Islamic Political Economy Research Articles

Perkembangan Ekonomi dan Keuangan dalam Islam: Inspirasi dari Khulafaur Rasyidin

Islamic economics is the response of Islamic scholars to the economic challenges of their time, which is closely related to the Koran and hadith. Islamic economics is also a social science whose Islamic values ​​influence all of society's economic activities. Islamic economics is part of every aspect of life which is based on four sciences, namely the Al-Quran, Sunnah, Ijma', and Qiyas. This discusses a very inclusive way of life. The aim of this research is to describe the history of public policy and the development of Islamic political economy during the time of Khurafaur Rasyidin. Based on the results of this research, Khulafaur Rasyidin's leadership period consisted of four levels of leadership. The first economic policies implemented during the Khurafaur Rasyidin era were during the Abu Bakr era, the second during the reign of Umar bin Khattab, and the third during the reign of Uthman bin Affan, and finally during the reign of Ali bin Talib. Regarding his leadership, several activities were carried out, namely establishing Baitul, shopping centers, distribution of welfare, pension funds, soldiers' salaries, as well as distribution and collection of zakat to Muslim and non-Muslim communities. All of these activities can help develop the country's economy and improve people's living standards. The method used in this research is the library research method. The data collection technique is to conduct a literature review study regarding the problem to be solved. Keywoards: Public Policy; Islamic Economics; Khulafaur Rasyidin

Sistem Ekonomi Politik Kapital sebagai Isu Hubungan Internasional: Perbandingan Dampak Sistem Kapital terhadap Kesejahteraan Sosial Menurut Perspektif Konvensional dan Islam

The Capitalist Economic System prioritizes individual freedom by maintaining market mechanisms to improve their economy, and trying to obtain maximum profits. On the other hand, there is an Islamic political economy which has a sharia basis by strengthening the role of 'Ukhuwah Islamiyah' so that social inequality does not occur between communities. This research will discuss the differences in the impact of the capitalist economic system from the perspective of Islamic and conventional political economy on the welfare of society. This research uses a qualitative-descriptive method by making literature reviews as the unit to search the main datas. The research findings in this research are that there are significant differences between the capitalist system based on an Islamic perspective and conventional ones based on fundamental values, principles and ultimate goals.

The metamorphosis of the Islamic political economy publications (1980-2021) – a bibliometric analysis

PurposeThis paper aims to trace the contours of Islamic political economy (IPE) for last four decades with the help of bibliometric analysis. This method does not focus on in-depth literature. However, it reviews more material content of the published papers in the field, generally including the number of publications, authors, title, H-Index and authors’ affiliation.Design/methodology/approachThe authors use biblioshiny by R in conducting bibliometric analysis. Based on the results of analysis, the authors only found 39 relevant documents to the topic with the help of keyword of “Islamic political economy”. The authors analyse the data and visualize it into bibliometric images for the convenience of the readers.FindingsThere are 39 documents on IPE in the annual scientific production. The year 1980 had the lowest productivity at 3% while the year 2007 showed an increase in scientific productivity by 13%. The most significant increase in production occurred between 2014 and 2015 by 8%, while the most significant decline occurred between 2007 and 2008 by 10%. The most significant contributors are Akan, T., Choudhury, M.A. and Asutay, M. According to the Corresponding Author’s Country, the UK has eight articles on IPE. Humanomics is the most influential Journal, with six documents.Research limitations/implicationsThis research only examines documents sourced from Web of Science and Scopus under the title “Islamic political economy” and does not include articles from other sources. This research has implications for future researchers and suggests a shift in recent research on IPE towards exploring current realities and expanding beyond traditional economic and political aspects. The goal is to gain a comprehensive understanding of Islam’s role in shaping economic and political systems, promoting inclusive sustainable development and social justice, and exploring its relationship with broader political and economic systems.Originality/valueIPE has become a trendy topic in the early days, the second half of the 20th century, during the revival of the Islamic mode of finance and development. However, with time, the discussion on this topic appeared less in scientific and academic publications; this issue needs an overview of how far this discipline has evolved. This work aims to identify future research trends in this area. Scholars should investigate articles by author, institution, country, databases, data sources with high-impact factors and objective metrics to get new perspectives.

