Prospect of Sukuk in financing disaster mitigation development program: an

infrastructure approach in providing solution toward shrimp farmer affected by

Porong Mud Volcano.
By: Achmad Room Fitrianto*), Curtin University
Abstract
A major environmental and social disaster has begun on May !, ""#$ A hot
ha%ardous mud and gases has eru&ted in 'orong (idoarjo in )ast *ava$ +he disaster
not only destroyed in,rastructures and buried a&&ro-imately #"" hectares o, land,
housing, the industries and most in,rastructures .ithin vicinity$
+he government could reduce the negative e,,ects o, the disaster by running a
com&rehensive mitigation and redevelo&ment &rogram$ /o.ever, because o,
government have limitation budget and the communities are urgent to be hel&, the
0slamic ,inancial system could be a &art o, ,inancing the mitigation$ For e-am&le, the
develo&ment o, in,rastructures such as toll road, high .ay or, rail .ay, bridges could
use (u1u1$ +here are there model (u1u1 that could be use2 su1u1 Al 0jaroh, su1u1 Al
0stisna and (u1u1 Murabaha$ (u1u1 .ith modi,ication scheme could become an
alternative in ,inancing the develo&ment o, in,rastructure caused by the disaster$
*) Achmad Room Fitrianto has been an academic at the (unan Am&el (tate 0nstitute
,or 0slamic (tudies in (urabaya since ""3$ /e earned a Masters o, 0slamic
)conomics ,rom the same university in ""4, and obtained a Master o, Arts in 'ublic
'olicy ,rom Murdoch University in ""!$ /e is currently ta1ing a 'h5 &rogram at
Faculty o, /umanities Curtin University su&&orted by 5i1ti (cholarshi&$ Be,ore
becoming an academic in 0slamic higher education, Achmad .as active in 'U'U6
7the Association ,or (mall Business Advancement) .hich mostly ,ocused on
streamlining business licensing &rograms in 0ndonesia$ /e has also .or1ed as a
researcher ,or the Regional )conomic 5evelo&ment 0nstitute 7R)50) under U(A058s
9ocal :overnance (u&&ort 'rogram 79:('), and in ""; carried out internal
assessments o, +he Asia Foundation8s +echnical assistance &rogram to su&&ort the
<ne (to& (ervices (ho&=,ronts ,or 6ota 6ediri and 6ota >ogya1arta$
/is s&ecial interest is in government re,orm, community develo&ment, (mall Medium
)nter&rises develo&ment and 0slamic ,inance
1
Prospect of Sukuk in financing disaster mitigation development program: an
infrastructure approach in providing solution toward shrimp farmer affected by
Porong Mud Volcano.
By: Achmad Room Fitrianto
A major environmental and social disaster has begun on May !, ""#$ A hot
ha%ardous mud and gases has eru&ted in 'orong (idoarjo in )ast *ava$ +he disaster
not only destroyed in,rastructures and buried a&&ro-imately #"" hectares o, land and
housing but also the industries .ithin vicinity$ +he 0ndonesian (u&reme Audit Board
7""4) 7BPK-Badan Pemeriksa Keuangan) calculated the losses o, local in,rastructure
and buried areas at around R& 3$?!;$!4" million$ A&&ro&riate and ade@uate relie, are
needs to be conducted$ (o ,ar, government just concentrated in mitigating the &hysical
e,,ort such as emban1ed the mud or relocate the &ublic in,rastructures$ Ahat it8s more
.hen the government rebuild the ne. &ublic in,rastructure occur, another &roblem
such as the land o.ner that their land is &ro&osed as the location o, the ne.
in,rastructure rejected$ +he rejection is due to the ina&&ro&riate com&ensation that is
o,,ered$ Another &roblem is that the socio economic &roblems such as disturbed small
medium enter&rises because o, the mud, or the occurring huge number o, ne.
