W. Sumatra denies seizure of cement firm

Adianto P. Simamora and Berni K. Moestafa, The Jakarta Post, Jakarta

Signaling that it was backing down from its controversial plan, the West Sumatra administration said on Monday that it had no intention of unilaterally taking over local cement-maker PT Semen Padang.

"There has been no expropriation of Semen Padang, the takeover statement is untrue," West Sumatra Governor Zainal Bakar told reporters after meeting with Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti and State Minister for State Enterprises Laksamana Sukardi at the finance ministry office.

Separately, the World Bank urged the government on Monday to immediately resolve the Semen Padang case, warning that the unilateral move by the West Sumatra administration could tempt other regions to take similar action with state companies.

"It's important that the government resolve this issue quickly," World Bank senior economist Vikram Nehru told reporters, pointing out that the central government must overrule the move by the provincial administration.

"Clearly, if this decision is allowed to stand then it will be a big blow to the privatization program of the government.

"It will lead to tremendous investor wariness and uncertainty about the future possibilities of privatization," he said.

The West Sumatra administration declared last week that it had taken over the local unit of state-owned cement maker PT Semen Gresik to protest the government's plan to sell a majority stake in the state firm to Mexico-based cement giant Cemex SA de CV.

The move was approved by the provincial council, saying that starting from Nov. 1, Semen Padang was temporarily under the control of the people of West Sumatra and had been transferred to the West Sumatra government.

The illegal takeover was strongly criticized, as it could have further damaged the country's reputation in the international business community and hampered the economic recovery process.

Analysts have said that the move was purely intended to protect the interests of certain members of the local political elite in retaining Semen Padang as their main cash cow.

Zainal declined to say much about the outcome of his meeting with the top economic ministers.

He said that the government had formed a special team to resolve the issue, and that the final decision was now in the hands of Dorodjatun.

But Zainal insisted that the West Sumatra demand for Semen Padang to be spun off from Semen Gresik remained.

Separately, the South Sulawesi government reiterated on Monday that it would not take over the operations of PT Semen Tonasa, another unit of Semen Gresik operating in the province.

"We will not follow West Sumatra's move, but we are firm in our demand to spin off Tonasa from Gresik," Syamsul Alambulu, a senior official in the South Sulawesi capital of Makasar and head of the spin-off team said, as quoted by Reuters.

However, he warned that an ultimatum was being prepared, giving the central government six months to spin off Tonasa.

"If the government fails, steps will be taken," Alambulu said. "But not in the form of taking over Tonasa unilaterally, because we understand how difficult it is for the government to settle this problem.

The local protest has hampered the government's effort to sell a 51 percent stake in Semen Gresik to Cemex via a put option (shareholder's contractual right to sell) that had to be extended from the initial Oct. 26 deadline to Dec. 14.

Cemex, the world's third-largest cement maker, already owns 25 percent of Semen Gresik.

The government had initially hoped to raise around $520 million from the Semen Gresik sale, which is some 80 percent of the government's 2001 privatization proceeds targets of Rp 6.5 trillion (about $634 million).

No proceeds have been collected from privatization as yet.

Elsewhere, Nehru would not speculate on whether the takeover moves would affect the outcome of this week's Consultative Group on Indonesia (CGI) donors' meeting.

The government is planning to request $3 billion to $4 billion in new loans to help finance the 2002 state budget deficit from the country's traditional donors.