Deal on Cemex expected on Tuesday
Deal on Cemex expected on Tuesday
Zakki P. Hakim, The Jakarta Post/Jakarta
Under pressure to fulfill a promise to settle the protracted row
with Mexican cement giant Cemex SA, the government may sign a
deal on Tuesday to end the four-year dispute, say economic
ministers.
State Minister of State Enterprises Sugiharto said that a
memorandum of understanding may be signed that would serve as the
basis of a "win-win solution" in the dispute over Cemex's plans
to take over the country's largest cement producer, PT Semen
Gresik.
Sugiharto refused to specify details of the MOU but said that
it would eventually scrap one of the six options offered on the
table, that is not to allow Cemex to acquire a majority stake in
PT Semen Gresik.
"I will not allow any dilution of the government's 51 percent
of Semen Gresik in any alternative options," he told reporters on
the sidelines of the CNBC Strategic Forum on "The New Indonesia
2005: Policy and Action".
Cemex currently has a 25.53 percent stake in Gresik while the
government has a 51.01 percent stake, with the remainder held by
private investors.
He went on to say that the solution would also include setting
up a new joint venture company, which would allow Cemex to invest
fresh capital to build new cement factories in Indonesia.
"The new venture would provide additional capacity that the
country needs. It's a win-win solution," he said, explaining that
Indonesia desperately needed additional cement supplies in
relation to major infrastructure projects planned by the
government over the next five years.
Meanwhile, Coordinating Minister for the Economy, Aburizal
Bakrie, said at the same event that while he could not confirm
Tuesday's signing, he "hoped that Cemex would drop its planned
arbitration suit after the dispute is resolved."
The dispute emerged after management personnel in Gresik's
subsidiary, PT Semen Padang, and local politicians in Padang,
West Sumatra, opposed an option to allow Cemex to increase its
shares in Gresik to a majority stake -- as stipulated under a
1998 investment deal -- on fears that foreigners would dominate
the country's cement industry.
Cemex then filed a lawsuit with the International Center for
the Settlement of Investment Disputes, demanding that the
government pay damages. However, the company temporary halted
legal proceedings to make way for negotiations with the
government.
If an agreement is indeed reached, then Cemex would drop its
lawsuit altogether, sparing the government from a very costly
compensation payout to the Mexican firm as a result of its
failure to honor the 1998 contract.
In addition, settling the dispute would also help revive
investor confidence in Indonesia.
Tuesday's agreement, if it materializes, would be an important
milestone for the Susilo Bambang Yudhoyono administration. The
new government had promised to settle the high-profile case
within its first 100 days of office, which falls due this coming
Friday.