Economic Governance Beyond State and Market: Islamic Capital Markets in Southeast Asia

Islamic finance has become an integral part of the financial systems of the Muslim-majority countries of Southeast Asia. At the same time, Southeast Asia has witnessed the emergence of new capital market governance practices and arrangements that are both multi-scalar and multi-sited. This article suggests that rather than only looking at the scale and rescaling of capital market governance in the region, more attention needs to be paid to the shifting balances between regulatory expertise, market practice and societal expectations. Indeed, for governance practices to be considered effective, they have to straddle at times competing demands of authority and legitimacy. This dynamic is nowhere as visible as in the case of Islamic finance, which explicitly involves Shariah experts, trained in Islamic law, in its governance structures. This article explores the novel forms of governance to which this new market has given rise. It argues that Islamic finance - rather than the product of privately held beliefs - has become increasingly bound up with the state apparatus. This facilitates the embedding of Islamic financial principles and ethical concerns throughout capital markets in the region. Yet, Islamic finance has also become increasingly submerged within national development and competitiveness agendas.