Monday, April 19, 2010

The Causes of Greece’s Economic Troubles and Lessons for Malaysia

The economic travails currently being experienced by Greece make interesting reading for economists, finance experts and laymen alike. Greece is somewhat in a humiliating situation. Some German leaders have openly suggested that Greeks should spend less time sleeping and more time working, that is, to be more like Germans.

There are diverging opinions in Europe as to whether economic assistance should be extended to Greece or not. Some are of the opinion that regardless of who is to be blamed, Greece still needs to be helped because failure to do so will result in more problems for everybody in Europe. Others feel that assisting Greece will establish a dangerous precedent whereby the bail-out of a profligate EU member country will only encourage others to be profligate in future.

What is not at issue is the root cause of Greece’s problems which is the Greek government's spendthrift policies over the last decades. In order to be popular with its citizens, it made their life as comfortable as possible. There are many stories of the good life in Greece. Education up to tertiary level is completely free. Employees are paid 14 months' salary for 12 months' work. Civil servants can retire after only 20 years of service with a full pension. As a result, many Greeks spend 30 to 40 years of their life enjoying life in retirement and contributing nothing to the economy.

The Greek civil service sector is also oversized and unproductive. This is because it is a common practice for political parties, after being voted into office, to reward key supporters with jobs in the civil service. Many ended up doing nothing productive because their posts were not necessary in the first place. The bloated public sector created unnecessary bureaucracy leading to a high level of corruption. Many businessmen , fed up with bureaucratic delays , preferred to pay bribes to speed things up . Greece is now widely seen as being among the most corrupt countries in the world. Transparency International Corruption Perception Index ranks Greece at number 71, i.e. among the worst in Europe. Even Ghana in corruption-rampant Africa is perceived to be less corrupt than Greece. Transparency International also estimated that in 2008 alone Greek citizens made 900 million Euros in bribery payments.

The worst aspect of the situation was the fact that the money being used to make life comfortable for everyone was actually borrowed money. The Greek government had been borrowing massively from European commercial banks. Their sovereign bonds were snapped up by the banks because these banks were able to borrow at a cheap rate, around 1%, from the European Central Bank (ECB) and lend to the Greek government at about 3-6%. These banks would then deposit the Greek government bonds at the ECB as collateral for more cheap loans. They were able to do this as long as the bonds were highly rated . Unfortunately this could not last forever and the massive amount of debt accumulated by the Greek government (almost 300 billion Euros by the end of 2009 and more than 120% of GDP) resulted in a downgrading of its bonds by rating agencies. This in turn increased borrowing costs tremendously for Greece since lenders are now worried about her ability to repay her huge borrowings, accumulated over the years. Moreover tax revenue collection in Greece is also very poor. A finance ministry report stated that a third of all economic activity in Greece do not yield any tax revenue to the government. It is a common practice for Greeks to pay cash for transactions in order to avoid paying tax. Revenue from income tax was 4.7 percent of GDP in 2007, compared to an EU average of 8 percent. The Greek government recently estimated that they were losing more than 1.2 billion Euros due to lax collection.

The only reason Germany and the rest of Europe may not want to see Greece default on her massive debts is the fear that many of the shareholders of the lender banks will lose out and this fear may be enough to persuade them to lend some more to her at a rate lower than that offered by the market. This indeed seems to be the case because on 12 April the finance ministers of the 16 Euro zone nations agreed to provide up to 30bn Euros ($41bn) in loans to Greece.

But this does not mean that Greece is out of the woods. It is simply a postponement of the day of reckoning. In the meantime there will be lots of pain for ordinary Greeks in the coming years as government expenditures will have to be radically reduced. Massive amount of job cuts and pay reductions are unavoidable. Many social services provided by the government such as free education and subsidized health care will also disappear. These severe economic pains, if not handled well, may very well lead to social and political chaos. Already there have been violent riots. More will take place as anger and resentment boil over as a result of the expected sudden rise in unemployment as well as radical reduction in the quality of life for everybody.

