The journal is listed in Cabell's, Ulrich's,and the Journal Rank List of Australia Research Council with ERA 10 40538.lt is ranked "B" by ABDC (Australian Business Deans Council)
of Taiwan Busine
~C8demy
Management Review
Volume 11 * Number 2* AUGUST 2015
ISSN 1 13-0534
1. Financial Characteristics of Most Trustworth US Co panies: An Empirical Analysis-Vonda
Cotton and Dr. Srinivasan Ragothaman ,
A .............. ..........
__ ......_ .. __......... __ ........_•.••.. 01
2. Maqasid AI Shariah Analysis of Budg
eficit Policy In Ina nesian Economy-Dr. Tika Widias08
tuti Ahmad Hudalfah,Noven SUPl"ID'ogi , f Indonesia
3. What Detenmines Airline Profitability I
Achinto Roy of Australia •
ustry Conditions r Firm Level Capabilities? -Dr.
•• ._-_.-_... 17
_ InYentAnd Capturing Intent In Marketing Strategy-Nagasi
a Balakrishna Kanagal of India
24
5. A Comparison of Intelligent Technique:; Accuracy for Finan ial Failure Predlction-Hia Jong
Tech and Hsing-Hul Chu , Taiwan .......... ............. ............. .... ..... ..... .. .........
34
W
"
..
6 The Influence of Client Fraud Risk And Client Cooperativeness on Professional Skeptic1sm of
Chinese Entry-level Auditors-Sammy Xiaoyan Ying and Chris Patel, Australia ...............
. , 44
7 Informality And Credit Constraints in M Es: An Empirical ~ am i nat i on of Low Income
Counfnes-Nlrosha Hewa Wellalage an Stuart Locke,New Zealand .,............................... .
55
8. Evaluating Bank Performance: Insfit t nal Pressures And
Kevin Baird and Sujatha Perera, Aus a ia .•..••... _ .......... J ..
62
trateglc Responses-Rahat Munir ,
. .. . ......
...
.. .............................. .
9. Regulatory Implications of Corporate G vemance USing 0 nership Structure-Dr. Ranajee and
Dr. Sudeepta Pradhan,lndia
.. ................................... 80
10. Entrepreneurship in SMEs The Effec
Ping Huang of Taiwan and Karen Yua
f Social Capital
d Environmental Dynamism· Kaing of Australia .. ........
.. ..... _.............. _...........
88
11 Management Types of HODsing and
ateI:
0 .00
!
•
;0
j
...
60
40
500
~
.a
•
E.
~
~
~
20
00
2008
_
2010
200'
20 11
2012
2013
Non 0 11 SubSid ies
011 Sub.$ld ies
_
SOCial Ass lshince
-Interest Payment
Source: Bank Indonesia Database. 2013 : \\ \\ \\ .bi .l!.o.id
The changing of public expenditure from oi l subsidy oriented to be pro-social program
especially education, healthcare and food cannot quickl y solve Indonesian soc ial problem especially
mal-nutrition, illiterate, bad-sanitation and poverty. It is mainly the budget of government as well as
regional local government is insufficient to cover all need and social programs. In the fact, lndonesia
is one of the richest natural resource in the world, abundantly all can be found in Indonesia from metal.
gold, oil until plantation product. Thus, critical question arises why deficit budgets to provide social
program must be financed through the debt both domestic and international ources. Debt-based
financing for government budget costs much in the economy because Indonesian government must
bear the interest rate itself at least 15 percent of central government expenditure every year. There are
two issues pertaining to inability to solve social problem, namely corruption crimes practiced by
political leaders, bureaucracy and public officials and mi smanagement of natural resource.
Critical Evaluation on Budget Deficit
The high interest rate payment is the main issue of public sector expenditure when the due takes
a place. Indonesian government seems no choices to resolve its public sector economy and relies too
much on debt management. It is actually the high costs that must be paid when take loan from any
sources. Every year Indonesian budget management runs behind debt dependence and most of them
come from international aid (refer to table 4.1). However, the budget deficit is utilized for the regular
expenditure and not emergency or very important needs like what Islam has stipulated is that during
the government of the prophet (Pbuh) and Abbasites' era has borrowed money from public it is
because of important needs whereby the country cannot provide immediately for example to defend
the country and there was voluntary mechani sm to provide public facilities by using phil anthropic
program (Kahf, 1999).
