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The centrality of Islamic organizations to Indonesia’s successful democratic transition and consolidation has affirmed scholars’ view that the inclusion of anti-system parties in the political process fosters their moderation. What this view ignores, however, is that the inclusion of Islamic actors also changes the political system. In other words, Islamic society and the secular state coevolve. This coevolution is demonstrated empirically through a diachronic case study of the sacralizing of Indonesia’s postcolonial state from 1945-2014. This genealogy demonstrates that the sacralizing of the state long predates democratization. As a result, the contemporary state is neither a secular nor a theocratic state, but rather somewhere in-between. Theoretically, this case suggests that sacralizing the postcolonial state is just as important for democratization in the Muslim world as are inclusion and moderation. In other words, for democratization to succeed in states like Tunisia and Indonesia, it is just as important that Islamic actors never fully “lose” as it is that they never fully “win.” In broader comparative perspective, given the salience of religion in contemporary Europe this paper suggests that politics in peripheral states like India, Indonesia, and Tunisia where religious actors are central to the crafting of mutual accommodation may illuminate aspects of Europe’s present, rather than its past.