Pak Harto

At the time of writing, the news reported that former president of Indonesia, Pak Soeharto is lying unconscious at Rumah Sakit Pusat Pertamina Jakarta. The presidential doctor team published reports about the vital conditions of the former president, and they are very bad, Pak Soeharto is in a very critical conditions. From the analysis of a close family, chances are, it might not be long before his time will be over.

Pak Soeharto, I have mixed feelings about this person. Because just maybe, despite all the sins that he has done in the past, I still think that Indonesia owe a lot to him. I think that, if you think positively, everything that we Indonesians enjoy right now, our education, our economy state, our pride as a nation, we really owe a lot of it to him. Although the homeworks that he has left is not easy.

Have you ever thought about what Pak Harto has achieve in his leadership days? 

• Development plan (Pelita, Repelita).
• Skyscrapers, huge houses, roads, cities are built.
• Indonesia built several important industry through BPIS (Agency for Strategic Industries). These include IPTN, PT PAL, Pindad, Krakatau Steel and many others. Many collapsed after his leadership.
• Indonesia has successfully maintained the Keluarga Berencana (Family Planning) Program throughout his leadership.

Although he is not without flaws. Too long he had ruled Indonesia for power tends to corrupt. And the flaws are just too many, if you speak with any Indonesian, undoubtedly he/she would be able to point the flaws. But it should also be noted that what Indonesia has experienced in Pak Harto's leadership is not entirely his fault alone.

Whatever people says, the fact is Pak Harto is one of the best leaders that Indonesia have. Let's forget the past, and fight for a better future. Just think of this simple question, "If you were in his position, will you be able to do any better?"

I pray to Allah that if Pak Harto is a really good person, if what Pak Harto has done is really benefiting us as a nation, may Allah forgive his sins and ease his pain. May the pain he suffers is an ablution to his sins. May Allah forgive Indonesia, and give its people ilham to be a better nation.

Please note that I don't have any political standings. I even hate (dirty) politics. Forgive me if in this writing you found something offensive, I know that this is a sensitive issue.

KPPU vs TEMASEK about Telkomsel and Indosat

It's finally decided as my presentation topic for Business ethics, About KPPU vs TEMASEK, I've tried to find real case situation to convince my teacher, While brainstorming myself to find such case, desperately i tried to relax a bit..checking for soccer news, fortunately I saw a pop out news about KPPU decision to Temasek, and thats it..everything suddenly comes out, just the case I needed. I never thought I could find the nice side of this long story of Telkomsel and Indosat Acquisition by Temasek-group..It's nice only for my discussion material to get through this course.., for other reason there is no more good side about this situation.


I do aware its such controversial things happen about the acquisition..first thing first is national security, Imagine that probably around 80% of Indonesia GSM user are probably tracked by Another Country..Amazing..what is the reason of Indonesia Government did this..., Anyway.. I didnt propose to do this discussion to the teacher..but more into ethical perspective of doing such acquisition (Since it is class about Business ethics of course..)..moreover discussion of National security in a class on another country is inappropriate and embarrass me as well.., although that is the truth..but still..


Here is the Proposal detail, I will probably discuss my result on early January:

Proposal

September 2006, data shown that Mobile user In Indonesia reach 38 million users or about 17.28% of Indonesia Population, and this number increasing rapidly every year. This number represent GSM (Global Satelite Mobile) Technology, CDMA (Code Digital Multiple Access) technology Is not considered yet, since it is relatively new implemented in Indonesia and share much smaller market share compare with GSM.

Nearly 80% of market share dominated by 2 biggest cellular operators, respectively by Telkomsel(49%) and Indosat(30%). Before tide of acquisition, Telkomsel as the biggest cellular operator owned by the government through state telecommunication company PT Telkom, it share is not listed in market. Second Biggest, Indosat listed in market and it shares owned by Government and Public.

Today, after acquisition, Temasek-Singapore based telecommunication company owns a 54.15 percent stake in SingTel Group which holds a 35 percent stake in Telkomsel, while Singapore Technologies Telemedia (STT) -wholy owned by Temasek- owns 75 percent of Asia Mobile Holdings which owns 41.9 percent of Indosat.

Domination and cross ownership make it possible for both operators to apply monopoly such as fixed higher price which is too high and operators enjoyed excessive profit, far above it basic/interconnection cost. Data also shown the fact for Telkomsel that Ebitda Margin (profit after tax, depreciation, and amortization) reach average of 72.09%, second highest after Philippine among 52 countries in the world, 56.7% for Indosat.

Based on laws of business competition or monopolistic practices to ensure sound business competition, The Business Competition Supervisory Commission (KPPU) found Singapore`s Temasek Holdings guilty of cross-ownership in domestic mobile telecommunication companies PT Telkomsel and PT Indosat leading it to abuse its dominant position in the marketplace and to pratice monopoly.

