Minister confirms Cemex legal battle over

Minister confirms Cemex legal battle over

Rendi A. Witular, The Jakarta Post/Jakarta

State Minister of State Enterprises Sugiharto has announced that
Mexican cement giant Cemex SA agreed to suspend its lawsuit
against the government and to accept an out-of-court settlement.

Sugiharto made the official announcement on Friday to amend
last week's comment by Coordinating Minister for the Economy
Aburizal Bakrie, who said the government and Cemex had reached
terms for negotiation, including not to continue the legal
proceeding scheduled for Jan. 11.

"After lengthy and complicated negotiations, we arrived at a
deal to temporarily halt the legal battle, unless Cemex disagreed
with our options for settling the dispute," Sugiharto said.

The dispute arose when the government failed to fulfill its
side of an investment deal signed in 1998. Under the deal, Cemex
was to acquire majority control in state-owned cement producer PT
Semen Gresik, but a subsidiary in West Sumatra, PT Semen Padang,
protested the arrangement.

The subsidiary company, along with local politicians, opposed
the plan, fearing foreign domination of the cement industry.

Cemex countered by filing a lawsuit with the International
Centre for the Settlement of Investment Disputes.

The government has thus been under pressure to resolve the
dispute quickly to help restore investor confidence and to avoid
paying huge penalties.

Sugiharto said the suspension of legal proceedings was part of
the government's requirement to protect itself against any
possible legal threats from Cemex during negotiations over the
out-of-court settlement.

"Negotiation is only possible if Cemex is not pointing its gun
at us. There should be mutual goodwill to settle the protracted
dispute... I expect it to be settled by this month," he said.

The government has offered six out-of-court options to Cemex,
including a buy-back mechanism, in which the government will
purchase Cemex's 25.5 percent stake in Semen Gresik. After
selling off Gresik's subsidiaries -- PT Semen Tonasa and PT Semen
Padang -- it will allow Cemex to retake control of Gresik.

Another option is to allow Cemex to build new cement factories
in the country to help meet the rise in demand expected from the
government's plan to break ground on massive infrastructure
projects this year.

Sugiharto declined to elaborate on the four other options, but
reiterated that the government would retain its 51 percent stake
in Semen Gresik at all costs and would not pay any compensation
to Cemex because of its limited budget.