Islamic Approach to Development

ISLAMIC APPROACH

TO

DEVELOPMENT

SOME POLICY IMPLICATIONS

Prof. Khurshid Ahmad

لحمد للة و الحمدللة و الحمد للة و الحمدللة و الحمدللة والحمدل

Institute of Policy Studies 1994

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PREFACE

the development experience of the Muslim countries in

World countries

spread, as it is, over the last forty years has failed to inaugu- rate a new era of sustained growth and widespread well- being, can there be an alternate road? Capitalistic as well as socialistic roads have landed mankind into a cul-de-sac. Is there a way out?

Muslims claim they have an alternative. Islam is not mere- ly a religion that deals with private relationship between man and God, it provides guidance for the entire gamut of life, in- cluding man’s economic life and destiny. An effort has been made in this small book to spell out some of the major fea- tures of an Islamic approach to economic development and what are its implications for the formulation of a develop- ment strategy.

I had a chance to speak on different aspects of this subject from different platforms. King Faisal Foundation invited me to speak on Islamic concept of development (May 1992). Earlier, I had an occasion to speak at International Economic Conference in Istanbul on Muslim common market (May 1987). On the occasion of the 3rd International Conference on Islamic Economics (Kuala Lumpur, January 1992) I had an occasion to give the keynote speech which also dealt with the development experience of the Third World countries. Materials discussed on all these occasions were available in transcripts of those presentations. Now an effort has been made to integrate the diverse presentations into a set of thesis on Islamic approach to development. I am grateful to my brother Sahibzada Mohibul Haq, to add in the form of ap- pendix valuable statistical material on the Muslim world. I hope in its present form this small book would be of some

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6

Islamic Approach to Development

help to those who want to understand what Islam has to say on economic development and how that guidance can be the source for the formulation of new strategies for the develop- ment of the Muslim countries individually, and of the Islamic Ummah, collectively.

ISLAMABAD December 8, 1993

Khurshid Ahmad

1

Introduction

The ‘god’ that has been jubilantly worshipped in the post- Second World War era, both in economically rich and po- litically triumphant countries of the West as well as in the poverty-stricken and newly independent countries of the ex- colonial empires in Asia and Africa, has been the ‘god’ of development. As the German scholar, Wolfgang Sachs, suc- cinctly puts: “The last 40 years can be called the age of de- velopment… Like a towering lighthouse, guiding sailors to- wards the coast, ‘development’ stood as the idea which oriented emerging nations in their journey through postwar history. No matter whether democracies or dictatorships, the countries of the South proclaimed development as their pri- mary aspiration, after they had been freed from colonial sub- ordination. Four decades later, governments and citizens alike still have their eyes fixed on this light flashing just as far away as ever: every effort and every sacrifice is justified in reaching the goal, but the light keeps on receding into the dark… Since then the relations between North and South have been cast in this mould: ‘development’ provided the fundamental frames of reference for that mixture of generosi- ty, bribery and oppression which has characterised the poli- cics towards the South. For almost half a century, good neighbourliness on the planet was conceived in the light of ‘development’.”

The scenario is now changing. “Today,” adds Wolfgang Sachs, “the lighthouse shows cracks and is starting to crum- ble. The idea of development stands like a ruin in the intel- lectual landscape.” In fact, “this epoch is coming to an end.

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Islamic Approach to Development

The time is ripe to write its obituary.” And obituaries have started appearing.

The First Global Revolution, a report by the Council of the Club of Rome, is one recent obituary from an internation- al think-tank. The report of the United Nations Development Programme, Human Development Report 1992 3 is another obituary, written in a somewhat different vein. The Club of Rome intellectuals start with the lament: “Humankind seems to be gripped by a fin-de-sieche attitude of uncertainty at the threshold of the new century, but the era of a millennium brings still deeper mystique with its sense of widespread change and the uncertainty accompanying it.”4

The results of developmental efforts, the report regretfully confesses, “have been uneven and often disappointing” and warns “the grave problems of world poverty, aggravated by population growth, could well give rise to great and disrup- tive disharmony on a wide scale, from which the industrial countries cannot escape the consequences.” The report sug- gests that “it is strongly in the self-interest of the rich coun- tries that a new, powerful and radically different approach be taken to the problems of world development.”

The Human Development Report 1992 brings to focus the glaring reality that the rich have grown richer and the poor become poorer at the end of the three decades of the so- called universal developmental effort. In 1960 wealthiest one billion of the world’s five billion population were 30 times better off than the poorest one billion. According to the lat- est estimates, taking into account internal discrepencies with- in nations, the top one fifth are probably around 150 times better off.” The Guardian editorially comments that the “de-

1

Wolfgang Sachs, “Introduction,” in The Development Dictionary: A Guide to Knowledge as Power, ed. Wolfgang Sachs. London: Zed Books Ltd., 1992, p.1. 2 Alexander King and Bertrand Schneider, The First Global Revolution, A report by the Council of the Club of Rome. London: Simon & Schuster, 1992.

Iluman Development Report 1992, New York: United Nations Development Programme, 1992.

• The First Global Revolution, op.cit., p.xv.

Ibid pp.16 and 19.

“The Independent London, April 24, 1992; The Guardian, London, April 24, 1992 The Economist, London, April 25, 1992.

8

Introduction

veloping countries enter the market as unequal partners and leave with unequal shares.”

Although the editorial falls short of calling this act of pe- nalisation of the Third World by “international economists and financiers” an attempt “to defraud the developing coun- tries,” it does accept that through “what is at best self-decep- tion these actions have the same result.” The tragic conse- quence is that “for a sizable slice of the world’s population, three decades of much-trumpeted development have been three decades of de-development.”

This is the international context in which we are examining today the whole “development syndrome” and the way the challenge can be met from an Islamic perspective.

‘The Guardian, London, April 25, 1992. Our focus above has been the global situtaion. The condition within the rich and developed countries is no different. About the US the latest information released by the Congressional Budget Office shows that the richest one percent of the population got almost 70 percent of the increase in average family income between 1977 and 1989. The situation becomes more startling if the income rise of the richest 20 percent is taken during this peri- od. The richest 20 percent took more than 100 percent of the growth in average income with the result that the bottom 40 percent of the population actually lost ground and transferred part of what they were getting 15 years back to the richest 20 percent. See “To Close the Wealth Gap,” The New York Times editorial repro- duced in International Herald Tribune, April 23, 1992.

9

2

The Development Syndrome

an has always been searching for short cuts to realise his ideals. With political freedom, the Third World’s self- realisation of its economic and social plight deepened. Its exposure to the West made it even more conscious of its ab- ject poverty and of the widening gap between the rich and the poor. During the era of colonial rule, the Third World heard many success stories of western development; in the post-colonial period it was invited to follow the growth path pursued by the West. Economic development was offered to the people of the Third World as an answer to all their prob- lems.

In the pursuit of development, industrialisation was seen as “the quick way to prosperity” and capital formation was em- phasised as the key to industrialisation. Transfer of western technology and foreign aid were seen as sufficient to make up for the two major gaps in savings and balance of pay- ments. Import-substitution and, to a lesser extent, export-pro- motion strategies were developed to realise the dream. Economic development became the new god at whose altar everything else was to be sacrificed — values, cultural pat- terns, social norms, customs, religion, ethics and what not. It was assumed that a rising GNP would usher in a new age of prosperity and affluence. Mankind would enter a new millen- nium of affluence by following in the footsteps of the devel- oped countries of the West.

This summary may rightly be described as rather too sim- plistic. But it is equally true that the development strategies based on western models, as they were introduced in the

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Islamic Approach to Development

Third World, contained a host of simplifications, carefully wrapped in sophisticated jargon, and not without an element of arrogance about the superiority of the western way of life. The most positive, even enthusiastic, response came from the Third World’s western-educated elite, who had been brought up in the cradle of colonialism and had inherited power from the departing masters. This alliance of convenience between the West and the new power-elite of the Third World is now under severe strain because the development strategy that was assiduously pursued has failed to produce the required re- sults. In almost every developing country, indigenous forces not so favourably disposed towards the western models are engaged in a search for new paths more in keeping with their own cultural identity. They are challenging the westernising minority almost everywhere.

