Ministers divided over controversial Cemex plan
Rendi A. Witular, The Jakarta Post/Jakarta
State Minister for State Enterprises Sugiharto opposed plan by chief economic minister Aburizal Bakrie to allow Cemex SA controls a majority stake in state-owned cement producer PT Semen Gresik, in what could be seen as the first sign of crack within the economic team of the new government.
Sugiharto said on Tuesday that the government should avoid foreigners to control the country's crucial cement sector.
"If Cemex manages to take majority shares in Semen Gresik, 92.6 percent of our cement production will be controlled by foreigners. This is not good for the public, and may hamper the government's planned infrastructure projects," he told lawmakers during a hearing with the House of Representatives Commission IV on trade, industry and state enterprises.
He was responding to questions from lawmakers after Coordinating Minister for the Economy Aburizal Bakrie told reporters on Monday that the government was considering to allow Cemex, Mexico's cement giant, to own up to 51 percent stake in Gresik, Indonesia's largest cement producer, as part of an out of court settlement over a long-standing investment.
News of the plan increased the share price of Gresik on the Jakarta Stock Exchange by 7.5 percent to a five-year record high.
Aburizal saw the plan as the most feasible option to avoid a costly court battle with Cemex, which had sued the government for failing to execute a 1998 investment deal, underwhich Cemex was entitled to eventually become a majority shareholder after acquiring more than 25 percent stake in the East Java-based company six years ago.
But Sugiharto warned that if the government lose control of Gresik to foreigners, future cement price could easily escalate as the government could no longer use Gresik to balance pressure for price increase launched by other cement firms already controlled by foreigners.
"Vice President Jusuf Kalla has clearly instructed to prevent cement cartel operating in Indonesia. If these foreigners decided to export all of their cement, and abandon local demand, we will be finished," he said.
The government currently controls a 51.01 percent stake in the publicly listed Gresik. The investing public holds a 23.46 percent stake.
Opposition towards Aburizal's plan also came from the Commission VI, which in its conclusion urged the government to maintain a 51 percent stake in Semen Gresik at all costs.
"We just cannot bear losing Semen Gresik. We should learn from the mistake made by the Philippines and South Africa when opening their cement industry to foreigners and now they are being controlled by cement cartel," said Didik J. Rachbini of the National Mandate Party (PAN).
Concern over invasion of foreigners into the local cement industry and the emergence of a cartel comes as German cement firm Heidelberg is now already the major shareholder of PT Indocement Tunggal Prakarsa, while Swiss-based Holchim and French cement company Lafarage, respectively are the main shareholders of PT Semen Cibinong and PT Semen Andalas.
With the government's plan to develop more infrastructure projects in the near future, the country's cement industry looks like becoming a lucrative prospect, with demand expected to grow by at least 12 percent.