Cemex ceases legal battle: Minister
Urip Hudiono, The Jakarta Post/Jakarta
Mexican cement giant Cemex SA has agreed to suspend a law suit it had filed against the government in a protracted dispute regarding cement producer PT Semen Gresik, a senior minister said.
Coordinating Minister for the Economy Aburizal Bakrie said on Friday the suspension had been agreed upon, so as to pave the way for further negotiations between the government and Cemex to amicably settle the case.
"We have reached an agreement on some terms for the negotiations, which includes not to continue proceedings scheduled for Jan. 11," Aburizal said.
Aburizal did not mention whether the terms also included a revision to the deal that the government had signed with Cemex in 1998. That deal would have allowed Cemex to increase its stake in Gresik by 25 percent to make it a majority shareholder in the East Java-based cement maker.
The deal broke down when the management of Gresik's West Sumatra-based subsidiary PT Semen Padang opposed the agreement, saying it feared that foreign ownership in the company would threaten the cement supply for the domestic market.
Cemex afterwards filed a lawsuit to the Washington-based International Center for the Settlement of Investment Disputes (ICSID), accusing the government of breaching the contract and demanding compensation.
ICSID then set a hearing for the case on Jan. 11.
Observers said the willingness of Cemex to ask for a temporary halt in the proceedings indicated the government's ongoing negotiations appear to have borne some fruit.
However, Aburizal reiterated the government would refuse to pay any compensation sought by Cemex regarding the case in view of the government's limited budget.
"I'll repeat once again, the government has no money. We will find a solution in which we will not have to pay for anything," he said, stressing that an out-of-court settlement would be the best possible solution for the government.
A five-strong legal team is representing the government in the negotiations, which officially started on Dec. 20. Earlier reports said that the talks would center on six options proposed by the government.
Sources said that the options include a buy-back mechanism, meaning that the government would purchase the 25.5 percent stake currently owned by Cemex, then sell off Gresik's subsidiaries -- PT Semen Tonasa and PT Semen Padang -- before allowing Cemex to again take control of Gresik.
State Minister for State Enterprises Sugiharto has also said Cemex would be allowed to build new cement factories in the country to help meet the rising demand of cement in accordance with the government's plans for massive infrastructure projects starting next year.
The government is under pressure to quickly resolve the years- long dispute with Cemex, as part of its efforts to help revive investor confidence in the country.