The Southeast Asian crisis as a crisis of governance.

PT Indocement Tunggal Prakarsa Tbk, a case study.

Isabel Sofia dos Santos dos Reis-Flood and Joe Flood

Melbourne, 20th May 2001

 Introduction

During July 1997 the baht’s crash triggered “the world’s worst financial crisis since the Great
Depression”.1 This crisis affecting South East Asia, and to a lesser extent other emerging economies. It
halted more than two decades of sustained economic growth in this region, leading to severe political
and social unrest.
However, this crisis had some major positive outcomes. It contributed to a new raised awareness
of the dynamics of globalisation and its negative effects, in particular those of finance liberalisation 2.
Most importantly, and within this context, it highlighted the importance of governance accompanying
economic transformation. For many authors, the South East Asian financial crisis was primarily a
crisis of governance3.
The Salim Group is the largest of the many business conglomerates that dominated Indonesia’s
economy during the Soeharto period, with holdings in cement, food, steel, banking and many other
sectors. As with other conglomerates, the Salim Group companies’ non-transparent and unaccountable
organization and business practices, market-distorting privileges and close relationships with the
Soeharto family and national finance contributed greatly to the crisis.
For these reasons, governance is at the core of the Indonesian economic reform. This essay shall
extrapolate upon this theme through the analyses of the response of the Salim Group’s Indocement
company to the crisis. As we shall observe, corporate restructuring is essential for Indocement’s
recovery, and governance reform is also critical in ensuring Indocement’s long term competitiveness.
However, both targets will only be achieved and sustained if changes also occur in the business and
institutional cultural environment.
This paper begins by giving an overview of the 1997-98 South East Asian crisis. It briefly
summarizes the impact of the crisis in Indonesia and analyzes its deep causes. Then, the impact of the
crisis on Indocement’s performance is described together with an analysis of its response. It concludes
with comments on these events.

The Southeast Asian Crisis

The Southeast Asian economic recession began as a crisis of currency and liquidity. Huge
quantities of unhedged credit to be repaid in short term, one year or less, in foreign currencies made
these countries particularly vulnerable to the reversal of market sentiment in general and exchange
rates in particular4. Hence, when hedge funds organised a concerted raid on the region’s currencies, a
regional illiquidity problem followed by insolvency crisis.
Moreover, it triggered social unrest and political turmoil because it amplified the levels of poverty
among the population due to the raise of the price of basic goods and levels of unemployment,
decrease of wages and lack of safety nets 5.
Among the Southeast Asian economies Indonesia was the most badly hit by the financial crisis.
The rupiah registered the fastest depreciation 6 and foreign debt was much higher, eventually rising to
150% of GDP. Moreover, its financial and corporate sectors froze very rapidly as the result of the high

1
Clifford, Mark L. and Engardio, Pete 2000 Meltdown, Asia’s Boom, Bust, and Beyond, Preface Vii.
2
Khor, Martin 2000 Globalisation and the Third World: Some Critical Issues, 43.
3
Baker, Richard W., Soesastro M., Kristiadi, J. and Ramage, D. Indonesia The Challenge of Change,
Introduction, p.5.
4
Daly, M and Logan, M 1998 Reconstructing Asia, The Economic Miracle That Never Was, The Future That Is,
Chapter 3 Asia and the global economy, p.79.
Clifford, M and Engardio, Pete 2000 Meltdown, Asia’s Boom, Bust, and Beyond, Chapter 9 Digging Out, p.224.
5
Ibid:225.
6
The Rupiah exchange rate against the US Dollar went from Rp.2.400, at the beginning of 1997, to 5.300 at the
end of this year and, on the 22nd of February 1998 it was at 16,000.
1997 Cement Operations: Indocement Corporate structure and Review of Operations.

