Kontroversi Kampanye Perubahan Iklim

Rayenda Khresna Brahmana

Kontroversi climategate semakin mempertegas dugaan konspirasi atas kampanye perubahan iklim (Climate Change Campaign). Bagai setitik nila, kasus ini ditakuti akan menurunkan legitimasi rencana perdagangan emisi karbon yang telah direncanakan selama 1 windu. Kasus climategate bermula dari email Prof.Jones dari University of East Anglia, Inggris Raya kepada Prof Mann dari Pennyslavania State University, Amerika Serikat. Isinya adalah ”Saya telah menyelesaikan trik milik Mike di Nature dengan cara menambahkan suhu yang riil dalam tiap serial data untuk 20 tahun terakhir (sejak 1981); dan sejak tahun 1961 punya Keith untuk menyembunyikan kecenderungan turunnya suhu” (The Economist hal 91, edisi 28 Nov-4 Des 2009).

Sebelumnya, kampanye perubahan iklim dan juga rencana perdagangan emisi karbon menjadi isu abad millennium. Beberapa penelitian menunjukan pentingnya isu ini bagi kehidupan. Rose (2007) menemukan bukti bahwa perdangan emisi karbon mendorong pemerintah dan masyarakat menjadi sadar lingkungan, dan beberapa peraturan pemerintah menjadi lebih populis.

Beberapa peneliti berargumen bahwa perdagangan emisi karbon sangatlah penting bagi negara – negara berkembang. Corong (2007) menemukan bukti bahwa perdagangan emisi karbon mampu mengurangi tingkat kemiskinan. Ellerman dan Decaux (2007) menemukan bahwa perdagangan emisi karbon mampu meningkatkan pendapatan per kapita penduduk negara berkembang. Namun, dibalik semua bukti pendukung betapa hebat dan pentingnya kampanye perubahan iklim dan perdagangan emisi karbon, beberapa aktivis berpendapat bahwa semua kampanye hanyalah modernism lainnya dari dunia barat. Bahkan, beberapa berpendapat bahwa kampanye ini hanyalah konspirasi dunia barat.

Konspirasi Kampanye Perubahan Iklim

 Beberapa aktivis dengan lantang menyatakan bahwa kampanye perubahan iklim adalah konspirasi dari kelompok – kelompok dari industri, sains, dan politikus. Industri memerlukan ceruk pasar baru yang berlandaskan ramah lingkungan. Ilmuwan memerlukan dana riset untuk tetap hidup. Tentu saja politikus bersama media membutuhkan cerita baru yang mampu menarik perhatian masyarakat.

Kontroversi akan semakin memperuncing konspirasi setelah tidak ada jawaban kolektif dari ilmuwan yang menyatakan perubahan iklim disebabkan oleh tindak tanduk manusia. Hingga saat ini, tidak ada jawaban yang pasti tentang perubahan iklim, hilangnya salju di kutub utara, atau bahkan semakin dinginnya beberapa wilayah di dunia.

Ekses Negatif Kampanye Perubahan Iklim Secara Ekonomi

Salah satu solusi dari kampanye perubahan iklim adalah penerapan pajak karbon. Tahun 2007, konsep ini pernah ditawarkan di Indonesia oleh Wapres saat itu, Bapak Jusf Kalla. Tanpa sadar, konsep pengurangan emisi karbon dengan cara menerapkan pajak atas emisi karbon akan semakin menggerus kesejahteraan rakyat. Secara ekonometrik, Pendapatan sama dengan Konsumsi ditambah Tabungan dikurangi Pajak. Jika sisi Pajak semakin besar, maka jumlah untuk konsumsi ataupun tabungan semakin kecil. Ini menandakan pengurangan tingkat kesejahteraan. Terlebih lagi, sejarah telah membuktikan, penerapan pajak hanya memiliki dua dampak. Pertama, pajak hanya memancing keributan domestik yang kadang kala berujung revolusi. Kedua, pajak hanya menggerus kekayaan individu tapi tidak korporat. Oleh karena itu, penerapan pajak sebagai salah satu bentuk kampanye haruslah dihentikan demi kesejahteraan rakyat.

Isu lainnya adalah sumber tenaga alternative ramah lingkungan. Salah satu solusi yang ditawarkan dalam kampanye perubahan iklim adalah penggunaan sumber tenaga alternatif seperti Geothermal, Nuklir, Angin, Matahari, Jarak, dan Kelapa Sawit. Tenaga nuklir tidak populer. Tenaga angin tidak memberikan daya listrik yang besar. Tenaga surya dirasakan terlalu mahal. Hingga sekarang, Jarak dan Kelapa Sawit menjadi solusi terbaik sebagai sumber tenaga alternatif. Untuk memperoleh tenaga alternative berasal dari jarak dan kelapa sawit, beberapa hutan harus dialihfungsikan menjadi lahan komersil. Dampaknya adalah: kehilangan ketersediaan air bersih asli dan mahalnya harga pangan. Hilangnya air bersih memaksa pemerintah untuk mengswastakan penyediaan air bersih dan proses sanitasi air laut menjadi air bersih. Artinya, masyarakat harus mengeluarkan uang lebih hanya untuk air bersih. Selain itu, secara alamiah, meningkatnya permintaan atas sumber tenaga alternatif, menurunnya lahan untuk pangan, dan meningkatnya jumlah penduduk akan berdampak pada mahalnya harga pangan. Jika harga air dan harga pangan semakin meningkat, tingkat kesejahteraan penduduk juga berkurang. Apakah kita sudah siap untuk trade-off kesejahteraan kita dengan permasalahan perubahan iklim di dunia?

Ekses negatif lainnya dari kampanye perubahan iklim adalah miskinnya transfer teknologi. Dalam skema kampanye perubahan iklim, negara yang memiliki hutan besar seperti Brasil dan Indonesia akan dikompensasi oleh negara – negara industri atas tiap karbon yang diabsorpsi oleh hutan. Misalnya, dengan harga 20 dolar per ton karbon, Indonesia mampu menyerap 1000ton karbon, dan Inggris memiliki ekses karbon sebesar 1000ton karbon, maka Inggris membayar kompensasi kepada Indonesia sebesar 20ribu dolar. Skema ini terlihat adil. Sayangnya, skema ini sangat merugikan negara – negara yang menjaga hutan.

Skema ini merugikan negara yang memiliki hutan dalam sudut pandang transfer teknologi. Seacara implisit, negara hutan diberi tanggungjawab untuk tidak mendirikan industri dan hanya menjaga hutan. Sementara, industri diperlukan negara untuk transfer teknologi. Transfer teknologi memiliki beberapa dampak baik bagi negara seperti: meningkatnya indeks pembangunan manusia, meningkatnya tingkat gini, meningkatnya investasi teknologi tinggi, penyerapan tenaga kerja ahli, peningkatan kualitas perguruan tinggi hingga pencegahan migrasi kaum intelektual dalam negeri. Artinya, nilai transfer teknologi jauh lebih mahal daripada sekedar kompensasi karbon. Kompensasi karbon in harus ditolak kecuali negara masih ingin tetap menjadi negara terbelakang.

