Falling from grace

The resignation from of Bank of Valletta chairman Joseph F.X. Zahra has unfortunately led to certain speculation. This was due to the fact that the resignation coincided with the botched Brindisi affair. It was persistently alleged that his resignation was somehow connected to this unfortunate business venture. In this country the resignation of top public officials or chairmen of important institutions always makes the news because we do not have a culture of resignations.

Sadly, Mr Zahra's resignation is, to a certain extent, still shrouded in mystery. All in all, the chairman's tenure of office has been a positive one and he seems to have succeeded in earning the respect of both sides of the political spectrum. In our polarised country, this is indeed no small achievement.

It must be pointed out however that the bank chairman did go on record in trying to explain the reasons for his sudden resignation. He hinted that partially to blame for his sudden action was the way in which the government planned to privatise the bank. It is clear he did not fully concur with the way the privatisation of this important bank was to be carried out and he, therefore, could no longer feel comfortable occupying his position.

The government seems to be intent on selling all its shareholding to what is being termed as a foreign strategic buyer. We are likely to experience a repeat of what happened in the HSBC affair. Mr Zahra said he is not against the process of privatisation as such but he is against the bank being handed over lock, stock and barrel to a foreign entrepreneur. Likewise, it seems he is of the opinion that it will prove to be wiser and more in the country's interest to dispose of only part of the government's shareholding in the manner prescribed by the government itself. The bulk of the government's shareholding should then be offered for sale to the general public.

Though, as already stated, the precise reason for the resignation is unknown and will probably never be known, if Mr Zahra's resignation was for the aforementioned reasons then his stand is laudable. Mr Zahra's preoccupation is, in my opinion, justified when one considers that here we have only two principal banks which practically dominate over 90 per cent of all banking activity. The larger bank, HSBC, already controls more than half the local market and if Bank of Valletta were to end up in foreign hands then practically all banking in Malta will be dominated by foreign owners. This, undoubtedly, could prove to be very dangerous to our economy.

It is important to note in this respect that it has been Labour's declared policy all along to avoid such a scenario. Not unlike the outgoing chairman, the Malta Labour Party is not against the process of privatisation as a principle. The opposition has moved with the times and concedes that it is no longer viable for the state to participate directly in the market, whatever kind of market it may be. In economic affairs it will always remain the sole prerogative of the government of the day to act as regulator but governments should refrain, as much as possible, from participating directly in business affairs.

This notwithstanding, the MLP is definitely contrary to the hasty way in which the present administration has been embarking on the process of privatisation in this country. We have witnessed how the administration has disposed of government stock merely to curtail the government's structural deficit. This is wrong since the income from such measures is never recurring and the check on the actual deficit will merely prove to be a cosmetic one.

Furthermore, the way negotiations have been and are being carried out by the government leave much to be desired. Everything seems to be carried out in secret with no transparency whatsoever. The opposition and Parliament are never given the opportunity to scrutinise the way the government is disposing of the people's assets and this is wrong.

On a final note, this tendency by the government even with regard to our banks is by far more compelling. Like the outgoing chairman of the Bank of Valletta, the MLP is deeply concerned by the fact that in a short while practically all banking in Malta will be dictated by foreigners. The banks are definitely the major players in all economic activity and therefore, by handing over the full control of our banks to so-called foreign strategic buyers, we are in actual terms handing over the direction of a substantial part of our economy to these foreigners. The repercussions of all this could be draconian for our micro economy and the government could have done well to embrace the advice given by one of its most prominent chairmen.

Dr Herrera is a Labour member of Parliament.