Cemex opens to amicable settlement of dispute

Sari P. Setiogi, The Jakarta Post, Jakarta

An out-of-court settlement to resolve an investment dispute between Mexico's cement giant Cemex SA and the government of Indonesia is still possible, according to a spokesman of the company's local office.

Wimar Witoelar, senior advisor at Cemex Indonesia, said that such an option was still possible if the government come up with a "convincing proposal which could make the company reconsider the arbitration process".

"Through arbitration proceedings, Cemex wants the Indonesian government to pay all cost and expenses, but everything is possible in life, so there is also a possibility for out-of-court negotiation," Wimar told The Jakarta Post on Friday.

Asked what he meant by a "convincing proposal", Wimar said he did not want to dictate to the government, but hinted that Cemex was still hopeful it would be able to have a majority stake in state-owned PT Semen Gresik, Indonesia's largest cement maker.

"It has been the company's spirit since the very beginning," he said.

"Cemex wants to show commitment to both the country and employees. If we hold the majority shares, we are sure there will be no layoffs. We might hire more employees at certain levels," Wimar said.

Cemex, the world's third largest cement maker, filed on Wednesday a petition against the government with the International Center for Settlement Investment Dispute (ICSID), a Washington-based affiliate of the World Bank.

The move was made after years of efforts to reach a solution to problems with its investment plan in this country had failed.

In the wake of the country's late 1990s financial and economic crisis, Cemex reached an agreement with the government to buy a 25.5 percent stake in Semen Gresik for US$290 million. But this September 1998 deal also provides an option for Cemex to increase its stake to 51 percent by the end of 2001.

However, the government could not execute the deal due to strong protests from PT Semen Padang, the West Sumatra-based unit of Semen Gresik, and local politicians. The protesters opposed the idea of the company being controlled by a foreign investor. Attempts to resolve this problem have be unsuccessful, leaving Cemex looking at an uncertain future for its investment here.

Some said that the government could not execute the agreement with Cemex for fear of triggering conflict between the local government in West Sumatra and the central government. Others said that certain top politicians were also supporting Semen Padang as without the control of Cemex, they could continue to treat the company as their cash cow.

Elsewhere, Wimar also criticized the government for its poor handling of the affair.

"We have given enough time to the Indonesian government to negotiate, but they never submitted an official proposal to Cemex. They only use the press to deliver sound-bytes," said Wimar.

He said many times Cemex had asked for a meeting with the State Minister of State Enterprises Laksamana Sukardi, but there was no response. "Even during the last days before we filed the petition, we still asked to see the minister and there was no response."

Analysts have said the Cemex case could further undermine foreign investors confidence in the country. The country is in dire need of foreign investment to help boost economic growth to a level that would be able to create enough jobs for the millions of unemployed.