The Indonesian government has not yet responded to Cemex SA’s decision to sell its stake in state-owned cement maker PT Semen Gresik (SG) to Rajawali Group, as it is still looking for ways to allow local administrations to have some of the shares.
Vice President Jusuf Kalla told reporters Friday that the State Ministry for State Enterprises was still evaluating the offer and would come up with a comprehensive approach.
Mexican-based Cemex recently signed a conditional sales and purchasing agreement with local investor Rajawali Group to sell its 24.9 percent stake in SG for US$337m. But the transaction is still subject to government approval since the government is the majority shareholder.
Kalla’s statement came following reports last week quoting a source saying State Minister for State Enterprises Sugiharto had requested that Rajawali, controlled by Peter Sondakh, allocate 14 percent of the SG shares to firms owned by the local governments of West Sumatra, East Java and South Sulawesi.
However the Govt’s latest move has not only drawn criticism, but also appears unfeasible due to time constraints. One obstacle is that local governments first need to obtain the approval of local lawmakers and the Ministry of Finance in order to use local administration budgets to finance the purchase of the SG shares. This is a lengthy process that is unlikely to be completed within five days.
In fact, the Secretary of the State Ministry for State Enterprises, M. Said Didu, warned his boss and other top government officials to be very careful in handling the Cemex-Rajawali transaction, as the success of the deal is key to making Cemex drop its arbitration case. The cash-strapped government may have to pay millions of dollars in compensation for Cemex if it loses in court.
"The government should, simply put, stop meddling in the business-to-business transaction between Cemex and Rajawali," said legislator Dradjad H. Wibowo of the National Mandate Party (PAN). "Don’t try to mess up this deal as it is the government itself that will benefit most from avoiding international arbitration."
Economist Faisal Basri of the University of Indonesia strongly criticized the apparent attempt to share out the Cemex stake with local government firms, and questioned the benefit of this to SG and the cement industry as a whole.
"We may be justified in suspecting that this is in reality a ploy to use the regional enterprises as mere puppets," he said.
"It may very well be the case that private firms that the government prefers to gain control of the Cemex shares are actually pulling the strings."
If this were the case, Faisal said, the cement industry could come under the control of a disguised cartel at the expense of the public, and the local government firms involved might well end up having to use local budget funds to cover any losses made by SG. "If the government is trying to nationalize and control a particular industry because of vested interests, this is just plain wrong," he said. (main reporting from Jakarta Post).