Kampanye perubahan iklim seharusnya tidak diterima secara gamblang. Harus ada pertimbangan serius dari pemerintah mengenai keikutsertaan dalam kampanye ini. Semoga pemerintah mampu melihat sisi lainnya dari kampanye perubahan iklim dan perdagangan emisi karbon. Sehingga Indonesia tidak selalu berada di posisi yang selalu dirugikan. Sisi pengurang kesejahteraan, biaya hidup yang mahal, dan transfer teknologi harusnya menjadi perhatian pemerintah dalam berpartisipasi pada kampanye tersebut.

Rayenda Khresna Brahmana

Isu brain drain menjadi diskusi yang hangat di Indonesia. Beberapa milis organisasi pelajar Indonesia di luar negeri memperguncingkan isu ini. Kepalang tanggung, I-4 (Ikatan Ilmuwan Indonesia Internasional) pun dibentuk sebagai salah satu upaya mencegah brain drain di Indonesia.

Brain Drain adalah keadaan di suatu negara yang mengalami migrasi kaum intelektual ke luar negeri. Fenomena Brain Drain pertama kali diperkenalkan oleh Royal Society untuk menggambarkan fenomena migrasi kaum teknokrat Inggris ke Amerika Utara pada era tahun 1950an. Saat ini, China, India, Pakistan, dan Iran terkenal sebagai negara pengekspor kaum intelektual ke negara – negara maju di AS maupun Eropa Barat. Tulisan ini akan mengulas lebih lanjut dampak dari Brain Drain dan cara penanggulangnya.

Umumnya, brain drain memberikan tiga bentuk kerugian bagi negara pengekspor. Pertama, brain drain menyebabkan kelangkaan SDM ahli. Hijrahnya kaum intelektual ke luar negeri menyebabkan kurangnya tenaga ahli di dalam negeri. Untuk mengatasi jurang antara kebutuhan industri dan kelangkaan SDM ahli, negara yang terkena brain drain harus merogoh kocek sangat dalam untuk membayar ekspatriat. Tentu saja, membayar para ekspatriat juga akan berimbas pada lemahnya produk domestik bruto negara. Negara – negara Afrika mengalami kerugian hingga sekitar 38 trilyun rupiah setiap tahun akibat brain drain. Negara jazirah Arab harus merogoh kocek hingga 200 milyar dolar juga akibat brain drain.

Kerugian kedua bagi negara ekspor adalah terhambatnya proses transfer teknologi. Kekurangan tenaga ahli di dalam negeri membuat para investor tidak berani berinvestasi teknologi tinggi. Terlebih lagi bagi industri yang mengandalkan pada penelitian dan pengembangan seperti farmasi, kimia olahan, hingga perangkat lunak, maka brain drain yang besar akan mencegah transfer teknologi ke dalam negeri. Kurangnya tenaga ahli akibat brain drain memaksa para investor untuk menggunakan jasa kaum ekpatriat. Hal inilah yang memotong transfer teknologi ke dalam negari melalui mekanisme adopsi dan adaptasi.

Kerugian terakhir adalah rendahnya modal intelektual negara pengekspor. Modal intelektual adalah satu pemicu kebangkitan industri (Bennet, 2005). Banyak kaum intelektual di Indonesia yang melakukan riset atas nama negara lain. Sebut saja Yanuar Nugroho yang mendapatkan dosen terbaik University of Manchester, atau Nelson Tansu yang menjadi professor termuda di AS, atau Ken Soetanto yang menjadi wakil dekan di Universitas Waseda Jepang. Kecilnya jumlah publikasi dan paten internasional akan mengurungkan niat investor untuk menanamkan modal di Indonesia.

Yuan (1992) menyatakan ada 5 faktor utama penyebab dari brain drain, yakni: keunggulan fasilitas belajar dan riset di luar negeri, prospek karir yang lebih cerah di luar negeri, tingkat pendapatan dan penghargaan yang lebih tinggi, kepuasaan dalam pekerjaan, dan desakan dari keluarga inti. Lebih lanjut lagi, Yuan (1992) memberikan 5 faktor utama yang memotivasi intelektual untuk pulang ke negara asal, yakni: patriotisme, perasaan bersalah, rindu terhadap keluarga, tersedianya pekerjaan yang sesuai, dan rasa nasionalisme.

Berdasarkan penelitian ini, penulis mengajukan 5 langkah penanggulangan brain drain yakni: Penempatan kerja, asistensi kewirausahaan, program visiting professor, asistensi rekrutmen, dan penumbuhan rasa nasionalisme.

Penempatan kerja. Pemerintah di Meksiko, Kuba, dan Taiwan, menerapkan program penempatan kerja untuk mencegah brain drain. Meksiko misalnya, pemerintahnya menggunakan anggaran khusus untuk membangun labotarium canggih sehingga ilmuwan Meksiko mau pulang ke tanah air mereka. Pemerintah Kuba menyediakan pekerjaan bagi dokter – dokter Kuba yang berada di AS agar mau pulang ke tanah air. Para dokter ini tidak hanya bekerja di RS ataupun mengajar di universitas, juga dikirim kembali ke RS luar negeri atas nama pemerintah Kuba.

Asistensi kewirausahaan. Kredit lunak kepada para ilmuwan untuk mengembangkan industri juga diperlukan. Pemerintah India memberikan kredit lunak untuk mendorong para ilmuwan membangun silicon valley tandingan di Banglore. Pemerintah Taiwan juga memberikan dana kewirausahaan hingga USD 300 ribu untuk menarik para ilmuwan. Hal ini lebih merangsang perekonomian daripada menerima ekses negative Brain Drain.

Program visiting professor. Jika banyak ilmuwan Indonesia di luar negeri, pemerintah melalui universitas dapat menjalankan program visiting professor. Para ilmuwan di luar negeri digaji ekuivalen dengan gaji di luar untuk mengajar dan mengadakan riset di dalam negeri. Hal ini dilakukan oleh pemerintah China, Iran, dan India sebagai transfer ilmu dan juga proses adaptasi di negara asal. Bahkan di tahun 2000, pemerintah China berhasil mencapai angka 5,000 ilmuwan pulang ke tanah air sebagai visiting professor dan hal ini berdampak terhadap jumlah publikasi dan kemajuan penelitian di China.

Asistensi rekrutmen. Beberapa ilmuwan yang berada di luar negeri tidak pulang karena masalah ketiadaan pekerjaan di tanah air. Pemerintah harusnya membantu para kaum intelektual dalam hal rekrutmen. Pemerintah Afsel dan Malaysia memberikan jaringan lapangan pekerjaan secara online untuk para ilmuwannya. Di Indonesia, British Council membantu WNI lulusan Inggris untuk mendapatkan pekerjaan dengan mengadakan Job Fair tahunan. Hal ini haruslah dicontoh oleh pemerintah Indonesia.

