International Journal of Civil Engineering and Technology (IJCIET)
Volume 10, Issue 03, March 2019, pp. 1029–1037, Article ID: IJCIET_10_03_100
Available online at http://www.iaeme.com/ijmet/issues.asp?JType=IJCIET&VType=10&IType=3
ISSN Print: 0976-6308 and ISSN Online: 0976-6316
© IAEME Publication
Scopus Indexed
THE ROLE OF CONFLICT OF INTEREST IN
IMPROVING THE QUALITY OF REGIONAL
DEVELOPMENT PLANNING
Zulkarnain Lubis, Erlina*, Sirojuzilam, Suwardi Lubis
Universitas Sumatera Utara, Medan, Indonesia
*Corresponding Author
ABSTRACT
Economic growth of a region is low if the quality of regional development planning
is relatively poor. It is necessary to analyze the causes of the quality of low development
planning. Several factors that are thought to influence the quality of regional
development planning are planning capacity, assessment capacity and conflict of
interest. Conflicts of interest in local governments are very high, each person involved
in the process of drafting local plans and budgets will prioritize their interests over the
interests of the community. The results of this study actually found that conflicts of
interest did not affect the quality of regional development planning.
Key words: planning capacity, assessment capacity, conflict of interest and
development planning quality.
Cite this Article: Zulkarnain Lubis, Erlina, Sirojuzilam, Suwardi Lubis, The Role of
Conflict of Interest in Improving the Quality of Regional Development Planning,
International Journal of Civil Engineering and Technology 10(3), 2019, pp. 1029–
1037.
http://www.iaeme.com/IJCIET/issues.asp?JType=IJCIET&VType=10&IType=3
1. INTRODUCTION
The quality of regional development planning is influenced by several factors. The results of
previous studies concluded that in carrying out planning, implementation of planning theory
will affect the quality of planning (Lawrence, 2000 ); (Richardson, 2005). The research has not
comprehensively developed planning theories in implementing regional development planning.
In addition, there are still gaps in the results of research from several previous studies related
to the factors that influence the quality of regional development planning, including gaps / gaps
between the theory and the results of research on the quality of planning, including the impact
of potential conflicts of interest in the quality of regional development planning. It is known,
there are several empirical studies that have discussed the factors that influence the quality of
planning, such as regional commitment (Norton, 2005), delegation planning (P. R. Berke,
Roenigk, Kaiser, & Burby, 1996), community participation Brody, Godschalk, & Burby,
(2003), collaboration between local governments (Burby & May, 1998), and implementation
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Zulkarnain Lubis, Erlina, Sirojuzilam, Suwardi Lubis
of planning (P. Berke et al., 2006); Brody, Carrasco, & Highfield, 2006) and Laurian et al.,
(2004).
Agency problems in local governments are thought to arise due to the existence of
information asymmetry between the executive-legislative and legislative-voters which causes
the opening of space for the tendency of opportunistic behavior in the budgeting process, which
is actually greater than in the business world which has automatic checks in the form of
competition (Boettke, Boyd, Coyne, Rugman, & Padoan, 2013). According to (Moe, 2010)
agency relationships in public budgeting are between (1) voter-legislature, (2) governmentlegislature, (3) finance-user budget minister, (4) prime minister-bureaucrat, and (5) service
providers. The same thing was also stated by Gilardi (2001), who saw the agency relationship
as a delegation (chains of delegation).
Legislatives are principals for executives as well as agents for voters. Information
asymmetry between the executive and the legislature is not very meaningful when the
legislature uses its discretionary power in budgeting. The results of this study indicate that (1)
the legislature as an agent of voters behaves opportunistically in the preparation of the Local
Budget (APBD) (2) the amount of Local Revenue (PAD) influences the legislative
opportunistic behavior, and (3) the Regional Budget is used as a means of political corruption.
Thus, the existence of agency problems in local government, where each party tends to show
its opportunistic attitude, it can be assumed that the quality of regional development planning
also tends to be less good. In budgeting, the legislative role is relatively high, when the
legislature uses its discretionary power in budgeting, the APBD is used as a means for political
corruption.
Based on the previous description, the principle is basically the researcher wants to conduct
research on the quality of regional development planning by extending the planning theory
comprehensively through the development of conceptual models to explain the impact of
conflict of interest and the factors that influence the quality of regional development planning.
