I would like to tribute this article to the commemoration of Indonesia's 65th Independence Day. We've seen so many people who try to establish an Islamic state (including in Indonesia) and claim that this state shall be eternally blessed by God and will solve all humankind problems. Not only that this is a false hope, it is also a big blunder. The main question is: does Islam actually recognize a specific legal form of Islamic state? My quick answer would be no. 

Islamic Political Leadership Succession: Lessons from the 4 Great Caliphs

Before we discuss the evolution of Islamic state throughout the history, let us first see how political leadership was formed and passed during the early era of Islam. When the Prophet Muhammad SAW was still alive, he had two authority within his hands, i.e. religion and politic. However, neither the Koran nor the Prophet ever stipulate any specific form of state to begin with. In any case, it was an informal form of leadership.

When the Prophet died, a huge debate occurred between his devoted followers ("Sahabat") on who will replace the Prophet's position as the leader of the people of Makkah and Madinah. If there is actually a clear concept of leadership and state in Islam, surely such debate would never happen, but as further recorded in various history books, the debate was so fierce that the Prophet's burial process was delayed for around 3 days. Without a doubt, this was the first political crisis in the moslem history. Many issues were discussed in that debate as people were trying to find the most suitable candidate, including ethnicity, seniority, and also capability of the candidates. You may wish to consider the fact that at that time, tribal issues were quite dominant, and there was a huge risk that our young Islamic community would be shattered due to this leadership succession. Miraculously, the community survived its first political trial.

When the debate was finally over, the Sahabats who attended the meeting agreed that the first person who converted into Islam, Abu Bakar, should become their first leader, the first caliph of the Islamic society. They also agreed that only political leadership which shall be passed to Abu Bakar, while religious leadership was deemed over with the death of the Prophet. After all, no one would be able to receive directly the wisdom of God other than the Prophet. Abu Bakar led the Islamic community for about 2.5 years. After he died, Umar bin Khatab became the next caliph through a direct appointment from Abu Bakar. Some prominent moslem historians claim that Abu Bakar has discussed Umar's appointment with other respectable Sahabats, and all of them agreed with his appointment. Nevertheless, it was Abu Bakar who directly appointed Umar as his successor. So by now, we could see 2 types of leadership succession. Later on, Ustman bin Affan became the successor of Umar. How did it go?

Umar appointed 6 members from the Sahabats (the "Council") with the task to elect the next caliph from the Council's own members. Again, another form of leadership succession. In my opinion, Umar was a great leader and he clearly understood that without any clear guidance, Abu Bakar's decision to directly appoint him would be considered as a binding precedent by the Islamic community if he also did the same in appointing his successor. Since he actually opposed the direct appointment mechanism, he decided to create a new mechanism for leadership succession. Then came Ali bin Abu Thalib as the 4th caliph.

After the death of Ustman due to a coup, Ali was elected as the new caliph through a direct election by the whole people of Madinah, and therefore became the first and also the last caliph who was appointed through a public election. The elections of Ali is a strong evidence that the early Islamic community practiced democracy, though maybe not as complex as today. Despite the inconsistencies in leadership succession mechanism, there is a general rule that we can learn from the above story. All of the 4 caliphs were considered as capable and respected leaders, and none of them were appointed because of family relationship with the previous ones. For such a young community with deep tribal issues, this was a great achievement indeed.

Unfortunately, this great system ended when Muawiyah bin Abu Sufyan gained the title of caliph. I'll reserve the story on how he got that title for another post (maybe when we discuss the Shia political movement), though I can say it here that it is a controversial one, and many historians are still disputing whether Muawiyah had valid grounds to obtain that title from Ali bin Abu Thalib. How did Muawiyah end the caliphate system of leadership succession? He appointed his own son, Yazid, as his successor, and by such act, he turned the caliphate into an ordinary kingdom. Yes, the Islamic people are still calling their leaders as caliphs, but they are not different from kings who gained their title simply because of family relationship.

The Evolution of Islamic State: Experience or Religious Doctrine?

Based on the above story, we can safely conclude that in terms of political leadership succession, the early Islamic community did not have a single established system. Furthermore, the mechanics existing at that time were not simply derived from Godly sources, rather they were created from trials and errors, the experiences of the caliphs and the moslem community as a whole. This is how the concept of Islamic state evolves within more than 1,400 years, experiences rule.

