Govt may seek new investor to buy out Semen Gresik
The Jakarta Post, Jakarta
The government is considering seeking a new investor to buy out the shares of Cemex SA in state-owned cement maker PT Semen Gresik in a bid to resolve a protracted dispute with the Mexican cement giant, State Minister for State Enterprises Laksamana Sukardi said on Monday.
He said that the government did not have enough money to repurchase the shares. "I don't think we have the funds. Our state budget is in deficit," he told reporters as reported by detik.com.
"Resolving the dispute does not have to involve only the two parties (government and Cemex). There could also be a third party (new investor)," he said, adding that the prospects for the country's cement industry was still quite promising.
He declined to name the potential investor, saying that it was still confidential.
Last week, Cemex asked the International Center for the Settlement of Investment Disputes (ICSID), an affiliate organization of the Washington-based World Bank, to act as an arbiter in its dispute with the government over its investment in Semen Gresik, Indonesia's largest cement maker with a consolidated annual output of 14 million tons.
The dispute centers on Cemex's failure to acquire a controlling stake in Semen Gresik as stated in a 1998 agreement with the government of Indonesia.
In the wake of the country's late 1990s financial and economic crisis, Cemex reached an agreement with the government to buy a 25.5 percent stake in Semen Gresik for US$290 million. But the September 1998 deal also provided an option for Cemex to increase its stake to 51 percent by the end of 2001. Cemex is the world's third largest cement maker.
However, the government could not perform its side of the deal due to strong protests from PT Semen Padang, the West Sumatra- based unit of Semen Gresik, and local politicians, who ostensibly claimed to be opposed to the idea of the company being controlled by a foreign investor. Attempts to resolve this problem have been unsuccessful, leaving Cemex's investment here facing an uncertain future.
Cemex has asked the ICSID to rescind the 1998 purchase agreement and demanded the government of Indonesia cover the company's investment outlay and pay damages.
But a spokesman for Cemex in Jakarta last week told The Jakarta Post that an out of court settlement was still possible as long as the government could come up with a "convincing proposal".
Laksamana said that the government was now in negotiation with Cemex to seek the best possible solution to the case. Analysts have said the Cemex case could further undermine foreign investor confidence in the country.