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Constitutional 'jihad' takes Jakarta back to the future

JAKARTA -- Indonesia's second largest Muslim organization is waging a self-proclaimed "constitutional jihad" against the legal infrastructure of the market economy. But the campaign has less to do with religion than a broad-based reaction against globalization and market liberalism that has gathered pace under successive democratically-elected governments.

     Underlying the resurgence of nationalism is a smoldering resentment against foreign governments and multilateral financial institutions for compelling Indonesia to reduce subsidies, deregulate trade and investment policies and sell off state companies at the time of the 1997-98 financial crisis, when the country was at its weakest.

     President Joko Widodo echoed these sentiments in his speech at the Asia-Africa Summit in April to commemorate the 60th anniversary of former Indonesian President Sukarno's 1955 Bandung Conference, a forerunner of the non-aligned movement. Jokowi, as he is commonly known, surprised delegates with a Sukarno-esque attack on the failure of international institutions to reduce global inequality.

     "Views stating the world's economy can only be resolved by the World Bank, International Monetary Fund and Asian Development Bank are outdated and need to be thrown away," he said.

     Although the president's statement failed to reproduce the drama of Sukarno's famous invitation to the United States in 1964 "to go to hell with your aid," it struck a chord in a country in which economic nationalism is on the rebound.

     Muhammadiyah, an Islamic social and educational organization that claims 30 million members, has vowed to contest 115 laws that it regards as inconsistent with Article 33 of the constitution, which calls for state control of land, water and natural resources, and stipulates that economic sectors that "affect the life of the people will be under the power of the state."

     In February, Muhammadiyah and other claimants successfully overturned a 2004 law on water resources on the grounds that the statute encouraged the commercialization of water distribution and was therefore inconsistent with Article 33. The annulment of the law has called into question the legal basis of private participation in municipal water supply and the rapidly growing bottled water industry.

     Within the next month, Indonesia's Constitutional Court will hear the organization's challenges to a 2007 investment law, a 1999 foreign exchange law, and a 2009 electricity law. Muhammadiyah has not disclosed the other 111 laws on the list, although it has said that all were enacted after the fall of former President Suharto in 1998.

Capitalism and colonialism

Article 33, which appeared in Indonesia's original 1945 Constitution, reflects the strong association between capitalism and colonial exploitation in the minds of nationalists at the time of independence from the Netherlands, and their conviction that collectivist solutions were more appropriate to Indonesian society and culture.

     Sukarno, the dominant leader of the nationalist movement and president from 1945 to 1966, saw state companies, cooperatives and household production as Indonesia's answer to the capitalist system imposed by Dutch imperialism. He proposed "Marhaenism," named for a West Javanese farmer that he claims to have met in the 1920s, as an ideology celebrating peasant self-sufficiency.

     If Marhaenism's reverence for the traditional peasantry made it an inherently conservative ideology, Sukarno burnished his revolutionary credentials with a fierce nationalism that was most apparent in Indonesia's Konfrontasi campaign against the Malay Federation from 1962 and its withdrawal from the United Nations in 1965.

     Sukarno's formula of socially conservative domestic policy combined with virulent nationalism, bordering on xenophobia, has regained traction since the fall of the authoritarian Suharto regime.

     Although the Suharto government welcomed foreign and domestic private investment in the natural resource sectors, it left Article 33 intact. Legal challenges to the increasing role of private capital in the national economy were effectively ruled out because of the absence of an independent judiciary or a system of judicial review.

     However, the subsequent introduction of judicial reviews, and the relative ease with which Indonesian citizens can challenge existing laws, have created an inexpensive yet powerful political instrument for groups lacking influence in government or parliament.

     Established in 2003, the Constitutional Court heard the first challenges to economic laws based on a literal interpretation of Article 33 during its first year in operation. In 2005 the court struck down an electricity law of 2002 in a case brought by the Association of Legal Counselors, a trade union for workers at the State Electricity Company (known by its Indonesian initials as PLN), and an association of the company's pensioners.

     Syaiful Bakhri, the newly-appointed rector of Muhammadiyah University and the head of the organization's legal team, argues that the 2009 electricity law has increased electricity prices for consumers by allowing foreign and domestic private companies to make "expensive investments" in the power sector.

     Syaiful also claims that private trading of foreign exchange under the 1999 foreign exchange and exchange rate system law undermines government control over the domestic currency and therefore causes inflation. He says the 2007 investment law opens too many sectors to foreign investment, disadvantaging domestic businesses. "Under Suharto 10 sectors were closed to foreign investment," he said, "but now it is just one: weapons."

     In fact, existing regulations close seven sectors to foreign investment and partially close an additional 19.

     Some observers link Muhammadiyah's legal moves to an effort to broaden the political appeal of the organization and its leaders. Din Syamsudin, the chairman, is a former deputy director general of Golkar --the ruling party in the Suharto years -- and will step down in August after two five-year terms. Some see him as a potential challenger to Widodo in 2019.

     However, Muhammadiyah has been joined in the upcoming legal cases by the PLN labor union and prominent politicians including Fahmi Idris, who was former President Susilo Bambang Yudhoyono's Minister of Manpower, and later Minister of Industry.

     The move has also received explicit backing from the National Human Rights Commission (Komnas HAM), the official body responsible for investigation and monitoring of human rights abuses. Commissioner Maneger Nasution was recently quoted in the Indonesian press saying that a successful challenge to the three laws would enable the government to "guarantee basic rights in terms of the welfare of the lives of its citizens, including future generations, and to maintain state sovereignty."

     Muhammadiyah won its first victory at the Constitutional Court in November 2012 when it overturned provisions of a 2001 oil and gas law that established BPMigas as the sector's independent regulator. The regulatory function was subsequently returned to the Ministry of Energy and Natural Resources.

Fears of the 'J word'

The use of the term "jihad" has sparked investors' concerns that religious leaders are using the legal challenges to reduce the role of foreign and ethnic Chinese investors in the economy.

     However, Muhammadiyah's rhetoric is more broadly anti-capitalist, and the group has been joined in its petitions by left-leaning groups such as the Anti-Debt Coalition, and by populist politicians, including non-Muslims.

     Professor Sri Edi Swasono, a University of Indonesia economics professor and co-complainant with Muhammadiyah, blames globalization for rising inequality and the spread of what he sees as a brutal and greedy form of neo-liberalism to Indonesia.

     "National development means the ability of the people to carry out economic activities, to raise the level of education and skills and to meet basic needs. Not to continually increase investment, especially foreign investment," he told the Bandung-based Pikiran Rakyat newspaper.

     Syaiful is similarly skeptical about the capacity of a liberal market system to deliver basic needs to most Indonesians. "Bung Hatta (Mohammed Hatta, Indonesia's first vice president) made a study of the economy in the 1930s," he said. "Cooperation and gotong-royong (mutual aid) are the basis of the people's economy. Article 33 of the constitution says that Indonesia must take the middle road between socialism and capitalism."

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