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

Zaki

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.

1 INTRODUCTION

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

Indonesia.

No.

Category of Local

Quantity

Percentage

(%)

Regulations

Morality

170

Zakat

Faith

Islamic Finance

Islamic Education

Muslim Attire

No.

Category of Local

Quantity

Percentage

(%)

Regulations

Etc.

Total

422

100

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.

810

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

2 METHODS

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 RESULTS AND DISCUSSION

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

regulations:

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

811

3.3 Legal Politics Sharia Rules in

Economics

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

ability.

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

principles.

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

government.

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

812

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

development.

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.

4 CONCLUSIONS

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

813

public knowledge and understanding of sharia law in

the economic field. Wallahua'lam bisshowab.

ACKNOWLEDGEMENTS

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

analyzed into the results of the study.

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