Even if it is conceded that too many hopes were pinned on the drama of development, the record of the last 30 years is still disappointing. The problems of poverty, underdevelop- ment and stagnation continue unameliorated. Two centuries after the advent of the industrial revolution and three decades after the inauguration of a grandiose development crusade, it is disturbing to note that a majority of the human race re- mains poor, suffering from under-nourishment, under-shelter, disease and illiteracy. The World Bank acknowledged with regret that the failure to achieve a minimum level of income above the “poverty line” has kept some 40 percent of the populations of the less developed countries in a condition of “absolute poverty.”

Although some “enclaves” of development have emerged as a result of developmental efforts, they have failed to result in any broad-based changes in the society; nor were they able to mobilise all major sectors of society in the cause of develop- ment. Over-emphasis on capital has generated distortions in price structure, exchange rates, tax system, wage-scales, forms of technology and so on. Distributional aspects have been largely ignored with the result that economic and social disparitics within societies have increased. Employment-gen- erating effects have been far far below the required mini- mum. Even natural population increase and consequent in- flow in the labour force could not be absorbed in the economy through new employment opportunities. In spite of

12

The Development Syndrome

import-substitution strategies, dependence on imports contin- ues and, as terms of trade have generally moved against the developing countries, trade and balance-of-payments gaps have increased. International indebtedness has also rocketed (over $1.3 trillion) while the net flow of real resources from the developed countries to the Third World has not only ta- pered off, in some cases even a reverse flow has begun. The energy crisis has further aggravated the resource constraints. The overall picture remains bicak.

A word may also be added about the international context in which developmental efforts of the Third World countries have taken place. The relation of dependence that was built into international economic relations during the colonial peri- od continues unabated. The gap between the rich and the poor nations is widening. Prices of internationally traded goods show erratic movements injurious to the interests of the developing countries. Inflation is being aggravated by the monetary and trade policies of the developed countries. Twenty of the 24 developed countries are pursuing protec- tionist policies vis-a-vis imports from the Third World. Consequently Third World countries are caught in severe bal- ance-of-payments problems. International monetary institu- tions are unable to handle the situation. The UNDP study, Human Development Report 1992, accepts that the structure and working of the World Bank and IMF must undergo fun- damental changes if they are to be responsive to the needs of the poorer countries of the world. Crises are being post- poned, not controlled. The fate of development in the Third World is very much tied to the reform and restructuring of the international economic order. There has been a lot of heat and smoke in the North-South dialogues; there is, how- ever, very little light. It seems pretty dark even beyond the tunnel.8

8

See Ahmad, Khurshid, “A Muslim Response”, in World Faiths on the New World Order, edited by J. Gramillion, et al Washington, Inter-Faith Plan Colloquium, 1978. See also Amin, Samir, “Self-Reliance and New International Economic Order,” Monthly Review, July/August, 1977, pp. 1-21; Cohen, Benjamin J., The Question of Imperialism: The Political Economy of Dominance and Dependence, New York: Basic Books, 1973; Bedjaoui, Mohammad, Towards a New International Order, New York: Hobus & Merer, 1979; ICE, The Muslim World and the Future Economic Order, London: Islamic Council of Europe, 1979.

13

3

Muslim World’s Disenchantment

uslims feel dissatisfied with the whole developmental ef- Miort on all the

MISH

fort on all the above counts. They are further disturbed by the amoral character of the entire growth philosophy, which is steeped in the ethos of western culture and its sccu- lar liberalism. In the context of the Muslim societies this has acted as a centrifugal force, tearing the Muslim societies into warring nationalities, regions and classes. A totally material- istic approach is alien to the Islamic way of life and the his- torical tradition of the Muslim people. Islam wants to trans- form human society and restructure its socioeconomic life according to the values of justice and fair play. It also seeks to weld the moral and material approaches into a unified and integrated approach to life and its problems. Any approach that splits life into secular and religious dimensions is anathe- ma to Islam.

The western approach has been based on a disrespect, al- beit not always explicitly articulated, for other cultures and social systems. As a result, efforts have been made to trans- plant western values and cultural patterns on to other peoples, leading to the disintegration of their cultures. This has been justified as imperatives of the process of modernisation. All this has been systematised into a theory of change stipulating that values and institutions that favour and strengthen exclu- sively materialistic considerations — motives, incentives, re- sults are the prime movers of social systems. Competition and reward have been made to replace long sustained human- istic attitudes and customs. People’s motivation patterns, val- ued social institutions, relationships and systems of pecuniary reward and punishment have had to change to suit the al-

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Islamic Approach to Development

leged demands of economic development. Even those who do not subscribe to the Rostowian stages of growth do accept the substance of his analysis of the nature and direction of social change.

Muslims look upon the entire developmental exercise as a grotesque effort aimed at cultural imperialism. Their main ob- jections may be summarised thus:

a)

The West-inspired approach to materi- al prosperity has promoted in Muslim society an imitative mentality which is inimical to creativity and destroys originality. This not only aggravates the trends towards moral decay in the society but also perpetuates the hegemony of western culture on Muslim lands. It promotes an active collusion be- tween the West and the westernised elite in the Muslim world because development of Third World countries as cultural satellites of the West is bound to ensure an ever-increas- ing demand for western products.

b) A systematic application of this de- velopment strategy has proved to be highly divisive in Muslim society, splitting it up into modern and traditional, liberal and conserva- tive, urban and rural, rich and poor and so on. This has perpetuated colonial traditions and encouraged consumption habits that tear the modern sector from the rest of the society and tie it in with its counterparts in the west- ern world. This has led to the enrichment of a privileged minority and the impoverishment of the mass of people. It has engendered eco- nomic and social dualism and new tensions and conflicts within society. Lifestyles are changing in such a way that a high consump- tion-oriented privileged society is being im- posed upon a mass of people committed to a

‘ See Rostow, W.W., The Stages of Economic Growth and Rustow (ed.), The Economics of Take-off into Sustained Growth, London: Macmillan, 1965. See also Black, C.E., The Dynamics of Modernisation, New York, 1966.

16

Muslim World’s Disenchantment

different set of values and traditions. This is alienating the allegedly developing sections of the society from the rest. Symbols of mod- ernisation are becoming targets of hatred.

c) The entire experiment has been terri- bly wasteful and extremely costly. Import substitution has failed to enhance the real technological capabilities of the economy, yet it is making a large number of people addict- ed to new luxuries and lifestyles that the so- ciety cannot, and should not, afford. A high consumption society is being created in coun- tries which have little to consume. The pat- terns of consumption and production have be- come distorted, and tilted to serve the whims and fancies of a privileged minority. The real gains to society have been minimal.

d)

There has been a metamorphosis of attitudes in the direction of hedonistic indi- vidualism. Concern for individual standards of living has taken precedence over that of strengthening the economic base of the na- tion. Greed and corruption have raised their ugly heads.

e) At the root of this approach is the as- sumption that an economic system can move on its own without simultaneous deliberate changes in political system, social institutions and moral attitudes of the people. It is as- sumed that the delicate balance that exists be- tween different aspects of individual and so- cial life will readjust itself in the light of the changed economic situation. The experience, on the other hand, is that this has divided the society and added to friction, rivalry, confu- sion and waste.

Consequently, the totality and integrity of the social system have been ignored. This is at variance with the Islamic ap- proach which stands for a happy balance between different

17

Islamic Approach to Development

aspects of life and aims at the development of an integrated personality in the individual and a happy balance in society.

Such an imitative and exclusively materialistic strategy of economic development is repugnant to Islam, which is not a religion in the limited sense of the word, but has its own so- ciocconomic programme based on its own world view and a set of ethical values and principles. Historical evidence indi- cates that the efforts to transplant western values and culture are proving counter-productive. Modernisation experiments have only touched the fringe of the Ummah and have failed to take root in its mainstream. This approach has been su- perficial as it has sought for artificial change, which is bound to prove abortive. A number of western developmental insti- tutions have failed to become an integral part of the society on which they have been transplanted.

