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Will Aceh’s Sharia Law Quash Investment?

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Will Aceh’s Sharia Law Quash Investment?

Indonesia’s only province with Islamic Law shows the risks inherent in its uneven application.

Will Aceh’s Sharia Law Quash Investment?
Credit: Aceh via

Aceh is the only province in Indonesia authorized to implement local Islamic (sharia) law. It is a resource-rich province with diverse investment opportunities, including mining (gold, copper, coal and limestone), energy (geothermal power), and agro industries (coffee, rubber and palm oil). The national government granted Aceh authorities the ability to implement sharia in 1999. In 2001, it followed up with another law that granted the province “special autonomy.” This allowed Aceh to implement sharia as a formal legal structure, institute a sharia court system, and enact a series of qanuns (local laws) to govern its implementation.

Recently, the regional government widened the scope of sharia law to include not only Muslims, but also other religious believers. The regulation, called Qanun Jinayat, was approved by the Aceh House of Representatives on September 27, 2014. Acehnese officials argued that it would be unfair if Muslims are punished according to sharia law, while non-Muslims are not. In addition, the law applies not only to Aceh’s citizens but also to visitors. With Aceh’s increasing appeal as an investment destination, investors and businesses need to pay careful attention to the intention behind such rules that discriminate against a minority.

A Human Rights Watch report in 2010 revealed some contentious cases regarding the implementation of Islamic Law and the methods that Wilayatul Hisbah (WH), the local sharia police, had been using to enforce the rules. Human rights violations were noted in the apprehension and detention of culprits for “crimes” related to seclusion and dress requirements. One case involving seclusion was that of a young Acehnese woman who was found by WH officers with her boyfriend on a motorbike on a rather isolated road, apparently because they wanted to take a shortcut. During her detention, the girl was aggressively interrogated before being raped by three officers. Regarding the dress requirement, the degree of appropriateness regarding attire is rather opaque. An article in The Diplomat reported that in a WH dress-violation raid, a total of 59 individuals were detained in which five men were found wearing shorts and 54 women wore “tight shirts” in public.

Human Rights Watch noted the selective enforcement of the law that discriminates against women and lower classes. The requirement to wear hijab (headscarf) is an example of how the law is gender-biased. The incident in which 54 women were detained in contrast to only five men strengthens the claim of gender imbalances. As for discrimination against the poor, WH seldom raided places frequented by the affluent, such as restaurants and places of recreation. Moreover, politically well-connected individuals are immune from being tried under the law.

A disproportionate imposition of the law against the lower class is accentuated by the fact that Aceh remains one of the most corrupt provinces in Indonesia. A study by Transparency International Indonesia (TII) revealed the low degree of awareness of the Aceh population regarding the detrimental effect of corruption. The situation is ironic: Sharia law is imposed as a moral obligation in which Islam itself correlates corruption with stealing as a crime linked to public interest, yet the application of the law seems to target the vulnerable while remaining powerless when it comes to those powerful enough to embezzle public funds.

The application of the law therefore presents risks for business and investment. The law may not have provisions directly related to business operations such as the confiscation of assets, but it does have a significant indirect effect on businesspeople as it governs the day-to-day behavior of each individual within the province. First, non-Muslim investors and businesspeople may see the law as detrimental to their religious freedom. For instance, Christians will not be able to hold mass because the consumption of wine (an alcoholic beverage) during communion is forbidden by law.

In general, regardless of religion, freedom of expression is suppressed by the law. Muslims have to comply with rules such as wearing hijab simply because of coercion. Lack of information and a broad interpretation of the law may further deter investors. The above cases indicate that there is a high risk of being arrested without fully understanding the reason why.

Second, the selective nature of enforcement creates a riskier business environment. To avoid being arrested, individuals must establish strong political ties, especially with more powerful people. This factor is exacerbated by endemic corruption. Those who are influential and rich enough to bribe officials will, in many cases, be exempt from the law. Investors, especially those who are foreign, may lack political support from local authorities and as such could be at greater risk.

Based solely on these two indirect effects, the application of sharia in Aceh represents a medium degree of political risk. Otherwise, Aceh offers a fairly appealing business environment. The establishment of the Aceh Promotion and Investment Board (BIPA) suggests that the province intends to actively promote investment opportunities. Yet this is offset by the risk confronting individual employees of firms with operations in Aceh, whose rights will be suppressed. It is not inconceivable that in the near future there could be a controversy similar to what happened in the United Arab Emirates last year, in which a Norwegian woman was convicted of reporting her rape to authorities.

Political risk in Aceh could escalate if the province becomes a hub for Islamic militants from across the archipelago or around the region. Indonesia’s Islamic militants have regularly insisted on a nationwide application of sharia law. Aceh may be seen as a good example of how sharia law is used in practice. Hence, it may become a magnet for Islamic militants. If businesses become targets for these militants, as they have in other parts of the world, Aceh may become too dangerous for operations.

Aceh is a region with a history of Islamic insurgencies. Investors and businesses should pay more attention and consider the possibility of Aceh becoming a hub for Islamic militants from across the country. The proliferation of hardline Islamic organizations like Jamaah Islamiyah and Islamic Defenders Front (FPI) should be seen as warning signs.

Farzikha Soerono is a graduate of the Rajaratnam School of International Studies, Singapore.