Margaret Thatcher once said that “if government owns, then nobody owns. If nobody owns then nobody cares”.
With this rationale, one can easily understand why this woman championed the privatisation of so many services in the UK during her time as Prime Minister.
From banking to health services, nothing remained a sacred cow.
Her dictum was that open market guaranteed a higher level of efficiency in the provision of goods and services and therefore there should be less space for government and more space for the private sector in the economy.
Malta during the tenure of the Nationalist governments of both Eddie Fenech Adami and Lawrence Gonzi embraced privatisation.
A string of parastatal companies were sold off as the Government sought to reduce its operating role to take on a stronger regulatory role.
With the benefit of hindsight we can say that we had some notable successes with privatisation but we also had some processes that did not produce the intended results. And in this, we are no different than the rest of the world.
Privatisation carries no guarantees. While conceptually it is true the marketplace can result in higher efficiencies, reality can prove otherwise. There are a number of reasons.
Not all private companies operate efficiently. Not all manage to export their operating systems to another country successfully. Not all have the wisdom to factor a level of social thinking in their operating model.
Sometimes, privatisation fails for even more mundane reasons. Cutting corners during the privatisation process can give short-term quick gains but lead to long-term pains.
Privatisation is sometimes referred to as selling the family silver. There are various methods, ranging from an outright disposal of a public company to selling a minority stake.
The extent to which a government is prepared to go depends on the nature of the service. When Mid-Med Bank was sold, the Government then had one central objective: not to privatise a bank but to privatise Malta’s whole banking system.
Much was said about the price obtained by the Government for its shares in Mid-Med bank.
Some questioned back then the logic of Eddie Fenech Adami when he said that to a certain extent the selling price was immaterial. He was, of course, right.
Hindsight can avoid repeating mistakes
Today almost 40 banks operate in Malta. We are one of the best financial centres in the world. Privatising Mid-Med Bank and getting the world’s biggest bank to operate here was a key step in the development of our financial services industry.
Let me cite another example: the privatisation of our airport. In this case no-one queried the price.
The privatisation process has led to a massive improvement in service delivery. Our airport is a successful commercial operation, giving a good return to its shareholders. It is also a significant job provider. Yet questions were asked as to whether it was wise of the Government to sell off what is basically the only air-gateway into Malta when we are so dependent on tourism.
With the advent of low cost carriers, airports and their fee structures suddenly became an important consideration in the tourism equation.
With the benefit of hindsight, one can argue that by selling off the airport, the Government has lost a degree of flexibility in its dealings with airlines. Hindsight’s only value is that it can help you avoid repeating the same mistake. And this is the whole point of this article.
The Government is about to privatise part of Enemalta, a company that has sizeable debts as a result of having operated at a loss for a number of years. Some would argue that there is little silver in this company. I would urge caution.
Enemalta has significant investments represented in the power stations, distribution system and now cable links to Sicily.
It enjoys a monopoly in electricity distribution in Malta. We are talking of an asset worth hundreds of millions. The distribution monopoly alone must be worth a fortune.
It is true that the current situation looks bleak for our energy, but have we really valued the prospects of what we are selling? Like most of us, I have no idea of the details of this deal. I do not know why the Government chose this Chinese company against any other possible contender or indeed whether it considered any other contender.
Should we give up sovereignty in our energy sector? The Chinese company taking over is not a private company. It is owned by a government. The fact that it is the Chinese government is immaterial.
Should we ‘privatise’ our State companies by giving them over to other State companies? These are the questions we should be asking ourselves now because if we do it at a later stage it might be too late.
What exactly are we giving up and what are we getting in return?
The Nationalist Party was and remains in favour of privatisation as long as this leads to a better and more efficient provision of service.
In this case, we are being left with more questions than answers. We urge the Government to come clean before any further action is taken.
Mario de Marco is the Nationalist Party’s deputy leader for parliamentary affairs.
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