Table 4.5 lndonesian
Bud
~
et Deficit 2008-20013) (In Billion Rupiah)
2008
2009
2010
2011
2012
2013
981.609
848.763
995 .272
1.210.600
1.338.110
1.438.891
Government Expendi ture
985 .73 1
937.382
1.042. 117
1.294.999
1.49 1.410
1.650.564
Budget Deficit
(4. 122)
(88 .619)
(46.845)
(84 .399)
( 153.300)
(2 11.673)
Years
Government
Grant
Revenue
and
Source: Bank Indonesia Database, 2014 : \\\\\\ ,bi.!!o.id
I ..
Academy ofTa1\\ an BUSiness Management Revie\\
From Islamic perspective, the government decision to take debt based on usury/interest is very
dilemmatic because indeed the purpose of debt itself is in line with Maqasid Al Shariah but the means
are prohibited clearly in Qur'an. Rational speaking, debt is not the way out to solve the problem and
instead of creating new problem for future generation. In the light of Maqasid Al Shariah, debt should
be taken by employing proper way, for example like what Islam has taught, partnership program
whereby involve private sectors to participate in government projects without having debt schemes.
The debt management is considered as the best way to cover and maintain the balance of public
sector economy because government argues that in order to support potential revenue, debt is very
useful. Even,lndonesian government issues sllkuk (Islamic bond) as the secondary sources of
debt-based financing in order to manage the government budget balance between revenue and
expenditure (refer to Table 4.4).
Table 4.6 Outstanding Government Securities (Billion Ruoiah) 2011
Jan
Feb
March
Apnl
May
June
JulY
Am!ust
ScD'
De,
Noy
Dec
577665
577303
511649
5800 19
585666
596141
6041 91
620023
619142
617261
61 1097
615498
Government
Bonds
5563 15
555453
547899
554749
558371
5681 46
574396
589018
589797
587972
587302
585103
Government
Islamic Securities
15169
23203
21544
29289
31939
3241 3
32927
36 118
36 118
38500
38500
38500
Year of2010
Government Debt
Securities
Sou rce. Bank IndoneSia Database, 20 II : \\ w\\ .bl.e.o.ld
In brief, Islam allows people and government to take a debt in case of necessities for the purpose
of emergency needs. Of course, its means must be guided by Islamic values, although IndoneSia is not
Islamic state its policy makers can think and analyze that the debt is not solving the problem.
Alternatively, a lot of partnership concept that can be applied to replace debt management from
Islamic perspective is available. It will help the government to avoid interest payment. Hopefully, by
removing debt from public sector management, more subsidies can be allocated for the needy
especially in providing free and quality education, creating new jobs for the poor and building new
mfrastructure.
CONCLUSION
Indonesian government has responsibility to set up an economic development which is in line
with Maqasid Al Shariah as the ultimate goal and of course to attain this goal must refer to right
means which is permissible in Islam. In terms of budgeting policy. Indonesian government seems to
have no option but adopt the western system in many sectors especially economic development
policies. As the Muslim populated-country, Indonesian government should work for aU Muslim
interest and not certain parties.
The high interest rate payment is the main issue of public sector expenditure. Indonesian
government seems no choices to resolve its public sector economy and relies too much on debt
management. A1thougt its allocation has gradually decreased. from Islamic perspective, the
government decision to take debt based on usury/interest is very dilemmatic because indeed the
purpose of debt itself is in line with Maqasid Al Shariah but the means are prohibited clearly in
Qur ' an . Rational speaking, debt is not the way out to solve the problem and instead of creating new
problem for future generation. In the light of Maqasid Al Shariah. debt should be gradually avoided by
replacing with proper alternative. for example like what Islam has taught. partnership program
whereby involve private sectors to participate in government projects.
