House urges government to dissolve SGG<\/p>\n
JAKARTA (JP): The House of Representatives called on the
\ngovernment on Monday to dissolve Semen Gresik Group (SGG) and
\nallow member companies to operate independently.<\/p>\n
The House Commission V for trade and industry said the merger
\nof East Java-based PT Semen Gresik, South Sulawesi-based PT Semen
\nTonasa and PT Semen Padang in West Sumatra into Semen Gresik
\nGroup had produced no beneficial results.<\/p>\n
In its recommendation, issued after a hearing with the Semen
\nGresik Group, the House called on the government as majority
\nshareholder in the publicly listed cement group to call an
\nextraordinary meeting of shareholders to approve the breakup.<\/p>\n
\"Generally speaking, consolidation just has not been
\nprofitable,\" said Azwir Dainy Tara, deputy chairman of the
\ncommission.<\/p>\n
Azwir said the assumed benefits of consolidating the three
\ncompanies failed to work out in practice.<\/p>\n
In 1995 the government merged Semen Padang, Semen Tonasa and
\nSemen Gresik into SGG, to prevent private cement producers from
\ncontrolling the domestic market.<\/p>\n
Semen Gresik paid Semen Padang and Semen Tonasa a total of Rp
\n1.06 trillion (US$112.76 million at current rate) for their
\nstakes.<\/p>\n
Together, they have a production capacity of 18.2 million
\nmetric tons of cement, against the country's total capacity of 45
\nmillion tons.<\/p>\n
But president of Semen Gresik, Urip Timuryono, expressed
\nobjections to the House's recommendation, claiming that the
\nbenefits were real.<\/p>\n
He said the consolidation allowed state owned cement producers
\nto leverage their control over market prices against private
\ncement producers.<\/p>\n
\"The consolidation can dictate the market price for the
\ninterest of the government,\" he explained.<\/p>\n
Urip also said that joint marketing effort within the three
\ncement companies had also created synergy, because each company
\nserved the market closest to its location.<\/p>\n
Under the joint marketing efforts, he said, the three cement
\nproducers could cut transportation costs in competing against the
\nprivate producers.<\/p>\n
\"Otherwise, state companies will be competing against one
\nanother in different regions,\" he went on.<\/p>\n
However, the House argued that their performance had dropped
\nafter 1995 because of the consolidation.<\/p>\n
It cited Semen Padang's explanation that part of its domestic
\nmarket share had been allocated to the other two producers. The
\nWest Sumatra-based cement producer is now relying on the export
\nmarket.<\/p>\n
In its recommendation, the commission said that the three
\ncompanies should be allowed to trade and distribute their cement
\nindependently, until the breakup was finalized.<\/p>\n
The commission also viewed the presence of the Mexican-based
\nPT Cemex Indonesia in SGG as not bringing any substantial
\nbenefits.<\/p>\n
Cemex, the world's third largest cement producer, entered
\nIndonesia in 1998, by paying the government about $114.2 million
\nfor a 25 percent stake in SGG.<\/p>\n
The company plans to become a majority shareholder in SGG, but
\nfaces resistance from the Padang people, who refused foreign
\ncontrol over their company.<\/p>\n
Urip said the government had agreed to spin off Semen Padang
\nfrom SGG, to pave the way for Cemex to raise its stake.<\/p>\n
However, he said the government was still counting the breakup
\ncosts.<\/p>\n
According to him, Gresik should receive compensation for the
\nfunds it used to acquire Semen Padang's stake. \"We must see
\nwhether the government is prepared to do this,\" he said.<\/p>\n
Cemex president Fransisco Noriega said his company was still
\nwaiting for the government to submit a proposal on the planned
\nspin off.<\/p>\n
\"We have not been approached by anybody from the government...
\nso we have nothing new,\" he told reporters after the hearing.<\/p>\n
He said the government had been working on the proposal since
\nmid-year.<\/p>\n
Noriega denied having made threats to pull out of Indonesia,
\nas reported in several media earlier this month.<\/p>\n
\"There is no deadline, as a deadline itself. Yes, we want to
\nhave a quick decision from the government, we have been patient
\nenough,\" he said.<\/p>\n
He suggested that shareholders and group stakeholders sit
\ntogether to discuss an amiable solution.<\/p>\n
But Noriega refused to comment on the question whether Semen
\nGresik was still attractive to Cemex without Semen Padang.<\/p>\n
\"I prefer to wait until there is a formal proposal from the
\ngovernment,' he said, adding that the company would be flexible.
\n(bkm)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/house-urges-government-to-dissolve-sgg-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}