IBRA under fire on severance pay

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA) has found itself in hot water after failing to answer the demands of the thousands of employees of the 38 closed banks for higher severance payments.

Thousands of laid-off employees have threatened streets protests if their demands for higher severance pay are not met.

"If the talks (with IBRA) remain deadlocked, we will hit the streets," Bimo Nugroho, an advocate for the estimated 25,000 bank workers, told journalists on Saturday.

Bimo, chairman of the Professional Society for Democracy, said the now-jobless bank workers and executives might also block account transfers if IBRA did not meet their demands for severance pays of up to 10 times the standard level as set by government regulations.

Pande Raja Silalahi, an economist at the Center for Strategic and International Studies, said on Saturday that if the severance pay snag continued it could jeopardize the country's bank restructuring program.

"The government or IBRA should have anticipated this. Even the press questioned the issue of compensation for bank employees prior to the closure of the banks," he told The Jakarta Post on the weekend.

He explained that the demands for higher severance payments were rational because the economy, particularly the banking sector, would continue to contract, making it extremely difficult for the redundant employees to find new jobs.

"The plight of the banking sector is not completely their (the employees') fault," he added.

Pande stressed that because the government had decided to close down the banks and guaranteed all deposits, it should also fulfill the demands for higher severance payments.

"The government must take full responsibility not just partially. IBRA has to be completely responsible for all the consequences of the bank liquidation scheme. And the problems must also be addressed quickly," he said.

The government closed down 38 ailing banks on March 13, resulting in at least 17,000 layoffs. The government guaranteed all deposits to prevent a rush on the banks and promised that depositors could withdraw their money, starting March 16, at the government-appointed banks.

But many depositors have not been able to make withdrawals as thousands of employees at the closed banks refused to verify their bank accounts until demands for additional compensation from the bank owners were satisfied.

Based on Ministry of Manpower Decree No. 3/1996, employees who worked for less than one year would receive two months' salary as severance pay, while those having worked for four years or longer would be entitled to 10 months' salary.

The employees, however, deemed the amount too small and asked for more from the former owners of the banks.

"I think the demands of the employees are just logical. The government has failed to anticipate this problem," said Didik J. Rachbini, an economist at the Institute for the Development of Economics and Finance (INDEF).

He said the bank restructuring program designed by the government and the International Monetary Fund (IMF) was weak from the start, pointing out that the program failed to differentiate between banks hampered by unsound practices and those suffering from the economic crisis.

"The government and the IMF have also disregarded public opinion," said Didik, who is also a member of the People's Consultative Assembly (MPR).

"This is a valuable lesson for the government," Pande said, saying that guaranteeing deposits was not enough, but that an acceptable compensation package must also be guaranteed in the bank liquidation measures.

Pande said that if the problem drags on, the government may face difficulties closing down other banks on April 21, the deadline for surviving banks to come up with 20 percent of the recapitalization funds or face closure, as the public may not trust the deposits guarantee any longer.

"IBRA should have asked the bank owners to make negotiations from the start," he said.

IBRA deputy chairman Eko Budianto Santoso said on Friday the bank owners were willing to negotiate with their former employees but demanded a "peaceful and nonviolent" discussion.

The bank owners were earlier reported to have met with IBRA senior officials to discuss the problems.

Eko warned the employees to be realistic and not to violate the law when expressing their demands.

He added that they currently remained as employees of the banks, which are still obliged to provide service to their customers. (rei)

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