For social welfare expenditure there has been a misallocation in emphasizing budget expenditure
whereby oil and petroleum subsidy consume almost majority of the total welfare expenditure in
Indonesian public sector economy. Subsidizing oil price is wrong decision because it is consumed
mostly by rich people. Petroleum is fuel for cars. motor cycle. machinery engine and industrial
vehicles which belong to middle-up society; they get benefit too much on lower oil price in the market.
shou ld allocate more expenditure since 2014 for non oil subsidy and social
Indonesian ~overnmt
protection, like food and education as well as social assistance like healthcare.
REFERENCES
Chapra, U.M .. (1993). Islam and Economic Development. Islamization of Knowledge-I 4: The
International Institute of Islamic Thought and Islamic Research Institute. First published in Pakistan
Bank Indonesia.(2014). Data Tabulation Center: Bank Indonesia, www.bi .!l.o.id
Iqbal, Munawar and Khan. Tarikull ah..(2004). Financin g Public Expenditure: An Islamic Perspective.
Occasional Paper 0. 07. Islami c Research and Tra ining Institute-I slami c De\'e!opment Bank : Jeddah.
Acad emy o f T:uwan Busmess i\lanagement Re\ ie\\
15
Kingdom of Saudi Arabia
Kahf, M,.(1999). Instrument of Meeting Budget Deficit in Islamic Economy, Research Paper IRTI
1412 H
Khan, Hayat. (2015). Some Implications of Debt versus Equity-Based Financing in the Backdrop of
Financial Crises, JKA U: Islamic Econ. , Vol. 28 No.1, PP.: 179-195 (20IsA.D.l1436A.H.) 001:
10.4l97IIs\ec.28-1.7
Omar, M. (20 II). Lecture Note, Shariah Oriented Public Policy, Kulliyah of Economics and
Management Sciences, International Islamic University Malaysia, Unpublished
Samuleson, P. A. (1969). Pure Theory of Public Expenditure and Taxation', in Margolis, J. and
Guitton, H. (Eds) Public Economics: An analysis of Public Production and Consumption and Their
Relations to the Private Sector, Proceedings of a Conference held by the International Economic
Association, MacMillan, London.
Siddiqi, M. Nejatullah,. ( 1996). Role of the State in the Economy: An Islamic Perspective, Leicester,
UK, Islamic Foundation
o
16
Academy orTatwan Business Management Re\ II!\'.
~C8demy
Management Review
Volume 11 * Number 2* AUGUST 2015
ISSN 1 13-0534
1. Financial Characteristics of Most Trustworth US Co panies: An Empirical Analysis-Vonda
Cotton and Dr. Srinivasan Ragothaman ,
A .............. ..........
__ ......_ .. __......... __ ........_•.••.. 01
2. Maqasid AI Shariah Analysis of Budg
eficit Policy In Ina nesian Economy-Dr. Tika Widias08
tuti Ahmad Hudalfah,Noven SUPl"ID'ogi , f Indonesia
3. What Detenmines Airline Profitability I
Achinto Roy of Australia •
ustry Conditions r Firm Level Capabilities? -Dr.
•• ._-_.-_... 17
_ InYentAnd Capturing Intent In Marketing Strategy-Nagasi
a Balakrishna Kanagal of India
24
5. A Comparison of Intelligent Technique:; Accuracy for Finan ial Failure Predlction-Hia Jong
Tech and Hsing-Hul Chu , Taiwan .......... ............. ............. .... ..... ..... .. .........
34
W
"
..
6 The Influence of Client Fraud Risk And Client Cooperativeness on Professional Skeptic1sm of
Chinese Entry-level Auditors-Sammy Xiaoyan Ying and Chris Patel, Australia ...............
. , 44
7 Informality And Credit Constraints in M Es: An Empirical ~ am i nat i on of Low Income
Counfnes-Nlrosha Hewa Wellalage an Stuart Locke,New Zealand .,............................... .
55
8. Evaluating Bank Performance: Insfit t nal Pressures And
Kevin Baird and Sujatha Perera, Aus a ia .•..••... _ .......... J ..
62
trateglc Responses-Rahat Munir ,
. .. . ......
...
.. .............................. .
9. Regulatory Implications of Corporate G vemance USing 0 nership Structure-Dr. Ranajee and
Dr. Sudeepta Pradhan,lndia
.. ................................... 80
10. Entrepreneurship in SMEs The Effec
Ping Huang of Taiwan and Karen Yua
f Social Capital
d Environmental Dynamism· Kaing of Australia .. ........
