The Politics of Law in Islamic Regional Regulation to Improve
Regional Economy Competitiveness
M.Haris Hidayatulloh
, Ridan Muhtadi
, Moh. Nafik H.R
, Sri Herianingrum
, Sri Iswati
, Irham
and Tika Widiastuti
Master Study Program of Islamic Economic Science, Post Graduate School of Universitas Airlangga, Surabaya, Indonesia
Post Graduate School of Universitas Airlangga, Surabaya, Indonesia
Keywords: Politics of Law, Sharia Regional Regulation, Sharia Financial Economy.
Abstract: The global financial crisis in 2008 made sharia economic a highlight for economists and practitioners as an
alternative to prevent economic crisis. Some regions begin to implement sharia economic, and provide legal
regulations by formulating local regulations. This study aimed to analyze regional regulations on sharia
economic and finance using juridical-normative approach. The approach was used to analyze contents,
concepts and cases. This study found that sharia rule has made legal political changes, from the paradigm of
incorporation of law into legal pluralism. Sharia economic regulations in Indonesia are important,
considering the forecast of rapid financial industry and sharia business growth in East Java. The acceleration
of sharia economy is necessary to create stability and regional economic development.
Since the application of Act No. 23 of 2014 on the
implementation of regional autonomy by Regional
Government, the Government has a wide authority
in managing its area. Sharia regional regulation, then
known as Islamic Sharia Law, has been
implemented by several regions in Indonesia.
Sharia law is a legal product of local government
in several provinces, cities and districts in Indonesia
inspired by sharia guidance. In this law, provincial
and mayoral/district governments are provided with
discretion in shaping public policy in the hope of
resolving multi-dimensional problems.
Table 1: Category of sharia regional regulation in
Category of Local
Islamic Finance
Islamic Education
Muslim Attire
Category of Local
djpp.depkumham, 2016
Sharia-based regional regulations give rise to
public policy in the fields of politics, law and
economics (fields of production, distribution,
consumption, economy, fiscal policy, etc.).
This study focused on the problems faced by
some regions, particularly the regulation and policy
of the local government based on sharia values for
improving regional economy. Pisani & Buehler
(2016) on “Why do Indonesian politicians promote
sharia laws? An analytic framework for Muslim-
majority democracies” argue that Muslim politicians
expect Islam to be part of state law. Cammack &
Feener (2012) on “The Islamic Legal System in
Indonesia find that Islam heavily influences the
Indonesian legal system. Based on those two
arguments, it is argued that local government can
consider implementing sharia guidance in the
process of policy-making in its efforts to accelerate
economic improvement in the region.
Hidayatulloh, M., Muhtadi, R., R., M., Herianingrum, S., Iswati, S., Zaki, I. and Widiastuti, T.
The Politics of Law in Islamic Regional Regulation to Improve Regional Economy Competitiveness.
DOI: 10.5220/0007551908100814
In Proceedings of the 2nd International Conference Postgraduate School (ICPS 2018), pages 810-814
ISBN: 978-989-758-348-3
2018 by SCITEPRESS Science and Technology Publications, Lda. All rights reserved
This study used juridical-normative approach, which
is a method of legal research using positive law
concept by examining library materials or secondary
materials in the form of legislative literature that
have implications on the issues discussed (Soerdjono
and Sri, 1994; Roni, 1994; Amirudin and Zainal,
2004; Ibrahim, 2006; Achmad, 2009).
This juridical-normative study focused on the
issue of local government policy by reviewing the
pattern of sharia-based regulation on economic
policy applied in some provinces in Indonesia,
including Aceh and East Java
3.1 Public Sector Government Policy
The difference between decision-making and policy-
making can be illustrated in the following flowchart:
Figure 2: Flowchart concept of decision-making and
policy-making (Faried, 2012:10).
The process of policy-making begins with
problems and ends with problems. However, these
problems will create new problems that drive current
policy reformulation, and thus the process will
continue to re-implementation and re-evaluation.
The scope of public policy review covers various
fields and sectors, including economics, politics,
social, culture, law and others. The coverage can
also be seen from the hierarchy of public policy,
either national or regional, such as law, government
regulations, presidential regulations, ministerial
regulations, local/provincial government regulations,
governor decisions, regulation/municipalities and
mayoral decisions.
