Islamic economics in Pakistan
The Islamization of the National Economy of Pakistan, (sometimes also rendered as "Islamization of Economy"), was a controversial economic policy measure programme in the economic context in the history of Pakistan. Conceived in the end-year of 1977, the programme was hastily enforced in 1979 in an attempt to counter the contemporary period of Stagflation, and to established a new systemic economic cycle which came to known as "Interest-free economy.
Introduced and its official enforcement on 10 February 1979, this programme came in a direct response to nationalization programme of the Pakistan Peoples Party (PPP), after the 1971 Indo-Pakistan war. Under this programme, the Islamic methods of Zakāt and Ushr were introduced with fundamental principles of Sharia laws concerning the issues of economics. The programme gained subsequent public support in a referendum and was integrated in state-sponsored Islamization. On January 1, 1980, approximately 7,000 interest-free counters were opened at all the nationalized commercial banks. Thus, Pakistan became the first country in the Muslim world to embark the full fledged work on the Islamic banking system with concerning of the Interest-free economy.
However in spite of its initial gains and success, the programme failed to achieved international targets and to meet commercial interactions with other major international banks. Therefore, after the mysterious death of President Zia-ul-Haq followed by the quick general elections in 1988, the programme was halted by upcoming people-elected Prime minister Benazir Bhutto who terminated the programme the same year whilst tightened the grip of the nationalization programme. After the conclusion of 1990 general elections, newly elected Prime minister Nawaz Sharif replaced the legacies of this programme with privatization and economic liberalization programme in order to increase the GDP growth rate of the country, and to meet with international economic reforms after the 1991 Soviet collapse.
Islamic conservatism and economic stagflation
The Martial law was again enforced in the country for the third time on 5 July 1977, to divert a serious political crises in the country. Since 1970, the country had been under serious period of stagflation and an attempt to end this subsequent period was brutally failed by the Pakistan Peoples Party who came in political power after the 1971 war with India. After enforcing the martial law in Pakistan for the third time, General Muhammad Zia-ul-Haq signed and issued executive decree on Zakāt (poor-due), Ushr (Tithe), termination of Riba (Interest-rate) and elimination of mudarabah (Profit-sharing) were promulgated with the avowed aim of transforming the Pakistan's national economy into an Islamic economic system.
The military government employed eminent scholars and economists led under professor Khurshid Ahmad to compile laws about Islamic financing. On January 1, 1980, President General Zia-ul-Haq appeared on national television and announced the introduction of a "Profit and Loss Sharing System", according to which, an account holder was to share the loss and profit of the bank. This was followed by the establishment of the Zakāt and Ushr Ordinances on 20 June 1980, to Islamize the interest-free economic system. The new system expelled the secular and international financial institutions and consisted only Islamic organizations, associations and institutions. The Zakāt was to be deducted from bank accounts of Muslims at the rate of 2.5% annually above the balance of Rs. 3,000. The Ushr was levied on the yield of agricultural land in cash or kind at the rate of 10% of the agricultural yield, annually.
Personally authorized by General Zia-ul-Haq, the government freely appointed Central, Provincial, District and Tehsil Zakat Committees to distribute Zakat funds to the needy, poor, orphans and widows. The Shia Muslim were exempted from Zakat deduction from their accounts due to their own religious beliefs.
Failure and collapse of the system
Despite its success in initial first five years, the programme was fractured in many obvious reasons, and the stagflation again began to bite the country's resources, as well as many technical and scientific problems arise in the new economic system that the military government and Zia-ul-Haq himself was unable to solve. The newly elected, but technocratic government of Prime minister Mohammad Khan Junejo refused to pass the new and more stricter version of Sharia bill, followed by lifting and resumption of political parties, including Communist Party and Pakistan Peoples Party— both steps frustrated President Zia-ul-Haq. Furthermore, Prime minister Junejo reached a secret understanding with the Soviet Union and proceeded with the 1988 Geneva Accords, allowing Soviet Union to peacefully withdraw their troops from Afghanistan. As repercussion, Zia surprisingly dismissed the new government of Junejo on May 29, 1988, and the dissolved parliament the next day. In explaining his action, Zia pointed to the failure to carry Islamization forward and also to corruption, deterioration of law and order, and mismanagement of the economy.
