Managing Change through Effective Leadership

Maltastar



As my brain is well set on an August holiday I thought I would quote verbatim from a lecture delivered in 1998 by Dr James P. Baughman on the topic of achieving change through effective leadership. I hope you enjoy reading it as much as I had enjoyed hearing it.

Quote

I have worked for some interesting CEOs in my life: The Shah of Iran, Ayatollah Khomeini and Jack Welch (ex-CEO of General Electric) to name just three. They shared many properties.` One of the things they shared was championship.

Championship

By championship, I mean not to win something, but to champion the idea of change. What they do very well is move a population of people, move a culture of society, or organisations through a series of questions.

`So the champion`s primary responsibility is to move through the catechism from it can happen here, to it might happen here, to it should happen here, to it must happen here, and indeed, to it will happen here`

First of all they deal with the question of: it cannot happen here. They address that by saying, well it is happening somewhere else.` That moves you to next question: It might happen here. Then they move to the question: it should happen here, and to the question: it must happen here.

And that`s only half the job, because then you have to demonstrate that it can happen here, and then you have to put in the right systems and structures to make sure that it will happen here.

So the champion`s primary responsibility is to move through the catechism from it can happen here, to it might happen here, to it should happen here, to it must happen here, and indeed, to it will happen here.

To do that they perform a number of operating routines, one of the most important of which is information: informing, informing, informing. But there is another side to informing that leaders experience what many people tend to forget. When I worked for Jack Welch, he and I made most of the speeches for the first two or three years of the GE change process.

And he came to me one day and he was almost in tears and he said: `Why do they keep asking me the same questions` Haven`t middle management told them We published our mission statement.` I have made hundred of speeches. And they ask the same questions`

Both being of the same age and the same level of intelligence, we figured out that what the general population was doing was not asking for information. What they were asking for was confirmation, and the role, the unique role, that leaders play is confirmation, confirmation and more confirmation, as well as information, information and more information.

That role very frequently is not perceived and not well executed. The leader believes that his job is to transmit and to receive and to transmit, but never really to confirm, to confirm and to confirm.

Discipline the process

Another specific role that the leader plays besides informing and confirming is that he or she is the proprietor of the discipline on the process. They discipline the process in an number of ways: through vocabulary, by moving to a common vocabulary; they discipline it by moving towards common analytics: what essentially is the proof that is required; they discipline the process through measurements; they discipline the process through incentives that they offer, and they discipline the process in ` most importantly ` terms of the values that are embedded in the change.

The leader of the change is ultimately the proprietor of the values that are embedded in the change.` If the values do not change, no change takes place. And at the end of the day, it is really the leader that is the sort of judge or exercises judgement and confirms, and confirms, and confirms the values. `Creating a burning platform means that through threat or opportunity, convincing others, through your force of will but through data demonstration, demand and diagnosis, that there is a reason to change, a benefit to change, and an imperative to change.`

But championship in that sense is an important ingredient, and the roles that I found the champion most skilful at, or most lacking ` depending on whether they are successful in their ability to inform or in their ability to confirm, and their ability to discipline the process, and ` particularly ` to discipline the values.` What they do is create a shared need- that is creating ` what is called as `the burning platform`.

The leader has a responsibility whether he or she uses threat or opportunity, to essentially challenge the status quo, and demonstrate through data, diagnosis and analytics that that there is a compelling reason to change.` Now there is a big difference between creating the shared need and shaping a vision.` Moving from creating a shared need to shaping the vision is what I want to spend a little time upon.

Creating a burning platform means that through threat or opportunity, convincing others, through your force of will but through data demonstration, demand and diagnosis, that there is a reason to change, a benefit to change, and an imperative to change.

I give an example of creating a shared need in a business that I experienced with Jack Welch. We had in General Electric a nuclear business. It had been one of the earliest nuclear businesses building nuclear reactors around the world, and in 1981 when he became the Chairman, we had the annual review of each business. The nuclear business came from California and they presented their strategic plan. They began the strategic plan by saying `In 1982 we will sell three nuclear reactors in the United States.`; that was the first line of their plan. He stopped the meeting at that moment. Five minutes into the meeting, and he said: `Excuse me, but we have not sold a nuclear reactor in the United States since 1972, ten years ago, and you have brought the same plan in for the last ten years, and I essentially want to give you the first sentence of the new strategic plan.` I want you to go back to California and when you thought it through come back and tell me whether we have a business or not. He said: `The first sentence of your plan is ` General Electric will never sell a nuclear reactor in the United States because of the Green Movement, because of the Government regulations and because of liability.`

He stopped the meeting, sent them back to California.` They came back in a couple of weeks and they said: `We have a business. We have a fuels business. We have a parts business. We have a service business and indeed we have a decommissioning business.`

He said: `Wonderful, now let`s continue the meeting.`

Unquote

`We can do it, we have to do it, we must do it, we will do it!` I could go on and on quoting Baughman`s experience how to pass from a shared need to shaping a vision and on to translating that into a formal action plan.` But it`s not necessary as the above proves the point I wanted to make. Change, if it is to be positive change, does not just happen.` It is made to happen. It is managed.` It is worked at firstly by creating a shared need for the change, then by creating a vision and finally by mobilising commitment and resources through a definite action plan.

Leaders don`t just spend their way through problems as the PN have been doing for the last 15 ways.` Leaders earn their way through problem solving and that it what this country needs and what the next Labour government has to provide. We can do it, we have to do it, we must do it, we will do it!

August Thoughts

The Malta Independent on Sunday



While politicians take a deserved break from the routine parliamentary duties, and the electorate gets probably an even more deserved break from the boredom of the stale debate that often dominates the House, it is fit and proper to use the August lull for reflection.

