Article Review: Corporate Crime

7 Jul

ARTICLE REVIEW

by NG BOON SIONG


            Raymond J. Michalowski and Ronald C. Kramer, The Space between Laws: The Problem of Corporate Crime in a Transnational Context. California: University of California Press, 1987.


Introduction

This paper seeks to review the abovementioned article written by Michalowski and Kramer in 1987, with the focal point revolving around the conceptualisation of the transgressions committed by transnational corporations as corporate crime. The authors have settled to use the term ‘Transnational Corporations’ (TNCs) to describe the corporations that expand their business operations beyond their resident countries to other countries that have less stringent laws and with societies having lower economic bargaining power compared to their resident countries. The authors delved extensively on the concept of corporate crime in relation to TNCs – primarily on its definition, perception, operation & influences from the societal and legal standpoint.

The authors’ perspective on corporate crime by TNCs also sought to push the limit of the traditional framework of criminal law to the extent that the definition of crime could be further expanded beyond the common parameters of violations of criminal codes of a State, that is to criminalise the violations of civil or regulatory provisions, in order to effectively categorise the transgressions committed by corporations as crime proper. The authors were keen to shed some light on the relevance of exploring the definitional framework regarding the space between the laws of both the home and host nations which has caused both positive and negative impacts. They have segmented the article into five (5) headings with several subheadings. It is viewed that the discussions in this paper is aptly arranged in accordance to the breakdown sequence of the headings and subheadings as set by the authors in their article in order to better illustrate and appreciate the framework of the authors’ objective on the topic.

 TNCs and Relocation of Corporate Hazards

After the end of the Second World War, especially since the economic upsurge from 1960 onwards, the activities of corporations around the globe have evolved from having business operations locally to broadening their wings to other countries as well, hence making them international in status, suitably addressed as ‘transnational’ in this context. This economic boom has sparked more transgressions committed by the TNCs not only in their home nation, but also in the host nations, primarily the developing countries. This development has thus prompted the authors to undertake the observation on the issue at hand.

Generally, the authors discussed at length the trend undergone that witnessed the relocation of TNCs’ industrial operations from their home nations which are usually a developed country, such as the United States and United Kingdom, to less developed nations such as the Third World countries. Guided by the studies undertaken by various researchers as well as the United Nation in mid-1970s through the 1980s, the authors observed that in the United States alone, majority of its multimillion dollars companies – specifically those with over $100 million in sales chose to set up their operation in the developing countries. One of the obvious reasons for such relocation was due to the lower capital and operating costs as well as less stringent compliance provisions and laws compared to those in their home nations. This has caused a prominent shift of not only the manufacturing activities from the developed countries to the developing ones, but also the baggage of the industrial hazards usually resulted from the injurious corporate activities engaged by the TNCs.

The authors also stressed that the TNCs have adopted a much more relaxed attitude in observing the legal standards and provisions of the host nations, unlike when they are operating in their home nations since the laws in the host nations, especially the developing countries have less-developed regulatory provisions. The relocation of both the manufacturing activities as well as the industrial violations and production hazards brought by the TNCs has induced great sufferings to the developing nations mainly because these nations have limited or adolescent awareness and legal control on relevant issues such as the environment, employment/labour rights as well as consumer protection. The authors have further narrowed down the industrial hazards exported to the less developed countries to three (3) undeniably noteworthy issues whilst being the host nations to the TNCs, they are the i) Working Condition, (ii) Environmental Pollution and (iii) Consumer Safety, all three being inter-related to one another.

(i)      Working Condition

It has been discussed by the authors that one of the striking problems of the industrial hazards exported to the developing countries that begs our attention is the condition of the workplace provided by the TNCs in the host nation. Although the workers may be working for the same company, the working atmosphere of the manufacturing facilities both in the home nation and the host nation are contrasting. The TNCs are more sensitive and obedient in ensuring the regulatory provisions on working condition of their employees in the resident country are complied with. However, they take a rather laissez-faire attitude in providing a reasonable working condition for their employees in the host nation simply because the labour-related provisions in the host nations, being a third world country, are not always as demanding or strict as the ones in the home nation.

However, this issue may not be as cut and dry ‘criminal’ as the authors implied it to be. It is felt that the TNCs should not be bombarded with criticisms merely because the working conditions in their manufacturing facilities may not match up to those in the home nation. This situation must be analysed objectively with other factors as well, such as the fact that the conditions of the workplace of both TNCs as well as the local companies may not be that much different after all. Furthermore, the workers of the TNCs are reasonably compensated with a much higher wages, at least twice as much, such as in Vietnam, compared to their fellow friends working in the local based companies in equally criticised working conditions[1].

(ii)      Environment Pollution

Many high-pollution industries prefer to have their manufacturing facilities in countries that have lower environmental standard and lower pollution control cost. This has caused the emergence of a new phenomenon that is the pollution export. The TNCs seem rather reckless in complying with the environmental standards in the host countries, unlike when they are in their resident countries which have stricter regulations. The authors highlighted that this attitude has resulted that the hazardous wastes produced in the developed countries were being exported to less developed countries. Pepsi, Nestle and Panasonic were among other giant TNCs, who have been found guilty of violating the water pollution control in China[2]. In Malaysia, one of many examples of hazard exports caused by TNCs was the case of Woon Tan Kan & 7 Ors v. Asian Rare Earth (1992) where the residents in Bukit Merah, Ipoh who were threatened by the dangers of radioactive wastes produced and stored by a Japanese-owned factory located nearby. Only after persistent efforts by the residents, a court injunction was granted to stop the hazardous operation.[3] The environmental pollution at hand is further aggravated by the inaptitude of the environmental authorities in the host nations in supervising the TNCs. Consequently, it has only caused more damages to the already alarming scenario.

However, the authors may have missed out in clarifying why should the TNCs be doing more than what they are expected to comply with when the host nations themselves do not even have strict regulations on environmental protection to embark on. Even when the TNCs are complying with the lax regulations of the host nations, some argued that it would still seem to be insufficient as the TNCs, having more financial stability and stronger economic leverage, ought to be expected to go an extra mile in ensuring that their profit-driven operation do not harm the society and the environment and at the same time to be the exemplary model for all the smaller enterprises to look up to in achieving sustainable development[4].

(iii)     Consumer Safety

The authors have associated TNCs with unsafe products exported to the consumers such as the sale of non-prescription drugs, which would have been illegal in the US due to its dangerous content but sold to a significant market elsewhere. Other examples were dangerous chemically-treated products, shoddily made mechanical objects, inadequate information on the use of products that may lead to injuries or even fatalities were some of many examples that can be related to insensitive profit-crazed TNCs who put the safety of the consumer as last in their priority list.

Concerns over consumer safety is one issue, but what is more alarming is the prosecution against these TNCs as the culprits of these injurious corporate actions has created another dilemma. More often than not, these violations do not fall under the category of crime in the host nations, again, due to the lax regulations on product safety. This was aggravated by the consistent efforts by the TNCs to find markets elsewhere, for the sale of products prohibited in their home nations. As such, it is understandable that some researchers are keen advocates for a higher level of supervision and control mechanism, to which these TNCs should succumbed to, that acts both as an umbrella to cover the no man’s land i.e. the space between laws, with guidelines and compliances as well as the referee to penalise any foul play amongst the corporate players. The authors have made a good attempt tapping on this issue under the subheading: U.N Code as International Politics, in the later part of the article.

TNCs and Regulatory Climates

Direct and Indirect Influence

The authors suggested that the TNCs have to a certain extent, direct and indirect influences on the host countries relating to regulatory denominator. Various strategies and incentives have been lined up by the developing nations who are competing with each other to attract foreign investments into their country such as the offering of lax regulations on environmental standards, limited labour rights, lower costs on labour and pollution control, imposition of lower tax and many more. The authors even suggested that there may be a double standard approach taken by the host nations at the expense of the workers, environment and consumers.

The notion raised by the authors is also supported by an article by UNESCO stating that the Asia-Pacific countries have been noted to have lower environment standard to attract foreign investment such as Indonesia and Philippines who have compromised their environment for the sake of attracting foreign investment in the mining industry[5]. It is quite understandable for the authors to note that the people’s rights as workers were put on the sideline by the host government to accommodate the TNCs as companies have been known to dissuade from investment in countries whose government could not control its people. It is also agreeable for the authors to suggest that too much repression by the host government would trigger unrest among its people, which would then result to wise TNCs pulling out from the investment.

The authors emphasised on the gap between the wages earned by the workers in the home nation and those in the host nation, the former earning much higher than the latter for the same job. This issue raises the question whether TNCs are inclined to degrade labour conditions. This point, as discussed earlier, may not always be such an unfair treatment as the workers of multinational companies operating in the host nations are usually earning at least twice as much as the workers in the local enterprises. The authors also mentioned that the TNCs have also been known to pressure the host nations to mould its regulations in favour of the TNCs to operate their manufacturing facilities with less hassles than in their home nations.  Using the economic bargaining power and strong leverage as TNCs, they have been known to use threats against the host nations with disinvestment. A United Kingdom-based firm known as P&O operating in India was reported to have pressured the Indian government to declassify the protected land of Dahanu so that their land can be used for the construction of an international port, thus adversely affecting the livelihood of the Dahanu residents who were mostly fishermen[6].

The authors have quoted an example which took place in Malaysia whereby the United States-based electronic firms have threatened the Malaysian government that they would withdraw their investment in Malaysia should the government proceeded with their plan to allow unionization of the workers in electronic field, as this would create much complications for the TNCs to deal with the demands for better labour rights such as wages, working hours, policies on recruitment and retrenchment. Since the developing nations were dependent on foreign investments to enhance their economy, the TNCs have also exploited the situation to their advantage to influence the political movement of the host nations while favouring the friendliest ones and most accommodating to their investment aside from thwarting those which are hostile and jeopardising their interest.

The U.N. Code as International Politics

The authors moved on to raise the concern that international politics have become a vital mechanism to govern the market operation of transnational businesses amongst all the corporate stakeholders. The authors observed that the “Draft Codes of Conduct on Transnational Corporations and the Guidelines for Consumer Protection” under the auspice of the United Nation (“U.N. Code”) has transformed the cross-border businesses into international politics. Unfortunately for the authors, they may have overlooked the fact that the U.N. Code has remained in its draft form and thus, it is hard to foresee that the code itself would have any political teeth or claws to regulate the conduct of the TNCs. To regulate the conduct of TNCs, it is viewed that the U.N. Code has failed to encourage TNCs in developing countries to pursue their own policies that are shaped based on the local conditions and culture in order to produce greater economic success in accordance with the international standards.

With regards to the formulation of the U.N. Code, the authors described the roles of various entities and organisations in the process of designing the code. Basically, the authors discussed the issues in the definitional process of corporate crime from the standpoints of the developing countries, developed countries and the TNCs themselves. For instance, the trade unions in developing countries favoured more public control in the world economy whilst the developed countries are more concerned with the conservative approach of providing more flexible room for the governance of corporate conduct in the realm of international businesses. On the other hand, the TNCs, especially the International Chamber of Commerce has questioned the essential principles that go into the roots of the U.N. Code since they emphasised more on the market force over the international politics in shaping such international code of conduct.

