Padang, Tonasa spin-off setback to govt program

JAKARTA (JP): The spin-off of PT Semen Padang and PT Semen Tonasa from publicly-listed PT Semen Gresik will be a major setback to the government's state enterprises development plan, experts have said.

Economist Faisal Basri said on Wednesday that if the government decided to separate the two companies from Semen Gresik, it would only heighten possibility of the companies being used as a political vehicle.

"The government is promoting greater transparency, greater public ownership in state enterprises, so why does it want to bring it back to a government-controlled company," he said in a seminar about the Semen Padang and Semen Tonasa spin-off.

Faisal said a government-controlled company was a ripe field for practices of corruption, collusion, and nepotism, and that they were exactly the kinds of features that the government wished to banish.

Another economist, Didiek J. Rachbini, also said that the plan was a major setback to the government's objective to attract foreign investors into the country to help heal Indonesia's ailing economy.

He said that a spin-off would ruin the chances of increasing the amount of foreign investment, as investors would question how far members of Indonesia's political elite could influence the business climate.

Didiek said that investment conditions in Indonesia had now reached a level where potential investors were no longer questioning the desirability of Indonesian investment, but of its feasibility.

"The government should have boosted investor confidence to a higher level. With a spin-off it would unfortunately be a step backwards," he said in the seminar.

Faisal said that he saw the spin-off suggestion to be mainly a game of politicking, and nothing to do with Semen Gresik's business at all.

"It wasn't even clear who came up with the idea in the first place. Was it the government? The provincial administration? Or was it the local people's aspirations?" he said.

Faisal said that if the problem was due to the fact that Semen Padang didn't provide many financial benefits to West Sumatra administration, then the local government should take the complaint to central government.

"Semen Padang pays a certain amount of money in taxes to the government. What the government gives back to the provinces is really not the company's concern," he said.

"If the problem is because the factory stood on ancestral land, then the people should ask for compensation instead of taking over the company," Faisal added.

Semen Padang of West Sumatra and Semen Tonasa of South Sulawesi merged with East Java's Semen Gresik in 1995 to boost production efficiency.

In 1998 the government sold 14 percent of the cement group's shares to Mexico-based cement producer Cemex, which later raised its ownership through the market to 25.53 percent.

However, the local community of West Sumatra and South Sulawesi late last year demanded Semen Gresik to spin off its subsidiaries Semen Padang and Semen Tonasa after the government gave a greenlight to Cemex's proposal to own a majority stake in Semen Gresik Group.

At present, the government holds 51.01 percent in the cement group, the investing public 25.53 percent and Cemex the remainder.

Separating Semen Padang and Semen Tonasa from Semen Gresik is not so simple.

Law expert Erman Rajagukguk said that the spin-off should be approved by shareholders in a special meeting, where about three quarters of the shareholders are obliged to attend, and another three quarters to agree.

"Furthermore, because there would be a reduction of capital, the action has to also be acknowledged by its creditors, who could take the matter to court if they refused," Erman said.

Semen Gresik finance director Satriyo said that the company was still waiting for the government's final decision on this, saying that, as far as he knows, the government hasn't a clear plan on how to carry out the spin-off.

"But we are prepared for whatever decision the government makes," he said.

As for Cemex's position if the spin-off goes through, Satriyo said that he was sure the Mexican company wouldn't pull out of Semen Gresik. (tnt)