Let me dwell on two points that should hopefully keep the government`s decision makers thinking time productively busy.` Just two points ` one about the economy and one about the EU issue. `We have what it takes to compete and win even in a fiercely globalised world.` Our smallness and our location are great assets that distinguish us from competitors.`

The economy belongs to us all. It is our livelihood; it is the future we will be bequeathing to our children. Do we really believe that economic solutions lie in spending our way through our problems` Can we really continue to amass debt at current rate thinking that we can continue to defy perpetually the laws of economic gravity Can we continue with the irresponsibility of privatising merely to gain access to more funds to keep spending our way out of problems without addressing the real underlying source of the problem`

We have what it takes to compete and win even in a fiercely globalised world.` Our smallness and our location are great assets that distinguish us from competitors. We must invest and compete in areas where the immutable properties of size and location add value to our offerings rather in areas where they expose of weaknesses.` Our people are capable and hard working, provided they are well managed and fairly rewarded. If not we could be among the most undisciplined and lazy.

So it`s all a matter of how well you lead us. How well you put the national objective above your quest for eternal power. Your claim for power should come from the economic well being which your leadership can create not from the illusionary money no problem culture that only solves problems for today by storing bigger ones for tomorrow.

So what on earth are you waiting for to perform the real re-structuring that this country needs` Why have you resigned yourselves to failure in attracting investment and creating of productive jobs that could act as a catalyst for the transfer of idle human resources in the public sector to productive employment in the private sector How can this happen if the conditions of employment in the public sector continue to offer privileges and security which the private sector can only dream about` Is it not possible that you explain this to the unions and get their agreement to re-balance the rights and obligations of all Maltese workers so that some will stop being more equal than the others` I grant it, you cannot do it alone. You have to do it together with the unions. But you have to lead by example. Unfortunately the example you give in the way you spend money without getting value offers a poor platform for demanding and obtaining the needed agreement from the unions; especially if you continue to deny the existence of economic problems. `The notion of holding a referendum before the next election is an obscene mis-use of power for party politics rather than for seeking national consensus.`

Or has your extended tenure in power blinded you so much that what for us lesser mortals with our feet on the ground are mountains of debt and debris, for you with your heads in the clouds are just dots on a map`

For the EU issue, it is not important if the government or the opposition is right or wrong.` Both are entitled to their respective points of views and ultimately these points of view will stand or fall on the level of subscription they get from the electorate.

What`s for sure is that the membership decision should only be taken when we are prepared for it. When we know what it means to say yes as well as what alternatives exist if we say no.` There will come a time in the not too distant future when the country can vote serenely on this issue.`

You owe it to this country not to use the EU issue to foster political division; not to squeeze the calendar for taking a decision about the EU to fit personal agenda linked to personal retirement of this or that from the political scene.

The notion of holding a referendum before the next election is an obscene mis-use of power for party politics rather than for seeking national consensus.` No serious government would hold a divisive referendum on a matter on which there are strongly contrasting political views without giving commensurate exposure to both views; particularly if the government does not command a tenure of mandate long enough to execute the people`s decision.

So basically once you close negotiations with the EU the sensible thing to do is to take this country to an election. If you win the election then you can probably proceed to a referendum where the resistance to EU membership would dilute and such achievement would be crowned with a huge approval befitting the end of a long political career.

If you lose the election you have to respect that the customer is always right.` You cannot always have it your way. After all it could well be that you may not know it all or if you do you just have to let your successors to persuade the electorate that although you knew it all , the others needed more time to get to know it as well.` Like a fruit in the` tree you cannot enjoy it if you pick it out of season.

1996 mill-Gdid

Il-Kullhadd  

 

Fis-sajf ta’ l-1996 John Dalli bhala Ministru tal-Finanzi hares lejn il-figuri tal-finanzi tal-gvern u thasseb.    Dak li kellu jkun deficit ghas sena kollha ta’ Lm32 miljun, sa Gunju 1996, fl-ewwel sitt xhur tas-sena kien lahaq Lm60 miljun.

 

Kif se jmur jaghmel budget ghal 1997 li kellu jkun il-budget ta’ l-elezzjoni meta l-finanzi tal-gvern kienu qed jisfrondaw?

“Il-Prim Ministru Fenech Adami, li kien qal li l-flus mhux problema, gie kkwotat mil-gurnalista ewlieni li kif raha il-qaghda mweghra tal-finanzi tal-gvern kien se jhossu hazin.”

 

Ghamel memo lill-kabinett u wissiehom bil-gravita tas-sitwazzjoni finanzjarja tal-gvern.    Il-Prim Ministru Fenech Adami, li kien qal li l-flus mhux problema, gie kkwotat mil-gurnalista ewlieni li kif raha il-qaghda mweghra tal-finanzi tal-gvern kien se jhossu hazin.    

 

Is-sajf ta’ 1996 kien wiehed ta nkwiet kbir ghal-gvern nazzjonalista.   Fl-ahhar ir-rejalta habbtet il-bieb u l-gvern ma setax jinjoraha izjed.  L-uniku mod li l-gvern seta jsalva wiccu kien billi jahbi ghal ftit xhur il-qaghda gravi tal-finanzi tal-gvern, jippretendi li kollox ghadu miexi skond il-pjan u jsejjah elezzjoni kmieni meta l-poplu kien ghadu sajjem mil-fatti halli mbaghad dawn johorgu wara li jkun rebah l-elezzjoni.  Hekk kien il-pjan meta f’Settembru ta’ 1996 flok laqqa’  il-parlament il-Prim Ministru Fenech Adami talab lil –President biex ixoljih u jsejjah elezzjoni ghas-26 ta’ Ottubru 1996.   X’gara wara jafu kullhadd.

 

Das-sajf il-Ministru John Dalli ghaddej mill-istess esperjenza.   Deficit ta’ Lm60 miljun fl-ewwel sitt xhur ta’ l-1996 tela ghal Lm84 miljun fl-ewwel sitt xhir ta’ 2002.   Kif se jmur jaghmel budget ghas-sena 2003 li jkun budget ta’ elezzjoni meta deficit ta’ Lm77 miljun ghas-sena kollha diga nqabez sew fl-ewwel sitt xhur biss?

“Ejja ma nhallux lil min johloq diversiv biex jghatti xturu.”