Given Above information, we want to analyze ethical issues related with the approval of acquisition execution, there are several points we want to discuss:

1. Initially, before the acquisition, it is not realized that SingTel Group and STT, both are backed up by a same bigger group, Temasek. From law perspective it is SingTel and STT concern to consider about law consideration regarding cross ownership and ownership of majority shares in companies which work in the same area (telecommunication in this case).However, it is also shareholders concerns (TELKOM) to take care of acquisition process so in the future no such thing happened like today, ethically shareholder have a responsibility to be sure that management is looking after their interest. In other words, shareholders responsibility is not only moral obligation, it may be smart investment as well-reference from Two Ethical Issues in Mergers and Acquisitions-Patricia H. Werhane.
2. Based on current situation, it turns out that the acquisition can be categorized into Hostile Takeover/ Acquisition, Hostile Acquisition can be describe as (from wikipedia): A takeover would be considered "hostile" if (1) the board rejects the offer, but the bidder continues to pursue it, or (2) if the bidder makes the offer without informing the board beforehand. The second imply our reasoning. There is also some ethical aspects from this situation we would like to discuss.-ref Ethical Dimension of Hostile Takeover, Lisa H.Newton.

Questionable Situation: Why the government approved this hostile acquisition, especially when they have already seen the monopoly possibility behind this acquisition? Have they ever followed their responsibility of monitoring and keeping the health of the market?

Actors: Indonesian Government( regulator and market surveillant)、Temasek-Singapore(acquisitor)、Telkomsel and Indosat(local cellular operator)

Stakeholders: users、cellular operator、government、acquisitor

Dilemma： advanced managerial experience of cellular operation、foreign capital for expansion of local network、excess profit from monopoly、personal interest of the governor versus national telecommunication security、quality of service without competition、fixed high communication rate

Alternative reaction: introduce another tactical institutional investor which has no relationship with Temasek to avoid market monopoly or limit the number of board members form Temase to reduce its influence over the companies

Theoretical Reflection: To be discussed

Our view: government responsibility、third party regulator and monitor、perfection of legal system

___________________________________________________________________________

some references:

Perang Interpretasi Undang-undang - Senin, 26 November 2007
Indonesian Consulate Sydney - Temasek case not to undermine investment
ANTARA News :: Temasek Bisa Bawa Kasus Kepemilikan Silang ke Arbitrase Internasional
KPPU: Konsumen Seluler Dirugikan 14 - 30 Triliun Rupiah :: Media Konsumen :: Suara Konsumen Online

or for those who interested on some intelegent issues:

[pulsa] Re: Rebut Telkomsel & Indosat dari Temasek !!!

A little bit about interest rate movement

This blog is to support another article. Although, I hope it is will be interesting to read independently.

There are several factors drive the decision making of a government (central bank in this case) in raising or lowering their existing interest rate, intuitively every event in market will affect the decision, but there is some major events will be dominant factors in taking decision, some if its:

Inflation: Higher inflation tend to make currency is not attractive anymore, since the effective interest rate is calculated as the difference of interest rate and the inflation.
Example, Rupiah 8% interest rate with 6% inflation have 2% effective interest rate, if inflation rise into 6.3% then the effective interest rate become 1.7%, it makes the investor more likely to convert the Rupiah into some other currencies with higher effective interest rate.
For lower inflation attractiveness of related local currency work in the opposite way.
In short, higher inflation makes government likely to increase the interest rate and vice versa.

Country's risk: the riskier a country, the more effective interest rate should be applied. An equal 2% of effective interest rate between Indonesia and Singapore will make investor choose Singapore than Indonesia from this point of view. That's why safest country used as benchmark by other country in make their decision. So far, most country in world make decision regarding their central bank after decision from US central Bank.For example, Bank Indonesia(Indonesia's central Bank) keep the spread of interest rate and inflation wider than US spread.
However, there are already some changes in using US as benchmark by another country regarding latest situation.


Credit traffic: high interest rate make people unwilling to borrow money or make credit, and economic traffic will be significantly affected by this. The reason if this is more active money transferred, which is mean money circulation happen faster, more people could use the money, more active economy,in the end is higher economic growth. Also this is one reason why stable country, such as developed country have much lower interest rate compare with developing one. Japan, in fact has less than 1% interest rate and at some times hits deflation condition (interest rate less than 0), however there are also other factors explain this anomaly. One of it is Cultural behavior.


Note that, all list above based on my own conclusion so far from newspapers and some sources, and my intuition tell me its work that way, CMIIW. I mean it is not theoretical explanation, thats why clarification of issue above are highly appreciated.

