Cement firm takeover will sink economy: Todung

Adianto P. Simamora, The Jakarta Post, Jakarta

A respected lawyer sharply criticized the unilateral takeover of cement firm PT Semen Padang by the local West Sumatra government, saying the move has further damaged the nation's already poor reputation among international businesspeople and severely undermines efforts to lure investors and improve the economy.

Todung Mulya Lubis said the move had only strengthened foreign investors' perception about legal uncertainties in this country.

"This unilateral takeover is a bad thing for the country amid its efforts to recover from the economic crisis.

"This will kill the Indonesian economy, and new investors will further delay investing in Indonesia," Todung told The Jakarta Post on Saturday.

He said having seen what happened with Semen Padang, many investors were now worried that similar incidents could happen in other parts of the country.

The West Sumatra provincial administration declared on Thursday that the province had taken over Semen Padang, a key unit of publicly listed state-owned cementmaker PT Semen Gresik, in protest against the central government's plan to sell a majority ownership in Semen Gresik to Mexican cement giant Cemex SA de CV.

The declaration was approved by the provincial council.

The move was followed by a declaration by the South Sulawesi government and council that the province would not allow Cemex to gain control over PT Semen Tonasa, another unit of Semen Gresik operating in the province.

The South Sulawesi and West Sumatra provincial legislatures have demanded that both companies be spun off from Semen Gresik.

Semen Padang and Semen Tonasa contributed half of Semen Gresik's sales of 13.8 million tons in 2000.

Despite the damaging impact, particularly with the country's key Consultative Group on Indonesia donor nations set to convene in Jakarta on Nov. 7 and Nov. 8 to decide on new loans for 2002, the government has failed to act swiftly.

For instance, Minister of Home Affairs Hari Sabarno, who oversees provincial administrations, has not taken any action to stop the West Sumatra and South Sulawesi governments from unlawfully taking over the local cement factories.

Economist Faisal Basri also lambasted the unlawful takeover of Semen Padang, saying that the move was aimed at protecting the interests of local politicians to maintain the cement company as their cash cow.

He said the government should act fast to resolve the problem to limit any damaging effects on the economy.

The locals' protest has hampered the government's efforts to sell a 51 percent stake in Semen Gresik to Cemex, which already owns a 25 percent stake in the former.

The government aims to raise some US$520 million from the Semen Gresik sale, which is some 80 percent of the government's 2001 privatization proceeds target of Rp 6.5 trillion (about $634 million). No proceeds have been collected from privatization as yet.

The government had initially agreed with Cemex to exercise the sale plan by Oct. 26 through a put option deal, but it was delayed until December due to the strong protest.

Todung, who is also a noted human rights activist, said the Semen Padang case was one of the consequences of the Autonomy Law which gives greater power to local governments to manage their own political and economic affairs.

"If this (takeover of Semen Padang by the local government) is the manifestation of the Autonomy Law, this is really not helpful to our efforts to improve our legal and economic systems," he said, warning of more capital flight from Indonesia following the Semen Padang case.

Todung asked the central government to sit down and discuss the matter with the local government, executives from Semen Padang, Semen Tonasa, Semen Gresik and Cemex to seek a win-win solution.

The government has formed a special team to resolve the issue.

Legislator Faisal Baasir also deplored the West Sumatra administration's action to take over Semen Padang and the provincial council's approval of the move.

"Neither the local administration nor the council has the authority to take over Semen Padang," he told the Post, adding that the right to decide on the fate of the company lies with the central government.

He said the House of Representatives had sent a letter to President Megawati Soekarnoputri asking the government to cancel the sale of the 51 percent share in Semen Gresik and to meet the demand for the spinoff of Semen Padang.

"We have in fact accommodated their aspirations, so it (the local government) must wait patiently for the solution," Faisal said.