For us Malaysians the most important question to ask is what is the possibility that the Greek experience will be repeated in Malaysia? To answer that we need to consider the following questions. What is the trend of Malaysian government debt? Is it increasing or decreasing over the years? Are the political parties, in trying to woo Malaysian voters, promising more comfortable life for them, promises which inevitably will result in the growth of public expenditure and public debt? Or are they willing to be honest and explain to voters that our massive public sector debt of more than RM350 billion (and growing) is evidence that we are living beyond our means and that we need to sacrifice short term comfort and cut public expenditures before the debt spins out of control? To me, the answers to those questions are obvious and therefore the prognosis for Malaysia is worryingly also very obvious.

Thursday, April 1, 2010

Supremacy of Shariah and Supremacy of Malays: Which one should we strive for?

In recent times, the concept of `Ketuanan Melayu’ which I translate as `Supremacy of the Malays’, has been a subject of many discussions. Some are of the opinion that as Malays, we are obligated to make sure that the fate of our fellow Malays is protected. Moreover some are of the opinion that the main duty of a Malay is to make sure that the Malay ethnic group remains politically, socially and economically dominant in this country. In this article I am going to argue that such an understanding is not only devoid of any Islamic basis but also dangerous for it may lead a person to engage in activities that are against the teachings of Islam.

As Muslims, we believe that Prophet Muhammad s.a.w. is a model human being to be emulated in all aspects, including his struggle to spread the message of Islam. It is therefore a compulsory duty of all Muslims to continue the work of the Prophet s.a.w. to spread the message of Islam to others. This is called `dakwah’ and all Muslims are supposed to perform this duty to the best of their abilityand to follow the example set by the Prophet s.a.w. in terms of the methods to be employed as well as the content of the message to be spread to others.

The central message that the Prophet brought to mankind is that we are all created by God for no other purpose than to submit and serve Him completely. Allah says in the Quraan:

“I have only created jinns and men, that they may serve Me.” (51:56)

As regard to the method of submitting or serving Allah, Muslim scholars have explained to us that this is achieved by our adherence or obedience to the teachings of Islam. Total submission to Allah therefore requires a person to follow in totality the teachings of Sharia in all aspects of our life. Allah says in the Quraan:

"O believers enter into Islam completely and do not follow the footsteps of Shaitan, surely he is your clear-cut enemy." 2: 208)

One question that is often raised is regarding the position of ethnicity or tribal group in the life of an individual Muslim. What is the Islamic perspective on people establishing relationships based on ethnicity or tribal or clan groupings? How does Islam look at people who feel that they are superior compared to others on account of their belonging to a particular ethnic, tribal or family group? In reality this issue has been clearly explained by the Prophet s.a.w. in one famous hadith:

“An Arab is not superior to a non-Arab and non-Arab is not superior to an Arab. Neither a black anyway better than a red nor a red is better than a black. The criterion for the superiority is only the element of piety.”

It is obvious from the above hadith that Islam abhors racist attitude. The Prophetic saying above clearly explains to us that from an Islamic perspective, one must not look down on others simply because they belong to another ethnic group or possess a different skin colour.

However, we must also take cognizance of the fact that Islam does not seek to eliminate ethnic cultures and languages. Indeed it was Allah’s decision to create human beings with different or diverse cultures and ethnic backgrounds as clarified by the following Quranic verse:

"O mankind! We created you from a single (pair) of a male and a female, and made you into nations and tribes, that ye may know each other (not that ye may despise each other). Verily the most honoured of you in the sight of Allah is (he who is) the most righteous of you. And Allah has full knowledge and is well acquainted (with all things)." (49:13)

It must be noted that the verse also reaffirms the central message of the hadith mentioned earlier: that there is no basis for anyone to argue that a particular tribal or ethnic group is superior compared to others. What matters in the eyes of Allah is only the individual’s piety.