It is doubtful as to whether the political definition of corporate crime contained in the U.N. Code serves any significant impact upon the legislations governing the corporate conduct in developing nations as envisaged by the authors. Pilon (1987) opined that the U.N. Code was “designed to force Western companies to operate according to the New International Economic Order for mandatory resource transfers from the West to the developing world”[7]. Furthermore, it seems that no unanimous understanding on the U.N. Code was reached during the consultations convened at the United Nations General Assembly in 1992 due to the reasons that the changing “international economic environment and the importance attached to encouraging foreign investment requires that a fresh approach should be examined”.[8]

 The Search for Alternative Frameworks

That said, the authors recognised the fact that there were attempts by criminological researchers to reach alternative definitions of crime with the aim to create a proper regime for the research on the corporate misconducts of TNCs. This effort has eventually culminated in the notions of “human rights” as an alternative definition of crime. The author further observed that it has been a norm for the criminological researchers to distinguish the behavioural standards from the intervention of law. Baucus and Dworkin (2008) argued that “corporate crime” should not be confused with the words “illegal corporate behaviour” which denotes a different phenomenon in the context of corporate misconduct.[9] This contention strikes a perfect consonance with the arguments of Shapiro cited by the authors that it is inappropriate to conduct the studies on corporate crime based on considerations other than the element of illegality as far as the definition of corporate crime is concerned. Although the authors somehow agreed with the contention that law may cover moral choice in defining corporate transgression, they questioned the need to opt for one specific framework rather than the other framework in defining the appropriate boundaries of study on corporate crime.

Be that as it may, the argument that law should be utilised as a means to control corporate behaviours since it relates to the “moral agenda” of transnational corporations has thus invited vast criticisms against its practicality and application due to the gaps between the international law and the national law in governing corporate crime. As Stone (1975) augured well that:

Those who trust to the law to bind corporations have failed to take into account a whole host of reasons why the threat of legal sanction is apt to lack the desired effects when corporate behaviour is its target – for example, limited liability, the lack of congruence between the incentives of top executives and the incentives of “the corporation,” the organisation’s proclivity to buffer itself against external, especially legal threats, and so on.[10]

Conclusion

In a nutshell, it is noted that the issue of substantial gap between the laws of the home and host States pertaining to the examination of corporate crime has been persistently thorny in the field of criminological research. In this regards, the authors have also observed that there are different approaches adopted by researchers in the studies of the definitional crime of TNCs. However, to date, there is still no one conclusive definition and satisfactory evidence that may lead to the setting up of an appropriate framework for the purpose of criminological analysis. Nevertheless, it is opined that there is some relevance to the issue at hand which cannot be ignored, that the violation of corporate responsibility should no longer be seen as mere violation of moral responsibility since there are damages and harm done not to oneself but to other entities such as the society and the environment. As such, it is vital for research efforts to march on cogently in high spirit beyond the boundaries of conventional criminal law in order to experiment and explore the aforesaid subject with an open mindset since at the rate the world is evolving, both economically and environmentally, we cannot afford to go on being unintelligent and oblivious, as the damages done, will soon take its toll on all of us.


[1] Flanagan, R. J. (2006). Globalization and labour conditions: Working conditions and workers rights in global economy. United Kingdom: Oxford University press.

[2] French, P. (2006). Pollution in China – Big foreign knuckles rapped. Retrieved from http://www.ethicalcorp.com/content.asp?ContentID=4748

[3] Woon Tan Kan & 7 Ors v. Asian Rare Earth, 4 CLJ 2299 (1992).

[4] Jianqiang, L. (2006). Multinational corporations violating China’s environmental laws and regulations. Retrieved from http://www.worldwatch.org

[5]  Jones, T. & McNally, R. (1998). Pollution for Export? Retrieved from http://www.unesco.org/courier/1998_12/uk/planete/txt1.htm

[6] Jones, T. & McNally, R. (1998). Pollution for Export? Retrieved from http://www.unesco.org/courier/1998_12/uk/planete/txt1.htm

[7] Pilon, J. G. (1987). The centre on transnational corporations: How the U.K. injures poor nations. Retrieved from http://www.heritage.org/research/internationalorganizations/bg608.cfm

[8] United Nations. General Assembly, 46th Session. (15 September 1992). Report by the President of the forty-sixth session of the General Assembly [United Nations document, A/47/446]. Available: http://unctc.unctad.org/aspx/index.aspx [Accessed on 9 September 2009].

[9] Baucus, M.S & Dworkin, T.M. (2008). What is corporate crime? It is not illegal corporate behaviour. Law & Policy, 13 (3), 231–244.

[10] Stone, C.D. (1975). Where the law ends. New York: Harper and Row.

Sale of Debts under Islamic Law of Contract

7 Jul

Nurshuhaida binti Zainal Azahar

2011

Sale of debt or Bai Dayn is defined under Article 158 of the Majelle as, “the thing due (which can be either in the form of money or commodity) owed by a certain debtor”. It is a sale of payable right or receivable debt either to the debtor himself, or to any third party and it could be paid immediately or for deferred payment. [1] There is no clear provision on the prohibition of sale of debt in Quran and Sunnah and on that basis; there were divergent rulings among traditional Muslim Scholars on the permissibility of the sale of debt. As far as the issue of the sale of debt to the debtor himself, the Majority of jurists (Hanafis, Hanbalis and Shafies) unanimously agreed that the sale of debt to the debtor himself is valid (through the contract of hiwalah) provided that it is sold at par value.[2]

However, the Jurists differ in their views in regards to sale of debt by the creditor to a third party. The Hanafis, Hanbalis and Zahiris were of the view that such sale is invalid because the creditor is not in the position to ensure delivery of the subject matter (debt) to the third party. It is therefore, in the presence of this uncertainty (gharar), such sale is void. The Shafies on the other hand, allowed sale of a confirmed debt to a third party because these debts are deliverable without impediments. Similarly, the Malikis allowed sale of debt subject to fulfillment of additional conditions. Firstly, sale of debt must adhere strictly to the prohibition of riba and gharar. Secondly, it must not involve food item or money or any ribawi item.[3] Obviously, trading money for money is not allowed. Thirdly, the debt must be sold prior to receipt or else selling of a discharged debt would be unfair to the new creditor. Fourthly, the price of sale must be paid immediately to avoid the selling of debt for a debt (kali bi al kali) which is prohibited in Islam. Fifthly, the price must be different genus from the debt to avoid riba al-fadl.[4] In addition, the debtor must be present during the conclusion of sale between the creditor (seller) and new creditor (purchaser) so that his financial standing is known to the purchaser. Furthermore, the debtor must acknowledge his debt to avoid selling an uncertain thing, thus invalidating the sale. In addition, the debtor must be able to take the responsibility of the debt.[5] Most importantly, there is no enmity exists between the debtor and purchaser.  These conditions are meant to safeguard the likelihood of nonpayment of debt or non delivery of debt to the new creditor and debtor are not subjected to injustice. In this regards, Malikis’ view is practical and would serve as credit risk’s mitigation in modern Islamic Finance.

In sum, it can be gathered from those rulings, that as a general principle, the sale of debt at its equivalent value and on spot payment is permissible.[6]  According to the Majority of Jurists, the permissibility of sale of debt for spot price is supported by the Hadith narrated by Abd Allah Ibn Umar, who said, “I came to Prophet (s.a.w.s) and said, I sell a camel in al Baqi, with the price denominated in gold coins and collected in silver coins and sell them in denominated silver coins and collecting in gold coins” He (pbuh) said, “there is no harm if you take it at its spot price, as long as you do not depart without fully concluding the transaction”.  On the authority of this Hadith, sale of debt was opined to be approved by the Prophet (s.a.w.) (Wahbah Zuhayli, 2003). [7]  This opinion is later endorsed by the Islamic Fiqh of Jeddah in 2002 which held that sale of debt for immediate payment is allowed.[8] In other words, the debt must be sold at an equivalent value; not more and not less or else any additional sum accruing from the sale of debt is riba.

Despite the standing of traditional Majority Muslim jurists that any surplus out of sale of debt is amounting to riba, it can be seen that Islamic banks and financial institutions continue to practice so by selling debt products such as the Islamic Accepted Bills and Islamic Bonds on discount. This paper shall unveil the operation of such products later and it can be observed that these Islamic Finance products are mere replications of conventional financing products. These products have incorporated the contract of sale of debt (bay’ al-dayn) to justify the “additional income” made such sale which shall be called as “profit” out of the trading of debts.  Indeed, while the Middle East Countries have prohibited the sale of debt, in Malaysia such practice is permitted on the basis the debt sold by Islamic banks is essentially the “profit” generated from sale of commodity based mode of Islamic Finance such as Murabahah. In other words, a debt is a tradable commodity/asset because its existence is attached or tied to the real assets sold under the Murabaha sale.

Another view to justify the permissibility of the sale of debt at a discount rate propounded by the minority of Muslim jurists is that such debt is in the form of the “rights” sold to the purchase. It is the sale of “haqq” and not the debt itself.  Thus, any gain out of this sale is considered a profit. However, the justification is considered unsound by majority of Muslim jurists.[9] Another contemporary view supporting the sale of debt at a discounted value is based on the principle of Ibra’. Ibra’ allows the discharge of a whole or part of one’s claim on a debtor. Hence, it is entirely the banks’ right to sell the debt at a discounted value. Nevertheless, scholars do not agree with this argument holding that Ibra’ and sale of debt have a completely different objective and implementation.[10]

In spite of such “justifications”, they are refuted by Mufti Taqi Uthmani who is of the view that sale of debt at discount value (even though backed by murabaha’s commodity) is prohibited because upon sale of the asset in a Murabahah transaction, the ownership has already been passed from the bank to the purchaser and it is no longer the commodity of the seller/bank. The bank is only entitled to the money (monthly installments) being the consideration of the commodity sold. Then, it is apparent that the bank is selling money rather than assets. [11]  Hence, the banks cannot justify the issuance of such paper money at discount. Thus, it is clear that any gain made on the sale of money for money is deemed as riba al fadhl.

 


[1] Article 158, Majjellah Al Ahkam Addliyyah

[2] Wahbah Zuhayli, Financial Transaction in Islamic Jurisprudence, Dar al Fikir: Damascus. 2003 V.1, P. 84.

[3] Hj. Zaharuddin, “Ruling on Debt Trading in Shariah” NST Business Times, 21st June 2006.

[4] Wahbah Zuhayli, Financial Transaction in Islamic Jurisprudence, Dar al Fikir: Damascus. 2003 V.1, P. 84.

[5] Ibid p.84

[6] Saiful Azhar Rosly & Mahmood M. Sanussi, “ The Application of Bay’ al- Inah and Bay’ al- Dayn in Malaysian Islamic Bonds: An Islamic Analysis”. International Journal of Islamic Financial Services Vol. 1 No. 2.

[7] Wahbah Zuhayli, Financial Transaction in Islamic Jurisprudence, Dar al Fikir: Damascus. 2003, First Edition. V.1;P. 81.

[8] 16th Convention on Islamic Fiqh Academy of Jeddah, Mecca, 5th-10th January 2002.

[9] Hj. Zaharuddin, “Ruling on Debt Trading in Shariah” NST Business Times, 21st June 2006

[10] Hj. Zaharuddin, “Ruling on Debt Trading in Shariah” NST Business Times, 21st June 2006.

