NORMATIVE ISSUES RELATING TO TRADE AND DEVELOPMENT IN THE OIC
MEMBERSHIP IN THE LIGHT OF ISLAMIC POLITICAL ECONOMY
Abstract
The question of sustainability
is studied in the context of a process model of knowledge formation according
to the interactive, integrative and evolutionary (IIE) worldview of the shuratic
process. This is applied to the issue of trade and development in the Muslim
World. Such a theme is fundamental in the study of complementary
interrelationships between economic, financial and social factors such as
money, the real economy, technology, debt-management and well-being all of
which are endogenously related with the inter-communal flows of trade and its
effect on development in the Muslim World. These central issues of
sustainability in relation to the problem of trade and development in the
Muslim World and including in it the specific treatment of institutions, money,
real economy, debt-management, technology transfer and social well-being are
covered in this paper. The thrust of this paper is on normative derivations
with quantitative estimation of the normative model, which is given in the
technical appendix and developed in the light of an actual Khartoum Shuratic
Meeting (KSM) on trade and development that was organized. The country blocs
comprising Bloc 1 = Bangladesh, Indonesia and Malaysia and Bloc 2 = Pakistan,
Turkey and Iran are specifically studied in the light of the issues and
problems of economic integration.
This paper is derived from
the author’s completed research project entitled, “Dynamic Analysis of Trade
and Development in the Muslim World: Selected Cases”, funded by the Social
Sciences and Humanities Research Council of Canada Grant.
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Statistical data on trade
and development for Islamic countries cannot help in forecasting the future
state of reconstruction of the Muslim World in this field. The limitation here
is due to the age-old debility of the Muslim World to project any significant
economic, social and institutional transformation in the light of her own
communal interest and self-reliance. Thus the past economic data on trade and
development variables show no pattern of future change. Forecasting with these
data simply projects the past state of the Muslim World into the future. For
these reasons, a model of reconstruction and transformation of the Muslim World
on Islamic grounds necessitates reliance on normative issues. Yet these are
issues that are first theoretically modeled and then empirically investigated
for viability according to survey data.
The
theoretical model used here is premised on Islamic discourse methodology. The
same model is taken up in the extensive sense of participation that remains
intrinsic both within and across the human and non-human domains. Institutions,
decision-making, policies and programs are examples of discourse methods within
and across human domains. The agency and markets, interactions among critical
variables and their interrelationships are interactive processes within the
non-human domain. The investigation of the latter by the former in the light of
the intrinsic methodology of interaction, integration and dynamic evolution, is
the comprehensive analytic of the study of interrelationships across human and
non-human domains. In each of these cases we retain the unique principle, model
and attributes of the extensively participatory process as an interactive,
integrative and dynamically evolutionary process of learning and
knowledge-formation.
In light of the model of
extensive participation as pointed out above, we will now introduce the
institutional decision-making theory in Islamic perspective. The Islamic
approach is adopted here because of its strongly non-neoclassical
politico-economic content that alone of all theories in institutional
interdependence is found to explain strong interactions, integration and
creative evolution realized within socioeconomic systems through discursion and
an analytical approach.
A brief explanation of this
institutional decision-making process-based model is formalized below. In
accordance with the terminology used in the Qur’an
relating to an interactive, consensual and creatively evolutionary process of
knowledge-formation called the shura,
we shall refer to such a process as the shuratic
process.
A Brief
Introduction to the Shuratic Process:
Formulating the Praxis of Sustainability
The shuratic process is the Qur’anic
methodology of decision-making through discourse (interaction), leading to
consensus (integration) and further evolving to more of the same cycles of
interrelationships (creative evolution). This characteristic of the knowledge-forming
process is also referred to in the literature on Islamic socio-scientific
systems as the interactive, integrative and evolutionary process (IIE) of
understanding the complexity of real world phenomena (Choudhury 1998a). The
IIE-model forms the groundwork of sustainability in the Islamic framework,
which here is being applied to the study of trade and development in Islamic
work.
Such a process-oriented
worldview emanates directly from the Qur’an
in the following way: Knowledge is the primal and sole epistemological root of
every Islamic issue under investigation. Such knowledge exists at a number of
levels. Epistemologically, it is derived from the unique premise of the Oneness
of God. This Unity precept explains God’s existence as the absolute, complete
and full in knowledge. From this divine root of unity of knowledge-flow the
divine law (sunnat al-Allah). The
divine laws are in turn explicated into reality by the primacy of Prophetic
guidance in Islam (sunnat al-Rasul).
In this way human comprehension, analysis, applications and dynamics associated
with the issue at point are subsequently generated. But the same methodology of
deriving knowledge from the epistemological roots and carrying it to the level
of reality is extended to all issues of life in every minutest detail at which
any analysis is addressed.
The implication here is that
there must be interaction not only within socio-scientific issues (systems) but
also across such issues (systems) as well, by virtue of the singular existence
of fundamental Unity, Oneness of Allah
(tawhid) as the episteme within each
and every one of these issues. Thus a systemic development of issues (systems)
in which knowledge is epistemologically derived and applied and then evolved by
an inherent dynamic of the same kind, underlies the development of the Islamic
worldview and world-system.
The process of deriving
knowledge from the epistemology of fundamental unity carries along with it the
instrument of sunnah (Prophetic
Guidance). This initiating step then injects the epistemology into human
inquiry through mutual interactions (ijtihad). Interactions lead to consensus
or integration (ijma) among the
agents who discourse given issues. Finally, the confirmation of the process
from interactions to integration is established by a continuum of similar
processes. This involves evolutionary epistemology to appear in cycles of
continuity within the process framework. This last stage explains the creative
and evolving transformation mentioned in the Qur’an as khalq in-jadid.
The entire IIE-process, from
the epistemological derivation of unifying knowledge-flow from the Fundamental
Unity of Knowledge to its induction on cognitive phenomena, and thereafter
followed by further evolution to higher levels of actualization, is referred to
in this paper as the shuratic
process. In the sense of unity within IIE, the underlying process manifests the
attribute of interlinkages and participation among the entities under study. A
systemic complexity arises across endless series of interlinkages among agents,
variables and systems. While the interactive medium defines extensive diversity
of being, the resulting integrative state defines the universally complementary
nature among the interacting entities, that is among agents, variables and
their systemic interrelations.
Such complex linkages
delineated by the IIE-characteristics take place among varieties of systemic
entities. Such entities comprise human agents, systemic variables, their
relations and complexes of systems. Complex relations among these kinds of
entities are to be found embedded in the IIE-order in view of the Islamic
effectiveness of the shuratic process
at any given time and in the issues under discourse. Thereby, denseness of the
knowledge formation characterizes the nature of effective Islamic emergence of
knowledge through the complexity of the issues and problems that the Islamic
world-system faces. The derivations of such evolving rules of life and thought
are taken up from the fundamental epistemology of divine Oneness. This
primordial unity of knowledge is referred to in this paper as the Stock of
Knowledge, by virtue of its unchanging nature, its completeness and
absoluteness. From the Stock of Knowledge emanate knowledge-flows in
world-systems. The medium of functionally transforming fundamental unity into
systemic unity in world-systems comprises the following steps: The media of
prophetic guidance (sunnah) maps the
divine law (Stock) into the particulars of the issues and problems under
investigation. This functional mapping of unity into world-systems is
discursively investigated. Thereby, inquiry and interactions (ijtihad) premised on Qur’an and sunnah, emerge. The
interactions are followed by consensus or integration (ijma) among the entities
of the systems. Finally, further
dynamic evolution of the same functional interrelations appear in continuum of cycles, indicating
evolutionary epistemology of unity of knowledge (khalq in-jadid).
Three central principles are
thereby at work in the praxis of the shuratic
process. These are first, the Oneness of God as the permanent epistemological
root, i.e. the Stock of Knowledge. Secondly, the knowledge-flows derived by the
IIE-methodology cause unification of knowledge in systems and their entities.
Thirdly, knowledge-flows are thus meant to be the natural medium of realizing
systemic unification among agents, variables and their analytical relations.
Unification of knowledge as a process is unveiled through such integrating
interrelationships that define the systemic complementarity among the entities.
Such a functional transformation happens pervasively across continuum of
emerging diversities in and across systems. Such systems can be extensively
made up of micro and macro-level issues, yet with well-defined interactions
existing between these categories.
The shuratic process exists in this self-same continuum. It traverses
complex orders reflecting creatively evolutionary equilibria in the states of
entities in all world-systems. Here the evolutionary equilibria have only
simulative states as opposed to optimal ones (Grandmont 1989). Consequently,
steady-state equilibrium conditions cannot exist with the increasing denseness
of knowledge-flows in the IIE-order.
The shuratic process is a pervasively embryonic process across all
knowledge-induced cognitive and material systems. Such knowledge-induced
processes are to be found in the realm of the human world and in the domains of
every other complex phenomena. The creatively evolutionary stages of khalq in-jadid mark the juncture of new
knowledge-flows arising from the realization of the previous knowledge-induced
world-system. In this way, rules of shari'ah,
which in itself is epistemologically premised on the Oneness of God (tawhid) and then translated into
unification of knowledge-flows across world-systems by means of the shuratic process, exist in a perpetual
medium of creative development with the immutable core of Fundamental Unity in
it. Thus most pervasively, the shuratic
process leads to the development, application and evolution of such dynamic shari’ah rules called ahkam as-shari’ah in a continuum of
similar processes.
One notes from our
explanation of the shuratic process
or the IIE-methodology that the underlying interactive, integrative and
evolutionary attributes are naturally and functionally created and perpetuated
in world-systems. Hence the shura and
its coterminous stages, such as, ijtihad,
ijma and khalq in-jadid, are process components that cannot simply be
limited to the human institutions. They equally describe complex processes that
exist in all such world-systems with which the human mind interacts. Such
non-human world systems comprise the interacting and participating entities and
their interrelationships that are subjected to human examination and worldly
organization in the light of the unity of knowledge that is comprehensively
conveyed by the shuratic process.
Likewise, shari’ah, the Islamic Law,
which marks the functional mapping of divine law (sunnat Allah) onto world-systems via Prophetic Guidance (sunnat al-Rasul) and its ensuing
IIE-methodology, is a universal law transcending a sheer socioeconomic one. The
shuratic process encompassing all the
above now spans world-systems re extensa.
Application of
the Shuratic Process to Issues of
Trade and Development
To exemplify the pervasively
unifying nature of the shuratic
process we will invoke it to study the problems of trade and development in the
Muslim World from a normative perspective for reasons as explained before. Such
a normative study will lead us into prescriptions of institutional reformation,
policy formulation, and organization of economic integration of the Muslim
World.
We commence our arguments
for the shuratic process in trade and
development with the following intriguing
question: What difference does it make whether we discourse such issues from
any other points of view rather than carry it out by means of the shuratic process, even though we may
deal with shari’ah instruments in
either of these two approaches?
