About this blog

In recent times a plethora of misconceptions, misrepresentation and myths have been forged about Islam
and Muslims. Many western influentials from politicians, policymakers to judges have taken it upon
themselves to undermine the Islamic beliefs, values and rules so to make it palatable to their
egotistic minds and the secular liberal thoughts.

This blog is dedicated:-

1. To argue the point for Islam in its belief and systems and to refute the misconceptions.
2. To expose the weakness and contradictions of all forms of secularism.

28 Dec 2009

The Collapse of Dubai’s Economic Dream: A Consequence of Abandoning the Islamic Economic System

Whist many have been looking at the prospect of global economic recovery, Dubai sent investors into a tailspin in December 2009 when the government revealed that it planned to ask creditors of Dubai World, the state-owned conglomerate, for a six-month standstill on its debt repayments, stopping short of defaulting. Dubai has $80 billion worth of debt, with the vast majority held by Dubai World, which owns Nakheel, the property developer.

Nakheel, which built the Palm Islands in the Gulf, was due to repay a $4 billion Islamic bond on December 14th 2009. Most investors had assumed that there would be no difficulty doing so as Dubai World, the Government of Dubai and Sheikh Mohammed bin Rashid Al Maktoum, Dubai’s billionaire ruler, were assumed to be supporting the developer. It now appears that nobody has the money to repay or refinance the bond and so the other $56 billion of Dubai World’s liabilities are also at risk.

Dubai’s rulers were considered to have provided a master class in how to develop an economy from almost nothing. They used what oil revenues they had to create a port and free-trade zone, believing that their little state could become a business hub if they created the right conditions. For many this was a shrewd move. Emirates, the airline, bolstered the hub and became the best possible mobile advertising banner. Dubai was considered a genuine economic miracle.

However the global economic crisis brought Dubai to its knees and has exposed the fragility of its economic model. Dubai’s growth was initially through its oil wealth. This wealth was used to develop Dubai in order to attract foreign investment and soon enough, foreign companies and foreign workers arrived looking for opportunities in Dubai. Its position as a trading hub meant many companies relocated their staff to work from Dubai which is fundamentally what brought Dubai its wealth.

This however was never sustainable. The skilled workers that were developing the service sector were mostly from overseas, with only a small percentage of Dubai’s population today considered to be native Arabs. Its growth has been a direct result of it becoming a tax-free zone for foreign nationals and companies. These companies, whilst providing jobs and income to people in the country, are not transferring any technical skills to the people. Its property market boom was due in large part to speculation that the prices would continue to rise.

Dubai has merely exploited limited natural resources and has been importing talent from abroad with little skills and knowledge-transfer to drive its economy. Dubai was always nothing more than a mirage in the desert; its growth and survival was dependent upon the talent and expertise of foreign entities. It could only offer specialist services such as banking and finance as a means to guarantee its future, along with tourism. As these sectors rely heavily on the goodwill and confidence of foreigners, if in any way this sentiment was affected, Dubai’s desert empire will crumble.

This is exactly what happened with the Global credit crunch. In order for financial companies to shore up their losses they have withdrawn their money from expensive and lavish projects. Service companies which relied on loans are now seeing this dry up as one bank after another either collapsed or required government bailouts. One expert from Nomura investment Bank encapsulated the situation in Dubai: “Lenders blinded by rising oil prices and borrowers spellbound by easy returns have helped build a mountain of private sector debt in parts of the region that has generated an illusion of excess and abundance.” As Dubai was built upon foreign money, it now awakes to find this has dried up, so in essence Dubai’s source of growth has been cut, causing the breakneck building-boom to come to a crashing halt. The lending bonanza has evaporated and the government continues to ponder wider steps to repay its debt, including asking its neighbouring emirate, Abu Dhabi, for financial assistance.

Dubai accumulated huge debt to construct the islands lavish towers and lavish lifestyle to attract foreigners. The development of the islands infrastructure led to Dubai borrowing large amounts of money in the form of bonds. Dubai even attempted to sell its development as a distinctly Islamic approach through the development of Islamic finance and through the sale of Islamic Bonds (Sukuk)

Sheikh Mohammed bin Rashid Al Maktoum has attempted to calm investor confidence through the tried and tested formula Western nations attempted on the eve of the global financial crisis with regard to the ‘fundamentals.’ Sheikh Mohammed said: "The economic fundamentals, such as our highly developed infrastructure, strong transport and communications hub and regional financial centre will ensure Dubai remains an attractive regional market."