[11] Taqi Uthmani (2002), An Introduction to Islamic Finance, Kluwer Law International:Hague.

2010 LegalPedia Blog in review

7 Jul

The stats helper monkeys at WordPress.com mulled over how this blog did in 2010, and here’s a high level summary of its overall blog health:

Healthy blog!

The Blog-Health-o-Meter™ reads Fresher than ever.

Crunchy numbers

Featured image

A helper monkey made this abstract painting, inspired by your stats.

The average container ship can carry about 4,500 containers. This blog was viewed about 21,000 times in 2010. If each view were a shipping container, your blog would have filled about 5 fully loaded ships.

In 2010, there was 1 new post, growing the total archive of this blog to 17 posts.

The busiest day of the year was April 29th with 144 views. The most popular post that day was Islamic Finance in the Blue Ocean.

Where did they come from?

The top referring sites in 2010 were facebook.com, search.aol.com, google.com.my, abajournal.com, and search.conduit.com.

Some visitors came searching, mostly for ocean, blue ocean, trial by jury, jury trial, and ocean pictures.

Attractions in 2010

These are the posts and pages that got the most views in 2010.

1

Islamic Finance in the Blue Ocean April 2009
5 comments

2

THE COMPARISON OF TRIAL WITH JURY AND TRIAL WITHOUT JURY IN MALAYSIAN LEGAL SYSTEM (PART IV) February 2009
1 comment

3

THE COMPARISON OF TRIAL WITH JURY AND TRIAL WITHOUT JURY IN MALAYSIAN LEGAL SYSTEM (PART II) February 2009

4

THE COMPARISON OF TRIAL WITH JURY AND TRIAL WITHOUT JURY IN MALAYSIAN LEGAL SYSTEM (FINAL PART) February 2009
3 comments

5

THE COMPARISON OF TRIAL WITH JURY AND TRIAL WITHOUT JURY IN MALAYSIAN LEGAL SYSTEM (PART III) February 2009

Comments: “Still a long way to go in substance over form?” (Part I)

27 Jan

Recently, the Business Times Online has published an article “Still a long way to go in substance over form?” which reported the excerpts from the discussion amongst the prominent market players and regulators at the Securities Commission-Business Times Roundtable on Corporate Governance.  The discussion quickly captured my serious attention as it has drawn me closer to the thorny issues on corporate governance in Malaysia.  I could not agree more but to add that most of the directors of public-listed companies (PLCs) in Malaysia have tried their level best to adhere to the “comply or explain” rule on corporate governance. However, such conformance to the corporate governance statement which is required under the Bursa’s Listing Requirements is of no useful purpose if the form is emphasized over the implementation of the substance.

Although efforts of the regulatory authorities in providing a “Corporate Governance Guide”  and Malaysian Code on Corporate Governance to the directors are commendable, it is believed that most directors still have some long distance to travel before even reaching the desired full implementation of the corporate governance best practices. I do not wish to undermine the mental capabilities or professional skills that a director has, rather I would like to point out the importance for the proper establishment of corporate governance mechanisms in order to effectively carry out the best practices adopted. It remains a daunting task as the directors may have no or little time to meticulously craft out a comprehensive corporate governance mechanism or system due to their onerous responsibilities in managing and overseeing the operations and business activities of a corporation.

Most often than not, the duty to comprehend and comply is left with the company secretaries, compliance officers or legal executives who may have no power or authority to implement the corporate governance practices even if they wish to do so. Hence, the Corporate Governance Guide or the Malaysian Code on Corporate Governance would at most serve as letters carved on the stone unless the directors have the initiatives to transform the letters into real corporate actions for the best interest of the company.

To illustrate such box-ticking approach, the Malaysian Alliance of Corporate Directors’ deputy president Paul W. Chan. rightly raised the concern that:

“I sit on some of the boards as well, and when it comes to application, the board is usually advised by the company secretary on corporate governance issues. The company secretary will photocopy the guide and say this is what you should be doing. This are of course some guidelines, but I think the board may not be so sophisticated to device a mechanism of how to apply the guidelines.”


Islamic Finance in the Blue Ocean

6 Apr

by Ng Boon Ka
2009

‘‘We don’t want to go back to the same normalcy that we’re coming from.
We will create a new normalcy which will stay and keep on moving and change the world.’’

Nobel Peace Prize winner Muhammad Yunus,
World Economic Forum 2009, Davos

Inspired by the ‘Blue Ocean Strategy (BOS)-How to Create Uncontested Market Space and Make the Competition Irrelevant’, a book of strategy and management by Prof. W. Chan Kim and Prof. Renee Mauborgne, it is high time to strategise the art of Islamic banking in a nascent ‘box’ altogether. Putting this into perspective, it is both strategically sound and tactically tenable in light of Albert Einstein’s words that, ‘‘we cannot solve our problems with the same thinking we used when we created them’’.

Leveraging on the distinctive and holistic fundamentals of Islamic finance such as the sharing of risk and reward, the prohibition of interest (riba) and gambling (maisir), minimisation of induced uncertainty (gharar), emphasis on real transactions, as well as ethical and charitable activities, a paradigm shift in the thought process of innovation and development is therefore warranted chiefly in vogue with the current age of financial turbulence.

To begin with, the thinking within the conventional box which seeks to benchmark against conventional risk and return profile in order to gain market share is plausibly applicable to underdeveloped and infant markets where Islamic finance is merely a small subset of the whole financial system. However, such thinking works in an accommodative rather than an innovative mode, taking into account the spirit of maslahah.

As Islamic financial markets are maturing with growing market shares, a more robust Shariah compliant approach would necessitate an upward shift towards thinking outside the conventional box. Once Islamic finance has gained dominant market shares at the higher innovation stage, the ideal level of thinking in a distinctive and ever-expansionary ‘Shariah box’ with a Shariah based approach, rather than a superficial realm of ‘outside the box’, shall achieve the higher ideals of Islamic economics and social order.

Having witnessed the unprecedented growth of Islamic banking along the global financial trajectory in recent decades, there is a current and sanguine need for a strategic metamorphosis from a niche ‘green field’ to an uncharted ‘blue ocean’, in lieu of a ‘red ocean’ with conventional banking.

ISLAMIC FINANCE IS RIDING THROUGH THE WAVE OF BLUE OCEAN

ISLAMIC FINANCE IS RIDING THROUGH THE WAVE OF BLUE OCEAN

Moving beyond Sun Tzu’s Art of War adage, ‘‘If you know both yourself and your enemy, you can come out of hundreds of battles without danger’’, to a higher ground of defeating an enemy without even fighting, the BOS advocates a better strategy by exploring ‘blue oceans’ – untapped and untargeted markets which hold tremendous growth potential – rather than going head-to-head against rivals for a share of the existing market. The latter scenario is akin to a ‘red ocean’ where competition is based on outperforming the existing competitive benchmark. In other words, the best approach to earn a competitive edge is to gain the first mover advantage over competitors.

While competitors are the ones who set the agenda and rule of the game in red oceans, competition becomes insignificant in blue oceans. At the heart of BOS lies the creation of value innovation which seeks to integrate all the firm’s functional and operational activities. That said, the development of BOS revolves around preference for more risk minimization and less risk taking by reconstructing market boundaries; focusing on big picture, not numbers; reaching beyond existing demand; and getting the strategic sequence right. Being a departure from business-as-usual, the execution of BOS entails the overcoming of organizational hurdles and the embedding of execution into strategy.

The current global economic crisis poses a ‘creative destruction’ whereby ‘out of destruction a new spirit of creativity arises’ for Islamic finance to be the optimistic agent of change. However, given that a full operation of an ‘Islamic institutional scaffolding’ (a platform of Islamic behavioral rules) is currently lacking, there is ‘‘need for the design and development of a comprehensive and dynamic regulatory-prudential-supervisory framework, uniquely designed for an Islamic financial system,’’ as highlighted by Abbas Mirakhor.

For Islamic finance to be the role model for global economy, emphasis should be also given to the formulation of Islamic monetary and fiscal system, banking for the poor and the unbanked, prioritization of inherent corporate social responsibility to create wider appeal for Islamic financial products, acquisition and transformation of conventional banks into Islamic banks, increasing market share as early market entrants particularly in emerging and/or underdeveloped markets such as Central Asia and Xin Jiang of China, among others.

It is worthy to note that, in promoting knowledge-based innovation with practical adherence to the tenets of Shariah, Malaysia has created a market space from her position of strength in advancing innovative drive by the establishment of institutional infrastructures like INCEIF and ISRA.

Viewing Islamic finance with the original spectacle in a new vision rather than a purely conventional glass may be the propeller for the departure of a prescriptive Shariah compliant approach towards a principle-based Shariah system. To conclude in Bank Negara Malaysia Governor Tan Sri Dr. Zeti Akhtar Aziz’s words, ‘‘Islamic banking and finance is a ‘mirror of the sea’ for until and unless we have the courage to explore its depth, we would never be able to uncover the treasures that reside within.’’

The summary of this article was published in The Malaysian Reserve on 6th April 2009.

Click here to find “A Blue Ocean Revolution in Islamic Finance” by Gabor George Burt, who is an internationally recognized expert on Blue Ocean Strategy and Value Innovation; the highly acclaimed, new approach to high-growth strategy formation and implementation conceived by INSEAD professors W. Chan Kim and Renee Mauborgne.

ISLAMIC BANKING IN MALAYSIA

6 Feb

by Nurshuhaida Zainal Azahar

ISLAMIC BANKING IN MALAYSIA

ISLAMIC BANKING IN MALAYSIA


Islamic banking (IB) in Malaysia had developed quite fast for the past of more than 20 years, starting with the establishment of Bank Islam in 1983. IB is governed by both Islamic Banking Act 1983(IBA) and Banking and Financial Institution Act 1989(BAFIA). Section 3 of IBA defines Islamic Bank as “any companies which carries on Islamic banking business and hold a valid license; and all the offices and branches in Malaysia of such a bank shall be deemed to be one bank”. Islamic Banking Business is further defined as “banking business whose aims and operations do not involve any element which is not approved by the Religion of Islam”. In addition to this statute, Section 124 of BAFIA allows any licensed institution to carry Islamic Banking Business and Islamic Financial Business.

In my opinion, the progressive development of IB in Malaysia has its advantages and disadvantages. One of the advantages is that IB allows for a wide banking transaction compared to conventional banking. This is supported by the legal definition of “Islamic Banking Business” provided under Section 3 of IBA, “banking business whose aims and operations do not involve any element which is not approved by the Religion of Islam”. Meanwhile, in conventional Banking System, the banking transaction is limited to the definition provided under Section 2 of BAFIA, inter alia receiving deposits, paying and collecting cheques and provision of finance.

On this basis, we can find the concept/ products of Bai’ Bithamin Ajil (deffered sales), Ijarah (leasing), Qard al Hasan (money lending), Mudharabah (dormant partnership) and murabahah (active partnerships), and Istis’na (manufacturing) began to evolve for the past 20 years. However, the development of conventional banking remained static relying heavily on its main business of financing (loan) till now because of the restrictions in BAFIA, example Section 33 (restriction on carrying on of trade) and Section 66 (restriction on investment). Islamic Banking Business to some extent may also include Islamic Insurance (TAKAFUL) without a necessity to form another company to manage it if Bank Negara allows it.

