Speechs in the year

Tarikh/Date	:	01/07/2003
	Versi 	:	ENGLISH
Penyampai	:  	PM 

      It  is a pleasure to be here today to deliver  the
   keynote  address  at  this Convention  on  gold  as  an
   alternative  to  the  traditional  methods   of   trade
   financing.    Trade can only flourish if the  value  of
   the  goods can be easily assessed and paid for in money
   or tokens that can be equally easily valued.  Otherwise
   only  the  exchange  of goods, i.e. barter  can  enable
   trade  between different countries to be  carried  out.
   Obviously  barter trade is inconvenient as it  involves
   each party trying to value the goods of the other party
   to  determine whether he is getting a fair price,  when
   translated  into his own currency and what  his  market
   will pay.
   2.    Today  most countries accept payments made  in  a
   common  trading currency, such as the US dollar.   This
   is possible if the buyers or importers can  have access
   to  the trading currency, a foreign currency that would
   only  be  available if the country has  exported  goods
   paid for in that currency.
   3.   Malaysia has devised a way to trade with countries
   which  are  unable  to  earn much  foreign  currencies.
   Under  this  arrangement called the Bilateral  Payments
   Arrangements the exporter is paid in his local currency
   by  the country's central bank or designated bank while
   the  importer  pays in local currency to his  country's
   central or designated bank.
   4.    At  the  end  of an agreed period the  designated
   banks  will  contra their accounts to  determine  which
   country  has  a deficit and the balance  in  the  trade
   would be settled in an agreed foreign currency such  as
   the  US  Dollar or Yen or Euro.  As the balance is  far
   smaller  than  the  total trade, the need  for  foreign
   currency  would be minimal.  Alternatively the  balance
   can be brought forward for future trade.
   5.    This  system  can be expanded  to  cover  several
   countries.  It reduces the need for countries  to  earn
   foreign currencies in order to import.
   6.     Through   the  Bilateral  Payments  Arrangements
   Malaysia has been able to increase trade by 400 percent
   with  some developing countries.  But still a reference
   currency  agreed by both sides must be used.  And  such
   currencies,  even  the most stable,  change  in  value.
   Currently  the  US  Dollar, the  most  frequently  used
   trading  currency has depreciated by almost 30  percent
   against  the  Euro in the last two years.   This  means
   that exporters are getting less for their exports.   To
   a  certain  extent this can be mitigated  by  accepting
   payment in the Euro equivalent or changing the receipts
   into Euro or other stronger currencies.
   7.    All  these problems arise because the world  went
   off the Gold Standard.  The Bretton Woods Agreement was
   about fixing the exchange rate of the currencies of the
   major trading countries against gold.  The value of the
   currencies  were however fixed against  the  US  Dollar
   which in turn was fixed at 1/35 ounce of gold or 35  US
   Dollars per ounce.
   8.    This fixed exchange rates worked quite well until
   major  trading  countries found their exports  becoming
   uncompetitive.  Then they reneged on their  undertaking
   and devalued their currencies.
   9.   Malaysia had remained in the "Sterling Area" after
   independence.  All the reserves were in British Pounds.
   The  British  decided  to  devalue  the  Pound  without
   informing   Malaysia.   Suddenly  the  value   of   the
   Malaysian  Ringgit and the Malaysian reserves  plunged.
   Since,  even  then, Malaysia was trading with  numerous
   countries,   exporting  rubber  and  tin   and   buying
   practically  all the manufactured goods it needed,  not
   only  were  the imports from non-sterling areas  costly
   but  buyers  of  Malaysian tin and rubber  insisted  on
   paying  the  Malaysian  Ringgit  equivalent  in   their
   currencies or the US Dollar.
   10.   As a result Malaysia decided to exit the Sterling
   Area,  and  convert  its  reserves  into  a  basket  of
   11.   But  following  the official devaluation  of  the
   Pound  the currency traders moved in and insisted  that
   the  market determine the value of the Pound and  other
   currencies.  The US also decided to reduce the value of
   the US Dollar against gold.
   12.   Effectively  this means that  money  became  just
   pieces  of paper on which certain figures were printed.
