Multinationals eye local cement firms
JAKARTA (JP): A senior governmental official warned of multinational companies' possible domination of the country's cement industry, saying that such a situation could severely hurt the government's infrastructure development program.
Director general of chemical, agriculture and forest product industries at the Ministry of Industry and Trade, Gatot Ibnusantosa, said on Wednesday he feared that multinational companies would one day "monopolize" the country's cement industry given their current aggressive efforts to acquire the country's ailing cement firms.
Once the multinational companies dominate the industry, he warned, they will control cement prices in the domestic market.
"The government fears that the foreign investors will set prices as they like, which could hurt the country and its people," Gatot said following a hearing with the House of Representatives' Commission V which deals with industry and trade affairs.
Gatot said that, currently, foreign investors control 35.6 percent of the domestic market's cement supplies, through majority shares in PT Semen Andalas and PT Indocement Tunggal Perkasa.
He then added that foreign investors could increase their control of the domestic market to 95 percent in the near future if they managed to acquire stakes in another two local cement companies.
Local cement companies already controlled by foreign investors are PT Semen Andalas, which is 71 percent owned by French firm Lafarge, and PT Indocement Tunggal Prakarsa, which is 61.7 percent owned by Kimmeridge Enterprise Pte. Ltd, a subsidiary of German cement giant Heidelberg.
Semen Andalas controls 2.6 percent of the domestic market and Indocement 33 percent, according to Gatot.
Another two companies now targeted by foreign investors are PT Semen Gresik Group and PT Semen Cibinong which respectively contribute 38 percent and 20 percent of the country's cement supplies.
On Tuesday, shareholders of Semen Cibinong approved management's plans to write off the company's deposits worth over US$250 million. The write-off will pave the way for Swiss-based Holderbank Financiere Glaris Ltd. to expand its stake to 75 percent from the present 12.5 percent.
Mexican cement producer PT Cemex Indonesia is also reportedly interested in raising its stake in state-owned PT Semen Gresik to a controlling stake from the current level of 25 percent.
"If the foreign players succeed in acquiring the two cement firms, about 95 percent of the country's cement industry will be under their control," Gatot warned.
In such a situation, the government would be unable to set prices at low levels and foreign players would have greater freedom to set their own prices.
"An increase of $1 per bag in the price of cement would result in an increase of up to $480 million per year in the government's expenditure on infrastructure development," Gatot said.
In order to increase domestic prices, the foreign investors will boost their exports, Gatot said. (03)