Arsip Kategori: risk country

A Smile at Prices of Hot Spices

Indonesia is a unique country, for I cannot say it is impossible to live in. I still have to use a positive sentence to start the year.  We are still celebrating new year, and we passed Idul Fitri and Idul Adha, two most sacred days for moslems. Over the two latter, prices of hot spices–you might call it chillis and we called it “cabe”–was hotter than mercurius. We usually cook special food to celebrate Idul Fitri (hot “ketupat rendang” or “ketupat opor” added with ground chillis and onions). We also cook “kare kambing” or “lamb curry” after we sacrifice the lamb in the morning. Curry, as we know it, needs spices mostly chillis.

So what happened when it’s Christmas time? Do we cook spicey food? Not too many. New year’s eve? We cook spaghetti with is tomato sauce, and chillis if required–not a must. We serve pudding and other sweeties to close the year. Why on earth the price of chillis per kilogram went from IDR 50,000 to IDR 100,000 overnight on the first week of  2011? This is amazingly outrageous or outrageously amazing…!

Blame it on the extreme weather? Awww, come on… the sun is still there at certain times of the day. We have reached the highest level of bioengineering for food production for the last decades. Why don’t we do something out of it? In Indonesia, again as a unique country, priority of doing the right things is upside down, inside out of whatsoever. Our president was best seen sitting graciously near a soccer field instead of chopping the grass in the middle of paddy field. Our local government is too busy doing knick-knacks instead of encouraging the people to produce and distribute more efficient farming or fishery goods. Public officers concern more on renovating their official houses and buying more expensive official sedans to suit their ranking of bureaucratic system. (click here for one of the news)

We, the Indonesians, are likely to face a very hotter year in the future if the prices of 9 staff and staple (“sembilan bahan pokok” or “sembako”) are crazily skyrocketting.  There were no significant government’s actions last year, and we are not hoping more this year. However, we are the still the kindest and the most forgiving species on earth. We Indonesians always handle things with smile, for better or worse.



Temasek and The Right Prescription

Risk and profit. They go hand in hand. The higher the risks one entity shall take, the more profitable she shall get. The hype of reality shows in TV are still on demand. Even Kinaryosih and her love Brett Money coupled to join AXN Amazing Race, a globespotters’ challenge TV show. Everyone loves higher risk challenge.

As a big entity, Temasek had calculated all risks before entering Indonesian market, a big fat profitable but lousy market. Lousy? Not so fast…

If the KPPU decision is made this week on Temasek of her monopoly power or abuse of dominant position, it is actually all about consumer welfare and other entities’ welfare (read: total welfare). This “consumer welfare prescription” has been implemented in many countries around the globe. Judge Robert Bork coined this term, and the concept is quoted in many decisions by other countries’ competition authorities.

In Indonesia, unfornately, Consumers’ Protection Law is outlined separately from Competition Law. For this reason, KPPU could only decide on monopoly power, not at the very thoughts of consumer welfare. Both laws must have been regarded under one umbrella for KPPU to make decision. For comparison, please comprehend Judge Bork’s “total welfare” interventionist actions.

Let me put it this way. For consumer welfare: a firm’s market power will depend on the buyers’ sensitivity to price (the firm’s elasticity of demand) therefore buyers or consumers shall be protected from any suspectedly-artificial pricing that a firm like Telkomsel or Indosat could conduct.

For competition’s sake, we shall look at a wider angle. Both firms’ elasticity, and therefore their market power, will depend on the elasticity of market demand, the number of firms, degree of product differentiation and the interaction between firms. When fringe players enter the arena, and the only strategy that both firms have conducted is advertising campaign. Theory has it that reducing price or dominant players to consumers would be the last strategy.

I have observed when one campaign conducted by Telkomsel took place, Indosat would place only itsy-bitsy ads (not campaign). The other way round happened. I have clipped all their Kompas ads for the last semester for proof.

On the other hand, Temasek, again, with her calculation to enter Indonesia, anticipated investments via dividing enterprises to handle both Telkomsel and Indosat: Singtel 35% of Telkomsel, and Singapore Technologies Telemedia Pte. Ltd. 41,94% of Indosat. Both Singtel and STT is under Temasek. But then again, KPPU has outsmarted this.

Even a campaign statement of “not healthy to invest in Indonesia” is broken if we see the due process of law is taken place. Please compare this with decision process taken by other countries’ competition authorities. There are consumer welfare and rule of reason to consider.

A public complain was sent to KPPU about pricing strategy that was harmonized by both Telkomsel and Indosat at the time many fringe players entered the arena, then KPPU conducted investigation and calculation. When the decision is made, and Temasek shall appeal to district court, then there is no way Indonesia is a risky country. Please, the system is progressing. Let it flow and work accordingly.

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Ditulis oleh pada November 20, 2007 in Indosat, KPPU, risk country, Telkomsel, Temasek