Padang, Tonasa spin-off setback to govt program

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)