The labor union of state-controlled cement producer PT Semen Gresik (SG) will launch a massive strike if the government decides to hand over the company's Tuban, Java plants to Mexican cement giant Cemex SA.

The decision is one of six options being discussed by the government to solve the ongoing contract dispute with the Mexican company over its investment in SG.

The labor union assembly chairman Zubeir Halim said the strike had already been planned because the workers fear that "foreigners would dominate the cement market in Java, Bali and Kalimantan", giving them the power to control the price of the commodity.

"The Tuban plants supply 80 percent of market demand in Java, Bali and Kalimantan. We just can't stand to lose them," he told the House of Representatives' Commission VI for industry and trade on Thursday.

The hearing was also attended by SG's management team and a number of noted councillors from Gresik and Tuban, as well as local clerics and other prominent figures.

Zubeir said future cement price could easily escalate as the government could no longer use Gresik to balance pressure for price increases launched by other cement firms already controlled by foreigners.

Tuban councillor Nur Aziz claimed the residents in his district would also support and get involved in the protesting, unless the government dropped the option to sell the Tuban plants to Cemex.

"Tuban and Gresik councillors will also support the strike. If the government finally decides to sell the Tuban plants to Cemex, we will 'disturb' the operation of the company by all means," he warned.

The Gresik, East Java-based SG has three cement plants in Tuban, east of Surabaya, with an installed capacity of 7.5 million tons per year. SG plants in Gresik can no longer produce cement due to raw material shortages.

Sources at the Office of the State Minister of State Enterprises revealed that the option to buy the Tuban plants would likely be agreed upon by Cemex to settle its investment dispute with the government.

Despite possible asset losses, the government will still be able to retain majority control in SG, with the proceeds from selling the plants used to establish new cement plants in East Java.

However, SG marketing director Hasan Baraja reminded the hearing that setting up and operating a new cement plant would not be easy as it would take years for completion and eventual revenues.

"The option to sell the Tuban plants is not strategic and will cause long-term problems for SG's business," said Hasan.

The Cemex dispute emerged after the management of Gresik's subsidiary PT Semen Padang and local politicians opposed an option that allows Cemex to increase its shares in Gresik to a majority stake as stipulated by a legal investment contract in 1998.

Cemex took the case to the International Center for the Settlement of Investment Disputes (ICSID), demanding the Indonesian government to pay damages for not upholding its contractual obligations.

However, Cemex agreed to postpone the hearing at ICSID earlier this week, pending the completion of out-of-court settlement negotiations.

Elsewhere, SG independent commissioner Tjuk Sukiadi, demanded that SG management and the government be transparent on the options being offered in the negotiations to prevent any irregularities in the deal.

"We are suspicious that there is something "fishy" going on in the negotiations between the government and Cemex due to the lack of transparency during the process. We must be allowed to monitor them to prevent state losses," said Tjuk.

SG shares ended lower by Rp 1,500 to Rp 17,750 on the Jakarta Stock Exchange on Thursday.