PUTRAJAYA: An investment corporation funded by oil-producing Islamic Development Bank (IDB) member countries has been proposed as a means to raise capital resources within member countries and create a new market block.
The proposal, made by the president and chief executive officer of Petronas, Tan Sri Mohd Hassan Merican, also outlined the setting up of a capital mechanism to build capital resources to fund investments on productive capacities within member countries.
He suggested that contributions be set at 1.5% of the revenue from oil of the participating countries and be made on a quarterly basis, which should be considered as a capital fund instead of a loan or grant.
Mohd Hassan made the suggestion in his working paper tabled at the World Conference of Islamic Scholars yesterday.
His working paper was presented by Petronas vice-president Datuk Ishak Imam Abas.
He said investment by the corporation in IDB member countries in the form of external direct investment would relieve the recipient countries of the normal obligations and implications from external borrowing to fund their economic activities.
He said that based on the current oil production of IDB member countries of 31.2 million barrels per day and using the oil price of US$18 (RM68) per barrel, the 1.5% of oil production would represent a capital formation of US$768.7mil (RM2.9bil) annually.
The corporation, he said, should be managed strictly as a public corporation just like other multinational corporations and be incorporated preferably in an IDB member country which has the best legal framework with the least tax exposure.
He also suggested that members of the governing board should be drawn from oil producing and other IDB member countries based on their tested expertise and experience in successfully running a business organisation.
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