Jakarta – Jakarta will maintain the status quo on a local government's unilateral takeover of a major cement firm's affiliate, Home Minister Hari Sabarno said Thursday.
"For the time being, it will remain on a status quo, meaning it will not be spun off nor a put on a put option," Sabarno said after attending a ceremony at the Negara Palace. "The important thing is that the plant can still operate and provide benefit to the local government," he added.
The West Sumatran parliament issued a decree last week saying the people of the province had taken over Semen Padang pending a spin-off from Semen Gresik, its state-controlled parent company.
The government was supposed to sell its 51-percent stake in Semen Gresik to Mexican cement giant Cemex SA de CV, which already holds a 25-percent stake, by October 26. The sale was delayed on opposition from the parliament and the regions. A new deadline of December 14 has been set. The local authorities want Semen Padang to be turned into a state company and remain in Indonesian hands.
The move further jeopardised Indonesia's already floundering privatisation prospects and prompted a warning from the World Bank on Monday that provinces elsewhere would replicate the takeover attempt.
The World Bank's chief economist in Jakarta, Vikram Nehru, has urged Jakarta to overrule the takeover attempt and immediately press ahead with the sale, or risk creating "tremendous investor wariness and uncertainty" towards future sell-off attempts.
Local leaders in South Sulawesi, the home of another affiliate, PT Semen Tonasa, have been pressing the administration there to follow West Sumatra's suit, also demanding Tonasa's spin-off from Semen Gresik.
In a briefing report prepared for Indonesia's key donors ahead of their annual meeting this week, the World Bank said Jakarta must complete the sale of Semen Gresik by the end of the year. It warned creditors were "becoming increasingly wary of pledging support for policy reform when the track record gives little comfort."
Jakarta is seeking around 3.5 billion dollars from the Consultative Group on Indonesia donors to plug the 2002 budget deficit.