Also note that in some circumstances there are some exceptions of contrary thing actually happen, for example, china government recently announced that it will help dollar not to fall further, from early thought low dollar value could make more power for china to spend, but since china income highly driven by its export, especially to US, lower dollar means lower income. also most of china reserve is in Dollar, 1 basis point(which is 0.01%) movement in dollar value will affect reserve of big country like china value of millions of dollar .

Another good news

It's an extension of my previous post regarding the Indonesia government strategy of handling some turbulences happen in world market, especially about weakening dollar and rising oil price.

I was wrong, but I'm quite happy because of that. previously, i worried about holding the foreign currency reserve in dollar because of trend that dollar tend to have higher probability to enter recession situation. Holding too much reserve in dollar will make us fall together with US if recession takes place.

But that is not the case. This morning I read news about government decision to lower local currency (rupiah) interest rates 25 basis point,0.25 %, from 8.25% into 8%.

Before we discuss about this further, I've provided one blog describes what factors affect central bank decision in raising or lowering interest rate.

in conclusion, one thing to describe almost all possible things is, Indonesia government gave signal that they are believe the economic growth in the future will be better. Negative effect of this decision is possibility in short term investor will take their fund abroad, make rupiah value lower than before, but taking decision of lowering interest rate should be also together with responsible to handle this kind of situation and I believe it is the case, Indonesia has higher reserve than before 1997, the year asian economic recession happened.

Another good news, the point which prove I was wrong, I though lower dollar and higher oil price will make reserve lower, but it works in contrary, it gains 800 million dollar for a month in government reserve because of those two situations. I believe the answer is a lot of reserve in Euro since the deputy governor of central Bank said: "decreasing value of dollar with respect to Euro make the foreign reserve value higher". moreover, Euro proportion must be higher than dollar since unfavorable movement in dollar make the reserve value higher. She also said :"Higher oil price give more income from Oil sector which directly add to reserve".

So far the central bank strategy has succeeded in hedging, prevention against unfavorable event, hopefully it will works in the future.

Dollar, not that green anymore..

It is interesting to discuss some causes of weak performance of dollar against several other major currencies:

(quoted from yahoo finance, click image to magnify)

Left: Dollar versus pound sterling, right: Dollar vs Eur.


Over the last two months dollar has reached lowest point on Eur, many times, not only once.
Using supply and demand argument we could say that decreasing value in dollar is simply because there is more offer to sell dollar than offer to buy it. It is also could be used as indicator that recently people didn't trust dollar that much anymore, further it could be interpreted as people no longer believe in USA economy.

This situation is triggered by announcement of china's government to switch some proportion of its dollar foreign reserve into another currencies. As a big world player, china's decision made some other investment players interpreted in the similar way. The situation of internal USA market, such as crisis in mortgage backed securities (related with housing market, to simplify), dropping value of index equity (S&P 500, Dow Jones), Oil price crisis (hitting new record 100$, from 50$ in less than 3 years) and almost any other indicators strengthen this reasoning, USA is heading to something unfavorable.Even OPEC is pushed to change the standard currency for trading oil from dollar to some other currencies.As you know, some countries (including Indonesia) decision of spending budget is very much influenced by oil price, which is valued by dollar.

As time goes on, people try to find the origin of the problem, one possible(and very possible i think), USA spend too much on Iraq and Afghanistan. Approximately, it could be from $1 trillion to $3.5 trillion. to remind you, starting with thousand, million, billion, and trillion (3,6,9 and 12 zeros respectively).

After all, I really worry about what my government decision will be, regarding these matters.

Hello Blog

Hi, this is my first time contributing to this blog. About me and why I'm here, just read my intro post.

Blog.

What is a blog? According to Wikipedia, the definition of a blog (short of weblog) is a website where entries are written in chronological order and commonly displayed in reverse chronological order. "Blog" can also be used as a verb, meaning to maintain or add content to a blog. In Wikipedia we can also read the history of blog, and many stories about it. In this article, I will be focusing on personal blogs.

Originally, blog (weblog) was used to publish logs (hence the name) on the network. Nowadays people blog for various reasons, for fun, to log a journey, to make online diaries, political reasons, advertising, self-advertising, and some people even make real money from blogging.

According to Technocrati, the number of blog worldwide now exceeds 70 million. About 120,000 new blogs are created every day. In countries worldwide, there are organizations or groups of people that coordinates gathering of bloggers. Blogging is a phenomenon.

So why does blogging become so popular for the common people? I think everyone who have access to internet connection have at least thought about blogging. Maybe it's because of the freedom blogging gave someone. Blogging gives someone the freedom to speak, freedom to express oneself to the world. Blogging exposes you to the world. Just look at the number of personal blogs worldwide. I still remember a time when someone writes a diary, she/he would lock or keep the book in a very safe place, where no one else can read it. Nowadays many people write about everything publicly, even about sensitive matters.

