Identifying the Root Causes to Indonesia’s Oil and Gas Problems and Islam’s Way of Solving Them

Author (s): 
Idries de Vries

The Islamic oil & gas resource management policy build on the saying of Prophet Mohammed (saw) “The Muslims share in three things, water, pasture lands and fire” (Abu Dawud). The meaning of the narration is that oil & gas resources are part of what in Islam is called “public property”, i.e. that which is owned by all people together, is free for each of them to use, while none of them has the right to limit the usage by others. In other words, the oil & gas resources of Indonesia belong to the people of Indonesia. Because it is not easy for individuals to benefit from the oil & gas resources in the ground, Islam has given the state the responsibility to develop these resources, and then to use them in a way that maximizes the benefit in them for the people.

In order to maximize the benefit in Indonesia’s oil & gas resources for the people of Indonesia, the state should manage production of oil & gas itself, possibly through a state-owned company. This would have the immediate benefit of keeping the billions of dollars that the foreign oil companies currently make on Indonesian oil & gas in Indonesia.

Following this, the state should make the produced hydrocarbons available to local industries at cost-price, rather than exporting them in their raw form. This would enable the development of extensive refining and chemicals industries in Indonesia, since their products would be highly competitive on the international markets due to the low cost of their raw material inputs. Similarly, industries that use a lot of energy in their production processes such as steel and aluminum smelting would flourish. Together, the development of these industries would enable a comprehensive economic development of Indonesia since the goods critical for this – both those used in physically building an industry and those consumed in the industry – would become cheap in Indonesia as compared to most other countries in the world.

This would create an enormous amount of jobs in the country. It would also transform Indonesia from an exporter of low price raw materials and importer of high price finished goods into an exporter of high price finished goods, thereby greatly reducing the country’s dependency on foreign goods and improving the Current Account Balance. And, the development of this industrial base would give Indonesia a practical ability to undertake R&D and become an innovator and leader rather than a copycat and follower.

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