 

Harsu lejn il-figuri tat-tabella li tikkompara l-finanzi tal-gvern fl-ewwel sitt xhur ta’ l-1996 ma l-ewwel sitt xhur ta’ l-2002.   Minkejja li d-dhul ordinarju tal-gvern ( jigifieri d-dhul mit-taxxi li qed jaghsru lil poplu u lilll-ekonomija) zdied minn Lm218 il-miljun ghal Lm319 il-miljun – zieda ta Lm101 miljuni fuq perjodu ta’ sitt xhur – id-deficit xorta kiber b’Lm24 miljun fuq dak li kien werwer lil Dalli sitt snin ilu.

 

Mela jekk twerwer sitt snin  ilu kemm aktar ghandu jkollu paniku llum iffacjat minn pozizzjoni ferm aktar gravi.   Jista’ jghid kemm irid il-Ministru Dalli li kollox miexi skond il-pjan u li fit-tieni nofs tas-sena se jfarfar il-bakketta magika halli kollox jigi f’postu.   Ma jikkonvinci lil hadd.

 

U lanqas billi jilghab bil-figuri billi jikkreja dhul one-off u artifjali minn transazzjoni ta’ bejgh ta’ propjeta’ tal-MIA m’hu ser jahbi il-gravita’ tas-sitwazzjoni.  Il-verita’ hi wahda u cara.  Il-gvern tilef il-kontroll tas-sitwazzjoni finanzjarja.   Minkejja li John Dalli efficjenti jigbor it-taxxi shabu jonfquhomlu b’rata aktar mghaggla tant li d-deficit kiber mhux ckien.

 

Finanzi tal-Gvern  6 xhur Jannar sa Gunju

 

	1996 (Lm Miljuni)	2002 (Lm Miljuni)
Dhul ordinarju                            A	218	319
Nefqa Rikorrenti                        (i)	231	316
Nefqa Kapitali                           (ii)	37	49
‘Servicing’ tad-Dejn Pubbliku      (iii)	10	38
Nefqa total  (i)+(ii)+(iii) =            B	278	403
DEFICIT                  A-B	60	84

 

 

Ejja ma nhallux lil min johloq diversiv biex jghatti xturu.   Ejja niffukaw fuq din il-problema li mhux tal-gvern biss, izda taghna lkoll.   Ghax il-gvern imexxi f’isimna.  Meta fl-elezzjoni li gejja il-poplu jibghat lill-gvern nazzjonalista fejn jixraqlu il-problemi mhux ser igorrhom mieghu.   Il-problemi ser jibqghu maghna u nkunu rridu ahna, gvern laburista, li nohorgu lil-poplu Malti mis-saram li dahhluna fih dawn il-karfa li hlief biex iberbqu u jsefsfu fil-widnejn ma jinqalghux.

 

Qed nghixu l-1996 mill-gdid.   Id-differenza hija li meta minn hawn u ftit iehor nergghu mmorru fil-gvern il-problemi ser ikunu akbar.  Izda akbar ukoll ser tkun id-determinazzjoni taghna li nahdmu u akbar se tkun l-ghaqda ta’ bejnietna biex taht il-Leader taghna nahdmu bhala tim wiehed ghal gid tal-haddiema maltin u ghawdxin.    Minkejja kul diversita’ ta’ opinjoni fuq affarijiet sekondarji ahna maghqudin ponn wiehed fil-herqa biex naghtu lil Malta il-gvern li tassew ghandha bzonn.
 

Masters of Spin

The Malta Independent 

 

The government’s campaign to take us blindfolded into the EU is founded on two particularly deceptive spins

 

The first spin is that no matter how problematic and painful such a decision could be, the alternative is going it alone into the wilderness of an Albanian-style economic barren desert that will exclude Malta from the benefits of the globalisation process.  This spin is shamefully re-enforced by every EU dignitary who chooses to pour his biased wisdom on us during fleeting visits. Okay, I should not complain about others pouring wisdom – point taken - but this is no complaint, it is a statement of fact.

“Okay, I should not complain about others pouring wisdom – point taken - but this is no complaint, it is a statement of fact.”

The reality is different. At the very least, without need for lengthy negotiations, our country could go for the European Economic Area model chosen by Norway and Iceland.  This would integrate us into the basic four freedoms of the EU single market, but give us the facility to keep out our agriculture and fisheries sector, and keep us out of the obligations of other EU pillars of justice, immigration and common, foreign and defence policies.

Pro-membership movements would criticise this model on two fronts.

Firstly, they argue it would exclude us from EU funding programmes available to members. Secondly, it would impose on us EU standards and economic decisions without actually having the chance to influence such decisions from inside.

In theory they are right. In practice, however, our qualifications for EU funding, net of our own direct and indirect contributions, are pie in the sky.   And our ability to influence decisions from inside is a figment of our imagination considering that the EU is embarking on an irreversible journey to render all decision-making based on a qualified majority system.

So the points which should be carefully debated are whether the two objections to the EEA, which in practice are also applicable under the membership option, are a price worth paying to preserve our agriculture and fisheries sector and our ability to leverage our strategic political importance, far greater than our geographical size, to gain economic benefits as we have been doing since time immemorial.

And then the EEA option is the worst possible alternative from a myriad of other possibilities. An ad-hoc bilateral agreement as negotiated by the Swiss could enhance this agreement and add value to our relationship with the EU by including co-operation in other areas tailor-made to our realities. So Malta’s place in the globalised world operating a free–trade system with the EU and hopefully with others is available under all alternatives.

“The tragedy is that those forces who are intellectually obliged to expose spin for what it is, particularly the press and the intelligentsia, are themselves spinning.”

The go-it-alone syndrome is deceptive spin pushed by those who are afraid to consider alternatives outside membership, less the defects of the membership option become over-exposed.

The other spin is the question of the referendum. The government maintains the right to hold a referendum without explaining the alternatives. It wants the people to believe that the choice is between the EU and post-war Albania.

I challenge professors of history, who are quick to criticise whatever Labour says or does, to tell us in which country in the democratic world has any government held a referendum on a matter on which there is strong contrasting views by the party in opposition when:

 

·         the Opposition’s views are not given commensurate resources for proper exposure

·         and the government has no electoral mandate long enough to execute the referendum decision.

