FEATURED PAPER

Project Management, Earned Value and Prompt Payment Practices Observed from the View of Islamic Syariah Law

By Farid Maloni, BEng. MEng

Jakarta, Indonesia

Abstract

The flow of funds from Muslim countries is estimated to be growing at a rate of some 15% annually in a form of Sukuk’ which is an investment instrument that relies on Islamic Syariah law. This phenomenon gives a sign that an investor/project owner, especially Middle Eastern investors, which has a specific demand to invest their money through a way that is aligned with their beliefs.

The fundamental or core elements of Syariah Law which apply to this paper are prohibition on Riba’ (charging interest) and payment of the worker’s salary.

This paper will observe another potential area in the Project Execution Process regarding to application of Syariah law. Some areas in the Project Execution Process which is attractive from Syariah point of view is project progress measurement and payment timeline. A sacred text of Islam (an Al-Quran) and Prophet Muhammad traditions, a Hadits, reveals on how Muslims believe on proceeding payment to workers and prohibition of Riba’ or charging interest in their living aspect.

A simulation model will show how the money supply chains flows in a project; and its correlation to the selection of payment method, Long versus Prompt payment duration, and how its measured will drive the amount of interest charging to the cost of project.

The Syariah belief in prohibition riba’ or interest charging, and its synergy with prompt payment is proved, and then it will bring a beneficial impact to the CAPEX cost efficiency. By utilizing Earned Value (EV) to measure project progress real-time, agree on the prompt payment (shortened duration), and possibly cut the supply chains, it will have reduced the interest charging about 1.5 to 4% embedded in a project’s cost.

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About the Author A Farid Maloni Author A Farid Malon, BEng, MEngi is a project management practitioner with 10 years working experiences in multinational Mining-Mineral and Oil-Gas industries. Farid started his career as a Mechanical Engineer, Project Engineer, and Project Manager in a Mining and nickel processing company, Vale Inco Indonesia Corp. Currently he is working for Chevron Corp in the Indonesia Deepwater Development Project, Major Capital Project, Assurance, Interfaces and Risks as a Coordinator. Farid is based in Jakarta, Indonesia and can be reached at farid.maloni@gmail.com