That's why blogging is not without consequences. Some people get violent reactions, some were fired from their jobs, some lose their credibility, and some were even jailed. All of this because of what they write in their blog.

There's a saying that I know (I forgot the exact wordings) that says, "The tongue is sharper than a sword". When you speak (or write) offensively, you will stab someone in their chest. And then there's the consequence. Of course, in the other hand, even when someone doesn't mean to hurt anybody and even intended to do something for the greater good, some people still hate them. It's just the rule of the world.

The point is, what people write in their blog doesn't get the proper treatment like professional media does. Sometimes some of the writing can become offending to some people.

Sorry, I tend to get to the dark side of things. But bad things aside, by blogging, someone can easily share their knowledge with others. Personal knowledge or experience that we would probably never able to discover on books or other things. I personally have solved many technical problems and got many answers on my personal questions by reading blogs.

In this blog, we would like to share something that we think about as interesting, and hopefully there's someone who can benefit from it. So please don't hesitate to give feedback and I hope the posts will do you good.

Peace.

Is it gambling or certainty..?

As more people think about randomness of financial instrument, more and more people argue whether investing in financial world is gambling or not.., well again as you may guess my answer would be both, depend on what part you want to take in this world.

There are mainly 3 players in investment:

1.Speculator:
If you insist investment is gambling then it is the right one for you, speculator is simply speculate for their payoff.
they profit depend on market movement, for those who take position in buy they hope market will bullish(increase) and sell at higher price, and the opposite way for those who take the sell position and hoping market will fall(bearish).
however, historically(at least in written history), no one will make consistently positive payoff, at average you will be very close to 0 return, most of the time people will exit the market because of their big loss and they cant hold on anymore, while people in high profit position tend to play more and more until bankruptcy, leaving Everyone with negative return for most of the time.
From my point of view, if you do this it just mean you enter another variation of casino game, you could name other that it: soccer bet, roulette, etc. Again, its not recommended.

2. Hedger:
New term for some people, its method is quite well known in investment world as hedging, basically it protect your capital for market movement against you. Example will always provide nice interpretation, suppose you want to trade in gold with stranger (btw, you are in Indonesia using rupiah and stranger is from US using $). in 1 week both of you agree to trade 100 grams of gold for 1000 dollar, you are buyer and stranger is seller.
What will you do? easiest way is to provide 1000$ now and wait a week and pay him the money for the gold. this method easy, however it is unlikely done because people like to circulate their money before they using it, hoping it would grow before it is used, deposit in bank and take the interest is just an example.Again to remind you, this example use 1 week time of period, what happen if we agree in 6 months, 1 year or even 10 years? providing 1000$ now will be like sacrifice all the opportunity in time between.
Another strategy is just provide 1000$ later in a week, wait 1 week, meet the stranger and pay it, done!! is it? remember you are in Indonesia, in 1 week you have to bring rupiah to currency converter and ask for 1000 dollar, what if in 1 week rupiah get weak in respect with dollar? then you have to provide more rupiah to get 1000$, you dont want it. what you want is rupiah getting stronger. now you choose, if you want to speculate about it, do nothing and wait for 1 week. if you want to assure what amount you should provide, do hedging(to remind you again that we talk about hedger not speculator). How? you make agreement with another stranger , call it stranger II, that in 1 week he would provide you 1000$ for fix rupiah, say 9.000.000 rupiah (using 1$=9.000 of course). and you can stop worrying about what happen in 1 week, its stranger II problem, none of your business :). Is stranger II exist? fortunately yes, it is known as a product called "future" or "forward", actually it is not the same but the idea is similar.
The question is can you imagine how big is hedging world? it is everywhere, bank to protect their capital, insurance company to protect their client, government to protect their people, thats why there exist such unit called treasury, risk management.

3. Arbitrageur: It act like speculator with different reason, it sure that his position will give profit payoff. As most of people believe in equilibrium, that every asset should stay in its price, while most of the time we see that all asset price will deviate, or called volatile(it is the reason to introduce randomness in modeling the asset price movement). Arbitrageur could interpret if stock price is not at its equilibrium and take the opportunity, although its not as good as it seems, competition in market demand player to be able to execute in very short time, millisecond, otherwise the opportunity went away taken by other player. thanks to computer that make all the flash-trading happen, also blame the computer that make todays trading is getting more complicate.

After All, sometimes you could have more than 1 role at a time from this 3 position.I also think all things in the world will be speculation, you open a company, you speculate in customer behavior, product trend, political situation. you buy food, you speculate with its taste, whether it satisfy you or not.but if you have to deal with speculation, try to manage your risk, get as small as possible. Take risk that you can handle.