Morcover, the conditions in which development took place in the West in the 18th and 19th centuries and the conditions which prevail in contemporary Muslim societies are very dif- ferent. It is naive to assume that what worked in the West at a particular moment in history will equally work anywhere. Again, there is reaction against many of the modernisation ideals of the West within the West, particularly among its younger generations which are increasingly attracted to what has been described as “counter-culture”.10 The scenario is changing and today’s Muslims, particularly young people, do not want to perpetuate what they deem as instruments and symbols of western dominance. The Muslim mind craves for the evolution of a new development strategy.

10 Paul Streeton writes: “Perhaps the most important reason is that the transfer of western institutions and standards has been disappointing and, indeed, in some cases has created or aggravated obstacles to development… Without any anti-west- ern animus, it is reasonable to argue that models that have been evolved in different historical and physical settings cannot be directly transplanted into entirely different cultures or can be ransplanted only at a cost… The differences in both initial condi- tions and current conditions call for different responses, though the history of the newly-developed economies clearly has something to teach.” Streeton, Paul, “Alternatives in Development,” World Development, Vol. 2, No. 2, February 1974, p. 6.

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4

Is

Islamic Concept of Development

slam is deeply concerned with the problem of economic de- velopment, but treats it as an important part of a wider problem, that of integrated human development. The primary function of Islam is to transform the individual morally and reconstruct his social environment with a view to guiding human development on correct lines and in the right direc- tion. It deals with all aspects of man’s economic life but al- ways in the framework of total human development. This is why the focus, even in the economic sector, is on moral and integrated human development, with the result that economic development remains an indivisible element of the moral and sociocconomic development of the individual and human so- cicty.

The philosophical foundations of the Islamic approach to development are as follows:

1)

Tawhid (God’s unity and sovereign- ty). This lays down the rules of God-man and man-man relationships.

2)

Rububiyyah (divine arrangements for nourishment, sustenance and directing things towards their perfection). This is the funda- mental law of the universe which throws light on the divine model for the useful develop- ment of resources and their mutual support and sharing. It is in the context of this divine arrangement that human efforts take place.

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3)

Islamic Approach to Development

Khilafah (man’s role as God’s vicegerent on earth). This defines man’s sta- tus and role, specifying the responsibilities of man as such, of a Muslim and of the Muslim Ummah as the repository of this khilafah. From this follows the unique Islamic concept of man’s trusteeship, moral, political and eco- nomic, and the principles of social organisa- tion.

4)

Tazkiyah (purification plus growth). The mission of all the prophets of God was to perform the tazkiyah of man in all his rela- tionships with God, with man, with the natural environment and with society and the

state.

The Islamic concept of development follows from its con- cept of tazkiyah, as it addresses itself to the problem of human development in all its dimensions: development is concerned with growth towards perfection through purifica- tion of attitudes and relationships. The result of tazkiyah is falah prosperity in this world and the hereafter.

It may be helpful to refer to some of the verses of the Qur’an which have direct bearing on the formulation of an Islamic concept of development.

“O mankind! We have created you from a male and a female and made you into nations and tribes so that you may know each other. Verily the most honoured of you before Allah is the most righ- teous of you; surely, Allah is most knowing, aware”. (al-Qur’an, 49:13)

“And the earth – We have spread it out wide, and placed on it mountains firm, and caused (life) of every kind to grow on it in a balanced mea- sure and provided thereon means of sustenance for you (i.e. humans) as well as for all (living things) whose sustenance does not depend on you. And there is not a thing that does not have its (source and) trea- sures (inexhaustible) with Us; but We only send

20

Islamic Concept of Development

down thereof in accordance with a measure well-de- fined”. (al-Qur’an, 15:19-21).

“O you who believe! when the call to prayer is sounded on the day of congregation, hasten to the remembrance of Allah (i.c. the prayer) and leave all worldly commerce: this is the best for you if you knew. And when the prayer is ended, disperse freely on earth (i.c. devote yourself to your economic pur- suits) and seek to obtain (something) of Allah’s bounty; but remember Allah often, so that you may prosper.” (al-Qur’an, 62:9-19).

—

“As for anyone be it man or woman who does righteous deeds, and is a believer – him shall We most certainly cause to live a good life; and most certainly shall We grant unto such as these their reward in accordance with the best that they ever did.” (al-Qur’an, 16:97).

“There shall most certainly come unto you guidance from Me: and he who follows My guidance will not go astray, and neither will be be unhappy. But as for him who turns away from My guidance his shall be a life of narrow scope (i.c. sterile, and spiritually narrow, without any real meaning or pur- pose) and on the Day of Resurrection We shall raise him up blind.” (al-Qur’an, 20:123-124).

“Yes, indeed, (O man), We have given you a place with authority on earth, and have appointed thereon means of livelihood (for the fulfilment) of your life; (yet) how seldom are you grateful.” (al- Qur’an, 7:10).

“And so, partake of all the lawful, good things which God has provided for you as suste- nance, and render thanks unto God for His blessings, if it is (truly) Him that you worship.” (al-Qur’an, 16: 114).

“Say: things good and things bad are not equal, even though the abundance of the bad may

21

Islamic Approach to Development

dazzle you. Be, then, conscious of God, O you who are endowed with insight, so that you may prosper.” (al-Qur’an, 5:100).

“Truly, successful is one who causes his self to grow in purity.” (al-Qur’an, 91:9).

“Truly, the successful is one who attains growth in purity (in this world).” (al-Qur’an, 97:14).

“Do not acquire wealth from each other wrongfully, nor knowingly offer it to authorities with the objective of unjustly acquiring the wealth of oth- ers.” (al-Qur’an, 2:188).

“And seck, with the wealth that God has given you, the abode of the Hereafter, but do not for- get your share in this world. And do good (to others) as God has done good to you, and spread not mis- chief, for God does not like those who do mischief.” (al-Qur’an, 28:77).

“And in their wealth is a known right for the needy (who asks) and the deprived.” (al-Qur’an, 70:24).

“And they prefer others over themselves even though they are themselves destitute.” (al-Qur’an, 59:9).

Some of the sayings of the Prophet (peace be upon him) which bring into sharp focus some of the priorities of an Islamic developmental strategy are given below:

22

“Your God is One, your father is one, and your faith is one; your father is Adam, and Adam was created from dust; an Arab has no superiority over a non-Arab nor a white over a black except by righteousness. (al-Bukhari)

Do not despise cach other, do not turn your back towards each other, and do not vie with each other (in worldly things), but be like brothers, crea- tures of the One God. (Sahih Muslim).

Islamic Concept of Development

Any Muslim who plants a tree or cultivates a field that a bird, or a human being, or an animal cats from it, this act will be counted as an act of charity. (al-Bukhari).

Earning a lawful livelihood is obligatory upon every Muslim. (Suyuti, al-Jami’ al-Saghir).

A man has not earned better income than that which is from his own effort. (Sunan Ibn Majah).

No one of you should refrain from sccking a livelihood and say, ‘O God! give me sustenance’, for the sky will certainly not rain gold and silver.

Seck of the bounty of God and be not a bur- den on others.

Do not beg anything from people. (Abu Dawud).

The hand that is above is better than the hand that is below. (al-Bukhari).

He who seeks the world lawfully, to refrain from begging, to cater for his family, and to be kind to his neighbour, will meet God with his face shining like the full moon. (Mishkat).