2
level of non-performing loans (which reached 82 per cent in May 19987), and the refusal of
international banks to provide further lending to Indonesia. 8
The crisis in Indonesia has been rooted in long-term structural and institutional problems. Poor
governance in the financial and corporate sectors combined with lack of market discipline contributed
to it9. At the outset of the crisis, Indonesia’s financial sector was characterised by inadequate prudential
regulatory, supervisory and enforcement systems. Lack of autonomy from the government and
corporate sectors enhanced its vulnerabilities 10; hence, the high quantity of unprofitable investments
and non-performing loans, particularly in the real estate sector.
Indonesia’s economy was dominated by conglomerates owned by Chinese families. This mode of
business expanded through market distortions, protectionism and easy and rapid access to finance 11.
The conglomerates benefited from Indonesia’s inadequate legal business protection and enforcement
system and its centralised and inefficient public administration. A particular business culture based on
connections and relationships was created, where bureaucratic and political patronage was vital for
business success and leadership12.

Case study: Indocement

Before the crisis: Salim Group
PT Indocement Tunggal Prakarsa Tbk is Indonesia’s largest private cement company 13. It was
founded in 1973 by the biggest conglomerate in Indonesia, the Salim Group. This Group belongs to a
Chinese-Indonesian family headed by Liem Sioe Liong who created his business empire through his
close connection with Suharto14. This in turn, enabled Indocement’s fast expansion and dominance in
the cement sector. The government supported Indocement in accessing capital through credit at the
state banks15,and through direct equity. In 1985 it acquired 25% of the company’s shares 16 and
supported the listing of the company in 1989 on the Jakarta Stock Exchange 17. The government also
granted Indocement market distorting privileges such as the concession of a local cement monopoly 18.
The Salim Group follows the complex organizational model of any traditional business
conglomerate. It comprises numerous and diverse companies, some of these with unclear perimeters,
operating across sectors and providing many diverse internal business services. This is one of the
reasons why Indocement became Indonesia’s largest and the world’s lowest-cost cement producer. It
supplied the entire archipelago thanks to its cost-effective transportation 19.

7
Clifford, M and Engardio, Pete 2000 Meltdown, Asia’s Boom, Bust, and Beyond, Chapter 10 Remaking Asia,
p.257.
8
Daly, M and Logan, M 1998 Reconstructing Asia, The Economic Miracle That Never Was, The Future That Is,
Prologue: Unravelling the Asian Crisis, p.16.
9
Lindgren, C., Balino, T., Enoch, C., Gulde, A., and Teo, L. 1999 Financial Sector Crisis and Restructuring.
Lessons from Asia, p. 4.
10
Ibid.
11
Baker, Richard W., Soesastro M., Kristiadi, J. and Ramage, D. Indonesia The Challenge of Change,
Introduction, p.26.
12
Backman, M. 1999 Asian Eclipse: Exposing The Dark Side Of Business In Asia, Chapter 5 Merchants of
Menace? Conglomerates Asian style, p.74.
13
December 21, 1999 Indonesian Commercial Newsletter 11: Production Capacity of Cement Industry Increases
Despite Shrinking Market Demand, p.2.
14
1995 The Conglomerates, Overseas Chinese Business Networks in Asia, p.164.
15
Baker, Richard W., Soesastro M., Kristiadi, J. and Ramage, D. Indonesia The Challenge of Change,
Introduction, p.26.
16
August, 1998 Indonesian Business News Can Salim Survive? , p.14.
17
This listing would not have been possible without government intervention because Indocement “had not made
the required profits in the previous two years” in 1995 DFTA The Conglomerates, Overseas Chinese Business
Networks in Asia, p.164.
18
Baker, Richard W., Soesastro M., Kristiadi, J. and Ramage, D. Indonesia The Challenge of Change,
Introduction, p.22.
19
1997, Indocement’s Corporate Structure and Review of Operation – Cement Operations, p.2.

