Current privatization efforts dwarf all which have gone before. In
general, the “less developed” nations, including peoples of the Muslim
faith, seem to have attracted the advocates of privatization. Disturbing
results are obtained when the substance and process of privatization are
juxtaposed to the teaching of Islam.
In certain cases, privatization may result in the transfer of wealth
from relatively weak hands (i.e., from the debtor governments of the less
developed nations) to relatively strong hands (i.e., consortia of
international entrepreneurs). Islam teaches the opposite: It recognizes the
right of the less able in the wealth of those who have grater ability or the
opportunity to produce greater wealth.
The outcomes of privatization are important to peace and security.
Consequently, the emergence of privatization as a cart’s paw in political discourse is not good omen, for example, Abdelhak Benhamouda,
Algeria’s labor leader, “opposes any privatization’s undertaken on the
back of the workers and demanded guarantees from the government”. In
most of the world “privatization” is equivalent to denationalization.
nor
The distinction between denationalization and outsourcing is basic:
outsourcing usually entails neither diminution in public accountability
change in the interaction of individual citizens with their government;
however, denationalization relieves government of further responsibility.
The current rush to privatize is rooted in the widespread belief that
state owned enterprises are inefficient. While there could be merit in this
assumption, one might expect that specific programs would be subjected to
fact finding before the complex solution of privatization is pursued.
The results of an operational review may support relatively easy
solutions such as the outsourcing of specific governmental tasks or the
substitution of suppliers where activities are already being outsourced,
(The mere act of rebutting could have salutary effects on the performance
of an existing supplier.)
Denationalization has long term effects: once accomplished,
denationalization becomes virtually irreversible. Moreover, it is
impractical to issue guidance as to the selection of an optimum technique
for privatization. The technical difficulties are compounded by a shortage
of experienced privatization managers, particularly, persons with the
vision required to succeed in culturally diverse situations.
The most important challenge to implementers of privatization is
posed by the national ethos of the host nations. Where a choice has been
made to denationalize, the model of the process (i.e., its nature, timing,
and extent) is greatly influenced by cultural, technological, and social
factors.
Muslims perceive problems with absentee shareholders: Islam obliges
business owners to be concerned activists, especially with respect to the
welfare of their employees and the preservation of the environmen..
Islamic theologians tend to be suspicious of stock transactions; they fear
that the issuers may have gained some of their profits from interest based
financial deals, contrary to Islamic law. Conservative Muslims may even
regard share trading as a form of (prohibited) gambling.
Also, privatization advocates have been known to ignore the
employment circumstances of developing nations which may require
national, provincial, or municipal governments to serve as
last resort. Furthermore, the act of denationalization may incorporate
employer of hidden disincentives. For example, it may curtail pre-denationalization
public employment which may have brought benefits through policies
designed to protect women and minorities.
A denationalized entity is subject to normal business risks; however,
rarely have these risks been identified, analyzed, or controlled. One such
risk, management fraud, represents a particularly dangerous threat.
Managers have literally stolen firms; they have sold or leased the assets to
shell companies owned by friends or to joint ventures set up with foreign
partners, in which they had some kind of stake or guarantee of
employment.
Islam aims to establish a just and moral social order through the
agency of man, rooted in justice. Islam does not distinguish between the
religious and the secular or between the spiritual and the temporal. Within
the framework of Islamic law each person is given freedom of action
subject to the limitation that the individual’s actions do not violate the
rights of others.
Islam’s economic system is an integral part of Islamic life. The
expression used for Islamic economics (iqtisad) literally means the “state
of being even or equally balanced”. Iqtisadi activities are considered to
represent a means for showing love of God. Some differences from
Western economics, in terms of emphasis, follow:
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Westerners may be influenced by materialism; Islam emphasizes
eternal values:
Westerners focus on human laws as governing humanity’s well being;
Islam sees an omnipotent God;
Westerners regard resources as limited; Islam sees resources as
sufficient (However, it prohibits waste);
Westerners maintain that wealth can be accumulated; Islam condemns
such accumulation while others are in need;
Westerners regard virtually any activity that leads to profit as lawful;
in Islam ethics and humanitarian endeavors play an essential role;
Westerners allow supply and demand to govern; in Islam there are
rules relating to prices and wages;
When some of the rules of Islam and iqtisad are reviewed in light of
the structural and operational issues impacting denationalization, areas of
potential friction come into focus:
hidden disincentives. For example, it may curtail pre-denationalization
public employment which may have brought benefits through policies
designed to protect women and minorities.
A denationalized entity is subject to normal business risks; however,
rarely have these risks been identified, analyzed, or controlled. One such
risk, management fraud, represents a particularly dangerous threat.
Managers have literally stolen firms; they have sold or leased the assets to
shell companies owned by friends or to joint ventures set up with foreign
partners, in which they had some kind of stake or guarantee of
employment.
Islam aims to establish a just and moral social order through the
agency of man, rooted in justice. Islam does not distinguish between the
religious and the secular or between the spiritual and the temporal. Within
the framework of Islamic law each person is given freedom of action
subject to the limitation that the individual’s actions do not violate the
rights of others.
Islam’s economic system is an integral part of Islamic life. The
expression used for Islamic economics (iqtisad) literally means the “state
of being even or equally balanced”. Iqtisadi activities are considered to
represent a means for showing love of God. Some differences from
• Western economics, in terms of emphasis, follow:
• Westerners may be influenced by materialism; Islam emphasizes
eternal values:
• Westerners focus on human laws as governing humanity’s well being;
Islam sees an omnipotent God;
• Westerners regard resources as limited; Islam sees resources as
sufficient (However, it prohibits waste);
• Westerners maintain that wealth can be accumulated; Islam condemns
such accumulation while others are in need;
• Westerners regard virtually any activity that leads to profit as lawful;
in Islam ethics and humanitarian endeavors play an essential role;
• Westerners allow supply and demand to govern; in Islam there are
rules relating to prices and wages;
When some of the rules of Islam and iqtisad are reviewed in light of
the structural and operational issues impacting denationalization, areas of
potential friction come into focus:
• The welfare and security of employees The optimum technique for privatization (Islam frowns upon
shareholding, but accepts state ownership);
the ethics of the righteous individual as governed by both internalized
Ethical awareness on the part of managers and employees; Islam sees
principles and external controls;
The rights of the various members of the stockholder family, beyond
investors and creditors;
Environmental protection and the avoidance of waste.
The causes of friction have been presented n realistic terms. Unrest
has been mounting over unemployment and ethical issues. In Pakistan,
opposition to privatization and pressure from fundamentalists to implement
Islamic business practices continue to pose risks. Egyptian labor is
strongly opposed to privatization of the state sector, fearing loss of jobs;
layoffs following privatization are expected to further increase social
tensions. Morocco’s biggest union, the Democratic Labor Federation,
believes that privatization will cost jobs and further concentrate wealth
among the Casablanca Rabat elite. The Algerian government has called for
a “social pact” to soften the flow of the movement toward a market
economy. The Speaker of the Kuwait national Assembly has demanded a
probe of allegations of insider trading said to have occurred in the State’s
latest share sale, which has already been alluded to.
CALL FOR ACTION
The problems of denationalization must be solved by using a
combination of Western and Islamic solutions. The Western solution
would call for improvement in the denationalization process, including
availability of proactive audit support. The Islamic solution would seek to
mitigate the effect of structural deficiencies. Time is of the essence.