House wants SOEs to pay more dividends

Urip Hudiono, The Jakarta Post, Jakarta

The House of Representatives has asked the government to up its efforts to increase budget revenues from state companies, and ensure higher dividend payments next year.

The country's 139 state-owned enterprises (SOEs) should have the potential to pay dividends of up to Rp 22.2 trillion (US$2.4 billion) next year, the House finance commission said in an assessment delivered during a hearing Wednesday with Finance Minister Sri Mulyani Indrawati.

This is nearly 40 percent more than the Rp 16.2 trillion in SOE dividend payments that the government has proposed in its draft 2007 budget.

"Dividends from state firms should come to between Rp 21.8 trillion and Rp 22.2 trillion, with an average payout ratio of 50 percent," the chairman of the commission's working committee on SOE revenues, Asman Abnur, said in the report.

He said that all the necessary elements for increased dividend payments were in place, considering the fact that the net profits of the country's state firms would rise to an estimated Rp 47.7 trillion this year from Rp 40.8 trillion in 2004.

The bulk of this -- Rp 34.6 trillion out of the total after-tax profits made by SOEs in 2006 -- came from 10 state firms that are regularly the biggest dividend payers. They include state oil and gas company PT Pertamina, state-owned telco PT Telkom, and state lenders Bank Mandiri, Bank Negara Indonesia and Bank Rakyat Indonesia.

"Of course, this will still depend on how the government manages the revenues from the SOEs that are wholly commercial and those that still have public service obligations (PSOs), as well as those able to book profits or those that are still suffering from persistent losses," Asman said.

Elaborating further on the potential for higher dividend payments, he said the government should be able to take in at least Rp 11.1 trillion based on a minimum 25 percent payout ratio, and up to Rp 24.3 trillion based on a 54.75 percent payout ratio.

Even counting on only 34 SOEs that were certain to be profitable this year, the government's take would still come to between Rp 10.9 trillion and Rp 23.8 trillion.

The government had previously estimated and proposed to the commission a total of Rp 13.9 trillion in dividend payments for next year, before upping the figure to Rp 16.2 trillion in the draft 2007 budget, based on a recent assessment that SOE net profits were likely to rise to Rp 45 trillion from the earlier estimate of Rp 35 trillion.

This, however, still represents a 25 percent drop from this year's dividend payment forecast, which has been revised downward to Rp 21.7 trillion from an initial Rp 23.2 trillion.

Last year, dividend payments from SOEs amounted to Rp 12.8 trillion, which was slightly above the Rp 12 trillion target. The last five years have seen the SOE sector contributing between Rp 9 and 12 trillion per year to the treasury.

The government's lower forecast is based on its own assessment that there will be little improvement in SOE performance, with many state firms expected to continue to be mired in red ink or struggling to break even.

More hearings on the subject are slated for later this week.
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