Islamic Economy Could Solve the Issues of Economic Gap in Malaysia

Islamic Economy Could Solve the Issues of Economic Gap in Malaysia

Muhammad Hakimi Bin Muhammad Helmi

1329113

Ammar Hatim Bin Muhammad Jamri

1328905

Kulliyyah of Economics and Management Sciences

English Language Department, CELPAD

Madam Majdina Binti Mansor

Section 8

International Islamic University Malaysia

27th April 2017

Islamic economy and economic gap

        Islamic economic is derived from the Quran and sunnah by Prophet Muhammad SAW, Shabbir (2015). Consequently, it may establish the society that has Islamic faith and believes the oneness of Allah SWT. In fact, previously we know that Malaysia is practicing mixed economy which the combination of the command economy and free market economy. In this discussion, we know that the mixed economy involved the government intervention in the economy system which the society free to do any economy activities but restricted by the government policy. But then, according to Alfatanni (2008), Malaysia started to implement Islamic economic by the establishment of Lembaga Urusan Tabung Haji in 1969 in order to help citizens to perform hajj. After that, in the year 1981, Malaysia’s Government introduce policy of Assimilation of Islamic Value (AIV) in Malaysia's administrations that would make their activities comply with the values of Responsibility, Sincerity, Dedication, Punctuality, Trustworthiness, Moderation, Diligence, Cleanliness, Discipline, Cooperation, Integrity, and Thankfulness. Before the Islamic economic develop, the two main pillars in developing Islamic economics, Banking and finance were established which are Bank Islam Malaysia Berhad (BIMB) and International Islamic University of Malaysia (IIUM) in 1983. Consequently, there are many frameworks, guidelines, legislations, and policies are introduced in order to govern the Islamic financial institutions, Islamic financial systems, products and markets.

        Meanwhile, when the implementation of Islamic economics is still at the first stage, there are many issues come out in terms of harmonization of citizens in Malaysia. For example, the issues of unemployment, poverty, inflation, recession and economy downturn. Statistics records that there are significant increased on the unemployment rates in Malaysia which from 2.7% in 2012 to 3.5% currently. It was the significant number of increase along 5 years. This means that there are many citizens perhaps losing their jobs because of the recession or fresh graduates who are still unemployment after their studies due to low demand of labours in companies. As a result, the productivity of a country would be lower if the unemployment rate is high. Furthermore, the problem of inflation rate in Malaysia is also showing anxiety report which increases from 1.4 % in October 2016 to 3.2% in January 2017.  In the short period of time, it records a huge difference. It means that price level of money in Malaysia become lower. Thus, the purchasing power of consumer would be less because of the price level is low. For example, previously we can buy two chickens with RM 15, but it becomes a chicken worth RM 15 after the inflation is becoming high, so that, it shows the less purchasing of consumer affected by the inflation. Thus, it is strongly agreed that Islamic economy can solve the problems of economics gap due to the development of Islamic-based financial products, enforcement of zakat and waqf institutions, and wealth protection.