.. ..... _.............. _...........
88
11 Management Types of HODsing and
ateI:
0 .00
!
•
;0
j
...
60
40
500
~
.a
•
E.
~
~
~
20
00
2008
_
2010
200'
20 11
2012
2013
Non 0 11 SubSid ies
011 Sub.$ld ies
_
SOCial Ass lshince
-Interest Payment
Source: Bank Indonesia Database. 2013 : \\ \\ \\ .bi .l!.o.id
The changing of public expenditure from oi l subsidy oriented to be pro-social program
especially education, healthcare and food cannot quickl y solve Indonesian soc ial problem especially
mal-nutrition, illiterate, bad-sanitation and poverty. It is mainly the budget of government as well as
regional local government is insufficient to cover all need and social programs. In the fact, lndonesia
is one of the richest natural resource in the world, abundantly all can be found in Indonesia from metal.
gold, oil until plantation product. Thus, critical question arises why deficit budgets to provide social
program must be financed through the debt both domestic and international ources. Debt-based
financing for government budget costs much in the economy because Indonesian government must
bear the interest rate itself at least 15 percent of central government expenditure every year. There are
two issues pertaining to inability to solve social problem, namely corruption crimes practiced by
political leaders, bureaucracy and public officials and mi smanagement of natural resource.
Critical Evaluation on Budget Deficit
The high interest rate payment is the main issue of public sector expenditure when the due takes
a place. Indonesian government seems no choices to resolve its public sector economy and relies too
much on debt management. It is actually the high costs that must be paid when take loan from any
sources. Every year Indonesian budget management runs behind debt dependence and most of them
come from international aid (refer to table 4.1). However, the budget deficit is utilized for the regular
expenditure and not emergency or very important needs like what Islam has stipulated is that during
the government of the prophet (Pbuh) and Abbasites' era has borrowed money from public it is
because of important needs whereby the country cannot provide immediately for example to defend
the country and there was voluntary mechani sm to provide public facilities by using phil anthropic
program (Kahf, 1999).
Table 4.5 lndonesian
Bud
~
et Deficit 2008-20013) (In Billion Rupiah)
2008
2009
2010
2011
2012
2013
981.609
848.763
995 .272
1.210.600
1.338.110
1.438.891
Government Expendi ture
985 .73 1
937.382
1.042. 117
1.294.999
1.49 1.410
1.650.564
Budget Deficit
(4. 122)
(88 .619)
(46.845)
(84 .399)
( 153.300)
(2 11.673)
Years
Government
Grant
Revenue
and
Source: Bank Indonesia Database, 2014 : \\\\\\ ,bi.!!o.id
I ..
Academy ofTa1\\ an BUSiness Management Revie\\
From Islamic perspective, the government decision to take debt based on usury/interest is very
dilemmatic because indeed the purpose of debt itself is in line with Maqasid Al Shariah but the means
are prohibited clearly in Qur'an. Rational speaking, debt is not the way out to solve the problem and
instead of creating new problem for future generation. In the light of Maqasid Al Shariah, debt should
be taken by employing proper way, for example like what Islam has taught, partnership program
whereby involve private sectors to participate in government projects without having debt schemes.
The debt management is considered as the best way to cover and maintain the balance of public
sector economy because government argues that in order to support potential revenue, debt is very
useful. Even,lndonesian government issues sllkuk (Islamic bond) as the secondary sources of
debt-based financing in order to manage the government budget balance between revenue and
expenditure (refer to Table 4.4).
Table 4.6 Outstanding Government Securities (Billion Ruoiah) 2011
Jan
Feb
March
Apnl
May
June
JulY
Am!ust
ScD'
De,
Noy
Dec
577665
577303
511649
5800 19
585666
596141
6041 91
620023
619142
617261
61 1097
615498
Government
Bonds
5563 15
555453
547899
554749
558371
5681 46
574396
589018
589797
587972
587302
585103
Government
Islamic Securities
15169
23203
21544
29289
31939
3241 3
32927
36 118
36 118
38500
38500
38500
Year of2010
Government Debt
Securities
Sou rce. Bank IndoneSia Database, 20 II : \\ w\\ .bl.e.o.ld
In brief, Islam allows people and government to take a debt in case of necessities for the purpose
of emergency needs. Of course, its means must be guided by Islamic values, although IndoneSia is not
Islamic state its policy makers can think and analyze that the debt is not solving the problem.
