House demand 50% Pertamina dividend to go to state budget, govt rejects

The House of Representatives on Tuesday decided that state oil and gas company Pertamina submit 50 percent of its net profits to the government, from the previous 10 percent, but the government remained stick to its stance that it would demand only 25 percent.

Chairman of the House's state budget committee Benny Pasaribu said that the hike in the dividend was necessary to provide more funding for government expenditures such as maintenance costs, teachers' wages, and for poverty eradication programs.

"There is no way (to fund these expenditures) other than to increase domestic earnings and minimize other expenditures ... otherwise we would have to request more foreign loans," he said on the sidelines of a hearing with Minister of Finance Boediono and Minister of Energy and Mineral Resources Purnomo Yusgiantoro on the 2002 state budget.

Pertamina has forecast a net profit of Rp 4.6 trillion (US$459.4 million) for next year. Last year it recorded Rp 4.98 trillion in net profits.

Other state-owned enterprises are required to pay between 45 percent and 50 percent to the government.

Legislators have questioned the large amount of retained earning kept by Pertamina, and the not-transparent use of the retained earning. They have speculated that it could be the source of corruption.

Benny admitted that the government may not be able to make a decision immediately on the proposal, but that he hoped it would eventually agree to the dividend increase.

Minister of Finance Boediono said that he would have to consult with other economic ministers before making the final decision.

He added that the government had initially proposed the hike to be 25 percent of Pertamina's net profits because that percentage was "the safest" to ensure the company's continuity.

The government has explained that 60 percent of Pertamina's operating profits of Rp 11.5 trillion last year was the government's portion of non-tax revenues.

An increase in the government's dividend portion would mean less money for Pertamina to conduct future expansion, increase production capacity, and finance projects such as exploration for new oil fields. (*)