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Islamization and the Pakistani Economy (Event)

Khurshid Ahmad, Institute of Policy Studies, Islamabad; Shahid Javed Burki, EMP Financial Advisers; Isobel Coleman, Council on Foreign Relations; Parvez Hasan, World Bank ; Vali Nasr, U.S. Naval Postgraduate School; Omar Noman, United Nations Development Programme; Ishrat Husain, governor, State Bank of Pakistan; Charles Kennedy, Wake Forest University; Saeed Shafqat, Columbia University; Akbar Ahmed, American University: Moderators: Munawar Z. Noorani, Fellowship Fund for Pakistan; Dennis Kux, Woodrow Wilson Center; William Milam, Woodrow Wilson CenterRead the Keynote Speech by Ishrat Husain Download the Conference Report in PDF Format

Date & Time

Jan. 27, 2004
8:00am – 4:00pm ET

Islamization and the Pakistani Economy (Event)

Download the Conference Report in PDF Format

Khurshid Ahmad, Institute of Policy Studies, Islamabad; Shahid Javed Burki, EMP Financial Advisers; Isobel Coleman, Council on Foreign Relations; Parvez Hasan, World Bank ; Vali Nasr, U.S. Naval Postgraduate School; Omar Noman, United Nations Development Programme; Ishrat Husain, governor, State Bank of Pakistan; Charles Kennedy, Wake Forest University; Saeed Shafqat, Columbia University; Akbar Ahmed, American University: Moderators: Munawar Z. Noorani, Fellowship Fund for Pakistan; Dennis Kux, Woodrow Wilson Center; William Milam, Woodrow Wilson Center

As the inaugural event in its expanded Pakistan programming, the Asia Program held a one-day conference on January 27 exploring a course of action being pushed by important political and religious groups in Pakistan: the adoption by that country of an Islamic economy. Efforts to establish an Islamic economy in Pakistan date back nearly to the founding of the country in 1947. Pakistan's first Constituent Assembly adopted the Objectives Resolution, which stipulated that the country's Muslims should order their lives in accordance with the teachings and requirements of Islam. This seminal statement of intent was subsequently incorporated into each of Pakistan's three constitutions, and stands today as one of the key documents in the country's political and constitutional history. Yet repeated efforts over the years to create an Islamic economy in Pakistan failed to establish the institutions, legal structures, and other mechanisms necessary to sustain such an economic system.

Pakistan's national elections in October 2002 reinvigorated the drive to establish an Islamic economy in Pakistan. The polling produced an unexpectedly strong showing by a coalition of six Islamic parties, which won 60 seats in the National Assembly (compared to two in the previous election), captured control of one of the country's four provincial governments (Northwest Frontier Province), and secured a prominent role in the governing coalition of a second province. Last June the triumphant Islamists in the Northwest Frontier Province secured adoption by the provincial assembly of a bill imposing sharia, or Islamic law, throughout the province. If fully implemented (which most analysts deemed unlikely), this would bring the province's legal, financial, and educational systems into line with what many in the West would term a "fundamentalist" interpretation of Islamic law. Some even speculated that this would turn the province into a Pakistani version of Afghanistan under the Taliban.

Such fears, asserted the governor of the State Bank of Pakistan, Ishrat Husain, in the January 27 conference's keynote address, are absurd, and merely serve to underscore the clichés and stereotypes of Pakistan and the Islamic world widely held in the West. "Pakistan is and will remain a responsible member of the international community." Pakistan, moreover, is far removed from the day when it will be ready to adopt a full-fledged Islamic economic system. Even so, Husain continued, non-Muslims should not fear such a system, since Islamic economics represent nothing more than an attempt to promote "a balance between market, family, society and the state." The Islamic economic model seeks to harmonize self-interest with the social interest. It gives self-interest a "longer-term perspective" by encouraging the individual to fulfill his or her social obligations. Islamization, if fully practiced, will address those income distribution and poverty alleviation issues where capitalism has fallen short. This in turn would serve to "eliminate the sources of instability, violence and propensity towards terrorism arising from a sense of deprivation." The world, in short, would be a far happier place were the Muslim world to adopt an Islamic economic model.

Professor Khurshid Ahmad, a member of the Pakistani Senate, an influential Islamic intellectual, and one of the senior leaders in the political coalition formed by Pakistan's religious parties, also emphasized this idea that Islam in not merely a religion in the limited sense of the term, but a guide for human interaction in all realms. The modern world, he argued, has severed the links between economics and ethics. Efficiency has been given precedence over justice and equity. A new holistic approach – an Islamic approach – is needed, so that efficiency and justice can co-exist. Ahmad concluded his presentation by recalling British economist John Gray's admonition that free market capitalism is a manifestation of a specific cultural milieu. The global economy must be reformed so as to accept "a diversity of cultural regimes and market economies as a permanent reality."

Former World Bank officer Shahid Javed Burki, who also served as Pakistan's finance minister for a brief time in the 1990s, explored three issues in his presentation: why the effort to bring Islamic principles to economic management in Pakistan has proceeded so unevenly over the years; how far Pakistan had gone in Islamizing its economy; and how much farther it is likely to move towards the goal of Islamization of the economic and financial sectors. He concluded that pragmatism has usually prevailed over piety, that efforts to Islamize the banking system have been largely cosmetic, and that rather than replace conventional institutions, Pakistan is likely to move, albeit slowly, towards a system of parallel banking and financial institutions that provide greater choice to the Muslim consumer. (Burki was unavoidably absent from the conference, but his paper was summarized for those in attendance.)

