Government - Cemex dispute settlement bombing out
Rendi A. Witular, The Jakarta Post, Jakarta
The government postponed the settlement of its protracted dispute with Mexican cement giant Cemex SA after both sides failed to agree on several points in the proposed out-of-court settlement, a minister said on Tuesday.
"We were hoping that there would be progress in our negotiations with Cemex on Monday. However, by 2 p.m. we had failed to reach an amiable agreement," said State Minister of State Enterprises Sugiharto at the State Palace on Tuesday.
The government and Cemex were scheduled on Tuesday to sign a memorandum of understanding, which would serve as a basis to end the four-year dispute over Cemex's right to control state firm PT Semen Gresik, the country's largest cement producer.
The failure to end the dispute may well further hurt investor confidence in Indonesia, at a time when the country is in dire need of foreign financing for its massive infrastructure projects to support economic growth of above 6 percent annually in the next five years.
Sugiharto said both parties would need more time to reexamine the proposed settlement so as to gain mutual understanding to end the row, without having to disadvantage either party.
"We failed to agree upon several points in the settlement scheme ... After the delay, we cannot forecast when the settlement deal will be signed," said Sugiharto, refusing to specify details of the disputed points.
A source at the Office of the State Minister of State Enterprises, however, said that the postponement could be mainly attributed to President Susilo Bambang Yudhoyono, who rejected the settlement scheme.
"There was a meeting between the President and Sugiharto on Monday night to discuss the settlement scheme scheduled to be signed with Cemex the following day. However, the President rejected the scheme and ordered a revision," said the source.
Solving the dispute is one of Susilo's top priorities during his 100-day governmentship, which deadline is on Friday.
According to the source, some of the points rejected by the President concerned a plan to hand over control of Semen Gresik's three plants in Tuban, East Java, to Cemex, in exchange for allowing the government to maintain a majority stake in the company.
Included also in that plan was the setting up of a new joint company owned equally by Semen Gresik and Cemex, to serve as a holding company for cement factories to be built in the future.
The Tuban plants are considered the heart of Semen Gresik's production since they supply 80 percent of market demand in Java, Bali and Kalimantan with an installed capacity of 7.5 million tons per year.
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.
The Cemex dispute emerged after the management of Gresik subsidiary PT Semen Padang and local politicians opposed an option allowing Cemex to increase its shares in Gresik to a majority stake as stipulated under a legitimate contract in 1998.
Cemex took the case to the International Center for the Settlement of Investment Disputes (ICSID), demanding the government pay damages for not upholding its contractual obligations.
However, Cemex agreed to postpone the hearing at ICSID earlier this month, pending the completion of the out-of-court settlement negotiations.