Mexico requests special protection for investments
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Learning a hard lesson from what happened to global cement producer CEMEX back in the 1990s, the Mexican government has requested special protection for Mexican investments in Indonesia in order to ensure future engagement.
Speaking after a bilateral meeting with the Indonesian delegation on the sidelines of the third ASEAN-Latin Business Forum in Jakarta on Tuesday, Mexican Economic Minister Bruno Ferrari said negotiations were currently underway to draft a mutual agreement on investment protection.
Ferrari said the agreement was necessary to promote trade and investment relations with Indonesia as investors sought some level of certainty on their investments.
“These talks include how those investments, by individuals and by governments, can be secured if they invest here or if they invest there. That is why we also went to talk with the finance minister,” Ferrari told The Jakarta Post.
CEMEX decided to pull its investment from Indonesia in 2001 after the government failed to
honor an agreement made in 1998 on the divestment of the country’s largest cement producer, PT Semen Gresik.
CEMEX had bought 25.5 percent of shares in Gresik in 1998 with an option to increase its stake by up to 51 percent according to the agreement with the government, which at that time was under pressure from the International Monetary Fund (IMF) to privatize state companies.
Efforts by CEMEX to acquire more shares in Gresik could not be realized due to what the government claimed was strong opposition from the company’s West Sumatra-based subsidiary, PT Semen Padang, and the provincial
Negotiations between the government and CEMEX dragged on for years before the Mexican company took matters to the Washington, DC-based International Centre for Settlement of Investment Disputes (ICSID) in 2003.
In May 2006, CEMEX agreed to sell 24.9 percent of its Gresik shares to Indonesia’s Rajawali Group, owned by tycoon Peter Sondakh, for US$337 million. Sondakh made a fortune from his investment two years later when he sold 23.66 percent of the stake to investors at Rp 7,000 (73 US cents) a share and reigned in a total of Rp 9.8 trillion ($1.08 billion) — three times the value of his initial bid.
Gresik is now 51 percent controlled by the government, while the remaining shares are listed on the stock exchange. Company head of investors’ relations, Agung Wiharto, said 42 percent of the public shares are held by institutional foreign investors.
Ferrari said he expected the draft to be finalized next month and to be signed by the presidents of both countries in September or at the Asia Pacific Economic Cooperation leaders’ summit in Bali next year.
“There are many entrepreneurs looking for possibilities; as I say, this provides very special momentum for the relationship,” he said. He refused to say, however, whether the possibilities included the return of CEMEX to Indonesia.
On his trip to Jakarta, Ferrari was accompanied by a delegation of top Mexican business players, including Carlos Slim Domit, the son of Carlos Slim Helú, the world’s richest man according to Forbes in the last five years.
Trade Minister Gita Wirjawan told the Post that Domit was looking for opportunities to expand his telecommunications and media business to Indonesia. Domit is the chairman of diversified investment company Grupo Carso, and a board member of Teléfonos de Mexico (Telmex).
— Andi Haswidi