In this study, researchers will add a theory that is usually used to assess the performance of
companies, namely agency theory (Agency theory). As explained earlier, there are also agency
problems in local governments, so that a conflict of interest arises between agents (executives)
and principals (legislative).
2. LITERATURE REVIEW AND HIPOTESIS
Principal-agent relations occur when an individual's actions influence another individual
(Stiglitz, 1987 in Gilardi, 2001) or in another formulation: whenever one individual depends on
the action of another (Pratt & Zeckhauser, 1985 in Gilardi, 2001). Agreements are formed in
institutional structures at various levels, such as behavioral norms and contractual concepts.
The institutional environment also influences the prevailing formal rules, legislation (which
regulates institutional responsibilities and competencies), budget procedures, and governance
structures where the budget process is implemented, and transactions are negotiated, monitored
and enforced.
Stiglitz (1999: 203) states that agency problems occur in all organizations, both public and
private organizations. (Healey, 2003) analyze how the application of principal-agent theory in
the public sector, especially the government. According to Lane, the analogy of corporate
theory and agency theory can be applied in public organizations. According to Lane (2000: 1213), "... the modern democratic state is based on principal-agent relationships in the public
sector." This opinion is parallel to Moe's (1984) view of the economic concept of public sector
organizations with use agency agency explanations. Christensen (1992) states that principalagent theory can be an analytical tool for the preparation and implementation of public budgets.
Furthermore Smith & Bertozzi (1998) holds that the application of principal-agent models by
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The Role of Conflict of Interest in Improving the Quality of Regional Development Planning
practitioners offers a more powerful analytic tool for both preparing and implementing public
budget.”
But if you talk about the concept of agency relations in government in the context of the
budget, the problem is not as simple as the conventional agency concept. As Moe (1984)
revealed, the agency relationship of the government sector cannot be fully approached with a
conventional agency approach, due to several considerations. First, there are differences in
organizational ideology. The basic ideology of public sector organizations (especially
government) is to maximize social welfare by prioritizing public interests and public services
above other interests. Meanwhile, the ideology contained in agency relations, generally, and
becoming a popular paradigm in mainstream (mainstream / positivist) accounting research for
almost two decades is the ideology of capitalism with an individualist attitude that places selfinterest as something more dominant.
Second, conventional agency theory by (Michael C. Jensen, 1976) cannot be applied in the
government sector budget, because one of the tools used by principals to control agents is the
provision of incentives. These incentives, generally, are measured based on profit achievement,
while government organizations do not have profit as a measure of performance. Another form
of incentive is the ownership of company shares by agents, while the government does not
consist of shares that can be traded, and or given ownership to a few people. This organization
is an organization whose ownership is collective and not owned by individuals. The legislature
is not a stockholder and cannot provide incentives in the form of shares to the executive (agent),
even the people themselves do not own shares, and therefore cannot sell shares.
This study is motivated by research conducted by Niskanen (1971, 1975) and Weingast
(1983). Niskanen's research (1971, 1975) says that executives are responsible for government
budget inefficiencies. He emphasized the executive role in the agency relationship. While on the
other hand, Weingast's research, Moran (1983) shows that the legislature is responsible for the
chaotic government budget caused by weak supervision. In his research in the local government
of Great Britain, he viewed that agency relations in the government were dominated by the
legislature. This is because, empirically, the legislature is the executive boss in the hierarchy of
government authority he is the principal (or, in practice, the committee) and the executive is the
agent.
Rational planning theory supports the use of indicators (1) the number of adequate and quality
planners, (2) routine renewal of plans, and improving technical skills to build strong planning
capacity in local environmental planning. In addition, pragmatism theory shows that an efficient
pragmatic planning process can finally prove the effectiveness of the plan (Lawrence, 2000).
Regional planning is a complex process including geographic, social, and economic settings,
which can be influenced by the jurisdiction's framework and planner's values and experience
(Forester, 1984). In this study, planning capacity is measured by the number of planners, updated
plans, professional technical skills, and regional collaborative efforts.
