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21 February 2010

Indonesia: State firm to lead cement holding company

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Indonesian government has decided to appoint state-owned Semen Gresik Group to lead a holding company of state-owned cement producers that is expected to enter the bourse later this year, the Jakarta Post reported.

State-Owned Enterprises Minister Mustafa Abubakar said Friday the ministry was in the midst of preparing legal producers for the establishment of the holding company with Semen Gresik as the lead.

Previously the government said it was opting between creating a new company to lead all existing state cement producers or appointing Semen Gresik as the lead company.

With the new decision, the Semen Gresik Group will be a parent to PT Semen Gresik in East Java, PT Semen Padang in West Sumatra, PT Semen Tonasa in South Sulawesi, PT Semen Baturaja in South Sumatra and PT Semen Kupang in East Nusa Tenggara.

The combination of the five companies controls more than 50 percent of the country's market share. Semen Gresik forecasts that national demand will grow at between 5.5 and 6 percent this year as the government expects to start some of its infrastructure projects.

"If Semen Gresik will be at the lead, the company will focus more on investment and expansion of the holding company," Mustafa said, signaling that factories under the company would be managed by its subsidiaries.

Mustafa said one of the main priorities of the holding company would be to revitalize Semen Kupang and Semen Baturaja, which had been underperforming over the past few years.

The plan to establish a holding company for cement producers is part of the government's plan to streamline state firms and make them more efficient. The government plans to establish holding firms for state-owned fertiliser producers, plantation operators, mining companies, banks and shipping services providers.

The initiative to create the holding companies, except for the holding of state banks, was supposed to be completed in 2009 because of problems such as costly producers and pending approvals from legislators.

The ministry argues that huge tax amounts for mergers and acquisitions is the main challenge for streamlining state firms.

Semen Gresik, for example, has estimated the plan would cost about 3 trillion rupiah ($324 million) in taxes.


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