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Indonesia to ease dividend payment requirement for state firms

[JAKARTA] Indonesia's new government plans to allow state-owned firms to use their profits for capital expenditure instead of sharing it with the government in the form of dividends, cabinet ministers said.

President Joko Widodo's administration, which took over in late October, is likely to soon ease the dividend payment requirement for many of the 138 state-owned enterprises (SOEs) as long as the firms use the money to develop infrastructure or expand their business operations.

The new president, who is popular for his can-do image, wants an estimated US$450 billion by 2019 to fix the infrastructure bottlenecks that have long constrained growth in Southeast Asia's largest economy. "The performance of SOEs will not be based on their dividend payments or profits, but by their capital spending and the effect it has on development. This will be the new paradigm for SOEs," National Development Planning Chief Andrinof Chaniago told reporters late Thursday.

Some of the biggest firms in Indonesia are state owned, including biggest telco company PT Telekomunikasi Indonesia Tbk , toll-road operator PT Jasa Marga Tbk, airline carrier PT Garuda Indonesia Tbk and construction company PT Wijaya Karya Tbk.

Finance Minister Bambang Brodjenogoro said the ministry would support state companies using the earmarked dividends for investment, particularly for infrastructure projects.

State firms are expected to contribute 40 trillion rupiah (US$3.25 billion) in dividends this year, or 2.44 per cent of state revenue.