STATED OWNED COMPANIES PROSPECT AMIDST ECONOMIC SLOWDOWN

The impact of global crisis, which touched national economy had generated anxiety among BUMN managers. To anticipate problems, the Ministry of BUMN had taken the right step to ask target of dividend distribution amounting to Rp 37 trillion proposed in APBN State Budget 2014 be revised to Rp 32.4 trillion.

Depreciation of Rupiah value against USD and falling prices of some primary export commodities at the international market greatly affected performance of state owned companies do the dividends due for the state must be re evaluated.

So far the recommendations made by the Minister of BUMN Dahlan Iskan at the technical meeting of Commission VI of House and Master plan and budgeting of the Ministry of BUMN had serious response. In next year’s state budget dividend of 141 BUMN targeted at Rp 37 trillion was projected Rp 5.9 trillion from banks and Rp 31.1 trillion from other BUMN.

Proposal the Ministry of BUMN to revise dividend to Rp 32.4 trillion was in accordance with the range of Rp 30 trillion to Rp 33.5 trillion dividend once proposed at the internal coordinative meeting between the Ministry of BUMN and Ministry of Finance.

So far BUMN banks were know as the highest dividend payer to the state. To illustrate, BRI paid dividend to shareholders amounting to Rp 5.55 trillion or around 30% of total net profit of RP 18.5 trillion in 2012.

The BRI dividend posted increase of around 84.2% to become Ro 225.232 per share compared to previous year. The highest contributor of dividend next to banks was Pertamina.

Last year Pertamina who pocketed profit of Rp25.89 trillion set aside dividend for the State amounting to Rp 7.7 trillion, or an increase of around 6.5% against previous year.

Beside request for revision of BUMN dividend to the state, the meeting of BUMN Minister with the Parliament also discussed request for inclusion of state’s capital [PMN] to 5 BUMN. Unfortunately the request for PMN worth Rp 5.75 trillion was rejected by Commission VI of House. The reason was that House was afraid they would be called by the Corruption Eradication Commission [KPK] as the PMN was beyond proper procedure.

The Ministry of BUMN admitted that the proposal was set forth after the APBN-P Budget 2013 was discussed. Five BUMN which was enlisted as candidate receiver of PMN was PT Hutama Karya Rp 2 trillion, PT Bahana PUI around Rp250 billion, PT Krakatau Steel Rp956 billion, PT Geo Dipa Energy Rp 500 billion and State Assets Manager Company Rp 2 trillion.

BUMN’s measly capital was always the one problem that surfaced when discussion was on to question why state owned companies tend to be stationary. An example was Pertamina which took pride as the greatest contributor of dividend in this country was small in terms of capital investment compared to similar companies of other countries.

For comparison, an oil-gas company in Thailand possessed invested capital of not less than USD 100 billion, while Pertamina had only around USD 10 billion. So forget about Pertamina making huge expansions like acquiring an oil well abroad.

It was know that Pertamina’s ambition to buy assets abroad was high, but being handicapped by finance. To overcome capital shortage instantly was to hold back for a while payment of dividend to the state. So if company’s profit was concentrated to expand capital investment, company’s opportunity would be greater.

The problem was, would the Government be willing to receive less dividend? It was but a matter of agreement; would they wish to see the state company grow big, or just be content wih the existing capacity?

Not less important was to question capital need fir BUMN banks. The Government, in this case the Ministry of Finance and Ministry of BUMN must understand that the growing need for capital was needed by corporate banks where by to be able to compete at the regional forum.

In the banking industry, the higher the capital the better was bank’s capability in taking risk. As foreign banks were operating in Indonesia with strong capital support from their principal abroad if local banks did not do anything to increase their capital, soon or late they might have to accept defeat.

One of the pragmatic way to increase capital of corporate banks was by increasing profit portion held for capital strengthening which would result in reduced amount of dividend paid to the Government. This way was feasible depending on the collective decision made at the Annual Shareholders Meeting [RUPST].

It must be realized that the threat and challenges of BUMN banking was getting heavier; while having to compete against national banks they had to compete against foreign banks as well. Beside human competence, capital was not less important. Now competition was not in fighting for third party fund, but in rendering premium service to customers.

The growing tendency to increase BI rate in the past 3 months also increased bank’s funding and operational expenses. Naturally a condition as such increased burden of banks. The rational choice was that banks must give up Net Interest Margin [NIM] due to increase deposit interest and to hold on credit interest to minimize NPL potentials.

As footnote, credit guarantee for deposits in Rupiah currency in banks increased to 7%, Rupiah deposit in People’s Credit Banking [BPR] became 9.50% and forex deposits in banks became 1.50%. The percentage level of interest in banks was effective as per September 15, 2013 until January14, 2014.

The application of deposit guarantee interest was among others based on: Rupiah fixed deposit interest of one to three months tenure in some banks being surveyed by Deposit Insurance Body [LPS] which increased significantly [between 50-100 bps] in 2013 to September 2013.

Beside that the inter-bank Rupiah interest in the JIBOR money market through the period of August 2013 was showing highest increase in one month JIBOR interest of 73 basic points to become 6.49%.

In regard to stipulation of deposit insurance interest level, the Deposit Insurance Agency [LPS] was constantly observing the development of liquidity and bank interest. In case of significant change in economic condition, LPS was going to evaluate interest level. In accordance with LPS rules, if the interest of deposit being agreed between bank and customers exceeded insurance interest level, the customers’ deposit would not be guaranteed.

In regard to the above, banks were obliged to inform to depositor customers about the interest level in effect by placing the information in places accessible to customers.

Bank’s sacrifice to reduce NIM would certainly reduce net income, which would automatically lessen dividend. So it seemed reasonable if target of dividend payment be lowered considering the uncondusive economic condition.

So some sort of deal was agrees upon, for the sake of securing profit, banks in Indonesia were striving to maintain net profit margin [NIM] in the range of 5%-6%. With NIM of that size, banks could still maintain profit bay maintaining NPL ratio and CAR at safe level. Banks were also constantly trying to suppress operational cost against operational income [BOPO].

Business News - September 20, 2013