Therefore, I am of the opinion that Islamic Banking had more prospect and profitable than Conventional Banking. This can be seen when many conventional banks had turned to Islamic Banking Business under section 124 of BAFIA. Some of the examples are RHB Islamic Bank and Maybank Islamic Bank. IBB is more profitable owing to the fact that there are wide varieties of banking products yet to be introduced. In addition, majority Muslim population in Malaysia contributes to a good prospect of IBB in future.

Nevertheless Islamic Banking still has its weaknesses. Firstly, there is a conflicting jurisdiction between Civil Courts and Syariah Courts. The issue of Islamic Banking’s jurisdiction had been resolved in the case of BIMB v. Adnan Bin Omar [1994] 3 CLJ 735, by N.H Chan J., where it was held that the case was rightly brought before the Civil Court because List I of Ninth Schedule includes banking being the subject matter where the Parliament can enact laws.

However, in my opinion, Islamic Banking’s cases should be brought before Syariah Court. This is due to the fact that not all Civil Court’s judges (with due respect) are well versed in Islamic transaction, what more in Islamic Jurisprudence in order to interprete the IB’s laws. My opinion might be obsolete based on Adnan’s case but I think that it is the time where High Court may set up an Islamic Division to deal specially with Islamic Banking cases. It would encourage specialization of judges and lawyers in IB as has been done with four other divisions (commercial, civil, criminal and appeal and special powers). This is the least we can do to serve the object of Islamic Banking. What is the point of setting up Islamic Banking if upon disputes; they may be interpreted by non Islamic Principles.

Secondly, Islamic Banking Products to certain extent, especially Bai’ Bithamin Ajil (BBA) is oppressive to the customers. For example in the case of Adnan Omar, the buyer (customer) had entered into BBA contract with BIMB, the purchasing price being RM 265,000 and the selling price was RM 583,000 for a deffered payment to be made in 180 months (15 years). The defendant had defaulted in payment after 2 year the contract was made. It was held in the case that the defendant was required to pay the amount of selling price of RM 583,000 and not entitled to Ibra’ (rebate) for early settlement.

In my opinion, this is unfair. The amount of selling price of RM 583,000 was agreed based on the consideration of the time factor of 15 years. When the defendant defaulted, the value of the house would not reach RM583, 000 just within 2 years, yet the defendant must pay such amount. This is unearned income by the bank. It defeats the object of Islamic transaction as it involves the element of oppression. In Affin Bank v. Zulkifli Bin Abdullah [2006] 1 CLJ 438 Abd Wahab Patail J., fortunately held that the customer was entitled to rebate even though he had defaulted in the payment. This is because the Bank is not entitled to gain such unearned income. The judge also had commented that Islamic Banking is oppressive compared to conventional banking.

In conclusion, Islamic Banking is a relief to the Muslims in this country who longed for Islamic financial aids. IB had come out with many products to serve this purpose. However, the fact that IB cases are decided by Civil Courts by Non Muslim judges or judges who are not well versed in Islamic transaction, raised doubts in the society. Is IB interpreted based on Islamic principles? Another interesting fact is, is BBA Islamic enough? Is the decision in Adnan Omar justifying the Islamic principle that a Muslim is not entitled to an unearned income? Should the Muslims still proceed to BBA knowing the fact that it is oppressive when they are unable to pay the sum within the specified period? Based on these reasons, I am of the opinion that IB must be reviewed frequently so as to ensure Islamic principles, forming the foundation of Islamic Banking is strictly adhered to.

Does The Peacock Deserve Better Recognition Than The Satyam?

1 Feb
satyam scandal

Satyam Scandal in India

A recent post by the Livemint mentioned that Satyam Computer Services will be stripped off the Golden Peacock Award. It was stated that the said Award was the very laurel it used for trumpeting its corporate governance norms when the controversy broke out.

The question that springs into our minds is the effectiveness of corporate governance. Why has Satyam been awarded such a prestigious award of good corporate governance when the dark side of the Satyam corporate practice remained hidden at the time of the bestow of such award?

This begs further serious doubts upon the sanctity of the Golden Peacock Award. After the fall of Satyam, one starts to wonder what are the best corporate governance yardstick employed by the World Council for Corporate Governance before deciding the recipient of such award.

Perhaps, it is merely a matter of trust confided upon Satyam to prove that it did deserve the Peacock Award. However, it was sad to say that Satyam has clearly gone beyond a matter of trust. As quoted from the Times of India:

“What do the two hot topics in business the global economic crisis and the Satyam swindle have in common? At the bottom of both are failures of business institutions leading to an erosion of trust in the economy. The collapse of Lehman Brothers in the US, and weaknesses in AIG, Fannie Mae, Citibank, GM, and many other large firms, have created panic extending beyond the US.

Similarly, the shenanigans of Satyam’s promoters have created widespread reverberations in India and abroad. It is not just the governance of these firms, but also the institutions set up to ensure the integrity of the corporate system auditors, credit rating agencies, etc, many of which are also business institutions which have failed in their duties to society. Recent polls show a dramatic erosion of faith in business. Three out of four Americans trust business less than they did one year ago.

At the World Economic Forum in Davos this year, economists from the IMF and global think tanks painted a dismal picture of the world economy. They described a global economic edifice shaken by an unexpected earthquake with its epicentre in the US subprime loan market. There is no safe haven in it they said and warned of further after-shocks, in Europe, the US, and Asia, for which India too must be prepared. The immediate solutions offered for central banks to release more money and for governments to spend more money seem inadequate. Whereas what the global economy needs is a new architecture to prevent such catastrophes and to restore trust in free-market capitalism.

Business leaders, who until 2008 had urged governments to stay out of business, are now urging governments to vigorously save businesses. They want governments to intervene in the markets but at the same time to keep markets free. This raises questions in the public’s mind about what they want markets to be free from. Freedom only from barriers to trade? Or also freedom from government regulations? Or even freedom from responsibility for their actions?

The freedom to succeed and to fail is the essence of the system of free enterprise. However, with these economic freedoms, entrepreneurs and managers cannot be given freedom from responsibility towards others. When top executives in Enron and WorldCom found ways to beat the systems then in place, Sarbanes-Oxley followed. Corporations doing business in the US complained that it was an overreaction to isolated deviant acts for which everyone was being inconvenienced. Satyam is turning out to be a case of criminal fraud, which overwhelmed systems of corporate governance. Businessmen fear that the reaction to the corporate failures in the US and Satyam in India will be more controls which could stifle business freedoms. Therefore, the architectural challenge is to shape institutions and systems of corporate governance that give business managers freedom to innovate with safeguards to ensure that they also fulfil society’s requirements.

If one used the metaphor of a house, trust in institutions is the solid roof that we all need above us. It gives us security to live without fear of bad things falling upon us. Structures are necessary to uphold this roof. When the roof begins to cave in, architects may propose more vertical pillars to support it. Thus, when problems of malfeasance appear in economies and societies, there is demand for more rules and more agencies that will regulate and control. The multiplication of such structures reduces the room to move around within the house, thus reducing the freedom of enterprises. Therefore, the architect must conceive of other ways to strengthen the structure that do no require this plethora of top-down controls. These could be well-placed horizontal beams, which strengthen the integrity of the structure while giving space within it.

These horizontal structures are the values by which people relate to each other and business conducts itself. Economists say that incentives must be aligned to induce people to behave properly. Economists tend to think of incentives in terms of improvement of measurable financial outcomes for individuals and investors. Therefore, they emphasise the creation of financial wealth, and measure ‘value’ in financial terms. And when societies are in trouble, economists will concentrate on improving the flow of money and investments. Whereas the present crisis of confidence in the free-market system requires that leaders also focus on moral and ethical values.

Like Arjun on the battlefield at Kurukshetra who asked Krishna a moral question, not advice on how to fight the battle, business leaders fighting the recession must also ask what they must change in their approach to business to regain society’s trust if they want more freedom in future. Therefore, corporate boards should introspect from time to time about the values that guide their decisions. Independent directors on boards are not expected to merely provide functional expertise, in finance, law, business management, etc or knowledge of the industry. These directors must also be a moral check, built into the system of corporate governance, to sense when promoters and managers are failing in their responsibilities to society and to correct them. How many independent directors are prepared to fulfil this role? And how often does the board candidly introspect into the values guiding its work?”

Hence, I strongly urge that companies must strictly adhere to the international best practices in corporate governance and disclosure standards since these benefits the companies. Transparency and good corporate governance practices provide additional comfort to stakeholders and enhance the long-term value of the company for its shareholders. It fosters and maintains investor and stakeholder confidence.

The companies’ annual reports should talk about their risk management policies, which include the institutionalization of an enterprise-wide risk management system, as well as the creation of on oversight board committee on risk management. Their annual reports should also feature the attendance of directors in board meetings, corporate governance scorecard, and code of conduct and ethics, among other things. This can also be ensured via the independence of board directors besides meeting the expectations of shareholders.

Empirical data is pertinent in validating research – Merits and demerits in relation to the various methods of data collection

1 Feb

By Ng Boon Ka 2008

RESEARCH ZOOMED IN

"RESEARCH" ZOOMED IN

INTRODUCTION:

According to the Oxford English Dictionary (2nd Edition, 1989), empiric is derived from the ancient Greek for experience, έμπειρία, which is ultimately derived from έυ in + περα trial, experiment. Therefore, empirical data is information that is derived from the trials and errors of experience. In this way, the empirical method is similar to the experimental method. However, an essential difference is that in an experiment the different ‘trials’ are strictly manipulated so that an inference can be made as to causation of the observed change that results. This contrasts with the empirical method of aggregating naturally occurring data.[1]

Notably, strict empiricists derive their rules of practice entirely from experience, to the exclusion of philosophical theory. Notwithstanding the disagreement of this author with such approach, the importance of an underlying philosophy will not be discussed in this paper due to the limit of space and time. For the purpose of this paper, this author proposes to discuss the matter at hand in an avant-garde style which seeks to unravel the merits and demerits of empirical data in validating research by reference to various data collection methods. A bold approach shall be taken by going beyond the confinement of traditional data collection methods, namely, questionnaires, interviews and observations, into structured and combined methods such as forecasting tools. This introduction shall be followed by different research areas (physics, metaphysics and divinity) which will determine the use of various kinds of collection tools. The kernel of the discussion shall revolve around core concepts like accuracy, predictability and practicality. Last but not least, the simplicity and clarity of thoughts is captured by a flow chart given in the appendix.

PHYSICS, METAPHYSICS AND DIVINITY:

While physics is the science concerned with the study of physical objects and substances, and of natural forces by employing empirical methods, metaphysics, on the other hand, is the part of philosophy that is concerned with trying to understand and describe the nature of truth, life, and reality. A higher level of ‘divine data’, which can be both visible and hidden from mankind, is beyond physics and metaphysics. Hence, it is obvious that only the first category may produce empirical data and not the latter two.

