The Global Finical Crisis from an Islamic Point Of View

When the world economy suffered a new financial economic crisis, it uncovered to the world that there were major failures within the Industrial financial system and it was caused by a number of issues including the practice of interest and the terrible effect it has on the financial crisis events. Issues that will be discussed in this paper are Riba, Gambling, Uncertainty, Derivatives, Saucerization, Sell of debt, Creation of Money, and the Private “Personal” interests. However, the paper will focus on the Islamic financial system and the financial instruments which are based and designed in compliance with Shariah Rules and Regulations, whether if practicing Islamic banking would cause such a crisis to accrue. The Sukuk, of the Islamic mortgage-Backed securities (MBS), and Islamic future contract will be discussed in order to prove why using the Islamic Financial system is better to assure that this kind of global crisis doesn’t come to pass again.

The dynamics of listed property companies in Indonesia

Purpose As an asset class, listed property companies (PCs) in the emerging Asian markets have taken on increased significance in recent years. Investors have seen Indonesian real estate investment trusts (REITs) being regulated to become a property investment vehicle in 2007. This sees macro-environment investment in the Indonesian property market taking off to a higher level regionally. In the background, Indonesian listed PCs maintain as one of the major investment vehicles for local and international investors. It has also been the subject of investment for REITs and property investment funds in Indonesia. The purpose of this paper is to assess the dynamics of risk-adjusted performances and portfolio diversification benefits of listed PCs in a mixed-asset portfolio context in Indonesia, from July 2006 to December 2018. The sub-periods of pre-global financial crisis (GFC), GFC and post-GFC of listed PCs is also assessed. Design/methodology/approach Using monthly total returns, the risk-adjusted performance and portfolio diversification benefits of listed PCs from July 2006 to December 2018 are assessed, with extended efficient frontiers and asset allocation diagrams used to assess the role of listed PCs in a mixed-asset portfolio. Sub-period analyses are conducted to assess the post-GFC recovery of listed PCs. Findings Listed PCs delivered higher returns but carried higher risks compared to stocks before the GFC, with bonds having both the lowest returns and risks. The impact of the GFC was highest for Indonesian PCs compared to stocks, where properties did not deliver strong risk-adjusted returns. Notwithstanding the poor risk-adjusted performance, Indonesian PCs had low correlations with stocks and bonds, suggesting some level of diversification potential for stock and bond investors. Stocks outperformed listed PCs across the sub-periods and the full period. Over the post-GFC period, both stocks and listed PCs recovered from the crisis, with stocks turning around stronger. This analysis shows a prolonged recovering and slow bouncing adjustment of listed PCs from the economic changes. This research suggests selected listed PCs may be the outperformers, and, a future contract as a hedge form for listed PC to be implemented. Research limitations/implications The use of the indices of Standard & Poor’s Indonesian property total return (for listed PCs) are as follows: MSCI Indonesia total return (for stocks), Indonesia’s ten-year bond’s total return (for bonds) and Indonesia’s three-month bill total return (for cash). This is used to study the Indonesian listed PCs and may have aggregation effects in its underperformance and therefore drawing a negative outcome. The results may reflect the common fact that the majority of listed PCs in Indonesia are property developers, which also sees underperformances in other emerging country markets. Practical implications Listed PCs have been under increasingly adjusted and positively adapted regulations from the Indonesian Government over the post-GFC period. Therefore, in order to attract interest from international investors in property investment in Indonesia, listed PCs need stronger and more efficiently adapted regulations to a competitive level of respective regulations in the region and globally. Notwithstanding the poor performance in the transitional stage, Indonesian listed PCs bring some diversification benefits to local investors who are able to pick the outperformed invested PCs at the right time. Of the on-going concerns, international investors have no restrictions on holding listed PCs in the Indonesian stock market. This provides room for improvement in business performance in listed PCs as a result of regional/global competition and international management being involved. The present study delivers awareness to investors, researchers as well as policymakers on the Indonesian property market. Originality/value This paper is the first published to present a country profile of significant property vehicles (commercial property, listed PCs and REITs). It also presents empirical research analysis of the risk-adjusted performance of listed PCs and its dynamic role in a local investors’ perspective across the pre-GFC, GFC, post-GFC periods. Given the significance of listed PCs in Asia, this research highlights more information for opportunities and on-going property investment issues in Indonesia.