In the light of the above quoted fundamental principles and values as well as specific guidance in respect of certain as- pects of individual and collective economic developmental ef- fort, different elements of the concept of development can be derived. The following are its essential features:

a) The Islamic concept of development is comprehen- sive in character and includes moral, spiritual and material dimensions. Development becomes a goal and value-oriented activity, devoted to the optimisa- tion of human well-being in all these areas. The moral and the material, the economic and the social, the spiritual and the physical are inseparable. It is not the well-being of a few individuals or certain groups of society that Islam aims at; it is the well-being of all human beings that is the target. Moreover, it is

23

Islamic Approach to Development

not merely “welfare” in this world that is the objec- tive. The welfare that Islam seeks extends to the life hereafter and there is no conflict between the two. This dimension is altogether missing in the contem- porary western concept of development.

b) The focus for development effort and the heart of the development process is man. Development, therefore, means development of man, his attitudes and ambi- tions, his behaviour and lifestyle and his physical and sociocultural environment. According to the contem- porary concept it is the physical environment alone

c)

natural and institutional — that provides the real arena for developmental activities. Islam insists that the centre of all activity is man, whose well-being is also the real measure of success. This means that man is to act as the premium mobile, not merely in a mechanical sense, but in the fulness of the human potential. Change within, as well as, without are rele- vant in the application of the Islamic approach.” As such, human ideals, attitudes, incentives, tastes and aspirations are as much targets for policy instruments as physical resources, capital, labour, education, skill and organisation. Thus on the one hand, Islam shifts the focus of effort from the physical environment to man in his socioeconomic setting and on the other, enlarges the scope of development policy, with the consequent enlargement of the number of target — and instrument variables in any model of the economy. Another consequence of this shift in em- phasis is that maximum participation of the people at all levels of decision-making and implementation would be made integral to the development process.

Economic development is looked upon by Islam as a multi-dimensional activity. As efforts would have

” “God does not change the condition of a people unless they first change that which is in themselves.” (al-Qur’an, 13:11).

12 This aspect is now increasingly realised by development economists. One of the lessons, insists Max F. Millikan, we must learn from the developmental experiences of mankind is to see development “as a systematic interaction of a large number of elements.” See Millikan, Max F., “A Strategy of Development”, in UN: The Case for Development, New York: Praeger Special Studies, 1973, p. 25.

24

Islamic Concept of Development

to be made simultaneously in a number of directions, the methodology of isolating one key factor and al- most exclusive concentration on that would not work. Islam seeks to establish a balance between all the different factors and forces and as such all of them would have to be harnessed and mobilised. This also underpins the need for balance and equilibrium be- tween these different forces and factors.

d) Economic development involves a number of changes, quantitative as well as qualitative. Involvement with the quantitative, justified and nec- essary in its own right, has unfortunately led to. the neglect of the qualitative or unquantifiable aspects of development in particular and of life in general. Islam would try to rectify this imbalance.

c) Among the dynamic principles of social life, Islam has particularly emphasised two: first, the optimal utilisation of resources that God has endowed to man and provided in his physical environment; and, sec- ond, their equitable use and distribution for the pro- motion of justice amongst all human relationships. Islam commends shukr (thankfulness to God by n.ak- ing use of His blessings) and ‘adl (justice) and con- demns kufr (denial of God and His blessings) and zulm (injustice).

In the light of this analysis, the development process is mo- bilised and activated through shukr and ‘adl and disrupted and distorted by kufr and zulm.13 As such the Islamic devel- opmental effort would be directed towards strengthening

“The Qur’an says: “It is God who has created the heaven and the earth. He sends down rain from the skies, and with it brings out fruits to feed you. It is He who has made the ships subject to you, that you may sail through the sea by His com- mand. He has also hamessed the rivers for you. And also the sun and the moon, both diligently pursuing their courses. He has subdued for you the day and the night and has given you of all that you ask for. If you try to count God’s favours to you, you would never be able to count them all. But man is given up to injustice and ingratitude.” (al-Qur’an, 14:33-34). In the context of this divine policy for human sustenance and development, it is very important to say inna al-insana la- zalumun kaffar. This refers to things that disrupt and destroy the process of human development. More specifically reference is to the disvalues of ingratitude, i.e. non- utilisation of what God has given, and injustice, i.e. their misuse in the social sense. See al-Sadr, M. Baqar, Iqtisaduna, Beirut 1968.

25

Islamic Approach to Development

shukr and establishing ‘adl and towards cleansing human so- ciety of kufr and zulm.

This approach is fundamentally different from the approach of those who look upon production and distribution in an ci- ther/or relationship with the development process. The devel- opmental effort, in an Islamic framework, is directed towards the development of a God-conscious human being, a balanced personality committed to and capable of acting as the witness of truth to mankind and towards establishing a society that is just, growing and capable of meeting the real needs of man and society without exploiting others or encroaching upon their rights.

In an Islamic framework, therefore, economic development has to be a goal-oriented and value-realising activity, involv- ing the active participation of man and directed towards the maximisation of human well-being in all its aspects. It also entails building the strength of the Ummah so as to discharge all over the world its role as God’s vicegerent on earth and as “the mid-most people” (ummatun wasatun) to bring mankind to the just social order that Islam envisions for all human beings. Development means moral, spiritual and mate- rial development of the individual and society leading to maximum sociocconomic well-being with the establishment of a just order resulting in the ultimate good of mankind, here and hereafter.

26

5

Now

Goals of Development Policy

Tow, we can formulate the general goals of development policy and also spell out some of the more specific tar- gets for a developmental plan for a Muslim society.

a) Human resource development should be the first ob- jective of our developmental policy. This would include the inculcation of correct attitudes and aspirations, the develop- ment of character and personality, education and training, producing skills needed for different activities, the promotion of knowledge and research and the evolution of mechanisms for responsible and creative participation by the common people in key developmental activities, in decision-making at all levels and, finally, in sharing the fruits of development. This calls for a high priority to be given to the expansion and Islamisation of education, the overall moral orientation of the people and the evolution of a new structure of relationships based on cooperation, sharing and co-participation. This also entails the need for a highly efficient machinery for the mo- bilisation of human resources and the inculcation of a spirit of self-sacrifice.

b) Expansion of useful production. Continuous and sus- tained increase in national productivity is an important objec- tive. However, our concern would be, on the one hand, with the quantum and efficiency of production, and on the other, with the achievement of a correct product-mix. Production in a truly Islamic framework would not mean production of anything and everything for which there may be a demand or which the rich may be able to buy. Production would be con- cerned with things which are useful for man in the light of

[27]

Islamic Approach to Development

the value-pattern of Islam and the general experience of mankind. In Islamic economics halal (permissible) and haram (forbidden) are clearly spelled out and constitute the bound- aries within which production and consumption mix are to be planned. The production of all those things whose use is for- bidden in Islam would not be allowed; the production of those whose use is discouraged would be discouraged, and all that is essential and useful would be given priority and en- couragement. In the light of this policy, the pattern of pro- duction and investment would be moulded according to the prioritics of Islam and the needs of the Ummah. We feel that three priority areas would be:

c)

i) Abundant production and supply of food and basic items of necessity (including construction material for building houses and roads and basic raw materials) at reasonable prices.

ii) Defence requirements of the Muslim world.

iii) Self-sufficiency in the production of basic capital goods and heavy machinery.

Improvement of the quality of life. Efforts should be made towards improving the real standards of moral and so- cial living of all people and not merely increase in per capita income or a few indications of economic change. This would call for a high priority for at least the following:

i)

Moral uplift, better education and a high degree of social cohesion along with maximum security for life, honour and property.

ii) Employment creation, with all its consequent structural, technological, investmental, regional and educational adjustments.

iii) An effective and broad-based system of social security, assuring the basic necessities of life for all those who are unable to undertake gainful employment or otherwise deserve society’s help and assistance. Zakat should be the nucleus of this system.

28

Goals of Development Policy

iv) Equitable distribution of income and wealth. A Muslim society must pursue an active incomes and wages policy directed towards raising the in- come levels of the lowest income groups, giving high priority to the abolition of poverty and de- privation, followed by efforts at reducing the rate of inequality and concentration of wealth in sɔci- ety, and leading to a greater diffusion of wealth and power in all sections of the society. A marked reduction in the absolute levels of pover- ty and a reduction in the extent of income differ- entials would occupy a high-weight position amongst the indicators of developmental perfor- mance. To serve this purpose the tax system would also have to be reorganised.

v) Cheap housing and transport.

vi) Priority to education; testimonial and vocational training and facilities for research and innova- tion.

d) Balanced development, i.c., balanced and harmonious development of different regions within a country and be- tween different sectors of society and economy. Decentralisation of the economy, devolution of power to re- gions and proper development of all parts and sectors is not only a demand of justice, but is also essential for maximum progress. This would also remedy economic dualism from which most of the Muslim countries suffer and would also lead to greater integration within each country. This is an area which would call for abundant use of principles of re- gional analysis, econometric techniques and input-output methodologies with appropriate changes to incorporate those variables which would be essential for the development of an Islamic socioeconomic framework.

c) New technology, i.c., evolution of indigenous technol- ogy, suited to the conditions, needs and aspirations of the Muslim countries. The development process would become self-sustained only when we become not only independent of foreign aid, but when, after mastering the technology that has grown in a different economic and cultural environment, we

29

Islamic Approach to Development

are able to internalise the process of technological creativity and begin to produce technology that bears the stamp of our distinctiveness. This would call for a high priority for re- search and a new spirit to face the challenges of our times.

f) Reduction of national dependence on the outside world and greater integration within the Muslim world. It is a direct demand of the Ummah’s position of istikhlaf that its dependence upon the non-Muslim world in all essentials must be changed to a state of economic self-reliance, self-respect and gradual building-up of strength and power.14 Effective defence preparations to maintain the independence of the Muslim world and ensure the peace and serenity of mankind are objectives that must feature prominently in our develop- mental planning.