As pointed by Uma Sekaran, though moods, feelings, and attitudes can be guessed by observing facial expressions and other nonverbal behaviors, the cognitive thought processes of individuals cannot be captured.[2] Howbeit, Uma qualified this by introducing projective methods where certain ideas and thoughts that cannot be easily verbalised or that remain at the unconscious levels in the respondents’ minds can usually be brought to the surface though motivational research.[3]

In this regard, while some stretched psychological testing tools, both electronically and traditionally, to test intuition and inspiration, which may be subjective and abstract, it is nigh to impossibility to test divine revelation. In the Islamic context, the Quranic revelations were always accompanied by certain psycho-physiological changes that could easily be perceived by those present with the Prophet S.A.W. As for the revelations themselves, they occurred according to definite measures and in varying time intervals in a way clearly neglectful of the personal state of the person who was receiving them. Put differently, those revelations were taking place irrespective of the Prophet’s grief and sufferings or wishes and aspirations.[4] Hence, Muslims must accept the incident of such Quranic revelation without an iota of doubt and empiricism. Any empirical method which claims to test the revelation would not validate such benign research of the Quranic origin.

This author is of the view that the compilation of the Quranic ayat in the early ages of Islam as a collection of data encompassed both empirical and non-empirical methodologies. It was empirical because of the direct observation by the Prophet’s sahabat and non-empirical as they believed in the words of Allah as long as they were authentically recorded.

The research on the nature of truth, life, and reality can be creatively seen in the context of the booming growth of Islamic finance. The survey on the use of Islamic financial products and services by customers either in the form of interview or questionnaire is a good empirical method to gauge the confidence and satisfaction level of customers. Seen in the light of communicational clarity, personal interviews may enable the identification of nonverbal cues and the building of rapport, thus, affording more insights to the subject matter. The questions may be structured in a systematic manner (e.g. Longitudinal scale or Likert scale in different products) which facilitates the supply of answers by the respondents. These methods had been also improved by the use of computer-assisted interviewing (CAT) which enhances the relevance of empirical data in validating research.

Nonetheless, such empirical data may not be able to identify the actual reasons of the use of Islamic financial products and services in the first place as some may wish to invest in such products regardless of its validity in the Shariah as long as it provides satisfactory returns. In other words, although interviews and questionnaire may churn out empirical data in relation to the confidence and satisfaction level of the customers (which may be expressed); it may not be deep enough to furnish wholesome understanding of its genuineness (which may be hidden or distorted).

ACCURACY:

Empirical data obtained through observational studies are generally reliable, rich and free from respondent bias. This resonate the ‘first hand theory’ as opposed to hearsay evidence in which the former underlines the importance to appreciate matters first hand rather than relying on transmission of data without credibility and transparency. Historically, in the ninth century, it was amazing that al-Razi hung raw meat at different places to find the locality with the slowest rate of decay which was later recommended for the building of the new Audidi hospital in Baghdad. This experiment by contact with nature has motivated mankind to understand the complexity of God’s universe in an ingenious and diverse manner.[5]

Nevertheless, the aforesaid example on observation may be tainted with extraneous factors which may skew the examination, determination and final result. Likewise, while it is easier to note the effects of environmental influences on specific outcomes through observational studies[6], there are possibilities that empirical data derived thereof may be invalidated by vitiating factors like natural causes which are beyond our control. Biasness that crop into the data collection methods may result in recording errors, interpretational errors, memory lapses, and unreliability of the empirical data.

PREDICTABILITY:

The use of meteorological tools to examine natural phenomena like the weather not only gives good empirical data of current status quo, but also gives good forecast to a certain extent. Empirical data from forecast is still second to none in most areas of physical sciences. However, a good forecast remains only as a good estimator since certainty of knowledge is still beyond the realm of human’s intellect. In short, the extrapolation of current or past empirical data to predict the outcome in the future may not indicate the whole truth. Assuming a research is done on the date of kiamat (Last Day), is it possible that we use forecasting tools to predict such an incident? Ostensibly, it is an affront to common sense!

Correspondingly, although fortune telling by observation of the palm and face is a type of empirical data upheld by some people, this kind of data derived from such data collection method may not validate a research, for instance, on the success rate of a person in the future. On the same token, biased empirical data can be found in the criminal profiling of certain suspects based on their DNA, cultural background and even religious belief as evidenced by the negative profiling of Muslims as potential terrorist after the Sept. 11 attack. On the flip side, the data collected though clinical (lab) experiment on the food intake of children may be used to gauge their growth rate in the future.

PRACTICALITY:

The collection of empirical data largely hinges upon resources such as time, energy and cost of the researcher which might bias the recorded data due to observer fatigue. In the retrieval of preexisting records particularly historical ones, one may doubt the extent of which all records have survived to allow for fair representation of the sample. In spite of that, empirical data is still better than non-empirical data especially in the historically-oriented research. In short, the practicality of the empirical data is matter to be judged according to the area of research that we are interested.

THE NUTSHELL:

As there is no certainty in knowledge, no single method and data are sufficient to provide a complete comprehension of an area of research. Empirical data from various data collection methods is the most useful source for contemporary research compared to futuristic and historical research. In both the latter cases, there are elements of uncertainty and subjectivity. In essence, it is contended that a research which adopts a multi-method and multi-data approach (the triangulation of methods), may yield more constructive outcomes. Thus, the axiom ‘do not put all your eggs into one basket’ rings a bell!


[2] Uma Sekaran (2003), Research Methods For Business – A Skill-Building Approach, John Wiley & Sons, Inc., 4th Ed, pg. 254.

[3] Techniques such as word associations, sentence completion, thematic apperception tests (TAT), inkblot tests, and the like.

[4] Malik Bennabi (2004), The Qur’anic Phenomenon – An Essay of a Theory on the Qur’an, Islamic Book Trust, pg. xxi.

[5] This point was stated in the earlier assignment on Muslim Contribution to Scientific Research – A Renaissance.

[6] Uma Sekaran (2003), Research Methods For Business – A Skill-Building Approach, John Wiley & Sons, Inc., 4th Ed, pg. 253.

JUST DISTRIBUTION: A MYTH OR A REALITY?

1 Feb

by Ng Boon Ka 2006

Equal Distribution

Equal Distribution

INTRODUCTION:

Prof. C.K. Allen in Aspects of Justice stated that, ‘Ever since men have begun to reflect upon their relations with each other and upon the vicissitudes of the human lot, they have been preoccupied with the meaning of justice.’[1] Justice is therefore not only an ancient terminology but a practical concept which governs the life of men from all walks of life at any place and time.

This article seeks to chart the theory of justice in the light of our economic integration in Malaysia. It is of paramount importance that coherence, tolerance and balance should be the predominant ingredients in upholding social justice. It shall first begin with understanding the essence of justice rather than the forms of justice and see how it can be practised in the general social context. Two contrasting theories of justice are outlined below, namely Rawls and Nozick’s theory. In addition, there is also a highlight from the Islamic perspective where the zakat and amanah principles are illustrated in brief. Just distribution will be discussed critically in the context of our New Economic Policy which had undoubtedly stirred many controversies hitherto. Eventually, it is the just and equitable sharing of a bigger pie in the economy which serves as the hallmark of a peaceful and balanced society.

THE ESSENCE OF JUSTICE:

Equality is the essence of justice. Thus, achieving equality and not preserving inequality is the fundamental function of justice. Justice is supposed to be applied to all people and in all circumstances to which it relates without fear or favour. Justice applied in this manner is no more than a formal principle of equality. However, it cannot be regarded as a principle of equality without qualification. The reason being so is that justice cannot mean that we are to treat everyone alike regardless of individual differences such as the financial or social backgrounds of a person. In other words, the like should be treated alike and not like chalk and cheese so that everyone who is classified as belonging to the same category for a particular purpose is to be treated in the same way. This can be summed up in the aphorism of, ‘Treat equal things equally and treat unequal things equally’. Thus, formal justice requires equality of treatment in accordance with the classification laid down by the rules.

As one should look at the substance rather than the form, justice can be further understood in its substantive essence. Substantive justice is concerned with the question of whether the actual rules are just themselves. Being concerned with the content and substance of law, this notion endeavours to solve queries on what basis that the society should be operated and what political institutions should be allowed to create laws.

In the past, the rule of Apartheid was adopted in South Africa where discrimination was allowed on the basis of colour. One may argue that its legal system at that time was procedurally just. Nonetheless, there was only formal justice but no substantive justice as the content of the law itself was bad and oppressive. Similarly, the United States’ capture and detention of alleged terrorists in Guatanamo Bay and Abu Ghaib prisons may be procedurally just according to their laws, if they ever claimed to be, but surely their actions in the guise of war on terrorism had indubitably harassed human dignity which was against substantive justice.

THE PRACTICALITY OF JUSTICE:

Aristotle (384-322 BC) has classified justice into distributive justice and corrective justice. Distributive justice is based on the principle that there has to be equal distribution among equals.[2] Distributive justice is concerned with the allocation of rights, duties and responsibilities among the members of the community so that the equilibrium is maintained. Aristotle spoke of the distribution of ‘honours or money or other things that fall to be divided among those who have a share in the Constitution.’

It is the cornerstone of justice that a difference ought to be made in a way that rights and duties, advantages and burdens are distributed with proper consideration in each and every circumstance. Hence, just distribution among and within classes of people signifies distribution according to a given criteria of discrimination which is allowed provided that the following conditions are satisfied, namely:-

  1. The classification is reasonable and not arbitrary;
  2. There is an intelligible differentia;
  3. The object of discrimination must be determined; and
  4. The object is achievable.

One may complain of injustice if he or she is treated worst than the other within that class itself. However, can the same person complain if he or she is treated better than others within the said class? It is humbly submitted that in both instances, there is still injustice.

On the contrary, corrective justice is justice that corrects any disequilibrium or any imbalance in the society by restoring whatever equality existed before a wrong was committed or to achieve a desirable form of equality in the future.

One may find it illuminating to see how the principles of corrective justice have been aptly adopted by the judiciary in the United States (U.S.). The U.S. Supreme Court’s decision in Brown v Board of Education of Topeka (1954) had not only opened the gates of all white school to Linda Brown, a little black girl but also put a full stop to the ‘separate but equal’ policy. The coming into force of the Civil Rights Act in 1964 had also forbidden segregation in all public facilities.[3] Similarly, the Court’s decision in Regents of University of Carlifornia v Bakke (1978) had witnessed a corrective justice which was designed to redress any unequal and unfair distribution that existed through past discrimination.

JUSTICE IN THE SOCIAL CONTEXT:

The aim of justice as a social virtue is to preserve equilibrium in the society and a state of harmony in all human affairs. In the social framework, justice is a quest for achieving justice for those who are exploited, oppressed, suppressed, discriminated, deprived and underprivileged. Social justice provides justice not only for the ‘haves’ but also the ‘have-nots’. It is an all-embracing ideology and theory which aims to obliterate and break the social barriers between the affluent and the impoverished, the powerful and the weak, and between the privileged and the disadvantaged. In this regard, justice ensures the equitable distribution of the social, material and political resources. Therefore, law and policy should be utilized as instruments of social change to achieve social justice in line with the social purposes of each and every society.

Although Aristotle observed justice as equality, the establishment of absolute equality or absolute uniformity is nigh an infeasible task. Justice in its realistic sense is concerned with substantial equality or equitability. Furthermore, Plato’s view of justice is that, ‘democracy distributes an odd sort of equality to equals and unequals.’ Given this view, it is often said that unequal distribution of resources is indispensable to equalise benefits in the case of unequals. In this context, the principle of need dictates that one should be judged according to his or her own peculiar circumstances. As such, there should be different treatments for different people which are carried out on a case-to-case basis. In other words, there should be varied scales of need realization where resources should be apportioned in different portions among different people.

