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.