Indonesia’s Regional Push

Indonesia’s Regional Push
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JAKARTA: PT Semen Indonesia Tbk plans to build a US$200mil factory in Myanmar in 2014 as it expands its business in South-East Asia to take on Thai rival Siam Cement Pcl, according to the head of country's biggest cement maker.

The Myanmar plan is the latest expansion strategy by the Gresik-based company, which became the first Indonesian state-owned firm to make an overseas corporate acquisition when it bought a majority stake in Vietnam's Thang Long Cement in 2011.

“If everyone is in Vietnam and Myanmar and we just play in Indonesia, then, like playing chess, we will be squeezed,” Chief Executive Dwi Soetjipto told Reuters yesterday.

“That's why we put our bishop in Vietnam and our knight in Myanmar.”

Vietnam's property market has come to a standstill in the past two years after a long period of strong growth fuelled by local bank lending.

This had presented foreign buyers with cheap takeover targets, Soetjipto said.

The Vietnamese cement industry has overcapacity of around 30 million tonnes per year, some of which is exported to Myanmar. Semen Indonesia's plant in Vietnam would supply Indonesia and other markets, Soetjipto said.

Overall, South-East Asian companies are battling to be more competitive across borders as they prepare for the Asean common market in 2015, which will loosen restrictions on the transfer of goods and services across the region.

The company is in discussions with the Myanmar government about opening a factory with a 600,000 to 1 million tonne annual capacity. Myanmar, which wants to develop rapidly but is doing so from a very low base, currently imports around half of the 6 million tonnes of cement it uses annually.

“It's a test case before the real game begins for a bigger regional competition against the Thais because they also sell their products in Myanmar.”

Siam Cement, Thailand's top industrial conglomerate, plans to invest US$900mil over the next three years to build cement plants in Myanmar, Cambodia and Indonesia.

Demand for cement in Indonesia, was around 60 million to 61 million tonnes in 2012 and the national cement industry association expects it to grow around 8% to 10% this year, led by infrastructure and property projects.

That demand was matched by local firms' capacity but Semen Indonesia and other cement firms were adding capacity to prepare for future demand growth expected at around 7% over the next five years, Soetjipto said.

Semen Indonesia, which holds a 44% share of the domestic market, plans to build a new factory with 1.5 million to 3 million tonne capacity in North Sumatra. It is also studying a plan to build another factory in the east of Indonesia.

The company expects to buy a 70% stake currently owned by the government in cement maker PT Semen Baturaja after that company sells a 30% tranche in an initial public offering planned for this year.

Semen Indonesia expects to produce up to 29 million tonnes in 2013, an increase of 20% from last year, while its net profit is expected to rise around 15% in 2013, according to Soetjipto. Reuters

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