unem&loyment or annoying education &rocess ,or school age victims$
<ne reason .hy such 1ind o, com&rehensive &rograms are not conducted yet,
this is because government have limitation budget ,or ,inancing all the &rograms$ +his
Ariting tries to &rovide an alternative ,inancing in the mitigation &rocess$ First o, all,
a bac1ground to the disaster describes in early section$ +his section details the events
o, the disaster and e-&lores the related issues regarding the occurring o, the mud
disaster in 'orong$ +his section consists o, t.o sub sections: the ,irst sub section
describe (idoarjo condition at a glance$ +he second sub section describes the origins
o, the disaster$
(econdly, identi,ication o, &roblems is &ortrait in the second section$ +his
section details the &roblems that occurs &rior and &ost the disaster, including the
indirect e,,ect o, the disaster$ +his section consists o, three sub section2 the ,irst sub
section describes the socio economic im&act o, the disaster$ +he second sub section
describes the &hysical e,,ects o, the disaster and the last sub section &ortrait the e,,ect
o, the mud to the ,isheries sector in (idoarjo$
+hirdly, the solution o,,ered in ,inancing the budget constraint ,aced describes
in last section$ An alternative 0slamic ,inance schemes are o,,ered$ +his section
divided in to t.o sub section, each sub section use di,,erence case study in a&&lying
0slamic ,inance schema in mitigation &rograms$
9astly is the conclusion, a discussion on the lessons that can be learned ,rom
the 0slamic Finance and disaster recovery$
A. BA!"#$%&' ($ ()* '+SAS(*#
A., Sidoar-o at a glance
Based on ""B census data, (idoarjo &o&ulation .as B,!3,BBB and had gro.n to
B,!4? million by (e&tember "BB 7Abidin, "BB)$ (idoarjo &o&ulation .as B,!3,BBB
and had gro.n to B,!4? million by (e&tember "BBmuch o, it originating ,rom ta-es$
2
+he district is the second richest in )ast *ava 'rovince a,ter (urabaya$ 0n the decade
be,ore the mud volcano in 'orong ,irst eru&ted in ""#, (idoarjo e-&erienced an
annual economic gro.th rate o, roughly ;$B4 C 7+he (idoarjo (tatistics Board, ""#)$
:ro.th .as su&&orted by industrial activities concentrated in three sub districts:
Aaru, (idoarjo
B
and 'orong$ 'orong is located a&&ro-imately D" 1ilometres south o,
(urabaya$ 'orong8s economic activities .ere su&&orted by B! villages, com&rising a
total o, B4, !;D households$ 0n ""#, land use in 'orong .as distributed as ,ollo.s:
housing: ?D;$34hectares, industry: D$#3hectares, mining: ;$"! hectares, agriculture:
B,?4$Dhectares 7+he (idoarjo (tatistics Board, ""#)$ /o.ever, a,ter the mud
volcano commenced, the (idoarjo economic gro.th declined signi,icantly and
reached a crisis &oint in ""? that reached D$?3C be,ore a year later rising again u& to
;$B4C$ 0n "BB, (idoarjo .as e-&eriencing ;$# C o, economic gro.th 75'R5
(idoarjo (ecretariat, "BB)$
(idoarjo geogra&hic &osition made this district has signi,icant roles o, &lay in
economic, not only just because neighbouring .ith three most &ros&erous districts in
)ast *ava

, but also because the t.o most dense &ublic trans&orts hubs are located in
(idoarjo, the 'urabaya buses &ort and the *uanda Air&ort$ Besides that, many core
in,rastructures that very im&ortant to.ard the goods and services distribution ,or east
java, the toll road, the rail.ays, electrics &o.er transmissions and also the gas
&i&eline that su&&lies the ,ertili%er ,actory in :resi1 also through (idoarjo$ 7B'6,
""42 McMichael, ""!)$
A.. the Mud volcano and Man/made 'isaster
+he 'orong mud ,lood volcano, located near the Banjar&anjiB 7B*&=B)=.ell
e-&loration site, &roduced not only hot to-ic mud but also caused a signi,icant
damage to in,rastructure, the environment, and to society$ (ome e-&erts have argued
that the disaster .as caused by misconduct o, oil drilling activities and other e-&erts
said the disaster .as triggered by the >ogya1arta earth@ua1e on May 4,
""#$ /o.ever both o&inions has similarity vie.s that the mud volcano .as a result
o, an underground e-&losion that .as caused by higher &ressure o, ,luid that &ush the
.ea1est layer o, the )arth8s, even though one blamed the human activities others
blamed on the earth@ua1e 75avies, ""42 0stadi, ""42 Budi, ""?)$
5es&ite o, those discourse, general agreement stated that the disaster mostly
caused by the natural &henomenon, but com&ounded by direct or indirect human
interventions$ Benjamin F$ +imms 7"BB) e-&lains the causes o, vulnerability are not
only the initial natural event that triggered disaster but also caused by cumulative
social and economic &rocesses$ 0n the 'orong cases, .hether the disaster .as
triggered by earth @ua1e in >ogya1arta or drilling oil activities, evidence indicates that
the e,,ect .as made .orse by identi,iable deliberate mismanagement o, the
government$ For e-am&le: 0n the Banjar&anji case, the e-&loration &ermit in Bloc1
Brantas that .as granted to '+$ 9a&indo Brantas by the central government .as not
com&atible .ith the (idoarjo site &lan 7B'6 re&ort, ""4)$