Assessment capacity is supported primarily by the main theories of pragmatism and
sociological idealism. There are opinions, from the theory of pragmatism, which shows
knowledge-based experience helps to achieve an effective planning outcome; so that highquality development planning can be encouraged through directing more efforts to streamline,
harmonize, procedural integration, scoping assessments and information management. In
addition, the theory of sociological idealism emphasizes the size of the integration of social and
environmental substances into a comprehensive land use planner (Lawrence, 2000; Richardson,
2005). Thus, the capacity of regional planning assessment can help to integrate critical planning
elements in the final planning to achieve the goals of socioecological idealism. The capacity of
planning assessment can be measured by three factors: scope of assessment, simplification
capabilities, and information management and information dissemination.
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The first factor is the scope of the assessment, which measures the different types of
proposals that have been considered in the regional planning assessment process, to identify
specific development issues and to assess the potential impact of the planning needs to be done
to regulate the context in which the assessment is critical regional planning and development,
is there a problem that must be dealt with immediately, the type of assessment of regional
development to be carried out, and the intended purpose of the assessment for planning for the
use of regional finance that is comprehensive, effective and efficient. Scoping assessment limits
highlight the requirements of regional planning and development that do not neglect the
environmental impact and social impact on the community. Useful assessments provide
opportunities to identify relevant stakeholders and the availability and quality of data, and to
determine a set of tools and techniques to address later. There are three main types of assessment
/ assessment capacity, namely main based (master base), program-based and project-based
assessment.
The second factor in assessment capacity is the ability to simplify. Simplification refers to
the process of achieving compliance with regulations regarding regional financial management
in the preparation of regional planning. The procedure for simplifying the planning process will
be useful for reducing costs, maintaining internal consistency, and integrating functions that
have related objectives. The simplification procedure also helps to establish a cooperative
regional planning process, concurrent reviews, and dispute resolution processes and
development consensus. Third factor, management and dissemination of information sharing in
regional planning, is the most important part of the assessment capacity. An important element
in regional planning is the management of information and information dissemination within
the local government, academics, legal practitioners, and the wider community. Web-based
information systems are effective systems to achieve the purpose of disseminating information.
This indicator is measured whether or not there are regular rules that provide regional planning
assessment documents including notification of preparations, assessment results, and other
information. From the previous description, the research framework is as follows.
Figure 1. Research Framework
3. METHOD
The population of this research is planning compilation officials in each work unit in the city
of Medan. Testing hypotheses using PLS applications. planning capacity, assessment capacity
andconflict of interest as independent variables and the quality of regional development
planning as the dependent variable.
4. RESULTS AND DISCUSSION
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The Role of Conflict of Interest in Improving the Quality of Regional Development Planning
The structural model in PLS is evaluated by using the R-square for the dependent variable and
the path coefficient value for the independent variable which then evaluates its significance
based on the t-statistical value of each path. Based on the results of PLS Algorithm output in
Figure 2, it can be seen that the R-square value is 0.626, which means that variations in the
quality of regional planning can be explained by construct variables (Planning Capacity,
assessment capacity and confict of interest), at 62.6%.
Furthermore, to see the effect of each variable on the quality of development planning, it
can be seen there is Table 1 below :
Table 1 t–Statistics Value
Path Analysis
t Statistics
p
Values
0.434
5.189
0.000
0.514
5.091
0.000
0.018.
0.300
0.764
Planning Capacity -> development Planning
Quality
Assesment Capacity -> development l Planning
Quality
Conflict of Interest-> development Planning
Quality
Source : SMART PLS (2019).
Conclusion
Accepted
Accepted
Rejected
Based on the results of testing in Table 1, it is known that conflict of interest does not affect
the quality of regional planning. The results of the study show that conflicts of interest in local
governments are not a factor that causes the quality of development planning to be low. But
planning capacity and assessment capacity affect the quality of regional development planning.
Regional development planning in general is a complex process, including attention to
geographical, social, and economic aspects, which can be influenced by the framework of
jurisdiction and the values and experience of planners (Forester 1984). Based on some of these
views, then in this study planning capacity in principle by researchers is measured by the
number of planners, collaboration between regions, update/revision plans and GIS levels.
Furthermore, based on the results of the analysis conducted, it is known that planning capacity
has a positive and significant influence on the quality of regional development planning. That
is, the better the planning capacity, the higher the quality of regional development planning.
This study supports the research conducted by (Tang & Brody, 2009), but partially on each
indicator of planning capacity is known to have several differences. Thus, the results of this
study indicate that the number of planners, collaboration between regions, revised plans and the
level of GIS applied have a positive and significant influence on the quality of planning.