 

An EU referendum on this side of the election is spin. Given its horrible performance on the economic, financial and administrative front it is little wonder that the government is forced to resort to spin.

The tragedy is that those forces who are intellectually obliged to expose spin for what it is, particularly the press and the intelligentsia, are themselves spinning.

 

Il-Problema huwa l-Gvern

Il-Kullhadd



L-aghar haga li jista jgrilu xi hadd fix-xena pubblika hija li ma jaghti kazek` hadd tghid x`tghid u tikteb x`tikteb.` Min dak li jghid u jikteb jigbed attenzjoni, mqar jekk kritika distruttiva, allura jkollu ta` lanqas konsolazzjoni li qed jinstema u jinqara.

Jien ma ghandix x`ingerger dwar dan. Kultant iz-zejjed. Issa jidher li nazzjonalisti ippuntaw l-lenti fuqi biex jaqilghu l-inkwiet. Esperti fiha din. Ma hemm xejn xi jtihom pjacir izjed milli kieku forsi jien itellghuhomli u ngholli kollox.` Kieku mill-ghada jibdew jiktbu kemm jien ta` l-affari tieghi u kemm jien serju.` Kieku tieqaf il-kritika ghax ikunu hadu dak li jimmiraw ghalih, li jdghajjfu lil-Partit Laburista.

`Ghalhekk ikun zball li meta n-nazzjonalisti jkesksuna ghal xi wiehed minn shabna, ikun min ikun u zbalja kemm ikun zbalja, npaxxuhom billi nuzaw il-medium taghhom flok nitkellmu` b`mod dirett.`



Ghal dawn mhux bizzejjed li ahna bhala partit wahedina qed niggieldu ma partit li ghandu ghajnuna ta` xibka ta` poter li tinfirex fil-media, fil-qrati , fic-civil, fl-universita`, fin-negozju, fil-knisja u kull fejn hemm nitfa` poter tas-socjeta` maltija. `Dawn apprati dan il-vantagg iridu jergghu idghajjfuna billi jkesjsuna ghal xulxin.

Ghalhekk ikun zball li meta n-nazzjonalisti jkesksuna ghal xi wiehed minn shabna, ikun min ikun u zbalja kemm ikun zbalja, npaxxuhom billi nuzaw il-medium taghhom flok nitkellmu` b`mod dirett.

Ovvjalment jien li nikteb hafna u li naghmel kritika li ssawwat inkun l-ewwel wiehed fil-mira biex isensluni. Ghalija jaghmlu li jridu.` Anzi aktar ma jikkritikawni aktar isahhuni. Jien mhux qed hawn biex nogghob lin-nazzjonalisti. Jien qed hawn biex mill-aktar fis nghin lil-Partit Laburista jiknishom min-nofs halli nergghu nibdew nibnu mill-gdid dal-pajjiz mkisser u mfarrak.

Ma jfissirx b`daqshekk li ahna lkoll sirna tfal ta` l-iskola nistennew lil-leader taghna jitkellem halli kulhadd jghid bhalu. Jien mal-Leader naqsam l-idejal Laburista. Kull fejn hemm policy tal-partit torbot lil kullhadd, lili daqs kemm lilu. Jekk hemm xi hadd irid jibdel xi haga, irid` juza l-istrutturi tal-partit biex issir id-diskussjoni mehtiega li jekk ikun il-kas twassal ghal bidla.

`Anzi aktar ma jikkritikawni aktar isahhuni. Jien mhux qed hawn biex nogghob lin-nazzjonalisti. Jien qed hawn biex mill-aktar fis nghin lil-Partit Laburista jiknishom min-nofs`



Izda fejn ma hemmx policy allura huwa dover` li nohorgu opinjonijiet li nghinu tigi ffurmata policy.` Fejn ma hemmx policy ma jfissirx li d-diversita ta` opinjoni tfisser qasma.` Tfisser li l-materja qed tigi analizzata minn vistas differenti halli l-Partit wara li jara kollox jaghmel l-ahjar ghazla fl-interess tal-Maltin specjlament dawk li biex jieklu jridu jahdmu.` Fejn ma hemmx policy ma tistax tkun kontra policy li ma tezistix.

Ghalhekk din il-hafna plejtu li ghamlu n-nazzjonalisti fuq il-VAT m`hu xejn hlief tkeskis biex iqabbduna f`xahar xulxin. La l-Partit ma ghandux policy fuq il-VAT ma tistax tkun kontra l-policy tal-Partit billi tghid li fic-cirkostanzi tal-lum ma ghandniex nintilfu fuq il-VAT ghax hemm prijoritajiet ferm aktar urgenti.

Meta l-Partit jaghmel policy ufficjali fuq il-VAT kif gie mwieghed fid-dokument tal-politika ekonomika ta` Ottubru li ghadda, mbaghad dik issir politika li torbot lil kullhadd. Il-maggoranza tikkmanda.` Min toghgbu tajjeb; min ma togghbux irid jara jekk jistax jghix maghha.

Dawn tant huma affarijiet elementari li ma titwemminx li n-nazzjonalisti ghandhom kontroll fuq il-medja tant qawwi li joholqu spin fejn assolutament ma hemmx lok.



`It-tghalima hi li l-avversarji taghna huma n-nazzjonalisti.`

It-tghalima hi li l-avversarji taghna huma n-nazzjonalisti. Huma dawk li lil pajjiz gabuh f`xifer ir-rovina. Huma dawk li wara li mlewna sa xfar ghajnejna bid-dejn issa qed ibieghu kollox ha jgibu l-flus biex ikomplu jcafcfu qabel ma jikkrolla kollox.

