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.