14 See the Qur’anic injunction: “Against them make ready your strength to the ut- most of your power, including steeds of war, to strike terror into (the hearts of) the enemies of God and your enemies and others besides whom you may not know.” (al-Qur’an, 8:61).

30

6

Thi

Towards a New Strategy: Geo-Economic Considerations

o achieve the objectives spelled out earlier a new plan- ning strategy will have to be developed at the macro and micro levels. Capital formation would be given the impor- tance that it deserves, but in the new model it would not be premium mobile. Human motivation and participation, so- ciocconomic infrastructure, feedback from welfare pro- grammes, role of innovation and appropriate technology would also be important aspects of the process. The role of capital would be examined not merely in the context of growth rates and marginal propensity to save, but also in re- lation to a different product and technology-mix, resulting in lower capital/output ratios and varying patterns of production and consumption. Job creation and elimination of unemploy- ment would be a crucial target. Institutional arrangements will have to be made for the formulation and implementation of plans at lower levels, particularly at the division, the dis- trict, the town and the village levels. Planning machinery would not have a mere horizontal existence at the apex: it would also operate along the vertical line reaching down to the grassroots. There should be an effective chain of inward and outward linkages connecting different sectors of society in the nation’s total participation in the growth process.

We have dwelt upon the ideological considerations at some length. A development strategy cannot be based merely on idcological considerations. The other set of considerations re- lates to the geo-economic aspects: the resourcebase, the state of factor endowments, and the political, economic and soci- etal institutions and their characteristics.

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Islamic Approach to Development

All Muslim countries belong to the group of developing countries, some at middle and lower middle stages and most at the lower rugs of the ladder. This is a reflection of the set- back to their sociocconomic progress caused by imperialist western conquests in the eighteenth and nineteenth centuries, from which they were able to recover only in the mid-twenti- eth century. Political freedom is only now being backed by efforts to construct an independent economic base, which would be the only guarantee, in the long run, for their sur- vival as self-respecting independent national entities working together with other Muslim nations for establishing an Islamic way of life and also for world peace and prosperity based on it.

The region’s resource base includes concentrated areas of high agricultural production, mineral wealth and large reser- voirs of diverse sources of energy including not only oil and gas but also coal and hydroelectric potential. The human re- sourcebase is not only quantitatively large, but also qualita- tively advanced to a stage where, despite a large brain-drain involving a reverse transfer of human capital and the technol- ogy it embodies from Muslim developing countries to the de- veloped world, a number of countries have advanced their in- stitutional base of technology to the extent which gives them the capability for a breakthrough into most modern fields, viz, nuclear energy, electronics and aerodynamics.

The resource base is so dispersed over the countries that natural complementarities are highlighted, even though pre- sent trade among the Muslim countries is rather limited. In 1992, such trade added up to only 10 percent of their total exports. Some of the countries such as United Arab Emirates, Qatar, Saudi Arabia, Kuwait, Oman, Algeria and Libya have as a common feature a highly developed oil production and export sector, with some initial attempts at diversification into industry, but with an atrophied agricultural sector. Their main resource has emerged, since the adjustment of oil prices to realistic levels in 1970’s and 1980’s, as the surplus of cap- ital which is available for investment within their own nation- al borders as well as abroad. The unfortunate fact is that the bulk of these investment resources are finding their way into the capital markets of the industrial nations and not into di- rect physical investment in the Third World countries gener-

32

Towards a New Strategy: Geo-Economic Considerations

ally or more specifically in the Islamic countries.

There is a different group of Muslim oil-exporting develop- ing countries where the mining industry (with a large weight of oil-extraction) forms the main export-oriented sector, but the agricultural and manufacturing sectors are relatively well developed. For instance, in Indonesia, the mining sector ac- counts for only 20 percent of GDP despite the substantial weight of the oil-producing sub-sector, with agriculture and industry accounting for 20 and 9 percent respectively. Such countries possess an internal balance of resources for devel- opment. Their main requirements are technology and the ex- pansion of trade with other Muslim countries.

The third major group consists of countries whose mining sector is less significant and who are thus large exporters of primary products based on agriculture, but with varying de- grees of progress in manufacturing for the domestic market and exports. Countries depending largely on agricultural pri- mary exports and with a limited manufacturing sector include Chad, Mali, Guinea, Somalia, Sudan, Uganda, Upper Volta, Niger and the Arab Yemen Republic. There are other coun- tries within this group which, while continuing to export agri- cultural primary products, have acquired a reltively high per- centage share of manufactures in total exports. Notable in this group are Egypt and Sierra Leone in Africa, and Lebanon, Turkey, Pakistan, Malaysia and Bangladesh in Asia. Major assets in such countries are a large labour force, and skills and an institutional framework conducive to develop- ment, together with a large domestic market. Their main lim- itation has been the availability of capital with the problems involved in extracting savings for development at low levels of domestic per capita income.’

It can be clearly perceived from this bird’s eye view of the Muslim world’s economic complimentaries that any strategy for the development of the human and material resources of this significant part of the globe must be based on mutual co- operation and collective Muslim self-reliance. This is not only an economic necessity; this is essential for seeking eco-

15 Socioeconomic profile of 30 Muslim countries is presented in the appendix, which provides some essential comparable information for 1988, as given in the World Development Report, 1990.

33

Islamic Approach to Development

nomic development in an Islamic framework which would be the only meaningful form of development for the Muslim countries. Unless the Muslim world seeks to pursue its devel- opmental goals on the basis of self-reliance, it is likely to fall prey to one of the dominant economic philosophies prevalent in the world.

In view of these characteristics of the Muslim countries, a development strategy under an Islamic acgis will have two important dimensions: one ideological-cum-economic aspect which would facilitate the maximum mobilisation of internal resources and orient their development to serve Islamic so- cioeconomic objectives. The second dimension relates to co- operation between Muslim countries, their organisation into sub-groups on the basis of geographic affinity, economic complimentarity and political understanding. These sub- groups would be related to a yet wider grouping of the entire Muslim world, committed to pursue certain defined common goals through an institutional infrastructure which is in its early stages of evolution. The Muslim world would be related to the larger community of the Third World, cooperating with it for the achievement of the common goal of setting up a more just new international economic order.

34

7

A Strategy of Self-Reliance

We have argued in favour of a strategy of self-reliance for

the Islamic Ummah and its components, i.e. the Muslim countries. It would be helpful to delve a little more on some of the essential aspects of self-reliance. Crucial to this ap- proach is the need for a radical departure from the current practice of aid-based development. It is our considered view that suspension of foreign aid would prove a blessing and not otherwise. It is an undeniable fact that the aid-based develop- ment effort during the last four decades has not been able to produce the results that were expected of it, and there is an urgent need to scientifically and rigorously evaluate the net contribution of what the Third World countries in general and Pakistan in particular had been receiving in the name of aid.

The term “aid” is a misnomer. There is only a small part which comes in the nature of a grant which can justifiably be called aid. The rest is either concessional loans or loans which are received more or less on market terms. The share of the latter is increasing in view of market-preference poli- cics of the World Bank and other aid-giving agencies. As such not only the loan component of this alleged aid has been constantly increasing during the last two decades, the rates of interest on which these loans are advanced are ap- proximately market rates of interest.