Under Abu Bakar's leadership, the Islamic community was still very small, and Abu Bakar spent most of his time fighting insurgents, mostly lead by fake prophets who tried to gain control over the moslem community. Thus, you won't find complex state organs under his era as his government mostly resembled tribal leadership. The only thing that may be considered as an evidence of modern state is the existence of baitul-mal, or the state's treasury, though at that time it mostly dealt with war's booty. Nevertheless, it is still a unique concept, as the war's booty is considered as people's assets and managed by the "state" through the baitul-mal It was actually under Umar bin Khatab leadership when Islamic community started to grow into a more formal state. During Umar's period, the Islamic community expanded their power aggressively and they succeeded in controlling many new areas. As more and more areas fell under the control of the moslem community, Umar realized that he was no longer able to directly supervise those areas. As a direct consequence, there is a necessity to appoint representatives of the caliph to lead and supervise those new areas, and suddenly, we have governors position.

Soon enough, official judges position were also available as the new community need professional lawyers to settle their disputes and uphold the law. In short, Umar fully understood his role as a caliph, administering the government, managing the needs of the people, and establishing a good foundation for a powerful state. He also believed that the caliph position is a political and administrative position. In other words, there's nothing holy about it.

Sadly, as the caliphate turned into a kingdom, the nature of the caliph's position was also changed. In order to secure the caliphs' power, new doctrines were formulated, they were seen as the representatives of God, their authorities over the people were granted by God. Some prominent scholars rejected this notion, and claimed that this is not the ideal form of Islamic leadership. I share the same view, but then again, it is a logic decision from the caliphs. When you are no longer elected by the people, you absolutely need a good doctrine to support your power, and what would be better than using God's name? These caliphs were not stupid, some of them were also good lawyers and soon they established caliphate's official scholars with the task to formalize the doctrine, changing the status of the caliphate from a mere administrative body of government into a holy state. It should be noted that in those eras, many scholars did not want to cooperate with the caliphs. Those who were willing to cooperate with the caliphate will not be respected as they will be considered as people who sold their soul to the devil.

The Illusion and Its Grave Consequences

For the sake of fairness, I won't say that the concept of Islamic kingdom is entirely bad, in fact the caliphate had their good moments in the history of mankind. But the damage has been done, this whole business creates an illusion to the Moslem community that the Islamic state, the caliphate, is a product of God, part of the religion, instead of a product derived from political experiences. There are some grave consequences when the caliphate is deemed as a part of religious doctrine, and we can easily spot one, i.e. the fact that most people who wish to establish an Islamic state focus most of their time in defining the characteristics of the Islamic state instead of how the state can be useful for its people.

In Umar's era, he did not bother the formal structure of the state, what bothered him the most was his people's prosperity. Another major problem is that this illusion also creates a false hope to many people. From historical perspective, the existence of the Islamic state does not automatically solve all problems. The history is very clear on this subject and it would be a huge lie if Abu Bakar, Umar, Ustman and Ali did not face critical and complex problems during their respective leadership. In some cases, they were successful, in other cases, they faced failures. However, some people buy the lies and completely believe that the establishment of the caliphate will solve all problems. I can only hope that this people could face the cruel reality someday.

Conclusion

We have reached an understanding that the concept of Islamic state is mostly derived from experience not religious doctrine. As a consequence, there is no use for discussing the formal structure of the Islamic state. Don't waste our time preaching the greatness of the Islamic state and the promise that it will bring, instead, we should really focus on how we can manage the state to provide better service to the people, and I am certain that this is relevant for the current Indonesia. Hope it's useful :) Happy Independence Day my beloved Indonesia!

