Makassar – The authority of central government was challenged afresh as the South Sulawesi House of Representatives (DPRD) issued a statement rejecting a plan to sell PT Semen Tonasa, a local subsidiary of publicly listed, state-owned cement producer PT Semen Gresik Tbk., to Mexican cement company Cemex S.A. under a put option (shareholder's contractual right to sell).

The statement also demanded the administration of President Megawati Soekarnoputri implement its plan to spin off Semen Tonasa from PT Semen Gresik Tbk. "The decision was taken on November 12 during a plenary meeting attended by all factions as a manifestation of our response to the people's aspirations," South Sulawesi DPRD Deputy Kallo Bandoso told The Jakarta Post on Wednesday.

Earlier, legislators in West Sumatra province endorsed the local administration's move to take over a local plant of PT Semen Gresik, PT Semen Padang, to prevent the central government from selling the factory to Mexican cement producer Cemex S.A., which now controls 25 percent of PT Semen Gresik.

The government is tied into a put option with Cemex S.A., under which the former was to sell 51 percent of its shares in PT Semen Gresik by October 26, but was forced to delay it until December 14 due to strong opposition from lawmakers and local people. Failure to sell its shares would not only deprive the government of much-needed cash but also badly hurt investor confidence.

Kallo said the South Sulawesi demand for the spin-off and rejection of the put option were already final. "The stance of council members is very clear; the decision was taken via democratic processes, thorough examination of various aspects and in the interests of South Sulawesi people," he said.

The decision of the South Sulawesi council to reject the central government's plan to sell PT Semen Tonasa is a direct challenge to Megawati's administration, which is struggling to cover the budget deficit by privatizing state-owned enterprises and disposing of assets under the control of the Indonesian Bank Restructuring Agency (IBRA).

The government has targeted 6.5 trillion rupiah from privatization and 27 trillion rupiah from the sales of IBRA-held assets to cover the budget deficit, which is expected to account for 3.7 percent of gross domestic product in 2001. To date, the government has received 19 trillion rupiah from selling IBRA-held assets, while not a single cent has been collected from privatization.

Kallo said the decision was based on a statement issued on November 2 by all regents and chairpersons of local legislative assemblies in South Sulawesi province demanding the spin-off, and on a letter from South Sulawesi DPRD submitted to the central government on March 20, 2001.

Kallo added that the council would examine the consequences of supporting the spin-off and rejecting the put option by involving the South Sulawesi administration and related parties, including PT Semen Tonasa and the South Sulawesi people.