Cement firm takeover will sink economy: Todung

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.