The shuratic process epistemologically rejects the random rationalistic
episteme in its theory of knowledge. Rationalism is characterized by pluralism,
systemic competition and hegemony as attributes of a political philosophy that
prevails among individuals, groups and the democratic institutions so raised by
these attributes. Individualism, conflict, human hegemony and the emerging
rules in support of these are necessary conditions to perpetuate the same
political philosophy of democracy. In the shuratic
process as an Islamic political philosophy of social contract, competition,
human hegemony and methodological individualism, are epistemologically replaced
by unity of knowledge and its continuity over knowledge-flows. Extensively
participatory socio-scientific orders embedded in everything are necessarily
established by epistemology in the
shuratic process as the Islamic political philosophy. Even the shura itself experiences the dynamics of
the shuratic process by the changes
necessitated in it in view of the dynamic needs of the article of fundamental
unity. This replaces human hegemony by the rule of the divine law as the
ultimate principle of oneness and being naturally embedded in human
consciousness. The shuratic process
is enabled by community participation taken in the midst of its institutional
and socio-scientific diversities.
The important requirement
though is that each of the representatives must be well-knowing in the shari’ah elements in their own fields
and must be appointed by their own respectively diverse representative groups
in the community, whose members are called shara'ee.
From these representatives appointed by the community is formed a shura cabinet. This appoints its body of
mujtahids, or the highly learned in
Islamic Law (shari'ah) vis-a-vis
fields of specialization and generalization. The mujtahids announce the final collective consensus on rule-setting (ahkam). At this point, one sequence in
the total discursive process comes to a completion.
The ensuing process then
continues on with respect to similar and other issues under discourse. In this
way, the internal structure of the institution of shura becomes diversely participatory across various departments of
decentralized shuras. These
micro-echelons of shuras can together
interact and integrate with the grand shura.
Among the vast majority of these decentralized shuras at the socio-scientific and community levels we are sure to
find one on the Islamic political economy of trade and development in the ummah, the world nation of Islam.
We have thus characterized
strings of interacting and integrating echelons of shuras that evolve by their dynamics in the entire body-politic of
the decentralized and embryonic nature of the shuratic process. The epistemology of unification of knowledge
signified by complementarity among
entities in such systems of diverse agents, variables and their
interrelationships, and as derived from and enacted by divine unity (sunnat Allah together with sunnat al-Rasul), annuls the
rationalistic individualism and pluralism of the political philosophy of
democracy as we know it. The shuratic process
transforms democracy into a participatory political philosophy of Islamic
social contract (Choudhury 1993a). In this political philosophy prevail the
extensively knowledge-induced interactions, integration and creative evolution
of knowledge-flows governing all issues and problems of the community, nation
and the world nation of Islam along with their relationships with the global
order. All this is discoursed, examined and implemented within the same
framework of the IIE-order.
Next we examine the nature of discourse in
the shuratic issues. In trade and
development, the choice of shari’ah
instruments arises from epistemological roots that cannot blindly accept the
methods and methodology of received economic doctrines. The politico-economic
methodology of trade and development must now be derived endogenously from the
premise of tawhidi epistemology. For
example, Islamic socio-scientific inquiry cannot simply accept the argument
that Islamic banking is ‘empowered’ to eliminate interest-based transactions
and that the Islamic Central Bank must accordingly set exchange rates in an
interest-free venue even though the economy may not be well Islamized. Such an
action has resulted to date in accepting the mainstream conventions on money
and banking practices, monetary policy, fiscal policy, trade policy and
economic stabilization as well-known macroeconomic instruments. Consequently,
although interest rate may be eliminated by institutional ‘enforcement’ and
political decree, and thereby, exchange rates are set by the Islamic Central
Bank, yet the result has proven to be unsustainable.
A Specific Treatment of Financial Relations in Trade and Development from Shuratic Perspective
Unsustainable relationships between the exchange rate, abolition of interest rate and monetary policy arise from the very nature of money as understood of not having an intrinsically endogenous relationship with the real economic sector. In an economic and social system the preferences of consumers and investors may not be sufficiently transformed by existing knowledge towards attenuating them into ethicized ones. Technological choices may not have been directed into the choice of appropriate sectoral projects that establish one-to-one ‘real’ interrelationships with the monetary and financial sectors. Projects selected may thus fail to have sufficient linkages among themselves due to the instability caused by the prevalence of the de-link between the real sectors and the monetary and financial sectors with their divergent self-interests. Consequently, national development plans cannot become sufficiently reformed by a participatory learning process within the common weal of agents taken from these diverse sectors when they remain systemically de-linked.
The result of exogenous
rather than endogenous money (Desai 1989, Choudhury 1997) and real sectoral
interrelationships has caused a permanent subservience of the Muslim countries’
currencies to hard currency basket and to interest-based debt financing. We
thereby find Muslim countries have come to acquire large outstanding external
debts in the name of industrial developments that have weak linkages between
themselves. The dictates of international development organizations to organize
their policies, programs and institutions in the light of the existing notions
of money, finance and preferred sectors, have caused high volatility of
portfolio investments. These culminated in the financial turmoil in South-East
Asia region, the currency runoff and socio-political instabilities.
Economic integration of the ummah is a critical issue at a time when
her political, institutional, social and economic conditions are being
disparaged by the model of global governance. Competition among Muslim
countries and their individual preference to turn away from communal
development and co-ordination of economic integration, instead to look towards
northern markets, are sure signs of methodological individualism, competition and
marginalism. These are derived from the non-Islamic roots of knowledge, that
is, not understanding the world in the midst of unity. The trading climate
within the ummah has thus not been
sufficiently developed to realize economic integration.
Monetary policy based
non-speculative real sector activities, with the demand and supply of money
being primarily determined by the demand for goods and services under shari’ah, cannot become functional
unless the prevailing economic and political climate is changed. We argue in
this paper that such a transformation can come about by adoption of the
extensively complementary model and by so rejecting the prevailing
socioeconomic and socio-scientific thinking based on marginalism and
methodological individualism (Choudhury 1998b).
Can the shuratic process prove to be effective in realizing such change?
Even in the choice of appropriate Islamic financing and developmental
instruments there are these centrally underlying issues against which the shuratic process determines the system
of linkages, which in turn must be dynamically realized within the knowledge
continuum. Discussing issues of ummatic trade
and development within a mainstream economic framework will not address the
issue of Islamic future, for the principal guidance of unity and unification as
cause and effect is missing when complementarity is dispensed with for a
marginalist model of socioeconomic organization.
The complementary process of
understanding and organizing interaction remains unknown in the marginalist
system. Even when the topic of interdependency is discussed, the focus is
always on a regime of development, co-ordination of trade and capital market
policies and choice of technology that are of the type found to be embedded in
neoclassical marginalist philosophy. This is testified by the development plans
of all developing countries, included in which are some major Muslim counties
(Alias & Choudhury 1996, Korten 1998). The resulting prescriptions are then
driven by the governing models of the neoclassical, monetarist or institutional
types. They emanate strongly from the background of the Bretton Woods
institutions and their latter days' sister organizations. If then the Muslim countries are to import these methods
and methodologies for Islamic reconstruction, the core principle of
complementarity through diversities, which is the mark of unification of
knowledge in the shuratic process,
will always be contradicted by the foundational premise of marginal tradeoff in
neoclassicism, monetarism and institutionalism.
The issue of appropriate
technological choice is linked with trade and development. In a shuratic methodology characterized by
its unifying complementary process among diverse possibilities, dynamic basic needs regimes of
development make up the moral and socioeconomic goal (Biraima on Shatibi
1998/99, Ghazzali trans. Karim undated). Such regimes are subsequently
sustained by ecologically interconnected technological know-how capable of
integrating the grassroots responses with higher levels of technology with a
social meaning. Markets for goods in such regimes are transformed by the
interactive, integrative and evolutionary preferences of consumers,
entrepreneurs, lobbying groups and Islamic institutions. Such endogenous
transformations bring about the acceptance of appropriate dynamic basic needs regimes of development as the basis of Islamic
change, self-reliance and development futures (Ahmad 1991, Huq 1997). Consequently,
the issues of price stabilization, debt management, monetary issues,
intersectoral linkages are concurrently determined by the appropriate choice of
technology and economic transactions that emanate from a worldview of systemic
linkages as the sign of unification of knowledge increasingly complementing
world-systems.
Debt Management in Shuratic Perspective
Debt management and control
of volatile foreign investments, particularly those that come in the form of
portfolio investments, lured by short-term returns of speculative transactions,
can be attained by maintaining a close relationship between money and real
economic activities. Indeed it was the de-linking factor between money and
‘real’ economic activity that brought about global volatility, financial and
economic uncertainties in recent years. Instead, shari’ah-related economic and financial instruments will help
because of their inherent attributes of ethical values that are endogenously
embedded in the projected unified worldview of the shuratic process. The processes employed in such a coordinated
organization and action, both at the grassroots levels of policy-making (shura committee) and at the level of
strings of decentralized socio-scientific shuras,
are contrary to the doctrines of marginal tradeoffs and hegemonic models of the
Eurocentric genre. They are participatory in nature.
At the end, elimination of
interest rate and the consequential determination of stable exchange rates in
the Islamic political economy are resumed in the problem of establishing
endogenous money and monetary interrelations with real sectoral activities.
This kind of complementary relationship between money and real sectors on which
the economic sages have written (Von Mises 1981, Yeager 1997a,b) is a
realization that can be feasible and sustainable within a progressive
transformation of the ummah according
to shuratic process (Choudhury
1998c).
As examples,
equity-financing, joint ventures, profit-sharing, economic cooperation, foreign trade financing, leasing, choices of
investments for the Islamic investors’ portfolio, development of Islamic
secondary financial instruments, development of an Islamic capital market and
segregated markets for the grassroots and for the specific Islamic financial
instruments and goods under transaction, and many more, must all be taken up in
the milieu of the complementary processes of unification of knowledge in all
systems of life.
Now on the one hand,
resource allocation, participation, distribution and opportunities are expanded
in the midst of interest-free transactions and financial instruments. On the
other hand, exchange rate ceases to be an issue of monetary policy alone. It is
instead jointly determined by conditions of productive linkages between the
monetary sector and real economic activities. The base line of both of these
sectors is made up of prices of exchangeables reflecting average costs of
production. Real prices now become the determinants of rate of return. They
replace interest rate as an exclusive price of money when money and real
sectoral valuation become complementary in an ethically and systemically
interlinked market environment (Yeager 1997a,b, Choudhury 1992a).
Exchange rate stability is
now attained in terms of a stable ratio between terms of trade and the cost of
production of commodities transacted in dynamically basic-needs regimes of
development. Such perspectives of Islamic political economy are contrary to the
theory of interest rate and exchange rate determination as exogenous policy
instruments in the interest-bearing economy or in a system that imports the
methodology of the same economic arrangement. Interest rate cannot be removed
by logical market forces from an Islamic economy that imitates the
macroeconomic policies and programs that remain premised on the concept of
exogenous money, promissory notes carrying interest rates and banking methods
based on paper money contrary to a statutory 100 per cent reserve requirement.
