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SOEs promise higher dividends to help economy
State-owned companies have come to the rescue against the backdrop of a crashing domestic stock market and cash-strapped state budget by promising share buybacks and disburse higher dividends earlier to cushion the economic impacts of COVID-19
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span>State-owned companies have come to the rescue against the backdrop of a crashing domestic stock market and cash-strapped state budget by promising share buybacks and disburse higher dividends earlier to cushion the economic impacts of COVID-19.
All four state-owned banks have allocated larger dividends earlier than last year as the government struggles with low tax collection and the need to disburse more money to stimulate a cooling economy.
The country’s largest bank by assets, publicly listed Bank Rakyat Indonesia (BRI), announced in February its plan to distribute Rp 20.6 trillion (US$1.5 billion) in dividends to its shareholders this year. The dividends are equal to 60 percent of the bank’s profits in 2019, higher than its previous payout ratio of 50 percent.
Bank Mandiri also decided to give out bigger dividends this year, with plans to distribute Rp 16.49 trillion to shareholders. The figure is equal to 60 percent of the company’s total 2019 profit and also higher than the previous dividend payout ratio of 50 percent.
Bank Negara Indonesia (BNI) allocated Rp 3.85 trillion in dividends or 25 percent of the bank’s 2019 profit — the same as in the previous year. Bank Tabungan Negara (BTN) set aside Rp 20.9 billion in dividend payments this year.
Of these, the government will get Rp 11.8 trillion from BRI, Rp 9.89 trillion from Bank Mandiri, Rp 2.31 trillion from BNI and Rp 12.5 billion from BTN.
The payouts were announced in February while last year, they were made public in May.
Separately, coal miner PT Bukit Asam (PTBA), the subsidiary of state-owned mining holding company PT Indonesia Asahan Aluminium, has signaled it would maintain a high dividend payout ratio this year despite dwindling profit.
“The higher dividend payout is related to the government’s effort to increase nontax revenue to offset last year’s slowing tax revenue,” Institute on Development of Economics and Finance (Indef) economist Abra El Talattov told The Jakarta Post on Feb. 24.
The government has announced stimulus packages worth trillions of rupiah to help shield the country’s economy from the adverse impacts of the COVID-19 pandemic.
It unveiled a Rp 10.3 trillion stimulus package aimed at boosting domestic spending and tourism and later made public a second stimulus package that delayed import duties and corporate income tax payments for six months, as well as exempted workers in the manufacturing industry from paying income tax for six months.
However, the government collected only Rp 103.7 trillion in state revenue in January, down 4.6 percent from the same month last year.
According to Finance Minister Sri Mulyani Indrawati, the state budget deficit is expected to widen and pass the 1.76 percent level stipulated in the 2020 state budget as the government planned on implementing its stimulus packages.
However, she denied that the government demanded higher dividend payouts this year to help cover the deficit, saying that it had followed the 2020 state budget’s dividends target.
The state budget stipulates that state-owned firms must deposit a total of Rp 49 trillion in dividends this year, up 7.46 percent year-on-year.
“It will purely be the companies’ and the State-Owned Enterprises [SOEs] Ministry’s decision, not us [the Finance Ministry] as the ultimate shareholder,” Sri Mulyani told the press on Tuesday.
SOEs Minister Erick Thohir said on Feb. 21 that the ministry would cap the minimum dividend payout of profitable state firms to attract investors to their stocks.
Higher dividends may seem like a burden for SOEs, said Abra, but it would be the right thing to do.
“It can help create a stimulus for the real sectors,” he said.
However, he warned that the higher dividends could affect the liquidity of state-owned banks amid declining third-party funds.
At the same time, the SOEs Ministry stated that 12 state companies had allocated between Rp 7 trillion and Rp 8 trillion to buy their shares from the public as share prices had fallen during a market rout.
The Jakarta Composite Index (JCI) has plunged 22.28 percent so far this year, and trading on Thursday was suspended after plunging by more than 5 percent.
“Share buybacks are needed as share prices have fallen far below their book value,” Arya Sinulingga, an aide to Erick, told reporters on Tuesday.
