Privatising under pressure

The Malta Independent on Sunday Privatising under pressure

As we enter the last quarter of the year government finances do not look good whichever way you look at them. Figures published up to July 2001 indicate that we are missing on the negative side targets for` budgeted revenue, budgeted recurrent expenditure and budgeted capital expenditure.

And as I have written quite extensively recently the budget figures give only a very partial story. The funding going on off-budget` from the Treasury Clearance Funds is substantial and irrecoverable.` It is passed over the Treasury Clearance Fund not because of the lame excuse offered to the IMF,` that people would otherwise get confused, but to window dress the figures and continue playing the make belief game.` The illusion` that the budget deficit is being addressed when in reality is it just being transferred from the Consolidated Account to the Treasury Clearance Fund.

My criticism that it is highly incorrect and against financial regulations to advance funds from the Treasury Clearance Fund which are either clearly irrecoverable ( like all the loans and temporary advances to our shipyards) or only recoverable not from the borrower but from outright sale of the State`s ownership in the borrower`s owning company ( like advances to Freeport which are only recoverable if at all from privatisation proceeds of Freeport) goes unheeded. Our lethargy has reached such a chronic stage where nothing matters anymore.

It is against this crisis background that one has to consider this week`s declaration by the Minister of Finance that by the end of the year the State will privatise the Public Lotto, part of Malta International Airport , Mediterranean Offshore Bunkering, Kordin Grain Terminal and Freeport.

After the gaffe of the sale of Mid-Med Bank and after 27 months of just talk now we have to do everything in the next 3 months.` If you smell crisis it is because it is crisis. With the loan limit approved by parliament used up and the Treasury Bill limit for short term funding ( even though there is nothing short term in the prospects for repayment of the national debt) close to exhaustion the Government is in a situation that without privatisation revenues it cannot balance its books by the end of the year.

Financial markets both in Malta and internationally have had a miserable year so far. What was sombre has been turned into darkness by the WTC terrorist attack.` Issues of new equities has practically disappeared as investors are becoming very risk averse.` In order to prop up the value of their own shares many companies are resorting to share buy back schemes believing that current share level will in the long term be considered a bargain. Shares buy backs essentially withdraw equity from the market when investors lose the appetite for investment risk.

Is it politically and financially` responsible for Malta`s privatisation process to be squeezed all in one of the worst investment scenario quarters purely because the government needs the money Is it not clear that under these circumstances the prospects of getting the best value for our prized treasures get very low`

And where is the transparency which we had been promised` to ensure that the privatisation process does not once again turn into political Ping-Pong` What is the Ministry of Finance waiting for` to publish the benchmark criteria against which it expects to measure the success or otherwise of privatisation of each individual unit`

In some cases the privatisation involves highly strategic assets of national importance. Privatisation must consider aspects which go beyond the purely financial terms.` Take Public Lotto What measures are being proposed to protect against the possibility of sudden surge in Lotto gaming expenditure through better marketing which would directly effect the spending power of the population on other consumption items with grave economic consequences even to the government itself` If people suddenly start spending more on` gaming and less on entertainment` would it create just more unemployment or could we promote moral disharmony even at the granular cell of the individual family unit Have any safeguards been taken to ensure that any growth in` gaming is kept in a reasonable relationship with the general growth of the economy`

Take the Freeport. Why have we not been informed what exactly is being privatised Is it just the management or the assets` And who is going to be responsible for the Freeport debt which is presently guaranteed by the State and for which the States still has to pass on annual` subsidies to the Freeport to pay interest`

In each and every case privatisation is shrouded in darkness contained in expensive documents only available to interested bidders. In the days of e-governmet when all documents should be readily and freely available on the Net` ( even if those to wish to bid will be made to pay a pre-qualification fee) Malta`s privatisation remains shrouded in mystery, managed by crisis and conducted under pressure.