Semen Gresik union wants government maintain majority stake

The dispute between the government and Cemex SA of Mexico over Semen Gresik has been a protracted one. Semen Gresik's labor union is often portrayed as party hindering the settlement of the dispute. The Jakarta Post interviewed Suwandi, the union's secretary general, to find out the union's position in the dispute.

Question: Some parties have said that Semen Gresik's labor union does not represent all of the firm's employees because most of the union's leaders are actually executives of Semen Gresik. Is this true?

In accordance with the union's statute, the union's executives consist of two elements, i.e. those at the company level and at the unit level. At the company level, the union's executives for 2002-2005 total 41 people, ranging from department heads to operational employees. At the unit level -- we have 48 units -- the union executives total 96 people, many of them are in the levels of group heads and operational employees. These executives are elected every three years through a meeting involving all members -- currently we have 2,122 members. Therefore, the allegation that Semen Gresik's union does not represent all the workers because many of the union's leaders are executives of Semen Gresik is not true.

In addition, Semen Gresik's union is currently the only forum available for Semen Gresik's employees to meet outside of work following the disbandment of Semen Gresik's Civil Servant Corps. It needs to be understood that it is common practice that executives of labor unions in state enterprises consist both of white collar and blue collar workers. This is totally different situation from labor unions at private companies, where executives have separate unions from the blue-collar workers.

Question: The Indonesian government and Cemex are currently seeking an amicable settlement out of international arbitration over Semen Gresik. Meanwhile, Semen Gresik's labor union seems to have made moves to try and torpedo this effort. How does the union as a stakeholder see this problem and what is your position in the dispute?

Answer: Semen Gresik Union as one of the main stakeholders in the company -- if we define the stakeholders to include shareholders, people and customers -- realizes its position in this dispute between the government and Cemex and therefore, we are positioning ourselves outside it.

Accordingly, we the union have stated our position clearly. Firstly, we will not hinder the settlement process as long as it is pursued fairly, transparently, and does not compromise the interests of the state, public shareholders and other stakeholders. Second, we demand the government maintain its controlling stake of 51 percent at Semen Gresik and do not give the Tuban plants to Cemex as part of the settlement. Thirdly, we ask the government to be more confident and be serious in preparing itself should Cemex continue go back to international arbitration.

The problem started initially when the government, through then state minister of state enterprises Tanri Abeng planned in mid 1998 to sell 35 percent stakes at Semen Gresik to Cemex through a strategic sale. This plan met with a strong reaction from Semen Gresik employees who wanted the government to remain the majority shareholder. In the end, the government decided to sell only a 14 percent stake to Cemex, thus reducing the government shares at Semen Gresik from 65 percent to 51 percent.

The next problem emerged related to the Conditional Sale and Purchase Agreement signed by the government and Cemex. This agreement drew controversy because it put the government in a weak position, while Cemex, which is a minority shareholder, has a position equal to the majority shareholder. This agreement sparked some operational problems.

The problem worsened when then state minister of state enterprises Laksamana Sukardi announced that the government planned to exercise a put option by selling the government's remaining shares at Semen Gresik to Cemex. We, the union, conveyed our stance against the sale to the office of the state minister of state enterprises and the House of Representatives. Our stance received wide support, and in the end, the state minister canceled the plan to exercise the put option.

Then, on Dec. 10, 2003, Cemex filed a case with the International Center for the Settlement of Investment Disputes (ICSID) against the Indonesian government. What their demands are, remain unclear to us to this day.

Then, before the establishment of a negotiating team at the office of the state minister of state enterprises, Coordinating Minister for the Economy Aburizal Bakrie said in Santiago late last year that the government had offered the Tuban plants to Cemex as a solution to the dispute.

This statement drew protests from the employees of Semen Gresik and it led to efforts to gather support from various quarters, including from local leaders, local government and legislative councils as well as the House of Representatives, especially Commission VI and IX.

These efforts bore fruit with the cancellation of the plan to sign a memorandum of understanding between the government and Cemex during the Infrastructure Summit in January.

Nevertheless, Francisco Noriega of Cemex said that Cemex hoped to clinch a deal with the government before February 28.

This chronology shows the problem has existed since the entrance of Cemex in 1998. This could well have happened because there were errors committed when in handling this problem since the beginning. In addition, the core of the problem was not used as the main basis to find a solution.

If Cemex is unhappy with the situation and goes ahead with its move to go to the ICSID arbitration. How strong is the government's position in the dispute?

Since Cemex filed the case with ICSID in Washington, there has been no formal explanation from either Cemex or the government about Cemex's demands. Therefore, it is difficult to say how strong the position of the Indonesian government is.

Nevertheless, I could say that Cemex has had two commissioners and two directors at Semen Gresik since the beginning (1998). This means that Cemex is involved directly in the operations of the company, and therefore, when there are problems in the company -- for example the late completion of the 2002 and 2003 financial reports and spin-off demand from Semen Padang -- they are also responsible collectively.

Therefore, it is not right for Cemex to file a case to international arbitration. We the union are of the opinion that the government has a good chance to win this case if the government is confident and well-prepared.