Government to settle Cemex dispute in 42 days

Government to settle Cemex dispute in 42 days

Rendi A. Witular, The Jakarta Post, Jakarta

The new government aims to settle an investment dispute with
Mexico-based cement producer Cemex SA in 42 days, in a bid to
help maintain investors' confidence in the economy, according to
a minister.

State Minister of State Enterprises Sugiharto said that
resolving the protracted dispute straightaway was crucial, to
show to the outside world that the new government is determined
to uphold legal certainty and the sanctity of contract.

"We plan to come up with a settlement to the dispute in 42
days since the setting up of a negotiation team for the problem
last week," said Sugiharto on Monday.

Sugiharto refused to disclose what settlement options would be
proposed to Cemex. But, according to sources at his office, it
would include an option for the government to buy back Cemex's
ownership in state-owned cement firm PT Semen Gresik, spinning
off the company's units before allowing Cemex to control Gresik,
and an option to allow Cemex to set up new cement factories if it
agrees to sell back its shares in Gresik to the government.

Cemex has launched a law suit against the government for
failing to execute a 1998 investment deal, under which the
company was entitled to eventually become a majority shareholder
in Semen Gresik after acquiring a stake of more than 25 percent
in the East Java-based company six years ago.

To avoid a costly legal battle, the government has since
proposed several options to settle the dispute out of court. The
previous government failed to reach an out-of-court settlement
with Cemex.

Sugiharto also stressed that all information about the
settlement of the Cemex case should be derived from him as the
authorized official for managing state enterprises, and to avoid
confusion in the public over different statements made by other
officials.

"I have asked Coordinating Minister for the Economy Aburizal
Bakrie to coordinate the economic ministers and to read 'the same
page' over the settlement of the dispute to avoid dissension in
the future," he said.

As previously reported, Aburizal told the press that the
government was considering allowing Cemex to increase ownership
in Semen Gresik to up to 51 percent, a statement quickly
challenged by Sugiharto, who said that the government should
avoid foreign control of the country's crucial cement sector.
Semen Gresik is Indonesia's largest cement maker.

He warned that if the government lost control of Semen Gresik
to foreigners, future cement prices could easily escalate as the
government could no longer use the company to balance pressure
for price increases launched by other cement firms already
controlled by foreigners.

The government currently controls a 51.01 percent stake in the
publicly listed Gresik. The investing public holds a 23.46
percent stake.