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