However on the other hand, the senior economist conducted their studies to find the causes of the failure and specifically pointed out that "there are three main reasons that the Islamic banking and economics system effectively failed." First and the foremost is, "lack of political will"; while the second being the "lack of awareness about the potentials of Islamic banking"; finally, the "inexperience banking sector of Pakistan" that led failure of the programme. While other economist remains convinced that since its introduction, "very little has been done to attract the deposits from the public." In 2000, the Governor of the State Bank of Pakistan, dr. Ishrat Hussain contended that "Pakistan is far removed from the day when it will be ready to adopt a full-fledged Islamic economic system".
(sic).... (...)... Most of the assumptions and premises on which the (scientific) hypotheses about the Islamic economic system have been constructed are serious flawed...(sic)....
In 1999, Economist dr. Yoginder Sikand observed that "Islamising" the economy in Pakistan cannot be seen apart from the wider attempt of regimes and political elites with low levels of legitimacy and popularity to win public support using religion as a convenient tool. "Rather than focusing on the Islamic imperatives of equality and social justice, which are so central to the Qur’anic text, successive regimes in Pakistan have sought to focus on particular economic injunctions of the Qur’an abstracted from wider issues of justice and equality", Sikand maintained.
Furthermore, Dr. Sikand argues that the debate on "Islamising" Pakistan’s national economy has been sought to be reduced simply to issues related to interest-free banking, the abolition of Riba (interest), the laws of inheritance and the levy of the "Zakāt". These methods and thoughts are sought to be presented as providing "magical solutions" to the problems of a complex modern economic problems that Pakistan's national economy has faced since its independence. After the death of general Zia-ul-Haq, this programme was finally came to its conclusion when it was terminated by Prime minister Benazir Bhutto in 1988, followed by removing the legacies of this programme in 1990 when Nawaz Sharif launched a twin intensified programme, Privatization programme and the economic liberalisation to promote the GDP growth rate as well as reverting the economy back to Westernized economic system.
Reports and notes
- Mehboob, Aurangzaib (2002). "Executive Initiative I" (PDF). Islamization of Economy. Islamic Studies. pp. 682–686. Retrieved 12 August 2012.
- Haq, Ziaul-. "Islamization of Economy in Pakistan (1977-1988): An Essay on the Relationship on Economic and Religion". Zia-ul-Haq. Retrieved 12 August 2012.
- See: Privatization in Pakistan and Economic liberalisation in Pakistan
- Administration. "Islamization Under General Zia-ul-Haq". June 1, 2003. The Story of Pakistan: The Rules of Democracy. Retrieved 12 August 2012.
- Nisar, PhD, Dr. Professor Shariq. "Problems in Islamization of Economy" (google docs). Dr. Sharif Nisar, PhD in Economics, is Joint Editor Islamic Economics Bulletin, India). Joint Editor Islamic Economics Bulletin of India. Retrieved 13 August 2012.
- UG Govt., United States Government. "ZIA-UL-HAQ". This work is the copyright of the United States Government. Library of Congress Country Studies. Retrieved 13 August 2012.
- Khan, M. Akram, "Islamic Banking in Pakistan: The Future Path", All Pakistan IslamicEducation Congress, Lahore, 1992.
- Khan, M. Fahim, "Islamic Banking as Practiced now in the World" in Ahmad Ziauddin et al(ed.), Money and Banking in Islam, Institute of Policy Studies, Islamabad, Pakistan, 1983.
- Lee, Wilson; Robert M. Hathaway. "Islamization and the Pakistani Economy". Woodrow Wilson International Center for Scholars. Woodrow Wilson International Center for Scholars. Retrieved 13 August 2012.
- Yoginder Sikand. "Failure of Islamisation in Pakistan". Yoginder Sikand. Yoginder Sikand. Retrieved 13 August 2012.
- Sikand, PhD, Yoginder; Izzud-Din Pal (September 23, 1999). "Failure of Islamisation in Pakistan". Pakistan, Islam and Economics: Failure of Modernity. Karachi, Sindh Province, Pakistan: Oxford University Press, Karachi. p. 195. ISBN 978-0195790689. Retrieved 16 February 2014.
- See:the pages of Privatization programme and the economic liberalisation
Haque, Ziaul (Fall 1990). "Religion and Economics: Islamization of Economy in Pakistan (1977–88)". Comparative Studies of South Asia, Africa and the Middle East 10 (2). doi:10.1215/07323867-10-2-25.
- "Pakistan launches media campaign to boost Islamic finance". Yahoo! News. 19 July 2013.