"Privatisation - A strategy for the future"
Privatisation time-frame expected shortly
by Karl Schembri
The government will be launching a privatisation unit in the coming weeks to set a time-frame for the privatisation process and implementation, Finance Minister John Dalli said at last week's seminar on privatisation.
Mr Dalli said that the government would consult and negotiate with all those involved in privatisation. The seminar, entitled "Privatisation - A strategy for the future" was organised by the Ministry of Finance and The Malta Council for Economic Development.
The privatisation unit will suggest policies to the government regarding the privatisation of public entities in line with the White Paper on the subject issued last November with the budget Mr Dalli said the unit will help government with the negotiation and consultation process.
"Privatisation is a whole process of change and things have to be done. Ultimately it is government that decides, because it is government that has the prerogative and the mandate to make decisions," Mr Dalli said. "The government will decide after consulting everyone but no one will stop this process by using the idea of consultation as an excuse," said a determined Mr Dalli.
"One sincerely hopes that the new privatisation unit will be better structured than the previous privatisation task force," Labour MP Leo Brincat pointed out. "The previous task force gave rise to serious concerns about potential conflicts of interest as a result of its lopsided composition."
Prime Minister Eddie Fenech Adami said change had to be managed by "realising that the ensuing pain and gain do not necessarily net out at the same point".
"There will be those who will suffer more pain than gain and there will be those who will gain much more than the pain that they suffer. We manage change by facing this reality and by instituting processes that will smooth out the differential of pain and gain in as many instances as possible," Dr Fenech Adami said.
Mr Dalli reiterated a phrase that was echoed by virtually all parties yesterday, even though they were seemingly in disagreement: "Privatisation is not a policy triggered by ideology."
This was said by the Nationalist Party, the Labour Party, the unions and the World Bank experts.
"If we want to plug this country into the global economy, then we need to start considering how to earn our daily bread," Mr Dalli said.
Mr Dalli said he was more determined than ever, after the seminar, to start the privatisation process: "an exercise of full privatisation for our country."
The unions, however, expressed their scepticism while Dr Hafeez Shaikh, a World Bank expert on privatisation, warned against the dangers of crony capitalism.
Mario Cutajar, deputy secretary general of the General Workers' Union, said government was insisting on privatising everything at the expense of the public interest. The ideology of privatisation should not prevail over other considerations. Moreover private ownership of companies does not in itself guarantee efficiency.
"If there is wastage of resources and obsolete managerial practices in the public sector, then these should be redressed. Total privatisation is not the solution. If the public sector is sick, then we have to heal it," Mr Cutajar said. The government should remain the major shareholder of essential services because only it can safeguard the public interest.
"We have to analyse why and how the public sector ended up in this situation. It is definitely not the employees' fault. Politicians have to shoulder responsibility and stop portraying employees as parasites, when in reality they are simply obeying orders issued by their superiors.
Not only do politicians not shoulder responsibility but they blame employees and opt for full privatisation."
The same point was made by the Union Haddiema Maghqudin secretary general, Gejtu Vella: "Whenever we hear that the public sector is suffering from over-staffing, the main question that arises is: but who employed these people? Someone must be responsible. What about the workers who are employed on the eve of an election? That is what I call responsibility and seriousness! These blunders cost thousands of liri to the Maltese, but it seems as if no one is responsible for such decisions."
Mr Cutajar added that privatised entities would be subjected to constant auditing.
"We are saying this because it is clear from this White Paper that government intends to abdicate from its responsibilities towards employees and employment. The lack of preparation and seriousness are crystal-clear."
Electricity, water provision, telecommunications and postal
services are essential services which must be guaranteed by government. The State should retain the majority shareholding of such entities to ensure that they are delivered to every citizen beyond the dictates of profit-making.
The chairman of the Privatisation Committee, Louis Farrugia, was, however of a different opinion. Enemalta and the Water Services Corporation provide essential services but they can be more efficient and deliver at a reduced price.
If government finds a private operator for such services it could remove subsidies and extra employees and strengthen competition.
"These State companies can be subjected to market forces," Mr Farrugia said. "It is fundamental that the whole process be independent and transparent, led by independent individuals in the interests of the citizens."
"Ultimately," Mr Farrugia said, "whether we privatise or not; whether we join the EU or not; globalisation remains a reality that determines the way we work. We are assisting to mergers and take-overs all over the world; multinationals are gaining power across frontiers and Malta can take part in all this."
Mr Vella, of UHM, said the privatisation process in the past 10 years was characterised by a serious lack of consultation with the unions. Privatisation should be paralleled with liberalisation of the market and with the setting up of a strong regulatory infrastructure which ensures checks and balances.
