencies of the different countries are not
\nof equal value. To make payments the relative values of
\nthe currencies, i.e. the exchange rates must be
\ndetermined. This is not so easily ascertained because the
\ncost of living of different countries differ greatly and
\nso do the inflation rates. The value in terms of
\npurchasing power of a currency even within the country is
\ntherefore continuously changing, some more rapidly than
\nothers. This must mean that the exchange rates between
\nthe different countries must differ at different times.<\/p>\n
4. All these make trading difficult as between the time
\nthe goods are dispatched and the goods are received the
\nexchange rates may change and may affect the profitability
\nof the transaction.<\/p>\n
5. The Bretton Woods Agreement tried to overcome this
\nuncertainty by fixing the exchange rates and fixing the
\nvalue of the US Dollar against a fixed amount of gold.
\nBut very soon it became necessary to devalue the US Dollar
\nagainst gold as inflation affected the price of gold and
\nthose of goods and services differently. In the other
\ncountries too the value of gold and goods did not stay
\nstatic but increased or decreased at different rates.<\/p>\n
6. Very soon some countries found it necessary to
\ndevalue their currencies in order to be competitive. For
\nobvious reasons the devaluation had to be done without
\ninforming the public before hand about the intention.
\nOnce a major trading country devalues, the whole fixed
\nexchange rate system of Bretton Woods was thrown into
\ndisarray.<\/p>\n
7. The speculators then moved in and forced the
\nGovernments to allow the market to determine the exchange
\nrates. This was fine as long as the speculators depended
\non the actual performance of a country’s economy and
\ntrade, and therefore on the demand or lack of demand for a
\ncountry’s currency to determine the value in exchange rate
\nterms of a currency. But the volume of trade between
\ndifferent countries, the trade balance, etc. between them
\nand the perception of the different currency speculators
\nmade it difficult to determine the exchange rate between
\ndifferent countries at different times.<\/p>\n
8. Since there was no longer a gold standard, by common
\nunderstanding the US Dollar, itself unstable, was used as
\na standard. In the end the US Dollar became a kind of
\ncommon world currency used for payment of international
\ntrade.<\/p>\n
9. This acceptance of the US Dollar as an international
\ncurrency confers on it tremendous power. The demand for
\nUS currency becomes very high and this demand must give
\nstrength to the dollar which otherwise it would not have.
\nIts very status and use as an international currency
\ncreates certain opportunities for profitable manipulation
\nby the unscrupulous.<\/p>\n
10. Ordinarily there would be a need to exchange one
\ncurrency into another only to pay for trade between
\nnations. Since the US Dollar is the currency most
\nfrequently used for payment, there is always a need to
\nchange for the US Dollar. The rate of exchange between
\nany currency and the US Dollar therefore becomes
\nimportant. Since there is no gold standard and
\nGovernments can no longer fix the exchange rate, the
\nexchange rate between a country’s currency and the US
\nDollar has to be determined on the basis of supply and
\ndemand. Currency traders, ever in search of more
\nprofits for themselves, soon discovered that they can
\nartificially create shortages or excess of supply of
\nany currency at will.<\/p>\n
11. Initially they had to hold the relevant currencies
\nin order to do business. Today that is no longer
\nnecessary. hey can offer to sell forward currencies that
\nthey don’t have in the hope that their sale would push
\ndown the value of the currencies. Once the value goes
\ndown they can buy back and deliver to the earlier
\npurchasers who had bought at the higher price.<\/p>\n
12. If there is a need to guarantee delivery they can
\nleverage their holdings with the big banks. The
\nleveraging can be as high as 100 times their holdings. In
\nother words hedge funds with capital of one billion can
\noffer to sell as much as 100 billion. Few central banks
\ncan counter them by buying up the national currencies
\noffered for sale by the traders.<\/p>\n
13. From being mere money changers these currency
\ntraders have become unbeatable manipulators of the
