A Vision of Convenience

The Times of Malta

A vision of convenience

Parliamentary Secretary George Hyzler (Talking Point, February 15) brushes aside all criticism for the scandalous agreements reached with NZ Post regarding consulting service and equity investment in Maltapost.

He justifies the deal as a matter of a vision and accuses with lack of vision all critics, coming from as broad an opinion spectrum as yours truly to the editor of this paper.

On the excuse of vision one could justify anything. Even Milosevic could probably justify his ethnic cleansing on the vision of stability for the Balkan region. This vision argument is just escapism to answer the very specific hard-hitting criticism.

Dr Hyzler says that I am annoyed because the government is delivering. I am annoyed, it's true, but because I am seeing the country's assets being undersold and disposed of in such haphazard manner.

The problem is that the government incompetence in managing its business is forcing it to privatise under stress. Just consider this. Maltapost was formed in May 1998 after tough negotiations with the unions representing the employees to ensure that we get their support for change in work practices to bring about the necessary efficiency improvements. It was formed following Posta Ltd was sent into bankruptcy in record time by the nationalist administration prior to 1996.

By the end of December 1998, after just eight months trading, there was an accumulated profit of Lm250,000. Not a bad start for a new company without any postal rate increases and with 60 per cent rebate on government's postage business.

In the two years under Dr Hyzler's administration, this profit was turned into an accumulated loss of Lm180,000, indicating a loss for the period of over Lm400,000. And this in spite of the fact that during these two years the government, in accordance with the original agreement, started paying full normal rates and benefiting from international distribution of Maltese philately through a contract introduced by the Deutsche Post who were chosen as consultants to help in the necessary restructuring. My calculations indicate a growth in revenue from these sources of nearly Lm1 million liri which, in evidence of gross incompetence, were not enough to avoid turning the profit we left in 1998 into a loss in 2001.

Dr Hyzler makes a lot of questions at the beginning of his article but he fails to answer any. Really the answer to the first question he asks would be enough. Could we have achieved our goals without a foreign partner` The answer is absolutely yes. If foreign technical inputs are required they could have been procured on a short-term consultancy with very specific deliverables. No equity involvement is necessary. The equity route is a very expensive one.

In the end, a very effective minority equity shareholding giving absolute control over the company's operations has been sold for a mere half a million in cash and a further Lm700,000 bartered against a highly inflatedly priced two-year consultancy services.

Against this, the Kiwis got a very real possibility to continue charging for posterity annual technical services well beyond the first two years, making the payback of the initial cash layout very short and lucrative indeed.

No wonder the Kiwis never had the opportunity to make similar equity investments wherever they went to sell their technical expertise. Reality is that no serious self-respecting government would offer them what the Malta government offered on a silver platter.

In the first half of 1999, I myself had made a formal application for a group of investors, including an A1 international bank, to acquire 50 per cent equity of Maltapost with the other 50 per cent remaining in the public sector.

Payment offered was in cash and not bartered against very expensive technical services. All I got was a simple acknowledgement. I assure that had this lead been considered, along with others following formal bidding process, it would have beaten the NZ offer on price, on vision, and on strategic sense in keeping public sector control over such a strategic monopoly service.

I am annoyed, because I see the country being sold on the cheap with strategic natural monopoly services being regaled through direct arrangements to private interests, in the process exposing the consumer to monopoly abuse.

To make the pasticcio complete, the government did not even reserve the right to buy back the shares in case the Kiwis do not deliver on the management agreement even though they obliged the government to buy back these shares in case of such an event. A one-way agreement if ever there was one.

At a time when internationally the pressure is building, following the Enron debacle, to separate auditing from consulting, the Maltese government has confounded all business gurus by mixing consulting with equity, creating the perfect recipe for conflict of interest. This is the work of incompetent amateurs.

Some vision!