According to the 0ndonesian (u&reme Audit Board, the drilling location o, B*&=B
.ell is located just ; metres ,rom residential areas, 34 metres ,rom 'orong ,ree.ay
and less than B"" metres ,rom the gas &i&e that cross along 'orong /igh .ay$ Based
on the decree o, Badan Standar Nasional Indonesia Eo$B3=#!B"=""
3
and
B
(idoarjo district consists o, B? subdistricts .ith (idoarjo being one o, those subdistricts

+he three most &ros&erous district in )ast *ava are (urabaya, :resi1, 'asuruan and Mojo1erto
3
+his decree regulates the o,, shore and in shore drill &rocedures
3
'residential decree 70n&res) Eo$ BFB!4#
D
, '+ 9a&indo should not have been allo.ed to
conduct its mining activities near residential areas and near &ublic in,rastructure
,acilities$ /o.ever, even though their drilling activities .ere not com&atible .ith the
(idoarjo site &lan, the government still a&&roved the e-&loration$ Moreover,
McMichael 7""!) investigation also ,ounded t.o im&ortant data8s about &ast
e-&loration in 'orong$ Firstly is that the 5utch Colonial archives ,rom B!B"
mentioned that the 'orong area .as considered &rone to gas eru&tions$ (econdly, in
B!;"s an American <il )-&loration Com&anies in )ast *ava .ere also a.are o, the
area8s unstable geological nature$
From descri&tion above could be seen that in the early stages, a com&any &roblem
in the drilling activities ,ailure .as the com&any &roblem, to become &ublic concern
since it has .ider e,,ect to.ard society$ +his ,act go along .ith Bridgman and 5avis
7B!!?) &ostulates since the &roblems have been identi,ied, a &rivate concern has been
trans,ormed into a &olicy issue$
B. +'*&(+0+A(+$& $0 ()* P#$B1*MS
0n order to achieve com&rehensive a&&roaches to the &roblems encountered,
s&eci,ic contingencies o, the situation must be ta1en in to account 7Guareantelli,
B!!4)$ More detail (tone 7B!?!) describes three as&ects that should be understood in
order to establish &riorities$ Firstly, the actors involved must be identi,ied and their
&roblems understood$ (econdly, the multi&le e,,ects o, the &roblems must be
identi,ied$ +he last as&ect is that clear and .ell de,ined &olicies are urgent to solve
the &roblems that have emerged$
Base on the theory above, ,ollo.ing &aragra&h describes the &roblems that occur
because o, the mud volcano$
B., 'isaster2 Pollution vs. Productivity
+he 'orong Mud Holcano emitted .as around ;,""" cubic meters a day at the
beginning and increased to around B3",""" cubic meters a day and remains constant
u& to ,ive years 7Ailliamson, ""4)$ +his has since dro&&ed to a lo.er level 76om&as,
"BB)$ +he dis&uted and the inade@uate mitigation strategies have caused local
distress$ 0t is no. .ell established that to date, thousands o, hectares o, rice ,ields,
&lantations and ,actories have been buried$ By ""4 around B;,""" .or1ers had lost
jobs, B," ,armers .ere unable to continue ,arming and ,!! small and medium
business enter&rises .ere ban1ru&ted 7B'(, ""?2 /am%ir.an, ""42 +em&o *anuary
, ""42 Ailliamson, ""42 McMichael, ""!)$
Ahat is more, +here .ere at least " ,actories, each consisting o, ,;""
em&loyees, have been closed and a&&ro-imately B,""" .or1ers .ere ,ired due to their
,actories being buried under the mud 7/am%ir.an, ""4)$ 0n addition, Tempo 7
*anuary ""4) re&orted that at least B;,""" ,actory .or1ers lost their jobs$ Moreover,
the e,,ects o, this disaster have the &otential to reduce national economic gro.th by
B$"3 C, and reduce the )ast *ava domestic gross &roduct by B" C
;
$ 7Kompas, 4 A&ril
""4)$
4
+his decree e-&els the synchronisation o, the agrarian sector to the ,orestry, mining, transmigration and general
.or1 that is stated in the la. number$ BBFB!#4$
;
McMichael in Rumiyati 7""4) mentioned that )ast *ava contracted by D,C bet.een May ""# and
August ""4
4
Figure B$B
Buried industrial area in 'orong
(ource: hotmud,lo. , .ord&ress,""# (ource: FarmB,""#
Based on the (idoarjo Regency8s 5e&artment o, (mall and Medium Business and
Coo&eration data, a&&ro-imately ,!! small businesses and medium si%ed
enter&rises have colla&sed and become ban1ru&t, and ?" C o, those .ere small
businesses 7Kompas, B *anuary ""4)$ +he indirect economic loses that has been
calculated by (u&reme Audit board 7B'6) a&&ro-imately R& 4,D"4,DD" million 7AU(
I!?4,#;? thousand) 7B'6 re&ort, ""4)$ 0n more detail, >ahya 7""4) states that
tourism sector su,,ered in terms o, the reduction in hotel occu&ancy in 'asuruan and
Malang$ 0t .as estimated to be bet.een #"=4"C be,ore the disaster and ,ell to B"C
a,ter it$ Another e,,ect o, the disaster is the real estate in the (idoarjo area su,,ered
,rom bad &ublicity and a &sychological im&act$ +hey are e-&eriencing the ,all o,
house sales by #"C in (idoarjo$
B.. the public transportation routes and gas and water installations threatened
+he main caused o, reducing economic gro.th in this area is the ,ree.ay
being buried by mud bet.een the 34 J 3! 1ilometre mar1s$ Moreover, the ,ree.ay8s
,ly over in 'orong .as crac1ed by a subsiding e,,ect on the 3" cm de&th and there,ore
had to be demolished on the ?