3
 The events of 1997
During 1997 Indocement had a net loss of Rp 337.8 billion, 20 - as the direct result of the fast and
sharp depreciation of the Rupiah by over 56% against the US Dollar, particularly during the second
semester of 1997. Consequently, the company’s burden of foreign debt servicing and cement
production costs increased considerably21. In total the company had Rp.1.575 billion of foreign
exchange losses22.
To circumvent the crisis, Indocement was restructured through the implementation of three
concomitant strategies. Firstly, a cost rationalization strategy aimed at improving the operational
results for all its activities. Secondly, its foreign exchange losses were explicitly recognized, in order
to safeguard its future financial performance and, ultimately access to capital for new investments. To
protect itself against further depreciation of the Rupiah, it adopted a more dynamic hedging policy on
its US Dollar borrowings23. Finally, Indocement sold its 50.1% shares in Indofood, 10.5% of which
were utilised to raise funds to repay part of its huge foreign debt 24.
The rationale behind this divestment was to consolidate Indocement’s leading position in the
national cement industry by becoming a pure cement company. Focussing on its core cement business
operations and competencies was intended to enhance Indocement’s competitive advantages, as the
lowest-cost cement producer in the world 25, and to improve the quality and efficiency of its products
and services.
This divestment should help Indocement to regain credibility 26 by enhancing the company’s
transparency and accountability in delivering its consolidated and financial results, facilitating the
assessment of its performance and risks by its shareholders. This should help to attract international
investors and creditors to Indocement27.
Despite the crisis, during 1997 Indocement continued to increase its production capacity, even
borrowing for this in November 1997. 28 This would prove to be a bad corporate strategy, given the
further decline of the Rupiah and the shrinking market demand for cement in 1998. It repeated
mistakes the company had made in the early 1980s just before the sharp economic crisis caused by
falling oil prices at that time (see the Appendix for a timeline which includes these early events).
Nevertheless, as at the end of 1997, Indocement continued to hold an important position in
Indonesia’s economy and cement industry, with a national market share of 36.8% and a West Java and
Jakarta market share over 70%. Furthermore, it had an increase in sales volume of 6.3% and an
average selling price of cement per ton higher by 2.7% than in the previous year 29, due to the abolition
of the price ceiling on cement as recommended by the IMF 30.
Finally, Indocement was less affected by the risks associated with exposure to foreign debt, in
comparison with other Indonesian companies. The reason for this lies in its past prudent and consistent
hedging policy31 and the fact that its US Dollars loans were due within four to five years, some in ten
years, as opposed to one year or less which was commonplace elsewhere in the industry.

20
1997 Indocement’s Report to Shareholders, p. 1.
21
The rise of production costs was substantially due to the rise of raw material costs as most of them had to be
imported. Ibid: p.2.
22
Ibid, p1.
23
This hedging policy had already started on 14 August 1997, upon the free float of the Rupiah exchange against
the US Dollar. 1997 Indocement’s Consolidate Results, p.6.
24
June 1997 Announcement: Indocement’s Financial Results, p 10.
25
Ibid: p.7.
26
de Ayala II, Jaime February 1999 Restructuring Industries and Corporate Governance, p.1
27
Ibid, p2.
28
1997, Indocement’s Corporate Structure and Review of Operations – Cement Operations, p.3.
29
1997 Indocement’s Report to Shareholders, p. 1.
30
Daly, M and Logan, M 1998 Reconstructing Asia, The Economic Miracle That Never Was, The Future That Is,
Prologue: Unravelling the Asian Crisis, p.12.
31
Until August 1997, Indocement had applied a 50:50 financial policy between Rupiah currency and foreign
currency debt exposure in order to take advantage of the lower US Dollar interest rate, of 8.72% compared to
interest rate for Rupiah loans of 18.15%, while managing the minimal foreign exchange depreciation.