Consequently, interest rate and exchange rate movements remain volatile as long
as speculation arising from promissory notes negates the money-good linkage
within a shari’ah environment,
wherein morally guided human possibilities are continuously evolved by the shuratic process.
In order to study the
developmental impact of trade flows between sectors and countries intra- and
inter-regions, we have elsewhere (Choudhury, 2001) adopted two approaches.
First, a time-dependent estimation of the computed socioeconomic effects on
balanced trading, value-added, employment and wages was carried out. Then a shuratic institutional background of
policy directions is incorporated in these estimates by the responses from
discourse in a shuratic setting on
issues pertaining to the problems and prospects of trade and development in OIC
grouping.
We have considered the
following two blocs of countries for reasons of their geographical diversity
and normative possibility for Islamic integration across diverse regions in the
ummah by virtue of a complementary
linked model of economic co-operation and integration. This selection of blocs
also helps us to understand the problems and prospects of future economic
integration in the face of a diverse ummah
interlocked against the realities of the capitalist globalization process. Bloc
1 comprises Pakistan, Iran and Turkey. Bloc 2 comprises Bangladesh, Malaysia
and Indonesia.
While examining the
structure of commodity flows of goods between the countries in bloc 1 and bloc
2, the developmental outlook in these regions is studied in the light of the
Bretton Woods institutional policies on trade liberalization and their
consequential effect on macroeconomic stabilization and structural adjustment
(Choudhury, 1999). In such a theory, policy variables of the type, trade
protection and property rights are found to be linked with the neoclassical
concepts of optimal and efficient trading. Interest rate and exchange rate
interrelationships are seen to be entrenched in the movements of these variables
as they affect resource flows.
Interactions between the
various Bretton Woods and WTO trade policies are examined in deducing the
implications of such policies as neoclassical prescriptions (SESRTCIC 1994).
The important implication of marginal substitution and tradeoff among
neoclassical alternatives are shown to lead to immiserizing growth for the
primary resource producing economies (Alias & Choudhury 1996). The case in
point here is to look at the binding WTO policy clauses on substituting industrialization
and secondary manufacturing for agriculture and resource-based manufacturing
diversification. Such a policy is clearly reflected in the development plans of
each of the countries in the two blocs that we have examined. The consequences
of such a neoclassical tradeoff in development planning are found to cause
costly production menus, technological choices and debt burden. The conclusion
then is to abandon the methodology and policy prescriptions of the neoclassical
and macroeconomic genre now being imitated by the Islamic countries, and
instead, to take recourse to endogenous policies that arise from a shuratic process for the Muslim
countries.
The theory of endogenous
policy-making relies upon agent-specific (institutions and participants)
interactive decision-making (UNDP 1997). In this case, since market agents,
such as entrepreneurs, corporations and consumers are locked in continuous
dialogues with the institutions and governments in making choices within a shuratic process, the possibility of
product and risk diversification increases monotonically with the production of
knowledge through participation (Blauert & Zadek 1998).
Policies that emanate from
the shuratic process are strongly
endogenous in nature by virtue of being knowledge-induced. The common induction
of both policy variables and the socioeconomic variables by knowledge-flows in
the plane of unification as derived from the episteme of divine unity, makes
all such variables to be interrelated in a circular causation and continuity
model of unified reality (Choudhury 1994).
The policy variables on
economic integration affecting development, trade, technology, monetary and financial matters in the two
regional blocs, all addressed from the Islamic viewpoints, can now be
normatively examined in the light of choices of shari’ah-based financing indexes and policies for promoting these
goals. Such interactively generated policy variables are derived from discourse
involving a cross-section of agents from various sectors.
An
Epistemological Study of Endogenous Policy-Institutional-Market Interaction,
Integration and Creative Evolution: A Continuing Issue of Sustainability
The knowledge-induced
endogeneity of policy and socioeconomic variables in our study of international
trade, shows that there is no escape from a certain permanently embedded
trade-distortion effects of tariffs and non-tariff barriers, trade protection
or otherwise. The main issue at hand instead, is consensual discourse premised
on interactions among agent-specific participation in reference to the trade
and development issues as the analytic approach to unification of knowledge emanating from shari’ah and its interpretation pertaining the particular issues
under discourse. When the common will of participants is established in such a
discourse oriented environment under the tenets of shari’ah, then the market process determines the consumption,
production and distributive menus, regimes of development, transactions and
sustainability in accordance with shuratic
policies on socially friendly choices. Markets of all kinds now interact in
unison as systems of social contracts that the shuratic process engenders within its model of social well-being.
The endogenous nature of policies in the shuratic process interlinking circularity between money, real economic variables and knowledge-flows is formalized as follows (Choudhury 2000):
W ® ® ® ® ® ® ® ® [q ® x(q) ® SW(q, x(q))] ® [q' ® x'(q') ® SW(q', x'(q'))]® etc.
Ż
Ż Ż Ż Ż
Ż Interactions Integration Evolution Continuity®
Ż Ż Ż
Epistemology Unification of Knowledge: Unification of
Knowledge:
of
divine unity shuratic process 1 shuratic
process 2
In the above formalization, ® denotes the ordinal flow of
knowledge derived from the epistemology of W (Oneness of God, tawhid) by means of the discourse medium on the issues at hand.
This in our case is the determination of Islamically determined dynamic
input-output results on trade and development. The theoretical construction of q across issues, variables,
their relations and agents, is a complex process on the ordinal assignment of
such weights by consensus in the shuratic
process on the particular issues.
x(q) is the resulting vector of
knowledge-induced socioeconomic variables. Some of these we have mentioned
above.
SW(q, x(q)) is the resulting social well-being function premised on the
principle of universal complementarity among the vectors, (q', x'(q')), as the shuratic process
continues. It serves as the criterion for the evaluation of the underlying
endogenous decision-making process in the real order in the light of the
complementary principle among diversity of possibilities with continuously
evolving (q', x'(q')). This processual
evolution in turn testifies the principle of unity and unification in
world-system.
The accented variables and
functions, (q',x'(q'); SW(q', x'(q')), are evolutionary ones of the above-mentioned kind. There is no
linearity from one stage to another stage of such evolutions, as complexity
within diversity is assumed to exist. Allowance is also made for the
possibility of ethical, moral and social decadence, when the process parts away
from shari’ah and the shuratic process ceases to be effective.
The meaning of circular
causation is shown in the above model by the following example of
interrelationships among the knowledge-induced variables, {X1 , X2
, X3}:
If, X1 (trade
flow) ® X2 (financial index) ® X3 (quantity of money),
then X3 ® (X1,X2)
only by first regenerating a new q (=q').
It is the same with other interrelationships among
the (X1,X2,X3) variables, etc.
In this way, the elements of
pure economic theory that remain benign to the idea of process in discourse due to its reliance on the precepts of
optimality and steady-state equilibrium, are replaced by knowledge-induced
discursive interrelationships and their orderly evolution through interactions
and integration across complexes realities. Such a permanent feature of the
processual system characterizes the shuratic
process as the essence of Islamic political economy.
Deriving Results from the Normative Study of Shuratic Process in Trade and Development
A powerful analytical method
for studying interactive and unifying linkages in the economic world by virtue
of shari’ah instruments reflecting
complementarity of interrelationships among entities is the dynamic
input-output model. The input-output model is of the dynamic form in its
knowledge-induced I-O coefficients due to the underlying IIE-methodology and
the circular causation worldview of unified reality that is reflected in this
methodology. The unraveling of this kind of worldview is manifested in the real
world by complementarity among systemic entities.
Dynamic input-output
coefficients are estimated in two ways: First, a quantitative model with
linkages among the variables is used. Secondly, factual workshop results of a
pilot shuratic process on trade and development
issues are used to develop normative inputs for transforming the sheer
time-dependent I-O coefficients that are estimated on the basis of statistical
data.
To formalize the dynamic I-O
coefficients in terms of the (q,x(q))-values, an actual pilot project on the shuratic process on issues of trade and development was conducted
at Khartoum, Sudan. The results of this Khartoum Shuratic Meeting (KSM) are given below.
The Khartoum Experiment on Shuratic Process relating to Trade and Development in Islamic Countries
A pilot shuratic
process was conducted in Khartoum (Sudan) under the auspices of selected
participants from different walks of life. They comprised academics in the
fields of economics, shari’ah, Qur’anic fundamental knowledge,
political science, bankers and businessmen. The one-day intensive workshop,
hereafter called the Khartoum shuratic
Meeting (KSM), was organized at the behest of the Institute of Islamization of
Knowledge, the University of Gezira in Wad Madani, Sudan and was held at the
Khartoum Hilton on November 18. The principal objective of KSM was to
experiment on the viability of shuratic
process as a groundwork to collectively evaluate critical policies, programs
and make decisions after investigating various interrelationships among shuratic entities on a scientific scale
by using shari’ah instruments and
rules (ahkam). The conduct of the shuratic process was also to be tested
as a decentralized and free forum for discourse on issues by using the
methodology of unity of knowledge reflected by the principle of complementarity
among the entities. Thus the test was for the KSM to evolve and endorse, out of
such free and vehement discourse, the end result of discerning, promoting and
establishing rules that promote complementarity among a diversity of
possibilities. This is a strong perspective of unification of knowledge in the
light of the fundamental epistemology of divine unity, and is thoroughly
contrary to the entire methodological perspective of non-Islamic worldview
premised as it always is on marginalism (tradeoff by competition and
individualism).
It was therefore not necessary for KSM to be a large
gathering of people at the shura
Meeting. The shura through its
echelons does not even promote mass appearance of people at shura meetings from the viewpoint of
group representation. Instead, what is important is a pervasive string of shuras at every level of society.
Echelons of shuras appoint their own
representatives. They bring with them social preferences that are then
discoursed and integrated. The process leads into higher echelons of shuras. This viewpoint was also adopted
in the gathering of fifteen members from diverse and well-informed backgrounds.
Sudan was chosen as the venue of the shuratic meeting because of the
successful experience of her Islamic banking system and the gradual
Islamization of the Sudanese economy over the years. Khartoum was chosen as our
place for the KSM because of the availability of many learned scholars in the
field of Islamic jurisprudence and Islamization of knowledge who could
discourse the issues at hand freely without inhibition in the open Sudanese
society. Sudan is a rare country besides Iran that has boldly launched free and
healthy debates among her citizens to consider her full transformation into an
Islamic State with the shura as a
central engine of decision-making at all echelons. The result of the choice was highly rewarding and the results of
the intensive one-day workshop greatly contributed to our understanding of shuratic process as the Islamic medium of
understanding unity of knowledge in a broad perspective. Within this,
participation was understood as an intrinsic process of comprehending and
deriving rules from the perceived complementarity among agents (interactions
and consensus) and among the critical variables and objectives of the problem
at hand, Islamic economic integration.