Nasionalisme. Faktor lain yang harus ditumbuhkembangkan adalah nasionalisme. Berdasarkan Yuan (1992), nasionalisme adalah faktor terpenting dalam menarik ilmuwan kembali ke tanah air. Pemerintah Taiwan dan China menggunakan program keteladanan untuk menarik para ilmuwan. Promosi tentang pentingnya keberadaan ilmuwan untuk memajukan bangsa menjadi cara untuk menumbuhkembangkan rasa nasionalisme. Di dalam program keteladanan, para birokrat dan pemimpin negara memberikan sosok keteladanan yang nantinya akan menyentuh sense of belonging para ilmuwan di luar negeri.

Jika pemerintah mau menjalankan 5 langkah penanggulangan tersebut, pelaku brain drain secara alamiah akan kembali ke tanah air dan mempercepat kemajuan bangsa. Indonesia diharapkan akan memiliki keunggulan kompetitif melalui peningkatan transfer teknologi dan investasi industri berteknologi tinggi dengan adanya reverse brain drain. Selain itu, reverse brain drain diharapkan juga dapat meningkatkan indeks pembangunan manusia Indonesia dan juga produk domestik bruto Indonesia. Sekarang, semua terpulang kepada niat pemerintah Indonesia.

Krisis Keuangan AS Bukanlah Kegagalan Kapitalisme
Oleh: Rayenda Brahmana *

Setelah krisis ekonomi yang dimulai sejak era krisis bunga tulip di tahun 1637, krisis perdagangan pelayaran tahun 1720, hingga krisis moneter asia tahun 1997, tampaknya tahun 2008 akan dicatat menjadi era krisis lainnya. Tampilan kinerja pemerintah Indonesia yang mampu masuk di 20 teratas negara dengan produk domestik bruto terbesar tidak tampak karena isu krisis global ini.
Hampir semua analis mengakui krisis ini dimulai dari runtuhnya perkreditan hipotek yang melanda dunia. Dampaknya juga tidak tanggung-tanggung. Hampir semua negara Industri hingga negara miskin di hajar oleh krisis yang dimulai dari AS ini. Di Inggris misalnya, RBS dan Northern Rock, dua raksasa perbankan di Inggris, menjadi lunglai akibat krisis pekreditan ini. Di AS, perusahaan raksasa seperti Merryl Lynch, Pimco, BOA, HP AIG dan Merryl Lynch hingga bankrutnya Lehman Brothers, menjadi bukti lain atas dahsyatnya krisis ini.
Di Eropa, tidak hanya industri perbankan yang terguyur dampak krisis. Perusahan perakitan mobil Opel juga terimbas oleh krisis global ini. Bahkan, Sekjen PBB Ban Ki-Moon juga mencemaskan krisis ini juga akan menyapu negara-negara dunia ketiga yang notabene adalah negara-negara miskin.Semua mulai berpikir dan berduga, “Inikah awal dari runtuhnya Kapitalisme?”.

Penyanggahan Pertama
AS dan Eropa Barat dijustifikasi sebagai lambang kapitalisme. Ini mungkin disebabkan oleh sejarah perang dingin yang menempatkan AS sebagai blok kapitalis dan Uni Soviet sebagai blok Komunis. Runtuhnya sistem ekonomi AS yang selama ini terkenal sebagai negara yang setia dengan ekonomi pasar bebas seolah-olah bukti atas kegagalan kapitalisme. Beberapa analis dan pengamat ekonomi bahkan setuju kalau krisis kredit hipotek dan perbankan di AS akibat terlalu bebasnya sistem pasar di AS. Padahal faktanya adalah sebaliknya.
Krisis kredit perumahan dan perbankan secara jelas adalah kegagalan sosialisme, bukan kapitalisme. Merunut dari sejarah perkreditan perumahan di AS, Fanni Mae dan Freddie Mac (perusahaan penjamin hipotek di AS) dibentuk dengan tujuan agar setiap warga AS memiliki kesempatan yang sama untuk memperoleh tempat tinggal yang layak dan para pembayar pajak membantu mereka mewujudkannya. Jelas ini adalah sebuah gagasan sosialisme, bukan kapitalisme

Penyanggahan Kedua
Intervensi pemerintah AS, dalam hal ini the Fed, kepada pasar dapat menjadi bukti atas gagalnya sosialisme, bukan kapitalisme. Pertama, pembentukan institusi bank sentral secara jelas adalah penistaan ekonomi pasar bebas. Di pasar bebas, setiap permintaan dan penawaran tercipta bukan karena “pancingan” dari pemerintah tetapi tercipta sendiri oleh tangan yang tidak tampak.
Kedua, intervensi pemerintah dalam bentuk bantuan bank sentral bukanlah wujud kapitalisme. The Fed telah berhasil menciptakan permintaan yang artifisial bukan permintaan yang nyata dari pasar. The Fed menyuplai uang imajiner yang diperlukan kepada para peminjam sub-prime loan.
Di ekonomi pasar bebas, permintaan yang muncul adalah permintaan akibat keinginan untuk membeli produk tersebut bukan kemampuan untuk melakukan pembelian. Sementara intervensi dari the Fed menyebabkan munculnya permintaan yang diciptakan bukan permintaan versi kapitalisme. Dengan intervensi suplaian uang imajiner ini ditambah dengan likuiditas yang juga buatan menyebabkan permintaan yang artificial. Inilah awal dari penggelembungan di pasar hipotek AS.
Lebih penting lagi, ini semua muncul dari ide pemerataan kesejahteraan yang nota bene sangat bertentangan dengan ide kapitalisme.

Penyanggahan Ketiga
Beberapa pengamat dan analis setuju bahwa krisis kredit perumahan dan perbankan adalah salah satu perhentian terakhir dari idealisme kapitalisme. Lagi, pernyataan ini salah.
Sejak jaman merkantilisme di abad ke 15, dunia telah banyak di hajar oleh krisis. Namun kelebihan dari ekonomi pasar bebas adalah daya adaptasi yang besar. Terlebih lagi di AS, krisis perbankan adalah sebuah siklus buat mereka. Tahun 1980an, terjadi krisis pinjaman dan tabungan. Solusi dari pemerintah AS kala itu adalah reformasi perbankan dengan beberapa regulasi yang baru. Hal yang serupa ketika krisis 2001 yang disebabkan kasus enron dan worldcom muncul pemberlakuan Sarbone-Oxley. Ini adalah bukti adaptasi yang hebat dari kapitalisme dan sangat diragukan “kematiannya”.
Ini juga menunjukan bahwa secara historis, peristiwa yang terjadi adalah sebuah siklus ekonomi. Jika belajar dari tahun 1929, 1997, ataupun 2001, dapat terlihat krisis – krisis yang terjadi adalah sebuah siklus, yang jika ditangani tanpa intervensi pasar melainkan dengan regulasi baru, akan kembali dari awal dan sehat.
Selain itu, nama – nama seperti Warren Buffet ataupun Benjamin Graham yang terkenal dengan value investing-nya tidak akan menjadi super kaya jika tidak ada siklus ini. Lihat saja langkah terbaru Buffet yang langsung membeli GE, Conoco Phillips, dan UPS ketika pasar sedang jatuh. Ini adalah bukti bahwa krisis ini bukanlah perhentian terakhir dari kapitalisme melainkan sebuah siklus ekonomi.