4
 From 1998 to 2001

In 1998 the domestic demand for cement decreased by 30%, particularly in the urban areas of
West Java and Jakarta32. This sharp decrease resulted from the declines in purchasing power, the
construction sector and the rise in the price of cement due to the increase in production costs 33.
Subsequently, Indocement had a decline in domestic sales of 30% and an oversupply capacity in
cement of 6.5 million tons34.
Building on the sharp devaluation of the Rupiah, the low cost of cement production and the
government lift on all cement export restrictions 35, the company decided to expand from 1998 onwards
its cement exports in Southeast Asia region but also into Africa and the USA, because that region was
also hit by the crisis36. However, Indocement’s sell price of cement will be lower than that practiced at
the international market level37.
In line with this strategy, it also chose to seek a strategic alliance with an international cement
company to further enhance its exports while strengthening its financial position 38. To resolve its
overcapacity problem, Indocement seems to have adopted a decision based on an overall business
strategy and vision rather than on the typical cement industry opportunistic strategy to resolve this
type of situation, which in turn might indicate further improvement on the company’s governance.
On the 22nd of February 1998 the Rupiah was at 16,000 against the US Dollar and by mid
February at around 10,000. Meanwhile, Bank Central Asia, the Salim Group’s bank, was buried in
nonperforming loans. Additionally, most international banks froze any further lending to Indonesia 39.
Finally, on May 1998 the Suharto regime fell and with it Indocement’s political patronage.

Corporate Debt restructuring

For the above reasons, and in order to prevent a further liquidity squeeze, Indocement stopped
paying its foreign debt in July 1998 and started negotiations with its creditors, led by the Bank of
America NT &SA, to restructure its foreign debt, which was estimated to be US$ 933 million 40.
However, Indocement’s debt restructuring agreement was only signed with its creditors in November
200041, which allows Indocement to repay its debt in up to eight years, therefore alleviating the
company’s debt servicing burden and financial situation.

Bank and corporate restructuring

Meanwhile, 58% of Indocement’s shares came under The Indonesian Bank Restructuring Agency
(IBRA) control, through PPT Mekar Perkasa42. This holding company was established pursuant to the
Shareholding Settlement Agreement between IBRA and the Salim Group, with regard to loans
32
Indocement has its cement plants concentrated in West Java, Citeureup and Cirebon, which is Indonesia’s
largest cement market, and a remain one in South Kalimantan.
33
December 21, 1999 Indonesian Commercial Newsletter 11: Production Capacity of Cement Industry Increases
Despite Shrinking Market Demand, p.4.
34
September 30, 1998 Press Release: Indocement’s Consolidated Results,p.2.
35
December 21, 1999 Indonesian Commercial Newsletter 11: Production Capacity of Cement Industry Increases
Despite Shrinking Market Demand,p..3.
36
According to the Central Bureau of Statistics, the volume of Indonesia’s cement exports rose sharply to 3.3
million tons in 1998 from 0.8 million tons in the previous year. Ibid: p.1 and 5.
September and June 30, 1998 Press Release: Indocement’s Consolidated Results,p.3 and 4.
37
The importers of Indonesian cement normally pay a lower price for it than what is paid at the international
market levels because they know that the cost of cement production in Indonesia is much lower than in any other
countries.
December 21, 1999 Indonesian Commercial Newsletter 11: Production Capacity of Cement Industry Increases
Despite Shrinking Market Demand. p1.
38
September and June 30, 1998 Press Release: Indocement’s Consolidated Results,p.3 and 4.
39
Daly, M and Logan, M 1998 Reconstructing Asia, The Economic Miracle That Never Was, The Future That Is,
Prologue: Unravelling the Asian Crisis, p.16.
40
These creditors are: Bank of America, Chase Manhattan Bank, Fuji Bank, Marubeni and Banque Nationale de
Paris. September and June 30, 1998 Press Release: Indocement’s Consolidated Results, p.2
41
June 30, 1999 Dow Jones International News.

5
extended by PT Bank Central Asia (BCA) to the Group’s companies. As part of this agreement, the
Salim Group transferred Indocement’s shares and assets to PT Holdiko Perkasa 43. The sell of non core
assets, such as power plants, while strengthening Indocement’s financial situation will also help it to
further concentrate on its core competencies.
At the end of 1999 a preliminary agreement was reached between the Salim Group and
Heidelberger Zement for a restructuring plan and acquisition of the company 44. Nevertheless, the
signature of Indocement’s final acquisition contracts took place at the end of December 2000 45 and the
acquisition itself on 18 April 2001.