th
o, 5ecember, ""?$ +he mud also threatened the
main road and the rail.ay, disru&ting the distribution o, goods in )ast *ava &rovince,
es&ecially in the (idoarjo district$
Figure B$
+he buried ,ree.ay and threatened rail.ay in 'orong
5
(ource: Bromund Hol1er, ""# (ource: Antara, ""#
Furthermore, this mud,lo. threatened the gas and .ater line under 'orong Road$
+he gas &i&e line e-&loded on the
nd
o, Eovember, ""# and 1illed thirteen &eo&le$
Moreover, the ,lattened lands surrounding the mud caused damage in .ater
installations$ (ince the disaster, the .ater &i&e line has been bro1en B" times$
7Kompas, B <ctober, ""4) +his has caused the brea1ing o, o&tic .ire used by 0ndosat
70ndonesian +elecommunications Com&any)$
B.3 (he effect of the mud to the fisheries sector in Sidoar-o
Based on the (idoarjo Fisheries and Marines 5e&artment 7""?), during ""4,
the ,our sub districts ,isheries sector centre, (idoarjo, +anggulangin, 'orong, *abon
sub=districts e-&erienced negative &roductivity$ +his is because the ,our sub district
are located near to the rivers that being use as one dum&ing location o, the mud$
(idoarjo sub district had D, DB, 4"" 6g ,isheries &roduction in ""4 and become
D,B?!,#"" 6g in ""?$ 0t is reduced B$3C$ +anggulangin (ub district had 4!!,B"" 1g
,isheries &roduction in ""4 become #D,"" 6g in ""?2 it is reduced B!, #3C$
*abon sub district had ;,#D4,D"" 6g ,isheries &roduction in ""4 become D,DD;,?"" in
""?, 0t is declined B$?C and the biggest declining ,isheries &roduction .as
e-&erienced by 'orong sub district, this subdistrict e-&erienced negative ;$!3C
gro.th o, ,isheries &roduction ,rom 4?,""" 6g in ""4 become ;4!,"" 6g in ""?$
<verall (idoarjo e-&erienced negative D$?BC o, ,isheries &roduction gro.th$ +his
declined &roduction sus&ected to the occurring o, the Mud volcano that eru&ted in
'orong$ Beside that another subdistricts .here are located around Madura strait such
as Buduran Aaru and (edati, .hich is the Madura strait is the estuary o, the 'orong
river and some other small rivers surrounding the mud volcanos, indirectly a,,ected
7McMichael,""!)$
)vidence is &rovided by Antara 7""!) that &ublish the direct e,,ects o, the
dum&ing o, 'orong Mud Holcano to the rivers$ +here .ere "" shrim& ,armer
&rotested to.ard the massive death o, their shrim& in the &onds to the B'9(
7Mitigation agency that manage the Mud Holcano)$ (hrim&s sector in (idoarjo district
&lay signi,icant role$ Because o, that, the shrim& serves as the district emblem$ +his
sector em&loys a&&ro-imately B3,!4? .or1ers and &roduced shrim& valued at
a&&ro-imately U(I D,?44,?4" in "B" 756' (idoarjo, "B"2 Marines and ,isheries in
,igures "BB)$
6
C$ +S1AM+ 0+&A&* AS ()* S$1%(+$&
)conomic rationali%ation and the &rohibition o, interest are become di,,erent
issues in 0slamic ban1ing$ 0n order to bridging those di,,erential conce&ts, interests
,ree conce&t becoming an evolutionary in ,inance$ 0n Finance there are some conce&ts
that should be considerate in &roviding ,unding ,or such 1ind o, &roject or &ro&osal$
+he ,ive 1ey elements a borro.er should have to obtain credit: character 7integrity),
ca&acity 7su,,icient cash ,lo. to service the obligation), ca&ital 7net .orth), collateral
7assets to secure the debt), and conditions 7o, the borro.er and the overall economy)$
Beside those ,ive conce&ts that should be a&&lied, in 0slamic ,inance must be
considered the ,orbidden things that should be avoid such as Riba, Maisir and
Gharar$ As the translation o, the verse o, the Guran (urah Al=Ba@orah, 4D say K:od
hath &ermitted trade and ,orbidden usuryL$ Usury means giving loan at high interest$
+here ,our &rinci&les that should be considerate in generating 0slamic ,inance$ Firstly
is that is not originate ,rom ,orbidden consumers goods activities such as, trading