Jalan Ketiga Giddens dan Solusi Austria
Dugaan lain penyebab krisis ini timbul adalah Jalan Ketiga (The Third Way) yang diambil AS sejak jaman Bill Clinton. Jalan ketiga merupakan gagasan yang ditemukan oleh Anthony Giddens di tahun 1998. Inti dari Jalan ketiga adalah pengembangan teknologi, pendidikan, dan intervensi mekanisme pasar yang kompetitif dengan tujuan perlindungan ekonomi.
Selain Tony Blair dan Bill Clinton, Fernando Cordoso (Brazil), Marianne Jelved (Denmark), Ferenc Gyurcsany (Hungaria), Mir Khan Zamali (Pakistan), dan Wim Kok (Belanda) adalah contoh kepala pemerintahan yang juga menggunakan Jalan ketiga di negaranya masing-masing.
Jauh sebelumnya, ketika Tony Blair dan Bill Clinton mencanangkan penggunaan Jalan ketiga, Republik Ceko sudah memperingatkan negara – negara Eropa Barat dan AS. Ditilik dari sejarah Cekoslovakia di tahun 1960an, negara bekas komunis ini mencoba menerapkan penggabungan antara sosialisme dengan kapitalisme. Sosialisme diterapkan dengan alasan kemanusian dan pemerataan kesejahteraan dan sementara Kapitalisme diterapkan dengan alasan mengejar ketertinggalan ekonomi. Tidak lama kemudian, intervensi pemerintah dalam ekonomi pasar ternyata virus bagi negara Cekoslovakia. Hal inilah yang tidak dipelajari oleh AS.
Selain itu, jauh sebelum terjadinya krisis di AS, ekonom di Austria telah memikirkan hal ini. Austria melakukan tindakan yang sama sekali bertentangan dengan kebijakan anti-ekonomi pasar ala AS. Langkah yang diambil oleh Austria adalah mempermudah regulasi bisnis terutama regulasi pasar tenaga kerja. Selain itu, Austria mempermudah realokasi sumber daya manusia dari satu entitas ke entitas lain. Austria tidak langsung mengintervensi pasar seperti yang dilakukan AS. Ketika ekonomi riil kelihatan kokoh dan mantap, maka pasar finansial tidak akan panik seperti sekarang ini.

Bukan Kegagalan Kapitalisme
Jika kita belajar dari sejarah panjang krisis finansial yang melanda negara adidaya seperti AS dan Eropa Barat, langkah apa yang harus ditempuh oleh pemerintah Indonesia? Ekonomi syariah ataupun ekonomi kerakyatan yang terus dikumandangkan beberapa schollars dari Indonesia mungkin dapat menjadi langkah alternatif.
Jika belajar dari situasi ekonomi AS, kita bisa memetik satu hal penting disini yakni: krisis finansial yang melanda AS bukan diakibatkan sebuah penerapan kapitalisme murni melainkan kapitalisme yang terlalu banyak intervensi pemerintah. Krisis finansial AS yang sedang terjadi di sepanjang tahun 2008 ini bukan pula bukti atas kegagalan kapitalisme. Lebih tepat lagi, krisis finansial AS sekarang diakibatkan oleh penyanjungan kita atas sisi humanisme dalam sosialisme.

*Kandidat PhD di USM Malaysia dan
Pendiri Financial Market Community
Unpad

It’s written by Robert J Shiller. I am reading his book (Irrational Exuberance) now.  It is a very good book. It also helped my PhD thesis. I just knew this book from my phd friend who will have his Viva next month, namely Gary rangel.

Briefly, I can say this book is good. I will resume the book and post it here. Just wait for it.

Regards,

Rayenda Brahmana

Origin of the Term

The term “irrational exuberance” derives from some words that Alan Greenspan, chairman of the Federal Reserve Board in Washington, used in a black-tie dinner speech entitled ” The Challenge of Central Banking in a Democratic Society” before the American Enterprise Institute at the Washington Hilton Hotel December 5, 1996. Fourteen pages into this long speech, which was televised live on C-SPAN, he posed a rhetorical question: “But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?” He added that “We as central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy, its production, jobs and price stability.”

Immediately after he said this, the stock market in Tokyo, which was open as he gave this speech, fell sharply, and closed down 3%. Hong Kong fell 3%. Then markets in Frankfurt and London fell 4%. The stock market in the US fell 2% at the open of trade. The strong reaction of the markets to Greenspan’s seemingly harmless question was widely noted, and made the term irrational exuberance famous. It would seem to make no sense for markets to react all over the world to a question casually thrown out in the middle of a dinner speech.

Greenspan probably learned once more from this experience how carefully someone in his position has to choose words. As far as I can determine, Greenspan apparently never actively used the words “irrational exuberance” again in any public venue. The stock market drops around the world that occurred after his speech on December 6, 1996 have all been forgotten, eclipsed by bigger subsequent events, but it was those stock market drops that focused public attention on the phrase irrational exuberance and which caused it to enter our language.

The term irrational exuberance became Greenspan’s most famous quote, out of all the millions of words he has uttered publicly. The term “irrational exuberance” is now often used to describe a heightened state of speculative fervor. It is less strong than other colorful terms such as “speculative mania” or “speculative orgy” which discredit themselves as overstating the case. I chose this phrase as the title for my book because many people know instantly from this title what this book is about. Often people ask me whether I coined the term irrational exuberance, since I (along with my colleague John Campbell and a number of others) testified before Greenspan and the Federal Reserve Board only two days earlier, on December 3, 1996, and I had lunch with Greenspan on that day. I did testify that markets were irrational. But, I feel sure that I am not the origin of the words irrational exuberance.

Actually, Greenspan is quoted in a Fortune Magazine article in March 1959, long before he became Federal Reserve chairman, about “over-exuberance” of the financial community. These are similar words. It appears that “irrational exuberance” are Greenspan’s own words, and not a speech writer’s.

In his 2007 autobiography, The Age of Turbulence: Adventures in a New World Greenspan said “The concept of irrational exuberance came to me in the bathtub one morning as I was writing a speech.” (p. 176.) A computer search finds that the phrase “irrational exuberance” had virtually never been used before Alan Greenspan. It has been pointed out to me that the words “irrational exuberance” were used in a 1989 novel A Trap for Fools by Amanda Cross, E. P. Dutton, NY, Chapter 8, p. 99, “. . . she didn’t just tumble out of that window in a moment of irrational exuberance,” but this was a very rare exception. But, the term did not spring full-born from the soul of Alan Greenspan either, for there were already common uses of the words individually to refer to speculative market excess. As early as 1931, Frederick Louis Allen, in his best seller Only Yesterday: An Informal History of the 1920s described “the profound psychological reaction from the exuberance of 1929.” (p. 285).

Two years before Greenspan’s speech, an editorial in Business Marketing by Rance Craine contained the paragraph “The stock market has been behaving in a seemingly irrational way most of the year. Every time the Commerce Department puts out fresh data showing that the economy continues to strengthen, the stock market goes down in a dramatic fashion. And when retail or car sales go down, or factory orders slow from the previous month, the stock market can hardly contain its exuberance.” I believe that there is nothing essentially catchy about the phrase “Irrational Exuberance,” but it lives on because the initial 1996 story of a stock market crash by nothing more than the utterance of those words led to a general interest in the phrase. The phrase survives in our language as more than a relic of one minor stock market episode because it has acquired a meaning that refers to the mindset that occurs during speculative bubbles like that of the 1990s.