Performance overview and the importance of Indocement’s

acquisition
With this acquisition Heidelberger Zement became the majority shareholder in Indocement, with
a 61.7% stake46, followed by the Indonesian government, 17%, the Salim group 14%, the Japanese
group Marubeni, 2%, and public shareholders, 6%.
This acquisition amounted to more than US $300 million and it is part of a deal involving three
steps47. Heidelberger will convert US$150 million of foreign debt into equity, which is expected to
reduce Indocement’s foreign debt to US $900million. Furthermore, it will purchase Indocement's
shares from the Salim's group subsidiaries, PT Mekar Perkasa and PT Kaolin Indah Utama. Finally,
the deal included the put option granted to the Indonesian government to sell its 17% stake in
Indocement to Heidelberger Zement, exercisable from 2003 onwards. In total, this gives Heidelberger
a controlling interest in the company, making it the world’s third largest cement company. The Salims
are now effectively excluded from an active role.

8000
7000 Net revenues
6000 Profit
5000 Net borrowings
4000
3000
2000
1000
0
-10001994 1995 1996 1997 1998 1999 2000
-2000

Figure 1. Indocement, revenues profits and borrowings 1994 –2000, billions of Rupiah
Since the onset of the crisis, the domestic price of cement has risen because of the increase in
production costs48. Moreover, after 1999 Indocement sales have been increasing. In the second half of
1999, the Indonesian economy began to show signs of recovery with the Rupiah exchange rate starting
42
This Indonesian government’s agency created in the beginning of 1998 is in charge of overseeing the
rehabilitation of Indonesia’s financial sector. For this purpose it can take over and control distressed banks
disposing of their assets and collateral. April 26, 2001 IBRA and Holdiko Close Indocement Transaction with
Heidelberger Zement, p3.
See also, Hoovers online the Business Network: PT Indocement Tunggal Prakarsa tbk.
43
April 26, 2001 IBRA and Holdiko Close Indocement Transaction with Heidelberger Zement, p3.
44
August, 1998 Indonesia Business News: Cover Story: Can Salim Survive?
45
The agreement took place between Heidelberger Zement, the Indonesian Government, IBRA (Indonesian
Bank Restructuring Agency), PT Mekar Perkasa and PT Kaolin Indah Utama.
46
April 26, 2001 Heidelberger Zement Press Release: “Acquisition of Indocement successfully completed.”
47
Ibid.
48
December 21, 1999 Indonesian Commercial Newsletter 11: Production Capacity of Cement Industry Increases
Despite Shrinking Market Demand, p.4

6
to stabilise and inflation and interest rates on the decrease. This in turn, delivered positive results for
the construction sector with a subsequent increase in domestic demand for cement 49. In 1999
Indocement had an increase of 10.6% in sales over the previous year 50 and in the third quarter of 2000,
versus the previous year's third quarter, sales increased by 66.5% 51. Moreover, the company had a net
profit of 521.11 billion Rupiah in 1999, in comparison with a net loss of Rp. 1,052 trillion in 1998. 52
Unfortunately, a further fall in the rupiah led to another currency loss of 1.1 trillion in 2000, which
contributed to a continuing business loss. These fluctuations are shown in Figure 1, which shows
Indocement's revenues, profits and borrowings during the recent period.
Despite this improving outlook, the national demand for cement remains low and there has been
increased competition on the domestic cement market 53. There has been a significant increase in
exports in the 1990s, but they are not likely to grow much further because of transportation costs 54
Against analysts’ expectations, recently Indocement reported a net loss of 877.78 billion Rupiah for
200055, because of further currency losses. However, the acquisition by foreign partners will be vital to
enhance Indocement’s competitiveness: through the injection of new capital, access to new export
markets, particularly outside of the region (Indonesian business December 1999) and expertise in the
area of technology and international trading –and most particularly, as part of the debt restructuring
regime given foreign debt is still at crippling levels. Moreover, this foreign investment will benefit
significantly Indonesia’s economy in general and its cement sector in particular.