The active participation in KSM among the members
across diverse sets of issues ranging from conceptual foundations of the shuratic process, the Islamic theory of
knowledge and its viability in studying diverse interactions between trade and
development matters in the Islamic World, were vigorously debated and discussed
among the participants. The result was a development of a near consensus on the
proper directions to be adopted to address the aspirations of these shuratic members for the ummah in the years to come.
The realities of capitalist globalization and the
impact of international development and financial organizations together with
what some members perceived as the political onslaught of the West against
Muslim countries, were taken into considerations. Most importantly, the
existing predicaments of a discouraging picture on Islamic economic integration
in the face of a lack of political will among Muslims and their national
leadership to foment a future Islamic economic integration, led to a sense of
alarm on this topic for the near future. Notwithstanding, the common aspiration
for a better Islamic World remained unique among all members.
While debating the issues on trade
and development, a guided discourse monitored by the author here was
maintained, so as to gear the shuratic
process toward recognizing how complementarity among the selected variables and
their relations can be derived. Here specific Islamic financing instruments
were considered in the complementing process of a future normative perspective
of economic integration among Islamic countries.
The following approach was
adopted in the conduct of the shuratic
process in KSM (video-taped): The workshop commenced with a brief deliberation
on the idea, philosophy and nature of the shuratic
process as it relates to the theory of knowledge in Islam. The central focus
here was to present the idea as a methodology and a worldview that remains
intrinsic in every socio-scientific problem. Hence the shura is not to be conceived narrowly as a political process or
organizational behaviour in Islamic institutions and decision-making. Rather it
overarches into the domain of hidden interactions in every human and non-human
order, albeit that all such hidden processes are unveiled by the derivation and
perpetuation of knowledge through human intervention in the shuratic
process. When understood as such a worldview, the shuratic process can
be effectively applied to issues of economic integration in Islamic
perspective.
Our objective of gathering
normative responses on the aspired future state of the ummah can subsequently be modeled. Contrarily, without such a
normative input to a futuristic structure of ummatic transformation, existing data cannot be extrapolated to
configure that change. Thus the importance of normative input in information
gathering is evolved out of the shuratic
process to be fed into a dynamic input-output analysis of trade and development
in the ummah. This was followed by an
extensive discussion on the methodology of shuratic
process by the members of the pilot shura
as members’ initially perceived difficulty in understanding the extended
concept of the shuratic methodology
in reference to problems of economic integration in the Islamic World. It also
took an effort to impart the idea as to how the shuratic process can be different from any other form of scientific
process prevailing in a non-Islamic environment. The difference here was
explained in terms of the episteme of divine unity that invokes particular
Islamic instruments and moral values that promote pervasive complementarity
among the shuratic entities.
In the non-Islamic system,
entities must necessarily exist in marginalist tradeoff because of the
competition, methodological individualism and hence independence among the
entities. The continuous production of knowledge in the shuratic process in a medium of complementarity with diversity
makes it possible to generate resources for augmenting the interrelationships
among entities in continuum. Thereby, the roots of neoclassical methodology and
the evolutionary epistemology of Popperian and Darwinian dialectics are
annulled in the face of endogeneity of knowledge production and its
perpetuation through the Islamic order. These points were essential to be
explained and a good deal of the initiation time of the KSM was absorbed in
this exercise.
The second part of the KSM
was to devote a length of time to the completion of the questionnaire questions
given below. Here too, wherever applicable, every question was subjected to
discussion and critical examination among the members in the light of problems
and prospects of a future emergence of the ummah,
wherein the topic of Islamic economic integration could be realized. The near consensus on the issues became the
background of answers for the questions in the questionnaire. These questions
and their responses are summarized below.
The final part of the KSM
meeting was devoted to a general response to the following question posed to
the members. What have the members learnt from the approach adopted in the shura meeting respecting the application
of unity of knowledge to various perspectives relating to Islamic economic
integration, given that complementarity and interactions between such entities
signify strong aspects of systemic unification?
The response to this
question was equally illuminating. The answers once again dwelled on the predicaments
of the ummah and the problems that
will inevitably be faced in unifying the Muslim countries due to inner
conflicts of interests and the onslaught of capitalism globalization on the
resources of the Muslim countries. A pressing need to transform the ummah through the methods of the shuratic process was articulated. This
conviction is reflected in the questionnaire responses that follow. These
questionnaires were distributed to participants well ahead of the KSM to
facilitate active participation on issues. This purpose proved to be true in
the midst of the vigorous participation and deliberations by members that
followed.
Questionnaire
The model of shuratic process of discourse whose
deliberations are reflected in the answers to the following questions proved to
be a pioneering work in the area of trade and development for the Muslim World.
This pilot project established the validity of shuratic process as an endogenous methodology in socio-scientific
investigation, not merely as a political process, but also being globally
applicable to the Muslim World as a whole on various issues.
1.
Having
understood the idea of shuratic
process as a knowledge-forming medium gained through interactions for
discovering unity of being in all issues, do you generally agree that this
process can be a potential approach towards:
1a. Attaining self-reliance in Muslim countries?
1b. Attaining self-reliance in the ummah as a whole?
1c. Attaining a comprehensive model for
i. reconstruction of
Islamic thinking on economic and social issues?
ii. practical approach for Ummatic
reconstruction?
The overall responses here
upheld shuratic process as a
potential medium for realizing the above-mentioned aims. Particular responses
pointed to the need for such discourse-related approach to be made a continuous
medium of knowledge formation at all levels of shuras.
2.
Do
you find any of the interactive and good complementary aspects conveyed by the shuratic process epistemological
methodology to be presently reflected in Sudanese political economy among:
2a. Islamic banks in Sudan?
2b. Business interrelationships in Sudan?
2c. Business interrelationships between Sudan and Muslim Countries?
2c.1. Name a few of such countries.
2c.2. Name the kinds of enterprises.
2d. Sudan’s trade relationships?
2d.1. Name the traded commodities.
2d.2. Name the major partner countries.
2e.
Islamic financial ventures:
2e.I. within Sudan:
(i) Kinds of Islamic instruments used?
Are there appropriate linkages
among such instruments to capture portfolio risk diversification?
2e.II. In other Muslim Countries:
(ii) Kinds of Islamic instruments used?
Are there appropriate
linkages among such instruments to capture portfolio risk diversification?
The reaction of the members
was negative. Most of the responses pointed to a bleak performance in all of
the above-mentioned areas. The commodities traded were primary goods with
little value-added processing. Examples given for Sudan are cotton,
cotton-seeds, gum, skins and leather. Recently some mining activity and
petroleum discovery have been realized in Sudan. Most of the financial
instruments both for Sudan and the Muslim countries were pointed out to be of
the non-Islamic types, although Islamic banks were found to promote mainly mudarabah (profit-sharing), musharakah (equity) and murabaha (cost-plus financing practiced
in foreign trade financing). The design of the Islamic financial instruments
was found not to realize the much-wanted product and risk diversification that
could lead to complementarity and linkages in the economy as a whole.
3.
What
is your reaction to the following questions?
3a. Is there effective risk and product diversification to be found
among the
enterprises that operate
around Islamic ventures and with Islamic financial instruments?
3b. What problems do you see
in these methods of Islamic enterprise and financing?
i. not an adequate
number of projects;
ii. problem
of management;
iii. Islamic human resource development;
iiv. global effects of financial uncertainty on Islamic equity
markets;
v. absence of an Islamic capital market.
3c. What do you suggest for
correcting the problems of 3b towards obtaining,
i.
greater
degree of entrepreneurial participation within and among Islamic
countries?
ii. realizing more effective product
diversification through sectoral linkages?
iii.
realizing
more effective portfolio risk diversification by Islamic banks?
Most members found no
effective product and risk diversification being realized by Islamic financial
ventures and financial instruments. They overwhelmingly expressed that risk and
product diversification in ventures and financial portfolios was essential, and
a greater degree of improvement in entrepreneurial activity was necessary in Muslim
countries. The members overwhelmingly identified all of the the above-mentioned
problems to be associated with Islamic enterprises and financial instruments.
4. Do you think a dynamic basic needs regime of development is an appropriate menu
for Muslim countries?
Explanation of
the idea of dynamic basic-needs approach to development
Dynamic basic-needs regimes are characterized by industrial, manufacturing,
service and agricultural diversifications of primary resources. Besides, there
is continuous innovation of such choices into diverse kinds along such regimes.
Three examples here are: (i) cotton as primary commodity can be converted into
industrial synthetics by crossing it with jute from Bangladesh, a commodity of
low value today. Further converting such synthetics by crossing with gypsum to
generate housing insulation materials and building materials that are
ecologically beneficial, healthier and resistant to natural calamity. (ii)
Agricultural resources can be researched for alternative medicinal products
that can be developed along with mainstream medicine. (iii) Petroleum products
as primary commodity or petro-based semi-processed products can be combined
with electrical energy and methanol at the output point to generate more
abundant, cheaper and environmentally friendly sources of energy for homes,
vehicles and industry.
4a. Should such an idea be incorporated in the
development plans of Muslim countries?
4b. Do you think that such an approach can be helpful in
inter-country trade in such
dynamically transformed commodities?
4c. Do you think that such development regimes
will enhance the terms of trade of the trading countries?
4d. Do you think that such a development
regime can engender better Islamic economic cooperation?
4e. Do you think that such development regimes
can generate better sectoral linkages within and across Muslim countries?
4f. Do you think that such development
regimes can improve the well-being of those at the grassroots?
The members responded by
overwhelmingly supporting the idea of dynamic basic-needs regimes of
development for the Islamic countries at all levels, as mentioned in the above
questions.
5. What
kinds of financial instruments would you suggest for developing the alternative
presented in question 4?
5a. Profit-sharing (mudarabah)?
5b. Equity-participation (musharakah)?
5c. Foreign-trade financing?
5d. Leasing?
5e. Cofinancing?
5f. Other interest-free joint ventures?
5h. Islamic secondary financial instruments?
5h.1. Name a few.
5i. An index that can combine all the above financial instruments?
5j. What place should qard
e-hassanah (interest-free loan financing that can be
turned into a grant in the
case of inability to pay) have in project financing for trade and development?
Members responded in favour
of mudarabah, musharakah and interest-free joint ventures in this order. They
generally rejected interest-free loans on grounds of their lower effectiveness
in generating enterprise, as often they are abused and not found to be
practical. Some members however mentioned, that interest-free loan financing
should be taken up by governments in infrastructure development, social
projects and mega projects. Capital surplus countries should undertake
interest-free financing for the poorer Muslim countries. Among the Islamic
secondary financing instruments pointed out were government interest-free
bonds, renting, leasing and foreign trade financing as well as cost-plus
pricing by firms.
6. What do you think should be some of the major items of trade
between Muslim countries in the following areas? Mention a few in each case.
