Investors want cement price reference removed

JAKARTA (JP): Investors planning to set up cement plants in Indonesia suggested yesterday that the government abandon the use of local references on the pricing of cement.

"Let the market mechanism decide cement prices at market places in order to attract investment in the cement industry," a director of PT Semen Gombong, Hitler Singadinata, said in a hearing with the House of Representatives's Commission VI, which oversees industry, mining, manpower and investment.

Singadinata, together with executives of companies planning to set up cement plants in Indonesia, was invited by the Commission to have a hearing due to its concern that 23 companies, which have received approval from the Investment Coordinating Board to make investments in the cement industry, have not started the construction of their projects.

The executives attending yesterday's hearing represented PT Eraska Semen Indonesia, which plans to construct a cement plant in Boyolali, Central Java; PT Semen Gombong, in West Java; PT Djajanti Djaja Semen in Maluku; and PT Semen Bosowa Maros in Maros, South Sulawesi.

"The introduction of a price reference makes it difficult for small-scale cement producers to make profits," Hitler said.

Under the newly-revised local price reference, the cement price in Java, for example, is set at Rp 7,460 per 40-kilogram sack.

During yesterday's hearing, the cement investors also suggested that the government offer incentives to companies establishing cement plants in eastern provinces, such as the introduction of low-interest rate loans.

A commission member, Iskandar Manji, said yesterday that he was opposed to the lifting of the price reference because such a move would result in tighter competition after the establishment of new cement plants in the coming years.

Iskandar said that, according to available data, there will be an addition of 25,8 million tons in Indonesia's annual production capacity by 1998.

Indonesia currently has a total cement production capacity of about 24.2 million tons. (31)