   Without  any gold reserves, money could be  printed  to
   any value.  If the market believes in the currency then
   it  will  have  a  value.  But when the  economy  of  a
   country  did  not  do  well the printed  value  of  the
   currency  will not fetch the former equivalent  of  the
   currency  in  foreign currency.  And so exchange  rates
   fluctuated and made trading difficult.
   13.   Although the US Dollar had devalued against gold,
   it  remained strong because the US economy was  strong.
   The US Dollar thus became a reference currency to quote
   prices  and to trade.  Currencies began to be  devalued
   or  revalued against the US Dollar.  Speculators  could
   then  speculate  on  the exchange rates  of  currencies
   based on the economic performance of the countries.
   14.   Then  the  currency traders became greedy.   They
   decided to make money into a commodity like rubber  and
   tin.   And  like all commodities selling large  amounts
   would lower the price and vice versa.
   15.   Unlike commodities where eventually they have  to
   be   delivered,  currencies  need  only  to  have   the
   ownership  transferred to the buyer in the accounts  at
   the  banks.   There  need not be physical  delivery  of
   cash.   This  enables huge sums to  be  traded  without
   actually  possessing the cash.  It  is  estimated  that
   total  trade  in currencies is many times  bigger  than
   world  trade.  There cannot be enough money  issued  by
   the  countries for these huge amounts.  In  almost  any
   country the total trade even within the country is  far
   bigger  than  the currency notes issued.   The  banking
   system  enables  credits to be  extended  and  payments
   16.   With the advent of the computer and the Internet,
   trading  in  currencies is even easier.  Huge  sums  of
   money  can be bought and sold by the traders simply  by
   changing the ownership of the figures representing  the
   currencies  in the computers.  The trading is  actually
   confined to a small group of traders who control  hedge
   funds.   These funds large though they may  be,  cannot
   cover  the  total  sums traded.  Off  and  on  delivery
   cannot  be  made and huge losses are registered.   This
   was  what  happened to the Long Term Credit  Management
   17.   The effect of treating currencies as commodities,
   is  to  devalue them or revalue them simply by  selling
   large  sums  or  buying large sums  of  literally  non-
   existent  money.   When the time to deliver  comes  the
   amount  is simply credited to the buyers account.   The
   whole  transaction is not transparent,  totally  hidden
   from  the public eye, because banks uphold the  secrecy
   of transactions of their clients.  Not even Governments
   can get access to the accounts of bank clients.
   18.   In the meantime the devaluation of the currencies
   because  of  the  currency  trade  impoverishes   whole
   countries   and  all  the  businesses.   Payments   for
   imported  goods, including food cannot be made  because
   in  local  currency term the prices have  shot  up  sky
   high.   Unless the wage-earners and traders  are  given
   increase  in  pay  and higher profit margins,  and  all
   assets  and properties are revalued upwards, they  will
   not  be able to buy even for their daily needs.   There
   will   be   rampant  inflation  and  all  trading   and
   businesses  would be thrown out of gear.   Local  banks
   would  hold  practically useless money,  including  the
   savings.   In  other words the whole economy  would  be
   paralysed.   There would be a great deal of uncertainty
   as  the  currency traders played around with the money,
   devaluing  and revaluing it at will and profiting  from
   every movement of the currency.
   19.   Thriving  and  even  very  profitable  banks  and
   businesses  would  become  stressed  or  bankrupt  when
   currency devalues.  If money is borrowed from  the  IMF
   to  pay  foreign debts, the Fund would insist that  the
   country  allow in foreign companies and banks and  that
   all  Government  companies and agencies be  privatised.
   With  the  local currency devalued and all the business
   in  serious  financial trouble, the  foreign  investors
   would  be  able to buy all the banks and  companies  at
   fire-sale   prices  as  their  currencies  would   have
   appreciated greatly against the local currency.  At the
   end of the day all the wealth of the country would fall
   into foreign hands.  The country would lose control  of
   its economy completely.
   20.  Currency trading is only possible when paper money
   and  then  computer money is regarded as legal  tender.