Isobel Coleman looked at the impact of Islamization on women. This is not merely an ideological question of inequality, she argued; gender discrimination retards development and exacts a large toll on both present and future generations. Challenged during the ensuing discussion, Coleman emphasized that Islamization per se does not mandate gender discrimination, but that Islamization is often found to exist side-by-side with conservative values and traditions that do discriminate against women. To the extent that Islamization reinforces conservative norms, she insisted, it comes at a considerable economic cost.

Charles Kennedy's presentation reviewed the "convoluted history" of Islamic legal efforts to secure a judicial ruling that riba, or financial interest, is repugnant to Islam, and therefore, that all federal and provincial laws that provide for riba must be brought into conformity with Islamic law. His analysis underscored the essentially political rather than legal character of this question. Efforts to secure the prohibition of riba have been effectively derailed, he concluded. Those who wish to pursue this goal further "are left with little recourse save trying to convince a heretofore dubious and disinterested public."

The "central issue" in Pakistani politics over the years, argued Vali Nasr of the Naval Postgraduate School, Monterey, has been the expansion of state power and the resistance these efforts have provoked. Islamization and its economic dimension, Nasr maintained, must be examined within this broader context. In Pakistan, successive governments have manipulated Islamic symbols not only to shore up state legitimacy, but to cast their redistributive policies in a favorable political light. This, in turn, has encouraged the political opposition to mobilize along religious lines as well. Political conflicts have frequently been fought over either land reform or the government's compulsory collection of religious taxes, but the underlying issues involved the intrusion of the state into domains claimed by the religious establishment. This establishment, finding its social and economic position under assault, responded by questioning the Islamic credentials of the offending government. In short, the debate over Islamization in Pakistan has historically been "a manifestation of deep-seated struggles between the weak and developing Pakistan state and powerful social forces," including an influential religious leadership.

Omar Noman, a senior official in the UN Development Program and an adviser to several Pakistani governments, devoted his comments to looking at the types of financial institutions that can best support markets. He also issued an eloquent warning that Islam should take care not to foster the idea that it offers a direct competition to capitalism, or that it should be seen as existing outside the global system. The notion of "Muslim separateness," he cautioned, is very dangerous in the present international climate. By all means, encourage the establishment of Islamic instruments of finance, he urged, but do not isolate Muslims economically from the rest of the world.

Longtime Pakistani civil servant and World Bank official Parvez Hasan looked at issues of poverty and social justice in Pakistan and returned to a theme introduced by earlier speakers – to wit, that ethics cannot be separated from economics. Pakistan has done a very poor job of poverty alleviation, Hasan maintained. Today 45 million Pakistanis – a figure larger than West Pakistan's entire population at the time of its birth 57 years ago – live in poverty. Moreover, inequalities are growing. The discussion of an Islamized economy has not adequately addressed these glaring failures, Hasan argued. The private charitable transfers envisioned under the Islamic system of zakat, for instance, frequently fail to help the poorest sectors of society. Until Islamic scholars address more realistically the matters of human development, poverty alleviation, inequality, and the creation of a fair society, Islamization per se will offer little solace to the large number of Pakistanis whose lives are mired in poverty and destitution.

Columbia University scholar Saeed Shafqat spoke of "the predicament of liberal modernists" and the need to "reinvent" Pakistan. The West need not fear Pakistan's religious parties, which have demonstrated a pragmatism and, as they move into positions of power, will no doubt develop a greater stake in the system. Those who wish to promote democracy in Pakistan, Shafqat advised, ought to focus on strengthening the political parties. He noted, however, that the parties have traditionally been more interested in power than in reform; this has to change if Pakistan is to be truly rejuvenated. Pakistanis must also begin to deal forthrightly with the deep mistrust with which their country is viewed in much of the West. As for the United States, he urged an end to the U.S. travel advisory that has not only limited contacts between the two countries, but also reinforced unfortunate stereotypes of each in the other.

In brief concluding remarks, Akbar Ahmed argued that South Asia's Muslims have much to contribute to the global debate concerning the nature of Islam. Mohammed Ali Jinnah, Pakistan's founder, stood for democracy, human rights, minority rights, and respect for constitutionalism and the law. Islam, Ahmed asserted, is about far more than the 19 hijackers of September 11th; it is also about compassion and tolerance. Islam has answers to many of the fears about itself prevalent in the West today, even if Muslims in recent times have failed to address those anxieties adequately. What is most needed, Ahmed concluded, referring back to Shafqat's formulation, is not Pakistan's "reinvention," but its "rediscovery." That is, Pakistanis must go back to their roots, to the country's raison d'etre. In so doing, Pakistan can escape the suspicions under which it presently labors and take its rightful place among the nations of the world.

This program was made possible through the generous support of the Fellowship Fund for Pakistan.

Robert M. Hathaway, Asia Program Director, 691-4020

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The Asia Program promotes policy debate and intellectual discussions on U.S. interests in the Asia-Pacific as well as political, economic, security, and social issues relating to the world’s most populous and economically dynamic region.   Read more

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