Studi Komparatif Konsepsi Dana Non-halal dan Dana TBDSP dalam Perspektif Politik Ekonomi Islam

This study aims to examine the comparison of the concept of regulation of non-halal funds and TBDSP funds in the perspective of Islamic Political Economy. This research uses qualitative methods with the type of research that is library research. The results of the discussion in this study indicate that the arrangement of non-halal funds was originally only limited to a concept which must then be used for social purposes, but there are no specific rules related to how to obtain or source of these funds, how to manage them, and what are the provisions for their distribution. . Presentation and reporting of non-halal funds have previously been regulated in PSAK 101 and 109. The presence of the DSN fatwa number 123/DSN-MUI/XI/2018 can imply that the concept of non-halal funds should not be recognized as income for Islamic financial institutions. So that the term non-halal funds in Islamic financial institutions is more accurately referred to as TBDSP funds. It is appropriate that maximum supervision is needed in implementing the DSN fatwa regarding TBDSP funds in Islamic financial institutions, so that the management of non-halal funds of Islamic financial institutions can be directed and on target in accordance with existing regulations.

Rekonseptualisasi Alokasi Lahan Pertanian dalam Undang-Undang Cipta Kerja Berdasarkan Perspektif Islam

The Job Creation Law is aimed at improving the business climate in order to facilitate investment. However, a number of laws that have been revised by the Job Creation Law have caused a flurry of rejection because they are seen as efforts to liberalize land. This is also a threat to the management of agricultural land in Indonesia because agricultural land is the main determinant of production activities for farmers. Meanwhile, Islam has a fair management concept of agricultural land. The purpose of this study is to explain the concept of agricultural land allocation according to the Job Creation Law based on an Islamic perspective. In addition, this study also aims to explain alternative solutions for allocating agricultural land in Indonesia that are inclusive even though it uses an Islamic perspective. oriented towards the interests of corporations and investors. The concept of agricultural land allocation policies based on an Islamic perspective is based on theological values to ensure that Islamic political economy goals can be achieved by prioritizing the poor. There are two concepts of agricultural land allocation in Indonesia based on an Islamic perspective that can be recommended, namely: (1) the concept of utilization of state land; and (2) the concept of agricultural land waqf.

The Development of Islamic Economic Politics in Sharia Banking in The Reform Era to Date in Indonesia

The article aims to determine the relationship between the Indonesian state and the Islamic economy related to the influence of the Indonesian government's Islamic political economy in the development of sharia economic practices in society, especially in the reform era. The research method used in this study is a qualitative approach with the type of library research. The data sources used are secondary data sources, obtained from the collection of documentation related to the development of Islamic economic politics in Islamic banking in the reform era in Indonesia. The data that has been collected is analyzed through content analysis and the validity of the data is checked through triangulation of secondary data sources. This article uses the political theory of Islamic economics in the reform era and the theory of the development of sharia banking regulations by Dr. Itang, M.Ag. This article finds that the influence of the State of Indonesia with its political economy oriented to the Islamic economic system in developing Islamic economic practices is very significant. This also shows that there is a rapid progress in the practice of Islamic economics, especially in the field of Islamic banking, which is increasingly attracting the whole community to invest in Islamic banking because the formal regulations are very clearly stated in the Act. In addition, the development of Islamic political economy has also greatly influenced the development of other non-banking Islamic financial institutions, such as sharia insurance, sharia capital markets, sharia bonds, sharia mutual funds, and Islamic microfinance institutions, and Islamic public finance after the Indonesian state supported them in many things, especially through formal regulation.

Religion and Public Policy: Digital-Based Islamic Political Economy and Human Security on Covid-19 Handling

Covid-19 has become a pandemic causing the condition of business income from business actors to decrease drastically. This phenomenon is in contrast to the conditions in Indonesia during the 1998 crisis, where business actors became the most substantial sector to adapt to the monetary turmoil at that time. This article discusses the Covid-19 handling through digital-based Islamic political economy and human security on business people in Pontianak City. The work is based on a quantitative research project conducted in Pontianak, employing a set of questionnaires to collect the data. The findings of this study indicate that in dealing with Covid-19, the Indonesian government has produced important policies to ensure the availability of economic opportunities for the population so that people can adapt rationally sound state policies. The handling of Covid-19 through a digital-based Islamic political economy is carried out by providing digital technology training and mentoring digital business incubators to Small and Medium Enterprises to improve human security. Islamic teachings have been important to the policy making as Indonesia is a home of predominantly Muslims.

