Paper Mill Threatens to Lay Off 2,500 Workers as Funds Remain Stuck in Failed Bank
A pulp mill in Mojokerto, East Java, PT Pakerin, is threatened with laying off around 2,500 workers after the company’s operations ground to a halt because its working capital is stuck in a bank currently in liquidation. The company’s funds, estimated at between IDR 800 billion and IDR 1 trillion, are under the supervision of the Financial Services Authority (OJK). The money had been placed in Bank Prima Master, which is now undergoing liquidation after its business licence was revoked by the OJK.
Farid Azhar Nasution, Deputy Chairman of the Board of Commissioners of the Indonesia Deposit Insurance Corporation (LPS), explained that the revocation of Bank Prima Master’s business licence was due to the bank experiencing liquidity and solvency problems, with a negative capital adequacy ratio (CAR). Bank Prima Master is known to be controlled by Henry Susilowidjojo, Steven Tirtowidjojo and David Siemens Kurniawan. The three are children of Soegiharto Njoo, the founder of PT Pakerin. David himself is the current controller and President Director of PT Pakerin.
In accordance with the provisions of the LPS Law, a bank whose licence has been revoked will undergo a liquidation process, including the implementation of customer deposit guarantees. Farid stated that the LPS deposit guarantee applies to a maximum of IDR 2 billion per customer per bank, subject to applicable requirements. “In the event that a customer has deposits exceeding IDR 2 billion, the remainder depends on the proceeds from the asset liquidation and is distributed proportionally according to the priority order of payment under the Law,” Farid told CNBC Indonesia on Monday.
Previously, Said Iqbal, Special Adviser to the President of the Republic of Indonesia on Employment and Workers’ Welfare, conducted a direct visit to PT Pakerin together with the Indonesian Metal Workers Union Federation (FSPMI), the East Java Provincial Manpower Office, the Mojokerto Regency Manpower Office, and the Mojokerto Regional Secretary. During the visit, the potential layoff of around 2,500 workers was identified due to the cessation of the company’s operational activities.
According to Said Iqbal, the main problem facing the company stems from working capital funds that are still held up in the liquidated bank. As the funds cannot yet be used, the company lacks the ability to run the production process normally. “PT Pakerin’s funds of around IDR 800 billion to IDR 1 trillion are under OJK supervision. As a result, production is not running because the LPS has not yet released the funds,” Said stated in a written release.
He also highlighted the knock-on effects felt by the community around the industrial area. From monitoring the market near the factory site, many stalls were found to be closed, indicating that the halt in the company’s operations has not only hit the workers but also the local community’s economic activity. To anticipate a larger impact, Said Iqbal said a number of mitigation steps have been taken. One of them is coordinating with the Directorate General of Industrial Relations and Labour Social Security Development at the Ministry of Manpower and the East Java Provincial Government to ensure workers’ rights remain protected if layoffs cannot be avoided.
In addition, his side is also seeking to ensure that the payment of workers’ rights and ongoing wages is made through a special escrow account so that it does not enter the company’s account. This step is taken to ensure that funds which are the workers’ rights are not used for other purposes. Said Iqbal added that the issue of PT Pakerin has been reported to the President of the Republic of Indonesia. The report was also copied to the Minister of State Secretary and the leadership of the Indonesian House of Representatives (DPR RI) with the hope of encouraging the summoning of the LPS to find a solution to save the rights of the affected workers.