Local lawmakers reject privatization

Local lawmakers reject privatization

The Jakarta Post, Makassar

The authority of central government was challenged afresh as the
South Sulawesi House of Representatives (DPRD) issued a statement
rejecting a plan to sell PT Semen Tonasa, a local subsidiary of
publicly listed, state-owned cement producer PT Semen Gresik
Tbk., to Mexican cement company Cemex S.A. under a put option
(shareholder's contractual right to sell).

The statement also demanded the administration of President
Megawati Soekarnoputri implement its plan to spin off Semen
Tonasa from PT Semen Gresik Tbk.

"The decision was taken on Nov. 12 during a plenary meeting
attended by all factions as a manifestation of our response to
the people's aspirations," South Sulawesi DPRD Deputy Kallo
Bandoso told The Jakarta Post on Wednesday.

Earlier, legislators in West Sumatra province endorsed the
local administration's move to take over a local plant of PT
Semen Gresik, PT Semen Padang, to prevent the central government
from selling the factory to Mexican cement producer Cemex S.A.,
which now controls 25 percent of PT Semen Gresik.

The government is tied into a put option with Cemex S.A.,
under which the former was to sell 51 percent of its shares in PT
Semen Gresik by Oct. 26, but was forced to delay it until Dec. 14
due to strong opposition from lawmakers and local people. Failure
to sell its shares would not only deprive the government of much-
needed cash but also badly hurt investor confidence.

Kallo said the South Sulawesi demand for the spin-off and
rejection of the put option were already final.

"The stance of council members is very clear; the decision was
taken via democratic processes, thorough examination of various
aspects and in the interests of South Sulawesi people," he said.

The decision of the South Sulawesi council to reject the
central government's plan to sell PT Semen Tonasa is a direct
challenge to Megawati's administration, which is struggling to
cover the budget deficit by privatizing state-owned enterprises
and disposing of assets under the control of the Indonesian Bank
Restructuring Agency (IBRA).

The government has targeted Rp 6.5 trillion from privatization
and Rp 27 trillion from the sales of IBRA-held assets to cover
the budget deficit, which is expected to account for 3.7 percent
of gross domestic product in 2001. To date, the government has
received Rp 19 trillion from selling IBRA-held assets, while not
a single cent has been collected from privatization.

Kallo said the decision was based on a statement issued on
Nov. 2 by all regents and chairpersons of local legislative
assemblies in South Sulawesi province demanding the spin-off, and
on a letter from South Sulawesi DPRD submitted to the central
government on Mar. 20, 2001.

Kallo added that the council would examine the consequences of
supporting the spin-off and rejecting the put option by involving
the South Sulawesi administration and related parties, including
PT Semen Tonasa and the South Sulawesi people.