Debt enslavement still exists in society, says Mahathir

Debt enslavement still exists in society, says Mahathir

Veeramalla Anjaiah, The Jakarta Post, Kuala Lumpur

Debt enslavement has not been totally eliminated from our
society yet, said Malaysian Prime Minister Mahathir Mohamad.

"Countries, which are unable to pay their foreign debts, are
actually being made debt slaves of the rich countries whose
government or banks had lent them (the funds)," said Mahathir,
while launching the Islamic Financial Services Board (IFSB) on
Sunday in the Malaysian capital.

He said if Islamic banking was practiced in international
financial lending, the enslavement of borrowing countries would
not happen.

Islamic banking was enjoined because of oppressive practices
that were prevalent in former times when debtors who could not
return the money they owed were made debt slaves of the lender,
Mahathir said.

While commenting on the process of globalization and
liberalization, the doctor turned politician said Malaysia wanted
to trade more, open up markets, enjoy a higher income and
increase welfare as globalization was supposed to deliver.

Stability in international financial markets is a must for
enjoying the benefits from globalization and liberalization, he
said.

"We need an international financial system that is fair and
rewards hard work rather than speculative activities that take
advantage of the weak and the ill-informed," he said.

Mahathir lashed out at speculators by saying "speculation is
really not business. It is a kind of gambling."

Under the Islamic banking system, financial transactions need
to be supported by genuine trade or business-related activities,
he said. That is why there is no room for investments in non-
traded activities, such as currency speculation, derivatives and
other unproductive financial manipulations, he said.

"The basic tenets of Islamic banking prescribe a financial
system that rewards productivity," said Mahathir.

Islam prohibits the concept of usury. The lender has to share
the risks that the borrower is exposed to, although the real cost
of management, which should be variable and not predetermined, is
not within the definition of usury.

The other prohibition is excessive profits, or profiteering,
through unprincipled manipulation of prices or supplies.

Mahathir also said the option to use the Islamic financial
system had to be voluntary and open so as not to cause turmoil
and economic regression, which Islam does not want to promote.

He also witnessed the signing ceremony of the articles of the
agreement by the founding members of the IFSB, including Bank
Indonesia Governor Sjahril Sabirin.

Malaysia's central bank governor, Zeti Akhtar Aziz, who is
also the chairwoman of the IFSB Steering committee, hailed the
inauguration of the new board in her welcoming address as a new
milestone in the history of the Islamic financial system.

Prior to the IFSB, the Islamic Development Bank and the
Accounting and Auditing Organization for Islamic Financial
Institutions were established in 1975 and 1990 respectively to
strengthen the Islamic financial sector.

IFSB will serve as an association of central banks, monetary
authorities and other institutions entrusted to develop and
promulgate internationally accepted prudential regulatory
standards and best practices.

After two years of an extensive consultative process,
Indonesia, Saudi Arabia, Bahrain, Iran, Kuwait, Lebanon,
Malaysia, Pakistan, Sudan, United Arab Emirates, the Islamic
Development Bank, the Accounting and Auditing Organization for
Islamic Financial Institutes and the International Monetary Fund
have succeeded in setting up the IFSB.