   The pieces of paper which is accepted as money based on
   figures  printed  on  them, and  subsequently  computer
   money  based on the number of zeros tapped out  on  the
   key board have no intrinsic value.  They cannot be used
   for anything other than tokens representing money.
   21.  If money is to be truly worth the value that it is
   purported  to be then it must have an intrinsic  value,
   i.e. on its own it can be used to produce something  of
   value.   Metals are lasting and can usually be used  to
   produce  something useful.  During the bronze and  iron
   age, these metals were used and were obviously valuable
   enough  to be made into currency tokens or coins.   The
   value  of  the tokens initially represented the  actual
   value of the metal.
   22.   Later gold and silver, because of the demand  for
   these  metals  for ornaments, were minted  into  coins.
   The value was real until the feudal rulers abused these
   coins  by  mixing with base metals and their value  was
   less  than  their true worth. Still gold coins  with  a
   known   degree  of  purity  commanded  a  price  almost
   commensurate  with their value in gold.   Often  enough
   the  coins  were used as ornaments or melted  down  and
   made  into ornaments of different shapes.  Whatever  it
   is  the  gold in the coins command a price, and can  be
   used   in   payments  for  goods  within  and   between
   23.   But  carrying gold and silver coins is  obviously
   cumbersome.  As trade within and between countries grew
   it  was  not  practical to use the coins for  payments.
   Paper  is more convenient and these days transfers  can
   be done very conveniently through telegraphic means and
   now  the  computer.   But as we have  noted  paper  and
   figures on the computer have no intrinsic value and can
   be  abused.  Although gold has intrinsic value,  it  is
   inconvenient  to  be used physically for  payments  and
   there really is not enough gold in the world to pay for
   the  huge amounts of trade going on internationally and
   nationally today.
   24.  In order to minimise the need to transfer gold, it
   should  be used only in international trade.  Within  a
   country  paper money can still be used with  the  money
   pegged  against  gold  at  a  rate  determined  by  the
   authorities.   The  authorities must however  guarantee
   that the gold can be purchased from the treasury at the
   stated  rate.  Even for this there will not  be  enough
   gold.   But as with paper currencies a run on the  bank
   would  bankrupt  the  bank, a  run  on  the  Government
   treasury  would have the same effect.   However  it  is
   less likely to happen simply because individuals cannot
   really  keep  or carry large amounts of gold.   Demands
   for gold against currency would really be very minimal.
   Still  it is better not to use gold within the  country
   but  to  use paper currency that is guaranteed  against
   gold.   The banking practices within the country should
   be able to go on as usual.
   25.   To  reduce the amounts of gold to be transferred,
   trade   between  countries  should  only  involve   the
   settlements of the balance of trade.   In the Bilateral
   Payments  Arrangements  as  has  been  explained,   the
   payments to the exporters are made by a designated bank
   in  local  currency  and the importer  also  pay  to  a
   designated bank in the local currency.  At the  end  of
   an agreed period the balance in the trade is settled in
   an agreed trade currency.
   26.   All that is needed is for the settlements  to  be
   made  in gold instead of a foreign currency.  But  even
   this can be inconvenient.  It is easier for a credit or
   a  debit note to the value of the gold to be made.   If
   absolutely  necessary only should gold be  transferred.
   Otherwise the gold should be held in the central  banks
   in  the form of ingots or coins of a certain purity and
   value  to back the value of the deficit in the  balance
   of trade.
   27.   It will not be possible for all trade between all
   countries  to be conducted using gold in  the  form  of
   gold dinars immediately.  For a time the use of the so-
   called hard currency such as the US Dollar or the  Euro
   or  Yen  will have to continue.  But pairs of countries
   can begin to use the gold in the form of gold dinars to
   settle  their  balances  of  payment.   It  should   be
   possible  to  then  advance by  involving  a  group  of
   28.  Actually since the Bilateral Payments Arrangements
   have   worked  using  the  US  Dollar  as  the  trading
   currency, switching to the Gold Dinar is simply done by
   substituting  the Gold Dinar for the  US  Dollar.   The
   value of the local currency against the Gold Dinar  can
   be determined by the authorities of each country, based
   on the local market value of gold.
