MALAYSIAN STATE AND CORPORATE CALIPHS: INFUSING ISLAMIC ETHICS INTO GLOBAL CAPITALISM

Under the influence of the Islamic resurgence of the 1970s and sociopolitical pressure from dakwah movements and the Islamic Party of Malaysia, the UMNO-led Malaysian state began to infuse Islamic ethics into its ongoing project of economic development and modernization within the global capitalist system.

Similarly, Islamic insurance (takaful) companies, established following the Islamic Insurance (Takaful) Act of 1984, were also officially placed under the supervision of the Shariah Advisory Council of Bank Negara. These insurance operators provide risk- and profit-sharing mudarabah (profit-margin sales) contracts to policyholders who mutually agree to insure one another against losses and damages and share in any surplus based on agreed-on profit-sharing ratios (Rudnyckyj 2013, 840). In the 1990s, Islamic “windows” offering sharia-compliant loans and savings accounts were opened in conventional banks, and Islamic debt securities and equity markets were established. In 2004, the Central Bank required conventional banks with Islamic financial operations to establish full-fledged Islamic subsidiaries, and in 2009 the country’s stock exchange Bursa Malaysia launched Bursa Suq Al-Sila’, a commodity trading platform that facilitates liquidity management in Islamic banks through commodity murabahah contracts and secondary trading of government-linked corporations’ ṣukūk (Islamic bond) offerings (842; Elder 2017).³ The Central Bank of Malaysia Act of 2009 established the Central Bank’s National Shariah Council (NSAC) as the most authoritative sharia financial body in the country. Its rulings prevail over the rulings of “any Shariah body or committee constituted in Malaysia by an Islamic financial institution,” and any court or arbitrator must take into consideration any rulings of the NSAC, which are binding on Islamic financial institutions and courts. Nevertheless, according to officials in the Malaysian Shariah Judiciary Department in Putrajaya, the NSAC must still “refer to and go through” the National Fatwa Council that issues rulings on all categories of sharia law, including muamalat (cf.

Similarly, the Malaysian state promotes “proper” Islamic consumption and the regulation, production, and distribution of halal (permitted) goods as part of its national and international project for development and modernity (Fischer 2008; Lever 2016). Fischer (2008, 37) argues that the Malaysian state combined authoritarianism and responsiveness to outmaneuver dakwah groups such as Darul Arqam and PAS; it used its authoritarian powers to ban Darul Arqam, popular for its production and distribution of halal products, and responded to Muslim concerns by forming government institutions to regulate halal goods. He suggests that the Malaysian government’s vision of proper Islamic consumption linking shopping to state-led nationalism held sway with a large segment of the Malay middle class who conceived of themselves as Melayu Baru (New Malays). The Malaysian government also sought to make Malaysia an international hub for the certification, production, and distribution of halal products. And Malaysia, in fact, has become one of the largest global exporters of halal products and has emerged as a major player in setting international halal standards, fusing Islamic traditions with the demands of international markets (Lever 2016).

The Malaysian state has recently strengthened its regulation of halal certification and the display of halal logos. During my visit to JAKIM, Zainul and Hamidah expressed their anticipation of the passage of a new federal act that would rectify the lack of standardization in halal certification. Speaking to Zainul, an Islamic scholar in the halal certification division at JAKIM, I told him, “I’d like to learn more about halal businesses in Malaysia.”⁵

“In Malaysia, you need a halal certificate because if you don’t have it sales will go down more than ten percent....

“I’ve noticed that a lot of restaurants will have Islamic-related pictures and symbols up, sometimes plaques, but there is no sign stating that the food is halal.”

They both laughed at this. Zainul said, “Actually, now, we have standard halal in Malaysia: JAKIM halal. But the problem we have until now is that there is no akta, no law about halal, halal law.”

“Is it very expensive to get the certification, because I noticed that several of the small Indian Muslim restaurants... in Penang, on Penang Road, Burma Road, don’t have the halal certification logos up. But I can see that there are Muslims making the food and managing the restaurants.”

“They put signs with Al Qur’an [the Qur’an] there... so they are responsible for the halal.” Zainul laughed at the apparent inefficiency of the current state of halal certification.

Hamidah further clarified that they are working on implementing new policies on halal: “Right now, our act allows for self-decoration of halal. That means they can put there Al Qur’an or decoration or whatever, showing they are Muslims and that all those things are halal. But right after this we are going to amend our act about halal so that all these stores and restaurants cannot do the self-decoration of halal.”

“[In] March of next year, Inshaallah, next year, we pray together to Allah,” Zainul said, projecting the planned timing for the new act on halal regulation and calling for prayer, with his bright smile radiating piety. The Trade Descriptions Act of 2011 and its subsidiary legislation that provided a definition for halal and required certification by the competent authorities (JAKIM / MAIN [Islamic Religious Council of the States]) and marking with the logo issued by these authorities were passed the following year. Any individual convicted of violating this act may be fined up to RM 100,000 and/or three-years in prison, and the penalty for a corporation is a fine up to RM 250,000.