The concept of egalitarian justice demands the concept of just distribution, not equal distribution of benefits. It ensures the just distribution of goods in the favour and well-being of all, giving paramount attention to the least served and backward segment in the society. In a broader context, a just and fair society aspires to protect the common good of all its members. What then is the common good? Briefly, common good is the hallmark of a just society which guarantees the total enjoyment of benefits by all participants in the society. It is, therefore, social justice which lays down the foundation and sets a benchmark of common good which extends not only to the society, but also to the political and economic systems of a nation as a whole.

RAWLS’S THEORY OF JUSTICE:

In Nicomachean Ethics[4], it was put forward that goods should be distributed to individuals on the basis of their relative claims. Thus, goods might be distributed according to needs or deserts or moral virtues and so forth. In this respect, John Rawls in his book ‘A Theory of Justice’ (1972) rejects the basic structures which incorporate arbitrary inequalities but he does not espouse egalitarianism. What he defends may, however, be described as a qualified egalitarianism.[5]

Justice is based on fairness in accordance with those principles which result from the ‘original position’. In this original position, the parties agreed on the principles by which their society should be organised subject to conditions which are considered as reasonable and fair. It is, therefore, not simple fairness but fairness from the original position. In this context, the conditions of the original position put everyone in the same position.

Rawls uses a ‘refurbished’[6] version of the social contract argument to establish his principles of justice. The free and rational persons concerned to further their own interests would accept in an original position of equality as defining the terms of their association. The intuitive idea is that since everyone’s well being depends upon a scheme of co-operation without which no one could have a satisfactory life, the division of advantages should be such as to draw forth the willing co-operation of everyone taking part in it, including those less well situated.[7]

The parties are supposed to live behind the veil of ignorance whereby they should not be acquainted with their own political, economic and social backgrounds. The veil of ignorance provides for an agreed choice which eliminates any prejudices. This is akin to a scenario where a person cutting the cake should only cut it in the same size to which other people may enjoy. Thus, it seems reasonable and generally acceptable that no one should be advantaged or disadvantaged by natural fortune or social circumstances in the choice of principles. It also seems widely agreed that it should be impossible to tailor principles to the circumstances of one’s own case.[8]

There are things which every rational person is supposed to acquire. These are called primary social goods which include, inter alia, rights and liberties, opportunities, power, income, self-respect and wealth. These primary goods are the fulfilment of rational desires of each individual which are the necessary means to achieve one’s ends.

In this spectrum, there are two principles of justice which are derived from the concept of primary goods. Firstly, each person is to have equal rights where the basic liberties are maximised. These liberties include freedom of expression and speech, freedom of assembly, freedom of movement and so forth which are theoretically available in all democratic countries. Nevertheless, liberty for all may have to be restricted but only for the sake of liberty itself. For example, freedom of assembly may be curtailed in line with the regulation and maintenance of public order. It is the latter which speaks volume of a greater order, peace and liberty for all. In other words, it is the lesser liberty which is restricted for the attainment of a greater liberty.

Secondly, social and economic inequalities are to be arranged to the greatest benefit of the least advantage consistent with just saving principle. This arrangement must be attached to all offices and positions open to all under conditions of fairness and equality of opportunity. The just saving principle can be discerned by looking at how the US is exploiting the natural resources in the oil-rich Middle East even though the US itself has sufficient resources in its own country. In fact, the recent price hike of petrol prices in Malaysia was not only a reduction of subsidy by the Government to finance other development projects, but was also aimed to safeguard the country’s reserve for the future generation.

Virtually, there are people who may be conscious of the reality of disparity and differences among individuals in the original position. In this aspect, Rawls does not advocate that resources and wealth are to be divided equally. However, any lopsided division can only be validated if such division results in favour of all people. Injustice, then, is simply inequalities that are not benevolent to all. Notwithstanding his validation, one may try to resolve this difference in principle by applying the maximum rule. This maximum rule indicates how to rank alternative by their worst possible outcomes and to choose that worst outcome which is superior to other worst outcomes. In sum, it is the maximum alternative out of the worst outcome.

The social system is to be designed so that the resulting distribution is just however things turn out. To achieve this end it is necessary to set the social and economic process within the surroundings of suitable political and legal institutions. Without proper arrangement of these background institutions, the outcome of the distributive process will not be just.[9]

In short, fair distribution for Rawls hinges on fair procedure which is the core idea of ‘justice as fairness’. What Rawls hunts out are mutually acceptable ground rules which are ideals for all. Given this connecting link, Rawls reasons that his principles would be preferred to others, since they favour the least advantaged members of the society.[10]

Be that as it may, Rawls’s theory can be aptly applied in moderate scarcity and deficiency. If there is too much sufficiency, justice will loose its hold and significance. On the other hand, when there is extreme penury, there can be only room for the survivor of the fittest as might is right. Thus, just distribution would only be meaningful in a moderate society which is neither self-sufficient nor too poor.

onetheless, this theory is not without flaw. The original position advocated is hypothetical, artificial, illusionary and difficult to realize. How can one imagine a person from whom individual history and values have been taken away? Such person no longer remains. In fact, Rawls’s model of economy takes into consideration only distribution but not production. Such one-way theory is further discredited as there is no elaboration on what institution arrangements that the distributions can be carried out.

ROBERT NOZICK’S THEORY OF JUSTICE:

Nozick’s treatise as projected in his book ‘Anarchy, State and Utopia’ (1974) eulogizes the virtues of the eighteenth century individualism and nineteenth century laissez-faire capitalism. Therefore, this theory rejects any form of governmental interventions in the distribution of wealth. A State which excessively intervenes so as to alter the pattern of wealth distribution is an immoral State as it involves continuous interference with the individual’s actions and choices. Hence, justice is a matter of entitlement which is not patterned as opposed to the goal-based theory of justice. Distribution based on entitlement is established from this formula, ‘From each as they choose, to each as they are chosen’. Simply put, as might is right, justice is the right of a strong man.

In actual fact, the duty of the State is not to redistribute resources but rather to protect a person’s natural rights in what they already possessed. In relation to these natural rights, they cannot be infringed without the approval of an individual as these rights are exclusive within a person himself and not extendable to that of others. What is imperative is that we abstain from peculating into the rights of others in the industrial pursuit of our own interests and objectives.

However, Nozick does not put paid to an idea of the presence of State. Otherwise, it will lead to anarchy and chaos that do not favour any States especially those poor ones. He advocates a minimal State which operates in a minimum manner and functions as a night-watchman. It protects the society from force, fraud, theft, enforcement of contracts, and enjoys monopoly of force. Nozick offers a speculative Utopia consisting in ‘a system of diverse communities organised along different lines and perhaps encouraging different types of characters, and different patterns of abilities and skills’.[11] In Nozick’s view, the only possible framework for such a system is the minimal State which ‘best realizes the utopian aspirations of untold dreamers and visionaries’.[12] It allows us, individually or with whom we choose, to choose our life and to realize our ends aided by the voluntary co-operation of other individuals possessing the same dignity.[13]

Indeed, he argues there is no such meaningful concept as the goods of society but only the goods of particular individuals and society has no prima facie right to shuffle those around between individuals.[14] How is destitution to be prevented and relieved? Nozick’s answer, naïve in the extreme, points to the free operation of the market, voluntary uniting and private philanthropy.[15]

Moreover, Nozick has likened taxation of the earning of labour with forced labour. Those who created wealth themselves have sacrosanct and inviolable rights over their own possession and wealth. As such, redistribution on the basis of social justice and social good is unjust, unmerited and untenable.

Many criticisms have been levelled against this theory. The concept of minimal State is a wishful and imaginative thinking as it cannot withstand against internal and external security threats by only carrying out its basic functions of a night-watchman. In addition, Nozick’s equivalence of taxation and forced labour is nothing but a figment of the imagination. Taxation is dissimilar from forced labour and slavery as it is different in terms of the burden it imposes. In fact, one may avoid different scales of taxation by freely opting for any employment according to one’s own choice as opposed to forced labour where there is no free choice at all. In forced labour, it stealthily robs an individual of dignity and rights. On the contrary, taxation is not an indecorous infringement of one’s rights but a lawful and rational contribution to the welfare of others. In short, taxation is for a just cause, not only for oneself but for the society as a whole. One must ponder as to what would happen if a person is incapacitated by an accident, who would support him financially?

This theory is non-altruistic as it shows no concern for others. Its winner-takes-all principle is purely an individualistic approach which is analogous to a tyrannical mastery of greed and wealth. In the diversity of interests, it is the collective interest and social good of the most disadvantaged which holds the flag and not that of an individual’s good.

Hence, it is humbly submitted that Nozick’s theory of justice is only a one stage process. As an illustration, imagine there is a job recruitment selection which demands a graduation degree as the basic requirement. Would this requirement in the process of selection benefit those without it? Surely it would not. How about those who come from the rural areas where the highest education that is available is only up to the level of secondary education?

On the other hand, Rawls’s theory of justice is a two-stage process. In the same example, the first stage would be the requirement of a graduation degree. Notwithstanding this, the second stage would allow an allocation (quota) that is based on the circumstances of each candidate. In a nutshell, one should be judged by the opportunity that one can enjoy.

JUSTICE FROM THE ISLAMIC PERSPECTIVE:

Justice in Islam does not function according to the contingency of time. What was once considered fundamentally just in the past is treated likewise in the current state of affairs. Islam is not merely a religion per se, but it is a way of life which seeks to establish peace on earth by regulating the society with principles of justice. Justice in Islam is the value of being morally and consciously just in giving every man his due. On top of that, justice does not only mean to give each person his due but it also means to be merciful in its due distribution.