Huma dawk li jriduna nitkellmu biss fuq l-UE flok fuq il-korruzzjoni, il-hmieg, l-izdingar, it-telqa u l-iggamjar li hawn.` Huma dawk li jriduna noqghodu ghal referendum qabel l-elezzjoni meta imkien fid-dinja ma jsir referendum ftit xhur qabel ma jaghlaq il-mandat tal-gvern ghax referendum jipprezumi li l-gvern li jakkwista l-verdett tal-poplu ghandu zmien bizzejjed biex jezegwih.`

Jista` l-Prof Pirotta, li bhala Chairman ta` l-Awtroita` tax-Xandir kien kuntent bl-izbilanc tal-MIC,` jista bhala storiku jghidli fejn x`imkien fid-dinja jsir referendum fejn il-poplu jisma qanpiena wahda u jsir minn gvern li johnoq il-vuci ta` l-oppozizzjoni meta l-gvern stess ma ghandux mandat twil bizzejjed biex jezegwixxi d-decizjoni tar-referendum.` U jippretendi li b`referendum bhal dan jorbot idejn ta` warajh.` Fejn saret fid-dinja din,` Prof Pirotta Din ghidilna u mhux tidhol f`dettalji storici li ma` jnehhu xejn mil-punt kardinali li referendum dwar l-UE qabel l-elezzjoni jkun dahqa fil-wicc u l-Partit Laburista ghandu jikkunsidra sew il-pozizzjoni tieghu qabel jikkontesta fih.

Nerga` nghid il-pajjiz mhux referendum ghandu bzonn.` Mhux jintilef fuq il-VAT jew mhux VAT.` Il-pajjiz il-problema tieghu hija l-gvern.

Comic Tragedy

The Malta Independent



Nothing else describes what`s going on in Malta at the moment.` The economy is stalling, tourism is having a very bad summer, in terms of value added if not in terms of visiting head count,` cash flow is just not flowing, investment and re-structuring are just not happening, and government finances are sharply deteriorating through higher expenditure in spite of extracting more taxes out of the economy.

And yet what make the headlines is whether my clear views on the VAT issue are meant to undermine Labour leadership rather than to help forming` policy in an area where currently there is none ( in the October 2001 official economic policy document Labour declared that it would pronounce itself on VAT prior to next elections).

`Anyone who can read figures of government finances for the first 5 months and who is willing to make an objective assessment of trends and progress, cannot but reach the conclusion that the end is not too far`



The media is scandalised to the point of inventing admonishments for my daring to speak my mind about a vacuum area of the Party policy. Yet they are not in the least scandalised by a string of much more serious outright untruths (just to avoid using a harsher but shorter three letter word) uttered by the Minister of Finance in the same TV debate.

Let me number these untruths to justify my calling them a string.

Firstly he said that the government had already secured a deal with the EU, permitting us to continue buying basic commodities (sugar was specifically referred to) at cheap international prices rather than at high internal EU prices. MIC had to explain a few days later that no such agreement exists and that negotiations are, at best, still proceeding.

Secondly the Minister said that government finances are broadly in line with the budgetary projections` for 2002 when officials figures show that the deficit for the first five months was more than double what it was two years ago and` when the full year`s deficit is planned to be substantially lower than` it was 2 years ago.

Thirdly he said that it was professionalism that made him include a 6% risk premium to top up discount factor to 12%, on top of the 6% risk-free rate, at which future earnings of Mid-Med were discounted to arrive at the price at which the bank was sold to HSBC.` This inclusion effectively halved the price at which Mid-Med was sold and could only be considered professional if the Minister was protecting the interest of the buyer not the interest of the seller (the Maltese nation and its tax-payers).

`That`s where the comedy will stop.` The` tragedy` unfortunately will remain`



Fourthly he said that retirement process from the public sector is so slow that the 8000 extra persons engaged by Labour before 1987 have not yet been re-cycled into proper jobs 15 years later.

Being forced to such a string of untruths can only mean that government has lost all control of the situation and cannot properly defend itself from pointed criticism. It is for this reason that the PN, with the assistance of their media allies, are trying to kill the messenger to ensure that the message does not get through.

But the message will get through. Anyone who can read figures of government finances for the first 5 months and who is willing to make an objective assessment of trends and progress, cannot but reach the conclusion that the end is not too far. That`s where the comedy will stop.` The` tragedy` unfortunately will remain.

Equity Meltdown

Maltastar 

 

International equity investors are getting dizzy and hurt by the progressive and extended period of price meltdown from the obscene high figures reached in March of 2000.

Two questions on every investor’s mind are: Why did this happen? Have we reached the bottom and will equity prices bounce back?

If I had the perfect answers to these questions I could get rich fast. No one can have a perfect answer in the face of irrational and obscure market behaviour. But I do have opinions which I propose to put over to you.

“It is not normal that a pullback goes this far back. So why did it happen this time?”

Why Did This Happen?

The stratospheric valuations reached in the first quarter of 2000 were unsustainable. A pullback was unavoidable and indeed healthy for orderly market progression. But few could have imagined that the bubble will not only burst, but that the valuations will go back to where they were in 1997.

 

It is not normal that a pullback goes this far back. So why did it happen this time?

I can cite three main reasons which are in themselves a new experience never experienced by the market before. New experiences bring uncharted reactions and therefore past record and experience serve as little or no guide to where the market had to go in future.

The first of such experience was the mad dance in auctioning 3G mobile licenses which forced mobile phone operators to bid incredibly high prices in order not to be locked out of the potential high revenue from the new culture of doing business over the mobile phone – m-commerce.

Many such mobile operators had to pay billions to get such licenses and in the process leveraging their finances with unsustainable debt levels at a time they needed to make large investments in the networks and hardware necessary to exploit the expensive licenses.

This realisation started to sink in at a time when news from the technology side showed that there could be substantial delays until the 3G technology could be effectively rolled-out for consumer use. And at a time when it started becoming increasingly doubtful how much the expected revenue streams from m-commerce were realistic when the revenue streams from e-commerce were already disappointing the growth expectations.

This explains why the market savagely cut back valuations of mobile giants like Vodafone from over four sterling pounds in March 2000 to current valuation of less than one pound sterling.

The second reason is that one of the most important criteria on which investors base their judgement of value is the current trading performance and the strength of the corporate balance sheet as evidenced in the published financial statements that are announced to the market from time to time.