Several Malaysian Muslims and international scholars teaching at Islamic institutions were critical of government projects regulating Islamic finance and halal certification. For instance, Cik Firdaus Koh, a Chinese Muslim, told me that mukmin (pious Muslims) in Malaysia generally avoid the products from certain banks because they know those institutions are not Islamic and they are aware there are many companies listed on the Islamic index that engage in haram (prohibited) activities. Moreover, he said that the “so-called Islamic finance is not Islamic.” Islamic financial advisers are even less fair than conventional bankers are because they say that there is no riba, but if a person cannot pay it off and defaults they want the full amount to be paid, which includes their calculation of profits. “It is just riba given another label,” he exclaimed. “There is also a problem with marketing really halal products in Malaysia,” he said, “because it is hard to break into the marketing networks.” Cik Firdaus gave the example of a halal toothpaste distributor that was not able to place its product in the Giant chain of stores because of the sum of money it was required to pay Giant; whereas Colgate, using haram (forbidden) ingredients in its toothpaste, was on the shelves in most of the big stores and chains.⁶

Likewise, Cik Tariq, an Indian Muslim, told me that he went to the “supposedly sharia-compliant branch” of a bank to finance his purchase of a car. He asked if they were charging him riba in the form of a large administrative payment or if they would be buying the car from the dealer and reselling it to him, but they told him that they were actually taking out a loan with interest and that he would be paying the riba indirectly from what they worked out. “There is only Islamic finance in name for the most part in Malaysia,” he declared.⁷ Dr. Burhan, an international scholar who has trained many of the sharia experts sitting on the bank’s Shariah Committees, told me that in some Gulf States they are really trying to implement Islamic finance, but “they can’t do it here in Malaysia now because they don’t want sharia regulations to stand in the way of profit.”⁸

“But they have to hire sharia experts, right?” I asked him.

“Yes, but they are not highly educated in Islamic finance.

Laura Elder (2017) argues that in the wake of the Asian financial crisis in the early 2000s, the Malaysian state and regulatory agencies exerted their authority to push for a merging of Islamic financial practice with a heavily efficient, market-oriented version of neoliberalism. She demonstrates how market-driven reasoning enters into the ijtihad of the Bank Negara’s Shariah Advisory Committee. For instance, one of her interlocutors, a woman that sits on the Shariah Advisory Committee of both the Securities Commission and Bank Negara claimed her innovative interpretation that wa’ad (promises) could be used to structure derivatives is justified because a certain degree of gharar (uncertainty, speculation) is unavoidable and acceptable. This Islamic scholar argued that financial instruments entailing these sorts of speculative promises would bring benefits to the industry. Similarly, a researcher at a government think tank, in line to be chairman of a bank’s Shariah Committee, informed Laura Elder that bai’ al ‘inah (sales/buy-back) contracts are accepted in Malaysia because they follow the Shāfi’ī ruling that focuses on the structure rather than the intention behind the two sales. He states that the Gulf Cooperation Council, stressing intention, consider the sales/buy-back contracts to be a “backdoor to riba.” In addition, the standards of sharia compliance for equities in the Islamic Financial Services Act of 2013 has allowed the Shariah Advisory Committee to certify Malaysian Airlines, a government-linked company, as sharia-compliant despite its practice of serving liquor on its flights.

Badlisyah Abdul Ghani, executive director and chief executive officer of the CIMB Islamic Bank Berhad, tried to dispel some critical ideas about Malaysia’s Islamic financial industry by pointing out that it is the most regulated and institutionalized framework for Islamic finance in the world; furthermore, he claimed that variations across Muslim jurisdictions are minor and based on local laws, market conventions, and customs (Ee Ann 2010). He claims, contrary to popular misconceptions, that Islamic finance is not better in the Middle East, where it is governed in a less institutionalized and regulated fashion. Their poor understanding of Islamic finance, he adds, leads to Muslims missing financial opportunities, in contrast to non-Muslim customers who are more interested in the “value propositions” offered by Islamic finance. He contends that instead of being fixated on the differences across jurisdictions in the global Islamic financial market, Muslims should revel in the benefits they gain as customers from the increasingly stiff competition between Islamic financial corporations to deliver new, unique financial instruments. Badlisyah’s discourse suggests a model of sharia economics that emphasized institutionalized control of the Islamic financial industry and values of accumulating wealth rather than the persisting moral concerns of many Malaysian Muslims about whether the products are properly sharia-compliant.

