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)