Semen Gresik sale to continue as planned
JAKARTA (JP): The bidding process for state-owned cement maker PT Semen Gresik will continue as scheduled although its subsidiary PT Semen Padang may have to be excluded from the sale in the wake of last week's protest by West Sumatran community leaders, State Minister of the Empowerment of State Enterprises Tanri Abeng said yesterday.
"The deadline for the second bidding stage remains August 19," he told reporters yesterday following a seminar on privatization.
He explained that after completing the bidding process, the government would sit together with the winning investor to formulate a new "strategy" that would be acceptable both to the investor and the government.
Such a compromise is also expected to accommodate the aspirations of the Sumatran people who strongly objected to the privatization, which will allow foreigners to become a majority shareholder of Semen Padang, a wholly owned subsidiary of Semen Gresik, he said.
"I admit that this will not be easy," Tanri said, but added that the modification would not confuse the foreign investor because it would be based on good intentions.
"The modification can be communicated as long as it is done with good intentions. We will not cheat or make profit unilaterally. Good faith in business is very important," he said.
He added that the foreign investor would have a long-term business plan in Indonesia.
"I don't think they would mind losing money in the first two to three years," he said.
Germany's Heilderberger Zement AG, Switzerland's Holderbank, and France's Laferge Asia Pacific are competing in the second bidding stage to top the first price offer made last month by Mexico's Cemex SA de CV of US$287 million for a 35 percent stake in Semen Gresik.
The latter, however, has the right to top any new bid within five days after the second bidding stage is completed.
Under the initial plan, the winner would be allowed to purchase another 16 percent stake in the publicly listed Semen Gresik through a tender offer mechanism to become the majority shareholder.
Last week West Sumatran community leaders, who culturally lay claim to the land on which Semen Padang's facilities are located, demonstrated against the sale plans.
"The protest will not delay the privatization process although we'll have to make a modification that is acceptable to the public," Tanri said.
He declined to disclose the new alternatives but admitted the modification might include restructuring the ownership of Semen Padang to prevent foreign control of the company or releasing it from Semen Gresik, and retaining the government's majority ownership of the company.
Credibility
Pande Raja Silalahi, an economist at the Center for Strategic and International Studies, said that if Tanri failed to appease the public uproar against the privatization plan, investors would question the government's credibility.
"I think Tanri must make a courtesy call on the senior leaders of the West Sumatran people and let one of them become an adviser to Semen Gresik or allocate part of the sale proceeds for the community ," he said.
The government plans to divest part of its shares in 12 state- owned companies this fiscal year to raise $1.5 billion to help finance the state budget which is heavily burdened by the huge subsidy commitments to help the poor in surviving the current crisis.
Semen Gresik is the first to be privatized.
Tanri, however, stressed yesterday that the government would limit the number of companies being sold off this fiscal year because of the state of the capital market.
He said shares of state companies which are listed on the stock exchanges are mostly undervalued at present and their value should therefore be allowed to increase before the firms are sold off.
He cited that publicly listed international telecommunications provider PT Indosat's current market value of less than $1 billion would have to be boosted to around $2.5 billion before the government sold 20 percent to 30 percent of its shares.
"We can do this by restructuring Indosat in cooperation with the telecommunications regulator so that the company can have new incentives," he said.
"Through this kind of value creation strategy, we can get cash flow without selling more state assets," he said.
Indosat is one of the 12 state companies being prepared for further privatization.
Tanri also said that although the government had received some $14 billion in international aid to close its wide budget deficit, the $1.5 billion privatization proceeds were still needed.
He also said that the public should not be upset by the privatization because $1.5 billion represented less than 1 percent of the total assets of the country's 159 state-owned companies.
"It's peanuts," he said, adding that the privatization would help the crisis-hit country to restore the badly needed investor confidence.
"Foreign aid is politically driven, but inflows of privatization money are an indication that investor confidence has started to return," he said. (rei)