After hearing from many of my Malaysian Muslim interlocutors that Islamic banks were charging interest on loans when it is clearly prohibited according to traditional Islamic jurisprudence and the National Fatwa Council, I decided in August 2012 to investigate on my own by visiting some banks. I took the monorail to the Bukit Bintang stop and walked to the Islamic subsidiary of Maybank. A middle-aged Chinese bank representative told me to go upstairs to speak to Suha. I went upstairs, approached a Malay woman wearing a tudung, and asked if she was Suha. She said she was and asked me to take a seat. I told her I was looking for information on Islamic housing loans. “For how much?” she asked. “Well, perhaps one for RM 150,000 if I get an apartment or RM 250,000 for a house,” I answered. She told me that the terms would depend on my immigration status. If I were a permanent resident I may apply for different amounts of money, but a foreign investor would have to buy a house valued at RM 500,000 or higher. As a permanent resident I would be able to buy a house valued at less. She wrote the terms of the loan down on a sheet of paper and explained to me that there would be an interest rate on the loan; after looking up the latest rate, she informed me it would be between 6.2 and 6.6 percent. The rate came from Bank Negara. I asked how it was different from a conventional loan, and she explained that they both have interest rates but the conventional loan is capitalized, so there would be less interest accruing on the Islamic loan. But there was still the same basic interest rate. Recalling that a close Malaysian friend told me that if I planned to buy a house in Malaysia it would be best to put it in his name and to have a lawyer draw up a power of attorney document stating that I am the actual owner, I asked Suha if this would be possible. She stated emphatically that it would be illegal because it would bypass the regulation concerning foreigners buying property in Malaysia. “Besides, there would be problems with inheritance if something were to happen to you,” she added.

After meeting with Suha, I walked around in Bukit Bintang, passing several sleek malls and eateries, until I found the OCBC (Oversea-Chinese Banking Corporation) Al-Amin Bank branch. I entered and asked a young Malay man for information on Islamic housing loans. He told me that they could give me some information but to process the loan I would have to go to a larger Al-Amin branch. A woman came out from an office in the back to help him, and they both explained to me that the interest rate they use is the one from Bank Negara, just as Suha had informed me. They showed me on their computer monitor that the terms of the loan would be the same regardless of whether I were a permanent resident or a Malaysian citizen. The loan would cover around 80 percent, and the rest would have to be paid in cash if the purchase were made in Melaka or 90 percent if it were in Kuala Lumpur. My visits to these two Islamic bank branches demonstrate that there are some significant differences between conventional and “sharia-compliant” loans, but indeed they both impose interest at rates set by Bank Negara.

Although Malaysian jurists on Bank Negara’s Shariah Advisory Council and many on other banks’ Shariah Committees appear to share the Malaysian state’s cultural model of merging pious Islamic ethics with neoliberal capitalist values, the corporate executives and managers of many government-linked companies applied a different cultural model to organize workplaces and to understand their activities within the global capitalist system. Sloane-White (2017) notes that many of the “corporate elites of sharia” in Islamic banks, takaful companies, and some government-linked and -owned corporations are members of an overlapping network of Qur’anic study groups and Islamic nongovernmental organizations. Many of them were members of three organizations of the Islamic resurgence—Pertubuhan Jamaah Islah Malaysia, Malaysian IKRAM Organization, and Muslim Professionals Forum—and conceived of the corporation as a “small Islamic state” and of themselves as its khalifah (caliph). Viewing the corporate workplace as their field of social responsibility, these corporate leaders implement and enforce a set of rules and obligations, which Sloane-White calls “personnel sharia,” based in their orthodox understandings of Islam. Many of these companies broadcast prayers over loudspeakers, established separate prayer rooms for men and women, organized lunchtime sermons, enforced payment of zakat, and deposited employee salaries in Islamic banks (Sloane-White 2011). They also directed employees to participate in their pious Islamic ethical projects such as building orphanages and religious schools and doing community service, which they considered to be part of their collective responsibility (fard kifayah). These sharia corporate elites of the Islamic resurgence distinguish their identities and practices as Muslim businessmen from those of Bumiputera businessmen, emphasizing simple lifestyles and moderate consumption (like PAS leaders), equitable relations with subordinate workers, and counting good deeds along with profits. Indeed, these Muslim corporate leaders value the way they perform dakwah in their relations with less religious, or even “sinful,” Malay Muslim businessmen, and stress a barakah (divine blessings)–driven corporate life in which they work to accumulate wealth and enhance the public good (maslaha) while producing more Islam.

Nevertheless, they defer to the guidance of sharia advisers operating with more market-driven models in terms of how to manage their businesses in the broader economic environment. They seek input from sharia advisers not only about how to avoid riba, uncertainty, and speculation, but also about how to relate to corrupt businesses and deal with bribes and patronage money. For instance, a sharia adviser ruled that it was ethical for a subcontractor to work for a contractor that secured the job by paying a large bribe to a politician. They also advised pious Muslim businessmen to accept “dirty money,” such as bribes and profits from political patronage, and donate it to charities (Sloane-White 2017). Thus, these sharia corporate elites were able to emplace their relatively rigid models of piety in the workplace, but as they operated in the broader world they were advised to adjust to the exigencies of doing business.

Hefner (2010, 1038–39) reminds us that although most popular new religious streams in East Asia have expressed market, materialistic, and consumer-oriented discourses, “there continue to be significant areas of tension between Islamic social ethics and late modern capitalism.” This is certainly the case with Darul Arqam, PAS, and some other Islamic revival movements and political parties (see Deeb 2006; Daniels 2009).