Suddenly the investor is finding that judgement passed on such information could be quite defective, as companies have to re-state their published figures due to corporate fraud or irresponsibility. The saga of Enron, Worldcom, Vivendi, Merck and others under investigation has pulled the carpet from underneath the investors’ feet.

The investor just cannot understand how auditors, meant to protect the shareholders' interest, let themselves get into conflict of interest positions by accepting highly profitable assignments from corporate management against whose abuses auditors were meant to protect the investors. Small investors are just wondering how this well-known and glaring conflict of interest was allowed to prevail by those who had responsibility to preclude it and who now try to profile themselves as champions to the investors’ cause.

“The market is ruled by sentiment not by fundamentals. Sentiment can take the asset valuation very far away from their fundamental values.”

The third reason is that investors base their investment decisions on the future expected earnings of the corporations in which they buy shares and to do this they rely on recommendations of investment analysts especially from the investment banks that boast of wide resources of research and great experience in investment judgement.

Investors are again hurt to learn that the investment bankers who were freely dishing out positive buy recommendations on over-priced shares were putting themselves in conflict of interest situations by taking mandates from the corporations for highly profitable merger and acquisition deals which brought value to management not to shareholders.


Have We Reached The Bottom And Will Equity Prices Bounce Back?

With valuations back to where they were 5 years ago it is quite safe to presume that on professional valuation basis the prices have now reached very realistic levels, and indeed could have crossed into bargain territory.

 

But this is not the same as saying that prices will not fall further. The market is ruled by sentiment not by fundamentals. Sentiment can take the asset valuation very far away from their fundamental values.

On thing is however sure. When there is a great gap between the sentiment driven prices and valuations based on fundamentals there is created rare opportunities for sure wins in the investment world for those who know how to step in at or near the bottom and wait until sanity returns to the market as it is eventually bound to do.

So just as in the first quarter of 2000 the market was positioning itself for an overdue and sharp correction sending signals to careful investors that it was time to move out as sentiment driven investment valuations had by far distanced themselves from fundamental valuations, in this 3rd quarter of 2002 the opposite is happening. When the pendulum goes in one extreme position, it never reverts to its equilibrium position, but swings to the other side with almost similar destabilisation from equilibrium.

 
 

Non-pressing Distressing Press

The Malta Independent on Sunday



This week`s experience shows that the local press has lost all objective sense of what makes news. News items are judged by any measure but their news value. Probably the best yardstick is how much the content can create obstacles to the Malta Labour Party.

In a TV debate I had with Minister John Dalli there emerged several items of news value.` The least of which was probably my assertion that Labour should drop its objection to VAT and concentrate on more economic priorities as the economy is too weak to withstand another shock caused by a further change to the indirect taxation system.

`The news value was in my untypical accepting to answer a hypothetical question of what would my position be if the MLP put removal of VAT again in its election manifesto. This is likely to happen as much as next Easter is likely to fall on a Wednesday.`



I have been saying this ad nauseam and there was absolutely no news value in it. The news value was in my untypical accepting to answer a hypothetical question of what would my position be if the MLP put removal of VAT again in its election manifesto. This is likely to happen as much as next Easter is likely to fall on a Wednesday.

But there were much more news value in some of Minister Dalli utterings.` Yet the Press just take no notice as what Min Dalli said in spite of being well loaded with news value.` Probably what he said fails to pass the test of creating obstacles to the Labour Party.

Let me be specific. Minister Dalli made a categorical statement that his government had reached an agreement with the EU enabling us to continue purchasing at cheap international prices, basic commodities which in accordance to the acquis communitaire we would be obliged to pay at high internal EU prices. This applies to sugar, wheat and other cereals, animal feed, butter, meat and similar basic commodities.

There wasn`t any doubt in Min Dalli`s statement.` The deal was done, he said. So on Monday morning I got one of my journalist friends to contact MIC to find out why such a praiseworthy agreement was hidden from the public when dirty deals like the fisheries 25 mile capitulation was presented as an achievement.

I was not the least surprised when the information came back from MIC that no such deal was made, that negotiations were still going on but that it was proving difficult to get the EU to consider such concessions. And difficult it will be, as such conditions cannot easily be wrapped up dirty deal which skirt the problems of precedent for the EU.

`Minister Dalli made a categorical statement that his government had reached an agreement with the EU enabling us to continue purchasing at cheap international prices, basic commodities which in accordance to the acquis communitaire we would be obliged to pay at high internal EU prices`



Which means that when my arguments cornered John Dalli, the argument being that any environmental funding we may get from the EU is still coming from our pockets through higher prices of basic commodities, he had to pretend a deal was done when in fact nothing of the sort has yet happened.

But for our journalist this is carries no news value.` Or are they so used to Ministers making statements that are not corroborated by facts`

And yet there was more. I have been asking in my writings Min Dalli to explain to the nation why in making the calculations of the valuation of Mid-Med Bank he included a 6% risk premium in the discount factor to bring to present value the future expected earnings of the bank` The inclusion of such a high discount factor on top of the other 6% normal risk free rate ( bringing the overall discount factor to 12%) effectively cut by half the value of the bank leading to the low price which was negotiated in a direct basis with the first buyer that walked through the door.

The discount factor is used to bring out the time value of money in acknowledgment that a sum of money today is worth more than the same sum of money at a future point in time. How much more depends on the discount factor used.` The higher the discount factor the bigger the difference thus giving a low present value to future earnings.

Min Dalli never replied to my questions. But last Saturday he had to. He could ignore my writings but could not ignore my direct questions in a face to face debate.

In being short of a real answer all he could say is that he did this because he was a professional and that was the way how things are done professionally.

`6% `. that was the way how things are done professionally -- `A serious financial Press would challenge Min Dalli on this ludicrous assertion`



A serious financial Press would challenge Min Dalli on this ludicrous assertion. A bank like Mid-Med with consistent trading record and commanding half the banking market does not merit any discount factor. At most one could justify including not more than 2%. But 6% is unthinkable.` And why should our own Minister who was supposed to be negotiating the best deal for us include this high factor remains an enigma.` Certainly this is not the way to do things professionally.