\nexchange rate of any currency. In the process they
\nmade billions of dollars.<\/p>\n
14. International traders can hedge against the
\nfluctuation in the exchange rates but this cost money
\nand obviously increase the cost of doing business. But
\nwhen currency traders actually devalue or revalue
\ncurrencies within very wide ranges, hedging becomes not
\nonly expensive but very difficult for traders. The
\ncost of trade must escalate and world trade will not be
\nable to expand. Poor countries as usual will suffer
\nthe most.<\/p>\n
15. Malaysia has fixed the exchange rate against the
\nUS Dollar. RM3.8 equals one US Dollar. Since 85
\npercent of our trade is paid in US dollar this makes
\ntrading easier. There can be no doubt that this fixed
\nexchange rate has contributed much to the high growth
\nof Malaysian world trade post turmoil. We are now the
\n17th biggest trading country in the world and we hope
\nthis year, insya-Allah, to achieve total trade of 200
\nbillion US Dollars, of which export would be slightly
\nbigger than imports.<\/p>\n
16. Unfortunately since the currencies of our trading
\npartners fluctuate against the US Dollar, their
\nearnings or losses cannot be correctly ascertained. So
\nfar our trading partners have not been affected too
\nmuch by the uncertainties in their exchange rates
\nagainst the US Dollar.<\/p>\n
17. Trade between the Islamic countries cannot be
\ntotally separated from world trade. But it would still
\nbe useful for Islamic countries to evolve a system of
\nexchange rates which would enhance trade between them.
\nIt is entirely possible for us to devise a payment
\nsystem which is not dependent on the US Dollar.<\/p>\n
18. Malaysia had introduced what we called a
\n“Bilateral Payments Arrangements” in which total trade
\nbetween two countries are computed over a fixed period
\nof time and only the balance between the total value of
\nexport and imports paid in an agreed currency. Within
\nthe country a central agency would collect payments
\nfrom an importer in local currency and pay an exporter
\nalso in local currency. The balance between total
\nexports and imports can be paid in the currency of the
\nexporting country or in other acceptable currencies.
\nAlternatively the balance can be retained by the
\ncentral agency or Central Bank in order to pay for
\nfuture transactions. This will eliminate the need to
\nhold foreign currencies or the US Dollar.<\/p>\n
19. Obviously this bilateral payments arrangement will
\nenable countries without foreign exchange i.e. the US
\nDollar to trade or to increase their trade volume. It
\nwould certainly be good for world trade. Since the
\nintroduction of the arrangements and agreements reached
\nbetween Malaysia and many developing countries, trade
\nwith these countries has increased by more than 400
\npercent over a few years. Malaysia is ready to enter
\ninto a bilateral payments arrangement with Islamic
\ncountries in order to improve trade. The bilateral
\npayments arrangement can be extended so that trade
\nbetween more than two countries can also be settled in
\nthe same way.<\/p>\n
20. Basically the bilateral payment arrangement is a
\nmore sophisticated form of barter trade. And barter
\ntrade is the fairest way of trading as we get the
\ngoods that we want at the price we want in local
\ncurrency. We know that some goods are very cheap in
\none country because of over supply or lack of demand
\nbut very expensive in another country. The exporting
\ncountry can get a fair price from the export of the
\nlocally cheap goods based on the acceptable price in
\nthe country where demand is better. The terms of trade
\nwould thus be fairer through barter trading. But since
\nbarter trading is cumbersome, the payment arrangements
\ncan facilitate large scale trading more effectively.<\/p>\n
21. The Islamic countries can also create their own
\ncommon currency. This should not belong to any country
\nbecause it would give undue advantage to the country
\nwhose currency is accepted as the trading currency of
\nthe Islamic nations.<\/p>\n
22. Recently there was a proposal to create a gold
\ndinar which can have a specific value in the currencies
\nof the different Islamic countries. All the Islamic
\ncountries must have a share in the international
\nIslamic dinar as a trade currency and as national
\nreserves. The dinar must be in gold and not paper.