6a. Primary commodities;
6b. Processed primary
commodities;
6c. Intermediate
manufactured/processed goods;
6d. Finished manufactures;
6e. Industrial goods and
equipments/components;
6f. Information technology.
In order of the above
questions, members responded by pointing out minerals (steel, iron), petroleum,
agricultural goods (meat, cereals, fruits, grains, raw materials, fish,
poultry, vegetables and dairy products), edible oil, for the category of
primary goods.
For processed primary goods,
members pointed out the choices to be fertilizers, propane, methanol, cotton
yarn, clothing, fabrics and other textile goods, petroleum products, rubber
products, asbestos and tin.
For
intermediate manufacturing/processed goods the items pointed out al kinds of
capital goods. For finished manufactures the items included electronics,
ready-made garments, transport equipments, household goods, foodstuff,
refrigerators, books.
For
industrial goods the items included agricultural machinery, military and basic
strategic weaponry, spare parts and miscellaneous kinds of machinery for
infrastructure development.
For
information technology the items included computer hardware and software,
networking equipment and telecommunication.
7. In your opinion what are some of the impediments to trade and
development in the Muslim countries in the following areas? Enumerate a few
problems in each case:
7a. policy and institutional coordination among the Muslim
countries?
7b. competition for trade access to western markets?
7c. liquidity requirement to finance trade?
7d. Required stability in currency values?
7e. prevailing state of economic development and growth?
7f. commodity terms of trade?
7g. political problems in and between Muslim countries and groups?
Members responded by
overwhelmingly asserting that each of the above-mentioned was a serious problem
in establishing economic integration among Islamic countries. The members also
pointed out that the key problem to economic integration was the lack of
political will among the Muslim countries to integrate. It was then pointed out
that some of the fundamental problems were absence of fair and visible rules,
endemic corruption, lack of accountability, poor work habits and ethics, lack
of surplus funds, not enough central bank reserves, large accumulated debts and
individual country nationalism. It was suggested that in the immediate future
OIC economic and cultural groupings should be reorganized; greater
inter-country dialogue should be promoted; zakah
should be effectively raised and mobilized; 20 per cent of oil and mineral
wealth should be used to pay off the Muslim countries debts. In the long run,
the Islamic Dinar should be promoted as an Islamic common currency. Military
defense groupings should evolve within the OIC membership.
8. To what extent are Islamic banks involved in
trade financing according to the following outlets?
8a. mainly foreign trade financing?
8b. by lending to businesses for trade financing?
8c. trading in specific commodities?
Name a few
8d. linking foreign trade financing with sectoral project
financing, equity financing or
other development financing
instruments?
Members responded by pointing
out that lending to businesses to undertake trade financing is the principal
mode of Islamic bank financing. This is followed by direct foreign trade
financing done by Islamic banks. Answer
to the question whether foreign trade financing is used to link up with project
financing, equity financing and other development financing instruments, was
inconclusive.
9. Are there good cooperation and coordination among
Islamic banks on the following trade and development issues?
9.I. Within Sudan
9a. To promote intercommunal trade?
9b. In specific kinds of commodities? Name a few.
9c. In joint project financing?
9d. In terms of inter-bank capital flows?
9e. Policy coordination on trade and development issues through
national
development plans/through Central Bank policies?
9.II. In the Muslim World in general pertaining to the above issues?
9a. To promote intercommunal trade?
9b. In specific kinds of commodities? Name a few.
9c. In joint project financing?
9d. In terms of inter-bank capital flows?
9e. Policy coordination on trade and development issues through
national
development
plans/through Central Bank policies?
Members overwhelmingly
responded in the negative for all of the above cases for the Islamic countries
as a whole and for Sudan in particular. However, the members pointed out that
the case of policy coordination among Islamic banks and the Central Bank was
identified to be existing for Sudan. It was also pointed out that joint venture
is promoted by Islamic banks in Sudan.
10. Are there sufficient linkages between trade and development in
Muslim countries by way of adopting the following strategies?
10a. Identifying appropriate flows of goods and services for
socioeconomic
development?
10b. Establishing policies that can generate closer cooperation among
Muslim
countries in the areas of trade and intersectoral
linkages?
10c. Developing appropriate financing instruments that would promote
trade
and development among Muslim countries?
10d. Introducing Islamization programs that would promote economic
cooperation among Islamic countries? Name a few of such programs.
Members overwhelmingly
responded in the negative in each of the above cases. Some members pointed out
that the Islamic Development Bank should increase its financing in terms of
loans and grants to needy member countries.
11. Please provide your general impression on the importance and
prospects for better economic co-operation through trade and development among
Muslim countries in the next five years. Please substantiate your views.
Members thought that trade
and development should be given serious attention for economic integration
among Muslim countries in the near future. To realize these a number of
directions were suggested. These include the following: Muslim countries are to
de-link themselves from the globalization process by coming out of the WTO.
Otherwise, international trade will make the Muslim countries to continue
trading outside their communal bloc. This will adversely affect the
indebtedness of the Muslim countries and accentuate the prevailing climate of
political and economic instability. Thus it was felt that in the near future
Muslim countries will fall victim to the onslaught of capitalist globalization
before they revert to the shuratic
process of addressing their problems.
Members recommended the
promotion of free mobilization of capital and human resources across Muslim
countries. They suggested a return of focus to agricultural development and
financial coordination.
Finally, it was felt that a
reversal of the existing uncertainty and decadence in Muslim countries can be
attained by a return to honest and moral values, transparency and
responsibility, political will to coordinate and cooperate among themselves.
Without this pre-condition Muslim countries are liable to fall victim to the
globalization process. This will further aggravate the prevailing economic,
social and political predicaments of Muslim countries. In the end, the members
did not give up hope for the near future by their expression that Muslim
awareness has indeed advanced even in the midst of bleak prospects.
Synthesizing the Results of the Khartoum Shuratic Meeting
The KSM results taken in
summary with respect to the normative background of a dynamic version of
input-output model, points to certain emerging policy conclusions against which
the aspiration of a future ummah can
be projected. The evident note we derive is a consensus on an immediately
pressing need to realize collective self-reliance among Muslim countries. The
participants felt that this is possible, but is presently marred by the lack of
political will and the encroachment of Western institutional dominance played
out through the Bretton Woods institutions and their latter days’ sister
organizations. The path to this ummatic
realization was seen to lie on an alternative path for trade and development
that would sever or marginalize their relations from the policies, programs and
governance of the International Monetary Fund, the World Bank and the World
Trade Organization.
The passage toward attaining
this kind of self-reliance and independence was pointed out to be a
reformulation of political will and a great deal of linkages among
institutions, financing and development policies, programs and sectors. Such
linkages are found to be seriously lacking at the present time.
It was also pointed out that
product and risk diversification was presently lacking but essential toward
realizing the direction of development that could generate economic
stabilization, debt management and well-being among the Muslim countries. Such
an ummatic future was uniquely
pointed out to be the dynamic basic-needs regime of development, as
defined in this paper.
In the end we have taken the
path of dynamic basic-needs regime of development as the convergent
prescription from which to learn on the future of trade and development in the ummah.
Then around this focus are to revolve the issues of shari’ah modes of financing and development of extensive coordination
and cooperation as signs of policy, institutional, instrumental and sectoral
linkages at all levels.
It is evident that in an age
of globalization and its engine of privatization, there is ample scope for the
private sector and entrepreneurs, including the Islamic sub-nation of the
Muslim World, to play a greater role in socioeconomic development and resource
mobilization. Such a entrepreneurial transformation of the ummah can overcome the existing political lethargy of Muslim
governments by passing over economic power to the Islamic grassroots.
Subsequently, market, sectoral and institutional linkages primarily with musharakah, murabaha (foreign trade financing) and mudarabah instruments can evolve in reinforcing the direction of
trade and development. Appropriate technological change within the purview of
product and risk diversification would then be taken up through the progress of
such extending linkages. Economic stabilization, debt control, cost
minimization in joint ventures and the terms of trade of the dynamically
transformed basic needs into manufactures, can then be forthcoming. These are
signs of a complementary process of transformation, wherein trade and
development get intertwined. The shuratic
process in its extended sense is now used to realize such an objective
criterion of well-being for Islamic future.
In the midst of the
entrepreneurial perspective of ummatic
globalization, Governments become joint venturists with the Islamic private
sector and markets. Being so, market forces prevail over undue policing by
governments. The private sectoral transformation of this nature endogenizes
Islamic values through the market process and the various instruments promoting
linkages. The residual role of the Islamic Government would then rest on
attending to national security, macroeconomic policing but with a
microenterprise basis to it, and dissemination of information and knowledge for
proper guidance of Islamic transformation.
The shuratic process practiced at the entrepreneurial level used for
developing extensive linkages among all kinds of possibilities now becomes a
model of participatory democracy. The very linkages generated and mobilized by
coordination and co-operation become ways of realizing the epistemological
roots of unity of knowledge both among participants and among the variables and
their relations pertaining to specific issues under discourse.
Dynamic Input-Output
Coefficients Emerging from Trade and Development within the KSM Framework
Incorporating
the above-mentioned factors emerging from the KSM questionnaire in the
trade-related input-output coefficient defines the dynamic version of such
input-output coefficients bij, with i,j = 1,2,..,n sectors (or countries) (not shown, for detail see
Choudhury, 2001):
bij = Tij(q)/Tj (q), (1)
with, Tij = Tij (Q,p,t,D,P)[q], (2)
where, Q denotes the GDP arising from a dynamic
basic needs regime of development,
p denotes price level for
commodities in such a dynamic basic needs choice,
t denotes terms of trade arising
from interconnected markets through shuratic
linkages,
D denotes debt management arising from the choice of dynamic basic needs regime of development,
Tij is inter-country export in the case of better trade relations between Muslim countries,
P denotes a vector of policy
variables, say {Pi}, such as mudarabah,
musharakah and murabaha that promote coordination and co-operation through
extensive linkages,.
The appearance of q inside the [.] bracket
means that each of the variables within the bracket (.) is qualified by the shuratic evolution of the variables
through discourse affecting decisions and variables in modes of linkages.
The
transformation issue of the ummah
based on the above variables as brought out by KSM means the study of changes
in bij as a result of changes in q-values reflecting factors as derived from KSM
questionnaire. Note that our emphasis is not on mere time-variation of the
coefficient, for this by itself is not found to yield the desired
transformation to the ummah in the
near future. On the contrary, dependence on q-values means the importance of shuratic process in Islamic
transformation through trade and development.
The
dynamic input-output coefficients in the normative sense can be estimated by
first determining the ordinal values of q associated with a given regime of trade and
development as described by expression (2) in the midst of a shuratic process on trade and
development. However, the dynamic adaptive features of the input-output
coefficients are formalized as follows:
dbij(q)/bij(q-)= g(Tij) – g(Tj)
= A(q+). (3)
As a growth rate differential (3) implies a positive
fraction under the normative assumption of increasing effectiveness of
inter-country (hence inter-sectoral) linkages in response to shuratic discourse on improving trade
and development relations.
