Investors want cement price reference removed

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)