Social partners 'in shock'

As oil prices soar, social partners have warned that the government's proposed price hikes would be a huge setback to the country's competitiveness and possibly fuel unemployment.

The Chamber of Small Business Enterprises, GRTU said transporters were prepared to take drastic action as Malta braces itself for "one of its biggest ever blows". It declined to give further details.

Most of the constituted bodies were yesterday engaged in internal meetings to try and counter the government's proposals to mitigate the explosion in oil prices.

Enemalta's cost of fuel shot up from Lm18.7 million in 1999 to Lm54.5 million last year and is expected to rise to Lm84 million in 2005/2006. The government is contemplating a massive increase the water and electricity surcharge, raising it to 102 per cent from the present 17 per cent, or putting fuel prices up by 20c per litre.

Another option is to shoulder 30 per cent of the burden, although to do so it would have to raise taxes or finance it through more loans.

A number of options were presented for the consideration of the Malta Council for Economic and Social Development by Investments Minister Austin Gatt on Tuesday and the council is meeting again on Monday. GRTU director general Vince Farrugia said yesterday that none of the proposals put forward so far were acceptable to his association.

He laid the blame for the crisis squarely on the government and Enemalta for failing to hedge oil prices, even if partially.

The government should have foreseen the massive growth of China and India, which was contributing to the fuel hikes, Mr Farrugia argued. The same social partners had warned the government of this global phenomenon. It was therefore unfair for the government to go to the MCESD with a fait accompli when it now had its back to the wall, Mr Farrugia said.

Enemalta has a fuel procurement committee which makes decisions on whether or not to resort to hedging. Dr Gatt has described hedging as taking risks with the people's money, saying that Malta is still in time to use hedging next year but to do so, it would have to pay $359.30 per metric tonne instead of the current spot price of $313.25.

But Mr Farrugia said he could not understand how the public and the industry were once again being asked to dig deep into its pockets because of some adviser's "incompetence".

"If this were to happen in the private sector, they'd be sacked on the spot. The private sector has been completely shut out of Enemalta, but then when the problems crop up, we're being given two options - jump into the sea or into the fire. It's crazy," Mr Farrugia protested.

The GRTU's members, he said, were vociferously opposing any proposed increases and were prepared to take to the streets. In a static or shrinking economy any price change is going to rock the economy and employers would have no choice but to lay people off, Mr Farrugia added.

The Chamber of Commerce and Enterprise said the options presented were deemed unaffordable to business and workers alike, particularly at this delicate period.

Within MCESD, the Chamber has already made a proposal for the government to address this issue within the ambit of the national budget.

Besides, the government must carefully identify what additional savings can be made from capital and recurrent expenditure while ensuring ongoing restructuring within Enemalta to include the electricity theft problem and other inefficiencies, the chamber argued.

Once the imbalance reported was netted from these factors, the Chamber would agree to discuss with the government and the other social partners what option to take to pay for the increased burden.

"The Chamber appeals for a balanced decision, ensuring that the economy's productive resources are not undermined. Only in this way can Malta pay for its higher oil/energy bill and at the same time recoup some of the extra wealth it is contributing to oil-producing nations."

General Workers' Union general secretary Tony Zarb warned that workers and pensioners would be crushed under the proposed hikes adding that the union would have no choice but to knock on employers' doors to ask for pay increases.

"This problem has been brewing for months and now the government expects us to find a solution in days," Mr Zarb charged.

"Instead of increasing prices, why hasn't the government embarked on a cost-cutting exercise or a campaign to save on fuel? Maybe if the government was careful with its finances we wouldn't have found ourselves in this mess."

Sounding a warning to the other social partners, Mr Zarb said: "If anybody agrees with the government's proposals then they are not living in this world."

Malta Employers' Association director general Joe Farrugia believes it is difficult for the social partners to reach consensus on the dilemma.

"At this stage, the social partners are in shock. Whichever way you look at it, there's going to be pain for all. Employers will look at the costs of production and the impact on demand while unions will look at the impact of the hikes on workers."

Any improvements registered this year with respect to the deficit and in economic growth risked being wiped out with the fuel price increase, Mr Farrugia argued.

On the other hand, he said, the government faces serious constraints because of the fiscal deficit and public debt which inevitably limit its ability to absorb the increased prices itself. MEA had been stressing the need for a leaner and more efficient public sector.

He said that where fuel is concerned, Malta is more vulnerable than other countries, since even the water supply depends on energy generation. The country has also been lagging behind in tapping alternative energy sources.

The proposed fuel price increases had also to be evaluated within the context of other changes and reforms in the pipeline, such as pension reform. These would all have an impact on purchasing power and costs of production.

"Too many things are happening at once. The ultimate solution remains in seeking ways to increase production. It is only through increased national output and productivity that the economy would really be in a position to bear the brunt of such shocks."

He warned that if rising costs of production, combined with a fall in consumption result in a significant drop in profitability, then unemployment is likely to follow.

Union Haddiema Maghqudin general secretary Gejtu Vella said the proposed revisions would harm competitiveness, erode workers' conditions and hurt pensioners.

"Having said that, the social partners are now faced with this fact. This is not our own doing and let's stop pointing fingers at each other. The social partners therefore need to come out with a national agreement," Mr Vella said.

However, the general secretary asked whether a lack of planning meant that Malta was once again gripped by an 11th hour pandemonium.