\nHow practical this will be will have to be dealt with
\nlater when the volume of trade becomes big.<\/p>\n
23. Effectively the use of the Islamic dinar will
\ncreate an Islamic trading bloc. Such a trading bloc
\nwill be a powerful voice in International trading
\nregimes and the shaping of the new financial
\narchitecture.<\/p>\n
24. There has been much talk about an Islamic economic
\ncommunity. It is very difficult to realise this but
\nthe international Islamic dinar is quite achievable and
\ncan be the beginning of a closer economic cooperation
\nbetween the Muslim countries. Islamic banking can
\nreally take off as all the Muslim countries adopt
\nstandard practices in banking and finance, compatible
\nwith Islam.<\/p>\n
25. However it would not be wise to reject the
\ncommercial banking practices as found today. The
\nMuslim world would still have to trade with the rest of
\nthe world as individual countries or as a regional
\ngroup or as an Islamic Financial Community. With both
\nsystems existing there will be a choice for everyone.
\nWe have already found in Malaysia a readiness to accept
\nIslamic banking if it suits the needs of the
\nbusinesses. It would be a mistake to suddenly change
\nto Islamic banking. All changes are disruptive.
\nSudden and complete change even for the good is most
\ndisruptive of all. In all matters we Muslims must
\nnever be fanatical. Gentle evolution is far better
\nthan sudden drastic revolution. So it is for politics,
\nso will it be for the financial systems.<\/p>\n
26. Islam is a way of life. There is nothing that we
\ndo that is not governed by the injunctions of Islam.
\nCertainly the economic activities of the Muslim society
\nare governed by Islamic perceptions of what is right
\nand what is wrong. The transaction involved in a
\nsimple sale is a contract which requires the agreement
\non the part of the seller to sell at a certain price
\nand the buyer to buy at that price. Whereas an
\nordinary purchase need not involve a written agreement,
\nthe Quran stipulates written undertakings where the
\ntransaction is substantial, involving cash payments or
\ncredit or delayed payments. While no interest is
\npermitted the price may be determined based on the
\namount of the goods involved, the time of delivery and
\nreasonable profit. The financier in an Islamic
\ntransaction earns a part of the profit and accepts also
\nthe possibility of a loss.<\/p>\n
27. The Al-Quran is the ultimate guide but as we all
\nknow the interpretation of Quranic injunctions differ
\nwith different people. It would not do for people
\ninvolved in business and, in particular, in financial
\ntransactions to have each making his own interpretation
\nof what he has undertaken or committed to. It is
\nimportant therefore to have standard interpretations
\nwhich are agreed to by everyone. If Islamic banking is
\nto be universally accepted including by non-Muslims,
\nthe practices must be documented and standardised.<\/p>\n
28. The Islamic Financial Services Organisation or
\nIFSO is an institution which has been proposed to set
\nup the specific standards and financial practices in
\nIslamic banking. Malaysia has offered to host this
\ninstitution. The setting up of this institution will
\nhelp establish and maintain the soundness of Islamic
\nbanking. Considering the huge amounts of money held by
\nthe Muslim countries, and their being deposited outside
\nthe Muslim world where Islamic banking is not available
\nand where they cannot earn any interest, the loss to
\nthe Muslim world is enormous. Yet there are so many
\nMuslim countries in need of funds and they are forced
\nto accept loans under the riba system. Thus while
\nMuslims cannot earn interest Muslims are paying
\ninterest. In certain cases it is Muslim money which is
\nbeing lent by others who earn interest on them. If we
\nare able to set up Funds and Islamic Banks, we can not
\nonly earn from the investments but we will be reducing
\nthe burden of our poor Islamic brothers. I am sure if
\nwe are able to set up IFSO and establish the standards
\nand practices of Islamic banking, we will all benefit.
\nFor banking in Islam is not purely for the lender to
\nmake profits at the expense of the borrower, but for
\nboth parties to benefit from the financial transaction.