Islam Economy

The suggestion that Dubai offered a new model for economic development and an Islamic approach could not be further from the truth. Building an economy upon foreign wealth, external expertise and personnel is a tried-and-tested model which has a substantial track record of failure. Latin America, South East Asia and the Baltic states have all attempted this approach with catastrophic results.

The development of the economy has extensive rules in Islam which have been elaborated by many scholars throughout Islamic history. Islam has made the Khilafah responsible for da'wah and the defence of the Ummah and this can only be achieved through a process of industrialisation. It also obliged the Khilafah to organise the fulfilment of the basic necessities of the people which are food, clothing and accommodation. This cannot be achieved by having an economy geared around services but needs one geared around manufacturing and agriculture. This allows a nation to produce all that it needs and export any surplus. Relying and depending on imports and foreign money is not an assured path for development and survival.

The Islamic economy also makes the aim of the economy the catering for it citizens, not foreigners. To attract foreign industry, labour and money, Dubai has had to compromise on many Islamic values to do with the mixing of the sexes and alcohol in the name of necessity. The imposition of some Islamic rules in reality is a charade. Islam has a framework for the economy and Islamic finance forms one aspect of its detail. The mere existence of some Islamic financial contracts does not make a nation Islamic. Britain was one of the first nations in the world to offer Islamic bonds yet nobody would argue that Britain has an Islamic economic system.

The Islamic economic system has extensive rules for ownership and disposal of citizen's wealth and assets. Beyond this Islam recognises a sphere of the economy as the economic science i.e. through study and research a solution can be derived. Hence how to develop and economy or to industrialise, where the factories and the supply lines should be, how the steel and iron mills should be constructed fall under this category, however what is produced and how it is distributed falls under the ‘system' for which Islam has extensive rules.

The Islamic economy is based upon wealth generation where participants partake in investment, employment and trade in the real economy. Islam does not have a dual economy where the real economy operates alongside a financial sector. The Islamic economy focuses all participants on the real economy, through employment, company profits, utilisation of land (agriculture) and manufacturing. This brings the huge benefit of wealth only circulating in one sector - the real economy, where all can participate.

The Islamic economy is built upon the real economy this is where the process of production of tangible goods and services, Islam has designated a role for finance in the economy - due to Islam’s focus on the real economy which is the wealth creating aspect of any economy finance in Islam is not an end in itself as there is no interest (Riba). Wealth in Islam is created through each stage of industry i.e. mining, refining, manufacturing and sales’ All of this adds value at each stage and creates wealth for the economy

Islam's monetary policy is centred around a legal tender based upon the Gold and Silver and not one based upon interest rates to regulate inflation and the economy. In Islam when it comes to exchanging a commodity with a specific monetary unit, Islam has guided Muslims to the monetary unit by which the exchange is to take place. It has restricted the Khilafah to a specific type of money, which is gold and silver. The Islamic evidences have designated gold and silver as the primary measuring unit for prices and labour. This is understood from the actions of Muhammad (saw) when he collected Zakat, levied taxes and imposed fines, all were measured according to gold and silver. This means the notes and coins circulating in the economy would all be backed by gold and silver. This will no longer make possible the free printing of currency as the Khilafah would need to increase the actual holdings of gold and silver. This has a unique effect on Inflation which free market economies have been unable to contain.

Although Islam is built upon the real economy and the financial sector is based upon providing finance for the real economy, Islam has allowed a few purely financial transactions. Islam has permitted currency exchange as this was a common practice amongst the people of Mecca and Madina and Muhammed (saw) did not object to it. Islam permitted some forward contracts - this is where payment is taken before the actual delivery of goods or before the final transfer of ownership of the goods. However the items that can be sold before ownership is undertaken must be of a defined nature where they can be counted, measured or weighed, this is due to what is established in the hadith of ibn Abbas, that the Messenger of Allah (SAW) said: “Whoever pays in advance in dates, let him pay in advance for a known price and a known weight for a known period.” And in another narration of ibn Abbas who said: The Messenger of Allah (SAW) said: “Whoever pays in advance in something then (it should be) in a known measure and a known weight for a known period” (narrated by Al-Bukhari). Islam has categorically prohibited purely financial transactions where one lends money in the hope of receiving more in repayment. All trade and transactions are linked to the real economy as they are built upon construction, manufacture, services, or the production of goods and so on.

