Forex speculation calls for concerted action
Forex speculation calls for concerted action
JAKARTA (JP): Minister of Finance Mar'ie Muhammad called on members of the Jeddah-based Islamic Development Bank (IDB) yesterday to cooperate in dealing with volatile foreign exchange markets.
Speaking at the bank's 20th annual meeting here, Mar'ie said that the impact of the appreciation of major currencies, such as the U.S. dollar, will continue to undermine the economies of developing countries if no countermeasures are taken.
"It is, therefore, imperative to stabilize foreign exchange through international negotiations," he told about 350 delegates of the bank's 48 member-countries.
The two-day meeting was opened yesterday by President Soeharto.
Bank Indonesia and central banks of other Asian countries recently signed a bilateral agreement on dealing with currency speculations. The deal allows the central banks to exchange their treasury notes for cash in times of crisis.
At yesterday's meeting, Mar'ie also called on the IDB to find a breakthrough in the mobilization of funds from its member- countries.
Fund mobilization within IDB member-countries is pivotal in supporting their development programs, given a continued decline in the inflow of funds from developed nations, he said.
The IDB's annual meeting, the first ever held in Indonesia, will elect a new chairman and review the applications of Mozambique and Kazakhstan to join the bank.
The meeting's main agenda also includes the approval of the bank's working programs and financial reports.
Established in 1975, the IDB has a paid-up capital of about US$8.4 billion and provides services which include lending, trade financing facilities and technical assistance.
The financing facilities are provided under Islamic legal principles, which allow for profit-sharing rather than the charging of interest.
The bank mainly directs its lending facilities to governments' development programs, particularly those related to infrastructure, education and health projects.
In supporting the private sector, the bank has established a number of financial arms.
Concern
Leading Indonesian entrepreneur Fadel Muhammad expressed concern yesterday that the bank's activities have not yet touched the private sector's operations in Indonesia.
"I don't know why. I think Indonesian businessmen are not well-informed about the bank's services," he told reporters. "I have been involved in business activities for more than 25 years. But I have never benefited from the bank's facilities," he added.
He said that local businesses' failure to deal with the IDB might be related to the bank' complicated financing procedures.
The profit-sharing arrangement is still confusing, especially for those who are accustomed to the conventional banking system, said Fadel, who chairs the Bukaka business group.
Fadel, an executive of the Association of Indonesian Moslem Intellectuals, is one of the businessmen who pioneered the establishment of Bank Muamalat, the only interest-free commercial bank in Indonesia.
Bank Muamalat, which also bases its services on a profit- sharing arrangement, has established a number of branches and several interest-free secondary banks.
He said that the IDB meeting should have been used to build momentum for the promotion of the Islamic banking system in Indonesia.
"But as you see, only a few businessmen are attending the meeting. Most of the participants are government officials," he said.(hen)