\nI believe that Islamic banking is far superior to the
\npresent commercial banking practices.<\/p>\n
29. Globalisation is already upon us. So while the
\ninflow of foreign capital can be beneficial to a
\ncountry, its sudden outflow can destroy decades of hard
\nwork in developing a country’s economy. Under present
\nconditions globalisation can have a disastrous effect
\non the economies of Muslim countries, which are all
\ndeveloping economies. Even the richest of us are
\nactually developing for we have little capacity except
\nto produce and sell raw materials, principally oil.<\/p>\n
30. Muslims must never forget that we missed the
\nIndustrial Age completely. We have practically no
\nindustrial capacity because when the Industrial
\nRevolution was taking place we could not decide whether
\nit was compatible with Islam or not. In the end we
\nwere left behind and found ourselves totally dependent
\non the industrialised countries for our needs,
\nincluding of course our defence needs.<\/p>\n
31. Today we see the rapid advance of the Information
\nAge. Whether we like it or not it is going to have a
\ntremendous impact on our society and on our religion.
\nWe cannot isolate or insulate ourselves from the
\nInformation Revolution and the technology which is
\ndriving it. Our economy will certainly be affected by
\nit.<\/p>\n
32. While we are thinking about Islamic banking, our
\ntrade and our economy, we have to learn how to deal
\nwith the information age and to acquire and make use of
\nthe technology and its applications so that we would be
\nable to sustain ourselves and our economies.<\/p>\n
33. This involves not just learning and mastering
\nInformation technology but in many instances the
\ndevelopment and innovation in the applications, the
\nsoftware and even the hardware by us. We have to be on
\nguard so that our religion and our values are not
\nundermined. Remember how the spread of socialistic
\nideologies actually resulted in some Muslim countries
\nabandoning Islam because they saw the failures of
\nMuslim countries and wrongfully attributed it to the
\nIslamic religion rather than the wrong interpretations
\nof Islam by their countries. We see how Muslim
\ncountries were conquered because they were materially
\nweak and how many Muslims abandoned the religion and
\neven became atheists.<\/p>\n
34. We cannot afford to have our countries fail in the
\nInformation Age through our own failure to acquire the
\ntechnology to protect and prosper our countries.
\nSpiritual and religious tenets of Islam must be
\nmaintained but at the same time the economic well-being
\nof the Muslim countries must not be behind those of the
\ndeveloped countries. Only with equal spiritual and
\nmaterial strength can we hope to sustain the Islamic
\nway of life and Islam itself. Terrorism are mere pin
\npricks which achieve nothing for the ummah.<\/p>\n
35. We all share a common belief and, to varying
\ndegrees, a common culture and tradition. There is no
\nserious ideological conflict. Inevitably, there are
\npolitical differences but none that cannot be overcome
\nfor common good. We are all part of the world with a
\npressing need to improve the social and economic
\nconditions of our people. It is therefore important to
\nask ourselves how we can put our hands together to
\nincrease the pace of socio-economic progress of the
\nMuslims against the background of a troubled world
\neconomy.<\/p>\n
36. The last time the world ushered in a new
\nmillennium, the Islamic civilisation was at its peak.
\nHowever, at the end of that millennium, Islamic
\ncivilisation was at its lowest ebb. In our endeavour
\nto achieve the advancement in Islamic banking and
\nfinance, we are in fact trying to resuscitate the
\nglorious Islamic civilisation. We still have a long
\nway to go. We have to change our attitude if we want
\nto avoid losing out again as we did in the Industrial
\nAge. The road ahead for all of us will be difficult
\nand challenging, but if we collectively as an Ummah
\nrise to the challenges, insya-Allah we will succeed. I
\npray that this 3-day symposium would be able to guide
\nus in addressing some of the pressing issues facing us.<\/p>\n","protected":false},"excerpt":{"rendered":"
THE 20TH AL BARAKA SYMPOSIUM FOR ISLAMIC ECONOMIES\uff08THE SHERATON IMPERIAL HOTEL, KUALA LUMPUR\uff0f2001\u5e74\uff16\u670825\u65e5\uff09 It is … \u7d9a\u304d\u3092\u8aad\u3080 \u30c7\u30a3\u30ca\u30fc\u30eb\u306b\u95a2\u3059\u308b\u30de\u30cf\u30c6\u30a3\u30fc\u30eb\u9996\u76f8\u306e\u6f14\u8aac\u2460<\/span>