Bank workers' demand

Bank workers' demand

Seen from an economic standpoint, the demand by former bank
employees for severance pay up to ten times the government-
mandated standard package could simply be discarded as completely
unreasonable and excessive. It indeed makes no sense to tax the
owners of the already insolvent banks with such an obligation,
however tragic the fate of the now unemployed workers. After all,
why do former bank employees deserve severance pay ten times that
received by laidoff workers in other sectors?

But to understand the real issue behind the demand of the
25,000 former employees of the 38 banks closed by the government
on March 13, one must look beyond the economics of the demand. We
believe their demand is prompted more by their anger at bank
owners and management and the government.

The statements of protest the former employees have made since
starting their wave of demonstrations last month clearly express
their feelings of being punished for the wrongdoings of others.
They do not see the bank failures as the unavoidable consequence
of the economic crisis. They instead put the blame squarely on
corrupt management and greedy shareholders.

The perception of the former bank employees is that many of
the closed banks were bankrupted by shareholders in collusion
with management and, in several cases, with bank supervisors at
the central bank. This could easily be seen in the threats of the
fired bank workers to disclose the reckless banking practices
owners and management had engaged in to plunder their banks.

Some of the laidoff workers could simply be bluffing, but we
tend to believe that as insiders many of these employees were
privy to transaction documents at their former banks and
witnessed how their management and majority shareholders might
have plundered their banks. That they remained tight-lipped about
such misdeeds up to now could simply be attributed to their oath
to adhere to the banking secrecy provisions or to their helpless
positions as underlings afraid of losing their jobs.

The perception that unsound banking practices and egregious
violations of prudential banking rules took place at many banks
in the country was confirmed by the due diligence conducted on
banks by international auditors over the past few months. The
comprehensive audits revealed that a number of private banks
violated the legal lending limits as management and shareholders
siphoned off most of the loans to their own businesses. The
auditors also found the bulk of loans at state banks were given
to politically well-connected businesspeople without proper
credit assessments.

It is understandable if the fired bank employees are
frustrated by the fact that despite these violations and despite
the fact that more than 50 percent of total bank loans have gone
sour and hundreds of trillions of rupiah in taxpayers' money have
been used to bail out depositors and creditors at the closed
banks, almost none of the bankers have been brought to court for
their crimes.

Because many of the laidoff employees are university
graduates, they know full well that there is more than enough
evidence to bring suits against bad bankers based on the Banking
Act of 1998, which stipulates a jail term of up to eight years
and a fine of up to Rp 100 billion for those found guilty of
violating prudential banking rules. The law also empowers the
state to seize the personal assets of the bankers if their bank
assets do not meet their liabilities.

The former bank employees see the government simply does not
have the political will to enforce the law. Even the management
and owners of the 16 banks closed as long ago as November 1997
remain virtually untouched. In some cases where the authorities
have taken rapid and firm measures, the moves clearly were
discriminative because they deliberately targeted businesspeople
who were critical of the government.

Given the perception that the government allows bad bankers to
get away with trillions of rupiah in ill-gotten gains from the
state coffers, the fired bank employees understandably consider
their demand for more severance pay quite trivial by comparison.

The Indonesian Bank Restructuring Agency, which acts as the
mediator between the fired employees and the owners of the closed
banks, should look past the economics of the issues and focus on
the aspect of justice when negotiating a compromise solution to
the problem of severance pay. We think the fired bank employees
would not so stubbornly stick to their demands if they saw that
criminal bankers were being brought to justice.