At last, the long awaited draft amendment to the VAT law has been passed by the Indonesian legislative board (the "New VAT Law"). You can see the soft copy here. The law will be effective as of 1 April 2010. The most important thing here is the fact that the New VAT Law recognizes the existence of Islamic finance and exempts VAT for transactions that fall under the term of Islamic finance. Article 1A Paragraph (1) h of the New VAT Law states that with respect to delivery of taxable goods by taxable entrepreneur in the context of Islamic financing activities, such delivery shall be only considered between the taxable entrepreneur and the party needing such taxable goods. While the elucidation of this Article does not provide specific explanation, it gives an example of a murabahah transaction for a vehicle financing, where an Islamic bank buys a car from a taxable entrepreneur based on an order from the Islamic bank customer. In this example, the New VAT Law acknowledges that under such Islamic financing structure, the Islamic bank would need to purchase the vehicle first and then resell it to its customer, however the New VAT Law further confirms that the delivery of such car is considered to be directly done from the taxable entrepreneur to the Shari'a bank customer. In other words, we can conclude that the New VAT Law acknowledges the role of the Islamic financial institutions as financial intermediaries. In addition to the above, Article 4A Paragraph (3) d of the New VAT Law states that financial services are exempted from VAT. The elucidation of such Article further states that the definition of financial services include Shari'a based financing, whereas the financial services may be in the form of: (a) leasing, (b) factoring, (c) credit cards, and (d) consumer financing. Although the above wordings are not clear enough to capture all kind of Islamic financing structure, I am still very happy with this new development as I believe that the New VAT Law might be the right trigger for bringing the Indonesian Islamic finance to a new level. As you may be aware, before the enactment of this law, there is a huge confusion within Islamic finance players on whether their transactions are actually exempted from VAT or not. To add the confusion, in most of the time, the tax authorities were silent on the tax treatment. In short, it was like sitting on a deadly time bomb. In my opinion, there should not be any confusion in the first place, since from the accounting perspective, these Islamic financing transactions are recorded as ordinary financing transactions in the balance sheets of companies that receive such Islamic financing (substance over form) . In other words, there would be no record of sale and purchase or sale and lease back transactions in the financial statements since those structures are merely used to satisfy the Shari'a aspect and do not reflect actual transactions. However, a risk is a risk and without having any tax advisor who is brave enough to issue a clean tax opinion, most Islamic financial institutions were not eager to develop the business in Indonesia. Thus, there are no significant development of Indonesian Islamic finance until today. Hopefully, this should be no longer the case. In addition to the above, further implementing regulations are still needed to resolve the remaining issues as provided below:

• Will there be any criteria to determine the transactions that fall under Islamic finance transactions? I guess the Government will need to stipulate such criteria to avoid any moral hazard from business players who are trying to avoid paying VAT under the disguise of Islamic financing transactions.
• It is unclear on how Ijarah transactions (lease structure) will be treated under the New VAT Law, since there is no transfer of beneficial ownership in an Ijarah transaction. Should the transaction be considered as an ordinary lease transaction? Surely not, but I would like to know how this will be solved from tax perspective.
• While Ijarah Muntahia bit Tamlik financing structure (sale and lease back) should be accommodated under Article 4A Paragraph (3) d of the New VAT Law, it seems to me that this article only applies to leasing companies. What about IMBT financing provided by other kind of Islamic financial institutions, such as Islamic banks? Is there any requirement for securing a leasing company license before the exemption works?
• What about Sukuk? From the original wordings, it seems that the New VAT Law only covers plain vanilla Islamic financing transactions conducted by Islamic banks.

I guess that would be the preliminary issues related to the New VAT Law. I will give more updates on this subject after the Government has issued further implementing regulations.

All right, it has been a while since my last post. I guess I can blame my excessive office workload (made a whopping 64 billable hours last week or more than 12 billable hours a business day) and the Id Mubarak holidays for this blogging non-productive period, eh?

In today's post, we will discuss a very interesting issue that has been debated for centuries without ever being finally resolved, even until today. Yes, we are talking about the validity of the claim that there is an eternally just law in this world that can be applied in whatever situation and condition, an everlasting law that will prevail over any other laws.

Now, is this claim valid, i.e. do we, humans, have this kind of law? Sorry to say, but my quick reply would be no. In my opinion, there is no such thing as an eternally just law, because those that are being called just as of now could turn into unjust the next minute. As long as we don't have a single, complete, and universally acceptable definition of the term "justice," we should say goodbye to the concept of an eternally just law.

However, I am not surprised if many people would disagree with my opinion. We could easily spotted these guys when we are dealing with those who believe in the existence of a perfect God's law that holds supremacy over all kind of man-made laws. Usually, such people also believe that the implementation of the God's law would solve any problem in the society because such law is made by the wisdom and grace of the God that surpass humans' limited capabilities.

