Muslim NGO lawsuits threaten Indonesia president's reformist agenda

Muhammadiyah is best known for running hospitals and schools. Now the group is pursuing what it calls 'constitutional jihad' in Indonesia's courts to stop privatization of state assets.

For the past century, Muhammadiyah, Indonesia’s second largest Islamic organization, has risen to prominence by building thousands of schools and hospitals across the vast archipelago. And, while it's long wielded political influence, it has in recent years turned to legal activism that puts it on a collision course with the country’s reform-minded president.

Muhammadiyah’s new strategy, which it terms "constitutional jihad," is intended to wind back a decade of legal reforms that it argues gives to much control of Indonesian resources to private companies, especially foreign ones. Its campaign is forcing overseas investors to think twice about committing to multi-billion-dollar infrastructure projects, a top priority of President Joko Widodo.

Muhammadiyah argues that privatization is against Indonesia’s 1945 constitution, drafted in the heat of its anti-colonial movement against the Netherlands, and threatens to further marginalize the country’s poor. 

“We are defending the constitution. We are defending the nation,” says Syaiful Bakhri, president of Muhammadiyah University in Jakarta. “Muhammadiyah is pushing the government to consider the people first before making new laws about our resources.”

But critics say the group’s litigious approach impedes development and, far from protecting the poor, could strengthen the grip of Indonesian tycoons who have a vested interest in fending off foreign competitors. In a recent report, the Organization for Economic Cooperation and Development concluded that Indonesia’s protectionist policies “inhibit openness to trade and foreign investment with uncertain development payoff.”

"The law of unexpected consequences reigns supreme here," says Arian Ardie, a risk analyst and former governor of the American Chamber of Commerce in Jakarta. "It comes down to whether you invest in Indonesia or some other country, and these rulings make the case for Indonesia that much harder."

Muhammadiyah vs. Jokowi

Mr. Bakhri is leading Muhammadiyah’s charge against privatization at the Constitutional Court. After a string of recent victories – including the overturn of a 2004 statute that allowed the government to sell water rights to private companies – the group is now turning its attention to its biggest target yet: the 2010 Foreign Investment Law.

President Widodo has used official trips abroad to coax billions of dollars from foreign investors in Japan, China, and South Korea, mostly directed at supporting a much-needed overhaul of infrastructure that could be worth as much as half a trillion dollars over the next five years. This includes contracts for building and operating ports, power plants, and water treatment facilities in the world's fourth most populous country. 

But Muhammadiyah argues that handing over control of strategic sectors of the economy to private or foreign investors is unconstitutional. Its legal argument focuses on a constitutional provision that says resources "shall be under the powers of the State and shall be used to the greatest benefit of the people." Similar arguments were made by Prabowo Subianto, the candidate whom Widodo defeated in last year's election and who remains a powerful opposition figure. 

In addition to fighting the Foreign Investment Law, Muhammadiyah may also challenge the government's decision in January to slash the $22 billion annual fuel subsidy that had long kept gas prices at about half the market rate. Widodo has said the resulting savings would help pay for his sweeping infrastructure program.

But in keeping with its populist agenda, Muhammadiyah contends that fuel should be as affordable as possible for all Indonesians. For now, the only thing preventing the organization from filing a court challenge is the low price of crude oil.

“If it appears the government can’t control the price of fuel we will fight it,” says Deputy Chairman Bambang Sudibyo.

Populist roots

Founded in 1912, Muhammadiyah has long focused on providing education and health care in rural areas where government services are lacking. It claims to operate three times as many orphanages as the central government and has an estimated membership of 30 million.

Nahdlatul Ulama, which has a more rural and less orthodox Muslim orientation than Muhammadiyah, claims to have more members; its former head, Abdurrahman Wahid served as Indonesia's president during 1999-2001. Muhammadiyah's former leader, Amien Rais, also forged a political career, with less success. The group insists that it's apolitical. 

Kevin Evans, a Jakarta-based analyst and consultant, says the legal campaign is a natural extension of Muhammadiyah’s populist roots and helps keep it politically relevant. “They are sparking a public policy debate,” he says, one that’s appears to be widely supported by its members.

“It makes me angry if our resources are being sold to foreigners when we have so much poverty,” says Asep, who is the organization’s secretary for charitable works and like many Indonesians uses only one name. “But I’m also proud to be part of this organization.”