"Consultation should not be limited to the imparting of information. The UHM does not accept lack of consultation. It would have been much more serious to know who contributed to this White Paper. That would have been real transparency."
Mr Vella said privatisation should take the form of popular capitalism, that is giving the opportunity to the employees to buy the shares of the same companies that employ them, thus owning their own companies and increasing workers' participation.
Privatisation is not ideological - Eddie Fenech Adami
"Privatisation is not an ideological dogma of any particular political inclination," Dr Fenech Adami said, as governments across the left and right divide, from America to Asia, were implementing a vast and fast privatisation programme.
"I believe that the reason for this trend is that all countries who want to participate in a global economy which has become the paradigm of economic progress and social advancement, have realised that economic activity has to be undertaken under very specific standards of efficiency."
"Governments realised that political direction was not as effective as entrepreneurial flair, and that parastatal companies often resulted in over-manning, mediocre services and high costs," Dr Fenech Adami said. These high costs had to be supported either directly by the user of the particular product or service or, in the case of subsidies on commodities, through subventions from the general taxation pool paid by users and non-users.
Government's target is that once parastatal companies pass through the privatisation process, "they emerge with a renewed vitality that will serve the country's economic growth more effectively. They will be in a better position to create wealth in the country through the provision of a larger spectrum of higher quality services backed by a reduction in their operation costs."
The Prime Minister said international companies and global players would be encouraged to participate in the privatisation process as strategic partners.
The government, however, will not be applying a standard formula in all cases. "Every candidate for privatisation presents a particular scenario of economic and social impacts, technological structure and marketing opportunities. All this will have to be evaluated before any decisions are made on the level and method of privatisation adopted."
Dr Fenech Adami, however, made it clear that it was not government's policy to hand over ownership of any shares to unknowns, as the Labour government had done with the issue of GDR shares in the privatisation of Maltacom.
"We strongly believe that the basic rule of transparency is that of knowing the identity of the owners of our entities," the Prime Minister said.
The privatisation process should also contribute to the government's finances and proceeds from the privatisation process will go towards the reduction of the government's debt burden.
Privatisation is not dogmatic - Leo Brincat
In the Labour Party's opinion it would be a great mistake to pursue a privatisation policy, purely as an ideological or dogmatic objective, or else to address our country's structural deficit problems.
A privatisation policy should be pursued pragmatically, in an appropriately timed and sequenced manner, completely in synchronisation with the country's social and economic exigencies.
A positive stance on privatisation should not be the end result of an international trendiness. Rather than being looked upon as a buzzword, it should be pursued because given our current circumstances, privatisation in principle makes economic sense.
"In spite of the rather structured manner in which the Privatisation White Paper was compiled, in the final analysis it poses far more questions than it offers answers or solutions," Mr Brincat said. It lists options without identifying clear guidelines for future sales of public assets.
Moreover the White Paper does not specify the means of valuation which companies earmarked for privatisation will be subjected to, nor does government specify the extent of ownership that it intends to grant to would-be strategic partners.
"In a nutshell, we have a privatisation policy that is still lacking direction, as a result of its failure to spell its intentions out clearly," Mr Brincat said. In order to boost employee morale and strengthen long-term loyalty to the companies involved, a new Labour government will revive the policy of offering employees a percentage of the privatised companies' shares through a foundation which will be set up.
"One area which we need to address in our party's economic policy update is that of introducing anti-trust legislation to ensure that the privatised companies do not lead to dominant sectoral positions by foreign or local private sector institutions," the Labour MP said.
Government has to be committed to privatisation - World Bank expert
The chief opponents of privatisation are not the unions but the ministers and officials in government, Dr Hafeez Shaikh, a World Bank representative, warned the government at last week's privatisation conference.
"The Cabinet and the public sector include beneficiaries of State-owned companies, chief executives and other individuals with vested interests who will oppose the privatisation process," Dr Shaikh cautioned.
This means that it is of utmost importance that all Cabinet ministers and members of government will be fully committed towards the implementation of the privatisation programme.
Dr Shaikh also stressed the importance of transparency throughout the whole privatisation process to ensure that there would be no "cronies of government" within the regulatory infrastructures.
"In the past there were instances in which privatisation was not carried out in a transparent manner, thus casting doubts about its validity as a
policy."
The same appeal for transparency was made by several other speakers during yesterday's seminar.
The role of government, the World Bank expert said, should be that of making policies and regulating the market.
"Privatisation ultimately has to lead to more efficiency, a better investment climate and more opportunities of employment," Dr Shaikh said.
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