There are many variations of laws that could fall under the category of God-made laws, however it is safe to assume that all religious laws could be considered as God laws (of course in this case, the deity to which we call it God will depend on the respective religions). Among these religious laws, I have no doubt that the Islamic law holds the foremost position due to: (i) its huge coverage (almost all aspects of life, private and public, are being governed by the Islamic laws), (ii) its well-established legal system (though the Islamic legal system does not have a single and united codification of laws which is applicable in each part of this world, it has established a generally acceptable legal sources and methods of legal reasoning), and the most important thing (iii) its wide use in various parts of the world (with modifications here and there).

Islamic law is indeed interesting. The fact that there are so many ways in implementing this law and the controversies that surround such implementation amuses me. How could this happen? Similar with other types of religious laws, the implementation of Islamic law often falls under the same trap of too much regulating the citizen's private life. Something that I believe is no longer acceptable in this modern world. In addition, as most devoted believers take as granted that the entire body of the Islamic law is derived from God itself, whether through the Koran or through the Sunnah (words, acts, and silent approvals from the Prophet), the Islamic law faces the chronic problem of inflexibility as these people claim that the provisions of the Islamic law cannot be changed in any condition whatsoever (subject to any waiver that is specifically provided under the Islamic law (rukshah)).

I could agree with the unchanging part if we're talking about the Ibadah aspect of Islamic law, i.e. any acts made as an implementation of the relationship between men and God, such as prayer, (shalat), fasting, and hajj. You can't change the basic rules that there are 5 obligatory shalat times in one day, or that mandatory fasting should be conducted in the Ramadan months. But, it is difficult for me to comprehend if we are also saying that any rules of Islamic law related to the Muamalah aspect, i.e. any private acts of men or any acts made between men, including trading, business, marriage, inheritance, etc, should also be fixed for eternity. The implementation of this kind of law should be made in accordance with the situation and condition of the respective era.

For me, rather than trying to made up the benefit or secret wisdom of this Muamalah related laws, it would be better to deeply analyze whether such laws are still viable for use. That would be more effective. You would be surprised to see how many books and articles were made to support the rule that daughters can only receive half of the sons' share in receiving inheritance, or why women is better staying at home and don't work. And that is not including the various ridiculous reasons contained within those books and articles. To add the problem, those who are trying to make a proper review of these rules will be most likely deemed as unfaithful, unbelievers whose faith in God should be questioned.

This brings us to the issue of the Aceh's Qanun. It is truly unfortunate that the Aceh's Qanun, as a part of Islamic law implementation in Indonesia, cannot outshine its counterparts by creating new development that can show some good quality of creativity. Instead, it stays with the mainstream and therefore brings unnecessary problems.

The Aceh's Qanun is basically a new regulation issued by the Regional Government of Aceh which deals with the penalization of certain acts that are being considered as a crime under the Islamic laws (the one which is specifically adopted by the Regional Government of Aceh since there is no single codification of Islamic laws in this world. See above). For ease of reference, let us call this new regulation as Qanun.

As stated above, the stipulation of this Qanun is very unfortunate and it really saddens me. Here we are in the 21st century, and yet, we are still clinging to the past, again and again trying to bring personal life choices into the public room. As you will see further below, except for rape, sexual harassment, and gambling, this Qanun mainly deals with humans' private actions. The Qanun makers also show a liking to the use of Arabic terms as all of the criminalized actions are named in Arabic (which is quite odd since the Qanun is intended for Indonesians).

These are the criminalized actions in the Qanun: (i) drinking alcoholic beverages, (ii) gambling, (iii) male and female being in a closed/hidden room without any marriage relationship and they are not prohibited from marrying each other (khalwat) (please note that these people don't have to do anything to be punished. Simply being together in a closed room would be sufficient to punish them); (iv) male and female making out (including holding hands together, kissing and hugging) without having a marriage relationship (ikhtilath); (v) male and female having sex outside of a marriage relationship (adultery/zina); (vi) performing male-to-male sex, a.k.a gay sex (liwath); (vii) performing female-to-female sex, a.k.a lesbian sex (musahaqah), (viii) harassing sexually, (ix) raping, and (x) accusing other people of performing adultery without having the minimum 4 witnesses as a valid evidence (qadzaf).

