IBRA cuts layoff target in bank merger

Dadan Wijaksana, The Jakarta Post, Jakarta

The planned merger of five banks under the supervision of the Indonesian Bank Restructuring Agency (IBRA) is now expected to cause fewer job losses than initially predicted, agency Chairman Syafruddin Temmenggung said on Monday.

He said that the projected 2,350 lay-offs reported by the press last week was based on the calculations made by IBRA's consultant for the merger process, and was not the agency's own target.

"That number came from the calculations made by our advisors for the merger plan. And after some deliberation, we think we can press the number to around 950," he told a hearing with the House of Representatives on Monday.

He said that this represented around 12 percent of the total number of employees of the five banks.

IBRA is currently in the process of merging the five banks -- Bank Bali, Bank Universal, Bank Prima Express, Bank Artamedia and Bank Patriot -- with Bank Bali expected to be the coordinating bank.

The five are among 11 private banks under the control of IBRA.

But the move has drawn protests from employees as they claimed they had never been consulted during the merger process.

On Friday, more than 500 people representing employees of the five banks staged a rally at the agency's headquarters.

The protesters wanted their unions to take part in any talks regarding the lay-off mechanism, including severance packages.

The support of the unions is seen as essential if any further obstacles to the merger program are to be avoided.

The agency has said the merger process is expected to cost Rp 4.6 trillion (US$500 million), including some Rp 157 billion in severance packages for laid-off employees.

As for financing, Syafruddin said this would take the form of both bonds and cash, with Rp 1.8 trillion worth of recycle bonds already being available.

"As to the remaining costs, we're working on it," he said, adding the amount would not be included in the agency's full-year asset-sales target of Rp 42.8 trillion.

IBRA was set up in 1998 to manage assets and loans it took over from a collapsed banking system after a $60 billion financial sector bailout necessitated by the 1997-1998 Asian financial crisis.

Merging local banks forms part of IBRA's efforts to restructure the still delicate banking sector.