6 - 12 April 2000

FOI urges caution over MIA and Freeport privatisation

by Ivan Brincat

The Federation of Industry is advising the government to proceed with caution in the privatisation of Malta International Airport and the Malta Freeport Terminal and any entities which might not have competitors in a small liberalised market.

However, this does not mean that privatisation should be held back. It is the FOI's belief to attract, wherever possible, suitable partners into any deals.

FOI President Joseph Zammit Tabona said the main objective of the government's privatisation programme should be to create a truly liberalised and efficient economy. He added the reduction of the public debt was considered to be a secondary but important objective.

The FOI was giving its reactions to the White Paper that was issued by government last November on Privatisation - a strategy for the future.

The FOI believed that privatised enterprises would generally render a more efficient and effective service to the consumer at a more reasonable price, especially in the cases of utilities and other infrastructural services. These would have to do without the annual subsidies which government is giving them to compensate for their inefficiencies.

The FOI feels that privatisation is the only way of distancing State-owned companies from political influences and enabling them to assume a more business-like approach to eliminate the inefficiencies, bad management and over- employment which exists in the public sector.

Mr Zammit Tabona said privatising a monopoly could create more problems than it would solve. He mentioned two cases in point, the privatisation of MIA and the Malta Freeport. These entities are essential for the infrastructure of the country and could become major direct problems for industry should they be turned into private monopolies without the necessary safeguards for users.

The FOI said since the first group of public entities to be privatised seem to be the most viable, one would suggest that ideally the potential strategic partners would not only inject fresh capital, but also new technologies, new ideas of improving and expanding present services and finding new markets.

Mr Zammit Tabona said the government should take a policy decision on whether to insist on the five per cent maximum shareholding of any privatised entity to any one personal or corporate shareholder. He said opportunities could be lost should this restriction be applied to strategic partners.

The FOI is insisting on the importance of creating independent regulatory authorities during the pre-privatisation stage which will go to show very clearly the conditions which government intended to make in order to ensure charges and service levels would be at a competitive level - benchmarked on an ongoing basis with those of competitor countries.

Mr Zammit Tabona said the regulator must ensure that the consumer is guaranteed good value for money, the system would stimulate further development of the sector and a balance of economic interests which would safeguard consumers and investors alike.

The FOI document stresses the need for utmost transparency in future transfers of ownership of government entities to private interests, and gives practical ways how strategic partners could be attracted, and how the principle of public private partnerships could be introduced. This is aimed at easing the burden from the public sector at the pre-privatisation stage as a means of introducing more efficient management. Mr Zammit Tabona said the FOI is not in favour of the creation of private monopolies to substitute State monopolies.

The FOI said there is a strong resistance to change in the public sector. Therefore it is suggesting that more discussion has to take place between the three social partners for a consensus to be reached in the interests of Maltese citizens.

The document suggests that public corporations should prepare an identification of skills of all personnel. This could indicate what re-training can be attempted prior to possible re-deployment.

The FOI said if Air Malta is privatised, industry would be interested in ensuring that no privileges or exclusivity of services would be given to the company.