Stop the spin-off lobby<\/p>\n
It is mind-boggling to observe how weak and slow has been the
\ngovernment in dealing with the vested-interest group, which has
\nbeen campaigning for the spin off Semen Padang from the publicly
\nlisted Semen Gresik Group.<\/p>\n
Even more flabbergasting is why the government allowed Semen
\nPadang management to spend so much of their highly-paid time and
\nthe company's money for the lobbying campaign that could kill the
\nwhole privatization program and destroy both the government's
\ncredibility and foreign investor confidence in West Sumatra.<\/p>\n
The vested-interest group, which consists of highly educated
\npeople, must be fully aware that it is impossible for the
\ngovernment to spin off Semen Padang from SGG. Even though the
\ngovernment owns 51 percent of SGG, this company is already listed
\non the Jakarta stock exchange and it therefore must refer all
\nmajor corporate decisions such as a spin-off to all the
\nshareholders, who include Mexico's Cemex, with 25.5 percent and
\nthe investing public, with 23.5 percent.<\/p>\n
True, the local people have often complained about what they
\nsaw as Semen Padang's ignorance of local community interests and
\nthe unfair treatment they received from the company in relation
\nto compensation for their land used for limestone quarrying.
\nThese complaints, similar to grievances raised by people in many
\nother provinces, were a carryover of the disillusionment with
\nformer president Soeharto's authoritarian rule.<\/p>\n
But neither the West Sumatra provincial legislature nor the
\nsecond-level legislature in Padang mayoralty, under whose
\njurisdiction Semen Padang operates, has ever outrightly demanded
\na spin-off. Nor have locals ever expressed outright opposition to
\nforeign investor control of the company.<\/p>\n
But the vested-interest group, afraid of losing a cash cow if
\nthe government exercised its put option (the right to sell its
\nremaining 51 percent holding in SGG), has used the locals'
\ngrievances as ammunition to push through its own agenda. This is
\nto maintain Semen Padang at least in its present status as an
\nindependent unit of SGG. The best would it be for their rent-
\nseeking operation if Semen Padang could be converted into a
\nwholly owned state company through the spin-off.<\/p>\n
The group's arguments about the damaging impact of foreign
\ncontrol of the cement industry, an unfair price to be paid by
\nCemex and other excesses that might harm the national interest
\nare groundless and are mere fallacies to advance its hidden
\nagenda of maintaining the rent-seeking activities of its members.<\/p>\n
As another opinion article on this page shows, Semen Padang
\nhas been the worst performer among SGG's three cement units due
\nto poor management and questionable deals in procurement and
\nmarketing. Last year, for example, Semen Padang got the lowest
\nexport price of the group, as it stubbornly refused to use SGG-
\nCemex marketing networks, instead using traders (rent-seekers)
\nwho certainly charged a commission for services that were not
\nactually necessary.<\/p>\n
There are now only three days before the Oct.26 deadline for
\nthe government to exercise its put option, signed in October 1998
\nwhen Cemex bought a stake in SGG through a competitive bid. After
\nthat date, Cemex will no longer be legally bound to take up the
\ngovernment equity.<\/p>\n
Cemex understandably does not wish to be held in uncertainty,
\nas its commitment to the put option agreement is not without
\ncost. The Mexican company has to tie up at least US$500 million
\nof its reserves in banks ready for use any time the transaction
\noccurs.<\/p>\n
Obviously, the government should do whatever is possible
\nwithin its power and legally possible within stock market
\nregulations to address the local people's grievances, but should
\nnonetheless go all out to prevent a spin-off.<\/p>\n
The put option must surely be the best, and the only, deal the
\ngovernment could get in its privatization program this year. Who
\nelse would be willing to invest so much in Indonesia now at a
\ntime when the country's risk is rising and the cement industry is
\nsuffering a huge overcapacity due to the depressed state of the
\nmarket?<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/stop-the-spin-off-lobby-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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