Thus, g(Tij(q+))= dTij (q+)/Tij(q+); g (Tj (q+)) = dTj
(q+)/Tj (q+); i,j = 1,2,..,n. (4)
The adaptive expression for
bij is obtained by,
bij(q+) = bij(q-)/(1 – A(q+)) (5)
On the nth iteration of the
adaptive process of expression (5), we would obtain,
bij(qn+) = bij(q-)/ Pl=1n (1 – A(ql+)) (6)
Furthermore, if shuratic discourse leads to dynamic
consensus over issues of trade and development, as this was found to be the
case within KSM, then lim (ql+) = q*, within a given range of
interactions, say n, leading to integration (consensus) in q* and thereby in Tij
= Tij (Q,p,t,D,P)[q], over sequences of evolution of the shuratic
process. In this case, expression (6) results in,
bij(q*) = bij(q-)/ (1 – A(q*))n, (7)
with n itself changing over ranges of interaction,
integration and creative evolution as the unique IIE-feature of the shuratic process. Thereby, over evolving
ranges of such IIE-stages we come up with different values for the consensual {q*}.
Expression (7) can be re-written
differently. For this we assume that there is an average A(q)-value, say A(q)/n, resulting from all possible
interactions, that is, now for n ® Ą, the shuratic
process arrives at a convergent knowledge value, say q* (without changing the
symbol). The corresponding a(q*)-value is A(q*)/n. We now re-write
expression (7) as,
bij(q*) = lim (n ® Ą) [bij(q-)/ (1 – A(q*)/n)n] = bij(q-).eA(q*). (8)
Under normative assumptions
in expression (8), since bij(q*) should reflect growing trading and sectoral
linkages, A(q*) would minimally attain a value of zero. This makes, bij(q*) = bij(q-), where bij(q-)indicates the value as given
by the time-dependent estimates of the input-output under reconstructed
scenarios (see appendix 1).
Expression (7) implies that
as A(q*)
increases under the force of increasing {q}-values converging to the long-run average
value, q*, greater degrees of linkages are generated progressively. This is a
reinforcing sign of shuratic
effectiveness premised on unity of knowledge. Such effectiveness is reflected
in complementarity, diversification and linkages among (i,j). Consequently,
better linkages are conveyed by bij(q*) upon starting from bij(q-).
In all of the above variants
of formulating bij(q+), note that bij(q-)’s can be set at their
empirical values as estimated by time-dynamic input-output coefficients (not
shown here). The rest of the forward moving variables are discoursed in the
extended meaning of the shuratic
process as the medium of discovering intrinsic linkages for attaining
complementarity and diversification among shari’ah-based
possibilities.
We also note that in each of
the above cases of bij(q+), with the progressive
evolution of a shuratic process, the
following conditions will necessarily hold:
Pl=1n (1 – A(ql+)) < 1 or (1 – A(q*))n < 1, (9)
over evolutionary values of q.
Hence, bij(qn+) or bij(q*), respectively, will be
increasing functions of {qn+}-values or {q*}-values, respectively. This
also implies that inter-sectoral, inter-country and other kinds of linkages
that are represented by Tij (i,j=1,2,…) and its functional variables
on trade and development, are improving. Establishing such linkages is a
principal objective of the shuratic
process in the light of its unifying and complementary objective.
In the above expressions a
list of shuratic normative
implications are combined with the possibility for empirical estimation. The
normative implications are yielded by q-values that are generated in the shuratic process by ordinal assignments
in view of the emerging regimes of expression (2). The empirical values are the causally related trade values during
the process of ummatic
transformation.
Through our presentation of
the methodology of the shuratic process relating to trade and
development for ummatic transformation along with its ramification by
the KSM we have come full circle now to conclude on the policies that must be
adopted to realize such a transformation. While this intellectual and
institutional project has always been in view of the Organization of Islamic
Conference for sometime now this paper concludes that the realization and
sustainability of that project as a reality reside on a normative model of
institutional and policy constructs of a substantive nature that require
extensive changes (Choudhury, 1998). This paper has offered a central venue for
that transformation to lie in trade, money, technology and development in the
Islamic World. We now go on to chart the way toward those policy and
institutional construction that would be required for realizing the ummatic
transformation.
1.
In the light of the KSM deliberations we have deduced that the OIC with its
membership is to galvanize the intellectual minds, practitioners and
governments to establish a think tank or center/institute enabling discourse on
the ways and means of putting into action a human resource program (Choudhury
& Korvin, 2001) that would develop the pragmatic understanding of the shuratic
process of decision-making and put that into action, as normatively explained
in this paper. It is encouraging now to note that the Prime Minister Mahathir
Mohammad has spearheaded this projected view on the OIC (STRATFOR, Nov. 17,
2001).
2.
The Human Resource Development Center on the understanding and application of
the shuratic process methodology for ummatic change in all fronts
but with a focus on the interactive and unifying dynamic relations between
trade, development and real money must be signified. This calls for a policy to
get the banking systems of the Muslim World to enact a program that will
incrementally change the existing banking relations based on fractional reserve
requirements into a 100-percent reserve requirement monetary system with the
gold standard. This monetary policy change calls for a program of establishing
a monetary system that looks at the function of money in terms of its direct
relationship with real economic transactions. Thus all the asset valuation
methods are to be changed into this kind of forward relationship of the real
linkages. Trade and development are then automatically linked up with the use
of endogenous money in promoting merchandise trade and capital that have
linkages directly with real sectoral activities rather than with speculative
portfolio investments (Choudhury, 1997).
3.
The banking community along with the national decision-makers and Muslim
intellectuals are to assign a program promoting linkages between money and the
real economic sectors and markets within the Muslim World over a stipulated
period of time, within which a reasonable transformation into the endogenous
monetary system with 100-percent reserve requirement monetary system would be
progressing. During this process of change growing linkages between effective
sectors and activities should be subjected to the trading and developmental
patterns on the basis of the on-going monetary transformation.
4.
We should then be contemplating on a regional trading bloc of the Muslim
countries that would ultimately enact a common monetary transformation based on
100-percent reserve requirement with the gold standard. This would cause the
exchange rates and the common tariff value of the Islamic customs union to be
based on the economic and social productivity of the commonly integrating
economies and in view of their resource endowments. Thus the exchange-rate
setting in such a case of 100-percent reserve requirement monetary system would
be converted into a productivity driven indicator rather than be determined by
a monetary policy as the latter is conventionally treated exogenously to affect
exchange-rate and interest-rate mechanisms.
5.
Exchange-rate setting and common tariff policy of the progressively integrating
Muslim customs union would automatically have to think of a common tariff on
the imports from outside this bloc. A two-tier pricing is automatically
generated in the hope that this change will cause improving terms-of-trade of
the commodities and manufactures of the Muslim World. This is possible as is
well known that the effect of customs union could be to increase the producer
surplus of the importing countries and the exporting countries within the
economic bloc by utilizing the tariff revenue in favour of consumer and
producer surpluses. These revenues are then recycled into development projects,
contributing thus to the common well-being of the ummah in which the
complementary effect of the two-tier pricing would act in favour of both the
consumers and the producers simultaneously. This is a sign of the complementary
nature of relations between economic growth, efficiency and distributive
equity, so much emphasized in the shuratic model of trade and economic
development (the shuratic process is identical with the interactive,
integrative, evolutionary IIE-process).
6.
In view of the existing agricultural predominance of the Muslim World but
having also a viable intermediate manufacturing technology, a Center of
Intermediate Technology Transformation needs to be established for the Muslim
World’s ummatic transformation. Its task would be to conduct research
and development with effective applications of the results in the social use of
appropriate technology. An important area to focus on in this front would be to
look at the complementary sectoral model of dynamic basic needs regime of
development that was presented in this paper and reinforced at the KSM. As
explained, a dynamic basic-needs regime of development means a growing
linkage model between the sectoral inputs and outputs of the agricultural and
manufacturing/service sectors that bring about all-round development benefits
at the grassroots but links the grassroots with the mainstream sectors within
the framework of creating effective rural-urban linkages a la the shuratic
process.
7.
Islamic banks, other banks and financing development intermediaries in concert
with the national planning departments would now establish programs to jointly
fund such complementary projects as an accepted focus of trade and development
in the Muslim World. The Islamic Development Bank, the Islamic Chamber of
Commerce and the Statistical, Economic and Social Research and Training Center
for Islamic Countries (SESRTCIC) must together enable the development of such
linkage programs. Such programs for developing and executing complementary
projects should aim at vitalizing the private sector in co-ordination with the
public sector and governments toward facilitating such developments that build
on programs of linkages along lines of the dynamic basic needs of development.
That is the practical overtone of the shuratic process in trade and
development through the process of linkages between endogenous money and real
sectoral activities. This was enhanced at the KSM.
8.
The dynamic basic needs regimes of development would automatically define the
trade patterns of the Muslim bloc. This kind of dynamic basic needs regime
vis-a-vis its linked manufacturing/service sectors would be a good sign in
capturing today’s global trend towards green industry and to keep the gaze of
technological transformation on its appropriateness in this age of ecological
revolution (Korten, 1990). The commodity sector would then realize improving
terms of trade, which is an important pre-condition in establishing the
complementary relations between economic efficiency with distributive equity
and between trade and development with the 100 percent use of money on real
economic activities.
9.
The financing modes of the Islamic transformation process must of course be
based on co-operative joint ventures (Choudhury, 2001). Mudarabah and Musharakah
instruments cannot remain simply as the financing instruments for specific
project financing as they presently are. Rather, their broader meaning and
effectiveness are to be realized within the foundational meaning of Islamic
socioeconomic co-operation. M&M must thus be changed into policy
instruments by the financial sector in concert with the central and commercial
banks and the planning departments of members of the OIC. The same M&M
instruments would determine the co-operative character of all other Islamic
trade instruments and secondary financial instruments. This transformation can
be realized through the use of 100-percent reserve requirement in determining
the productivity driven values of exchange rates and common tariffs as
mentioned earlier. Such a computation was mentioned in this paper.
10.
In every area of institutional and policy change recommended above the OIC with
her sister organizations such as the IDB together with the Islamic Research and
Training Institute, Islamic Chamber of Commerce, SESRTCIC must play a catalytic
role in collaboration with the governments, private sectors and development
financing organizations of the OIC membership. The shuratic process
model of ummatic change must become the human resource foundation
(epistemology) for the progressive ummatic transformation as charted
above. The progress of the Islamic transformation in the years to come would
then see the effective interactive, integrative and dynamic evolution of the
echelons of linked shuras and their complementary relations in terms of
policies, programs and economic transactions on all fronts. This is the essence
of the complementary shuras of the ummah. The OIC would then need
to become the ummatic governing shura that circularly connects
with the hierarchies of micro-shuras through feedback.
11.