An Islamic critique of rival economic systems’ theories of interest

PurposeThis paper aims to contribute an Islamic critique of various competing economic system’s theories of interest, which have evolved within the distinct ideological frameworks of distinct rival economic systems and religions from the point of view of discovering potential effective Islamic economic solutions of the interest-driven modern economic, financial and banking and debt crises and the related problems of inflation, extreme, wealth inequalities and extreme poverty.Design/methodology/approachThis historical research paper portrays the chronological evolution of competing narratives and theories of interest in realms of religions, philosophies and rival economic systems for contributing their comparative review and critique from an Islamic point of view in light of the pertinent literature of multidisciplinary history of religions, philosophies and economic thought. It develops an Islamic critique of theories of interest in light of interactions among history of religious thought on interest, history of economic thought on interest and economic theories of interest and the interest-driven economic crises for highlighting potential Islamic interest-free solutions of the modern economic crises in the framework of the Islamic political economy. In light of an Islamic critique of various competing theories of interest, the paper presents pertinent economic policy recommendations for the governments of the countries of the contemporary Muslim world.FindingsThe interest-free Islamic economic, as well as banking theories and models, offer the potential practical exploitation-free and injustice-free humanitarian solutions of the contemporary persisting macroeconomic crises (national, regional and global economic crises, financial crises, debt crises and banking crisis). Current Islamic discourses on interest and interest-free Islamic banking have effectively promoted the popularity and growth of global Islamic banking industry in the Muslim world in the 21st century.Practical implicationsKeeping in view a general universal consensus of the Islamic jurists on the elimination of interest of all types from the economy, it is recommended for the Governments of the Muslim countries to implement a consensus-based Islamic banking model, which uses only the Islamic juristic consensus-based Islamic modes of banking and finance – Musharikah, Mudharabah and Al-Qardh Al-Hassan (interest-free loan) – for precluding the possibilities of emergence of controversies about the prospective Riba-free Islamic economic and banking system. Litmus test of the practical success of the interest-free Islamic universal economic and banking system is the successful elimination of all forms of Riba (interest) and all possibilities of its involvement in extractive and exploitative activities in letter and spirit.Originality/valueThis research paper contributes a comprehensive logical and objective critique of various competing prominent theories of interest from an Islamic economic point of view and highlights their pertinent practical macroeconomic problems-cum-consequences as well as the potential Islamic macroeconomic policy responses in the form of interest-free Islamic banking/monetary/fiscal policies.

EPISTIMOLOGI POLITIK EKONOMI ISLAM: KAJIAN DALAM PEREKONOMIAN NEGARA

Correct understanding of the basic elements in Islamic political economy is a necessity for its development. This writing attempts to trace the conceptual understanding of the basic elements of science, including the views and epistemology of Islamic economic politics in a country. His position in constructing the methodology of Islamic political economy to become the main topic. So that there are differences in the aims of epistemology and the framework of the methodology of Islamic political economy with the West. The consequences of these differences lead to differences in science. At the practical level, this gives rise to differences in determining policies. Meanwhile, logic, coherence and consistency are important prerequisites for a scientific approach. Islamic economic politics must be studied through its own epistemological view. However, on the other hand, we cannot deny the role and position of political science and economics today in the process of developing Islamic political economy. The study of political-economic epistemology covers the role of the state in the economy, especially in terms of public policy.
 
 
 Keywords: Epistemology, Islamic Political Economy, State Economy

POLITICAL PARADIGM OF CONVENTIONAL ECONOMICS AND ISLAMIC ECONOMICS: INDONESIAN SHARIA BANK DISCOURSE

This article discusses the paradigm of Islamic political economy and conventional political economy by looking at the discourse of Indonesian sharia banks. This article aims to find out how the political economy that occurs in Indonesian sharia banks. This article is qualitative library research. The data in this study were obtained from library materials such as books, journals, and so on related to the problems studied, namely the conventional political economy paradigm and the Islamic political economy paradigm. The data collection technique used is to collect as much data as possible about the problems studied through the internet and library websites. The data writing technique used is a data analysis technique known by Miles et al., namely data condensation, data presentation, and drawing conclusions. The analysis results show that the differences between Islamic and conventional political economy paradigms are seen in the unification (religion and economic activity) by Islamic economics and separation (religion and economic activity) by conventional economics. The dominance of the conventional economic system, represented by the capitalist and socialist economic system in the world economy, especially Indonesia, does not dampen the significant development of the Islamic economic system, which is agreed upon by various parties.