It is true to a certain extent that one may be allowed to enjoy whatever one deserved. But, one should not enjoy rapaciously at the expense of others. The concept of philanthropic sharing and giving in Islam is evidenced by the paying of zakat to the poor. Fundamentally, zakat is the third after tawhid and prayer in the five pillars of Islam. It is obligatory on every Muslim who owns the nisab, regardless of race, colour, social status or sex.[16] In addition, Adam Smith defined justice in the sense that all citizens of the State must share in financing government expenditure, each according to his ability, which is protected by the State. The concept of zakat is stated in the following verses:-

“Alms are for the poor and the needy, and those employed to administer the (funds); for those whose hearts have been (recently) reconciled (to Truth); for those in bondage and in debt; in the cause of Allah; and for the wayfarer: (thus is it) ordained by Allah, and Allah is full of knowledge and wisdom.” (Verse 9:60)

“And be steadfast in prayer; practise regular charity; and bow down your heads with those who bow down (in worship).” (Verse 2: 43)[17]

Furthermore, the theory trust (amanah) imposes social, political, economic and religious obligations upon man as the vicegerent on earth. These obligations which are based on trust must be discharged sincerely and honestly to the fullest extent as possible. We should tailor our own interests with those of others in a just manner and administer the trust in all sincerity as if it is an act of devotion as the Quran states that,

“Allah doth command you to render back your Trusts to those to whom they are due; And when ye judge between man and man, that ye judge with justice: Verily how excellent is the teaching which He giveth you! For Allah is He Who heareth and seeth all things.” (Verse 4:58)

“O ye that believe! betray not the trust of Allah and the Messenger, nor misappropriate knowingly things entrusted to you.” (Verse 8:27)

“Those who faithfully observe their trusts and their covenants.” (Verse 23:8)[18]

“We did indeed offer the Trust to the Heavens and the Earth and the Mountains; but they refused to undertake it, being afraid thereof: but man undertook it;- He was indeed unjust and foolish.” (Verse 33:72)

Justice in Islam is to undo injustice as the saying goes, ‘Do not do injustice and do not accept injustice’. The following Quranic verses illustrates how justice plays a pivotal role in Islam, viz.:-

‘‘We have sent down to thee the Book in truth, that thou mightiest judge between men, as guided by Allah: so be not (used) as an advocate by those who betray their trust.’’ (Verse 4.105)

‘‘O ye who believe! stand out firmly for justice, as witnesses to Allah, even as against yourselves, or your parents, or your kin, and whether it be (against) rich or poor: for Allah can best protect both. Follow not the lusts (of your hearts), lest ye swerve, and if ye distort (justice) or decline to do justice, verily Allah is well-acquainted with all that ye do.’’ (Verse 4.135)

‘‘O ye who believe! stand out firmly for Allah, as witnesses to fair dealing, and let not the hatred of others to you make you swerve to wrong and depart from justice. Be just: that is next to piety: and fear Allah. For Allah is well-acquainted with all that ye do.’’ (Verse 5:8)

‘‘We sent our Messenger with the clear signs and sent down the Book and the Balance with them so that mankind might establish justice.’’ (Verse 57:25)

“O mankind! We have created you from a male and a female, and made you into nations and tribes, that you may know one another. Verily, the most honourable of you with Allah is that who has more piety. Verily, Allah is All-Knowing, All-Aware (of your condition and deeds).” (Verse 49:13)

Therefore, justice is the bond which holds the society together and transforms it into one brotherhood. It underscores the principle of universalism enshrined in Islam which abhors individualism with no regard of others. Having stressed that, it is the collective duty for collective welfare which aims to decrease the gulf between the ‘haves’ and the ‘haves not’ in order to create a balanced society.

In this context, Islam Hadhari, being a model approach for development and progress, focuses on a balanced and comprehensive economic development which enjoins all communities to take the opportunities available under the Malaysian concept of partnership in order to improve our economy. Undoubtedly, a mature and stable political system coupled with a sustainable economic development and a just society would surely make the rope strong enough to tie the people together.

ECONOMIC INTEGRATION – LET’S HAVE A BIGGER PIE!:

Having perused justice in a general framework, let us delve with its application and practicality in the context of our country’s economic integration.

Under the expurgated British divide-and-rule regime in Malaya, different ethnics were divided and identified by way of employment and geography. This thwarted racial conflicts but it also preserved the cultures of the different racial groups almost intact. However, it was a policy which saddled the plural society with differences, resentment, distrusts and even animosities in people who live in the same country. Since then, much muddy water has flowed under the bridge until the disastrous May 13 riot in 1969 which gave birth to the controversial New Economic Policy (NEP).

WHY NEP?:

A Government White Paper issued in 1971 entitled Towards National Harmony stressed that the ‘economic factor’ was the main cause of the May 13 riot. The Second Malaysia Plan also noted that,

‘National Unity is unattainable without greater equity and balance among Malaysia’s social and ethnic groups in their participation in the development of the country and in the sharing of the benefits from modernisation and economic growth. National Unity cannot be fostered if vast sections of the population remain poor’.

In line with this novel nation building philosophy, the NEP was born. It was an ambitious endeavour of social engineering aimed at redistributing wealth, eradicating poverty, and restructuring society. There was a necessity to ‘restructure Malaysian society’ in order to rid of the identification of race according to economic activity. The raison d’être behind this policy was, inter alia, to dilute and ultimately dispel the spells of jealousy that stirred up racial odium and hostility which at one stage unfortunately shoved Malaysia into the vast chasm separating rich and poor.

WHAT IS NEP?

The NEP aims to: 1. restructure the economic imbalances in the society and eliminate the identification of race with economic function; and 2. increase employment opportunities and eradicate poverty of all Malaysians irrespective of race.

The initial target was to move the ratio of economic ownership in Malaysia from a 2.4:33:63 ratios of bumiputras, other Malaysians, and foreigner ownerships to a 30:40:30 rations. The NEP plans to achieve its target in 20 years, namely by 1990 in order to enable the bumiputras to own 30 per cent of the corporate sector of the economy. It plans to reduce poverty among the bumiputras neither by robbing Peter to give to Paul, nor by robbing Ah Chong to give to Ali; but by enlarging the national cake.

Our former Prime Minister, Tun Dr. Mahathir once said, ‘It is better to have a portion of the big thing than the whole of a small thing, or worse still, the whole of nothing’. The whole economic pie should get larger and be cut more evenly so that everyone, whether Malay, Chinese or Indian would get a larger slice.

The NEP purportedly ended in 1991. Nonetheless, the policies continued in the form of other programmes such as the National Development Policy. Moreover, the current Ninth Malaysia Plan also allows all ethnic communities to advance collectively and work together to increase the overall size of the economic pie.

NEP-A VIABLE APPROACH?

The Asian financial crisis in 1997 which sparked off the racial turmoil in Indonesia fortunately did not take place in Malaysia. Despite the tremendous hardship undergone by many Malaysians, our people had grown stronger together which had impliedly endorsed a resounding triumph of policy transformations in Malaysia since 1969. Let us give ourselves a big round of applause!

Practically, although the affirmative action in Malaysia is still far from the ivory tower, it had nevertheless helped in stabilising the country from arrays of external and internal turbulences. Besides Malaysia, India’s long war on caste has also provoked India’s federal Cabinet to expand the affirmative action to include the backward classes who wants a slice of the globalisation cake. By comparison, our positive discrimination is working better than those in the United States, India, Sri Lanka, Fiji, just to name a few.

Malaysia’s exemplary model of economic crisis management has been adopted in the Pacific Islands no more obviously than in Fiji. To this end, the nationalist-minded Fijian government has implemented policies projected to apportion 50 per cent of business into the indigenous Fijian hands by 2020 which is now dominated by the Indian, the white and the Chinese.

Plato, in his book The Laws stressed that, ‘If a State is to avoid civil disintegration, extreme poverty and wealth must not be allowed to rise in any section of the citizen body because both lead to disasters.’ In this regard, Ye Lin-Sheng in The Chinese Dilemma averred that, ‘The NEP favours a particular interest group in the name of the general interest, namely a better economic balance, which in turn makes for greater stability.’[19]

On the other hand, our former Prime Minister, Tunku Abdul Rahman who opposed against the 30 per cent target, wrote in the 1980s that, ‘an attempt was made to fill the target without thought for the ability and the capability of attaining it… Some became rich overnight while others became despicable Ali Babas and the country suffered economic set-backs’.[20]

One of the NEP’s reproaches is that it no longer helps the poor but instead is a protectionist scheme which shield and shelter the biggest ethnic community in Malaysia. Ostensibly, the bumiputras classification itself does not discriminate based on economic disparities. For sure, those well-off bumiputras could always do away with their so-called privilege in favour of those needy, regardless of whether they are bumiputras or non-bumiputras.

Recently, it was said by our Prime Minister, Datuk Seri Abdullah Ahmad Badawi that, ‘The struggle to strengthen the economy of the Malays is an economic mission that has to become a national mission and only after the economy has been strengthened would the pride and honour of the Malays be more meaningful’. However, he also stated that, ‘This can only be done when Malays adopt the approach of helping other Malays such as the rich helping the poor’.[21]

Datuk Seri Abdullah Ahmad Badawi, in his maiden speech as United Malays National Organization (UMNO) president to the UMNO general assembly in 2004 stated, ‘Let’s not use the crutches for support all the time, the knee will become weak’. It was further emphasized that the continued usage of crutches would eventually result in needing a wheelchair instead. Indeed, no one who wants to walk tall would want to talk with crutches. On the same token, Tun Dr. Mahathir’s book The Malay Dilemma was quoted to have stated that, ‘they (Malays) are not proud of the ‘privilege’ of being protected by law like cripples. They would like to get rid of these privileges if they can, but they have to let pride take second place to the facts of life’. In this regard, the NEP has raised self-worth rather than self-doubt.[22]

Furthermore, Khairy Jamaluddin, an investment banker and the Barisan Nasional deputy youth chief, has also written that, ‘if developing human capital is the heart of the Ninth Malaysia Plan, levelling gross inequalities is its soul…But instead of simply reintroducing targets for ethnic communities, Abdullah has clearly spelt out that distribution of income and opportunities will go to those who deserve it, judged by need and merit.’[23]

SHARING A BIGGER CAKE!:

In reminiscence of the infamous bloody May 13 incident, we should not be oblivious to such an event and its significance. We should not ignore at our own peril the danger of economic imbalances among our people. The vicious circle must be broken. Poverty should not be the hallmark of our country. Indeed, history is a good teacher but never a good master.

Therefore, it is ripe time that we put thoughts of lack behind us. It is time for us to discover the secrets of the stars and to open up a new heaven where our spirits can soar. The privilege given under the affirmative action should be used as an incentive to nurture our competitive streak. We should leverage on our harmonious diversity to explore the neoteric opportunities and develop new markets. As learning is a life-long process, each of us must learn from each other. The Malay Muslim may aid in bringing the rest to tap into the oil-rich Islamic nations (‘so-called the Camel’); the Chinese may help to bring others to capture the booming market in China (‘so-called the Dragon’); and the Indians may assist in taking the Malay and the Chinese to explore India (‘so-called the Elephant’). All this augurs well for the future of Malaysia.

CONCLUSION:

Aristotle argued that human beings are politikon zoon, political or social animals, to wit, individuals who are inclined by their nature to live in groups and ultimately in societies. There arises from this an inevitable conflict between individual wish and collective interests. As such, any emphasis which is so individualistic as to deny the collective, or so collectivist as to deny individuality will omit half the terms of equation. Justice, ultimately, is about a concept of ‘right relations’ in society and the choice is not between individualism and co-operation but rather a choice to be made for the expression of the individualism of human beings as social creatures.

Since there is no one-size-fits-all policy which favours everyone, the implementation of the NEP and its ensuing progresses must be carefully scrutinised. As it takes two to tango and it also takes two hands to clap, any disgruntlements are to be settled peacefully and diplomatically taking into consideration of all parties. No doubt, it is a balancing act on a tight rope, a delicate balance that has to be struck in balancing the interest of all communities which form the very existence of a sustainable society.

The 30 per cent target is merely a numerical and designative label. What lies beneath its true letter and spirit is the propitious effort to uphold a more equitable and just society for the overall benefit of each and everyone in Malaysia. Surely, the quest for unlimited wealth by the avaricious could destroy the tranquillity of life and without a just distribution anchor, man would have despair. As Winston Churchill had once said, ‘we make a living by what we get; we make a life by what we give’

Can we really feel contented if in the midst of our wealth, there are still pockets of people suffering from hunger? Definitely we can’t. We must be the champion of the weak, the powerless and the disenfranchised against the outwardly overpowering dominance of the rich and the powerful. Let us together sacrifice to create new opportunities for the poor to hop on the gravy train and have a bigger pie!

