The privatisation process

The government's announcement, during last week's seminar on privatisation, that it will be launching a unit in the coming weeks to set a time-frame for the implementation of privatisation is to be welcomed. Finance Minister John Dalli made it clear during the conference that although the government will hold consultations before State-owned companies are privatised "no one will stop this process by using the idea of consultation as an excuse". This shows that the government is truly committed to privatisation. It is essential that the government has a clear strategy in place when the privatisation process starts but one hopes that we will witness a vast improvement in the way last year's major privatisation was carried out, that of Mid-Med Bank. In that case consultations came about rather late in the day and no real professional advice was given to the government over the sale.

During last week's seminar Labour shadow finance minister Leo Brincat, said: "One sincerely hopes that the new privatisation unit will be better structured than the previous privatisation task force". UHM secretary general Gejtu Vella pointed out that the privatisation process in the past 10 years was characterised by a serious lack of consultation with the unions. The Malta Business Weekly fully shares both these views.

Mr Dalli emphasised a point that was agreed to by virtually all the speakers at the seminar, namely that privatisation is not a policy triggered by ideology. To a certain extent, this is true because nowadays nearly all political parties ranging across the political spectrum agree on the merits of privatisation. However, privatisation is an economic method of bringing about more efficiency and greater economic growth and the fact that there is often consensus on this point does not mean that it is not a political belief. It is a political viewpoint which originally was championed by the centre-right and which today is also encouraged by the centre-left. Such a conversion is therefore a triumph for policies which advocate less State involvement in the economy.

What needs to be stressed about ideology and privatisation is that one cannot simply adopt an attitude that all publicly-owned companies should be privatised as a matter of principle. Such a policy makes no sense and each company should be properly assessed as to whether privatisation would be in the interest of the country, the economy and the consumer. Privatising companies which enjoy a monopoly situation and which would continue to do so when privatised, because competition would not be feasible, is certainly in nobody's interest. What is needed there is an independent authority to regulate such companies if an abuse takes place as a result of its monopoly position.

The deputy secretary general of the General Workers' Union, Mario Cutajar, expressed some misgivings about the government's privatisation policy. He said: "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". He also said that the government should remain the major shareholder of essential services because only it can safeguard the public interest.

The problem, however, is in identifying what exactly is an essential service. Furthermore, if competition is a viable option, then privatisation should not be excluded. For example, it is doubtful that an element of competition can be introduced in the water and electricity sector, so imposing a regulatory authority would be preferable to privatisation. However, in the telecoms sector, for example, competition would be in everyone's interest and so the privatisation of Maltacom should be on the government's agenda.

Louis Farrugia, managing director of the Farsons group, made a very valid point when he stated: "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." Malta has to wake up to the realities of the globalised economy and to start living in the real world and Mr Farrugia's point should be noted by all policy makers.

Perhaps one of the most interesting speeches at the seminar was made by World Bank expert Hafeez Shaikh. He made it clear that the chief opponents of privatisation are not the unions but the ministers and officials in government.

"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. He said it is of utmost importance that all Cabinet ministers and members of government are fully committed towards the implementation of the privatisation programme.

Dr Shaikh's cautious words should be kept in mind by those in government.