Conclusions
The financial crisis opened up the Indonesian economy to the global market. It also revealed that
in this new business context, the model of “octopus-like conglomerates” had became redundant. The
establishment of an efficient market requires the destruction of monopolies and market-distorting
privileges. To be competitive, corporations were encouraged to focus on their core business 56, to adopt
an overall business strategy and vision and transparent and accountable management.
However, while restructuring allowed the recovery of Indocement to some extent, it was not
sufficient for full recovery, as the company remained affected by the contraction of national demand
for its products and by the national shortage of capital 57.
Corporate and bank governance reforms will only be attained and sustained if they are also
accompanied by wider reforms in public administration and in the legal and judicial sectors, to end a
business culture based on bureaucratic and political patronage. Progress in Indocement’s debt
restructuring has been slow, which in turn might reflect the present Indonesian environment of
corruption. Corruption undermines the effective application and enforcement by the judiciary of
Indonesia’s legal system in general and amended bankruptcy laws in particular 58. It is not surprising in
these circumstances that many debtors do not initiate restructuring negotiations, or co-operate once
they have been mandated.
There has also been some political resistance to the sale of domestic assets to foreigners, as with
the sale of Indocement shares to Heidelberger Zement, which was seen by many as a strategy for
foreign market penetration into the traditionally protected Indonesian cement sector 59.

49
December 21, 1999 Indonesian Commercial Newsletter 11: Production Capacity of Cement Industry Increases
Despite Shrinking Market Demand, p.5.
50
June 30, 1999 Corporate Information: Wright Analysis Indocement Tunggal Prakarsa Tbk
51
Ibid. Exports are also not very profitable (around 10% compared with 50% for domestic production).
52
1998 Indocement’s Consolidated Statement of income
53
December 21, 1999 Indonesian Commercial Newsletter 11: Production Capacity of Cement Industry Increases
Despite Shrinking Market Demand, p.1.
54
Ibid.
55
May 5, 2001 The Asian Wall Street Journal Indocement posts loss of $73 million for 2000.
56
Clifford, M and Engardio, Pete 2000 Meltdown, Asia’s Boom, Bust, and Beyond, “Chapter 9 Digging Out”,
p.237.
57
de Ayala II, J February 25 1999 10 th Annual Corporate Conference in Asia: “Restructuring Industries and
Corporate Governance”, p. 1. http://www.asiasociety.org/speeches/ayala.html
58
IMF October 2000 IMF Staff Country Report No 00/132 Indonesia Selected Issues, p.53.
59
October 12, 1999 Dow Jones Newswire: Indonesia Indocement Pact With Heidelberger Shrugged Off

7
 Overall, there remains considerable room for improvement in Indonesia’s corporate governance
and legal system to allow for improved transparency and solid future performance of large Indonesian
firms in an open market environment.

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9
Appendix. Indocement: timeline of events.

1981 Indocement takes out 8 year international syndicated loan for a sixth
plant, doubling capacity. "Banks appear eager to participate in the loan to
strengthen their ties with Liem and his businesses".
1983 Oil price fall brings Indonesian economy to its knees. Dramatic fall in
demand.
7 May 1985 Government invested the equivalent of $330 million in the company in
exchange for a 35% stake, and pays off the loan. Move is widely perceived
as a bailout from overcapacity (17 m tons against 10m demand) and big
debts, in a company with Soeharto connections. Mr Soeharto's stepbrother,
Sudwikatmono, is president-director of PT Indocement and Salim flour
milling interests. Members of the Suharto clan also have sizeable equity in
Indocement. Salims hold 45%.

