Who will look after our common good?

For a small, open and vulnerable country like ours depending totally on its air and sea links for all its imports, exports and tourists, the shipping lines and airlines that connect us with the rest of the world are crucial and essential. We cannot depend totally on airlines and shipping lines which see us as only a small part of their operation. We need our own communications infrastructure and facilities that have as their core mission the promotion of Malta's tourism, trade and manufacturing.

Malta cannot simply afford to privatise its ports, airport, shipping line and airline in a bid to address some of its huge structural deficit and public debt problems without looking at its long-term interest and the strategic role this communications infrastructure plays in its national development.

Privatising the Freeport's facilities is short-sighted. While it may be in government's short-term interests to obtain a more lucrative terminal contract, they are not looking at Malta's longer-term interests in having a diversity of reliable and reputable lines, nor are they helping local industry and importers to have the widest coverage of ports/countries served.

The fact that the Federation of Industries (FOI) and its members have complained to Government about the possible negative consequences of handing over the Freeport to foreign operators illustrates the seriousness of the problems. Privatisation will not necessarily and automatically improve matters. As Edwin Calleja (FOI) has pointed out: what is not being achieved for industry when the Freeport is still run by Maltese, will surely not be improved when foreigners operate it.

Now that CP Ships and P&ONL (and CMA-CGM in the Epic service) no longer call at Malta Freeport, exporters like Foster Clark (who are our largest exporters to Jeddah and Arabian Gulf during the present run up to Ramadan) have no direct possibilities any more. China Shipping and IRISL do not accept containers to the Middle East (Jeddah and Arabian Gulf). The only remaining lines that serve the Middle East with a direct service are CMA-CGM and Norasia who charge higher freights and, besides, exporters now have fewer chances to export because only these two lines operate directly.

The other alternative would be to ship exports from Malta via another hub port as Gioia Tauro and Cagliari but transit times are much longer, total transport costs are of course higher, and worse still, feeder services between Malta and Gioia Tauro and Cagliari are now few and far between. The fact that EPIC and CP Ships services have left Malta for Cagliari, means that feeder ships also moved from Malta to Cagliari, and so there are fewer feeder services to/from Malta.

In the hands of a few

In the first week of this month Playmobil told The Business Times that their exports to the US were badly affected by as much as 34 days' delay. This is a pure case of lack of sailings. This might seem like a small detail in the big picture, but it is a reflection of the problem that has arisen consequent to the departure of EPIC service.

Yet the Freeport have remained silent over this fact which they brought about owing to their arrogant behaviour with clients, in this case towards companies like P&ONL and CP Ships. When they "pushed" away these lines, they were only thinking about their own interests, and left exporters in the lurch, standing without shipping connections.

In its role to attract high volumes of transhipment business, the Freeport's priority should be to have a diversity of shipping lines that use its facilities, because the greater the number of lines, the wider the coverage will be of ports served, whether for imports or exports. Indeed, the Freeport itself blows its own trumpet when it announces that more ports are being covered when a new contract is signed with shipping lines. This should be one of the Freeport's ambitions when seeking new customers.

Local trade on its own does not constitute sufficient traffic to attract new lines and when a line has an interest to use the Freeport as its hub, industrialists and importers will benefit from the lower freight rates that such big shipping lines derive through their economies of scale, and better and new shipping links. Apart from the economic logic to have the widest possible diversification of shipping lines as its clients, the Freeport is simultaneously assuring industrialists and importers of what counts most to them, that is, lowest freight rates from a competitive shipping environment and regular and reliable shipping connections to as many ports as possible.

The movement by two important services (CP Ships and EPIC services) from Malta Freeport to Cagliari, severely restricts the choice that local entrepreneurs have to get to their overseas markets. A Playmobil spokesman has declared: "Should the situation persist, it would drive companies to transfer production elsewhere."

A situation has been brought about where there is a heavy concentration of what shipping services are available in the hands of a few shipping lines: CMA-CGM and their partners Norasia, China Shipping and IRISL, and exporters' requirements are not being met. This inevitably means fewer ports are served and the tendency for freight rates to rise, that are all bad news for our economy. In fact, it was reported recently in the shipping media that freight rates have been substantially increased from/to North Europe and the Far East as from June 1.

To overcome our inherent island disadvantage, a wise government should help Maltese business and industrial communities by means of a sound Freeport policy, but in the bad climate that our economy is passing through, Government is instead compounding the shipping problems when it has allowed the concentration of essential shipping services in the hands of a few. And privatisation, whether of the Freeport, Sea Malta and Air Malta, does not augur well. Having now committed such blunders, it is very difficult for the government to turn the clock back, but Government should not persist in its privatisation of these strategic assets without a sound plan in place that will safeguard the economy in general and tourism and industry in particular.