A WEEK IN ECONOMICS (13/05/13 – 19/05/13) IMPOSING RELIGION WITHOUT SENSE OR SENSITIVITY

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Week-in-Economics

There are grave fears for Syria. What started as a peaceful protest against the Assad regime has escalated into a full scale, destructive civil war. Moreover, the war has become increasingly sectarian, and is now a religious conflict. The rebels are composed of Sunnis (and their derivatives), while the pro-Bashar militia are Shia (and their derivatives). Aside from the 70,000 people that have been killed, the conflict has the potential to further inflame global Sunni-Shia antagonism. Tensions between the two sects are already high as witnessed in Iraq and Pakistan.

There should not have been a drawn out conflict in Syria. The initial protests were quelled quickly by force; yet the imbroglio persists. This owes itself not to the general discontent of the Syrian population – this has been present since the Hafez al Assad’s rule – but to the funding given to the rebels. Qatar has invested US$ 3 billion into assisting the rebels; Saudi Arabia has been generous too, although actual investment figures are unknown.Weapons have been amassed and often channelled through Turkey. By arming the rebels, ensuring equal footing against government forces, the conflict continued. On the other side, Russia and Iran have been benefactors to the Assad regime. Iran have stepped up provision of weapons and have encouraged Hezbollah to enter the conflict;Russia, a long term ally of Syria, are now providing anti-ship cruise missiles amongst other artillery to the regime.

These four moneyed nations are enabling a bloody war to continue, and it appears the only way to end the war is if one side loses its funding.  Unfortunately, positions are entrenched with the benefactors supplying the funds to achieve a religious and political stronghold. This is not limited to just Syria. In addition to funding Sunni rebels, Qatar has been active in funding the Muslim Brotherhood in Egypt, Tunisia and Libya. Such largesse has ensured the intrusion of religious principles into the financial markets as Islamist parties take control over the governance of the respective country.

Thus Islamic finance is taking centre stage in the three aforementioned countries although not with the support that advocates desire. In fact striking paradoxes are arising. Egypt is experiencing difficulties in ensuring the economy functions according to Islamic financial principles. The much touted sovereign sukuk to shore up Egypt’s sinking economy has ran into a number of legal headaches which have pitched the secularists with religious conservatives; conservatives with other conservatives, etc. Even if the bill is agreed upon, the Egyptian Islamist government are painfully aware that Islamic finance alone will not be sufficient. Negotiations with the IMF continue for an interest based loan. Thus the notion of a pure Islamic economy is currently a mere pipe dream, and it begs the question as to whether an economy based on Islamic principles can run independently of the conventional based system.

In Libya, the ruling National Transitional Council has approved a law to introduce Islamic banking the country.  The central bank also signed a cooperation agreement with INCEIF, a Malaysian university dedicated to the teaching of Islamic finance, to assist in the training of bankers in Islamic finance.  However, while these are recent developments, the ruling council had already passed a law banning interest in the country while not clarifying the alternative. Consequently, lenders have stopped lending (they are not receiving a return) estensively and people have no access to loans to help fund domestic needs. The recent Islamic bank law and the training programmes may go some way in forming an Islamic economy; however the experience of Sudan and Pakistan in islamising their respective economies suggest that attempting a full scale transformation of an economy into an Islamic one is doomed to failure. Iran is perhaps the exception, although it is likely that Iran are straddling both systems rather than relying on exclusivity of one.

In fact, the success of Islamic finance has been in countries that have a dual financial system: Islamic and conventional. Malaysia and GCC nations are examples where this dual system has functioned rather harmoniously. Individuals have the option of choosing the type of bank they wish to bank with. Governments and central banks rely on both markets to assist their monetary policies.

There is potential that in the long run, by gradually bringing in Islamic finance into the regulatory system, the economy of these respective nations may become fully Islamic. Currently, this is unlikely given the pervasiveness of the conventional financial system and the interconnectedness of the global economy. But progressive implementation does show that an immediate transformation in a country’s economic profile is the least effective way of incorporating a certain system such as Islamic finance. An interest based financial system may be prohibited under the Shari’a, but it cannot be replaced with such impromptu.

History has proven time and time again that precipitous changes often do not lead to overall transformation. Planning and patience has long lasting effects, and incremental changes can accumulate leading to a more holistic change. Many Islamists, believing in the all encompassing purview of the Shari’a in ensuring justice and peace, often resort to hurried responses to societal problems. Jihad is a particular favourite especially in oppressive situations. Calls for jihad in Syria, Afghanistan, and Iraq have not led to stability; in fact it has stoked the flames of war even further. Even if Islamist parties get into power, they are shackled by the limitations of Islamic finance in meeting the general needs of the overall population. The industry is still small and niche.

Therefore, funding Islamist parties simply due to their belief in a political ideology is not a sagacious way of championing ones cause. The world’s geo-political and economic situation is far more complex than 7th Century Arabia, and requires a more cerebral approach to managing affairs. Much to their chagrin, Islamist parties in Egypt and Libya are finding this out. Likewise, channelling funds into a war machine without considering its impact on mortality or the creation of sectarian conflict has led to a quagmire in Syria in which there appears to be no end in sight. In the end, victory for whichever side will come at a far too high a cost. US$ 3 billion could have been better utilised in more economically productive ways and with far fewer deaths.

Progressive and structured policies are far more likely to be successful in transforming societies. A lesson often forgotten from the life of the Prophet Muhammed (PBUH) is that his ministry lasted over a period of 23 years. The Quran was not revealed immediately, and the Shari’a was not implemented wholesale from day one. The audience had to be educated; their wilful acceptance had to be consolidated. Laws came incrementally to assist in their growth. With a more committed citizenry, the law was easier to enforce. Today, Islamists often see it as the other way round: law first, acceptance later. Unfortunately for them, there are too many forces that would rally against such an approach. Bloodshed usually results.

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