Thu, 12 Feb 2004

Govt tries to stop Cemex exit

The Jakarta Post, Jakarta

The government said it will try to prevent Mexican-based cement giant Cemex SA from leaving the country by offering a settlement to resolve a protracted dispute over the company's investment in this country.

"I cannot reveal what option the government will take now, because it is confidential. For sure, we will try to offer Cemex a lucrative solution, so that they don't leave the country," State Minister of State Enterprises Laksamana Sukardi said on Wednesday.

Rumors are circulating that Cemex may leave the country after facing difficulties in carrying out its investment plans.

Laksamana, speaking after a hearing with the House of Representatives Commission IX for finance, said the country's image would be tarnished if Cemex decided to pull out.

He added that the government was now in the process of preparing a team of legal advisors to handle the arbitration case at Washington-based International Center for Settlement of Investment Disputes (ICSID), while investigating options for an out-of-court settlement.

The dispute between the government and Cemex centers on its being unable to acquire a controlling stake in state-owned PT Semen Gresik, Indonesia's third largest cement maker.

Cemex acquired a 25.50 percent stake in Gresik in late 1998, when the government agreed to provide Cemex with an option to increase its ownership to a maximum 51 percent by 2001.

But efforts by Cemex to acquire a majority stake in Gresik could not be realized due to strong opposition from Gresik's West Sumatra-based subsidiary PT Semen Padang and provincial administration, and the government has thus retained its 51 percent stake in publicly listed Gresik.

After years of trying unsuccessfully to resolve the dispute, Cemex filed a litigation against the government with ICSID late last year.

Under ICSID rules, the losing party, besides paying an award to the winner as determined by the tribunal, must reimburse all arbitration costs borne by the winning party.