&or1, alcoholics li@uor or illegal drugs trading$ (econdly, not originate ,rom
activities that led to deterioration to the society, such as a result ,rom corru&tion or
robbery$ +hirdly is not originating ,rom object related immoral act such as &rostitution
or human tra,,ic1ing$ Fourthly is that not originated ,rom gambling activities such as
lottery$ Underlining all those &rinci&les is that 0slamic ,inance has to not originate
,rom activities that against the la.$
Be,ore, going ,urther discuss about the 0slamic Bond, let8s discuss some 0slamic
0nsurance &rinci&les that could be used in determining the using o, 0slamic bond in
mitigating disaster$
G$( Al Maidah article , teach Muslims to hel& each other and to coo&erate in
goodness not in sin and against the la.$ +his Guran statement is also describe ,urther
by /adist cited by Abu 5a.ud that e-&lant i, Allah &re,er hel& the one .ho al.ays
hel&ing each other$ Moreover, another /adith that cited by Bu1hari, Muslim and Abu
5aud &rovide more e-&lanation M+hose that meet the needs o, his brother, Allah .ill
,ul,il his needs$L Another &rinci&les that considerate in using 0slamic ,inancing ,or
in,rastructure develo&ment is that G$( An Eisa, articles !, MK< ye .ho believe, do
not eat each other neighbour8s &ro&erty by .ay o, vanity, e-ce&t by .ay o, trade
a&&licable to consensual among you $$$$K

., Brief descriptions about Sukuk
Sukuk has similar characteristics to those o, a conventional bond .ith the major
di,,erence being that they are asset bac1ed$ 0ndeed, Sukuk re&resent the &ro&ortionate
bene,icial o.nershi& o, the Sukuk holders in the underlying tangible assets, usu,ruct
or services$ 'ro,its, .hich de&end on the &er,ormance o, the underlying assets, are
&eriodically &aid to the Sukuk holders according to their &ro&ortionate o.nershi& in
the Sukuk$
0n 0ndonesian 9a., the (u1u1 de,inition is de,ine as a long=term securities based on
0slamic &rinci&les issued to the holders o, the issuer o, 0slamic bonds re@uire the
7
issuer to &ay to the holders o, revenue bonds ,or the 0slamic ,orm o, margin F ,ee, and
&ay bac1 the bond ,und at maturity 70ndonesian Ulama Council ,at.a Eo$ 3F5(E=
MU0F0NF"")
0n &rinci&le, Sukuk are non=recourse asset=bac1ed instruments, i$e$ Sukuk holders are
e-&osed to losses incurred on the underlying assets .hich bac1 the Sukuk$ /o.ever,
in &ractice and ,or commercial reasons, (u1u1 structures usually include an e-it
strategy .hich allo.s the originator to re&urchase the underlying assets in certain
circumstances$
0n &ractice, Sukuk transactions can be structured by combining Sukuk .ith other ty&es
o, Sharia com&liant contracts such as e$g$ musharaka, mudaraba, ijara, istisnaa,
Salam and murabaha
5evelo&ment o, the (u1u1 in 0ndonesia began .ith the issuance o, (u1u1
Mudaraba 0ndosat R& "" billion in ""$ 0n ""? the :overnment issued a (haria
(tate (U6U6 7(urat Berharga (yariah Eegara =(B(E) the e-istence o, (u1u1 is
needed by government and business institutions$ For business institutions (u1u1 can
be used as a counter.eight o, the balance sheet$ +here are t.o ,unctions that
bene,ited the government in &racticing (u1u1 ,or su&&orting the government budget$
Firstly (u1u1 could broaden the base o, the state budget sources o, ,inancing2 the
broaden bene,it could be understand as an enrichment o, the ,iscal ,inancing
instruments and e-&and and diversi,y e-&and and diversi,y its investor base o, (tates
Bonds certi,icate$ (econdly, (u1u1 could encourage the gro.th and develo&ment o,
0slamic ,inancial mar1et in the country2 the encouragement that aimed is develo&ing
alternative investment instruments and benchmar1ing the 0slamic ,inancial mar1et$
.. Sukuk for the funding source of the relocation of public transportation
routes
..., Problem identification
5ue to the occurring the mud volcanos that buried the ,ree.ay in bet.een the 34 J 3!
