Government to settle Cemex dispute

Government to settle Cemex dispute
Published: 14 December 2004

The new government aims to settle an investment dispute with Mexico-based cement producer Cemex SA in 42 days, in a bid to help maintain investors’ confidence in the economy, according to a report in the Jakarta Post. State Minister of State Enterprises Sugiharto said that resolving the protracted dispute straightaway was crucial, to show to the outside world that the new government is determined to uphold legal certainty and the sanctity of contract. "We plan to come up with a settlement to the dispute in 42 days since the setting up of a negotiation team for the problem last week," said Sugiharto on Monday.

Sugiharto refused to disclose what settlement options would be proposed to Cemex. But, according to sources at his office, it would include an option for the government to buy back Cemex’s ownership in state-owned cement firm PT Semen Gresik, spinning off the company’s units before allowing Cemex to control Gresik, and an option to allow Cemex to set up new cement factories if it agrees to sell back its shares in Gresik to the government.

Cemex has launched a law suit against the government for failing to execute a 1998 investment deal, under which the company was entitled to eventually become a majority shareholder in Semen Gresik after acquiring a stake of more than 25 percent in the East Java-based company six years ago. To avoid a costly legal battle, the government has since proposed several options to settle the dispute out of court. The previous government failed to reach an out-of-court settlement with Cemex.

Sugiharto also stressed that all information about the settlement of the Cemex case should be derived from him as the authorized official for managing state enterprises, and to avoid confusion in the public over different statements made by other officials. "I have asked Coordinating Minister for the Economy Aburizal Bakrie to coordinate the economic ministers and to read ’the same page’ over the settlement of the dispute to avoid dissension in the future," he said.

As previously reported, Aburizal told the press that the government was considering allowing Cemex to increase ownership in Semen Gresik to up to 51 per cent, a statement quickly challenged by Sugiharto, who said that the government should avoid foreign control of the country’s crucial cement sector. Semen Gresik is Indonesia’s largest cement maker. He warned that if the government lost control of Semen Gresik to foreigners, future cement prices could easily escalate as the government could no longer use the company to balance pressure for price increases launched by other cement firms already controlled by foreigners. The government currently controls a 51.01 per cent stake in the publicly listed Gresik. The investing public holds a 23.46 percent stake.