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

Image
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

Google slaughters Indonesia in 2013!

Google is one of the largest companies in the world.

In fact, it is so large a company, that you can’t really compare its value to any individual Indonesian company – rather you have to compare it to the entire value of Indonesia’s stock market, or what is better known as the market cap.

When I first did the calculations back in 2006, Google was valued at US$130 billion and worth more than all the Indonesian companies put together (just US$80 billion).

To me this didn’t make much sense.

How could one single company, operating almost exclusively in the virtual world, be worth more than all the Indonesian cement producers, mining, property and retail firms, banks, agribusiness firms and telecom companies etc combined?

Surely Indonesia as a growing emerging economy would catch up?

And it did.

In 2011, Indonesia’s stock market was valued at 1.87 times Google.

And in 2012, Indonesia was still valued at 1.69 times Google.

But in 2013, things reversed as Google’s valuation soared and the value of Indonesian companies slumped as the rupiah nosedived.

In fact, Google’s share price surged 53.91 percent in 2013, translating into total market capitalization of US$374.68 billion (up from US$232 billion at the end of 2012).

In contrast, Indonesian share prices sank as investors lost confidence and pulled their money out of the country. To make matters worse for foreign investors, they also had to shoulder massive forex losses as the beleaguered rupiah lost 20% of its value.

2013 was a crap year for Indonesian stocks

As a result, by the end of 2013, Indonesia was worth just US$347 billion or 0.93 times Google’s valuation.

Of course, the data may just be a blip and Indonesia should perform much better in 2014. After all, what could possibly go wrong. Prabo… No!!!!!! 

Comments

Popular posts from this blog

The 10 best plus plus massage spas in Jakarta

20 things you should know about Indonesian women

The comfort zone (Jakarta hotel and spa)