There's no such thing as a free lunch...Or is there?

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It's official. The next president of Indonesia is former army general Prabowo Subianto. Quite how the next five years will pan out is anyone's guess but hopefully the foreign pundits who always bring up his dodgy human rights record will be proven wrong. Nonetheless, on policy making, Prabowo's popularist move to literally offer the poor 'a free lunch' every day of the week does not augur well for the future. Such a policy - if it ever came to fruition - would cost a phenomenal amount of money and likely lead to huge inefficiencies (food waste) and poor incentives (make people lazy). Another concern is Prabowo's strong nationalist bent. Thus, in the possible event that he finds himself with his back against the proverbial wall in the face of stern economic challenges, there is a big chance that he will simply scapegoat foreigners. But he will have to be careful. Construction of the new capital city, Nusantara, for example, is highly dependent on foreign in
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Indonesia races ahead of Google in 2010!

An optimist stays up until midnight to see the new year in. A pessimist stays up to make sure the old year leaves. ~Bill Vaughan

Only 5 years ago, it was pointed out that one single US tech company, the behemoth internet stock Google - which was valued by the market at more than US$130bn - was incredibly worth more than ALL the companies listed on the Indonesian stock market with total capitalization of around US$80bn.

Quite incredible I’m sure you’ll agree.

One single company that operates in the virtual world (what exactly are its assets?) is worth more than all the listed banks, coal mining companies, CPO producers, retailers, property developers, telecommunications firms and others listed on the Indonesian Stock Exchange.

Wow!

So what exactly does it tell us?

Well, that Google’s search engine is great and that Yahoo’s is crap. And not forgetting of course that Google is the preeminent internet company with a virtual empire covering almost the entire globe.

But it also tells us that there is huge potential just waiting to be unleashed in Indonesia – because there is no way all the listed Indonesian companies should be worth less than Google – and that if only Indonesia could get its act together, then Indonesian share prices would surely take off.

And this is exactly what has happened.

As a result, Indonesian listed companies were worth US$210 billion at the beginning of last year, or higher than Google’s valuation of US$189 billion.

And by the end of 2010, the Indonesian market’s value had soared to an astonishing US$346 billion, or far above Google’s US$192 billion!!!

Performance of the Jakarta Composite Index in 2010Jakarta stocks had a great year in 2010

NB: the valuations of tech stocks is utterly insane. The estimated value of Facebook for example is put around US$42 billion – up threefold in just 12 months! And as for Twitter? That’s worth an estimated US$3.7 billion! Twitter are said to be making considerable revenues (how I wonder?), but are still loss making, having high overheads with over 300 employees. How does that West Ham song go? I'm Forever Blowing Bubbles / Pretty bubbles in the air / They fly so high, / Nearly reach the sky / Then like my dreams…

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