1ilometre mar1 and cause the ,ree.ay8s ,ly over in 'orong crac1ed had to be
demolished on the ?
th
o, 5ecember, ""?$ Moreover, the disaster also result 3" cm
de&th subsiding e,,ect that &otentially threatened the main road and the rail.ay,
disru&ting the distribution o, goods in )ast *ava &rovince, es&ecially in the (idoarjo
district$ +here,ore government though the mitigation agency 7B'9() &lanned to have
road relocation$ A&&ro-imately B3 hectares o, land ac@uisition needed$ +he ne. road
is located .ithin t.o 1ilometers ,rom the center o, the mud,lo.$ /o.ever, there is a
rejection o, land ac@uisition ,rom residents or the land o.ner, as result o, the
com&letion o, the 'orong high.ay ,aced &roblems and the relocation cannot be
,inished on time
+he using o, (u1u1 in develo&ing in,rastructure caused by disaster is a mi-ture
&rinci&le o, insurance and investment$ 0t cannot deny that in,rastructure relie,
&rograms re@uired huge ,unds$ (ometimes the government ,unding that &re&are .as
not ade@uate to &rovide the in,rastructure redevelo&ment &rogramme$ +he use o,
0slamic ,inancing in in,rastructure develo&ment has already begun in several
countries$ 0n 0ndonesia, the state ,inancing o, retail (u1u1 listed on the stoc1
8
e-change trading in ""! .as R&$ #44$D4 billion$ 0t is seen (u1u1 issued by the state
has an over.helming res&onse in the community$ Using this assum&tion, the idea o,
,inancing the mitigation redevelo&ment &rogram occurs$
+here are three things that made the case ,or mud volcano 'orong interesting to be
observed$ First o, all, the disaster occurs and still continues u& to ne-t ,uture$ +his
disaster not only buried #"" hectare o, land but also resulting in 3" cm subsidence
e,,ect in certain radius$ Beside that the mud that s&outed u& &oisoned and to-ic ,or
environment$ +here,ore, the e,,ects o, the disaster is not only e-&erienced by the
o.ner o, the buried lands but also ha%arding surrounding areas ,or e-am&le, &eo&le
.ho living in the &ro&osed high.ay construction site and the ne. 'orong road, must
let their land to be used ,or the in,rastructure develo&ment$ +he 'ricing di,,erential
bet.een the residents .hose their lands .as buried and the &eo&le .hose their lands
is used ,or road construction .ill bring con,lict$ +he con,licts arise because o, the
objection o, the residents in releasing their land ,or the road$ 9astly is that, the
involvement o, &rivate com&any that assumed must res&onsible ,or the emergence o,
a disaster even though the (u&reme Court decision decree mentioned 'orong Mud
Holcano is naturel &henomenon$
+he 0slamic ,inance that is o,,ered is (U6U6 in redevelo&ment &rogram &ost disaster
es&ecially the Mudarabah (u1u1 mechanism$ +he (chematic 'lan o, &ro&osed (u1u1
Mudarabah mechanism could be seen on the ,ollo.ing chart$
+he using o, Mudarabah term re,er to a contractual arrangement bet.een investor and
(u1u1 issuer institution .hereby the investor .ould contribute s&eci,ied assets or
commodities to the (u1u1 issuer institution ,or s&ot delivery in the e-&ectation that
the 0nvestor .ould be able to meet its de,erred &ayment obligations under the
mudarabah agreement$ 0n redevelo&ment o, ne. 'orong road and +oll .ay, the land
9
o.ner .ho o.ned the land in .hich has been use as the road develo&ment location
has similar right as the investors, .ho &ut assets or commodities that e-&ecting a
mudarabah &ro,it .hen the roadF,ree.ay is o&erated
+he de,erred &rice .ould ty&ically include the cost &rice at .hich 0nvestorsF land
o.ner had &urchased the assetsFcommodities, &lus a &re=agreed mar1= u& re&resenting
the &ro,it generated ,rom its involvement in the transaction$ +he &ayments o, the
de,erred &rice ,rom the Agency that issued the (u1u1 certi,icates may be structured as
&eriodical &ayments on dates s&eci,ied at the outset, thus creating an income stream
,or the investor ,or the term o, the transaction$
.... the benefits
+here are three bene,its in the changing o, land o.nershi& to become su1u1
certi,icate o.nershi&$ Firstly is that the o.ner o, the land does not loss their land
