INTRODUCTION
Among the Asian Tigers, Indonesia can now be called the Asian Mouse, which used to be respected by its peers, and has now transformed into a mouse, which lives off the remains of its neighboring countries and the world at large. The meat consumed by the Economic Tigers and the remains consumed by the Economic Mouse are packaged in the form of riba, which at its essential core will worsen the condition of Indonesia itself.
Allah has stated in Al Qur’an Surah Al Baqarah ayat 275-276; 278-279:
“Those who eat Riba (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Satan (Satan) leading him to insanity. That is because they say: “Trading is only like Riba (usury),” whereas Allah has permitted trading and forbidden Riba (usury). So whosoever receives an admonition from his Lord and stops eating Riba (usury) shall not be punished for the past; his case is for Allah (to judge); but whoever returns [to Riba (usury)], such are the dwellers of the Fire – they will abide therein. Allah will destroy Riba (usury) and will increase for Sadaqat (deeds of charity, alms, etc.) And Allah likes not the disbelievers, sinners.”
O you who believe! Be afraid of Allah and give up what remains (due to you) from Riba (usury) (from now onward) if you are (really) believers. Moreover, if you do not do it, take notice of war from Allah and His Messenger, but you shall have your capital sums if you repent. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums).”
MARSHALL PLAN VS. RIBA DEBT
The United States of America provided aid to Western Europe after World War II through Marshall Plan. The countries given aid repaid America’s generosity with goods they produced for several years afterwards. What is conducted by the US at the time can be considered the As-Salam scheme (In-Front Payment Sale), where the aid is paid in front for goods needed by the American people for the next several years. Marshall Plan revived Western Europe’s industry and stimulated factories to produce certain goods that the US needed, and in the meantime, the United States could concentrate on producing other things.
While studying at the University of Indonesia as Faculty of Economics, the author was taught that Marshall Plan was hailed by Indonesia’s economic and finance ministers and advisors. These giants were called ‘Berkeley Mafia’ as they had graduated from the University of California Berkeley. Their praise for the Marshall Plan was to justify the government’s strategy to constantly borrow from Western countries under soft terms (represented by the IGGI-Inter-Governmental Group on Indonesia). The practice continued under the next cabinet through CGI, World Bank, IMF – International Monetary Fund, and other institutions.
The debt issued under the Marshall Plan was different from the interest-bearing loans to Indonesia stated above. Marshall Plan contains the substance of As-Salam, one of the critical concepts of an Islamic-based economy, whereas interest-bearing loans are the opposite.
Western Europe continued to grow after receiving US aid through Marshall Plan. On the other hand, the interest (riba) based loans packaged in bilateral aid were responsible for Indonesia’s perceived high growth and natural growth. As we may call it, the deceptive growth was susceptible to outside influences due to its dependence on other countries. We witnessed that Indonesia was overburdened by those loans and open to influences by Western countries. This influence was not confined to economics but also extended to political and government administration as well.
ISLAMIC BASED ECONOMY
Islamic Based Economy (IBE) has established that interest (riba) is unacceptable, while profit/revenue sharing based on risk-sharing (muqaradhah/mudharabah) and independence in fulfilling one’s need is acceptable and encouraged.
Allah SWT & Hadiths Rasulullah Muhammad SAW states:
“Allah has permitted trading and forbidden Riba (usury)” (Q.S.: Al Baqarah: 275).
From Suhaib Ar Rumi r.a.: Rasulullah Muhammad SAW has stated, “There are three things which holds blessing: deferred purchase and sale, muqaradhah (mudharabah), the mixing of flour with grain for household usage, not for sale purposes” (H.R. Ibnu Majah).
The riba economy upon which Indonesia’s economy is based has turned Indonesia into a high-cost economy. This can be avoided by adopting the principles of Shari’a-based economics.
The graphs below clarify how profit/revenue sharing in IBE results in better economies of scale compared to the conventional economic system as measured in the microeconomics scale.
