Salim Group upset about constraints

Salim Group upset about constraints

JAKARTA (JP): Sudwikatmono, a key executive of the Salim
Group, the country's most influential business conglomerate,
expressed concern yesterday over increased government control of
the expansion of large businesses.

He said that the government's policy of seeking to slow the
expansion of companies with a market share of more than 50
percent was counterproductive.

"The move will not only cause losses to the state but will
also discourage foreign investments," he said in his response to
State Minister for Investment and Chairman of the Investment
Coordinating Board (BKPM) Sanyoto Sastrowardoyo's recent
statement on the government's new policy of seeking to restrict
the growth of Indonesia's widely-criticized business monopolies
and cartel operations.

In a hearing with the House of Representatives, Sanyoto said
this week that the government will no longer issue expansion
licenses for companies which have hold a market share of above 50
percent. He said the new policy was intended to limit
monopolistic activities.

"The policy should be exclusively enforced to those selling
all their products on the domestic market," Sudwikatmono said
following an annual shareholder meeting of PT Indocement Tunggal
Prakarsa and PT Indofood Sukses Makmur, the prime members of the
Salim Group.

Sudwikatmono, who is the president of the two companies, said
that if the policy was applied to companies which export part of
their products it would be counterproductive because, he said, it
would significantly hurt the competitive edge of those companies
in relation to overseas markets.

The Salim Group, through Indocement and Indofood, respectively
controls about 50 percent of the cement market and 90 percent of
market for noodle products.

Sudwikatmono acknowledged that the government had recently
turned down the Salim Group's proposal to build four new instant
noodle factories.

"We could say nothing about the government's rejection except
that the move would hurt domestic investment activity," he said,
adding that local investors whose applications to do business at
home would invest overseas in countries such as Vietnam and China
which, he said, also offer promising investment opportunities.

Acquisitions

Independent shareholders of Indofood unanimously approved
during yesterday's annual meeting the management's proposal to
take over the Bogasari Flour Mills, the country's largest flour
producer, from Indocement, its own principal company.

In a separate meeting yesterday, the independent shareholders
of Indocement, which owns 51 percent of Indofood, also endorsed
the internal acquisition worth about Rp 1.7 trillion (US$772
million).

The business move will allow Indofood to operate not only in
the manufacturing of processed food but also in the production of
its raw materials.

The approval of the independent shareholders on the takeover,
which will allow Indofood to control all the production lines of
instant noodles in the country, was needed to comply with the
capital market regulation in which the international acquisition
is subject to an approval of at least 50 percent of independent
shareholders.

Bogasari, acquired by Indocement from another member of the
Salim Group for only Rp 780 billion ($354 million) in July 1992,
is to be sold to Indofood for Rp 1.7 trillion ($772 million).

Eva Riyanti Hutapea, a director of Indofood, said that about
Rp 1.2 trillion of the acquisition cost would be financed by
loans to be arranged by Bank Central Asia (BCA), also a member of
the Salim Group.

"Rp 450 billion will be exchanged with Bogasari's liabilities
and another Rp 150 billion in the form of promissory notes," she
said, adding that the fairness of the transaction had been
assessed by Central Investment and Business Advisory and several
other local and overseas financial agencies.

Eva said that Bogasari, which operates two integrated plants
in Jakarta and Surabaya with a combined annual capacity of 2.3
million tons of flour, booked operational revenues of Rp 96
billion in 1994, rising from Rp 85 billion in 1993.

The shareholders of Indofood, which booked a 60 percent
increase in its consolidated after-tax profit to Rp 220 billion
last year, approved the management's proposal to pay cash
dividends of Rp 58 (2.6 U.S. cents) per share for its 1994
operation.

The annual meeting of Indocement's shareholders also agreed to
the distribution of dividends of Rp 120 (5.2 U.S. cents) per
share, about half what was paid in the previous year.

Indocement's consolidated after-tax profit rose 17.7 percent
to Rp 367.8 billion last year from Rp 312.4 billion in 1993.
(hen)