Therefore, if a person desires to achieve honour in the sight of Allah, then he must direct all his efforts to achieve religous piety and if he wants his family, tribal or ethnic group be held in high honour by Allah, his efforts will be focused on exhorting his ethnic group members to achieve a high level of religious piety.

Just as the manifestation of piety in a person is his or her observance of Shariah, similarly, the manifestation of piety in a community is the observance of Shariah by that community. Therefore a basic aspect of the striving of a community which is focused on achieving high honour in the eyes of Allah is to seek complete implementation of Shariah in all aspects of life.

In short, for Muslims who really understand the true meaning of life, the true purpose of their existence and their true role as Allah’s vicegerent in this world, the real issue of concern is simply how to ensure that Shariah is supreme in this world. A true Muslim will always yearn for the complete implementation of Shariah in his personal life, his family, his neighbourhood, his community, his ethnic group, his country and ultimately the whole world.

Having said that, let us be reminded that a Muslim is not supposed to be unconcerned about the welfare of his family, ethnic or tribal group. Indeed the need to be concerned for the fate of family members is a command by Allah, as stipulated in the following verse:

“O you who believe! Ward off yourselves and your families against a Fire (Hell) whose fuel is men and stones, over which are (appointed) angels stern (and) severe, who disobey not, (from executing) the Commands they receive from Allaah, but do that which they are commanded” (66:6)

However, as seen in the above verse, the concern of a Muslim towards his family or ethnic group members or even countrymen should primarily revolve around the issue of their fate on the Day of Judgment. In other words, the ultimate concern is still focused on exhorting our family members to observe the Shariah in its entirety in order to avoid the punishment of Allah.

This focus on reminding one’s community to obey Allah as being the main concern of the Prophets of Allah is evidenced by a series of verses in the Quraan in Surah Al-A’raf as follows:

“We sent Noah to his people. He said: "O my people! worship Allah! ye have no other god but Him. I fear for you the punishment of a dreadful Day! (7:59)”

“To the Ad people, (We sent) Hud one of their (own) brethren: he said: "O my people! worship Allah! ye have no other god but Him. Will yet not fear (Allah)?" (7:65)

To the Thamud people (We sent) Salih one of their own brethren: he said: "O my people! Worship Allah; ye have no other god but Him. Now hath come unto you a clear (sign) from your Lord!... (7:73)

“We also (sent) Lut: he said to his people: "Do ye commit lewdness such as no people in creation (ever) committed before you? (80) "For ye practise your lusts on men in preference to women: ye are indeed a people transgressing beyond bounds." (7:81)

“To the Madyan people We sent Shu`aib, one of their own brethren: he said: "O my people! Worship Allah; Ye have no other god but Him. Now hath come unto you a clear (sign) from your Lord! Give just measure and weight, nor withhold from the people the things that are their due; and do no mischief on the earth after it has been set in order: that will be best for you, if ye have Faith. (7:85)

Additionally, the Shariah also commands Muslims to perform good deeds to their family members. In fact Islam makes it a religious duty for a person to treat their parents with love and respect. This love and respect is then supposed to be extended to other close family members as well as members of his community. A Prophetic saying on this is as follows:

“You are not believer until you love for your brothers what you love for yourself”.

However, Islam is also clear in its call to Muslims to observe certain very strict limits when being kind and loving to our family members. The love and kindness that Muslims have towards their close family members or ethnic groups must not be at the expense of justice for in Islam justice transcends considerations of race, religion, color, and even creed. Muslims are commanded by Allah to exercise justice to friends and foes alike.

