Daewoo to build cement plant in S. Sulawesi
JAKARTA (JP): South Korea's Daewoo Corporation yesterday secured a US$208.8 million contract to build a cement plant in South Sulawesi for PT Semen Bosowa Maros.
"The signing of the turnkey contract proves that Indonesia's investment climate remains attractive for both foreign and domestic investors," Minister of Industry and Trade Tunky Ariwibowo said yesterday, after witnessing the contract's signing.
Daewoo's president, Lee Il-sae, Muhammad Aksa Mahmud of the Bosowa Group and Rachid Hamdani of Semen Bosowa Maros yesterday signed the turnkey contract for the plant's construction. The plant will have a production capacity of 1.8 million tons per annum.
"This turnkey contract isn't the government's concern, because Bosowa is a newcomer to the cement industry. However, in future plant construction, we hope that Bosowa will cooperate with local engineering companies," the minister said.
Daewoo is merely a contractor in the project and has no shares at Semen Bosowa Maros, which is 100 percent owned by the Bosowa Group.
Eighty percent of the plant's financing will come from domestic banks, comprising Bank Dagang Negara, Bank Negara Indonesia, Bank Ekspor Impor Indonesia, Bank Tabungan Negara (all state banks) and privately-owned Bank Niaga, while the other 20 percent will come from Semen Bosowa Maros' equity.
A Daewoo executive noted that the cement plant's construction will begin in early July and will require two years for completion, scheduled for the middle of 1998.
He added that the plant will begin trial production during the 17th month of the construction and commence commercial production following the project's completion.
Meanwhile, Mahmud said his company has targeted sales of 60 percent of its total output on the domestic market, especially in eastern provinces, while the other 40 percent will be exported "provided that the local market has been satisfied".
He was very optimistic about the local cement market, saying that his company would recover its investment within 10 years of operation.
"There are still tremendous opportunities in the cement industry, as our per capita consumption of cement is among the lowest in the region," Mahmud said.
To illustrate, he noted that Indonesia's per capita consumption of cement stood at 84 kilograms, as compared with 120 kilograms in the Philippines, 400 kilograms in Malaysia and 500 kilograms in Singapore.
Agreeing with Mahmud's assessment, Tunky said demand for cement is increasing by 15 percent per annum, reaching a total of 28 million tons this year from 24.1 million tons in 1995.
Indonesia's cement plants currently have a combined production capacity of 26.5 million tons a year.
He said Indonesia needs a significant amount of new investment in cement plants, as the country still suffers a deficit in cement because demand exceeds supply.
Tunky earlier predicted that cement imports are likely to increase by 218 percent this year to 3.5 million tons, including clinker -- raw material for cement manufacturing -- from 1.1 million tons last year.
He added that Indonesia would export some 500,000 tons of cement this year during a season of low demand.
Tunky responded to critics by saying that Indonesia's investment climate has been marred by the introduction of the national car policy, which discriminates against foreign car manufacturers.
Tunky said the construction of the cement plant in Maros, South Sulawesi, is expected to stimulate investments in eastern provinces. (rid)