   29.  Gold prices in any currency will fluctuate.  It is
   not  really  the gold which revalues or  devalues.   It
   will be the currency which fluctuates against the gold.
   During  the  Asian currency crisis the currencies  were
   devalued  against  the  US Dollar  basically.   The  US
   Dollar  was not regarded as depreciating when an  Asian
   currency  revalues.   Similarly  with  gold.   When   a
   currency   strengthens  against  gold,  gold   is   not
   considered as having devalued.
   30.   But  as  we  are  now seeing the  US  Dollar  can
   devalue.  Presently the US Dollar has depreciated by 30
   percent against the Euro.  It can devalue further.   In
   fact  during the Asian crisis some currencies  devalued
   to one-sixth of its former value against the US Dollar.
   But  gold cannot be so devalued simply because it is  a
   metal  that  can be used for other purposes besides  as
   coins.   The  fluctuation in  the  gold  price  in  any
   currency  would be quite limited.  Gold is therefore  a
   more stable reference currency.
   31.  Since trade is conducted in gold, the prices would
   be as stable as the gold prices.
   Speculation  in gold can still take place  but  as  has
   been pointed out the fluctuation would be minimal.   It
   is  not  possible for anyone to corner the gold  market
   simply  because it will not be possible to deliver  the
   gold upon settlement.  The amount would be too big  and
   too  cumbersome  for  the  rapid  transactions  of  the
   currency traders.
   32.   But  the  payment in gold  is  not  the  same  as
   speculation  in gold.  The payments of the  balance  of
   the  total trade over an agreed period will have to  be
   made  by  the  designated bank, preferably the  Central
   Bank of the country, and such banks cannot renege on an
   undertaking  agreed  upon by the Government  under  the
   Bilateral Payments Arrangements.
   33.   There will be hitches in the early days but  they
   can be resolved.
   34.   The  realisation of this proposal on the  use  of
   gold  for  trade  settlement, or for that  matter,  the
   pursuit  of alternative mechanisms for trade financing,
   will depend, to a large extent on its acceptance by the
   parties  and  countries  concerned.   The  support  and
   endorsement  of the trading community is  of  paramount
   importance.   In this connection, the Dewan Perdagangan
   Islam Malaysia (DPIM) has a key role in mobilising  the
   support of its membership to ensure the success of  the
   gold-based BPA.
   35.   The benefits of the gold-based BPA to the traders
   and  businessmen  are  quite apparent.   By  converting
   commercial  risk associated with trade  into  sovereign
   risk,  such a mechanism will assume a pivotal  role  in
   enabling  traders  to  penetrate  new,  non-traditional
   markets with greater confidence.  The BPA process would
   also  reduce  the cost of doing business by  dispensing
   with  the need for banks to confirm letters of  credit.
   At  the  national level, the gold-based  BPA  mechanism
   would  help to diversify export markets and avoid over-
   reliance  on  the traditional export markets.   In  the
   process,  we  can  also reduce the  over-dependence  on
   foreign currencies in international trade.
   36.  In moving forward this important initiative on the
   use of gold in trade settlement, a Secretariat is being
   established  in  Malaysia to coordinate  the  necessary
   follow-up activities.   The Secretariat can serve as  a
   focal point for the dissemination of information on the
   use  of  gold in international trade, liaise  with  the
   relevant parties, both domestic and foreign to  develop
   the  operational  framework  on  the  use  of  gold  in
   international  trade settlement.  The Secretariat  will
   also  serve to promote public awareness on the  use  of
   gold as a mechanism for trade settlement.  I would urge
   DPIM  members  to give full support and cooperation  to
   this initiative for the benefit of the national economy
   in general and the business community in particular.  I
   am  confident  that this convention will deliberate  on
   this   matter  in  some  detail  and  generate   useful
   suggestions on alternative proposals to the traditional
   methods  of  trade financing and settlement,  including
   other options on the use of gold.
   37.   On this note, I am pleased to declare open,  this
   DPIM  convention on the use of gold as  an  alternative
   international currency.

   Sumber : Pejabat Perdana Menteri