o.nershi& and including the &otential bene,its$ (econdly, could &ush the land
ac@uisition cost that should &re&ared by government$ +hirdly, it can reduce the land
s&eculation$
.3 Sukuk for the funding source of *mpowering 1ocal Business: Shrimp
0armer cases
.3., Problem identification
(hrim& is one o, highly value &roducts .orld.ide 7FA<, "B")$ +here,ore
this commodity is highly traded$ +he .ealth economies such as *a&an, U(A and
)uro&ean Union are the main e-&ort destination$ Besides that, in local economy
&ers&ective, shrim& culture industry also &rovides many jobs ,rom ,ry gatherers to
gro.ers and &rocessors$ /o.ever, develo&ing shrim& culture industry have some
conse@uences such as the ris1 o, salini%ation o, .ater and soil, declining o, the
mangrove areas and other social con,licts that occurs ,ollo.ing the shrim& ,armer
develo&ment 7'rimavera, B!!42 'Oe%=<suna, F$ ,""B)$ 5evelo&ing shrim& ,ishery
sector has double edge s.ord ,unction, in one edge could enhance economic gro.th
but in other edge could destroy the environment$
(hrim& remains the leading e-&ort o, ,ishery commodities its national ,orces$ From
the years ""; =""! 0ndonesiaPs shrim& &roduction is on average a rise o, #$3;C &er
year$ From ?"$#! tons in ""; to 3?"$!4 tons "B"$0n addition the average e-&ort
rate &er year ,rom ""; until "BB reached R& B?$! trillion or e@uivalent to U$($ I $B
billion$ +here are three main destination countries e-&ort 0ndonesia, ,irstly is that the
United (tates that is an average o, ?3,3D4 tons &er year or B$;D &recent o, the total
national e-&ort o, ,ishery &roducts$ (econdly is that *a&an that absorb a&&ro-imately
4D,!43 tons &er year or e@uivalent to BB$? &recent o, the total shrim& e-&ort, the
third e-&ort destination is )uro&ean Union that reach u& to ;B,!4# tons annually or
e@uivalent to 4$? &recent, and a&&ro-imately ;3,;# tons &er year are e-&orted to
many countries$
10
(idoarjo &lay signi,icant role in ,ishery sector in total 0ndonesian ,ishery e-&ort$
According to 5ahuri 7""#), the ,ormer ministry o, ,isheries and marine, mentioned
that it8s contribute a&&ro-imately 3"C o, total 0ndonesian ,isheries e-&ort$
+he .ide o, ,isheries &onds in (idoarjo are B;,;3" hectare that s&reads on the eight
sub district$ D" hectare in Aaru, D,B"" hectare in (edati, 43B hectare in Buduran,
3,B? hectare in (idoarjo, D!4 hectare in +anggulangin, B,"3 in Candi, D!# in 'orong
and D,BDD hectares are located in *abon 7+he (idoarjo Fisheries and Marine
de&artment, ""!)$ 'orong, +anggulangin and *abon are the nearest location to the
mud volcano in 'orong$ +here,ore the ,ishery sector es&ecially shrim& &roduction it is
believed a,,ected directly by the Mud$ And other subdistrict .here the location are
around Madura strait, .hich is the Madura strait is the estuary o, the 'orong river and
some other small rivers surrounding the mud volcanos, it is believe .ould indirectly
a,,ected$
0n res&ond to the ha%ard o, the occurring o, mud volcano in 'orong, the
shrim& ,armers res&ond di,,erently$ +here are ,our res&onds that ,armers sho. in
,acing the threats$ +he ,irst res&ond is that the ,armers react s&ontaneously by
&rotesting the B'9( and sought a com&ensation ,or their losses$ +he second res&ond
is that the ,armers sold their &onds and changes their business to another sector$ +he
third res&ond is that the ,armer changes their commodity that cultivate ,rom shrim& to
another stronger ,ish$ +he last res&onds that identi,ied is that the still cultivate the
shrim& but by modi,ying their techni@ue and &ractises in cultivate shrim&$ +he
creative one .ould ado&t a ne. method in shrim& cultivation such create .ater
,iltering techni@ue, ,ind ne. ,eeding method or discover ne. treatment in cultivate
shrim& that more environmentally ,riendly$ +his creativity could escalate o&&ortunity
,or gaining stable and rising &ros&erity ,or advanced economies8 community
7Benne.orth Q *an /os&ers, ""#)$ /o.ever, ,armer innovation cannot o&timum i,
there is no su&&ort both ,rom government and ,inancial institution$