The sanctions for these criminal actions include among others caning, prison, fines in the form of gold and stoning/death penalty for a married person that conduct adultery. Now, I wouldn't discuss why this Qanun can exist under the Indonesian legal system. If you're interested with that subject, I suggest that you should see this nice post here. Instead, I would like to focus on the backgrounds used by the Aceh Regional Government to issue this Qanun including all of its provisions.

In the elucidation of the Qanun, the Qanun makers claim that the Qanun was made as a response to the need of the Aceh's people to implement the Islamic law in their society since Islamic law has been considered as an inseparable part of the Aceh's culture. Further, they also claim that the Qanun was established on four basic principles which include: (i) the rules shall be derived from the Koran and the Sunnah; (ii) the interpretation of such rules shall be made in accordance with the local needs of Aceh people and in the context of Indonesian legal system; (iii) the implementation of such rules shall be made by taking into consideration the future progress and the needs of the 21st century's Indonesian people who are still in the process of development (which cover modern issues such as protection of human rights, gender equality, and technology development); and (iv) the implementation of such rules shall also be guided by the Islamic legal principles of using the best opinions from various schools (mazhab) and finding and developing better provisions.

Comparing to the reality of this Qanun, I must admit that the above principles sound very bombastic, if not misleading (especially for the third principle). I don't see any aspect, even the slightest one, that can be used to say that this Qanun has been made in accordance with the above principles. Well, maybe the Qanun corresponds with the first principle, but surely the makers are not paying any attention to the other three principles.

And to complete the irony, the Qanun makers were also hoping in the Qanun's elucidation that the implementation of this Qanun (in accordance with the above principles) can reflect a law that could bring justice and prosperity to the entire society (rahmatan lil alamin). Nice try and keep dreaming sirs.

Come on, how can we say that a law that permits a married person to be killed by stoning due to adultery can be considered as a law that brings prosperity? I can agree if the state would like to punish this kind of person (and by the way, we do have this kind of provision in our Penal Code), but killing the person? That's outrageous.

What make it worse is the fact that the Qanun does not provide any clear mechanism for evidencing the adultery, whereas in the classic Islamic law, an adultery case can only be validly proofed if there are 4 witness who clearly see such act, i.e. a penis is being inserted into a vagina. In fact, it is so hard to implement this rule, that the only known case where a person is being stoned for conducting adultery is a case where a pregnant woman came to the prophet and acknowledged that she has conducted an adultery. The prophet himself has ordered this woman to go home since there is no clear evidence that she has indeed conducted an adultery (even though she is pregnant). But the woman insisted and after more than 2 years of begging to be stoned, she actually got what she wanted, which only happen after she gave birth and taken care her child for some time.

Why do we still insist of using this rule? On a bigger scale, why do we even consider to use the rules that were established a long time ago and might not be relevant anymore in this era. Maybe, it would be effective in the past to control the society by fear. It is not a secret that 1,400 years ago the arab people were living in a barbaric era. Of course they would need to have a law that can impose fear to them and make them obey such law. But now?

I would even dare to say that this law is inefficient! Why bother to find people who are being together in a closed room or are making out somewhere and then punish them? Are we trying to deplete our resources to finance these useless acts? Or assuming that an adultery case is validly evidenced, should we stone the convicted to death? Who will bear responsibility for the family left behind? The state by using the money of the tax payer??? This is utterly ridiculous and the Qanun simply doesn't meet the test of a law that can bring global prosperity to the society, well, unless the Qanun makers believe that the prosperity will come since God will bless Aceh and Indonesia for implementing the Qanun. Again, keep dreaming sirs. The real fact is clear, this Qanun brings unnecessary costs and fear to the society.

I believe that this is the right time for us to bring an end to the claim of an eternally just law. In this modern era, a law or a policy should be made in accordance with the people needs and should be implemented in the most effective and efficient way. A good law shall prevail without much hesitation, but a bad law can only prevail by using force which would be costly. For Islamic law, it would be useful if we start to review the current rules and determine whether such rules would still be applicable. We need to remember that since Koran or Sunnah cannot be changed forever, the law contained within should be flexible and it is our task to make a better interpretation. When man-made laws are wrong, we can always amend them, but we can't amend the content of the Koran and/or Sunnah. The content will always be the same but the implementation should depend on the actual condition. Only by making it flexible that we can ensure the survivability of the Islamic law, or else, I fear that in the future, the Islamic law shall only be regarded as a part of the forgotten history.