Thursday, 5 February 2015


The Government’s discourse to reduce dividend payment for state-owned companies [BUMN] was widely acclaimed by BUMN, as they believed that the plan to expand business could be more aggressive.

World was out that BUMN was calculating the amount of BUMN dividend to the Government in the discussion of APBN-P 2015 with related ministries. In fact it was not elimination of dividend but rather reduction.

Dividend was out division of profit to shareholders of a company based on the amount of shares owned. The division would reduce profit held and the cash available to company, but distribution of profit was the main objective of business.

Dividend could be divided into four categories. Firstly, cash dividend which was the most commonplace for division of profit; paid in cash and tax imposed based on year of issuance. Secondly, share dividend, quite commonplace and paid in the form of additional shares usually calculated proportionally against the shares owned. To every 100 shares owned 5 extra shares were given. The method was like stock split because it was done by way adding the number of shares while reducing the value of share so as not to change market capitalization.

Fourthly, property dividend paid in the form of asset. This way of dividend distribution was seldom exercised. Fourtly, interim dividend, divided before closing of company’s book keeping.

Normally dividend distribution at regular interval, but sometimes there was additional dividend given not at usual time. Dividend would be given to shareholder only when the company made enough profit to play with and provided the Board of Directors deemed it worthwhile to announce profit.

Dividend was common stock to obtain part company’s profit. If the company decided to divide profit in the form of dividend all shareholders were entitled to the same right, but giving away of dividend for preference shareholder was prioritized.

The income expected by shareholders was fund from dividend distribution, where the company gave part of the profit to the shareholder. The dividend policy was inseparable part of company’s financial decision.

Dividend policy might be defined as decision whether the profit made by the company by year end would be distributed to shareholders or to kept as fund for investment financing in the future. Here is where the management of BUMN must stipulate the dividend payout ratio policy.

Dividend payout ratio was a certain percentage of income paid to shareholders as “cash dividend” in other words, dividend payout ratio was comparison between dividend per share and earning per share of the related period.

In the dividend-per share was the component of dividend, so the bigger the dividend the bigger the dividend payout ratio. The distribution of high dividend was not something undesirable to investors, but if the dividend payout ratio was above a certain percentage [like 25%] it was feared there would be liquidity problem in the company.

Reduction of dividend was reckoned applied to companies of high business potentials in the future, especially BUMN of the banking sector whose business structure was capital intensive. BUMN of the construction kind of business could build infra structure more aggressively, BUMN of the banking sector could have stronger capital and be competitive especially toward AEC era.

Referring to APBN 2015 the Government set target of Rp.44 trillion of BUMN dividend, which was higher compared to target of APBN-P 2014 at Rp.40 trillion. The dividend increase against that or 2012 and 2013 at Rp.34 trillion and Rp.30.8 trillion respectively.

Although increasing year after year, growth of divided was quite volatile. Dividend received for APBN 2015 state budget only increased by 10% of lower than that of APBN-P 2014 at 17.65% against that of 2013. Meanwhile the amount received in 2013 increased by 20.39% against 2012 which grew by 9.22%.

Target of BUMN dividend in 2015 varied. Pertamina was the biggest dividend payer at around Rp.9.6 trillion. Furthermore Telkom at Rp.5.2 trillion while Bank BRI and Mandiri Rp.4.4 trillion and Rp.3.1 trillion respectively.

Positive response from the Head of State. To enhance corporate act and play a part in national development, President Joko Widodo planned to write off dividend payment obligation to BUMN so they could execute programs more dynamically and progress well.

President Jokowi Widodo’s directives stems from his ambition to make BUMN gow big and spur on economic growth. The point was that not all BUMN were making any profit in business. President Joko Widodo believed that it would be more efficient if the dividend were kept by the BUMN so they could invest more on infra structure.

Naturally there were consequences if BUMN decided to reduce dividend portion; one of the solutions to compensate reduction of divided payment was through increasing income from tax, so BUMN dividend could be allocated to productive posts.

As told, next year the Government set target for Government income of Rp.1,793.6 trillion. The highest income was still from tax which came to Rp.1,201.7 trillion. Furthermore income from the Tax Dept and grant was Rp.178.3 trillion and Rp.3.3 trillion respectively while non tax income was quite significant i.e. Rp.410 trillion.

The only thing was that if the Government decided to reduce BUMN dividend, the BUMN Management must not lose zest to perform well to pursue profit. Knowing that there was no target to meet, BUMN Management might loose spirit to struggle as there was no obligation to fulfill.

So it was right indeed if the Minister of BUMN proposed to fire BUMN managers if they performed low. BUMN as agent profit and also agent of development must proof to the stakeholders that they deserve to hold the position in the company.

It was noteworthy that the Government there a discourse to inject extra capital to BUMN to develop the company. The capital could be the spearhead of national development. As BUMN with stronger capital stepped up their activity in business they could be in a better position to pay more tax.

In the future, the criteria for BUMN performance appraisal would not just be the amount of dividend and tax paid but to but to what extent do BUMN supported micro, small, and medium business [UMKM] how much do BUMN counsel small business and to what extend do BUMN execute Corporate Social responsibility [CSR]. (SS)

Business News - December 12, 2015

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