On Quality 4.0 in project-based industries

PurposeProject-based industries seem ignored in the quality management literature. These industries have some peculiarities that warrant attention, and the purpose of this paper is to discuss some of the critical aspects of project-based industries concerning quality management and particularly Quality 4.0.Design/methodology/approachThe approach is based on reviewing the literature and then developing the paper using basic definitions, literature, logic and experience. It should be noted that the type of literature review is so-called “integrative” due to the fact that the topic of this paper is new. Furthermore, for this paper, as for integrative literature reviews in general, the purpose is to create initial and preliminary conceptualizations and theoretical models, rather than review old models. Creative collection of data is therefore key to combine perspectives and insights from different sources. This paper is therefore more a discussion piece rather than a paper presenting results per se. The relevant literature is only a starting point from which the argument is developed.FindingsThe paper demonstrates that quality management in project-based industries is outdated, driven by adversarial and legalistic interpretations of contracts, which results in manual work and reactive quality management. Initially, this can be a stumbling block for Quality 4.0. However, the greater credibility and transparency of Quality 4.0 technologies can enable relational contracting such as partnering. This will subsequently result in major improvements in total quality.Research limitations/implicationsThe research was initially triggered by industry experience over years. The empirical aspect of the paper is therefore related to the construction, shipbuilding and the oil and gas industry. Because contracting regimes are similar across these industries, the findings are arguably applicable to other project-based industries. However, this is not demonstrated. Furthermore, as the topic is new to both literature and practice it is likely that the paper has not covered all relevant aspects that will emerge as the ideas are implemented.Practical implicationsThe paper supports the argument for developing the contracting into a relational approach away from the adversarial and legalistic approach of today. It is illustrated how Quality 4.0 technologies can help in this transition. Therefore, the practical implications can become substantial in how industry works and the research about it.Social implicationsIf the ideas were implemented, they could change contract management in project-based industries from the adversarial approach of today to genuine cooperation. It would therefore be relevant for teaching future contract managers. The project outcomes would also result in improved quality and reduce the loss to society.Originality/valueThe combination of Quality 4.0, new contracting regimes and project-based industries is according to the knowledge of this author, an original contribution that can help people improve the management of quality in project-based industries. With these industries constituting a large and growing share of an economy, the value can also become significant once practical issues concerning implementation are sorted out.

The Challenges of Closing Construction Projects Final Accounts in Botswana Local Authorities

Anecdotal information in the construction industry in Botswana indicated that the process of closing financial accounts for construction projects within a stipulated period is inefficient and ineffective. This is a serious industry problem because a project with an unclosed account is not a successful project as there are unfinished issues and claims left in abeyance to the detriment of both the client and contractor. This motivated a study aimed at investigating this aspect, including identifying the major causes of delays in formally closing final accounts of construction projects in local authorities. A multimethod approach consisting of a review of project documents which were beyond the end of the defect liability period were used in the study. Also, a questionnaire survey was administered to parties dealing with construction projects in the selected local authorities. Lastly, a focus discussion was held with key stakeholders who implement projects in some selected local authorities. Results indicated that while the final account closure process was inefficient (as only 42% of the accounts which were closed were finalised in the stipulated contractual time). Secondly, it was marginally effective (as only 54% of the sampled project accounts were closed). Common reasons for inefficiency and ineffectiveness include (i) contractors abandoning the project when they realise that the cost of rectifying the defects far exceeds the outstanding balance; (ii) clients taking too long to agree and approve final accounts; and (iii) loss of information when key personnel leave the project on the contractor's side before the final account is finalised. Despite the limitation of considering a selected number of local authorities’ projects, the findings have confirmed anecdotal information circulating in the industry about the substantial numbers of project accounts that are usually left unclosed. The following recommendations based on the study results are made. That all adopted contract conditions be modified to focus on nipping the challenge in the bud as well as deterring instrument to future defaulters. The suggested modification: 'it shall be mandatory for contractors to bring the project under tender to a formal closure through final account documentation within a specified period, defaulting contractors to be blacklisted from future contract awards in Botswana LAs'. Ordinarily, since contractors can hardly suffer financial losses, the paper suggests that consultants and clients should objectively entertain contractors' claims arising from defects rectifications in the liability period. This is provided such defects were neither caused by poor materials nor are traceable to poor workmanship. These hopefully will mitigate the challenge if followed.

Is ‘Global Value Chain’ a Legal Concept?

Today’s organization of production and services along global value chains (GVCs) uses contracts as central building blocks, yet is largely disconnected from contract law’s dominant epistemology and social imaginary. This article charts when, how and why GVCs have appeared on the radar of contract scholars and unravels the related methodological and disciplinary challenges. Rather than treating GVCs as a ‘legal concept’ in a strict sense that might command the application of particular rules, I propose to understand them as a ‘legal heuristic’: GVCs require contract law to revisit its constitutive role for matters of distribution, participation and equality under globalization. Towards this, GVCs need to be understood as organizational arrangement and simultaneously as a stage in the evolution of a global political economy. Beyond the classical confines of ‘contract governance’, this brings into the picture the wide array of formal and informal technologies of ‘contract governmentality’. Together with the material, technological or informational infrastructure, these are referred to as ‘code’ of GVCs, suggested here as focus of future contract law research on GVCs.

