How the sharia economy shapes democracy in Indonesia

• The implementation of sharia economy in Indonesia is not just related to economics, but also the politics of identity and winning votes
• The structural shariatisation of the economy is problematic for Indonesia’s democracy as it can lead to social segregation and discrimination

In Indonesia, there has been an increasing tendency to incorporate sharia into the legal and public sphere (shariatisation) in the post-reform era since 1998. The country’s openness provides a space not only for the conventional economy, but also a religious or faith-based economy. For the last 20 years, the Indonesian government has introduced many state laws that were influenced by sharia, such as Islamic banking and halal product assurance.
A clear trajectory for the shariatisation of the economy was established during the first administration of President Joko Widodo (popularly known as Jokowi) from 2014-2019. Under the second Jokowi administration, such sharia-influenced laws are expected to be increasingly clearer and stronger considering that Ma’ruf Amin, an important figure behind the initiative, is now vice-president.
Sharia economy should gain broader support from the state and society because it is perceived by some groups as a system that can improve the economic prospects of Indonesian Muslims. This expectation, however, is not free of a deeper political interest, and support by Muslim elites is also for personal benefit.
The implementation of sharia economy in Indonesia is not purely related to economics, but is also very much about the politics of identity and the winning of votes. In this regard, it is intended to produce more political than economic benefits. For some Indonesian Muslims, sharia economy is not only instrumental in establishing social justice and welfare for inner Muslim groups, it is also a demonstration of their religious and political identity as Muslims.
To gain support from the Muslim community, the narrative of sharia economy is developed towards addressing the relative backwardness of Indonesian Muslims in the economic arena. Non-Muslims are perceived as dominating the economy at the cost of Muslims’ well-being. The Muslims in turn, as the majority, think that they should have control over the country’s economy, and sharia economy is perceived as a means for achieving this goal.
The MUI (Ulama Council of Indonesia) established two important pillars for sharia economy. The first is sharia-based banking and financial businesses, designed to improve the welfare of the community and nation. The second pillar is halal economy, enforcing the lawfulness of goods produced and consumed by Indonesian Muslims through the issuance of halal certification.
In October 2019, Indonesia passed a law on halal product assurance, transferring the authority for halal certification to a state body, but the MUI still has a significant role in the process, as the issuer of halal fatwa.