Cemex to become majority shareholder in Semen Gresik

Cemex to become majority shareholder in Semen Gresik

JAKARTA (JP): The government tentatively agreed to a proposal
by Mexico's Cemex SA de CV to increase its stake to become the
majority shareholder in state-owned cementmaker PT Semen Gresik.

"Cemex wants to raise its stake (in Semen Gresik) to become
the majority shareholder and the government has agreed in
principle to this," State Minister of Investment and State
Enterprises Development Laksamana Sukardi said on Friday.

Laksamana was speaking to reporters after accompanying a Cemex
delegation to a meeting with President Abdurrahman Wahid.

He said Cemex was interested in investing in Indonesia and was
considering moving its headquarters to Jakarta if its plan to
become the majority owner in Semen Gresik went through.

Laksamana's comments came as a surprise because a previous
attempt by the Mexican cementmaker to become the majority
shareholder in Semen Gresik failed after the proposal was
rejected by the public, particularly residents of West Sumatra.

Laksamana said the government had not yet decided on how many
additional shares of Semen Gresik would be divested or at what
price.

"The President said the important thing was that the
aspirations of the people of Padang (in West Sumatra) were
accommodated," he said.

Semen Gresik is Indonesia's largest cementmaker. The company
is based in Gresik, East Java, but also owns two other cement
companies -- PT Semen Padang in West Sumatra and PT Semen Tonasa
in South Sulawesi.

The previous administration of president B.J. Habibie
initially planned to sell 35 percent of the government's stake in
Semen Gresik as part of its privatization program to raise cash
to finance the state budget.

The government controlled a 65 percent stake in the company at
the time, while the other 35 percent was publicly held.

Cemex, the world's third largest cementmaker, won the first
round of the bidding process in July 1998 for the government's 35
percent stake.

But the decision was met with protest by the public as it
would have given Cemex a controlling ownership in Semen Gresik as
well as in Semen Padang. This forced the Habibie administration
to divest only 14 percent of the government's stake.

Cemex and the government reached an agreement in September
1998, with Cemex paying US$1.38 per share, or $114.6 million, for
the 14 percent stake.

Cemex now owns a 25 percent stake in Semen Gresik after
increasing its investment in the company by buying additional
shares on the open market.

Laksamana did not comment on whether the government expected
to face a similar nationalistic outcry over the new plan.

Resistance to foreign control over Indonesian resources seems
to have gained steam lately, particularly with the high-profile
allegations of environmental destruction and human rights
violations by gold mining company PT Freeport Indonesia in the
country's easternmost province of Irian Jaya.

Laksamana is under pressure to raise some Rp 6.5 trillion from
the government's privatization program this year to help finance
the April-December 2000 state budget.

The privatization revenue target was initially set at Rp 5.9
trillion, but legislators forced the government to raise the
target in order to fund a larger increase in the salaries of
government employees.

Semen Gresik was not even on the list of state companies to be
included in the privatization program this year.

The government initially planned to divest between 20 percent
and 49 percent of its stake in eight state companies. These
companies are airport operator PT Angkasa Pura II, coal mining
company PT Bukit Asam Batubara, plantation firms PT Perkebunan
Nusantara III and PT Perkebunan Nusantara IV, fertilizer producer
PT Pupuk Kaltim, pharmaceutical manufacturers PT Indo Farma and
PT Kimia Farma, and publicly listed mining firm PT Aneka Tambang.
(rei/prb)