10 - 16 May 2001

Reversing a negative trend

A couple of weeks ago The Malta Business Weekly reported that a number of companies planning on seeking a listing on the stock exchange through an Initial Public Offering (IPO) had put their plans on hold due to the pessimistic economic situation pertaining in Malta. Although, these companies are aware that the day-by-day slide in share prices could have a negative affect on their market capitalisation, they are more worried that the local banks will not give them any more financing. Therefore, operating in market that is passing through an extremely lean period, coupled with the fact that banks are unwilling to fund their activities, is leading to a total slowdown of investment in Malta. No funding. No room for expansion. Economic slowdown.
Recent events over the past few weeks have continued to dampen spirits that a turnaround in the economy can be expected in a short time frame. The closure of two supermarkets and speculation that one of Malta’s largest supermarket chains is in dire straits, have sent shivers down investors’ spines and put creditors on alert.
“Obviously, one cannot blame creditors for wanting their money’s worth. They, as suppliers, have to pay their own debts and face the same problems if they don’t pay up on time.
When one examines the impact the closure of the supermarket chains could have on the local economy, it is not surprising that key government ministers are doing their utmost to keep the ship afloat. If a minister’s intervention in such a situation is required, then something must really be amiss.
This vicious circle, coupled with the banks’ reluctance to bail out any companies is causing apprehension in business circles.
This apprehension is now also reflected in the performance of equities on the stock exchange. The fall in equity prices on the Malta Stock Exchange has not helped the Maltese financial sector – a sector that is becoming a key indicator of how the local economy is faring. Financial companies have been dropping bombshells – some of them posting the most depressing and disappointing results we have witnessed in many years. Bank of Valletta, Middle Sea Insurance and even recently-listed Globe Financial Management published figures which paint a bleak picture of the situation in the local financial sector.
While many could very well hope and argue that the negative trend in the sector’s profitability is nothing more than a short-term break from the spectacular growth rates of the past decade, tracing the potential sources of a hoped-for recovery is a very tall order under current market conditions – on all fronts. The situation in which local financials now find themselves presents them with a very ominous challenge as they strive to reverse the vicious decline in profitability.

A categorical ‘No’

Prime Minister Dr Eddie Fenech Adami has categorically made it very clear: No, a reshuffle is not on the agenda. In an interview last Friday, the prime minister made a couple of statements that will undoubtedly cause a certain amount of apprehension among his backbenchers and among the party faithful. The prime minister gave the impression that there is no one among his government’s backbenchers that is minister or parliamentary secretary material.
This is worrying and we sincerely hope that Dr Fenech Adami has more faith in his government members and does not believe that he is simply surrounded by MPs who are there to fill up the necessary seats in parliament. We have no doubts that there are MPs capable of taking over the role of a minister or parliamentary secretary. We do, however, doubt whether Dr Fenech Adami is right in saying no to a government reshuffle. What this country really needs is a government of new faces, new ideas and a new vision and not necessarily a change of government.
The government has always called on the people to accept and adapt to change. Since 1987, Dr Fenech Adami has brought about many positive changes in Malta. He led the country to prosperity and economic progress. After so many years at the helm, bar 22 months in opposition between 1996 and 1998, Dr Fenech Adami is conscious that certain changes have to be made – today more than ever before.
He is astute enough to get the country back on its feet, yet he needs to take some decisions. He should re-consider his decision not to have a reshuffle. We believe it is the only way forward.