Legal Standing of Pre-Contractual Good Faith Principle as a Law Reformation of Indonesian Contract Law

Good faith plays an important role in a contract since it holds a dominant position either during pre-contractual phase or when a contract is executed. However, pre-contractual good faith in Indonesian Civil Code is not recognized as such there is no legal assurance. In fact in pre-contractual stage, the parties already put some investment based on trust and hope, however, they faced dead end and they did not reach an agreement. This was tinted with the fading of wall between two major legal systems: Common Law System and Civil Law System as a result of dynamic in business relation involving countries bringing some developments in contract law. The extension in the substance of good faith in Article 1338 verse (3) of the Civil Code should not be implemented so grammartically that good faith does not only appear during the execution of the contract but it should also be interpreted during the whole process of the contract that good faith should lay the foundation of the parties relation both in pre-contractual phase and during the contract such that the good faith in Article 1338 verse (3) of Civil Code functions dynamically. In UPICC, the provision of good faith is stipulated in Article 1, 7 stressing on the importance of good faith and fair dealing. This stressing underlays the process of contract agreement. Good faith should be interpreted and formulated during the whole process of contract. Under the traditional doctrine of Common law, court cannot punish the defendant because Common Law system does not recognize the good faith principle in negotiation process. Nevertheless, modern law contract waives the legal assurance to reach a substantial justice that good faith is not only applied in a contractual relation but also in a pre-contractual. Meaning, good faith does not only bind upon matters explicitly stated in the agreement, but also upon ones that traditionally are required by appropriateness, tradition, or the law as stipulated in Article 1339 of the Civil Code and Article 6:248 of Netherlands NBW. The good faith and fair dealing principles should be the underpinning of contract law. Each party should uphold the principles of good faith and fair dealing in the whole process of the contract starting from negotiation, contract arrangement, the execution of the contract as far as the termination of the contract particularly in the reformation of Indonesian future contract law

New EU legislative instruments concerning contracts for the sale of goods and supply of digital content

On the 20th of May 2019, the European legislator adopted new Directives on the sale of goods and supply of digital content, which determine the vector of future contract law development in the European Union. Directive 2019/770 on certain aspects concerning contracts for the supply of digital content and digital services, and Directive 2019/771 on certain aspects concerning contracts for the sale of goods are the first steps in adapting European private law to the requirements of the digital economy. The article discusses the reasons and preconditions for the adoption of new Directives. The authors, making a historical excursion of the harmonization of European contract law, demonstrate the continuity of the new Directives’ norms of European tradition on the basis of Principles of European Contract Law, Acquis Principles, Draft Common Frame of Reference, Common European Sales Law and Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees. The advantages and disadvantages of the selected full harmonization in new Directives are examined. The legislative freedom granted to European Union Member States on certain issues related to contractual relations for the sale of goods and the supply of digital content are analyzed. The authors pay considerable attention to the disclosure of major legislative novelties related to contractual relations for the sale of goods and the supply of digital content, in particular the conformity of goods (digital content), and requirements for conformity; the seller’s (trader’s) duty to ensure that the consumer is informed of and supplied with updates that are necessary to keep those goods (digital content) in conformity; the burden of proof; data monetization; remedies for lack of conformity of goods (digital content). The problem of the hierarchy of remedies for lack of conformity of goods in a circular economy, such as repair and replacement, is also touched upon. The authors draw attention to the fact that taking into account the peculiarities of the circular economy and in order to determine the disproportion of the chosen method of legal protection, it is necessary to enshrine in legislation on the sale of goods the requirement to take into account its impact on the environment.

Do countries learn from experience in infrastructure public–private partnerships? Public–private partnerships practice and contract cancellation

Learning from experience to improve future infrastructure public-private partnerships is a focal issue for policy makers, financiers, implementers, and private sector stakeholders. An extensive body of case studies and “lessons learned” aims to improve the likelihood of success and attempts to avoid future contract failures across sectors and geographies. This paper examines whether countries do, indeed, learn from experience to improve the probability of success of public-private partnerships at the national level. The purview of the paper is not to diagnose learning across all aspects of public-private partnerships globally, but rather to focus on whether experience has an effect on the most extreme cases of public-private partnership contract failure, premature contract cancellation. The analysis utilizes mixed-effects probit regression combined with spline models to test empirically whether general public-private partnership experience has an impact on reducing the chances of contract cancellation for future projects. The results confirm what the market intuitively knows, that is, that public-private partnership experience reduces the likelihood of contract cancellation. But the results also provide a perhaps less intuitive finding: the benefits of learning are typically concentrated in the first few public-private partnership deals. Moreover, the results show that the probability of cancellation varies across sectors and suggests the relative complexity of water public-private partnerships compared with energy and transport projects. An estimated $1.5 billion per year could have been saved with interventions and support to reduce cancellations in less experienced countries (those with fewer than 23 prior public-private partnerships).