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Asia: New Gold Savings Scheme Funds Pilgrimages To Mecca

Muslims who live far from Mecca have to save a lot of money if they want to make the Hajj, or pilgrimage, before they die. RFE/RL correspondent Ben Partridge reports that they now have an innovative way to do so -- a way that also promotes the interests of the Gold Council, which is sponsoring the plan.

London, 13 October 1999 (RFE/RL) -- The World Gold Council has launched an imaginative new scheme aimed at helping Muslims in rural areas to save gold coins to pay for pilgrimages to Mecca. The savings scheme was launched on a trial basis two months ago in Indonesia, the world's most populous Muslim country. Officials say it is already such a success that the London-based World Gold Council (WGC) may expand it into other Muslim countries, possibly including Central Asia.

The scheme was the idea of the Jakarta representative of the WGC, an international association funded by the world's leading gold producers. The group's aim is to promote the use of gold as a product and as a reserve monetary asset.

The WGC chose Indonesia to launch its new program because in that country, as in many other Asian countries, many rural residents store their savings in gold.

Haruko Fukuda is a Japanese-born and British educated businesswoman who is the chief executive of the WGC. She says the new savings scheme, called "gold saving for the Hajj," has been tailored for the needs of the 200,000 Indonesians who seek every year to make the pilgrimage to Mecca. The birthplace of the prophet Mohammed, Mecca is located in what is today western Saudi Arabia.

She says Indonesians can buy very small gold coins, minted at the country's three gold refineries, in denominations of one gram, five grams or 25 grams. The aim is to encourage rural farmers to accumulate a total of 250 grams of gold -- equivalent to the price of a return trip to Mecca.

The attraction of the scheme, according to Fukuda, is that savings in gold coins will retain their value at a time when faith in Indonesia's national currency, the rupiah, has collapsed. Each new coin has an Islamic design, and the new currency is priced to be affordable.

"Because it comes in small units, anyone can afford to buy it. You see, what happened in the Asian (economic) crisis, because the Indonesian rupiah was devalued by 84 percent, all their savings for going on pilgrimage to Mecca became less than valuable, insufficient to go on pilgrimage. They can't buy foreign exchange in rural areas, they can't save in dollars or anything like that. What we have come up with is a way of savings to go on Haj."

Fukuda traveled to Indonesia in August for the launch of the new scheme, which has proved so successful that the country's three gold refineries cannot handle the demand for the new gold coins.

"In Indonesia, there is a state-run pawn shop, it's like a bank (and) its assets, its collateral that they hold for having issued money, 80 percent of their collateral is in gold. Indonesia is a very pro-gold country."

The Indonesians' trust in gold may be surprising, because the metal has plummeted in value in the past two decades. In 1980, it was worth $850 an ounce, but last month, it had fallen to as low as $250. It has since staged a recovery, rising to over $300. This supports Fukuda's argument that gold, in the longer term, keeps up with inflation -- hence its appeal for Indonesians. As a result of the collapse of the rupiah in the 1998 Asian crisis, fewer than 100,000 people could afford to go on Haj last year, less than half the national quota of 200,000 pilgrims.