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Policy - Banking & Money Explorations - Energy & Environment

By: Abdullah, PhD (Birmingham, UK)

Prepared for Focus Group Discussion of Perhimpunan Intelektual Muslim Indonesia (PRIMA) 12 Safar 1432


Agenda Foremost role of the Muslim intellectual: monitor, influence and implement optimal policy for the state. 

What is policy?

Banking

Money

Energy

Environment

This is an exploration (not definitive answers) to provoke thought. 2


What is policy? System

Policy

Procedures/Protoc ol

Definition Rules emanating from an Ideological viewpoint

Plan of action towards real time application of the system

Operational activities to implement the policy

Goal

Compels or prohibits behaviour

Guides action to achieve desired outcome

Behavioural and technical actions to deliver the desired outcome.

Answers

What, why (maybe) What, Why

What, how, when, where

Entails

System (integrated fiqh)

System + science

System + science + action

Example

Zakat

Mode of estimation and collecting

Actions taken to estimate and collect it 3


Implications for diagnosis 

poor system – poor policies – poor procedures 

Good system – poor policies – poor procedures 

Eg. Umar (jumping fence and miscarriage case), lazy firm, lazy da’wah

Good system – good policies – good procedures 

Eg. Failure reasons of Ummayid, Uthamiyya state, Mughal state, Andalusia

Good system – good policies – poor procedures 

Eg. Later Abbasids.

Good system – poor policies – good procedures 

Eg. All developing countries incl. Indonesia

Eg. Khilafah rashida, ummayid.

Poor system - good policies – good procedures : produce relative results. 

Eg. Developed countries 4


Scope of pre-state policy discussions 

Clarifying application of Islamic system generally 

Scenario planning – context dependent    

As it stands now in Egypt, what land reforms can improve sustainable food supply. Under current conditions, how will Turkey industrialise? If there is substantial loss of Gold reserves, how can the economy be managed? Alternatives tax system to capitalism, under existing conditions.

Evolving resource distribution (physical and human capital)   

How will Gold standard be implemented?

Eg. Where will we get scientists in 2020? How much will they be paid from what budget? Alternative energy sources will not be as efficient as fossil fuels in 2020. Short term budget planning vs. strategic long term budget planning

Too broad 

What is the internal/foreign policy of the state? This is a multi-dimensional issue, so in order to be precise, one aspect cannot be discussed without considering others.

Speculative issues   

We have hit peak gold (predicted in 2001, contradicted in 2011) We have hit peak oil (predicted for 150 years, not happened yet) Global warming is caused by anthropogenic causes. 5


Banking 

Conventional banks not allowed – Dustoor article no. 156 It is completely prohibited to open banks, and the only ones permitted will be the State bank, and there are no transactions upon interest. This will be dealt with by a particular department of the bait-ul-maal. Financial loans will be undertaken in accordance with the rules of the Shari’ah, and the financial and currency transactions will be facilitated. (assumes private profit not sufficient without interest)

Options to serve similar function: 

Angel investment.

Make paperless/metal-less transactions available, circumventing need for outlets.

Bait ul-maal would undertake the functions of transferral, loans and transfer of loans based on ijthihad of imam.

Bridging firms: connecting ideas/effort with funds

Version of venture capital/seed funding that complies with the 5 types of partnerships

Transferral services firms - are the profit from these services so low it cannot be maintained?

Bait al-maal: independence, oversight and regulation (equiv. FSA, Basel)? 6


Money: 10 key arguments against Gold 

Maneuverability problem

Supply problem:

Price instability problem:

Growth problem:

Cost problem:

Compatibility problem:

Monitoring problem:

Global asymmetry problem:

Transition problem:

Implementation problem: 7


Option of control? 

Maqasid as-shariah – protect property

Inflation

Controlled release of money into the economy

Initiating new projects: commensuration of growth with supply

Deflation 

Circulation of wealth, not necessarily circulation of money.

Channelling money via incentivising alternate transaction methods

Absorbing deflation by improved production and economies of scale.

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Energy – stats of muslim world    

     

74% of the World’s oil reserves The Muslim world pumps 42% of the world’s daily oil requirement Saudi Arabia possesses the Ghawar oil field, which is the world’s largest oil field Kuwait the small city state single handily posses 10% of the worlds oil reserves.

54% of the world’s gas reserves Pumps 30% of the world’s daily gas requirement Iran and Qatar posses the South Pars North Dome field, located in the Persian Gulf it is the world’s largest gas field. Iran also posses the world’s largest proven natural gas reserves after Russia Brunei Liquefied Natural Gas (BLNG) plant, built in 1972 is the world’s largest Liquefied Natural Gas plant. Qatar, Indonesia and Malaysia are the worlds largest exporters of Liquefied Natural Gas (LNG) The Shoaiba power and desalination plant is an oil-fired CCGT power and desalination complex in Saudi Arabia and the world’s largest fossil fuel power plant, and the world's third largest integrated water and power plant. Kazakhstan is the world’s largest Uranium producer after Australia and posses the world’s largest uranium reserves after Australia. Kazakhstan single handily posses 20% of the worlds Uranium. Pakistan has the world’s largest Coal reserves after the US. The Thar coal field in Sindh is the world’s largest coal field.

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Energy - challenges 

Rapidly industrialising state, makes energy utilisation critical

Potentials strikes by other powers

As the rate of industrialisation is dependent on the energy available the current energy and electricity infrastructure is poorly designed in many of the current Muslim lands to cope with base load (minimum energy need) demands of heavy industries.

Existing infrastructure is poor

Lack alternative technologies

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Energy – advantages of decentralisation 

Expanding state; expanding grid networks will be more difficult

Expensive and inefficient if expanded from power stations positioned long distances from demand.

Likelihood face a foreign attack; facilitating continuation of power in one region if another was to lose power.

In most Muslim lands, populations are distributed with a larger percentage resident in rural areas rather than urban areas

help prevent the formation of ‘mega-cities’ and large urban conurbations seen throughout the world.

Local grids will be a key element in providing power for existing areas that do not have power.

Helps uptake of renewable sources.

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Energy – advantages of centralised power 

Exploiting economies of scale

Better control and consistency

Where there is lack of resources to power decentralised stations

Continuous high power requirements for industrial complexes

Optimising location based on source and delivery

Nuclear power stations are hard to decentralise

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Environment 

Advise of rasoolullah to visiting tribe in Madinah: 

On Pollution: 

“Do not collect what you will not eat, do not build what you will not live in, do not compete in something that you will leave tomorrow.”

Muadh ibn Jabal (may Allah be pleased with him) narrated from the Prophet (pbuh): "Avoid the three actions that bringpeople's curses: defecating in water sources, on roads, and in the shade." (Abu Dawud and ibn Majah)

On wastage: 

Abdullah ibn Ámru bin Al-Ás (may Allah be pleased with him) narrated: "That the messenger of Allah (pbuh) happened to pass by Sa'd as he was performing ablution. Whereupon he said: Sa'd what is this squandering? Sa'd said: Can there be any idea of squandering (israf) in ablution? Whereupon he (the Prophet) said: Yes, even if you are by the side of a flowing river." (Ibn Majah)

Qaida kulliya:  The means to harm/haram is haram.

Accounted via the three judges – hisbah, khusamat and madhalim

Priorities of the state: life over environment

No acceptance of international protocols that undermine objectives of the state.

Investment into cleaner technologies, without giving into vested lobbies.

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Alhamdulillah........

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Islamic Policy on Banking, Money, Energy and Environment  

Kebijakan Islam di bidang Perbankan, Keuangan, Energi dan Lingkungan

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