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in Sudan have proven to be disastrous in power, partly because of an outdated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.