In conclusion it will not be surprising if Dubai eventually defaults on its debts, this is because the cash line for Dubai has been cut, which was foreign wealth entering the nation and going into lavish projects. Dubai could have utilized the foreign expertise and developed oil refineries in the region which although blessed with huge oil reserves lacks the necessary refineries. Instead it was duped by the notion of hyper finance and geared its economy around finance, which may bring some wealth, but it does not give a nation any skills or technical knowledge. Bankers have lost all credibility in the West due to inventing dubious financial products. Dubai could have taken a lead in constructing the 21st century’s first Islamic economy and unified with the wider Muslim world that are blessed with mineral resources.

[Article written by Adnan Khan, December 2009]
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What they said...

“Islam represented the greatest military power on earth…It was the foremost economic power in the world…It had achieved the highest level so far in human history, in the arts and sciences of civilization...Islam in contrast created a world civilization, poly-ethnic, multiracial, international, one might even say intercontinental.”





[Bernard Lewis, Professor of Near Eastern Studies, Orientalist and Historian, 2001]





"There was once a civilization that was the greatest in the world. It was able to create a continental super-state that stretched from ocean to ocean, and from northern climes to tropics and deserts…the civilization I'm talking about was the Islamic world from the year 800 to 1600… Although we are often unaware of our indebtedness to this other civilization, its gifts are very much a part of our heritage"





[Carly Fiorina, ex-CEO of Hewlett-Packard, 2001]





"For the first three centuries of its existence (circ. A.D 650-1000) the realm of Islam was the most civilized and progressive portion of the world. Studded with splendid cities, gracious mosques and quiet universities where the wisdom of the ancient world was preserved and appreciated, the Moslem world offered a striking contrast to the Christian West, then sunk in the night of the Dark Ages."





[Lothrop Stoddard, Ph.D (Harvard), American political theorist and historian, 1932]





"Medieval Islam was technologically advanced and open to innovation. It achieved far higher literacy rates than in contemporary Europe;it assimilated the legacy of classical Greek civilization to such a degree that many classical books are now known to us only through Arabic copies. It invented windmills ,trigonometry, lateen sails and made major advances in metallurgy, mechanical and chemical engineering and irrigation methods. In the middle-ages the flow of technology was overwhelmingly from Islam to Europe rather from Europe to Islam. Only after the 1500's did the net direction of flow begin to reverse."





[Jared Diamond, UCLA sociologist and Author, 1997]



"No other society has such a record of success in uniting in an equality of status, of opportunity and endeavour so many and so varied races of mankind. The great Muslim communities of Africa, India and Indonesia, perhaps also the small community in Japan, show that Islam has still the power to reconcile apparently irreconcilable elements of race and tradition. If ever the opposition of the great societies of the East and west is to be replaced by cooperation, the mediation of Islam is an indispensable condition."





[Hamilton Alexander Rosskeen Gibb, Professor at Harvard University, 1932]





“The Muhammadan Law which is binding on all -- from the crowned head to the meanest subject is a law interwoven with a system of the wisest, the most learned and the most enlightened jurisprudence that ever existed in the world.”





[Edmund Burke, British Statesman and Philosopher, 1789]





"The Exile here is not like in our homeland. The Turks hold respectable Jews in esteem. Here and in Alexandria, Egypt, Jews are the chief officers and administrators of the customs, and the king’s revenues. No injuries are perpetuated against them in all the empire. Only this year, in consequence of the extraordinary expenditure caused by the war against Shah Tahmsap al-Sufi, were the Jews required to make advances of loans to the princes."





[David dei Rossi, Jewish Traveller 17CE, quoted by Norman A. Stillman, The Jews of Arab Lands]





"The notable religious tolerance towards Christians and Jew under Muslim rule had given way to the uncompromising zealotry of Spanish Inquisition. Jews and Muslims thus fled Spain with large numbers of Jews immigrating to the Ottoman Empire which was known for its tolerance to the Jews."





