Privatisation blues (5)

We are meant to feel upbeat about the government's privatisations. They are intended to roll the government back from areas where the private sector can perform better. They will provide the financial resources by which the government could cut the national debt. Not only will privatisation make Malta more efficient; new investment will emerge, thereby generating new jobs.

The Sea Malta debacle highlights the futility of these claims. As more people realise that the story spun by the government's media doctors ("it was all the fault of the General Workers' Union") is actually one big untruth, questions arise not just over the Sea Malta privatisation process. They also impinge with maximum impact on the overall privatisation as attempted by the Gonzi/Fenech Adami administrations. This process is failing to deliver across a number of fronts. Despite the ongoing bluster by the Prime Minister and his Cabinet colleagues, privatisation has become another big indicator of this government's failure to get things done the right way.

Since I have been writing this Wednesday column for The Times, the following privatisations have occurred, among others: Mid-Med Bank was sold to HSBC; the postal services were hived off to a postal corporation from New Zealand; the airport was partly sold to an Austrian company; the lottery department was converted into a corporation and auctioned to a Greek company; management of the Freeport was transferred to a big ship transport company and Sea Malta was liquidated following an aborted attempt to sell it off to an Italian shipping firm. In all these cases, you could hardly say that the national interest has been well served. Take them one by one.

Mid-Med Bank was the jewel in the crown of the Malta government's assets. It was sold secretively to HSBC, a firm about which nothing "bad" can be said.

They are a big global bank, in full throttle to expand while securing maximum profits, and good luck to them. This is what they did in Malta, upping service charges and maximising their revenues from Maltese providers of funds. The futility of the government's thinking (if there was any thinking after all) was to believe that HSBC's competitive practices would make the economy more efficient. These happened under the same duopolistic system that had prevailed prior to HSBC's arrival... So they were copied immediately by Bank of Valletta, in a tit-for-tat approach, to the growing cost of bank clients. The big banks now register ballooning profits as the economy stagnates. Meanwhile, public authorities have lost the leverage to make the financial system kick-start new economic growth... Given the profits registered by the big banks, it has been confirmed that the price at which Mid-Med was sold off was a give-away...

The "privatisation" of the postal service went spectacularly wrong. In double quick time, the Gonzi administration had to acknowledge that the passage to New Zealand ownership and management was a total flop...

Only now is it seeping in among some businesses that the privatisation of the airport was another such mistake. They believe that the arrival of low cost airlines would improve the fortunes of our tourism. This can only be achieved by slashing airport usage tariffs across the board. The private sector operator at Gudja airport has no interest in doing so. More tellingly, the argument for privatisation was premised on the point that it would boost international business. Nothing of the sort has happened.

As far as the lottery privatisation is concerned, much remains to be told. Data about what has been happening here remains camouflaged by government propaganda, with the Prime Minister himself leading the drive to urge the Maltese increase their gambling. The process which led to the allocation of the foreign "partner" remains obscure; how lottery and gambling practices are being "regulated" is another mystery.

Less mystery surrounds the Freeport privatisation, which saw the control over the Freeport's assets given to a company with primary interests in the transport of cargo by sea. Again, there is nothing to fault in this company per se; only, as a cargo carrier, there is an inherent conflict of interest between its main business and the responsibility of running a transhipment port. Unsurprisingly, the number of carriers interested in using Malta Freeport has continued to shrink. Why should they risk letting sensitive information slip into the hands of a competitor? Meanwhile, under the terms of privatisation, the Malta government will still have to pay over the years all the interest expenses connected with financing the major quays at the Freeport as well as the repayment of the capital outlays involved, running into hundreds of millions of US dollars.

About the Sea Malta privatisation process, the least said, the better. The whole approach was doomed right from the start, and purposely so. How can a negotiation for the disposal of assets be meaningful if the person leading the negotiations roundly declares that if he fails to clinch the deal, he will liquidate the company? Which is what duly happened.

In terms of the financial flows generated, in terms of the flexibility and efficiency gained by the Maltese economy, in terms of the new investments triggered, the whole process of privatisation has been a fiasco. Curiously, on all these counts, the best outcome yet remains that achieved by the Labour administration of 1996-1998, when 40 per cent of Maltacom stock was sold to the public. For the government and its media spinners, this is simply too bitter a pill to swallow. Yet...

To the editor, staff and readers of The Times, and their families, all best wishes for a Happy Christmas.