The Middle East and its development has been forever tied to its black gold.
What challenges lie ahead in a world of low oil prices and how can the global economy be once again stimulated?
We speak to Dr Khalid Al Janahi, General Advisor at the Dubai Islamic Economy Development Centre for his thoughts on the post oil era, Human capital – and the role of the Islamic economy today.
What is your outlook for world economies in the coming years?
In general, forecasting world economies can prove a daunting task. Due to the slowdown that productive economies like Japan and China face today, the average growth of global economies will not exceed 3.6%, according to the International Monetary Fund. This deceleration has resulted in a falling demand for crude products such as oil that has created a general state of tension and anticipation for investors on a global level. Investments have declined in many countries and capital is often confined to sectors that make it hard to liquidate quickly and easily. In addition, government spending on infrastructure projects has decreased, even while public debt has increased.
These forecasts are certainly based on logical reasoning. The old-fashioned mechanisms of traditional economy have not proved adequate in reviving the global economy. On the one hand, they do not factor in sustainable growth or responsible investments. Furthermore, they still focus their investment decisions on accumulating quick profits.
What is the role of Islamic economy in light of the future global economic challenges?
The significance of Islamic economy’s role today is largely driven by the great interest that Islamic finance’s mechanisms and financial products have generated with people seeking a change from the conventional system. This interest is certainly proof of Islamic economy’s inherent ability to revive the global economy. Some of the core aspects of Islamic economy include:
• The Islamic economy focuses on purpose without justifying the means. The approaches that are adopted to achieve a comprehensive and sustainable development have to be ethical in their direction and fair in their consideration of the concept of development.
• The concept of development within Islamic economy has to be inclusive – what this would ideally mean is that the benefits it offers have to include all social segments. While people’s ability to trade and consume is a sign of a healthy world economy, their inability to trade is also a main reason for the slowing of growth and stagnation of the global economy.
• Islamic finance is based on partnership and aims to fund real development projects that result in expanding the beneficiaries of these projects - unlike traditional projects that do not consider such priorities.
How can the Islamic economy turn into a major economic contributor that replaces oil?
The Islamic economy is an integrated economic system that includes all the essential sectors required for achieving income diversity. It also stimulates industries that are essential for human life without focusing on luxuries or nonessentials. These nonessential items – or the industries they represent - are usually not within the reach of all social segments. Therefore they will not activate the economic cycle in a stagnant global economy. The Islamic economy plays a key role in creating a new economic culture that is based on a partnership between the society and the state in funding major projects. This funding is carried out through leveraging Waqf and Islamic Sukuk as legitimate financing sources - without leading to debts or cessation of any government projects. The Islamic economy considers human beings a core development tool, as well as its ultimate goal and the most important wealth in the economic landscape. This tenet explains the Islamic economy’s attempts to nurture human talent and intellect through a focus on innovations that lead to new sectors capable of providing stability and sustainability to national economies.
What are a few important steps that need to be taken to support the Islamic economy?
Supporting the Islamic economy needs to be done across four focus areas:
The UAE and Dubai specifically; has served as a leading example of government efforts to support the Islamic economy through providing the ideal environment for the growth of its sectors. Such an environment has been made possible due to enabling laws and regulations that safeguard all economic activities and direct them to boost development. The government has also launched many innovative initiatives related to further expanding Islamic economy and its sectors.
Islamic jurisprudence and legislation:
There is an urgent need to unify Islamic economy standards and regulate its references. We are at the threshold of a new economic era in which Islamic economy will become the key driver of development and sustainability. For Islamic economy to efficiently perform this role, we have to create accepted standards and unified references to organize trade activities within this ecosystem.
I believe many private sector companies are now totally convinced that the Islamic economy provides sustainable development and protects corporations from market challenges due to its inherent system of ethics and efficient mechanisms.
For any economy to succeed, it needs to instill a culture of sustainability among the public. It has to convince people of its ability to provide them with welfare, security and financial stability.
By: Dr Khalid Al Janahi
Dr Khalid Al Janahi serves as the General Advisor at Dubai Islamic Economy Development Centre (DIEDC). In this role, he is mandated to oversee the development and execution of strategies related to Islamic economy.
Dr Al Janahi holds more than 19 years of experience in diverse Islamic financial disciplines, and strategy gained from working with Islamic institutions in the UAE, Bahrain and Saudi Arabia. Prior to the establishment of (DIEDC), Dr Janahi served as a consultant to various legal institutions, and contributed to the structuring of new Islamic finance products. He has also served as professor of Islamic law in banking and finance at the French Arabian Business School, Al Sharjah University, and Islamic Jurisdiction at Al Imam Malek Islamic Institute, Ministry of Justice and Islamic Affairs in Manama, Bahrain. Earlier, he has led the Sharia Department at Al Baraka Islamic Bank in Bahrain. Dr Al Janahi holds a PhD in Islamic Studies from Warnbrought College in Ireland, as well as a Master’s in Business Law from Bond University in Australia, and a degree in Management Information Systems from the University of Central Florida in the US, he is also certified international Islamic commercial arbiter.