Subterfuge at Semen Gresik<\/p>\n
There is only a very slim chance that Indonesia might win its
\ndispute with Mexican cement company Cemex SA over the foreign
\nfirm's investment in state-controlled PT Semen Gresik (SG), which
\nis undergoing arbitration proceedings at the International Center
\nfor the Settlement of Investment Disputes (ICSID) in Washington.<\/p>\n
An out-of-court settlement is thus the best, least costly
\nsolution, as opposed to a messy, costly and protracted litigation
\nprocess. After all, it is the government that failed to fulfill
\nits part of the deal in Cemex's October 1998 purchase of 25.5
\npercent shares, with an option to expand to a controlling stake
\nin SG.<\/p>\n
However, the latest initiative by State Minister of State
\nEnterprises Laksamana Sukardi to set up a consortium of state
\npension institutes, including workers' insurance firm PT
\nJamsostek, to buy back Cemex's shares is a very dangerous game.<\/p>\n
Laksamana will expose hundreds of millions of dollars of
\nmoney belonging to pensioners and workers to great risk if he
\ngoes ahead with his plan to buy out Cemex's SG shares, because
\nSG's consolidated financial reports for 2002 and 2003 were filed
\nwith a disclaimer by its independent auditors.<\/p>\n
The country's largest cement producer has been mired in legal
\nwrangles since 2000, after its West Sumatra subsidiary, PT Semen
\nPadang, launched a campaign to break off from SG as its holding
\ncompany, refusing to be under foreign ownership.<\/p>\n
It is this internal battle that forced the Mexican company to
\nbring the case last December to ICSID, an affiliate of the World
\nBank, because the secession of Semen Padang would mean a breach
\nof contract. The government, unable to control its renegade
\nsubsidiary, however, made matters worse by failing to honor
\nCemex's contractual option for a controlling stake in SG.<\/p>\n
Early this year, SG shareholders, including the government
\nwith 51 percent and the investing public with 23.50 percent,
\nordered a forensic audit on Semen Padang. The shareholders had
\nbeen left in the dark about the subsidiary's performance for the
\npast two years, up until its \"rebellious\" board of directors was
\nforcefully ousted from the company's premises last September.<\/p>\n
They wanted independent auditors to verify the rumors that
\nSemen Padang had been \"pillaged\" by its old management, local
\nofficials and local legislators.<\/p>\n
Even though SG is still traded on the Jakarta Stock Exchange
\nafter its temporary suspension was lifted in early July, and
\nalthough investment in cement stocks do promise good returns upon
\nhigher demand for building materials from a recovering economy,
\ninvesting in SG now is highly risky because no one knows its real
\ncondition.<\/p>\n
Until the forensic audit of Semen Padang -- which accounts for
\n32 percent of the group's output capacity of 17.2 million metric
\ntons -- is completed in October as scheduled, it is better not to
\ntouch SG shares.<\/p>\n
It is thus mind-boggling to discern why Laksamana, after
\nfailing miserably to resolve the imbroglio faced by SG and Semen
\nPadang, is attempting -- apparently in a desperate bid -- to take
\nthe seemingly easy, but treacherous, road to settle the dispute
\nby buying back the Cemex shares in SG.<\/p>\n
The failure of the government, as the majority shareholder, to
\ncontrol Semen Padang management since 2000 had provided an
\nopportunity for vested-interest groups, including senior
\nofficials and politicians in West Sumatra, to turn the company
\ninto their personal cash cow. It is no wonder that Semen Padang
\nhas always been the worst performer against SG's other
\nsubsidiaries Semen Gresik, Surabaya, and Semen Tonasa, South
\nSulawesi.<\/p>\n
While German-controlled PT Indocement and Swiss-controlled PT
\nSemen Cibinong, respectively the second and third largest cement
\ncompanies, have consolidated their operations to capitalize on
\nthe rising market demand for cement, SG has constantly been
\nbeleaguered by its Semen Padang subsidiary. While share prices
\nfor Indocement and Semen Cibinong increased by almost 200 percent
\nlast year, SG's share price inched up by a mere 3 percent.<\/p>\n
SG's dispute with Semen Padang has affected its performance on
\nthe stock market, inflicted severe damages to its corporate image
\nand caused an endless stream of negative publicity. Strangely,
\nthe central government and Laksamana seem impotent to resolve the
\nlegal mess.<\/p>\n
The company's predicament will certainly not end until the
\ngovernment resolves, once and for all, the status of Semen Padang
\nand deal with the vested-interest groups that sponsored the
\nbreak-off campaign, arguably to maintain Semen Padang as their
\ncash cow.<\/p>\n
_______<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/subterfuge-at-semen-gresik-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }