IBRA under fire on severance pay

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)

Protest -- Page 3