[Graham Fuller, Author and former CIA, 1995]





“If there is much misunderstanding in the West about the nature of Islam, there is also much ignorance about the debt our own culture and civilization owe to the Islamic world. It is a failure, which stems, I think, from the straightjacket of history, which we have inherited. The medieval Islamic world, from central Asia to the shores of the Atlantic, was a world where scholars and men of learning flourished. But because we have tended to see Islam as the enemy of the West, as an alien culture, society, and systems of beliefs, we have tended to ignore or erase its great relevance to our own history”





[Charles Philip Arthur George, HRH The Prince of Wales, 1993]





"...Not being subject to the Sharia, Jews and Christians were free to go to their own religious authorities for adjudication of disputes; but in many cases they went instead to the [Muslim] Qadi"





[Richard W. Bulliet, Professor of History and Author, 2004]





"Here in the land of the Turks we have nothing to complain of. We possess great fortunes; much gold and silver are in our hands. We are not oppressed by heavy taxes and our commerce is free and unhindered. Rich are the fruits of the earth. Everything is cheap and each one of us lives in freedom. Here a Jew is not compelled to wear a yellow star as a badge of shame as is the case in Germany where even wealth and great fortune is a curse for a Jew because he therewith arouses jealousy among the Christians and they devise all kinds of slander against him to rob him of his gold. Arise my brethren, gird up your loins, collect up your forces and come to us."





[In his book 'Constantinople', Philip Mansel quotes a rabbi in Turkey writing to his brethren in Europe where they were facing increasing persecution after 1453]





"Praise be to the beneficent God for his mercy towards me! Kings of the earth, to whom his [the Caliph’s] magnificence and power are known, bring gifts to him, conciliating his favour by costly presents, such as the king of the Germans, the king of the Gebalim, the king of Constantinople, and others. All their gifts pass through my hands, and I am charged with making gifts in return. (Let my lips express praise to the God in heaven who so far extends his loving kindness towards me without any merit of my own, but in the fullness of his mercies.) I always ask the ambassadors of these monarchs about our brethren the Jews, the remnant of the captivity, whether they have heard anything concerning the deliverance of those who have pined in bondage and had found no rest."





[Hasdai Ibn Shaprut (915-990 CE) Jewish physician, chief minister of Islamic Caliphate in Cordova, 'The Jewish Caravan']





"In Baghdad there are about forty thousand Jews, and they dwell in security, prosperity, and honour under the great Caliph [al-Mustanjid, 1160-70 CE], and amongst them are great sages, the Heads of the Academies engaged in the study of the Law…’"





[Benjamin of Tudela, Rabbi in Baghdad in the year 1168 CE, 'The Jew in the Medieval World']





"Those Eastern thinkers of the ninth century laid down, on the basis of their theology, the principle of the Rights of Man, in those very terms, comprehending the rights of individual liberty, and of inviolability of person and property; described the supreme power in Islam, or Califate, as based on a contract, implying conditions of capacity and performance, and subject to cancellation if the conditions under the contract were not fulfilled; elaborated a Law of War of which the humane, chivalrous prescriptions would have put to the blush certain belligerents in the Great War; expounded a doctrine of toleration of non-Moslem creeds so liberal that our West had to wait a thousand years before seeing equivalent principles adopted.





[Leon Ostorog, French Jurist]





"The debt of our science to that of the Arabs does not consist in startling discoveries or revolutionary theories; science owes a great deal more to Arab culture, it owes its existence"





[Robert Briffault, Novelist and Historian, 1928]





"The only effective link between the old and the new science is afforded by the Arabs. The dark ages come as an utter gap in the scientific history of Europe, and for more than a thousand years there was not a scientific man of note except in Arabia"





[Oliver Joseph Lodge, Writer and Professor of Physics, 1893]





“Thus, when Muslims crossed the straits of Gibraltar from North Africa in 711 and invaded the Iberian Peninsula, Jews welcomed them as liberators from Christian Persecution.”





[Zion Zohar, Jewish scholar at Florida International University, 2005]







“Throughout much of the period in question, Arabic served as the global language of scholarship, and learned men of all stripes could travel widely and hold serious and nuanced discussions in this lingua franca. Medieval Western scholars who wanted access to the latest findings also needed to master the Arabic Tongue or work from translations by those who had done so.”





[Jonathan Lyons, Author, Writer and Lecturer, 2009]