But our Press cannot be interested in a Minister boasting professionalism in discounting by 50% the sale of one of our best prized assets when sold without any bids to the first interested buyer.

Our non- pressing distressing Press is more interested in knowing whether MLP would include removal of VAT again in its electoral manifesto ready to shout U-turn when in fact the Leader had warned prior to the 1998 election that if VAT is re-introduced by a PN government it would be nearly impossible to remove again 5 years down the road.

Tort tat-Temp

Il-Kullhadd



Meta hargu il-figuri tal-finanzi tal-gvern ghall-ewwel hames xhur tas sena dawn urew zbilanc ta` Lm68 miljun.

Meta lil Ministru Dalli qalulu kif jispjega dan meta id-deficit tas-sena kollha kien ippjanat Lm77 miljun, dan maljar harreg jghid li kollox miexi kif ippajnat u sa l-ahhar tas-sena kollox jigi f`postu.

Qalilna li l-izbilanc qawwi fil-bidu huwa tort tat-temp. Ghax il-gvern idahhal hafna mid-dhul tieghu f`Gunju` f`Awissu u f`Dicembru u allura ma tistax targumenta li la l-izbilanc ta` hames xhur kien Lm68 miljun mela sa l-ahhar tas-sena id-deficit jitla billi taghmel division b`hamsa u multiply bi 12 li jwassal ghal deficit ta` Lm160 miljun.

`Izda huwa skandaluz li John Dalli jippretendi li noqghodu fuq il-kelma tieghu li kollox miexi sew u noqghodu nistennew il-figuri ta` l-ahhar tas-sena bit-tbissima ta` l-anglu tal-festa`



Dan bhat-turizmu. Jekk ikollok in-numru ta` turisti ghal sitt xhur sa Gunju` ma jfissirx li sa l-ahhar tas-sena it-turisti li se jigu jkonnu id-doppju.` Ghax f`Lulju, Awissu u Settembru in-numru ta` turisti jizdiedu sew.` Dan il-kuncett statitikament huwa maghruf bhala seasonality. Hafna statistici fil-fatt meta johorgu jigu `seasonally adjusted` biex il-paragun ikun uniformi u validu.

Izda huwa skandaluz li John Dalli jippretendi li noqghodu fuq il-kelma tieghu li kollox miexi sew u noqghodu nistennew il-figuri ta` l-ahhar tas-sena bit-tbissima ta` l-anglu tal-festa. Ma tantx nistghu naghmlu dan meta nafu kemm bazwar fl-1998 biex gholla artificjalment id-deficit halli wara jkun jista jiftahar kemm baxxih meta fil-fatt kollox fittizzju.

Ghax biex tkun taf kif sejjer bla ma tidhol fil-kumplikazzjoni tas-seasonality kull ma ghandek taghmel huwa li tqabbel il-figuri ghal perjodu ta` din is-sena mal-figuri ta l-istess perodu tas-snin ta` qabel. B`hekk id-difett tas-seasonality jigi meghlub.

Ghalhekk biex naraw jekk fl-ewwel nofs tas-sena gewx turisti aktar mis-sena `l ohra ma nqabblux man-numru ta-turisti li gew is-sena `l ohra u niddividu bi tnejn.` Izda naraw kemm gew turisti fl-ewwel sitt xhur ta-sena `l ohra u nqabblu maghhom.` Jekk gew izjed morna tajjeb jekk anqas ma nistghux nghidu li kollox sew ghax f`Lulju u Awissu jigu izjed turisti.

Mela kif il-Ministru tal-Finanzi jista` jserrah mohhu li l-finanzi tal-gvern huma kollox sew u skond il-pjan jekk id-deficit fl-ewwel hames xhur ta` din is-sena tela minn Lm31 miljun sentejn ilu ghal Lm48 miljun is-sena `l ohra u Lm68 din is-sena. Dan zgur mhux tort tat-temp.` Id -deficit zdied Lm20 miljun fuq is-sena `l ohra u Lm37 miljun fuq sentejn ilu.

Kif tista` ma tinkwetax meta quddiem sitwazzjoni serja bhal din il-Ministru ma ghandu l-ebda risposta u jwahhal biss fit-temp`

`Mhux ta` b`xejn jippruvaw jaqbdu mal-kwistjoni tal-VAT biex jiddevjaw. Il-problema tal-pajjiz mhux il-VAT.` Il-problema tal-pajjiz huwa l-gvern.`



Mhux ta` b`xejn jippruvaw jaqbdu mal-kwistjoni tal-VAT biex jiddevjaw. Il-problema tal-pajjiz mhux il-VAT.` Il-problema tal-pajjiz huwa l-gvern.

Meta l-partit laburista se jmur fil-gvern se jsib pozizzjoni finanzjarja hafna hafna aghar milli sab fl-1996. Dak in nhar kien kollox mistur u stajna` nargumentaw li ma kellna ebda ideja tad-dizastru finanzjarju fil-kotba tal-gvern li kien qed jinheba.

Izda issa mhux hekk.` Issa l-fatti maghrufa.` Issa d-dizastru huwa car u tal-biza. U dan jekk tiehu biss dak li jidher. Ghax jekk mieghu izzid xi Lm400 miljun lira dejn mohbi bejn it-Treasury Clearance Fund u dejn tal-banek garantit mill-gvern li ghalih irid jaghmel tajjeb il-gvern kull sena sahansitra biex ihallas l-imghax, u izzid min jaf kemm kontijiet mhux imhallsa qed jithallew jingemghu,` allura is-sitwazzjoni tkun aghar.` Izda fuq dak li hu maghruf huwa hazin bizzejjed.