We must realise that a large part of the aid is tied. It can- not be utilised according to one’s own preferences, nor can it be used for purchasing the cheapest available supplies from the world. Instead, the donor country has a very substantial part of the commodities (or services) which it wants to sell at a price which suits the donor country and normally the differ- ential is so large that in certain cases even up to 30 percent

[35]

Islamic Approach to Development

more is paid only because the supplies can be had only from the donor country. This aid is a greater help to the exports of the donor country than the receiving one.

Then, of course, there are other costs including transport, insurance, technical know-how. Once everything is taken into view, we discover that the net contribution is minimal. Currently, around 70 percent, of the aid received is directed towards loan-interest payment. The remaining 30 percent is the gross contribution; its net contribution is marginal.

It also desrves to be noted that the geo-political situation has changed. It will be imprudent on our part to expect that whatever support and aid we were expecting or getting in the past could continue in the future. As such, we find that as a nation we have no option but to go for self-reliance.

Doubtless we should have friendly relations with all coun- tries of the world, yet we must not remain dependent on aid. Ideologically also, we realise that one of the issues on which Islam is very sensitive is the indepedence, sovereignty, hon- our and self-respect of the Muslim Ummah. The Ummah is shuhada’ala nnaas, and you cannot be a witness of Islam to the world if you are dependent on them economically, intel- lectually, technologically, scientifically and financially. So self-reliance is the only way.

What is self-reliance? We may define it as a condition in which a nation makes free and voluntary choices in the dis- position of its resources and output and in setting its econom- ic and political priorities. This state of affairs is totally dis- tinct from a situation where decision-making is constrained by a political or economic situation dictated by external com- pulsions. Self-reliance signifies the capacity and capability of the country or group of countries to face any crisis on the basis of internal strength. This is only possible if the econo- my can maintain equilibrium on the basis of commercial transactions including trade and capital movements. In short, it implies self-confidence and the capacity of autonomous goal-setting and decision-making, rejecting all forms of de- pendence, invited or imposed.

36

Self-relience does not mean self-sufficiency: no country can

A Strategy of Self-Reliance

be totally self-sufficient and as such we must not equate self- relience with self-sufficiency. Though the Muslim Ummah, taken as a whole, has also the capability to become almost self-sufficient, even then in the interest of future development and other global considerations we think, trade relations with the rest of the world would be integral to any concept of self-reliance.

That is why self-reliance does not mean isolationism or au- tarky: We are part of the world and we would maintain a network of relationships at all levels, including trade and cap- ital movement.

Furthermore, self-reliance is not a static concept: it is growth-oriented and dynamic; Yet it is very important that self-reliance must be our national objective. Also, self-re- liance is not exclusively an economic concept: it represents an approach to life and its problems.

While self-reliance is not achieved overnight, there is a cer- tain type of gradualism to which we have been addicted to and that has taken us nowhere. To take one instance, Pakistani planners claimed in the First Five-Year Plan (1955- 1960) that within 25 years Pakistan would be self-financing – self-sustained growth was the term used. But where are we after 40 years of planning? More dependent than from where we started; this type of gradualism is not going to work. For that reason we suggest a radical departure from the past though it entails some risk a calculated risk. Time has come that the nation take this calculated risk.

The Muslim Ummah should adopt self-reliance as a na- tional covenant, a fundamental principle of the sociocconom- ic policy and a basis for individual life in the national con- text. It would be helpful if there is a legislation on the subject, a national self-reliance act, so that there is an explic- it legal framework wherein policy-making takes place.

The programme to achieve self-reliance would have to be multi-dimensional. One of the dimensions is that the govern- ment would have to launch a programme of curtailing con- spicuous consumption and check nondevelopmental expendi- türe. Another law should be enacted putting a ceiling on

37

Islamic Approach to Development

both budgetary deficit and deficit-financing, because rhetoric apart, even blunt criticism from experts, economists and par- liamentarians has not been able to deter the governments from incurring reckless expenditure, deficits and deficit-fi- nancing.

The present gigantic size of the government, as well as the all-pervasive presence of the government in the country’s economic life, has immensely contributed towards the depen- dence of the country on the outside world. An important ele- ment of the proposed strategy of self-relience is a significant reduction in the size of the government. It needs to confine itself to:

protecting ideology, sovereignty and security of the nation;

protecting the rights of the weak, and the underprivileged in the society;

⚫ creating a congenial social and administrative environ- ment for economic activities in the country; and

⚫ taking care of these strategically important activities where private sector is unable to fulfil country’s needs.

Development plans would have to be totally restructured and many of its economic chapters would need to go to the private sector. Education, health and the social sector should be the primary concern of the public plan.

A kind of a decentralisation would be required to transfer a number of functions from the centre to the provinces and from provinces to the local administration.

There would also be a need to totally restructure the taxa- tion system because resource mobilisation is not possible without a fundamental change in the taxation system. To protect the interests of the consumer it may be essential to establish a public utilities commission under an act of the parliament. This can also safeguard against monopolistic price manipulation, etc. Similarly, a long period tariff policy would be needed and the institution of tariff commission would have to play a very crucial role in ensuring self-reliant

38

development.

A Strategy of Self-Reliance

The most important plank of this strategy would be a switchover from interest system to an equity-based mode of financing. Shift towards self-reliance in the context of coun- tries like Pakistan may be impossible without elimination of riba. As such, our most revolutionary proposal is that a cut- off date be fixed for the elimination of riba, first from the domestic economy and then from external government deal- ings.

This is not the place to go into details on how interest is to be eliminated and what alternatives are available at the do- mestic and external levels. Enough literature has been pro- duced on the subject. Here, we would only share the thoughts of some of the leading economists and bankers sug- gesting that the new approach bears great promise for the fu- ture. 16 Dr Mohsin Khan, writing in the IMF staff paper says:

Indeed it is readily apparent that the Islamic model of banking based on the principle of equity participation bears a striking resem- blance to the proposals made in the literature on the reform of the banking system in many countries. The Islamic system may well prove to be better suited to adjusting to shocks that result in banking crises and dis- truption on the payment mechanism of the country. In an equity-based system that ex- cludes predetermined interest rate and does not guarantee the nominal value of deposits, shocks to asset positions are immediately ab- sorbed by changes in the values of the share deposits held by the public in the banks. Therefore, the real value of assets and liabili- ties of banks in such a system will be equal at all points in time. In the more traditional banking system since the nominal value of deposits is fixed such shocks can cause a di-

version between real assets and liabilities. It

16 M Umer Chapra, Towards a Just Monetary System, Leicester, The Islamic Foundation, 1985; Elimination of Riba from the Economy, Institute of Policy Studies, Islamabad, 1994.

39

Islamic Approach to Development

is not clear if this would be correct and how long the process would take.”

Another quote from Prof Haus Alba’eh, a leading German economist, who says that Islamic banks belong to the class of equity-participation banks:

They supply equity in the form of venture capital to investors whose share is their inge- nuity and their labour. Secondly, they supply equity in the form of equity capital as partici- pants in the type of project which in general has a majority shareholder. They may be ide- ally suited to meet the need for equity capital in developing countries where the business risk is particularly high as well as in the in- dustrialised countries where the development. of new processes and new projects involves high risk and requires large amount of ven- ture capital.18

Prof Traute Wohlers-Scharf of the OECD has to make the following observation about riba-free banking:

Islamic banking is trying to develop the rela- tionship between finance on one hand and in- dustry and commerce on the other. This new relationship is the basis of the Islamic eco- nomic system being set up. Though Islamic principles have yet to be put to the test in the competitive environment of international fi- nance, the two systems are similar in that they both strive for closer ties between finan- cial intermediation and economic asset cre- ation. Islamic banks could make a useful contribution to economic growth and develop- ment particularly in a situation of recession, stagflation and low growth level because the core of their operation is oriented towards productive investment. All countries, both in

“Mohsin Khan, “Islamic Interest-Free Banking,” Staff Paper, Vol. 33, No. 1, March 1986, p. 19.

