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)