Govt warned not to cancel Semen Padang's spin-off

Govt warned not to cancel Semen Padang's spin-off

JAKARTA (JP): State cement producer PT Semen Padang has urged
the government to go ahead with plans to spin off the Semen
Padang unit from the Semen Gresik holding company, in fear that a
reversal might trigger strong reactions from people in West
Sumatra.

Semen Padang president Ikhdan Nizar warned that the people in
the province of West Sumatra would be very upset if Semen Padang
lost its status as a state company.

"They are likely to react harshly," Ikhdan said when asked
what would happen if the government reversed its decision to spin
off Semen Padang from the Semen Gresik Group (SGG).

He was responding to local media reports quoting several
economists as saying on Wednesday that spinning off Semen Padang
would be a major setback to attracting foreign investment.

The government plans to spin off Semen Padang from Semen
Gresik to allow Mexican-based cement producer PT Cemex Indonesia
raise its stake in Gresik after people in West Sumatra opposed
Cemex's plan.

Ikhdan urged the government to keep its promise to the West
Sumatra people in not letting Semen Padang fall into foreign
hands.

"For the people of Padang, the biggest ethnic group in West
Sumatra, this is a matter of pride," he said.

According to him, when rumors abounded that Cemex would become
SGG's majority shareholder in 1998, locals began blockading Semen
Padang's production facilities.

He said the government managed to prevent the situation from
worsening, only after it promised that Cemex would remain a
minority shareholder.

Asked whether locals could turn violent again, he said,"I
don't know, you can try (their reaction) if you dare."

Local protests against companies can turn ugly such as in the
case of pulp producer PT Indorayon Utama near Lake Toba in North
Sumatra.

Indorayon was forced to shut down both of its pulp and rayon
plants in 1998 after strong protests from locals that their
operations damaged the environment.

Violent clashes between locals and security personnel added to
the resentment locals harbored against the company.

Indorayon has remained closed until today even though the
government has allowed it to reopen its pulp plant.

"I just want to operate in a safe and peaceful environment,"
Ikhdan added.

Locals in West Sumatra claim that Semen Padang's plant
occupies their ancestors land, for which they have never received
compensation.

The people of Padang, Ikhdan said, were not demanding a share
in the company, nor was their local government.

"Their (locals) idea of a state company is a company that is
owned by the state and the public," he explained.

Ikhdan said that personally he thought spinning off Semen
Padang would bring the company greater economic benefits.

In 1995 the government merged Semen Padang, PT Semen Tonasa
and Semen Gresik into SGG, to break the virtual oligopoly of
private cement producers in the domestic market.

Ikhdan said during that time, the government regarded cement
as a strategic commodity, thereby subject to regulated trading.

But the government later revoked the strategic product status
of cement, thus allowing the commodity to be freely traded, he
said.

"There is no reason anymore for us (SGG) to remain one (a
strategic commodity); let the free market handle competition, it
is in line with the IMF (the International Monetary Fund)," he
said.

So far, he said, Semen Padang's growth was impeded by SGG's
policy not to allow their markets to overlap.

He also dismissed Cemex's important role in raising Semen
Padang's global competitiveness, saying that becoming a global
player was not his priority.

"Cement is a bulky and cheap product. It's high transportation
costs make it rather commercially unfeasible as an international
commodity. A cement mill therefore must serve its nearest market
to remain competitive," he explained.

SGG is 51 percent owned by the government, 25.53 percent by
Cemex, and 23.46 percent by the investing public.(bkm)