Mexico's Cemex may drop hub plans in Indonesia

Mexico's Cemex may drop hub plans in Indonesia

JAKARTA (Reuters): Mexican cement giant Cemex has warned it might drop plans to base its Southeast Asian operations in Indonesia unless the government acts decisively on allowing it to take over a local producer in which it has a 25 percent stake.

"If no decision is made soon, the first thing we have to do is to move the headquarters out of Indonesia. Now it's the government's call," Francisco Noriega, the head of Cemex's Indonesian operation, told Reuters.

The move would be a major blow to Indonesia, which is struggling to attract foreign investors still scared by the country's myriad economic and political problems more than three years after the Asian financial crisis struck.

Cemex, which is seeking majority ownership in PT Semen Gresik from the current 25 percent, made an agreement with Jakarta more than two years ago to increase its shareholding under the government's privatization plan.

Gresik is Indonesia's largest cement producer and 51 percent owned by the government

"Cemex was invited by the government to invest in Semen Gresik. What the government offered to us was to sell its majority stake so we can control it and because we want to make a lot of investment in the company," Noriega said.

But that planned acquisition has been blocked, mainly because of protests from employees in West Sumatra at Gresik's Semen Padang unit, who feared foreign ownership.

Semen Padang contributed 36 percent of Semen Gresik's total sales volume in January-October and the largest export volume.

"I hope the government can soon come up with a proposal regarding the selling of the additional shares and that the proposal represents a win-win solution for all the parties," said Noriega.

He said Cemex would give Indonesia until December 31 to make a formal proposal.

"The decision can be made before the end of the year if the government is committed," he said.

Cemex, the world's third biggest cement producer, is on the prowl for purchases in Asia and plans to fund the Semen Gresik deal through an initial public offering of its Spanish Valenciana unit, expected in the next 15 months.

Cemex said part of its plan for majority ownership in Semen Gresik did not include divesting stakes in Semen Padang -- a key concern of its workers in West Sumatra.

"We came here to buy a company with three companies (subsidiaries) and now we've been forced to consider alternative measures. It's not the first time the deal has been changed," Noriega said.

President Abdurrahman Wahid in May approved a plan to spin off Semen Padang first in a bid to allow Cemex to increase its stake in Semen Gresik, but no decision has been made.

Parliament has also suggested divesting stakes in another Gresik unit, PT Semen Tonasa, but Noriega played down the prospect and analysts say it is unlikely.