Semen Gresik union wants government maintain majority stake

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.