Considerable anger from technocrats and business: "State intervention

and protectionism have become widespread and entrenched to a point
where they are almost impossible to dismantle. Meanwhile, the domestic
economy, starved of funds, remains in a slump it cannot climb out of."
24 Nov 1986 165 trade monopolies abolished to deal with serious economic crisis,
but Soeharto clan monopolies remain intact.
Jul 1989 10% of stock is publicly listed at $335 million despite large losses (78
billion rupiah), and exempted from normal profitability rule, increasing size
of stock market by 30%. Public offering wipes out most debt.
Liem listed as 55th richest man, with a fortune of $1.3 billion.
27 Jul 1992 Indocement buys Salim food assets to cool reception, and becomes
largest company on the Exchange. Borrows 1.3 trillion, raising gearing to
150%.

No new cement plants have been built for last 5 years.

27 Nov 1994 Indocement sales up 27%, profits up 10%, plans to increase capacity
by 1.2 million tons by 1997. Severe cement shortages and hoarding, due to
lack of capacity and price control. Demand for cement rises 34% in Jakarta,
in the face of 7% economic growth.
July 1997 Sells Indofood to QAF, a Singapore company controlled by Salim, to
fund 15% cement expansion. Described as "a new kind of nationalism" by
Soeharto. Expansion of output and profit has been around 17% a year for
last 3 years, now owns 12 plants with 2 more coming on line. Sees no
danger of an oversupply, despite falling demand.
Nov 1997 Net profits up 47% for first 9 months 1997, but gross profits are down
and there is a big foreign exchange loss. Hedges half of debt at 3000 rupees
to dollar. Takes out $133 million loan for expansion, from Japanese Bank.
Aims to increase production from 10.8 to 15.8 mt . Conducts swaps for the
credits into US$.
Feb 1998 Announces a full year loss of R360 billion for 1997 due to a R1.8
trillion currency loss on debt. Owes R6.2 trillion ($890 million), payable
within 5 years, and mostly in US$. Costs have risen 20% while revenue
increased 8.5%.
May 1998 A further R1.1 trillion currency loss. Sales are now falling. Cuts
production, begins exporting, sells non-core assets. Sees 45% drop in
demand.
21 Sep 1998 Salim Indocement shares pledged against CAB losses. At least 10% of
Indocement shares are ceded to the government to reduce CAB loans to

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 Indocement

29 Nov 1998 A further 2.5 trillion currency loss. Demand falls 21% but is balanced
by a 30% price rise. Debt restructuring underway. Cancels swap contract to
help with cash flow. Government plans to sell its 23% stake.
22 Jun 1999 Indofood is sold to a Salim Hong Kong company. Investigations from
three overseas cement companies to buy Indocement have been continuing
since January.
22 Oct 1999 Salim shares (62%) transferred to Holdiko. "Mr Liem is reducing his
exposure to Indonesia and shifting his assets overseas as he faces an
uncertain future given his close ties with Mr Suharto". Short term debt is
now R 9.6 trillion.
22 April 2000 Full year results for 1999 - operations just profitable due to an increase
in prices, currency gain of R500 billion.
14 Aug 2000 Deal with Heidelberger announced. $150 million of debts purchased
and recapitalised through a rights issue. Government shares will also be
purchased at a premium to market for $210 million.

Good pickup in construction, but big exchange losses again. "After

years of over-borrowing to fund a building frenzy in the mid 1990's,
Indocement stopped paying its debt back in July 1998 and is trying to work
out a restructuring deal with creditors."
20 Oct 2000 Debt restructuring agreed. "With the restructuring, all the company's
debts will be repaid in eight years with a grace period of two years under a
LIBOR interest rate of two percent for the US dollar-denominated debts,
one percent for the Japanese yen-denominated debts and three percent for
the rupiah-denominated debts". Signed on 1 December.
8 Jan 2001 Heidelberger deal signed, giving it control of the company and a 30%
boost in production to 3rd biggest producer.

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