North Sumatra forms company for a piece of Inalum

North Sumatra administration along with its 10 regencies and municipalities have agreed to form a regional-administration-owned enterprise (BUMD) in hopes of obtaining shares and taking part in the management of PT Indonesia Asaham Aluminium (Inalum) after Japanese consortium Nippon Asahan Aluminum’s contract to manage Inalum ends in October of this year.

The provincial administration said that the establishment of the BUMD was a demonstration of the province’s seriousness of wanting to be involved in the running of the aluminum smelter.

Acting governor Gatot Pujo Nugroho said that in the 30 years that Inalum had been managed by Japanese investors, North Sumatrans had only been spectators.

“We don’t want to experience the same thing for the next 30 years. We want to cease being only spectators. That’s why we established the BUMD, to take part in the management after the central government takes over Inalum from the Japanese consortium,” Gatot said during the signing of the BUMD establishment among the local leaders on Thursday evening.

Six regents and a mayor were present at the ceremony: Asahan Regent Taufan Gama Simatupang, Tapanuli Utara Regent Torang Lumbantobing, Humbang Hasundutan Regent Maddin Sihombing, Samosir Regent Mangindar Simbolon, Karo Regent Kena Ukur Surbakti, Batubara Regent OK Arya Zulkarnaen, and Tanjung Balai Mayor Thamrin Munthe. Three regents from Simalungun, Dairi and Toba Samosir were represented by top officials from their respective regencies.

The local administrations would soon prepare the ownership details of the BUMD and recruit top officials, Gatot said. The officials should be persons who have the skills to negotiate terms with the central government, he went on.

The Regional Representatives Council (DPD) member from North Sumatra, Parlindungan Purba, said he supported the BUMD’s establishment. The BUMD would be a good head start as the central government had yet to agree on whether to let the local governments take part in managing Inalum after the takeover.

“But in principle, North Sumatra has to be given a part in managing and owning shares of Inalum because the company is located in North Sumatra. We don’t want to have what we had anymore; being only a spectator,” Purba told The Jakarta Post on Friday.

Purba said the establishment of the BUMD was not an act of defiance toward the central government. “We just want to be invited to participate,” he said. “This BUMD will be our negotiation tool in which the provincial and regency administrations join forces to put pressure on the central government to invite them in managing and owning shares in Inalum.”

Established in 1976, Inalum is 41.12 percent owned by the Indonesian government and 58.88 percent by the consortium of 12 Japanese firms comprising, among others, Mitsui Aluminium Co. Ltd., Mitsubishi Corporation, Sumitomo Chemical Co. Ltd. and Sumitomo Shoji Kaisha Ltd.

Inalum, which has run the only aluminum smelter in Southeast Asia since 1983, annually produces 250,000 tons of aluminum ingots, of which 60 percent is exported to Japan, with the remainder sold in the domestic market.

The NAA consortium has repeatedly requested an extension of the contract, promising to raise Inalum’s production capacity to 317,000 tons and offering US$367 million to seal the deal. Other foreign companies, as well as local firms including Aneka Tambang (Antam) and Toba Bara Sejahtera, have expressed their interest in taking stakes in Inalum. In October last year, the government formally rejected the extension request. Planning to take over 100 percent of the shares of Inalum, the central government has yet to talk about the possibility of local governments’ participation.