Sustainability of Islamic Economics in The Political Domain in Mojokerto

Economy and politics influence each other. A changing political map will affect policy to economic conditions and vice versa. Likewise with Islamic economics, its development was influenced by political power during the emergence of Islamic economics until today. Islamic political economy has a positive value for Indonesia in an effort to accelerate the empowerment of small and medium enterprises as an element of economic growth. One of the areas for Islamic economic instruments to become part of national policy is regulation. Through research with qualitative methods and a literature study approach, the researcher wants to analyze the regulations on the Islamic economy in Mojokerto district which has many micro, small and medium enterprises. Researchers conducted this research with the aim of analyzing the sustainability of Islamic economic values to all components of government apparatus and business actors in Mojokerto Regency and at the same time offering regulations to the Mojokerto Regency government which focuses on efforts to increase the size of the Islamic economic industry in institutional expansion. This study provides the results, first, Islamic economic values have not been sustainable in the political economy of Mojokerto Regency. Second, the sustainability of the Islamic economy in Mojokerto Regency can be realized in the political economy of government through policies or regulations that improve the Islamic financial industry by synergizing it with the community to empower MSMEs.

Islamic Political Economy: Critical Review of Economic Policy in Indonesia

This article is based on a phenomenon of inequality that occurs in Indonesia which is still quite high. Besides, the current reality shows that the implementation of political economy has not been able to meet the primary needs of each individual. The purpose of this article is to describe and elaborate the concepts and objectives of Islamic political economy. The used method is a qualitative descriptive method with a literature review approach with sources from books, journals, news and other sources relevant to the title. The results of the discussion of this article show that economic politics in perspective of Islam has a different perspective from capitalists. Islamic Political Economics aim to fulfill the primary needs (food, shelter and clothing) of each individual. In implementing the Islamic Political Economy, the state has an important role to play, either directly or indirectly. As for case studies in Indonesia, regarding aspects of fulfilling food needs, it is ranked 73rd in the world with GHI of 21.9. This is a very large number with a serious level. The number shows that Indonesian government has not been able to fulfill one of the political goals of Islamic economics, namely the fulfillment of each individual's food. In addition, in terms of security, education and health have not also been well fulfilled. It is expected that this writing able to become a reference and add to the treasure of thought regarding the Islamic economy.

POLITIK EKONOMI DAN KEMISKINAN (STUDI KOMPARATIF POLITIK EKONOMI KAPITALIS, SOSIALIS, DAN ISLAM)

Poverty is a condition when the inability to fulfill basic needs such as clothing, food, shelter, education, health, security. Poverty is a classic problem that is increasing day by day. Even though the news conveyed has decreased in average (aggregate), in fact poverty has always increased. A fundamental solution is needed in overcoming the problem of poverty, because the existing poverty condition is the background for the birth of other social problems, such as crime, violence, and even committing kufr (apostasy). The application of the Capitalist-Liberal Political System and Socialism-Communist has proved to be a failure in solving the problem ofpoverty. Even from the application of this system, it creates structural poverty in the community. A different reality from the application of the Islamic Political Economy system, in which the State guarantees the fulfillment of the basic needs of each person as a whole, as well as the possibility of himself fulfilling his secondary and tertiary needs, according to the level of ability as an individual who lives in a society that has a lifestyle ( life style). Guarantee the fulfillment of primary needs (clothing, food, shelter, education, health, and security) is carried out through various mechanisms, either directly or indirectly. So, by implementing it will minimize the poverty rate, and also allow the poverty rate to be zero percent. It has been historically proventhat at the time of the Caliph Umar Ibn Abdul Aziz radhiallahu 'anhu, state officials had difficulty finding the poor / poor in distributing zakah assets.

