West Sumatra rejects new Semen Gresik plan

The Jakarta Post, Jakarta

The West Sumatra people rejected the government's new plan for the sale of the state-owned cement producer PT Semen Gresik to Mexico's Cemex SA de CV, insisting that the local PT Semen Padang must first be separated from its parent, Semen Gresik.

The rejection was made during an abruptly held meeting on Saturday afternoon after the government had announced the new plan. The meeting was attended by provincial administration officials, members of the provincial legislative assembly and local informal leaders.

"The government has deceived and insulted the people of West Sumatra for not listening to their aspirations," said Faigi Asa, head of the Indonesian Democratic Party of Struggle (PDI-P) faction in the assembly.

Padang, the capital city of West Sumatra province, is the home-base of Semen Padang.

Faigi demanded the government unwind Semen Padang from Semen Gresik before selling the latter to Cemex.

"If there is no spin off by Dec. 14, we will take over Semen Padang. No more excuses from the central government," he said, referring to the deadline in the agreement the government has with Cemex to sell Semen Gresik.

The government announced on Friday that it would sell a 51 percent stake in Semen Gresik to Cemex, and use part of the proceeds to subsequently repurchase a majority of the shares in two subsidiaries: Semen Padang and PT Semen Tonasa.

The two units contribute half of the Semen Gresik group's production of 12.29 million tons.

The people of South Sulawesi, the home-base of Semen Tonasa, have also made similar demands to those of West Sumatra.

The protest by the local people has long been a major stumbling block in the government's efforts to privatize Semen Gresik so as to raise cash to help finance this year's state budget deficit. The government had to extend an earlier Oct. 26 deadline to sell Semen Gresik to Cemex to Dec. 14 due to the protest.

Under the new government plan, Cemex would end up as the majority owner of Semen Gresik with 76 percent of its shares, while the investing public would have 23 percent of the shares. Cemex already owns 25 percent of the shares.

Cemex and the public would still own 49 percent stakes in both Semen Padang and Tonasa through Semen Gresik.

Local economist at the University of Andalas, Azhar Makmur, said this indirect control of Semen Padang was the crux of the problem that made the plan unacceptable to the West Sumatra people.

In South Sulawesi, Arifuddin Saransi, a member of the provincial legislative assembly, said the new plan did not make any difference because Cemex would still have influence over Semen Tonasa's management.

The people of Padang have been the strongest in resisting the privatization of Semen Gresik.

Arguing that Semen Padang was built on their ancestors' land, they demand that the company be spun off from Semen Gresik.

Groups claiming to represent the people of Padang have visited Jakarta frequently, urging authorities here to push ahead with a spin off.

Experts, however, warned of groups instigating such public campaigns to protect their interests, with one political observer noting that many state-owned firms had been treated as cash cows for political parties.

Meanwhile, West Sumatra Governor Zainal Bakar was strongly criticized during the Saturday meeting because he declined to take a clear stance on the issue. He argued that Jakarta had yet to formally brief him on the new plan.

The government said it expected to net around US$200 million from the new sale plan.

This compares to $520 million under the original deal with Cemex, which will expire on Dec. 14. The proceeds, if realized, should help to cover this year's state budget deficit.

Meanwhile, Cemex has so far declined to comment. A spokesperson at Cemex Indonesia said the company was preparing a statement, which she expected to be issued this week.

Meanwhile in Jakarta, Azwir Dainy Tara, deputy chairman of the House of Representatives Commission V, which among other things oversees state firms, described the new plan as an acceptable compromise.

He said a hearing with the government was due to be held this week to discuss Semen Gresik.

"The government has said they will make a decision on Semen Gresik with the approval of the House," Azwir said.

With this in view, he said Commission V members planned to visit Semen Gresik, Semen Padang and Semen Tonasa.