Economists hail government's new plan on Semen Gresik

Economists hail government's new plan on Semen Gresik

Dadan Wijaksana, Jakarta Post, Jakarta

Analysts hailed the government's new plan for the sale of
state-owned cement producer PT Semen Gresik, describing it as a
realistic approach to accommodate both the interests of local
people and Mexico's Cemex SA de CV, the would-be investor.

"Laks has made a brave move, because this means he is willing
to take on challenges from two sides; both the locals and Cemex,"
said Institute for Development of Finance and Economics (Indef)
economist Bustanul Arifin, referring to the State Minister for
State Owned Enterprises Laksamana Sukardi.

Bustanul, however, acknowledged that disappointment was
inevitable as in this case the government could never make a
decision that would please all of the opposing sides.

"It's a dilemma, the government can never satisfy both sides.
Somebody will be disappointed either way."

Sri Adiningsih, an economist at Gadjah Mada University,
concurred, saying: "The decision is a positive breakthrough on
the part of the government as it took into consideration all the
interests of the stakeholders."

The comments came as certain quarters in West Sumatra and
South Sulawesi, respectively the home-bases of PT Semen Padang
and PT Semen Tonasa, two key units of Semen Gresik, rejected the
government's new proposal for the long-stalled privatization
program of the cement giant.

The government announced last week that it would sell a 51
percent stake in Semen Gresik to the giant Cemex, and use part of
the proceeds to buy back 51 percent of the shares in Semen Padang
and Semen Tonasa.

Some lawmakers and informal leaders in West Sumatra, claiming
to represent the local people, have strongly opposed the Semen
Gresik sale plan, arguing that it would allow foreigners to
control the local unit.

But even with the new plan, under which Cemex would only have
a minority stake in Semen Padang and Semen Tonasa, protests from
West Sumatra and South Sulawesi continued. They insisted that the
two local units be spun off from Semen Gresik.

Sri deplored these rejections and said that the locals should
realize the complexity of the problems that the government had to
face in finalizing the deal.

"The locals should respect the decision of the government as
the later has shown its good faith as evidenced by the newly
designed scheme," she said.

"Not to mention that the world is now keeping a close eye on
the case. If the government fails to properly settle this, then
who will come and invest their money in Indonesia."

The government had been forced to extend an initial Oct. 26
deadline to sell a 51 percent stake in Semen Gresik to Cemex via
a put option deal to Dec. 14 due to the continuing protests from
local interests, particularly in West Sumatra.

With big cement producers PT Indocement and PT Semen Cibinong,
having been taken over by foreigners, they argued that Cemex's
taking over Semen Gresik Group would hand a lucrative national
business to foreign control.

However, some analysts believe that the protests are
politically motivated and represent struggles for control of the
local companies, which are regarded by many as cash-cows to help
finance their political ambitions.

Bustanul warned that the government was running out of
financial resources from which to cover the 2001 state budget
deficit, with the new scheme only providing some US$200 million
in cash, far less than the $520 million in projected proceeds
from the previous deal.

Elsewhere, legislator Suko Waluyo said that the local people
had no alternative but to accept the decision because it had been
designed to accommodate their demands, and the fact that they
were now protesting against the decision was irrelevant.

"First, they did not want Cemex to hold the majority of the
shares, which wish has already been fulfilled (by the
government's plan). But now they're protesting again, why?" he
said, referring to the recent rejection by locals in Padang.

If they still wanted to fully take control of the company:
"Then there's no other way for them but to buy the 51 percent
held by the government," said Suko.