Govt lowers retail prices of cement

Govt lowers retail prices of cement

JAKARTA (JP): The government, harshly criticized for its
recent decision to raise the reference prices of cement by more
than 40 percent, announced yesterday that retail prices of the
material should be 10 percent below the new reference prices.

Acting Minister of Trade Tunky Ariwibowo said that Minister of
Trade's Decree No. 70/KP/IV/95 on the cement retail prices had
been issued after listening to the views of various parties,
including the Indonesian Cement Association.

"But the decree does not repeal Minister of Trade's Decree No.
48/KP/III/1995 on the increases of cement reference prices," he
said.

Under the latter decree, which was announced just two weeks
ago, the government raised local cement reference prices by over
40 percent to an average of about Rp 9,000 (US$4.05) per 40-
kilogram sack.

Yesterday's announcement has caused confusion because the term
"reference prices" had previously been regarded as referring to
recommended retail prices in various parts of the country.

The new decree, which was signed by Minister of Trade Satrio
B. Joedono on April 15, refers to "retail prices", but does not
say whether the prices given are the maximum that retailers
should charge for their cement, nor whether violators will face
sanctions.

Tunky, who held the press conference yesterday while Trade
Minister Joedono was out of the country, did not clearly
elaborate on the government's options if retailers do not abide
by the new decree.

"What is important is the good intentions of producers,
distributors and everyone involved in the cement business," Tunky
said, adding that he will soon meet various cement distributors.

Despite occasional imports, Indonesia has been plagued by
market distortions in the cement trade for the past two years.
The government forecasts that demand for cement will reach 26
million tons this year, while production will likely reach only
24.5 million tons.

Some analysts have said the problem is caused by the dominance
of several major cement producers, who are believed to control
distribution and to be able to bar newcomers to the industry.

Minister Joedono said two weeks ago that four state trading
firms had been instructed to import between 1.5 million tons and
two million tons of cement this year. The firms pledged that they
would sell their imported cement at levels lower than the
government-set reference prices.

Tunky yesterday declined to elaborate on why the new decree
was passed. He only said that the government had considered
"inputs from various parties."

Attack

Fearing inflationary pressures, various local analysts and
politicians, including members of the ruling Golkar political
group, had attacked the government's earlier decision to raise
the reference prices of cement by 40 percent.

Siti Hardiyanti Rukmana, a deputy chair of Golkar, said in a
televised ceremony in Madura, East Java, over the weekend: "On
the instruction of Golkar Chairman Harmoko, I recently reported
to President Soeharto, who happens to be my father, about the
cement situation... The President is very concerned with the high
price of the construction material...which has burdened the
people."

President Soeharto is also the chief of Golkar's Board of
Patrons.

Harmoko, who is also Minister of Information, said on Sunday
in Jambi that he thought the increase in cement reference prices
"should be around 20 to 30 percent".

Harmoko said Golkar had set up a special task force comprised
of legislators to inquire into the cement price hike. The team
was to approach several ministers, contractors, real estate
developers and various consumer groups.

Golkar has never before made such moves since Soeharto became
Indonesia's president in 1967.

While Minister Tunky was holding yesterday's press conference,
Golkar's faction at the House of Representatives held another
press conference to welcome the government's decision on cement
retail prices.

The faction's chairman, Moestahid Astari, who was accompanied
by five colleagues from Golkar's "cement team", said that Golkar
wished to express its gratitude to the government, "which has
wisely accommodated and responded the people's aspirations."

Sudwikatmono, the president of PT Indocement Tunggal Prakarsa,
the country's biggest cement producer, also welcomed the
government's latest decision in dropping cement prices.

"The decision to drop cement's retail prices by 10 percent
below reference prices is still adequate to encourage businessmen
to make investment in the cement industry," said Sudwikatmono,
who is a cousin of President Soeharto.

Sudwikatmono's statement differed significantly from the
immediate reaction of another major cement producer after the
government raised the reference prices by 40 percent two weeks
ago.

Hashim Djojohadikusumo, president of PT Semen Cibinong, who
has a law relation with Soeharto, was reported to be "happy" with
the reference price increase because the cement industry had a
low rate of return on investment.

Neither Hashim or other Semen Cibinong top executives were
available for comment yesterday.

A political observer described the government's change of mind
regarding cement prices as "most interesting."

"The government -- comprised of Golkar people -- decided to
hike the prices. Now, after what seemed to be an intervention,
they have revised the decision, making Golkar look like a hero,"
the analyst, who requested anonymity, told The Jakarta Post
yesterday. (32/pwn/hdj)