The specific centers/institutes mentioned here for facilitating the shuratic
transformation in the areas of trade, development, money and the real economy
vis-a-vis the central role of human resource development in all of these
respecting the understanding of the shuratic process in action, can be
housed in IRTI and SESRTCIC or they can be launched in major Islamic
universities.
The improved values of the input-output coefficients
and tables shown in the appendix 1 of the paper would then be the projection of
the end result of the transformation process as mentioned above. The
knowledge-induced dynamic coefficients are thus shown in the paper to be
normatively determined on the basis of the feedback of the KSM and now driven
by the above-mentioned series of policy and institutional reconstruction.
The shuratic process as a pervasively embryonic and intrinsic methodology
of every branch of human institution and the socio-scientific order was
actually experimented upon at the Khartoum Shuratic
Meeting with glaring results. KSM proved that indeed such a process can be put
into effect with respect to all technical, entrepreneurial and decision-making
matters across the Muslim World in search of establishing unity and
complementarity among possibilities.
The shuratic medium of interactions, integration (consensus) and
dynamic evolution of learning therefrom was found to be unique in generating
normative feedback for the purpose of reconstructing the future of the Muslim
World. Thus the shuratic approach
helps out here where otherwise statistical data cannot forecast a
transformation of the Muslim World, even in their best manipulation within an
input-output analysis under optimistic assumptions. This shortcoming of
empirical analysis arises from the acutely aggravated situation of the Muslim
World in all fields, political, economic, institutional and social in recent
history. As a result we now find the absence of useful data projecting an
Islamic future.
The
shuratic process taken up in the
broadest sense ranging from microeconomic issues of enterprise, issues of
studying intrinsically IIE-phenomena among complementary entities of the
process and in the political and decision-making situations, can be applied as
a superior alternative to the political philosophy of democracy. Thus it was
argued that while democracy is the political philosophy of Western social
contract, the true Islamic social contract is realized by the universal
application of the shuratic process
as a participatory political philosophy guided by shari'ah.
The
normative feedback from the KSM on the specific questions of the discoursed
questionnaire will be used to revise the time-dependent input-output
coefficients of trade and development to come up with such knowledge-induced
dynamic coefficients for the two blocs of countries (bloc 1 and bloc 2) in
appendix 1.
TECHNICAL APPENDIX 1:
ESTIMATION OF NORMATIVE
CORRECTIONS TO
THE TIME-DYNAMIC
INPUT-OUTPUT
TRADE COEFFICIENTS
In this apppendix we will
use the expression (7) of the paper, under the assumptions given thereof. These
are, that as the shuratic process on
trade and development proceeds continuously, the resulting interactions (n)
tend to a large recursive value through discourse. The shuratic process now arrives at a convergent knowledge value,
denoted by q*. The resulting expression derived was,
bij(q*) = bij(q-).eA(q), (A1)
where, bij(q*) = Tij(q*)/Tj(q*);
Tij(q*) denotes the export value
from country i to country j; Tj(q*) = SI=13 Tij(q*);
bij(q-) is the time-dependent
reconstructed input-output coefficients for the two blocs of trading countries;
Aij(q*) = g(Tij(q*)) – g(Tj(q*));
g(Tij(q*)) denotes the percentage growth rate of Tij(q*); g(Tj(q*)) denotes the percentage
growth rate of Tj(q*);
i,j = 1,2,….. sectors or
trading countries
Under normative assumptions in this expression,
since bij(q*) should reflect growing trading and sectoral linkages, A(q*) would minimally attain a
value of zero. That is, in this case, bij(q*) = bij(q-), where bij(q-) indicates the value as
given by the time-dependent estimates of the input-output under reconstructed
scenarios.
Expression (A1) will be used to
estimate the new normative forms of the input-output coefficients for the two
blocs of countries. These tables are,
Export Flows I-O Coefficients
Pakistan Turkey Iran Total
Pakistan Turkey Iran
Trade
Pakistan 0 136,535 124,701 261,236 0 0.3842 0.1416
Turkey 89,781 0 265,574 355,355 0.3437 0 0.3016
Iran 191,070 689,476 0 880,546 0.7314 1.9402 0
Bloc 1: Reconstructed (1995 to 2000)
Pakistan Turkey Iran Total Pakistan Turkey
Iran
Trade
Pakistan 0 136,535 201,585 338,120 0 0.1546 0.2262
(180,555)
(317,090) (0.2075)
Turkey
161,730 0 721,280 (883,010) 0.4783 0 0.8095
(145,519) (657,673)
(803,192) (0.4589) (0.7559)
Iran 201,585 689,476 0 891,061 0.5962
0.7808 0
(180,555) (870,031) (0.5694) (0.8584)
Bloc 2: Actual (1995)
Export
Flows I-O Coefficients
Bangladesh Indonesia
Malaysia Total Bangladesh Indonesia Malaysia
Trade
Bangladesh 0 9,102 9,079 18,181 0 0.0085 0.0088
Indonesia 90,303 0 986,567 1,076,870 4.9669 0
0.9589
Malaysia 55,201 973,637 0
1,028,838 3.0362
0.9041 0
Bloc 2: Reconstructed (1995 to
2000)
Bangladesh Indonesia
Malaysia Total Bangladesh Indonesia Malay.
Trade
Bangladesh 0 93,613 57,342 150,955 0 0.0869 0.0557
(86,993) (53,060) (140,053) (0.0808) (0.0516)
Indonesia 90,303 0 986,567 1,076,870 0.5982 0
0.9589
(0.6448)
Malaysia 55,201 973,637 0 1,028,838 0.3657
0.9041 0
(0.3941)
The reconstructed normative tables are obtained in
the following way: Table A2 gives the construction of Aij(q*) values, i,j = 1,2,3 for the two blocs of
countries.
Table A2: Construction of Aij(q*) = g(Tij(q*)) – g(Tj(q*)) annual average percentages of
inter-country exports for the period 1995-2000
Bloc 1 Countries
g(Tij) g(Tj) Aij(q*) = g(Tij(q*)) – g(Tj(q*))
Pakistan Turkey
Iran Pakistan
Turkey Iran
Turkey 16.02 0
34.32 29.69 0 0 4.63
Iran 1.10 0 0 0.24 0.86 0 0
Bloc 2 Countries
g(Tij) g(Tj) Aij(q*) = g(Tij(q*)) – g(Tj(q*))
Bangladesh Indonesia Malaysia Bangladesh Indonesia Malaysia
Indonesia
0 0 0 0 0 0 0
Malaysia
0 0 0 0 0 0 0
The above results point out
that in bloc 1, Pakistan’s export to Iran should further improve by 6.44
percent; Turkey’s export to Iran should further improve by 4.63 percent; Iran’s
export to Pakistan should improve by 0.86 per cent. All other input-output
coefficients would remain unchanged at the values estimated by the
time-dependent values given earlier.
In bloc 2, Bangladesh should
increase its exports to Indonesia by 39.38 percent. All other input-output
coefficients would remain unchanged at the values estimated by the
time-dependent values given earlier.
The normative forms of the
reconstructed export tables in the two blocs between the years 1995-2000 on the
average would look as follows:
Tables A3: Reconstructed Input-Output Export Table for the period 1995-2000 on the Average
Bloc 1
Pakistan Turkey Iran
Pakistan 0 0.1546 0.2262xe0.644 = 0.4307
Turkey 0.4783 0 0.8095x
e0.0.0463= 0.8479
Iran 0.5962x
e0.086 0.7808 0
=
0.6497
Bloc 2
Bangladesh Indonesia Malaysia
Bangladesh 0 0.0869x e0.3938
0.0557
=
0.1288
Indonesia 0.5982 0 0.9589
Malaysia 0.3657 0.9041 0
The new reconstructed export values are given in
Table A4.
Bloc 1
Pakistan Turkey Iran Total
Pakistan 0 136,535 bPIxTI
= 0.2262xe0.644x891,061
= 383,783 520,318
Turkey 161,730 0 bTIxTI
= 0.8095xe0.0463x891,061
=
755,496 917,226
Iran bIPxTP 689,476 0
= 0.5962xe0.086x338,120
=
219,691 909,167
Bloc 2
Bangladesh Indonesia Malaysia Total
Bangladesh 0 bB,INxTIN 57,342 =
0.0869xe0.3938x1,076,870
=
1,596,572 1,653,914
Indonesia 90,303 0 986,567 1,076,870
Malaysia 55,201 973,637 0 1,028,838
In each of the above tables
only the principal time-dependent estimates were considered to yield the
corresponding normative time-dependent estimates of the input-output
coefficients and the inter-country exports, where applicable, in the two blocs
of countries. In developing the above normative estimates we have kept
unchanged the total exports for each of the countries considered in the two
blocs of countries as estimated by the purely time-dependent estimates. Since
export-orientation has been promoted as the single most important focus for
gaining trade liberalization between trading partners, we have limited our
estimation to export flows alone. The reader could develop similar estimates
for import values as well.
Although a better
alternative would have been to build in the normative factors in these aggregate
estimates of export values, this was not possible in the absence of a
specifically agreed upon shuratic
recommendation as to what the growth rate of exports should be during the
period 1995-2000. Such an empirical indicator could evolve out of a closer
discourse with the Islamic Development Bank (Jeddah, Saudi Arabia) and the
Center for Islamic Development and Trade (Casablanca, Morocco).
Normative
approach to economic integration using trade and development issues within a shuratic process framework of discourse
with its epistemological grounding thus proves to be a powerful medium to fill
in the existing gap in data availability at the micro-level. The normative
approach also aims at developing policy analysis and institutional
restructuring towards promoting Islamic economic integration.
This conclusion
overwhelmingly reinforces our inferences from the findings of the Khartoum Shuratic Meeting on the pressing need
and importance for the shuratic
approach. In view of the findings of this paper such an approach now proves to
be also a medium for data and information gathering, where there does not exist
at the present times in Islamic development and financial organizations. The
normative framework in the perspective of its epistemological grounding and
socioeconomic instruments is now found to be causally linked with positivistic
analysis. This kind of situation has always pervaded Islamic socio-scientific
thinking, wherein the normative and the positivistic, the deductive and the
inductive, the conceptual and experimental bases of scientific inferences have
always been unified by the cyclical methodology of cause and effect. It is this
very principle in the shuratic
process of normative-positive framework of discourse that distinguishes such a
knowledge-forming methodology from the individuating one to be found in the
dichotomous and pluralistic treatment of the same issues within occidental
perspectives of science, economics and society.
In our economic analysis of
the time-dependent input-output coefficients and trade flows we noted the
problem of unbalanced trading between member countries of the two selected
blocs of countries. The concept of balanced trade (hence unbalanced trade) was
shown to be that which maximizes inter-country trade flows so as to make the
export and import values in this respect close to each other.
