RoI Government welcomes Mittal

August 9th, 2008 alaksir Posted in Indonesian news in English |

Click here for the original article in Indonesian

Jakarta, 27 July 2008 - Indonesian Ministry for State-Owned Companies welcomes Archelor-Mittal’s entry to the country’s steel industry through its planned greenfield investment in Banten province.

The steel giant’s entry will increase competition in Indonesia’s steel industry, which is currently dominated by government-owned PT Krakatau Steel (PTKS).

"If Mittal wants to build a steel industry here, it will be a good thing. PTKS will have competition then. Competition is beautiful. If you look at Pertamina (Indonesia’s state petroleum company), their performance is continuing to improve after Shell and Petronas came in," said Minister for State-Owned Companies Sofyan Djalil to journalists in Jakarta last weekend.

Mittal, whose previous plan to acquire PTKS was met with rejection, recently stated its intention to develop steel facilities in Indonesia. One of the company’s future facilities will be built near PTKS’ manufacturing complex in Cilegon, Banten, and it will deal not only in downstream steel industry but also upstream.

This is what Minister Sofyan is welcoming, as it will encourage monopolist PTKS to be more competitive and more efficient.

In addition, he said that Mittal will be able to fulfill steel demand that PTKS currently cannot meet. "It will really help solve the problem, especially that they plan to build the facility next to PTKS," said Sofyan.

Sofyan added that a new investment in steel industry will be an acknowledgement of the high potentials in the the Indonesian market, such that Mittal’s failed bid into PTKS is transformed into a greenfield investment. That’s why the plan deserves a warm welcome, not only by the government, but also by PTKS.

The government and the parliament previously decided to privatize PTKS through an IPO. The plan is for PTKS to offer its shares to the public in stages. When market conditions are favorable, PTKS will be allowed to sell its targeted 40% shares.

The plan to privatize PTKS has been heavily politicized. Any talk about the plan has often been marked with suspicion and politicking by politicians. As a result, the Ministry handed over the privatization decision to the parliament.

Yet, the parliamentarians have yet to green light the IPO, although they previously indicated their preference for the IPO scheme. IPO is also favored by PTKS’ management team, who rejected strategic sale to Arcelor-Mittal.

The whole point of privatizing PTKS is to enhance its business to allow it to increase its production to five million tons a year. Indonesia has high steel demands, and they are expected to continue to increase. If PTKS cannot increase its capacity, the country will be heavily dependent on import. Yet, this will all have to wait until the IPO, which is targeted to take place in September or October this year.

Translated to English from Media Indonesia daily.

Share and Enjoy: These icons link to social bookmarking sites where readers can share and discover new web pages.