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.