3.2 Application of Islamic Sharia in
Autonomous Frame
The difference between decision-making and policy-
making can be illustrated in the following flowchart
According to Fazlur Rahman (1997: 140-141),
sharia is the religious values expressed functionally
and in concrete meaning in life that aims to direct
human life in goodness. The emergence of sharia
law has consequences as a law ruled in a region that
has absolute binding force to all society, government
and private institutions as well as immigrants within
the region. Sharia law is a special type of law, which
originates from local custom or law prevailed within
the territory. Sharia regulations are born as the result
of Islamic political journey (Munawar, 2007:04).
Muhtada (2014: 38) classifies Indonesian sharia
regulations into seven aspects: 1) Local regulations
related to morality, 2) Local regulations related to
zakat, infaq and shadaqah policies, 3) Local
regulations related to Islamic education, 4) Local
regulations related to the development of Islamic
economics, 5) Local regulations on the faith of a
Muslim, 6) Local regulations on Muslim attire, and
7) Sharia regulations in other categories. Local
bylaws in this category are the local regulation of the
great mosque, the hajj service, and culture of
welcoming Ramadan.
There are several sharia regulations and
formalization of Islamic sharia demands realized
through local government policy in the form of
Decree, Instruction and Circular Letter of
Regent/Mayor. This study discussed the following
1. Aceh Province: Qanun No. 9 of 2014 on the
Formation of Bank Aceh Syariah.
2. East Java Province: East Java Governor Decree
No. 188/600/KPTS/013/2016 on Task Force of
Sharia Economic Acceleration in East Java.
The existence of sharia law is a form of formal
effort to strengthen Islamic identity. Therefore, the
implementation of sharia law is an affirmation of
Islam as a symbol of the spirit of struggle. Sharia
law is a form of Islamization process in politics by
emphasizing the welfare of Islamic principles.
The Politics of Law in Islamic Regional Regulation to Improve Regional Economy Competitiveness
3.3 Legal Politics Sharia Rules in
Regional autonomy provides authority and
responsibility to local governments, as the
implications of various central government
authorities granted to local governments. Therefore,
the political will of policymakers to implement
Islamic value in economic field will seek to create
an Islamic economic system that is inherently a
logical consequence of Islamic perfection.
Islam provides the principle of fiscal policy or
the budget of income and expenditure that aims to
develop a society based on the distribution of equal
wealth by placing material and spiritual values at the
same level that is inseparable from economic
political control (as-siyasatu al-iqtishadi).
Abdurrahman Al-Maliki (2009: 32) stated that this
principle will ensure the fulfilment of primary needs
(al-hajat al-asasiyah) of each individual as a whole,
and assist them in meeting secondary and tertiary
needs (al-hajat alkamaliyah) according to their
Efficiency and effectiveness are the basis of
government expenditure policy. In Islamic
teachings, those factors are guided by sharia rules
and determining priorities. According to al-Maliki
(2009: 44), there are four cases that become the
political principle of Islamic economics: 1)
Everyone is an individual who needs fulfilment, 2)
The fulfilment of basic needs is performed
thoroughly (complete), 3) Mubah, the law for
individuals seeking sustenance (work) with the aim
to gain wealth and improve the prosperity of his life,
4) The noble values (sharia of Islam) must dominate
(be the rule applied) all interactions involving
individuals in society.
3.4 Aceh Government's Commitment
to Islamic Economics
Aceh society has a long historical background in
making Islam a guide for their lives. The society
must obey Islamic values and the clerical orders
because they are the heirs of the Prophet
Muhammad. Culture is born from the reflection of
the scholars, then practiced, developed, and
preserved into customary law in the midst of
government and sharia law.
Aceh society upholds the culture and prominent
clerics with a respectable role in community life.
The clerical consultative assembly (Majelis
Permusyawaratan Ulama (MPU)) has a duty to
provide input, consideration, guidance and
suggestions in determining regional policy from the
aspects of Islamic law, either to the regional
government or to the community in the region. In
addition to having authority to formulate rules in
accordance with Islamic sharia, based on Act No. 11
of 2006, Aceh government establishes an Islamic
Sharia Office, which has authority to perform
general and specific tasks of regional government,
and responsible in the field of development and
implementation of Islamic sharia. Islamic sharia law
in Aceh covers worship, family law (ahwal al-
syakhshiyah), civil law (mu'amalah), criminal law
(jinayah), court (qadha'), education (tarbiyah),
da'wah, syi'ar and defense of Islam.