A NEW METHODOLOGY TO INITIATE ISLAMIC POLITICAL ECONOMY OF ACCOUNTING

A NEW METHODOLOGY TO INITIATE ISLAMIC POLITICAL ECONOMY OF ACCOUNTING

EKONOMI POLITIK ISLAM: PENDEKATAN MAQASID AL-SHARI’AH

The Indonesian nation, which has undergone its independence for more than 70 years, experienced two major changes, namely in 1966 and 1998. 1966 gave birth to the New Order. The New Order period which lasted 32 years with a full orientation to pursue economic growth which was supported by security stability which killed democratic values. We have also gone through the reform era that was rolled out in 1998 which later gave birth to the state order as we feel today. During the 20 years or so of reformation, Indonesia's condition can be said to be more democratic even though it is still procedural which is marked by an election celebration party and post-conflict local election. However, economic orientation and development have almost no fundamental correction, no significant changes. The strategic economic policies taken by the government have not been in favor of the people. Potential economic resources are still held hostage by the interests of foreign countries. Both in the banking sector, insurance, capital markets, state-owned enterprises (BUMN), oil and gas mining and other economic sectors. The government only relies on the amount of economic growth, which does not contribute much to the real economy of the people. As a result, poverty and unemployment rates have not been significantly reduced. The quality of life of the people becomes low. In this paper, the author tries to study the economic growth which is always glorified by the ruling regime in the perspective of Islamic political economy. However, economic policies are inseparable from government political interference. Therefore, questions such as how is the political economy of Islam in view of economic growth amid the high poverty rate of the Indonesian people? Then what is the solution that Islamic political economy can provide in overcoming policies that are deemed not to benefit the people? From the discussion, the writer can provide some things that according to the authors are important to conclude. Islamic political economy is only one area of ​​science that will be built based on the tauhid paradigm. Basically, all existing science needs to be built within the framework of the monotheistic paradigm. The emergence and development of Islamic civilization for more than a thousand years is always based on the Tawhid paradigm. At that time, all science was built on the basis of monotheism. The problem of economic development can be solved by tauhid paradigm.

Ekonomi Politik Islam: Pendekatan Maqashid Al-Shari’ah

The Indonesian nation, which has undergone its independence for more than 70 years, experienced two major changes, namely in 1966 and 1998. 1966 gave birth to the New Order. The New Order period which lasted 32 years with a full orientation to pursue economic growth which was supported by security stability which killed democratic values. We have also gone through the reform era that was rolled out in 1998 which later gave birth to the state order as we feel today. During the 20 years or so of reformation, Indonesia's condition can be said to be more democratic even though it is still procedural which is marked by an election celebration party and post-conflict local election. However, economic orientation and development have almost no fundamental correction, no significant changes. The strategic economic policies taken by the government have not been in favor of the people. Potential economic resources are still held hostage by the interests of foreign countries. Both in the banking sector, insurance, capital markets, state-owned enterprises (BUMN), oil and gas mining and other economic sectors. The government only relies on the amount of economic growth, which does not contribute much to the real economy of the people. As a result, poverty and unemployment rates have not been significantly reduced. The quality of life of the people becomes low. In this paper, the author tries to study the economic growth which is always glorified by the ruling regime in the perspective of Islamic political economy. However, economic policies are inseparable from government political interference. Therefore, questions such as how is the political economy of Islam in view of economic growth amid the high poverty rate of the Indonesian people? Then what is the solution that Islamic political economy can provide in overcoming policies that are deemed not to benefit the people? From the discussion, the writer can provide some things that according to the authors are important to conclude. Islamic political economy is only one area of science that will be built based on the tauhid paradigm. Basically, all existing science needs to be built within the framework of the monotheistic paradigm. The emergence and development of Islamic civilization for more than a thousand years is always based on the Tawhid paradigm. At that time, all science was built on the basis of monotheism. The problem of economic development can be solved by tauhid paradigm. Keywords: Islamic Economic Politics, Maqashid al-Shari’ah Approach

EKONOMI POLITIK ISLAM: PEMIKIRAN, PERGERAKAN DAN PERKEMBANGAN NYA DI INDONESIA

ABSTRACT One of the dominant factors affecting the economic performance of a country is the political economy system used. The thougt and movement of Islamic political economic system will also affect the economic and financial practices of sharia (Islam). In the economic-political context, Indonesia is more likely to use a pattern of political systems that the government is to engage and interfere the economic and business fields. The movements of Islamic political economy in Indonesia based on periods are as the following: (1) at the beginning of independence and the period of the Old Order, the practice of Islamic political economy is reflected from the thoughts of the nation founding father, M. Hatta, with the concept of Indonesian Socialism or Religious Socialism. (2) in the New Order era, the political economy of Islam tends to disappear due to economic policy and political system at this time. (3) the politics of the reform period have a positive effect on the movement and development of Islamic economic politics. Stakeholders such as governments, academics and practitioners contribute actively to the movement of Islamic political economy. Keywords: Political Economy of Islam, Thought and Movement

Uswah Hasanah Country Of Khalifah Umar Abdul Aziz: An Islamic Political Economy Research

