Daewoo to build cement plant in S. Sulawesi

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)