The following verses of the Quraan are evidences of this principle:

“O you who believe! Stand out firmly for justice, as witnesses to Allah, even if it be against yourselves, your parents, and your relatives, or whether it is against the rich or the poor...” ( 4:135)

“Let not the hatred of a people swerve you away from justice. Be just, for this is closest to righteousness…” (5:8)

The Quran also exhorts Muslims to be just with non-Muslims:

“God does not forbid you from doing good and being just to those who have neither fought you over your faith nor evicted you from your homes...” (60:8)

The principle of not favouring one’s family or tribal members when dispensing justice is illustrated by the following hadith of the Prophet as narrated by the Prophet’s wife `Aisha:

The Quraish people became very worried about the Makhzumiya lady who had committed theft. They said, "Nobody can speak (in favor of the lady) to Allah's Apostle and nobody dares do that except Usama who is the favorite of Allah's Apostle. " When Usama spoke to Allah's Apostle about that matter, Allah's Apostle said, "Do you intercede (with me) to violate one of the legal punishment of Allah?" Then he got up and addressed the people, saying, "O people! The nations before you went astray because if a noble person committed theft, they used to leave him, but if a weak person among them committed theft, they used to inflict the legal punishment on him. By Allah, if Fatima, the daughter of Muhammad committed theft, Muhammad will cut off her hand.!" ( Sahih Muslim Volume 8, Book 81, Number 779)

The above hadith proves that love and concern for family or clan members is not unconditional. In the final analysis, the interests of truth and justice as prescribed by the Shariah must take precedence over the interests of family or ethnic members.

In discussing the two inseparable topics of being a Malay and a Muslim, we also may want to note the crucial fact that there are in reality many instances of conflicts between ethnic Malay cultures and Islamic Shariah. For example, whilst the wearing of figure-hugging Kebaya dress or the performance of traditional dances by ladies with exposed arms and head (such as tarian zapin or joget roggeng) as well as the `Bersanding' ceremony are all considered quintessential examples of Malay culture till today, they are according to many Muslims scholars all contrary to Shariah teachings. Therefore, one must always be mindful of the fact that striving for `Supremacy of the Malays’ may inadvertently result in the flourishing of practices that are unIslamic in nature if Malays do not attach enough importance to observance of Shariah in their daily affairs. Even though according to the Malaysian constitution, the definition of a 'Malay' is one who professes the Islamic faith, the sad fact is that not all aspects of Malay culture and practices which contrary to Islamic teachings have been abandoned.

Lastly, let us reaffirm the point that the `jihad’ of Muslims in this world is not to establish the supremacy of one’s family or tribe or race but rather to establish God's Shariah in its entirety. As far as family members and close relatives are concerned, Islam asks us to love and be kind to them. However, it is contrary to Islamic teachings for a person to strive to ensure that his ethnic group or family members are dominant or `supreme’ over other ethnic group or family members. Indeed it was precisely due to such narrow attitudes that we have witnessed injustices being committed by people in the past. It was the efforts to establish German Aryan superiority that lead to millions being killed during the World War 2, and it was the due to efforts to establish the superiority of the people from the Land of the Rising Sun that led to the death of hundreds of thousands of Japanese, Chinese, Koreans, Malays and other Asians during the same war, and it was due to efforts to establish the superiority of the Serbs that led to the death of hundreds of thousands of Serbs, Bosnians and Croats during the Balkan conflicts and it was also the desire to establish the superiority of the Hutus over the Tutsis that led to the killings of more than a million Rwandans. Clearly ethnic feelings are dangerous if left unchecked. This is the reason why Islam is against the concept of narrow `wataniah’ or narrow `nationalism’.

In conclusion, the supremacy of the Shariah is supposed to be the main concern of Muslims everywhere including those in Malaysia. Muslims in this country and everywhere else must be clear in their mind that their efforts should be directed towards establishing the supremacy of truth, justice and equality (i.e. the Shariah ). It is high time for all of us Malays to jettison the concept of `Ketuanan Melayu’ and replace it with `Ketuanan Shariah’ in order to achieve true success, both in this world and in the Hereafter.

Allah knows best.