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.