May 28, 2024
JAKARTA – Alocal company belonging to a Chinese conglomerate is to build a cement factory in South Aceh regency, despite a nationwide moratorium in place since 2020.
Interim South Aceh regent Cut Syazalisma signed an agreement on May 18 that permits PT Kobexindo Cement, part of China’s cement conglomerate Hongshi Holding Group as a subsidiary of Zhejiang Hongshi Cement Co., Ltd., to construct a factory in the regency.
The prospective investment amounts to Rp 10 trillion (US$622 million) for the facility, which is to have a production capacity of 6 million tonnes per year.
The deal contravenes a moratorium the central government imposed to halt the construction of cement factories across the country, except in Papua, West Papua, Maluku and North Maluku.
The moratorium was issued in response to cement oversupply in the domestic market, as the national output of 119.9 million tonnes far surpassed the annual demand of 65.5 million tonnes, according to the Indonesia Cement Association (ASI).
The policy is implemented in the Online Single Submission (OSS) system, the government’s business permit platform.
With that in mind, Kobexindo Cement should not have been issued a Business Identification Number (NIB), an essential step in the licensing process, the ASI says.
Putu Nadi Astuti, the Industry Ministry’s director of cement, ceramics and nonmetallic minerals industries, said the ministry would hold a meeting with all stakeholders to decide whether to cancel the factory’s planned construction or allow it to proceed.
“This is what we will discuss in the meeting. With the OSS supposedly locked for [applications to build] cement factories, companies should not be able to get an NIB,” said Putu, as quoted by digital media outlet Kumparan.com.
The cement industry is perceived to have medium to high risks, which means that under risk-based rules, prospective investors must apply for permits via the OSS and the National Industrial Information System (SIINas) prior to receiving their NIB.
ASI president Lilik Unggul Raharjo emphasized that the move by South Aceh regency not only violated the moratorium but also threatened the facilities of three state-owned cement companies on Sumatra.
The three companies he referred to are PT Solusi Bangun Andalas, which operates a factory with an annual capacity of 1.8 million tonnes in Aceh, PT Semen Padang’s factory in West Sumatra with an annual capacity of 8 million tonnes and PT Semen Baturaja’s 2.5 million-tonne capacity factory in South Sumatra.
In addition, Dumai in Riau is home to another Semen Padang factory, albeit with a far lower capacity, and there are private cement factories all over Sumatra.
“These [companies] are guaranteed to go out of business,” Lilik said on Saturday, as quoted by Kumparan.com.
“The Industry Ministry will conduct a technical verification of [foreign direct investment in the cement industry] before the permit is issued,” Lilik said, as quoted by Tempo.co.
The OSS, on the other hand, is run by the Investment Ministry.
Another Chinese-owned cement company, PT Conch South Kalimantan Cement, was found guilty in 2021 of selling its products far below market prices with intent to monopolize, and was fined Rp 22.35 billion by the Business Competition Supervisory Commission (KPPU).