“Islamic Banking, proceedings of the Baden-Baden seminar, London.

40

A Strategy of Self-Reliance

the North and in the South, need more ven- ture capital. Loan capital is available, partic- ularly from industrialised countries but at high interest rates. However, even medium- scale entrepreneurs find it difficult to raise sufficient risk capital for expansion and inno- vation. This has acted as a brake on produc- tivity and economic growth in the North. Thus, practical and immediate cooperation possibility exists between Islamic banks and enterprises all over the world. The intermedi- ation process remains to be fully developed.”9

19 Traute Wohlers-Scharf, Arab and Islamic Banks, OECD, Paris, 1983.

41

8

Some Thoughts on

Muslim Economic Union

ye have argued for a development strategy aiming at self- Wreliance will have to reliance will have to move away from narrow national- ism and towards greater cooperation and integration of the Muslim world. Let us now briefly examine the question: can the Muslim world emerge as an economic bloc? My very emphatic answer is yes, and that is must.

Muslim countries today constitute about one-third of the total membership of the United Nations. There are around 56 independent Muslim states having a population of around 800 million covering about 20 percent of the land area of the world and stretching between Atlantic and the Pacific. The Muslim world straddles from North Africa to Indonesia, in two major blocs, the bulk being concentrated in the heart of Africa and Asia and a smaller group in South and Southeast Asia. Despite differences in language, racial stock and level of economic development, the Muslim world constitutes a homogeneous unit characterised by common faith and cultur- al and behavioural characteristics emanating from Islamic tra- ditions. A recent report by Rodney Wilson published as the Economists Intelligence Unit Special Report on Islamic Business: Theory and Practices affirms “indeed many western companies engaged in business worldwide would find it bet- ter sense to see the Islamic world as a unit rather than to deal with separate regional divisions covering the Middle East, North Africa, South and Southeast Asia.”

The Muslim world is also important because it occupies a strategic position between Asia and the European hemisphere. Despite the disintegration of the yester-superpower of the

[43]

Islamic Approach to Development

Soviet Union, the Muslim world constitutes a vast geo-eco- nomic bloc between Russian Federation and Western Europe on the one hand and the Mediterranean and the Atlantic Oceans on the other. The northern gateway of the Mediterranean is guarded by Turkey, the master of the Basphorus and Dardanelles and the eastern gateway is con- trolled by Egypt through Suez and Port Saced. The Mediterranean is almost 60 percent a Muslim lake while the Gulf is almost 100 percent under the Muslim control. So is the case with the Red Sea. There are important Muslim out- posts in the Atlantic and the Pacific.

The Muslim world is rich in natural resources and man- power. Around 60 percent of the world petroleum reserves are in the Muslim world. It also has huge reserves of iron, phosphates, copper, manganese, tin, rubber along with rich resources in the fields of agriculture and livestock.

The Muslim countries can be grouped into three major cat- egories: one, the rich oil-producing countries. Second, dense- ly populated countries with reasonably high degree of indus- trialisation having physical as well as human infrastructure indispensible for economic and social development. The rest which are less densely-populated countries at different levels of industrialisation, yet contain great potential for growth. About a dozen Muslim countries have achieved reasonably high level of industrialisation and almost self-sustaining com- mand over technology, which can make immense contribution towards the transfer of technology and industrialisation of the rest of the Muslim world. Turkey, Pakistan, Iran, Kazakhstan, Egypt, Algeria, Indonesia, Malaysia and Bangladesh among this group can play an outstanding role.

While trade between the Muslim countries is not very sig- nificant there has been an increasing degree of transfer of capital and manpower within the Muslim countries during the last two decades. This movement of capital and manpower has opened up new avenues of economic cooperation and in- tegration. Moreover, there has been a rich historical tradition of intense trade between these countries.

A number of institutional developments have also taken place which constitute important stepping stones towards

44

Some Thoughts on Muslim Economic Union

greater cooperation among the Muslim countries. Among these are the establishment of Arab Common Market between Egypt, Syria, Jordan and Iraq; the Gulf Cooperation Council between Saudi Arabia, Kuwait, Qatar, Bahrain, the UAE and Oman; the creation of Economic Cooperation Organisation between Turkey, Iran and Pakistan and the recent inclusion of six Central Asian states into this organisation; the establish- ment of the International Islamic chambers of commerce; the Islamic Development Bank, Jeddah; the Union of Arab cham- bers of commerce; the Organisation of the Islamic Conference; the OIC Institute of Statistical Economic and Social Research and Training, Ankara; establishment of over 60 interest-free banks in Muslim countries with over 200 branches in different parts of the world; and a number of joint ventures between different Islamic countries represent major landmarks towards the emergence of an economic bloc of the Muslim world.

A number of Muslim countries have emerged as financial giants over the oil-price revolution of the 1970s, with the re- sult that the economic balance of power of the world has changed in favour of the Muslim countries. Huge reserves have been built by a number of Muslim countries and vast capital resources are available. In this background, we should examine two fundamental questions:

Should the Muslim countries seek greater economic integration and become one bloc?

In view of the objective economic and political con- ditions is it possible for them to emerge as an economic bloc?

As to desirability at least for three reasons they must strive to become an economic bloc:

1) On religious, moral and ideological grounds the Muslims constitute one Ummah and it is an imperative of their faith and history that the Muslim countries which enjoy political sovereignty must join hands to emerge also as an economic bloc leading towards self-sustained growth of the Islamic Ummah.

45

Islamic Approach to Development

2) For strategic reasons it is important that the Muslim world must reduce its dependence upon the western and non- Muslim countries, many of whom have been responsible for the underdevelopment of the Muslim world and the Third World and who control and manipulate the present-day world economic order in a manner detrimental to the best interests of the Muslim world and the rest of the developing countries. This hegemony of the West can be broken only if an alterna- tive bloc comes into existence. The Third World is not in a position to do so because of a number of economic, geo- graphic and political reasons. Muslim world, on the other hand, has greater cultural homogeneity, geographic contiguity and economic complimentarities. As such, this is the only way to attain economic independence from the world system and make conditions congenial for the fullest development of the Muslim world. This objective cannot be achieved by indi- vidual Muslim countries, despite whatever leverage some of them might develop. The way the influence of OPEC has been curtailed bears witness to it. The only way to seek eco- nomic de-colonisation is through economic integration of the Muslim world.

3) The future of the Third World depends very much upon the future of the Muslim world. The agony of the Third World cannot be brought to an end unless the Muslim world succeeds in achieving this objective and as such sets an ex- ample for the other countries of the Third World for whom it is possible to emerge as an economic bloc, to seck disen- gagement from the West-dominated world economic system. The Muslim bloc can act as a counter-veiling power helping the Third World to seek real de-colonisation. All this is pos- sible only if the Muslim world emerges as an economic bloc.

These three basic reasons are sufficient to establish the de- sirability of an Islamic economic union.

Is it possible to achieve what is desirable? Yes, for the fol- lowing reasons:

a) Compactness of the Muslim world into two major geographic regional regions which are also culturally homogeneous.

46

Some Thoughts on Muslim Economic Union

b) Developed lines of communication and transport. Air, sca, road and even rail links are available which provide effective communication infras- tructure for the integration of the Muslim world.

c) Diversity of resources available in different Muslim countries ensuring economic complimen- tarity along with a degree of economic competi- tiveness.

d) Availability of capital resources and a number of financial institutions, both on Islamic and secular lines, which can provide the financial mechanism through which this development can take place.

e) Availability of highly-trained professional and skilled manpower in different parts of the Muslim world as well as presence of a huge reservoir of Muslim expertise working in the West. In the past, the Muslim world has suffered from brain- drain to the West, but now flow of Muslim brain power from the West to the Muslim homeland can be great source of strength and power.

f) Different levels of industrialisation in different Muslim countries with the result that exchange of technology and experiences is possible within the Muslim world.

g) Finally, development of a number of institutions financial, economic and political – during the last three decades has paved the way for the emergence of an economic bloc of the Muslim world.

What are the major hindrances? Some of them are as fol- lows:

i)

Non-availability of effective political will.

ii) Efforts of the western countries to keep the

Muslim world disunited.

