An Adventure Capitalist’s Notes on Indonesia (Part II)
Indonesia’s middle class youth prefers the Blackberry as their mobile device, and I’ve never seen its penetration beat out the iPhone more than here. Every email we get from newly introduced friends seem to include something like “Sent from my BlackBerry® smartphone from Sinyal Bagus XL, Nyambung Teruuusss…!” in the footer. Of course Facebook integration is extremely important (one might say the killer app.) for these users, but Facebook on the iPhone is even more robust.
I confess, I am a Blackberry user myself on AsiaWheeling. The physical keypad makes typing quick and deliberate, and the speed of the OS means no waiting around for bells and whistles. But why does the Blackberry succeed when the iPhone has better haptic interaction, visual sensuality, and application extensibility? The Blackberry, first used by executives and bankers on Wall Street and in London, broadcast to onlookers that “I’m important, I’m connected to money, and people need to reach me to get their jobs done.”
Extending to fashonistas, tastemakers, and socialites, these Blackberries became a symbol of the snobbish cool yearned for by age groups as young as tweens and as old as the newly married. This, and the walled garden of Blackberry messenger, which allows only Blackberry users to communicate with each other, creates the ability for RIM to buy their way into groups of friends who are “cool.” It is this proximity to the business and social elite that makes the Blackberry a handset of choice over the iPhone, which is more utilitarian than it is social or businesslike.
While skinny jeans, plastic sunglasses, slip-on shoes, and white tank-tops are all relatively cheap and hip clothing, the Blackberry serves as the Accessory to broadcast wealth. In developing Asia, where a credit history is rare, but required for a post-paid Internet-enabled phone contract, the Blackberry even serves to say “I have assets, “I have an address”, and “I pay my bills.” That stability can go a long way.
To the partygoer, the Blackberry represents social sophistication. Ask a recent Ivy League graduate working in investment banking, and she’ll tell you that the Blackberry represents a ball and chain. Many would even argue that in the business arena, mobile email makes communication inherently unsophisticated.
Indonesia’s Banking Sector
In Indonesia, Woody and I both find ourselves comparing and contrasting the country to India. The differences seem to outweigh the similarities, but it makes for valuable assessment of data points as we move from city to city on Java.
One striking difference is the presence of foreign banks in Indonesia. Jakarta’s skyline features prominent HSBC, Standard Chartered, and Deutsche Bank skyscrapers, where Mumbai’s does not. Our bureau chief confirmed that regulations governing international banks are less stringent, with lower costs associated for operating permits. This no doubt helps fuel the culture of entrepreneurship that is seen in Indonesian and ethnic Chinese Indonesian industry, since credit is more widely available.
We also see in Indonesia corporations financing themselves primarily by these bank loans, as we see in Japan. This is unlike the U.S. where financing is dominated first by bond (trade-able debt) issuance, and second by public stock (trade-able equity) issuance. This seems to be a more appropriate stepping stone for a developing market, rather than rushing to illiquid bond or equity markets spoiled by abuse of insider information. In India, the Bombay Stock Exchange alone has 4,700 equity names listed, and the National Stock Exchange of India has 1,587, bringing the total to 6,287. With only 380 companies listed on the Indonesian Stock Exchange (formerly the Jakarta Stock Exchange), the sleeping tiger of Indonesia has a Nominal GDP per capita of USD $3,600, compared to $1,016 of India. Why a penchant for all this more costly and complex public issuance if the country isn’t better off?
While a much more rigorous argument with much deeper supporting data would be needed to do justice to this question, a first glance shows bank financing and private investment a more effective form of financing for medium-sized enterprises than small public share offerings resulting in illiquid markets and small float for those names. What are the forces at work here? What impetus could be given to Indian CFOs by regulators or markets for better results?
If you’re curious about all the financial regulatory factors that contribute to economic growth and development, pick up a copy of Ross Levine’s book, Rethinking Bank Regulation. A lot of people ask me why I’m interested in finance, and part of it is the power of insurance to prevent suicides, bonds to pave roads, and venture capital to enable the use solar energy.