EXPLANATION OF THE GRAPHS ABOVE
- Profit sharing will render the total revenue curve (profit sharing) – TRp to slightly deviate from starting TR semula after Equilibrium (Break-Even Point) where Total Revenue – TR is the same as – TC.
Revenue sharing will render the total revenue curve (revenue sharing) – TRr to rotate to the right of starting.
TR semula so that Equilibrium (Break-Even Point) of revenue sharing – Er will shift to the right of starting E.
- Interest Atau riba will cause the fixed cost curve (interest)
- FCi to shift upward from starting FC so that total cost curve (interest) – TCi will also shift upward from starting TC; this will result in Equilibrium (Break-Even Point) interest – Ei to shift to the right from starting E.
On all Q;
- Total Cost profit/revenue sharing – TCp,r < Total
Cost of interest – TCi
- Equilibrium (Break-Even Point) of profit-sharing
– Ep l < Equilibrium (Break-Even Point) revenue sharing – Er and Equilibrium (Break-Even Point) interest – Ei
- Profit sharing operates with much better economies of scale compared to revenue sharing and interest.
When applied, profit/revenue sharing will bring effectiveness and efficiency to the domestic economy. Effectiveness and efficiency of the domestic economy will increase the volume of transactions of goods and services domestically. The growth of domestic goods and services transactions will lead to an economically independent country.
ECONOMIC INDEPENDENCE
A self-sufficient economy or independent economy should be the primary objective of developing countries to achieve economic sovereignty. Economic independence does not mean withdrawing from the trade of goods and services and the international economy. A transaction in goods and services with the international economy is conducted to fill gaps in products that cannot be produced domestically.
In previous CGI conferences, Indonesia was deliberately put into the category of less developed countries to receive foreign debt up to 80% of the outstanding debt. This is possible and has been done to several countries in Latin America (one example is Brazil). Indonesia did not have the resolve to demand the same treatment from the international board because the country was still able to pay its debts and did not want to lose the current investors in Indonesia, even though the total investment of current investors was far less than the amount of riba debt that the country would receive. With the same reasoning, Indonesia continues to seek loans from the International Monetary Fund (IMF) and the World Bank controlled by Western countries. Indonesia continues to pursue riba-based financing to solve economic problems, which were caused by riba debts in the first place.
The tsunami disaster in Aceh and North Sumatra has hit Indonesia hard and received the world’s sympathy. However, the disaster was not enough to prompt the government to ask for a reduction of debt. The government did not even agree to a moratorium (delay of debt payment) offered by lender countries. The government officials made a series of announcements, which were controversial and dismayed the author, among others:
- “Indonesia’s current account can still pay principal payment plus interest!”
- “Indonesia’s currency reserves is enough to anticipate debt payment”
In response, the author states the following:
- “Indonesia will never know when it will be able to pay its debts!”
- “If calculated, it is possible that riba payments is more than principle debt payment!”
- And the two reasons above are enough to put Indonesia in the condition of Unpayable Debts… or as many Muslims pray “Yaa Allah we seek Your Protection from… unbearable debt… and ruthless tyrant!”
It is time for us to try to get out of this satanic circle by stating pure forgiveness. Stop all efforts to receive riba debts from Western countries; forge a better relationship with countries with a substantial Muslim population and close in spirit with Indonesia; and promote investments in Indonesia by applying the principles of ISB.
CLOSING THOUGHTS
It is not unreasonable to think that the Islamic-based economy will continue to grow, judging from the many areas of the world, which demand autonomy to conduct their economic activities according to Islamic Shari’a. The Islamic-based economy is the application of Islamic Shari’a to the economy. IBE is established to bring Indonesia’s economy more in line with Shari’a principles, followed by a strong relationship between the financial sectors and the real sector without resorting to riba. In Sha Allah, this effort will benefit all parties concerned.