Robert J. Shiller

http://www.irrationalexuberance.com/definition.htm

Rayenda Brahmana

This afternoon (9 April 2009) I went to a talk show that held by School of Management, University of Science Malaysia. It discussed about Sukuk or Islamic Bond. The speaker was Muhammad Zahid Abdul Aziz, an expert in Islamic Finance. Muhammad Zahid Abdul Aziz is the Director and Owner of Muamalat Financial Consulting Sdn Bhd. His career started as an auditor and investment banker. Nowadays, he and his company are well known as consultant in underwriting of Islamic Finance product.

The seminar is fairly shocking. As a person who does not know much about Islamic finance, I got new information. First phase, he described about Islamic finance and Sukuk. I just knew that Islamic Bond (Sukuk) already established in Germany, China, and Japan. Then, he described the current state of play in Middle East (because he worked there for many years).

Islamic Capital Market, itself, is not a new object in finance. It already established around 40 years ago. Thus, it was forgotten. Islamic Capital Market is a market that the transaction, operation, and services comply with Islamic rules.

Islamic Capital Market has to be free from 4 main items, which are (1) activities prohibited by Islam, (2) Usury or Riba, (3) Gambling or Maysir, and (4) Ambiguity or Ghahar.

First, there are lot of sukuk types. Because Sukuk is lay on one of Islamic Instruments and indeed can be structured in different techniques. There are Sukuk Salam, Sukuk Istisna, Sukuk Mudharaba, Sukuk Musharaka, etc. In Malaysia, as presented by the speaker today, there are Sukuk Isthimar (Investment), Sukuk Ijarah (leasing), and Sukuk Musharaka (Joint Venture).

Sukuk Ijarah is based on Ijarah concept. Ijarah in conventional finance is leasing. It means selling benefit or to use or service for a fixed price. Sukuk Ijarah is issued to finance the Ijarah transaction.

There are also Sukuk that based on Musharaka. This sukuk was very well known in Islamic Finance until February 2008. As we all know, the investor is always conservative; thus wants higher return. This kind of investor who always plays in conventional finance does not want to have risk sharing. Then scholars found a new way to attract investor. Scholars were re-engineering the sukuk musharaka to find the fixed rate and of course still in the Islamic Finance path. Scholars added LIBOR as another gain that investor can get. The latter, this situation creates debates.

As I note from the speaker, all the transaction involves agents and SPV (special purpose vehicle). The reason is to avoid debt trading. Further, the interest rate that applied in Sukuk is based on Internal Rate of Return. Actually, I want to ask about IRR but due to time I could ask him today. In my point of view, IRR is a concept of Time Value of Money including uncertainty (Ghahar) and of course, Riba. I do really want to know about the IRR concept in Sukuk.

The main point is every transaction in Islamic Finance has to follow Islamic Rules. It is also applied in Sukuk. The basic and important “criteria” in Sukuk are (a) asset must be clearly owned by sukukholders, (b) Objection in debt trading, (c) Not allowed to restructure bank facilities, (d) not permissible to structure Price undertaking (including taking collateral).

The seminar was not only talking about Sukuk, but also about Islamic Money Market products. It discussed Islamic Medium Term note (IMTN) and Commercial Paper (ICP). IMTN, similar with conventional MTN, has maturity from 1 up to 7 years. It based on Murabahah. FYI, Murabahah is a concept where the sale of goods at a price which includes a profit margin agreed to by both parties. IMTN is almost similar with rent-to-own agreement. IMTN has to be private placement basis. In other hand, ICP has to be tender and underwritten basis. It has less than one year maturity. ICP is also based on Murabahah.

Information that I can also “extract” in the seminar was about the Credit Card. Islamic card must based on Bai Al – Inah. Bai Al-Inah is sale and buy-back agreement. The most shocking information that I can acquire in the seminar is “Islamic Finance is part of Islamic Economics. Islamic Economics can run well if the country also applies Islamic Law. Thus, the problem is….Not every Islamic Country applies good Islam Law due to politics, even in Middle East”. Then, I remembered with a proposal defense in School of Management by Fareed M Alyagout from Saudi Arabia. Fareed told the examiner that in business, Saudi Arabia applies different business law. Saudi Arabia has two courts to intermediate business problems. One court is adopted from UK law and another one indeed applies Islam Law. Thus, in Business, in Saudi Arabia, They are more comfortable to use International Law which adopted from UK.

Penang, 9 April 2009

Rayenda Brahmana

My MSc dissertation is about Market Efficiency. It discussed the level of weak form market efficiency in South East Asia (Singapore, Malaysia, Indonesia, and Thailand). The purpose is to examine which stock market has better form in term of weak level of efficiency. I conducted R/S analysis, ACF, Probability Distribution, and GARCH (1,1) as the statistical tools to investigate the weak form efficiency. Market Efficiency is an old topic but still discussed ‘til today.

Ironically, some lecturers (not in USM or UoB) argue this topic should not be discussed further. They also argue market efficiency is not an interesting topic to discuss. They prohibit their supervisee researching about market efficiency which is a very idiotic way in learning process. If they prohibit investigating further about market efficiency, why don’t they stop discussing about capitalism or accounting?

Several students ask me about market efficiency and I just knew their lecturer do not teach them about market efficiency and just skip that section because the lecturers think market efficiency is out-of-date topic.

The latter, I will not debate about the importance of market efficiency issue in finance. I prefer to give a brief of market efficiency for those students. Hopefully, my short explanation can inspire them to dig further about market efficiency.

In 1900, Bachelier surprised finance world with his Ph.D thesis. He found Brownian motion in share prices, implying that share prices move randomly and does not follow systematic pattern. Then, in 1933, Cowels did the same research and found the same result that supported Bachlier’s work.

After the Brownian motion in stock trading found in the early 19^th century, finance as a science converges to investigate the caused. Several scholars ended their conclusion that the caused of the Brownian motion in stock is market efficiency. This market efficiency usually measured by the speediness of stock reaction to newly information.

Further, Kendall and Hill (1953) attempted to study share prices behavior changes. Kendall found that knowledge of historical price changes yield none of information about future price changes and in speculative markets, history does not repeat itself.

Working (1934) and Alexander (1961) findings were consistent to Kendall works. Working (1934) argued that a series obtained by cumulating random numbers will for brevity and simplicity be called usually a random-differences series, since it is the first difference of the series an not the series itself, which are random number.

Alexander (1961) quoting the study of Kendall (1953) and Osborne (1959) stated that in an efficient speculative market, the price movements are random. Further, Guru of fractal analysis in finance, Benoit Mandelbrot, in 1966 presented the Martingale Model, implying that price series may not be random but its unbiased property does not allow the traders to exploit price dependences to secure super normal movements. Then, Smidt (1968), LeRoy (1989), and Roll (1994) observed the random walk hypothesis by using the Martingale Model and found it is remarkably hard to make profit even from the most extreme violations of stock market efficiency.

