Introduction I slam is very comprehensive religion as the way of life that guides mankind in all aspects of life. The human as vicegerent of Allah has two responsibility as worshiper of Allah and agent of economic on earth. In order to enhance a successful (falah) in here and the hereafter, the human should follow His guidance that is derived from revelation. Historically, the highest civilization was shown in the time of Caliph Harun al-Rasyid. In that time was Muslim societies led the world in science, philosophy, culture and prosperity. This progress was supported by the government policies which were derived from Islamic principles. Unfortunately, after declining the Empire of Ottoman and emerging the colonialism in the Islamic territory, Muslim countries have faced multi-disciplines problems. Economic is one of the major effects of the malaise of Muslim world. Most of the Muslim countries are still under developing countries where all members are illiterate and production of goods and services are below their needs. Developed countries are still dominance in the world economy and their discriminatory policies toward developing world. This problem causes the emergence of Islamic economic resurgence in Muslim world that were initiated by Muslim scholars. In 1970s, several high reputation Islamic bank came together such as Nasser Social Bank Cairo (1972),Islamic Development Bank (IDB) (1975), Dubai Islamic Bank (1975), Kuwait Finance House (KFH) (1977), Faisal Islamic Bank of Sudan (1977) and Dar Al-Maal Al-Islami (1980). Nowadays, the development of Islamic economic and finance in many Muslim countries is significant to contribute the economic growths in the country in spite of many of Muslim countries are still in the poverty problem. Therefore, it is needed to analyse what obstacles that hamper economic development in Muslim countries. After knowing the problem of Muslim countries it will be provided the solutions derived from Islamic perspective that is especially from Islamic Golden period. Economic Development in Muslim Countries Definition of Economic Development The term of development has a variety of meanings. In regard to economic systems it might means increase in the absolute size of, increase in the complexity and progress toward some ethically defined goal.1 For Adam Smith development means the extension of the division of labour and the application of machinery to the productive process so that an increase in the productivity of labour could be achieved.2 In Islamic perspective, development can defined as the process of fusing the material and spiritual progress aimed 1Lord Robbin, the Theory of Economic Development in the History of Economic Thought (Mac Millan, St. Martin Press: 1970), 4. 2 Jorge Larrain, Theories of development (UK: Blackwell Publisher, 1994), 19.

at a continual growth of human personality.3 To Abdul Mannan, economic development from Islamic point of view is a balanced and sustained improvement in the well-being of the “totality”of man over a period of time.4 In economic term, development has traditionally meant the capacity of a national economy, whose initially economic condition has been more or less static for a long time, to generate and sustain an annual increase in Gross National Product (GNP).5 Therefore, the term development sometimes constitutes meaning of economic progressing in a given country, which is called as economic development. So, in relating to economic development from Islamic point of view it should not be only infused material aspect but also spiritual aspect that can support economic prosperity in human life. Moreover, to understand the inner meaning of development at least should be served three components or core values, there are: sustenance, self-esteem and freedom.6 The sustenance means the ability to meet basic needs such as food, shelter, health and protection. The fulfillment of them are still becoming problem in most developing countries. The self-esteem means a sense of worth and self-respect, of not being used as a tool by others for their own ends. Last important component is freedom that is needed in human life. Furthermore, the meaning of economic development refers to the process of improving the standard of living and well-being of the population of developing countries by raising per capita income.7 To Roger Bakhouse (1991), the term of development economics, as understood today, is with countries or regions which are seen to be under or less developed relative to others, and which, it is commonly believed, should, if they are not to become ever poorer relative to the developed countries, be developed in some

