Govt fears Cemex may back down out of Semen Gresik purchase

Govt fears Cemex may back down out of Semen Gresik purchase

Dadan Wijaksana, The Jakarta Post, Jakarta

State Minister for State Enterprises Laksamana Sukardi said on
Thursday that Cemex SA de CV had basically agreed with the
government's new scheme for the sale of state-owned cement maker
PT Semen Gresik, but he feared that the Mexican giant might back
down amid concerns about legal uncertainty as protests continued
in the provinces.

"I think in principle there's no problem (with the new
scheme), but what they're (Cemex) thinking about is whether or
not there'll be legal certainty.

"That's the problem, not the prices or the methods," Laksamana
told reporters after a hearing with the House of Representatives
Commission V on industry and trade affairs.

He added that what was important for Cemex and other investors
was legal certainty, in terms of their ability to execute
legitimate contracts.

Laksamana's comments came amid continuing protests from West
Sumatra and South Sulawesi politicians and several unofficial
leaders over the government's plan to sell a majority stake in
Semen Gresik to the Mexican company.

West Sumatra and South Sulawesi are the home bases of PT Semen
Padang and PT Semen Tonasa respectively.

The latest dissenting voice came from East Java, the home base
of Semen Gresik, when Governor Imam Utomo sent a protest letter
to President Megawati Soekarnoputri on Tuesday, after hundreds of
the cement company's employees had staged a demonstration.

The government announced the new scheme for the Semen Gresik
sale last week, under which it would sell a 51 percent stake in
the company to Cemex and would use part of the proceeds to
repurchase a 51 percent share in Semen Padang and Semen Tonasa.

The new deal was made to accommodate the demands of West
Sumatra and South Sulawesi, which had not wanted to see
foreigners controlling their local cement factories.

Under the original plan, which was supposed to have been
executed on Oct. 26, Cemex would have become a majority owner of
Semen Padang and Semen Tonasa.

The government was supposed to complete the Semen Gresik sale
before the end of this year to raise proceeds to help finance the
2001 state budget deficit.

Laksamana did not rule out the possibility of the deal
collapsing, saying the government was considering looking for
alternative strategic partners.

"If Cemex pulls out, the whole deal will be canceled, and
we'll start looking for alternative investors," he said.

"But we are still continuing negotiations with Cemex," he
said.

However, he added that the process of seeking other strategic
partners could not be finalized this year because it required a
new due diligence process.

Attempts to seek comment from Cemex have been unsuccessful.

If Cemex does refuse to accept the deal, the government's
credibility will be at stake. Moreover, it would take an enormous
effort to restore investor confidence, because it seems that
honoring contracts is definitely not one of the government's
specialities.