Cootner (1962) inferred that price movements in speculative markets are random and the returns tend to be significantly leptokurtic. Then Fama (1966) in his discussion paper stated that the returns are more skewed and the kurtosis. Stevensson and Bear (1970) also found the leptokurtic distribution of Soya Beans and Corns of CME.

Evans findings (1968), which conducted price movement study of 470 securities listed in S&P index of 1958-1967, state there is irrespective of the randomness or form characterizing the empirical distribution of security price changes. Further he found that although some degree of non-randomness exists in the distribution of security price changes, it is not of a magnitude that should be considered meaningful to investor dealing with portfolio of securities.

The peak of random walk booming was occurred when Fama in 1970 stated the efficient market hypothesis and classified the informational efficiency in three categories: weak form efficiency, semi-strong efficiency, and strong efficiency.

Eugene Fama in 1970, broke down the EMH into three forms, which are:

Weak Form Efficiency

The Information set considered includes only past information. The characteristics of this form are:

<!–[if !supportLists]–>a. <!–[endif]–>No excess returns can be earned by using the investment strategies based on historical share prices or other financial data

<!–[if !supportLists]–>b.<!–[endif]–>Technical Analysis will not be able to consistently produce excess returns

<!–[if !supportLists]–>c. <!–[endif]–>Fundamental analysis can be used to identify undervalue stocks and overvalue stocks.

Semi-strong Efficiency

The information set considered includes all publicly available information. The characteristics of this form are:

a. There will no excess return can be earned from publicly information

b. Fundamental Analysis techniques will not be able to reliably produce excess returns

c. All investor has the same interpretation of publicly information.

Strong Efficiency

The information set includes all information, whether publicly available or not. The characteristics are:

1. Share prices reflect all information and no one can earn excess returns
2. Strong efficiency market will be impossible if there are legal barriers to private information becoming public
3. Investors can not consistently earn excess returns over a long period.

This market efficiency topic has very long debates until today. Many researchers debate the market efficiency theory and give the contrary results which are:

1. Post Earning Announcement (Ball and Brown, 1968)
2. Market Microstructure (Bagerhot, 1971)
3. Growth Vs Value (Basu, 1977)
4. Excessive Volatility and Volume (Shiller, 1981)
5. Small Firm Effect (Banz, 1981)
6. Long Term Price Reversal (DeBondt and Thaler, 1985)
7. Equity Risk Premium ( Mehra and Prescott, 1985)
8. Market Puzzle (Ritter,1991)
9. Momentum Anomalies (Jegadeesh and Titman, 1993)
10. Accrual Economy (Sloan,1996)
11. Home Bias Puzzle (Hubermann, 2001)

In modern theory, an efficient market is not only created by the adjustment acceleration to the new information but also how the market fully reflected of all available information (Fama, 1991). A more rigorous definition is a market is said to be efficient with respect to particular information set, if it is not possible to generate excess return on the basis of trading on the information.

Thus, market efficiency topic is still an interesting topic to discuss. The psychology effect (behavioral finance) in traders’ decision making is also market efficiency topic (Kahneman and Tversk, 1979; Lo and Repin, 2001; Barbaris, Huang, and Thaler, 2006).

As the conclusion, even though market efficiency has started in the beginning of 20^th century, it is an interesting to investigate it further; mainly, in this current financial crisis. Happy researching!

Rayenda Brahmana

As Requested to make the bachelor degree’s lecture material

The fact is my PhD topic is not about risk management, it is about valuation. I have been called to make a brief about risk measurement. Fyi, I do not have any experience in teaching or lecturing. I do not know where and how to start, especially, when they gave me a very specific topic about risk measurement. At least, I remember what my teacher in high school told me, “A Loser says: It looks easy, but it is impossible. A winner says: it looks difficult, but it still possible.”. So, I just tried my best and sketched the taught that passed by in my head. Then, I made mind mapping, and I want to describe and write my mind mapping. This is the result……….

Theoretically, risk can be defined as a model about the precise of probability. It is about the possibility of suffering loss. It means Risk concept, statistically, is a model of dispersion. Dispersion, itself, can be defined as variability in a probability distribution. The measurements of dispersion are (i) Standard Deviation, (ii) Interquartile range, (iii) Range, (iv) Mean difference, (v) Median Absolute Deviation, (vi) Average absolute deviation, (vii) Covariance, etc

In finance, everything about risk is must be closely related to volatility. Before you learn what volatility is, you have to know about Normal Distribution. Because risk is defined as the possibility of suffering loss, it means there is dispersion from normal condition. Perhaps, the most important distribution which represents adequately many random processes is Normal Distribution. If the set of events disperse from the normal distribution, it can be identified as the occurrence of risk.

Dispersion model, which proxy by Standard Deviation, also can be applied in finance. To measure the risk of stock price can use volatility. The proxy of volatility is standard deviation. So, to know how much the risk of the stock that you choose is, you can just model it from the standard deviation of the stock returns.

In finance, this dispersion model concept is applied to measure financial risk such as market risk, credit risk, and liquidity risk. Of course, according to Jorion (2006) there is another risk which is Operational Risk. Operational risk is more about insurance, mitigation, and contingency. Before we hop to financial risk, maybe I should explain in brief about operational risk.

Operational Risk is a risk arising from execution of a company’s operation. It includes the fraud risk, litigation risk, environmental risk, and contingency risk. Many cases shows that operational risk is one of the important risk that have to be managed by companies. Indorayon Case in Indonesia shows how environment and contingency risk play important role for company going concern. Other cases are Allied Irish Bank (2002), Natwest (1997), Morgan Grenfell Asset Management (1991), Sumitomo (1996), Daiwa (1995), Barings (1995), and Bankers Trust (1995). These cases show how the failure of supervision which created rogue traders and internal fraud cause problems to companies. The failure of supervision is the part of operational risk. Operational risk can create financial distress or default. Then, to indicate the financial distress or default, we can use Z-Score of Altman.

Back to market risk, credit risk, and liquidity risk. Market risk is the risk inherent to the entire market or entire market segment. It can not be reduced by diversification. It is also called un-diversifiable risk. There are four standard of market risk which are: (i) equity risk (occurs in stock prices changing), (ii) commodity risk (occurs when commodity prices change), (iii) currency risk (occurs in forex changes), and (iv) interest rate risk (occurs in interest rate changes). The changes can be measured also by standard deviation or variance.

Theoretically, primarily to measure market risk is by using Value at Risk (VaR). VaR attempts to quantify the risk of losses DUE MOVEMENTS in financial market variables. Standard Deviation or Variance is a measurement of dispersion only. But the concept of standard deviation will be brought to VaR model.

VaR quantifies the risk losses probabilities in certain confidence level such as 99% or 95%. The result of VaR will be not a notional amount such as percentage of probability of losses. But VaR will give “managers” the nominal amount in certain level of significance.