way.8To Porter, the long-term process of building a number of interdependent microeconomic capabilities and incentives to support more advanced forms of competition. 9 By these explanations can be said that economic development is a subject that focuses on the problems in the third world countries dealing with economics, social, political and institutional mechanism. Characteristics of Developing Countries In economic term, previous explanation has mentioned the meaning of development which is related to the something less or static that needs to increase economic. Therefore, economic development is more discussing on the third world country. Economic development can be classified within the third world country such as least developed (poorest countries), developing nations and developed nation. To Todaro (2000), there are seven common characteristics of developing nations, they are: 1) Low levels of living, characterized by low incomes, inequality, poor health, and inadequate education; 2) Low level of productivity; 3)High rates of population growth and dependency burdens; 4) High and Rising levels of unemployment and underemployment; 4) Substantial dependence on agricultural production and primaryproduct exports; 5) Prevalence of imperfect markets and limited information; and 6) Dominance, dependence, and vulnerability in international relations.10 The most problem of developing nations is Low level of incomes except other characteristic which is actually derived from low level of income. It can be seen in low of gross national product (GNP) per capita, the growing gap of income inequality, problems of poverty, health and education faced by the developing nations. These elements can be measured and seen by human development index (HDI) as mentioned in table 2.1.

Table 2.1: Human Development Index in Muslim Countries Source: http://hdr.undp.org/en/composite/HDI By the shown that the developed countries are regards as very high human development with HDI 0,865 (Brunei) and high human development with HDI 0,779 (Malaysia), while the developing countries are regarded as medium human development with HDI 0,684 (Indonesia) and low human development with 0,465 (Afganistan). By then, comparing with Muslim developed countries, there are many still Muslim in under developed countries. Some Major Issues of Economic Development in Muslim Countries The major issues of economic development have been emerging after colonialization era in the Muslim countries. It has just few countries that still in wealth country because of their excessive of oil resources. Moreover, there are three thesis between the issues of economic development and Islam as mentioned by Kuran: 1) the economic irrelevance thesis, 2) the economic advantage thesis and 3) the economic disadvantage thesis.11 First argument belongs to Eric John that said successful economic of Islamization have had nothing to do with Islamic values but it was related to the changes in material condition in that time. Islamic injunctions appear inimical to growth. Second argument said that

Islam support economic development, does not conflict with the Islamic world’s undeniable economic descent, which Islamic economic regulation and mechanism are derived from the sources of Islam. Last argument focuses on why the Islamic world experienced a relative decline; why the decline lasted so long; why Muslims were slow to industrialize; and why the Islamic world remain in relatively poor. These questions are mostly related to the economic development of Muslim countries. This group does not ignore the successful of economic growth in the Islamic civilization age, but just criticize economic barrier of Muslim countries to the development. For example, Islam itself as permanent barrier to development and static worldviews associated with Islam. Furthermore, another problems faced by Muslim countries are poverty, illiteracy, income inequality, nutrition, accumulation of foreign debt and lack of technology. These characteristics are categorized as the poor countries, which explains that poor people are more located in rural than urban area, generally landless, illiterate, very high propensity to consume food item and have no access to public goods and services.12 However, it can be seen from that 2.1 that mostly of human development index in Muslim countries are in medium and low except Brunei, Bahrain, Kuwait, Qatar and united Emirate Arab (Muslim countries with excessive of oil resources). It is clear, the worse of poverty are in Sub Saharan Africa comparing to Asia and Middle East Countries.

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3Zubeir Hasan, Economic Development in Islamic Perspective: Concept, Objectives and Some Issues, Journal of Islamic Economics Vol 1 Issue 6 (1995). 4M.A. Abdul Mannan, Economic Development, in An Islamic Framework, ed. M.A. Mannan and Mehboob Ahmad (Islamabad: International Institute of Islamic Economics, 1996), 3. 5Michael Todaro, Economic Development (New York: Addison-Wesley, 2000), 14. 6 Ibid, 16. 7C.S. Nagpal, Dictionary of Economics (Malaysia: Crescent News (K.L) SDN. BHD, 1995), 95.

8Roger Backhouse, A History of Modern Economic Analysis (Oxford, UK: Basil Blackwell, 1991). 9Please refer to http://www.eda.gov/Research/ClusterBased.xml, accessed on November, 20, 2011. 10Michael Todaro, Economic Development, 18.