The results of the study of these variables in general are basically in line with the various
empirical conditions of regional development planning in most regions in Indonesia in general,
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Zulkarnain Lubis, Erlina, Sirojuzilam, Suwardi Lubis
and in the city of Medan in particular. This condition is quite prominent because as the center
of government and at the same time the capital of North Sumatra Province, the availability of
planners of human resources is known to be relatively more adequate both in quantity and
quality because it is supported by the existence of various universities, academics and
researchers who can be used as planning staff needed in regional development planning. In
addition, planners from internal planning institutions are also available more adequately,
because the opportunity to increase capacity and competence as planners is more widely open
both in the regions and abroad with the support of regional government funding or other
financial institutions that are easy access. In addition, regions with large financial capabilities
can also utilize a more adequate number of planning staff. Thus, the number of planners,
especially in big cities, tends to be increased in various fields of regional development, both
internally and externally with the support of regional government budget allocations. Through
the increasingly adequate number of planners, various regional development plans can certainly
be initiated, initiated, formulated, designed and determined by the regions through a
comprehensive feasibility assessment, so that the quality of regional development planning can
be accounted for both financially and economically. Empirically, planning institutions in the
regions face challenges not only in the limitation of staff planners, but also in the limited quality
of planners available in various fields of regional development. This condition will also
contribute to the quality of regional development planning.
The influence of assessment capacity in the regional development planning process in
conception is supported mainly by the main theory of pragmatism and socioecological idealism.
Based on the theory of pragmatism, there is a strong view that knowledge-based experience
helps to achieve a more effective planning outcome, so that higher quality development plans
can be encouraged through streamlining, harmonizing, integrating procedures, scope of
assessment, and dissemination information management. In addition, socioecological idealism
theory emphasizes the need to integrate social and environmental substances into more
comprehensive regional planning (Lawrence, 2000; Richardson, 2005). Thus, the
environmental capacity of a strong assessment/assessment is believed to help to integrate the
basic environmental elements in the final environmental plan in order to achieve the objectives
of socioecological idealism. The capacity of assessment/ assessment can be measured by three
factors, namely the assessment of scope, the ability to streamline/simplify and management of
information and dissemination to further encourage participatory and democratic planning,
based on the results of interviews conducted, at present many local governments through their
planning institutions have begun to develop management information systems (MIS) to support
the regional development planning process, because in fact the quality of regional development
plans has not been realized. compiled one of them due to lack of available database/information
that is owned and can be used by planners. Furthermore, given the demands, needs and interests
of the stakeholder (community) for regional development, both in the physical spatial, socioeconomic and cultural fields, it must be admitted that it has varied greatly, so that in the planning
procedures there have been many processes for determining the scope of planning and priority
scale development regional development vision and mission agreed upon.
Thus, to improve the quality of regional development planning, it is the duty of regional
development planners to continue to manage the availability of increasingly adequate
data/information in the form of planning information management to support planning
procedures, as well as monitoring and evaluating increasingly quality and sustainable regional
development plans.
Empirically, the forms of regional development planning are arranged in stages, some of
which are arranged in the form of a 20-year regional long-term development plan (RPJP), 5year regional mid-term development plan (RPJMD) and regional based short-term development
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The Role of Conflict of Interest in Improving the Quality of Regional Development Planning
plan (RKPD) 1 year, or at SKPD level translated into The Strategic Plan (Renstra-SKPD), Work
Plan (Renja-SKPD). Based on the level of planning prepared, it must be ensured that there is
strong harmonization and synchronization between the regional development plans, namely
between the long-term, medium-term and annual. Therefore, it will always be seen that there is
a strong link between master planning prepared in good planning. Synchronization of each of
these development plans can also be generated with the help of the application of Information
Technology (IT) based planning applications.
5. CONCLUSIONS
The results of the study indicate that the magnitude of the conflict of interest in local
governments does not affect the quality of regional development planning if the planning
capacity and assessment capacity in the area are good. This result is not in line with the other
researchers (Erlina, Tarigan, Mulyani, Maksum, & Muda, 2018). Planning capacity indicators
are the number of planners, collaboration between regions, budget revisions and GIS levels.