Jorion (2006) addresses the chronology of the Evolution of Analytical Risk Management Tools, which is:

1938 Bond duration

1952 Markowitz mean-variance framework

1963 Sharpe’s capital asset pricing model

1966 Multiple factor models

1973 Black-Scholes option pricing model,“Greeks”

1988 Risk-weighted assets for banks

1993 Value at Risk

1994 RiskMetrics

1997 CreditMetrics,CreditRisk+

1998 Integration of credit and market risk

1998 Risk budgeting

Credit risk is the risk of loss due to a debtor’s non-payment of a loan, or interest of the credit. In the past, the measurement of credit risk was done by credit officer professional judgment. It is very hard to measure the credit risk contribution at overall level. Nowadays, credit risk can be measured in several ways such as Distribution, Expected Credit Loss, Worst Credit Loss, Marginal Contribution to Risk, and Remuneration of Capital.

Liquidity Risk is including asset liquidity and financing liquidity. Asset liquidity is related to how quick the asset can be traded. Financing liquidity or funding liquidity is related to liabilities such as the inability to pay the liability in maturity date, etc. So, liquidity risk can be defined as the risk that an asset can be traded quickly enough in the market to acquire require returns or to prevent a loss.

In finance, there are also two important variables in risk measurement, which are beta and correlation. As we know, in portfolio management, beta is the concept that explaining how the expected return of a stock or a portfolio is correlated to the return of the market as a whole.

Beta is a combination of volatility and correlation. For example, if one stock has low volatility and high correlation, and the other stock has low correlation and high volatility, beta can decide which is more “risky”. In other words, beta sets a floor on volatility. For example, if market volatility is 10%, any stock with a beta of 1 must have volatility of at least 10%.

Another way of distinguishing between beta and correlation is to think about direction and magnitude. If the market is always up 10% and a stock is always up 20%, the correlation is one (correlation measures direction, not magnitude). However, beta takes into account both direction and magnitude, so in the same example the beta would be 2 (the stock is up twice as much as the market).

In the end, briefly, in risk measurement, normal distribution concept is very important. Many models in risk management established from this concept. To learn more about risk measurement is to learn more about normal distribution concept. Happy studying!

Beta is familiar term in finance. If I may define it, beta is a correlation measurement of the volatility or systematic risk, of a stock or portfolio and the market as the whole. Usually, it is used in the Capital Asset Pricing Model.

Now, I will not explain about CAPM, APT, or the ability of beta. But, it is more about which beta will we use, especially in valuation. Actually, this hand-writing will be my answer to my supervisor tomorrow. He asked me, why I have to modified “the beta”. And this is my answer… (will be approximately like this)

It is started from three papers that I read. First is the paper of Pereiro (2004). Pereiro (2004) addresses that In emerging markets, it will be wrong valuation model if using the same beta calculation as the developed countries. Pereiro showed evidences of the comparison of US and Latin America. The result, shown by Pereiro, is there will a bias result and overestimation in valuation. Pereiro (2004) offers that beta should be modified if we want to valuate the emerging markets equities.

Further, Fernandez (2004) addressed the common error in valuation that analyst usually does. Fernandez paper, 80 common errors in company valuation, is my favorite! (Even, I plan to resume and put the resume to this blog!). Fernandez mentioned how analyst used wrong beta in valuation. The common errors which commonly happened are (a) Use the historical industry beta, or the average of the betas of similar companies, when the result goes against common sense; (b) Using the historical beta of the company when the result goes against common sense; (c) Assuming that the beta calculated from historical data captures the country risk; (d) Using the wrong formulae to lever and unlever the beta; (e) Arguing that the best estimation of the beta of an emerging market company is the company’s beta with respect to the S&P 500; (f) When valuing an acquisition, us ing the beta of the acquiring company.

Lastly, as my back-up is Mishra and O’Brien (2005) paper about Cost of Equity in Emerging Markets. Mishra and O’Brien examine the relationship of ex-ante cost of equity and risk of individual stock in Emerging markets. Further, Mishra and O’Brien argue that global investor for emerging countries should notice that global beta appears to be explanatory power. Further, for global beta offers some additional explanatory power for emerging market stocks that permit significant international investment, while local beta offers additional explanatory power for stocks that are more restricted in terms of international investment.

So, based on these main articles, I have to modify my beta for my DCF and RIV model. I do not need beta for multiple screening. I follow Fernandez rules when I want to find the fair value. Not only in beta, also in cost of equity, risk-free rate, risk premium, and the dirty surplus accounting.

(……not finished yet. But I have to finish my data processing for tomorrow meeting.To be continued)

Anyway, my PhD thesis is about the alternative way to measure efficiency by valuation. So, in certain efficiency level, we will know which valuation model work better than others. Wish me luck!

By: Rayenda K Brahmana

Around 30 state-owned enterprises (SOE or BUMN and BUMD) are ready to go public. Going public is the process of selling shares to new investor for the first time in Stock Exchange. In finance, going public means two things, fresh money and increasing value. We are not going further by discussing about IPOs related issues such as underpricing, cyclical behavior in volume and initial returns, or poor long run performance that addressed by Ritter (1991), Levi (1993), Lougharn and Ritter (1995), and Brav and Gompers (1997). We will just discuss about the study case of privatization in Indonesia

Commonly, there are three main methods of privatization which are: (a) Asset Sale Privatization (ASP), (b) Voucher Privatization (VP), and (c) Share Issue Privatization (SIP). ASP is a privatization method by doing strategic sales. Usually, ASP conducts auction or Treuhand Model. VP is a method by discounted the price largely. SIP is the common method where shares are sold on the stock market.

Further, there is no evidence about the first privatized company. Ancient Greece and Roman Empire did privatization during their era. Some also believe that during mercantilism era, privatization was also conducted. The first modern privatization is British Steel in 1950s by Churchil. Then, in 1961, West Germany, for their politic-economic motives, privatized Volkswagen. The first boom of privatization was conducted by Thatcher in 1970s. Thatcher privatized British Aerospace, British Telecom, Roll Royce, British Leylands, etc. Indonesia started privatization in 1992 . The first privatized SOE is Semen Gresik. Starting from early 1980s until today; privatization has become a new face of economic policy.

30s Indonesia SOEs which will be privatized are including the big-sized companies are: Pembangunan Perumahan (30% of ownership), Waskita Karya (35%), Bank Tabungan Negara (30%), Krakatau Steel (49%), PTPN III (30%), PTPN IV (30%), PTPN VII (30%), Asuransi Jasa Indonesia (30%), PT Rekayasa Industri, Rukindo, Bahtera Adiguna, Industri Sandang, Sarana Karya, Cambrics Primissima, Industri Gelas, etc. Some of the SOEs will be divested which are Semen Kupang and Semen Baturaja. Meanwhile, the privatization of giant SOEs such as PLN, Pertamina, Merpati, and Garuda are still just issues without obvious information.

In Indonesia, privatization is a very sensitive issue. It is more about nationalism talks than economic discussion. Especially, after former president Megawati sold Indosat to Temasek. Many scholars were suspicious in that time. Indosat, which good in firm size, normal in dispersion of ROA, and very healthy, was sold for bizarre purpose.

