E. Java joins in to urge govt to scrap Gresik deal<\/p>\n
Berni K. Moestafa
\nand Dadan Wijaksana
\nThe Jakarta Post
\nJakarta<\/p>\n
The government may have lost its last bit of provincial support
\nfor the planned sale of PT Semen Gresik this year, as the
\ngovernor of East Java joined opposition in West Sumatra and South
\nSulawesi rejecting the sale of state-owned cement firms to
\nMexico's Cemex SA de CV.<\/p>\n
The governor of East Java, Imam Utomo, said on Tuesday he had
\nsent a letter to President Megawati Soekarnoputri urging the
\ngovernment to maintain a majority stake in Semen Gresik, which is
\nlocated in the province.<\/p>\n
\"But the point was that I wanted the government not to sell PT
\nSemen Gresik,\" he was quoted as saying by Antara.<\/p>\n
He said it was the second letter he had sent to the central
\ngovernment since last year, prompted by protesting Semen Gresik
\nemployees who rejected the sale.<\/p>\n
Some 500 Semen Gresik employees have threatened to go on
\nstrike if the government pursues its plan to sell its majority
\nstake in the firm.<\/p>\n
They joined forces with West Sumatra and South Sulawesi, where
\nSemen Gresik operates two major subsidiaries.<\/p>\n
The government planned to sell its 51 percent stake in the
\nSemen Gresik Group, a holding company comprising Semen Gresik, PT
\nSemen Padang in West Sumatra and PT Semen Tonasa in South
\nSulawesi.<\/p>\n
But the plan has been staunchly resisted by those with vested
\ninterests in it from West Sumatra and South Sulawesi. Local
\npolitical leaders insist that Semen Padang and Semen Tonasa
\nshould remain state firms without foreign investors to meddle.<\/p>\n
Last week the government unveiled a new plan, in which it
\nwould sell its remaining 51 percent stake in Semen Gresik and use
\nthe proceeds to buy back a majority stake in Semen Padang and
\nSemen Tonasa, leaving the two under national control.<\/p>\n
Cemex would still own 76 percent of Semen Gresik and a
\nminority stake in Semen Padang and Tonasa.<\/p>\n
But what was hoped to be a win-win solution has drawn fire
\nfrom certain West Sumatra leaders.<\/p>\n
Some legislators and informal leaders of the province called
\nthe new plan an insult to the province's pride, repeating demands
\nthat Semen Padang be spun off from Semen Gresik entirely.<\/p>\n
Protests also broke out in South Sulawesi.<\/p>\n
\"We'll obviously lose out in the sale. With the ownership in
\nthe hands of a foreign investor, we won't be able to control
\nanything,\" East Java governor Imam explained.<\/p>\n
The fiery demonstrations that occurred in West Sumatra and
\nSouth Sulawesi have not occurred in East Java.<\/p>\n
But, if the East Java population were to turn against the
\nplan, as in the other two areas, it would make it very difficult
\nfor the government to justify the sale, and the privatization
\nprogram could shatter and become fruitless, further alienating
\nforeign investors as well as multilateral lenders.<\/p>\n
By privatizing Semen Gresik, the government hopes to net at
\nleast $200 million, and possibly as much as $520 million under
\nthe previous plan, to finance this year's state budget deficit.<\/p>\n
More at stake though is the government's credibility, after
\nthree years of attempts to sell Semen Gresik have got it no where
\ncloser to a deal.<\/p>\n
The government is torn between appeasing regional leaders, and
\ndemonstrating to foreign investors that it is able to push ahead
\nwith much needed asset sales.<\/p>\n
The government has been lagging behind with a number of asset
\nsales, most notably the Bank Central Asia case, which underscores
\nthe difficulties investors face in acquiring Indonesian assets.<\/p>\n
Through privatization and asset sales, the government hopes to
\nrevitalize investment in this country and as such boost economic
\ngrowth.<\/p>\n
With domestic investors still reeling from a crippled banking
\nsector, much of the investment is expected to come from overseas.<\/p>\n
Few investors, if any, still have confidence in the country.
\nBut, now what little remained of that confidence may soon vanish
\nif the government loses the Semen Gresik deal and that could
\nspell economic disaster.<\/p>\n
However, State Minister of State Enterprises Laksamana Sukardi
\nstood firmly by his plan on Tuesday, saying it was the best
\noption.<\/p>\n
The new plan has yet to receive Cemex's consent, and is also
\nsubject to approval of Semen Gresik's independent shareholders,
\nwho comprise 23 percent of the total.<\/p>\n
\"Cemex has not received an official offer from us yet. There
\nwill be terms and conditions that we will propose as soon as
\npossible,\" he said.<\/p>",
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