The Effect of Regional Original Income and Capital Expenditure
Total Page:16
File Type:pdf, Size:1020Kb
Proceedings of the International Conference on Industrial Engineering and Operations Management Sao Paulo, Brazil, April 5 - 8, 2021 The Effect of Regional Original Income and Capital Expenditure Management against Economic Growth of Mamuju Central Regency through Performance Effectiveness Regional Finance Andi Syahrul Asfar, Muh. Akob, Gunawan Bata Ilyas Sekolah Tinggi Ilmu Ekonomi AMKOP Makassar, Indonesia [email protected], [email protected], [email protected] Muh. Abduh. Anwar Universitas Muhammadiyah Sidenreng Rappang, Makassar, Indonesia [email protected] Yusriadi Yusriadi Sekolah Tinggi Ilmu Administrasi Puangrimaggalatung, Makassar, Indonesia [email protected] M Chairul Basrun Umanailo Universitas Iqra Buru [email protected] Suprayitno Fakultas Ilmu Sosial dan Ilmu Politik, Universitas Palangka Raya [email protected] Abstract This research aims to analyze the effect of Regional Original Income (PAD) and Capital Expenditure Management on Economic Growth through the Effectiveness of Regional Financial Performance. This research uses a quantitative approach, and analysis uses the SPSS tool. The sample was determined by purposive sampling technique and panel data in the form of a time-series cross-section. The results showed no direct effect of PAD and Capital Expenditure Management on the Effectiveness of Regional Financial Performance. However, PAD on Capital Expenditure Management had a tremendous impact on economic growth, in contrast to the effectiveness of Regional Financial Performance which had no direct or indirect effect on economic growth. Likewise, PAD and Capital Expenditure Management on Economic Growth through the Effectiveness of Regional Financial Performance also do not indirectly impact. Keywords: Economy, Performance, Finance, Management, Indonesia 1. Introduction The evolution of GRDP demonstrates a region's economic growth. The state of the regional or regional economy is highly dependent on its capacity and resources. In improving an established opportunity, the district government's policies, steps, and efforts. Mamuju Central was completed to boost the regional economy. All activities and measures in growth carried out have shown the sufficiency of the results obtained. The importance of the GRDP from year to year shows this. © IEOM Society International 3180 Proceedings of the International Conference on Industrial Engineering and Operations Management Sao Paulo, Brazil, April 5 - 8, 2021 PAD is the source of PAD as described in the APBD. PAD is a source of income for a region produced by economic activities/area activities. In theory, an area's independence is calculated in conjunction with its PAD, which includes the effects of regional taxes, usage fees for a region, separate asset management, and other legal revenue from the area. According to Rondonuwu et al. (2015), the ability to handle finances as the Regional Government does is specified in the APBD, for example, the Regional Government's ability to raise regional tax revenue and also the ability to fund growth in their area and social services offered to the community. APBD applies to regional finance's scope at the provincial government level, which comprises three (three) significant components: investment, financing, and income (Halimdan Kusufi, 2016). Management of regional finances, as found in the APBD for each region, can be used as a tool in deciding development regulations so that subsequent reports on provincial responsibility are obligatory and must be provided annually (Lucky, 2013). Meanwhile, Halim (2008) suggests that the application of APBD financial ratios, namely the freedom, level of quality, growth, and effectiveness ratio, can be used to analyze a regional economic output related to its financial management. This APBD framework involves capital spending on property, machinery/equipment, infrastructure/buildings, highways, drainage, networks, and other physical capital as a means of government expansion (BPS, 2009). According to Abdullah (2013), capital expenditure is a part of direct spending on the government budget in which output is generated in the form of fixed assets. There are two types of fixed assets used by the public: those that have direct contact with government / public institutions or are used by the public and those who do not directly contact the community/public. Physical projects generate products such as houses, which are all enjoyed by the apparatus or by for reasons unrelated to public services' role. Setyawati and Hamzah (2007) and Maryati (2010) researched PAD and economic growth. They found that PAD has a substantial positive impact on economic growth, while Santosa (2013) found that PAD has no positive economic growth effect. Research on capital expenditures and economic growth, such as that conducted by Anasme (2008) and Putra (2010), concluded that capital spending has no impact on economic growth; however, research conducted by Sularso and Restianto (2011) shows that capital expenditure allocation affects economic growth. Researchers were inspired by the inconsistency of research by Setyawati and Hamzah (2007), Maryati (2010), Santosa (2013), Anasme (2007), Putra (2010), and Sularso and Restianto (2011) regarding the impact of PAD and spending capital on economic growth. Go back to your study. Researchers anticipate inconsistency since other variables are needed to improve the relationship between PAD and capital expenditures on economic development, specifically the efficacy of regional financial output. In theory, an increase in blood income and the implementation of capital expenditures as allocated to finance development, namely infrastructure, facilities for the public/community economy; productive economy; and the development of a region's local economy. Influence regional economic growth through exemplary performance in provincial finances, which demonstrates the success of managing a region's finances. According to the study's definition, the authors want to change the title to "The Effect of Regional Original Income and Capital Expenditure Management on Economic Growth in Central Mamuju Regency through the Effectiveness of Regional Financial Performance." 2. Literature Review According to Law Number 33/2004 on the balance of central-regional government finances, PAD comes from taxes held by the regions, regional levies, regional wealth management, and other legal provincial revenues, which are intended to provide independence for the regions to explore the source of funds for the implementation of Otoda as an embodiment of the decentralization concept. PAD revenue sources are sources of financing for implementing government programs in the regions (Halim, 2014). According to Mahmudi (2009), a region's high level of capability in terms of generating revenue through PAD, as well as a high level of action or decision to take advantage of the region's revenue tailored for its needs and growth. According to PP No. 71/2010, capital expenditure is a budget expenditure for acquiring fixed assets and other assets that can provide several benefits in a single cycle. This capital spending is used to purchase fixed assets for the Regional Government, such as facilities, utilities, and other long-term investments. It will obtain this capital expenditure through an auction or tender process. PSAP No.2 on cash-based budget reporting divides capital spending into six categories: 1) shopping; 2) equipment/machinery shopping; 3) construction/building shopping; 4) shopping street; irrigation/network; 5) expenditures for other fixed assets; and 6) other shopping. © IEOM Society International 3181 Proceedings of the International Conference on Industrial Engineering and Operations Management Sao Paulo, Brazil, April 5 - 8, 2021 Financial performance is a metric for measuring performance that employs financial metrics or cost allocation. The Regional Government's economic output is the achievement of work results in a country's finances, including regional revenues and expenses with financial metrics as specified in legislation provisions/policies for a given period (Agustina, 2013). Financial ratios may be used to measure indicators or signs of good local government financial results. The financial ratio is the effectiveness ratio. Economic growth is a crucial metric for assessing regional economic achievements. Economic growth is a physical, economic change of actual economic activity. Some of the physical-economic changes that occur in a region include increases in the production of goods and services and infrastructure development. According to Sukirno (2004), economic growth is a fiscal expansion of a country's output of products or services, such as an increase in the production of manufactured goods, different schools, infrastructure development. Additional production in the service sector and increased production of capital goods: Evaluate the regional economy's development/growth for each time. 3. Research methodology This research is quantitative. The population includes all the years that exist in the economic growth of Central Mamuju District. The sampling criteria used were the Regional Income Financial Statements consisting of PAD and APBN in capital expenditures and economic growth in the 2013/2017 APBD realization report. The sample includes 2013-2017 APBD and Economic Growth data sourced from BPKAD and BPS Central Mamuju Regency. It collected the data by using the non-participant observation method. This method is carried out by