Khalifah Umar Abdul Aziz was renowned as a great leader in implementing an Islamic based government. His country was among the countries that served as a guide for forming a system of government in accordance to Islam. His country was fit to be declared as an Uswah Hasanah country (good role model country). Khalifah Umar Abdul Aziz himself as an Uswah hasanah could be considered as a measurement of success of his Uswah Hasanah country, compared with the government before and after his. Since good governance is important, the question is, can an Uswah Hasanah country, implemented under the governance of Khalifah Umar Abdul Aziz, be emulated today? This article aimed to answer this question by analyzing the approach of uswah hasanah country of Khalifah Umar Abdul Aziz based on the implementation of Islamic political economy in his government. In order to achieve the goal, this article was written utilizing the method of documents analysis in order to gather secondary data. The data was then analyzed using the method of content analysis. As a result, it was found that uswah hasanah of Khalifah Umar Abdul Aziz affected the formation of Uswah Hasanah country based on his implementation of Islamic political economy. The application of this approach involved two subject matters. Firstly, the implications of political uswah hasanah of Khalifah Umar Abdul Aziz on the economy of the Uswah Hasanah country; and secondly, the implications of economic uswah hasanah of Khalifah Umar Abdul Aziz on the politics of the Uswah Hasanah country.

Redefining Poverty and Its Measurement: An Islamic Political Economy Perspectives

Islamic economists have always taken the position on the intrinsic capability of poverty alleviation in the Islamic economic model. The poverty, in economics and social sciences, is taken in the context of economic deprivation. Among the multitudinous meanings of poverty, generally it is defined as the lack of income, human underdevelopment, social exclusion, ill being, unsustainable livelihood, lack of basic needs, vulnerability and relative deprivation, while multifarious methodologies like head count ratio, poverty gap ratio, income gap ratio and Sen index are used to measure the poverty. The poverty in the developed countries mostly is identified relative to the average level of income as compared to developing countries which usually define it on the grounds of absolute standard of living. Islamic model clearly addresses poverty in number of ways and even considers it as a threat to faith and recommends alleviating it through different tools like zakat, which is the negative rate of return on savings. The tools prescribed in Islam for counteracting poverty are designed on different conceptual grounds to conventional poverty reduction tools, similarly Islam’s conceptually constructed understanding on: lack of income, human underdevelopment, social exclusion, ill being, unsustainable livelihood, lack of basic needs, vulnerability and relative deprivation differs in its context and in its intrinsic intellectual positioning to the conventional interpretation of these concepts. Inductively therefore, Islam’s idea of, ‘what is poverty?’ and ‘How it can be measured’, is distinct and different to the general perception of poverty. This paper objectively examines the subjective meaning of poverty within Islam, through analysing the intellectual rigour on poverty in the transcendental sources of Islam along with the conceptual construction of Al Ghazali’s work on happiness. It further applies the uniform principles of maqasid al shariah (objectives of Islamic law) and nisab (standard for Zakat to be liable) in an attempt to develop the understanding of monetary measures, which can be used to identify ‘poor and needy’ within an economy. The results should provide the basic argument for the distinction on Islamic concept of poverty and a framework in which such definition can translate into the categorisation of ‘poor’ within an economy; along with some foundational understanding of Islamic value approach on monetary measurement of poverty.

DECLARATION OF MALAYSIA AS AN ISLAMIC STATE IN THE ERA TUN DR MAHATHIR MOHAMAD’S GOVERNANCE: IMPLICATIONS TOWARDS POLITICAL ECONOMICS IN ISLAMIC WAYS

During Tun Dr. Mahathir Mohamad's tenure as the Prime Minister of Malaysia, he once declared that Malaysia is an Islamic state. This declaration is the apex of TunDr. Mahathir Mohamad's resolution to establish an Islamic political economy. However, there are others who believed that this declaration is done in order to get the political support of Malay Muslims. From the above statement, is it true that this declaration have an impact on political economies towards Islam? This article is written to examine and analyze the implications of the proclamation of the Islamic State by Tun Dr. Mahathir Mohamad towards the development of Islamic political economies in Malaysia. The data is gathered through literature and content analysis methods.Literature method is used to gather the secondary data, while content analysis method is done to analyze the data. The result of the analysis is made after Malaysia is declared as an Islamic state and it affected the political economic in this nation in Islamic ways. In terms of economic implications towards Islam, he managed to further reassure people to choose Islamic banks such as Bank Islam Malaysia Berhad. In terms of political implication in Islamic ways, InstitutKefahaman Islam Malaysia (IKIM) was established by TunDr. Mahathir Mohamad to provide an understanding towards the socio-political of Islamic to the public. In addition, International Islamic University Malaysia (IIUM) and UniversitiSains Islam Malaysia (USIM) were also established to provide better understanding of the essential of Islamic education from basic level to students in order to lead the Muslim community and develop the development of Islam in Malaysia.