Many scholars already proved the importance of privatization. Buckland and Fraser (2000) showed the evidence of abnormal return of UK water industry after being privatized. Gupta (2001) stated that even government sales minority share of SOEs, it can improve performance. Janes et al (2003) addressed how Estonian SOEs has performance improvement after privatization. The performance improvement of privatized SOEs is also occurred in East Africa (Ranja, 2004), and Nigeria (Tanko, 2004). The latest paper about privatization which addressed by Wolf and Pollit (2008) also showed the performance improvement of Oil Companies. Thus, Florio and Grasseni (2004) argue that privatization only has small impact in long term productivity trends.

Is it very important to be privatized? I found interesting article that written by Michael Kirby. He concludes that after Australia went privatized the wheat sector, Australia has lost their control in wheat export. Chowdury (2006) expressed the relationship between corruption and privatization. Indeed, many scholars are suspicious that the privatization in Russia and Latin America are indicating of corruption in the process of privatization. Please, do not forget Indosat case. Indosat, the second largest telco in Indonesia, also at that time still has competitive advantage, must be sold to STT very cheaply. Qtel already bought Indosat from STT 3 time higher than the price Indonesia sold.

Indeed, the dividend that received by Government (who controlled 14.29%) are also increasing (2002-Rp48Billion; 2003-Rp867Billion; 2004-Rp233Billion; 2005-Rp232Billion; 2006-Rp201Billion; 2007-Rp292Billion). Thus, fyi, every healthy companies which is injected by working capital should perform the same result, an increasing value. At least that’s what I learnt in Private Equity class and Security Analysis Class. Wanna me to prove it?

Is it very important to be privatized? I will answer it NO. China already proved that privatization is not the only answer. China had 127 thousands of SOEs. Then, they restructured SOEs to be more efficient. The junk SOEs was sold. Nordic Countries also already proved by having large public sectors, the SOEs are still efficient and effective. The Nordic Countries SOEs also can generate sustainability income. Do not forget to mention that Nordic countries are famous for their low corruption. Then, why does Indonesia still want to privatize SOEs with good shape in financial performance? Why does Indonesia still want to privatize SOEs which has competitive advantage?

Garuda Indonesia for example; Is it important to privatize the only premium class airplane in Indonesia? Garuda Indonesia just needs a better management. The privatization plan for PTPN (National Plantation) is weird for me. The ROA PTPN IV is 13.25%. It is almost similar to Lonsum which has 14% ROA. Of course, if we compare with Astra Agro Lestari which has around 27% ROA, PTPN IV’s ROA seem very low. This is indicating that the management can not utilize the asset to create more profit. Then, why does PTPN IV need more financing if they still can not manage their asset? Why PTPN IV wants to go public? For marketing reason? For transparency? Stock Exchange is the media for financing, not for putting ads.

Actually, there are several things that Government can do before put all SOEs on Sale. Firstly, check the SOEs is a junk corporation or not? There are 8 parameters for it, which are: (1) the competitive advantage, (2) dispersion of ROA, (3) firm-size, (4) Productivity Output, (5) Current Ratio, (6) Debt Ratio, (7) Risk Factors, and (8) Financial Sustainability. Selling healthy SOEs just because of to cover Government expenditure is a stupid answer.

Government also can give incentives to SOEs or make a good regulatory for SOEs. I like how Sugiharto managed SOE by CSR, restructuring, and improving GCG (although some scholars told me that he also put privatization foundation).

Government also can push SOEs to be more transparent, not only the financial performance, but also the social performance (starting from recruitment process until CSR implementation). If the SOEs are difficult in financing, selling shares in stock exchange is not the only solution. Government should help SOEs in financing by establishing a better system and infrastructures.

Privatization is the other method to improve performance. But it does not mean as the only solution. Restructuring, better regulation, better financing, and improving internal control can be the method to improve performance. Please, do not sell SOEs for absurd reason. Please do not sell SOEs for short term personal interest.

P.S : This note does not mean the author is anti-privatization. But, the author is rejecting if Government keep trying to sell healthy SOEs

Fundamental Vs Technical

By: Rayenda K Brahmana

Can we use it both? Yes! Which one is the best? Hm… Is it that hard to answer that question? Actually no! So, which one is the best? Hm…

Okay. In security analysis, there are two main valuations which are Fundamental and Technical. Technical analysis is a security analysis tool to predict the direction of security prices by its volume and historical prices. Meanwhile, fundamental analysis is a security analysis that claims ability to find the fair value of the firm. The question is still the same. Which one is the best?

Okay. Before showing which one is the best, here is the history of technical and fundamental. Technical analysis has been used since 1700s. Homma Munehisa, a rice merchant from Japan, is believed as the founder of candlestick chart. Further, Charles Dow is believed as the founder of modern technical analysis. If you love security analysis, Dow Theory must be remembered by you. Another technical developer is Ralp Elliot and William Delbert Gann.

In other hand, it is very hard to find when the first fundamental analysis had been conducted. The first merger occurred after the depression of 1883. In that time The Great Merger Movement was a predominantly U.S. business phenomenon that happened from 1895 to 1905. During this time, small firms consolidated with similar firms to form large. Even though in that time, there are no DDM, DCF, or other models, maybe the fundamental analysis is firstly used during the Merger Movement. Thus, DDM, DCF, RIC, and other models are introduced in 20^th and 21^st century.

Okay. Which one is the best? Hm…Before answering that question, I will introduce you to another important finding in finance area which is known as market efficiency. In 1900, Louis Bachelier, a French mathematician, found a Brownian motion in US stock prices. Then, in 1933, Cowels did the same research and found the same result that supported Bachelier’s work. Then, in 1970, Fama introduced the Efficient Market Hypothesis and classified the informational efficiency in three categories: weak form efficiency, semi-strong efficiency, and strong efficiency. In weak form efficiency, technical analysis can not beat the market frequently. If the market moves more efficiently to semi-strong efficiency, the fundamental analysis can not beat the market frequently. Does it mean fundamental analysis outperform technical analysis? Hm… Which one is the best?

Okay. Before answering the question, I will introduce to two strategies of investing, Passive Investing and Active Investing. Passive investing is a strategy that making time limitation ongoing buying and selling action. Passive investor has an intention of long-term appreciation. It’s also known as buy-and-hold strategy. Passive strategy must require good initial research and well diversified portfolio. Their main security analysis is fundamental analysis.

In other hand, active investing can be defined as an aggressive strategy where investor continuously monitors the market in order to develop profitable condition. Active investor use technical analysis as their security analysis. Thus, some times they use multiple screening as second opinion.

The facts show that the return of passive investing is outperforming the active investing. Another fact shows that active investing can not beat the market frequently. So, which one is the best? (I will put the table as soon as I know how to upload images).

Okay. Which one is the best? Hm… Before answering the question, I want to introduce several facts. (These are real facts. I got it when I was studying in UK in Dr. Ranko Jelic Class. After I know how to manage images, figures, and charts, I will put it all here. Promise you). First, Fundamental analysis beats market more frequently than technical analysis. Second, We must know the richest man in the world Warren Buffet. If I may add Peter Lynch who also fundamental believers. But from technical analysis? Hm….Hardly finds one who can beat Warren Buffet.

So, which one is the best? Fundamental or Technical? Hm…

RB