47

Islamic Approach to Development

iii) Dependence of the Muslim world on the industri- alised countries of the world in respect of certain strategic supplies and inputs for industrial devel- opment.

iv) Absence of institutions for strategic planning and effective machinery for the implementation of common economic programmes for the Muslim world.

There should be a think-tank of the Muslims which, under the auspices of OIC, Faisal Foundation or such international Muslim organisations, should systematically work for devel- oping the idea of Muslim economic union and see how the obstacles could be removed. The political climate should also be made congenial for this.

Establishment of new institutions to move in that direction should also be considered. Some of them could be:

i)

ii)

One or more multinational Muslim corporations or authorities for the development of agriculture and livestock industries in the Muslim world.

Establishment of one or more international Islamic companies with the primary objective of developing economic resources within the Muslim world, particularly in the areas of food, livestock, fishing, natural resources, consumers industries, heavy industries and defence industry. In fact, a number of corporations can be estab- lished to take care of these areas.

iii) Development of an effective capital market with- in the Muslim world.

iv)

Delinking of the Muslim currencies from dollar, pound sterling and SDR and development of a common Islamic dinar. Also, development of other measures to minimise the ill-effects of the vagaries of the changing exchange rates and other international monetary discquilibrium.

48

v)

vi)

Some Thoughts on Muslim Economic Union

Development of joint shipping, air, cargo and tanker companies and other transport industries and agencies.

Development of common service industries in the fields of banking, insurance and re-insurance.

vii) There is also a need for the development of a technology bank for the Muslim world and the establishment of a number of institutes or techni- cal universities, to ensure continuous supply of skilled and technical manpower in the future.

viii) Promotion of bilateral and multilateral trade and development of one or more customs unions within the Muslim world based on the principle of preferential tariff.

ix)

x)

xi)

Legal and commercial agreements between the Muslim countries avoiding double taxation and other impediments to economic cooperation.

Joint ventures at the level of private enterprises as well as amongst the Muslim states.

Establishment of a Muslim development fund as a sister organisation to Islamic Development Bank mobilising Zakah, Sadaqah and other aid or subsidy resources from Muslim states and peo- ples and utilise them for the eradication of poverty and promotion of economic well-being at the grassroots level in the poorest Muslim coun- tries.

xii) Greater coordination between universities, re- search centres and technical or educational insti- tutes with a view to ensure greater coordination of education and research programmes within the Muslim countries and greater absorbption of Muslim students and researchers within the Muslim world.

49

9

Epilogue

uslims the world over feel disenchanted with the whole

development model of the West, which, they consider is based on an amoral growth philosophy deeply entrenched in the ethos of western culture. It follows a totally materialistic approach which is alien to the Muslim way of life and histor- ical traditions. Unless the moral and material approaches are weld into one integrated body and the socioeconomic norms are restructured to ensure unreserved justice and fairplay, the alienation of the Muslim mind will persist.

The western model presents a deliberate attempt to trans- plant its values and patterns, justified as imperatives of the process of modernisation. This, in fact, poses a threat to the Muslim faith and civilisation which is characterised by alto- gether different motivation patterns, social institutions, rela- tionships and modes of pecuniary reward and punishment. Resistance against this monstrous attempt, which is the spear- head of cultural imperialism will continue, because a living and dynamic civilisation never yields casily.

Admittedly, the West-inspired models to material prosperity have made strides among the Muslim communities as mani- fest in the divisions of Muslim societies on a number of lines -modern and traditional, liberal and conservative, urban and rural, rich and poor and so on all as a result of the collusion between the West and the privileged westernised elite minority of the Muslim population. The impoverishment and the resultant hatred of the great majority of Muslim pco- ple, the social dualism and ever-increasing tensions and con- flicts in the Muslim lands are, however, clear indications that a positive change is in the offing and a final settlement, fully reflective of the mass demand, is not far away.

[51]

Islamic Approach to Development

Realising the fact that the western civilisation and its capi- talist approaches are now being increasingly challenged right within the West and a sort of counter-culture is evident and having also seen that the 70 years of communism have come to a disastrous end, there seems to be a global demand for a new development strategy that ensures a judicial blend of spiritual and material values and a totality and integrity of social and economic systems. The future of this globe thus depends wholly on Islam. This conclusion could be a source of great pride for the Muslims, but it provides a great chal- lenge too, and much depends on how the Muslim Ummah chooses to face the occasion which demands that it picks up its enjoined role of Allah’s vicegerent on earth and as the ummat-e-wasat to provide mankind with a just order that re- sults in the ultimate good of whole mankind.

For ideological as well as strategic reasons, it is imperative for the Muslim world to reduce dependence on the West and the non-Muslim countries, which control and manipulate the present world economic order in a manner detrimental to the interests of the Muslims and the Third World countries. An alternative economic bloc will have to be created to break the hegemony of the West. The cultural homogeneity, geograph- ic contiguity and economic complimentarities of the Muslim land mass provide the best opportunity for the evolution of such a bloc. Attempt at economic de-colonisation is possible only through economic integration of the Muslim world, as individual efforts are bound to result in isolation rather than creating any positive impact on the global level.

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Appendix

Socio-Economic Profile of 30 Muslim Countries

Page 50 -55 Tables

Source:

Note:

NOTES

World Development Report, World Bank, 1990.

GNP criterion is used for country classification. Latest com- parable information available for 1988 is given. See explana- tory notes at the end.

Table 1

1. By mid-1988, population of the Muslim countries given in the tables (excluding Afghanistan and Lebanon) was over 841 million and is estimated to reach the figure of 1.15 billion by the year 2000. The increase will be 36.6 percent which on average means over 3 percent. The high increase in population seen along with the very high illiteracy figures warrants very special efforts in the social sector in general and human development area in particular.

2. Even by the year 2000, the overall population density would be around 46 per square kilometer offering enormous opportunities of economic expansion. This will, however, be possible if there is liberal movement between the dense and scarcely populated areas.

3

Based on GNP per capita, the 30 Muslim countries could be classified as under:

a) Poor (upto $400)

b) Lower mid-level ($400-1000) c) Higher mid-level ($1000-2000) d) Rich ($2000 and above)

[61]

8859

Notes

Table 2

4. Out of 30 countries, 17 registered an average GDP growth above 3 percent — the expected average annual pop- ulation growth rate. Rich countries like Saudi Arabia, Kuwait and UAE appear to have been facing recession during the ’80s as is evident from the negative GDP and industrial growth figures. They, however, did better in agriculture.

Table 3

5. As against industry, the value-added in agriculture in- dicates that the Muslim world is by and large still agrarian in nature. The only notable exception is Turkey where in spite of large arable land and advanced agriculture, the industrial sector has taken a lead. Figures concerning countries like Oman, Kuwait and UAE will be misleading because moisture scarcity inhibits agriculture in these areas.

6. A substantial number of the countries appear provid- ing better caloric intake which almost corresponds with thin GNP per capita. The major factor of better food supply, how- ever, is the high import of cereals (and other foods) because the average index of food production hardly keeps pace with the population growth in most of these countrics.

Table 4

7. Except the oil-rich countrics, the trade balance of the Muslim world in general is negative. The average annual growth rates of exports indicate that the situation has deterio- rated during the ’80s even for the oil-producing countries. Negative growth in imports during the same period must have cased the trade balance, but it is also indicative of the slow economic activity. The percentage of food imports means that in spite of agrarian economics, almost all the Muslim countries are heavily dependent in this respect too.

62

Notes

Table 5

8. The poorer the economy, the more the dependence on foreign assistance. As a result, a great number of countries is heavily indebted. Thirteen of these Muslim countries have to pay more than 20 percent of their foreign exchange carnings to meet the debt service charges. Algeria paid more than 3/4th of its export earnings on this account. The seven highly rich oil-producing countries had no debt to pay, meaning thereby having their own surpluses, which could be chan- nelled for the betterment of the poorer Muslim states and to enhance the cause of an Islamic economic order.

Table 6

9. As evident from the table, data in respect of the cen- tral government expenditure is deficient. Available informa- tion, however, indicates that emphasis on defence and social sectors (education, health) has in most cases decreased.