Malaysia pushes for RM 38b Islamic bond fund
Pakistan Times Business & Commerce Desk

KUALA LUMPUR (Malaysia): Second Finance Minister Tan Sri Nor Mohamed Yakcop has unveiled a plan to ask the Islamic Development Bank (IDB) to start a US$10 billion (RM38 billion) Islamic bond fund to invest in infrastructure to narrow the gap between rich and poor Muslim nations, Malaysian media reported.

Malaysia, which hosts this week’s annual IDB meeting and also chairs the Islamic world’s main political grouping, said the bank’s 55 member nations should divert some of their reserves locked in US dollar bonds and Treasury bills to the new fund.

Nor Mohamed said on June 17 ahead of the June 23-24 meeting: “We can have some form of cross-investment... from the richer to the poorer countries maybe by way of this infrastructure bond fund perhaps.”

“Then we can really reduce poverty, increase income level and help the poor, developing countries to reach a higher level of income,” he said. “Ideally, it (the fund) should start with US$10 billion and it should grow,” he added.

The Jeddah-based IDB is the financial arm of the 57-nation Organisation of Islamic Conference (OIC), a political grouping that says it speaks for 1.2 billion people. Malaysia currently chairs the OIC.

IDB operates in line with the principles of Syariah Law — which forbids the payment of interest — and its financing instruments are mainly asset-backed. “We must give a business and economic face to these organisations,” Nor Mohamed said, adding that economic integration was an increasingly important aim of the Islamic world, whose peoples spanned some of the poorest countries in Africa and Asia.

Muslim nations, some rich in oil and gas and other natural resources, should also beef up trade, including between themselves, Nor Mohamed said. OIC countries account for only a small percentage of total world trade, but represent 15% of the world’s population and more than 60% of its natural resources, he added.

IDB officials have said the meeting may approve the creation of an international Islamic trade financing firm, with an initial paid-up capital of US$1 billion, to spur intra-IDB trade.

Trade within the IDB, which groups nations ranging from Saudi Arabia to Malaysia and Chad, accounts for just 11% of global trade, IDB representative for Malaysia Ahmed Hariri said.

Other issues on the IDB agenda include the admission of a new member, Nigeria, and the election of the IDB president. The present chief, Ahmad Ali, completes his five-year term this year.

Some 2,400 people, including finance ministers, central bank chiefs and Islamic bankers and government officials, are attending the meeting, held in Malaysia for the first time since 1978.●