Business, Banking and Insurance Labour Union chairman Bomer Pasaribu has called for the merger of weaker banks with stronger ones and the establishment of tripartite institutions with government and employers to discuss how the retrenchments should be carried out. The value of the separation fee that the banks are required to pay retrenched employees has plummetted as a result of high inflation over the last year. Retrenched bank workers face a bleak future with few prospects of getting employment elsewhere. The delay in the bank restructuring has come under immediate attack. Deputy chairman of the Indonesian Bank Restructuring Agency Farid Harianto told a group of economists last weekend that the decision threatened the credibility of economic reform and would hurt the remaining banks.
Political motives are behind the delay.
In 1997, the winding up of 16 banks caused a run on all commercial banks. It proves that special connections and political factors have been too powerful. The government is under considerable pressure to proceed with the bank restructuring. Economics minister Kartasasmita claimed that the major international institutions had agreed to the postponement. But the World Bank has threatened to hold up aid payments to Indonesia if these and other measures are not carried out.