Based on the descri&tions above, the (u1u1 Murabaha or (u1u1 Musyara1ah
could be im&lementing ,or su&&orting the shrim& ,armer &roductivity$
+he ,inancial scenario that using (u1u1 Murabaha could be de&icted on the ,ollo.ing
chart:
11
First o, all the (&ecial 'ur&ose vehicles have to be created in order to bridging the
need o, the ,armers and the ,inancial institution$ For e-am&le, one o, the ('H
,unctions is that to assist the ,armer more ban1able$ A,ter the clients are ban1able,
s&ecial body that issues (u1u1 endorse investors to &ay the &roceeds to issuer ('H$
An then 'urchaser 7com&any .ho acts as ,armer buyers) enters into a murabaha
agreement .ith +rustee or the (u1u1 issuer 7as (eller), &ursuant to .hich +rustee
agrees to sell, and <riginator agrees to &urchase shrim&s ,rom +rustee that su&&lied
by the ,armers or by ,armer association on s&ot delivery and de,erred &ayment terms$
+he &eriod ,or the &ayment o, the de,erred &rice .ill re,lect the maturity o, the su1u1$
+rustee &urchases the Commodities ,rom a third &arty Commodity (u&&lier ,or a Cost
'rice re&resenting the 'rinci&al Amount ,or s&ot &ayment$ A,ter.ard, the selling
document could be used as guarantor ,or (u1u1 holder neither .ill 1ee& the
certi,icates o, sell on the secondary mar1et$ +he (u1u1 issuer .ill have &aymentF
revenue &rom the ,oreign buyers ,or the ,uture revenue$ +he &ayments has been made
base on de,erred &rice at regular intervals to +rustee 7as (eller)$ +he amount o, each
de,erred &rice instalment is e@ual to the returns &ayable under the su1u1 at that time$
+he e-isting &ractice that occurs among shrim& ,armers are, the agency, mostly the
association or &rocessing de&ot su&&lies all the ,armer needs$ +he association or the
de&ots, sell the trust that they had ,rom ,armer to the investor ,or obtaining ,und$ +he
,und is used ,or su&&lying all the ,armer needs$ Ahen the harvest time occurs, the
,armers sell their shrim& to the association or the de&ots that &lay as the (u1u1
arranger$ (ometimes, big de&ot o,,ering the &ond maintenance, &ond e@ui&ment8s and
also trans&ortation .as also assisted$ +he shrim& cro&s are sold to the pengepul
7Middleman) that collect the shrim& on behal, the 5e&ot and sent to the sorting
.arehouse that do si%ing, &eeling and re&ac1ing &rocess o, the shrim&$ Farmer
receives the transaction note and money ,rom the &enge&ul directly$ +he &enge&ul
recei&t B= .ee1s &ayment system ,rom the e-&orter com&any$
.3.. the benefits
+he bene,its ,rom the mechanism are that, the ,armer .ho already has buyer but
,acing di,,iculties in su&&orting their &roductivity could have ,inancial su&&ort
through this mechanism$
'. '+S%SS+$&S
+he using o, 0slamic ,inance es&ecially su1u1 in redevelo&ment in,rastructure and
em&o.ering community is beyond ,uture$ +his is because o, ,our reasons$ +he ,irst
&ossibility &roblems is the Ris1 o, Failure to 'ay 75e,aults Ris1), is the ris1 that
investors cannot obtain &ayment o, ,unds &romised by the issuer at the time o,
maturity o, investment &roducts$ )-ce&t i, there is a government body that guaranty
the ('H, it .ills reduce the ris1 7assumed to be ris1 ,ree)$ (econdly, Mar1et Ris1
7Mar1et Ris1) is the &otential loss to the investor 7ca&ital loss) ,or the retail su1u1
sold &rior to maturity 7.hen the value goes do.n)$ 0t could be ha&&en .hen the
,armer ,acing the viral diseases ,or e-am&le, or /igh .ater &ollution$ +hirdly is that
12
9i@uidity Ris1 79i@uidity Ris1), is the di,,iculty in melting, this ris1 could be due to
the tendency o, (haria=hold 7do not be traded until maturity), but ,or the retail su1u1
sales agent has guaranteed to buy bac1 the goods sold by the investor $ Ris1s that can
ha&&en are investors are ,orced to sell to dealers at a &rice belo. mar1et &rice$ 0, the
&urchase amount is not large, the interests are relatively small and can be trans,erred
to the ban1 is not signi,icant and can be used$ +he biggest &roblem o, this mechanism
is that the moral ha%ard and the trust$
13
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16