Only the number of planners and GIS levels has a significant influence on the quality of regional
planning. Indicators of capacity assessment are the scope of assessment, the ability to simplify
and information management and dissemination. All indicators have a significant influence on
the quality of regional planning. It is necessary to carry out further research by improving
research indicators or questionnaires to measure conflicts of interest in the local government.
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Tang, Z., & Brody, S. D. (2009). Linking planning theories with factors influencing local
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Berke, P., Backhurst, M., Day, M., Ericksen, N., Laurian, L., Crawford, J., & Dixon, J.
(2006). What makes plan implementation successful? An evaluation of local plans and
implementation practices in New Zealand. Environment and Planning B: Planning and
Design, 33(4), 581–600. https://doi.org/10.1068/b31166
[18]
Berke, P. R., Roenigk, D. J., Kaiser, E. J., & Burby, R. (1996). Enhancing plan quality:
Evaluating the role of state planning mandates for natural hazard mitigation. Journal of
Environmental
Planning
and
Management,
39(1),
79–96.
https://doi.org/10.1080/09640569612688
[19]
Boettke, P. J., Boyd, G., Coyne, C. J., Rugman, A., & Padoan, P. (2013). Concerting
entrepreneurship: an international public good. European–American Trade and Financial
Alliances, (March). https://doi.org/10.4337/9781845426699.00013
[20]
Brody, S. D., Carrasco, V., & Highfield, W. (2006). Measuring the adoption of local sprawl:
Reduction planning policies in Florida. Journal of Planning Education and Research, 25(3),
294–310. https://doi.org/10.1177/0739456X05280546
[21]
Brody, S. D., Godschalk, D. R., & Burby, R. J. (2003). Mandating citizen participation in
plan making: Six strategic planning choices. Journal of the American Planning Association,
69(3), 245–264. https://doi.org/10.1080/01944360308978018
[22]
Burby, R. J., & May, P. J. (1998). Intergovernmental environmental planning: Addressing
the commitment conundrum. Journal of Environmental Planning and Management, 41(1),
95–110. https://doi.org/10.1080/09640569811812
[23]
Erlina, Tarigan, Z. A., Mulyani, S., Maksum, A., & Muda, I. (2018). the Role of Conflict
of Interest in Improving Budget Quality in Local. International Journal of Civil Engineering
and Technology (IJCIET), 9(October), 696–707.
[24]
Forester, J. (1984). Bounded Rationality and The Politics of Muddling Through.
[25]
Healey, P. (2003). Collaborative Planning in perspective. Planning Theory, 2(2), 101–123.
https://doi.org/10.1177/14730952030022002
http://www.iaeme.com/IJCIET/index.asp
1036
editor@iaeme.com
The Role of Conflict of Interest in Improving the Quality of Regional Development Planning
[26]
Laurian, L., Day, M., Berke, P., Ericksen, N., Backhurst, M., Crawford, J., & Dixon, J.
(2004). Evaluating plan implementation: A conformance-based methodology. Journal of
the
American
Planning
Association,
70(4),
471–480.
https://doi.org/10.1080/01944360408976395
[27]
Lawrence, D. P. (2000). Planning theories and evirnonemtnal impact assessment.
Environmental Impact Assessment Review, 20, 607–325.
[28]
Michael C. Jensen, M. W. H. (1976). Theory Of The Firm : Managerial Behavior, Agency
Cost And Ownership Structure. Journal Of Financial Economics, 3, 305–360.
[29]
Moe, T. M. . (2010). The New Economics of Organization Author ( s ). American Journal
of Political Science , Vol . 28 , No . 4 ( Nov ., 1984 ), Pp . 739-777 Published by : Midwest
Political Science Association Stable URL : Http://Www.Jstor.Org/Stable/2110997, 28(4),
739–777.
[30]
Norton, R. K. (2005). Local commitment to state-mandated planning in coastal North
Carolina. Journal of Planning Education and Research, 25(2), 149–171.
https://doi.org/10.1177/0739456X05278984
[31]
Richardson, T. (2005). Environmental assessment and planning theory: Four short stories
about power, multiple rationality, and ethics. Environmental Impact Assessment Review,
25(4), 341–365. https://doi.org/10.1016/j.eiar.2004.09.006
[32]
Tang, Z., & Brody, S. D. (2009). Linking planning theories with factors influencing local
environmental-plan quality. Environment and Planning B: Planning and Design, 36(3),
522–537. https://doi.org/10.1068/b34076
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