Table A5 gives the
percentage changes in inter-country export flows between time-dependent and
normative estimates between 1995-2000 and average annual for this period. It is
clear from these estimates that the much higher levels of export flows from
countries like Pakistan to Iran and Bangladesh to Indonesia will need
substantial re-alignment on various fronts including institutional
restructuring, policy and program coordination affecting trade, enhancement in
economic growth and development. These are factors that cannot be included in
the time-dependent estimates for reasons as explained earlier.
In the light of the
normative responses of the Khartoum Shuratic
Meeting on trade and development issues facing the Muslim World, it is evident
that the expectations of the Muslim World would be far beyond the present state
of affairs. These would range from the gamut of political changes and
re-alignment of trade and development issues, policies and programs. In view of
the powerful institution and process of shuratic
discourse the high percentage growth of trade among the disadvantaged countries
(particularly Bangladesh and Pakistan) can be realized through development
co-operation in the context of the shuratic
process. Such kinds of institutional induction keeping in view the natural
process of emergence of market forces and the appropriateness of the factors
such as appropriate technological change, pricing, risk and product
diversification, sectoral linkages, human resource development configure the
knowledge-inducing augmentation of the expression (A1). Assignment of values to
the knowledge-inducing variable in expression (A1) is therefore only through
the normative source of shuratic
discourse that leads to changes in the structural parameters of economic,
social and political life. Such knowledge-flows can be assigned ordinal values
in accordance with the dynamic regimes of consensus gained within shuratic processes.
Consequently, while the shuratic process drives the momentum of
structural change, in turn within the regimes of consensus gained in
evolutionary planes of knowledge formation the shuratic process itself is driven by the realities of the
structural change that it enhances. A circular process of structural change and
its interrelationship with the shuratic
process is thus generated. This is also of the essence of the IIE-model that we
have identified with the shuratic
process.
In the responses of KSM a
high degree of importance was given to the dynamic basic- needs regimes of
development for the Muslim countries and sectoral linkages was pronouncedly
emphasized. Yet it is also in these directions that there is least
effectiveness in and among the Muslim countries and their institutions
including the Islamic banks.
Consequently, in accordance
with the cyclical nature of causal interrelationships that are to be found in
regimes of dynamic basic needs and inter-sectoral linkages, there would appear
conformity between such cyclical interrelationships and the circular causation
and continuity model of unified reality between the epistemological and
ontological levels. Such a circular causation and continuity model of unity of
knowledge-induced entities is the essence of shuratic process (or the IIE-model).
Table A5:
Percentage Changes in Inter-Country Export Flows Between Time-Dependent and
Normative Estimates, 1995-2000 and Average Annual (in bracket)
Bloc
1
Pakistan Turkey Iran
Pakistan 0 0 90.38 (18.08)
Turkey 0 0 4.74 (0.09)
Iran 8.98 0 0
Bloc 2
Bangladesh Indonesia Malaysia
Bangladesh 0 16.06 (8.21) 0
Indonesia 0 0 0
Malaysia 0 0 0
By using the estimates of
Table A5 we derive Tables A6 on actual export flows in the three cases. These
are namely, the actual figure for 1995, the time-dependent reconstructed export
values for the year 2000 and the estimate of export value for the year 2000 in
the normative case. The percentage changes between the time-dependent estimates
and the estimates derived by a combination of time-dependency and normative
factors for the year 2000 are also shown in these tables. Thus the average
annual estimate is calculated as well.
Table A6: Estimates of Aggregate and Percentage Changes in Export Values between 1995 and 2000
Actual
Time-Dependent Normative Percentage Average Annual
Values
Reconstructed Values
Differential Percentage Change
1995
Values, Year 2000 Year
2000 Year 2000 1995-2000
Pakistan 261,236
338,120 520,318 53.89 19.89
Turkey 355,355 883,010 917,226 27.17 31.62
Iran 880,546 891,061 909,167
3.87 1.08
Bangladesh 18,181 150,955 1,653,914 995.63 1,799
Indonesia 1,076,870 1,076,870 1,076,870 0.00 0.00
Malaysia 1,028,838 1,028,838 1,028,838 0.00 0.00
It is obvious from the
estimates of Table A6 that Bangladesh has a slim prospect to catch up with the
immense gap in improvement of its export orientation to Indonesia and Malaysia.
Thus the prospect of balanced trade in terms of the reciprocity of exports
among the three members of bloc 2 remains slim, because the high levels of
export orientation cannot be attained by Bangladesh. In other words, to bring
up Bangladesh to the level of balanced trading with Indonesia and Malaysia it
will be necessary for her to attain similar levels of high economic growth and
development. But beyond these goals, the significance of shuratic process in structural change will necessitate high levels
of institutional, policy and program coordination among the three countries.
This could be feasible to some degree within a global Islamic economic
integration, within which Bangladesh would find her meaningful place in trade
and development.
Similar implications apply
for Pakistan and Turkey to establish better trading climate in bloc 1 region.
The inference we derive in this case is that Turkey’s export penetration to the
member countries of bloc 1 must increase in order to create a climate of
balanced trading and greater degree of economic penetration. Once again, the
implications of enhanced development impetus and institutional coordination
among the countries of bloc 1 countries would be necessary in order to uplift
their levels of economic integration and export potential within the bloc. It
is also implied that such enhanced levels of export orientation must be
causally related with the effects of various kinds of linkages, product and
risk diversification in the production and marketing environments.
In all of the above cases,
the inference we obtain is a much greater degree of enhancement in trade and
development that can be attainable through the medium of shuratic process working in favour of economic integration among
the Islamic countries. It is not so important here to accurately estimate the
targets of trade values that would be attained, as these estimates are based on
normative factors in conjunction with time-dependent estimation of the
estimates. The important inference is that of gains in trade and development
that can go far beyond the expectations of either existing conditions or
time-dependent estimates on exports.
The further implication
which comes out of the KSM responses is to target dynamic basic-needs
regimes of development with good and progressive product and risk
diversification as well as various kinds of co-operative linkages between the
countries. The latter would cover areas of sectoral linkages, policy and
program coordination, institutional and political change. In the end, the shuratic process of structural change is
to become the effective modus operandi for the Islamic World in all her matters
of Islamic political economy, unlike the case of capitalist globalization that
has not favored the Muslim countries in progress and prosperity to date. Once
again in the light of the KSM responses such momentous changes would require
dissociation from the Bretton Woods institutions, the World Trade Organization
and the imitative globalization process, that according to the KSM responses,
has caused economic and political retrogression and uncertainty rather than
progress.
The long-term consequences
of such momentous changes can result in subtle ways only through
well-coordinated organization of technological change, capital market,
relationship between money and real sector economic activity, debt liquidation,
enhanced flows of FDIs and trade flows among themselves with appropriate cost
reductions together with the whole gamut of developmental change. These can be
the results of a circular cause and effect interrelationships between knowledge
simulation institutionally and the knowledge-induced real economic entities
within the framework of the interactive, integrative and evolutionary process
worldview that characterizes the shuratic
process.
The questionnaire responses highlighted the need for a dynamic
basic-needs regime of development as the medium of structural change,
incorporating in it such instruments as economic diversification, institutional
reform, political change and the use of the appropriate Islamic instruments,
such as, musharakah, mudarabah and
murabaha. Adoption of these factors for structural change in the political
economy of the Muslim World was shown to be causally related with the
establishing of economic linkages between all kinds of possibilities that
eventually would bring about economic integration of the Muslim World. The
questionnaire responses also pointed out that such a structural change and the
realization of Islamic economic integration would not be possible as long as
the Muslim countries remained tied to the policies, programs and governance of
the international development organizations.
On combining these summary observations of the questionnaire responses
with the results of normative input-output analysis we can arrive at the
following conclusion. The responses followed by normative input-output analysis
implicate the need for serious rethinking on the new paradigm of
complementarity between trade and development together. These must spring from
the indigenous forces of the Muslim World and remain cautiously insulated from
the capitalist globalization process. This might appear to be a gigantic task
to achieve.
Islamic transformation in the midst of capitalist
globalization
Can Islamic transformation be realized at a time when the rest of the
world is proceeding zealously towards capitalist globalization? To consider
this question we note that politico-economic change in the Muslim World must
come about through close coordination between the thinking process and its
application to the problems and issues of economic integration that would be
endogenous to the Muslim World. Given the large number of OIC members endowed
with an enviable large stock of human and natural resources, the missing link
is to galvanize these forces into a viable organism. Such a coordinated
organism would undertake changes reflecting a pattern of development,
technological change, institutional restructuring and an organizational power
for management and control that would be progressively of a consensual nature
on Islamic grounds. Mobilization of human resources must establish curriculum
change at the formal and informal levels to bring about a thorough
understanding of the paradigm of interactive, integrative and evolutionary
process methodology in all matters.
This task could be attained by linking up the formal educational sector
with the vocational and informal educational sectors. All existing technical
methods available to disseminate such knowledge must be used. However, even at
the level of using methods as finished technical products, there must be considerable
rethinking in the theory and application of the techniques or methods
themselves. This is an area that differentiates methodology from sheer use of
methods as the artefacts of machines and equipments. The adoption of
appropriate technology through the use of indigenous technological knowledge
premised on the IIE-model would bring about the realization of the
progressively Islamic transformation process in ways of thinking out a
pragmatic organization of life and thought. Such a blending between methods and
methodology is truly a conception at the level of paradigm shift for the Muslim
World in all fields.
It is subtle to note that in the above kind of transformation process,
which is essentially of the nature of substantive interdisciplinarity, information
technology will play a central role. That is because the IIE-methodology would
initially display its scientific and organizational design of specific projects
in terms of a computer algorithm of the IIE-model and its manifestation on the
specific projects under study. Such manifestations will then be applied to the
real world.
While estimating the normative values of input-output coefficients and
the concurrent export flows of countries in the two selected blocs of countries
we noted that very large adjustments will be needed for many of these
countries. Most important in these are the countries now facing severe problems
of unbalanced trade as defined earlier. Hence, the normative estimates arising
from the findings of the KSM questionnaire responses are to be considered
simply as indicators of such massive economic adjustments in trade and
development. These indicators further establish the very low levels of economic
integration among the trading partners along with the related problems of
development linked to foreign trade.
In the light of normative findings qualifying the shuratic process applied to issues of trade and development in
Islamic countries, we conclude that the same principles that establish
complementarity across diversity according to the intrinsic interactive,
integrative and evolutionary model, are equally to be applied to explain
structural change. This will involve the application of this wider concept of
the shuratic process within its
IIE-worldview to economic, political and institutional issues taken up in their
increasingly relational complexity.
The essence of such economic choices rests on
the growing range of various linkages that specific projects can generate,
spanning across resource-based sectors and their product transformation across
manufacturing, secondary and information technology sectors. This was also the
strong implication of the questionnaire responses with respect to the pressing
need for restructuring institutional, political and technological change in the
Muslim World with the use of appropriate choices and Islamic resource
mobilizing instruments that can realize the objectives of integrating the
Muslim World with the IIE-approach in all fields.
References
To follow upon acceptance