As charity begins at home, we should not hesitate anymore to share our material and non-material wealth with others on our road to a peaceful and balanced society. Truly, a journey of a thousand miles starts with the first step. There must be a beginning of any great value, but the continuing unto the end until it be thoroughly achieved yields the true glory. John F. Kennedy once said,

‘Peace is a daily, a weekly, a monthly process, gradually changing opinions, slow eroding old barriers, quietly building new structures. And however undramatic the pursuit of peace, the pursuit must go on’.

Let me end here by quoting the proclamation by the Yang di-Pertuan on the occasion of Independence Day celebrations, 31st August, 1970 where the Rukunegara was worded in the form of a pledge that,

‘OUR NATION, MALAYSIA, being dedicated to achieving a greater unity of all her peoples; to maintaining a democratic way of life; to creating a just society in which the wealth of the nation shall be equitably shared; to ensuring a liberal approach to her rich and diverse cultural traditions; to building a progressive society which shall be oriented to modern science and technology…’.

In sum, just distribution will be a myth if the right theories do not come up to scratch. Conversely, it can be a reality if the right theories are practised earnestly. The future is not only about growth and material prosperity, as history had taught that the world would be a better place wherever good universal values of fairness, compassion, justice and tolerance prevail. As we enter the new millennium, as always, the hope for a brighter and peaceful future reigns eternal.

Endnotes:


[1] CK Allen, Aspects of Justice, 1958, p. 112.

[2] Nicomachean Ethic V 3.

[3] Ye Lin-Sheng, The Chinese Dilemma, East West Publishing Pty Ltd (2005).

[4] Book 5.

[5] Lloyd’s Introduction to Jurisprudence

[6] Per N. Mac Cormick (1973) 89 L.Q.R. 393.

[7] A Theory of Justice, Oxford University Press.

[8] A Theory of Justice, Oxford University Press.

[9] A Theory of Justice, Oxford University Press.

[10] Lloyd’s Introduction to Jurisprudence

[11]Anarchy, State and Utopia’, Basic Books Inc., p. 317.

[12]Anarchy, State and Utopia’, Basic Books Inc., p. 333, Lloyd’s Introduction to Jurisprudence

[13]Anarchy, State and Utopia’, Basic Books Inc., p. 333

[14] Per C. Fried, ‘‘Distributive Justice’’ Social Philosophy and Policy, vol. 1, no. 1, p. 45 at p. 49.

[15] Lloyd’s Introduction to Jurisprudence

[16] Dr. Yusuf al-Qardawi, Fiqh az-Zakat.

[17] See also Verse 2: 83, 110, 177, 277; 4: 162; 5: 12, 55.

[18] See also Verse 70:32.

[19] Ye Lin-Sheng, The Chinese Dilemma, East West Publishing Pty Ltd (2005).

[20] Tunku Abdul Rahman Putra, Political Awakening, p. 98. Pelanduk Publications (1986).

[21] New Straits Times, 7th June, 2006.

[22] Ye Lin-Sheng, The Chinese Dilemma, East West Publishing Pty Ltd (2005).

[23] New Straits Times, 1st April, 2006.

SOCIAL INTEGRATION – HARMONISING UNDER ONE BIG UMBRELLA

1 Feb

By Ng Boon Ka 2006

Social integration

Social Integration in Malaysia

INTRODUCTION:

Centuries of bloodshed in the Holy Jerusalem, years of tension between the Fijian majority and the Indian minority in Fiji, endless confrontation between Israel and Palestinian, the war in Sri Lanka which is rooted in the grievances of the ethnic Tamil minority against the ethnic Sinhalese, the atrocious genocide in Darfur and Rwanda, the civil warfare between Croats and Serbs, turbulence between Armenians and Azerbaijanis had immensely plagued human society for ages. Hitherto, one may still question as to what exactly is the casus belli for all these mayhems which had proven a worldly albatross to all.

Malaysia, being a multi-cultural, multi-ethnic, multi-lingual and multi-religious nation, is accredited for peaceful maintenance of its national unity in such a vibrant and pluralistic society. Such pluralism had further augmented and enriched our tolerance, understanding and respect for one another. Uniting as a single man, the Malaysian people of different ethnics and backgrounds are working assiduously to make Malaysia a modern, prosperous, highly democratic and civilised country in 14 years time by 2020.

In this industrious pursuit, many policies have been drawn up and many actions have been taken. The National Unity and Integration Action Plan under the purview of the Prime Minister’s Department aims to build the nationality of ‘Bangsa Malaysia’ with the Malay, Chinese, Indian and other minorities living proudly and sheltering harmoniously under one big umbrella of Malaysia. This is what makes Malaysia truly Asia!

China, despite its multiple cultures in various provinces, is able to co-exist in diversity. Muslims population alone in China is more than triple the whole of Malaysia. Its cultural integration amongst the Muslims and Han Chinese had started since the Ming Dynasty. What then is the raison d’être that China is still able to exist and prosper peacefully in the face of its gargantuan population of 1.3 billion? In this regard, leaders of our country must think and re-think, learn and re-learn from the past history and current development of China.

VISION SCHOOLS-THE NEW WAY FORWARD:

There is no shred of doubt that education is the key instrument in the promotion of social and cultural integration. It is also a human machine that churns out our future leaders. Our education system is a combination of at least 2.3 million primary pupils in national schools, 640,000 in Chinese schools and more than 97,000 in Tamil schools. Be that as it may, a study in year 2000 at the University of Malaya shocked the nation when it revealed that only 10 per cent of students see themselves as Malaysians and the rest identify themselves as Malays, Chinese or Indians. (Asiaweek, January, 2001).

The Student Integration Plan for Unity (RIMUP), being the brainchild of our Prime Minister, Dato Seri’ Abdullah Ahmad Badawi when he was the Education Minister in 1986, provides for primary schools of different streams to interact with each other. Notwithstanding that 1,387 primary and 540 secondary schools had signed up to join the programme since July 2005, the response on the ground was rather lacklustre thus far. This plan is of paramount importance as it is deemed as an alternative to the Vision School (Sekolah Wawasan). Under this plan, platforms are arranged for participating schools to report on their progress such as sports and other activities between schools which further commit them to inter-racial programmes.

Nonetheless, the main stumbling block to its progress is due partly to the strong antagonism from a small number of ‘conservative and orthodox’ Chinese educationists who perceive this plan as a threat to the erosion of their mother tongue and identity. But, these prejudices and uncalled for fear are very wide of the mark and should be corrected in line with the country’s vision and mission. Truly, we should not burn the mosquito net if we are angry with the mosquito. It, therefore, takes magnanimity to look beyond communal interest. In this regard, Ye Lin-Sheng in The Chinese Dilemma stated that, ‘Fighting to safeguard Chinese-language education is fighting for residual rights in another guise. Indeed it may be seen as the Chinese community’s last stand’. At a more nuanced level, the taboos which cultivate ignorance and hidden discontent cannot be seen as an impasse which impedes our progress to becoming a developed nation in a not too distant future.

In this flat globalized world, the learning of other languages has gone beyond any ethnic and cultural barriers. Indubitably, its probative value far outweighs its prejudicial effect as, for instance, there are 85 countries with more than 30 million people learning Mandarin hitherto. Therefore, there should be no fear as the Chinese language has been in existence for millenniums, what more when there are many other countries like the UK, US, France and so forth that are making beelines to learn this international language. At present, there are approximately 2,400 schools in America alone providing Chinese (Mandarin) as an elective subject for all students in which their grades can be used for consideration into their university entrance requirement. In this respect, similar laudable efforts have been taken in our local context where our Prime Minister had proposed to make Chinese and Tamil languages as elective courses in national school.

Indeed, the best way for our children to get a taste of multiracial, multicultural and multireligious concoctions is in the Vision Schools. In view of today’s segregation in our education system whereby most of the Malays study in national schools, the majority of the Chinese in Chinese primary schools and Indians in Indian primary schools, it is a ticking human time bomb which may explode even before year 2020. Therefore, the respective political party leaders, be it UMNO, MCA, MIC, Gerakan, DAP or Keadilan must put their heads and pool their resources together to address this volatile issue. Let us learn by heart. If we cannot stay under the same roof, at least we shelter under the same big umbrella!

In this crusade, I humbly opine that we must move ahead rapidly to set up more Vision Schools in all major towns and cities to attract pupils from all races to study in such schools. Accordingly, the Government may establish after-school clubs to look after students whose parents are working so that they can be picked up after their parents finished work. These after-school clubs are very common in the United Kingdom. In fact, I was a product of these after-school clubs in London whereby after normal school hours, I went to the after-school club until 6pm. My parents would pick me up after their daily work.

The Government may offer more ‘carrots’ such as sport complex, swimming pools, IT facilities, foreign expertise such as English teachers from the UK, Chinese teachers from China, Indian teachers from India and Arabic teachers from the Middle East to teach the respective languages. Certainly, a common sport complex and a common play field for all races to interact is the best form of early social integration as sports transcend culture, religion and race. Hence, we would not rest on our laurels and relax in the valley of complacency but would start preparing vigorously for this benevolent integration as the old Malay adage says Melentur buluh, biarlah dari rebungnya’.

Similarly, the recent birth of the National Service Programme has also indubitably forged greater bonds amongst the participants from diverse backgrounds. As the saying goes, ‘Together we stand strong, apart we fall’! I always believe in ‘unity in diversity’. During my days in the prestigious Philip C. Jessup International Law Moot Court World Competition in 2005 which was held in Washington D.C., although I was the only Chinese in the team, we worked as a team regardless of racial or religious differences. Though we ‘slept on different beds, we shared the same dream’- to win the Jessup Cup and to set a new benchmark in the Malaysia’s Book of Records.

ISLAMIC PERSPECTIVE:

Islam Hadhari, among others, is an educational approach which seeks to protect the minority group and women. It aspires to uphold the dignity of human beings without any discrimination and without differentiating between majority and minority groups. The Quranic verse states,

“O mankind! We have created you from a male and a female, and made you into nations and tribes, that you may know one another. Verily, the most honourable of you with Allah is that who has more piety. Verily, Allah is All-Knowing, All-Aware (of your condition and deeds).” (Surah Al-Hujurat 49:13).

‘And among His Signs is the creation of the heavens and the earth, and the variations in your languages and your colours: verily in that are Signs for those who know.’ (Surah Al Rum 30:22).

Islam considers all humans the same as it makes no distinction between one group and another. This is evident in Surah an-Nahl 16:90, that “Allah has enjoined justice and righteousness.” In addition, Islam is based on principles which are accommodative, just, fair, and responsible towards everyone in the society regardless of race, background and religious belief. The minority groups have the right to partake in the development of the country in terms of political, economic, social, educational, and religious activities. In addition, historical evidence stands firmly to show that the non-Muslims were treated well and protected under covenants in States governed predominantly by Muslims especially during the governance of Prophet Muhammad S.A.W. In the same vein, one may also witness the same peaceful co-existence of both the majority and the minority groups in Malaysia.

CONCLUSION:

Everybody must maintain cordial inter-racial relations. We can reap bountiful benefits from racial harmony in the country. Only then will disunity be removed, and we can rest assured that we will move in the era of globalisation with great alacrity. Our diversity mould us into who we are. Though we may echo idiosyncratically, we tone at the same chord of harmonization. We, as Malaysians, should live and dream as Malaysians!