Nanggroe Aceh Darussalam basically has
regional autonomy specialized in the application of
sharia economic. It is written in several regional
regulations, such as Qanun no. 9 of 2014 and Qanun
no. 88 of 2014. Qanun is a basic rule for the
development of financial institutions based on sharia
Qanun no. 88 of 2014 Article 21 states:
Paragraph (1): Financial institutions operating in
Aceh should be based on sharia principles;
Paragraph (2): Conventional financial institution
already operating in Aceh shall open a sharia
business unit; Paragraph (3): Aceh government
financial transactions and district/municipality
governments shall apply sharia principles and or
through the process of sharia financial institutions;
Paragraph (4): Further provisions concerning sharia
financial institutions shall be regulated in the Qanun.
Likewise in the public finance sector, the Aceh
government already has a legal standing, in which
Aceh’s source of local government revenue derived
from zakat funds of Aceh society. The Act no. 11 of
2006 on Aceh Government has three chapters
mentioning zakat: Article 180 about zakat as a
source of local government revenue; Article 191
mentioning Baitul Mal Wat Tamwil as the manager
of zakat; and Article 192 mentioning zakat as tax
deduction factor for taxpayers. The presence of these
articles shows the importance of zakat for Aceh
3.5 East Java Government’s
Commitment to Islamic Economy
East Java has a huge potential as a basis of economic
development and Islamic finance in Indonesia, with
96% Muslim population and has more than 6000
boarding schools. Bank Indonesia of East Java in
collaboration with East Java government established
Task Force of Sharia Economic Acceleration
ICPS 2018 - 2nd International Conference Postgraduate School
through the Decree of Governor No.
188/600/KPTS/013/2016 on East Java Sharia
Economic Acceleration on October 21, 2016. The
unit has some activities, including organizing Sharia
Economic Development and Acceleration Program
in East Java based on the established road maps.
Moreover, it develops coordination with various
stakeholder elements involved. The unit also
facilitates communities and economic actors to gain
access to sharia-based financial institutions, as well
as providing strategic policy recommendations to the
Governor of East Java in terms of sharia economic
East Java has a potential to establish the Strategic
Policy of Sharia Economic Development and
Acceleration Program, namely: 1) Institutional
synergy and synchronization between institutions
related to PPAES, 2) Synchronization of central and
local government policies, 3) Awareness and
education of Islamic economics, 4) Management of
Human Resources, 5) Building a business and
network base, 6) Management and governance, 7)
Fundraising by Islamic economic institutions to give
more contribution in the economy of East Java.
Figure 3: Target of sharia economic share in PPAES East Java.
Ten potential sources of funding for the economy of East Java are described in the Table:
Table 2: Total fund estimates 2018-2020.
There are five commitments of development and
acceleration program of sharia economics in East
Java: 1) Preparing human resources; 2) Raising
awareness and commitment of sharia economic
society; 3) Developing and strengthening sharia
business base, network and linkages; 4) Improving
the quality of management system and governance
of sharia economic and financial institutions; and 5)
The development of strategic policies that support
the acceleration of sharia economic, with the Central
and Regional Governments, Bank Indonesia and
Financial Services Authority as the main actors.
Nanggroe Aceh Darussalam and East Java are two
provinces in Indonesia that make some policies in
seeking the improvement of regional economy by
applying sharia economic. However, the policies
have not been widely socialized by the government,
therefore the application still needs improvement. It
is necessary in the future to increase effective
performance among stakeholders, either through
electronic media or printed media, in the process of
socialization and education in order to increase
The Politics of Law in Islamic Regional Regulation to Improve Regional Economy Competitiveness
public knowledge and understanding of sharia law in
the economic field. Wallahua'lam bisshowab.
The researchers would like to thank to the related
parties from Bank Indonesia, Financial Services
Authority, Government of East Java and
Government of Aceh who gave contribution to this
research by providing data and information,
including financial reporting agencies. We would
also like to thank to some relevant policies for being
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