BPK probes Gresik's past acquisitions

BPK probes Gresik's past acquisitions

Sari P. Setiogi, The Jakarta Post, Jakarta

The Supreme Audit Agency (BPK) is launching an investigation
into the past acquisition of PT Semen Padang and PT Semen Tonasa
by the country's largest cement maker, PT Semen Gresik, a move
that may further complicate problems at the publicly listed firm
and deter investors.

Amrin Siregar, a senior auditor at BPK, said that the
acquisition might not be lawful because it was not supported by a
government regulation.

"According to Law No. 9/1969 and government regulation No.
12/1969, every asset allocation in a state-owned company should
be followed by a government regulation," he said.

He did not explain why the problem had come to light after so
many years, but said that since Semen Gresik, previously fully
owned by the government, became a publicly listed company in 1991
(it was the first state-owned company to do so), the firm had
declined to be audited by BPK.

Amrin said that BPK had sought clarification from the
independent accountant of Semen Gresik's 1995 financial accounts
on why there was no explanation in the audit report about the
absence of the required government regulation.

He said that the audit agency was still awaiting a response
from the public accountant. He did not name the accounting firm.

Semen Gresik acquired the assets of West Sumatra-based Semen
Padang and South Sulawesi-based Semen Tonasa (both were also
state-owned firms) in 1995, creating the country's largest cement
producer. Under the acquisition move, the government's shares,
worth Rp 1.1 trillion in Semen Tonasa and Semen Padang, were
consolidated into Semen Gresik.

In 1998, Mexican cement maker Cemex SA de CV, which is also
the world's third-largest cement maker, acquired more than 25
percent of the shares in Semen Gresik. The government now owns a
51 percent stake, while the remainder is held by the public.

The government had for years tried to divest more shares in
Semen Gresik to Cemex, but had failed due to strong opposition
from Semen Padang. This had also caused trouble for Semen Gresik
as it could not consolidate last year's profit from the West
Sumatra subsidiary because the audit work could not be done at
the time, amid protest from the old management of Semen Padang.
Semen Gresik has promised the audit work will be completed by
February 2004, which does not please Cemex, as it wants the audit
to be finished by the end of this year.

There have been rumors that Cemex is considering pulling out
from Semen Gresik due to the various problems.

Elsewhere, Amrin said that BPK would also seek clarification
from Semen Gresik's accounting firm on a questionable liability
figure in the 1995 financial report. In the report, a liability
worth Rp 581 billion (US$68.39 million) is shown, but the auditor
did not give a clear explanation about it.

He said that if the accounting firm continued to disregard the
BPK request, the agency would report the firm to the Ministry of
Finance and to its professional association.