Alternatively, a lot of partnership concept that can be applied to replace debt management from
Islamic perspective is available. It will help the government to avoid interest payment. Hopefully, by
removing debt from public sector management, more subsidies can be allocated for the needy
especially in providing free and quality education, creating new jobs for the poor and building new
mfrastructure.
CONCLUSION
Indonesian government has responsibility to set up an economic development which is in line
with Maqasid Al Shariah as the ultimate goal and of course to attain this goal must refer to right
means which is permissible in Islam. In terms of budgeting policy. Indonesian government seems to
have no option but adopt the western system in many sectors especially economic development
policies. As the Muslim populated-country, Indonesian government should work for aU Muslim
interest and not certain parties.
The high interest rate payment is the main issue of public sector expenditure. Indonesian
government seems no choices to resolve its public sector economy and relies too much on debt
management. A1thougt its allocation has gradually decreased. from Islamic perspective, the
government decision to take debt based on usury/interest is very dilemmatic because indeed the
purpose of debt itself is in line with Maqasid Al Shariah but the means are prohibited clearly in
Qur ' an . Rational speaking, debt is not the way out to solve the problem and instead of creating new
problem for future generation. In the light of Maqasid Al Shariah. debt should be gradually avoided by
replacing with proper alternative. for example like what Islam has taught. partnership program
whereby involve private sectors to participate in government projects.
For social welfare expenditure there has been a misallocation in emphasizing budget expenditure
whereby oil and petroleum subsidy consume almost majority of the total welfare expenditure in
Indonesian public sector economy. Subsidizing oil price is wrong decision because it is consumed
mostly by rich people. Petroleum is fuel for cars. motor cycle. machinery engine and industrial
vehicles which belong to middle-up society; they get benefit too much on lower oil price in the market.
shou ld allocate more expenditure since 2014 for non oil subsidy and social
Indonesian ~overnmt
protection, like food and education as well as social assistance like healthcare.
REFERENCES
Chapra, U.M .. (1993). Islam and Economic Development. Islamization of Knowledge-I 4: The
International Institute of Islamic Thought and Islamic Research Institute. First published in Pakistan
Bank Indonesia.(2014). Data Tabulation Center: Bank Indonesia, www.bi .!l.o.id
Iqbal, Munawar and Khan. Tarikull ah..(2004). Financin g Public Expenditure: An Islamic Perspective.
Occasional Paper 0. 07. Islami c Research and Tra ining Institute-I slami c De\'e!opment Bank : Jeddah.
Acad emy o f T:uwan Busmess i\lanagement Re\ ie\\
15
Kingdom of Saudi Arabia
Kahf, M,.(1999). Instrument of Meeting Budget Deficit in Islamic Economy, Research Paper IRTI
1412 H
Khan, Hayat. (2015). Some Implications of Debt versus Equity-Based Financing in the Backdrop of
Financial Crises, JKA U: Islamic Econ. , Vol. 28 No.1, PP.: 179-195 (20IsA.D.l1436A.H.) 001:
10.4l97IIs\ec.28-1.7
Omar, M. (20 II). Lecture Note, Shariah Oriented Public Policy, Kulliyah of Economics and
Management Sciences, International Islamic University Malaysia, Unpublished
Samuleson, P. A. (1969). Pure Theory of Public Expenditure and Taxation', in Margolis, J. and
Guitton, H. (Eds) Public Economics: An analysis of Public Production and Consumption and Their
Relations to the Private Sector, Proceedings of a Conference held by the International Economic
Association, MacMillan, London.
Siddiqi, M. Nejatullah,. ( 1996). Role of the State in the Economy: An Islamic Perspective, Leicester,
UK, Islamic Foundation
o
16
Academy orTatwan Business Management Re\ II!\'.