Ghalhekk il-Partit Laburista ma jistax iwieghed mirakli. U ma jistax jinhela f`affarijiet li fil-kuntest kollu ikunu sekondarji.` Meta l-Partit Laburista jmur fil-gvern se jsib l-ekonomija bhal marid li ghandu bzonn operazzjoni urgenti. Operazzjoni li ma tistax tistenna.` Operazzjoni li tkun trid issalva l-ekonomija generali u l-finanzi tal-gvern mid-dizastru li qed ihawwar John Dalli.` Dan f`4 snin zied id-dejn li jidher u dhul mil-bejgh tal-privatizzazzjoni b`Lm500 miljun.

Dan jhezzez is-sahha tal-flus u eventwalment il-fiducja tan-nies fis-sistema finanzjarja.` Huma dawn cirkustanzi li fihom huwa sekondarju jekk is-sistema tat-taxxa tkunx VAT jew CET. Sekondarju` u hela li tkompli tonfoq biex togghob lill-UE.

F`cirkostanzi bhal dawn trid tiehu hsieb l-interessi tal-Maltin billi tindirizza` b`mod determinat, aggressiv u effettiv id-dizastru li jhallu warajhom dawn ta` bla ghaqal. Dawn li jekk tnehhilhom il-pozi ma jifdallhom xejn.

Biex taghmnel dan trid tigbed investiment u ssahhah is-settur produttiv halli l-ekonomija tqum fuq saqajha.` Ma nistghux ninhlew fuq tibdil strutturali fis-sistemi tat-taxxa. Meta s-saqaf ikun se jaqa ma tistax toqghod tibdel il-madum tal-banju.

In-nazzjonalisti iriduna nitkellmu fuq il-frilli ha ma nitkellmux fuq il-problemi vera.

Loghob bid-demokrazija

L-Orizzont



Id-demokrazija f`Malta tinsab mhedda. Iz-zewg partiti l-kbar li permezz taghhom il-poplu jesprimi ir-rieda demokratika tieghu biex il-pajjiz jitmexxa skond ir-rieda tal-poplu ma ghandhomx access bilancjat ghar rizorsi.

Filwaqt li l-Partit Nazzjonalista jifforma parti zghira, holqa wahda minn xibka shiha ta` poter mferrxa mas-socjeta maltija ( fil-knisja daqs kemm fin-negozju, fil-media daqs kemm fl-universita`, fic-civil daqs kemm fil-qorti) il-partit laburista jinsab wahdu ifendi ghal rasu kontra il-forza tal-kapital.` Bla ma ndunajna ergejna ninsabu f`konfront dirett bejn il-forza tal-kapital u l-forza tal-haddiema. Ghajb ghal` min gabna f`dan l-istat ghax f`pajjiz zghir bhal taghna il-haddiem u l-kapital jehtieg jimxu id f`id ghal gid tat-tnejn u tal-pajjiz.

`Issa wasalna fil-qaghda perikoluza fejn il-parrtit nazzjonalista fil-gvern qed juza l-flus tat-taxxi taghna biex jipprotegi l-poter.`



Issa wasalna fil-qaghda perikoluza fejn il-parrtit nazzjonalista fil-gvern qed juza l-flus tat-taxxi taghna biex jipprotegi l-poter.` Qed jaghlef sew lil mixtrija fil-media biex kull ma jaghmel ipenguh dritt u kull ma jaghmel il-partit laburista jghawwguh u jdamdmuh.

Issa ghodosna f`livell inaccettabbli. Meta fl-ahhar l-Awtorita tax-Xandir tat dritt ferm parzjali ta` risposta lil partit laburista biex ikollu access ghal media mhallsa mit-taxxi taghna halli jfihem il-posizzjoni tieghu dwar l-UE,` hsibt li bdejna nersqu lejn civilta` normali. Izda huwa car li lil Prim Ministru Fenech Adami iz-zmien twil fil-poter qed jaghmel bih. Qed jaghmlu dejjem izjed` arroganti.` Nesa x`kien jghid meta kien fl-Oppozizzjoni. Jahseb li dak li jghid huwa huwa tajjeb u sew sempliciment ghax ikun qalu hu.

Issa L-Awtorta tax-Xandir m`ghadix il-korp imparzjali li trid il-ligi avolja il-magguranza tal-membri jinnominahom il-Prim Minsitru stess. Issa l-Prim Ministru u klieb tal-but tieghu li jmexxu TVM mil-flus tat-taxxi taghna lkoll, jidhrilhom li jistghu jiehdu l-ligi f`idejhom u jiksru l-kelma ta` l-Awtroita tax-Xandir taht skuzi mill-aktar banali.

Jien wiehed li nemmen shih li l-kwistjoni tal-UE ghandha tigi deciza f`referendum mil-poplu. Nemmen hekk ghax din decizjoni li torbot fit-tul, torbot mhux biss lill-gvern tal-gurnata izda anke lil gvernijiet li jigu warajh.

Nemmen ukoll li decizjoni bhal din ghandha tittiehed mil-poplu bil-kalma kollha `l boghod mill-elezzjoni, u wara li l-poplu jkun fehem sew l-ghazliet veramenti ghandu quddiemu.

`Taht cirkostanzi bhal dawn il-partit laburista ghandu jesponi l-abbuz tal-poter mad-dinja kollha u ghandu joqghod attent milli jservi ta` staffa biex il-gvern jaghmel referendum meta l-poplu mhux jithalla jisma z-zewg qniepen.` X`se jaghzel il-poplu -` UE jew bahh



Kif jista dan isir jekk l-poplu qed jigi kostrett jisma` qampiena wahda; jekk il-pozizzjoni tal-partit laburista qed tigi mahnuqa llegalment` Ergajna lura ghas-snin sittin meta l-kelma tal-partit laburista kienet tigi mahnuqa, dak in nhar bid-dnub il-mejjet llum bl-abbuz tal-poter civili.

Nemmen li wasal iz-zmien li l-Partit Laburista ma jibqax jibla go fih, iwerzaq u jghini bla ma jigdem.` Ghal kollox hemm limitu u nemmen li n-nazzjonalista l-limitu qabzuh sew meta irrangaw il-konfini elettorali biex jizguraw li l-partit laburista anke jekk igib rebha ta` 12000 il-elf vot ikollu biss maggoranza ta` wiehed waqt li huma ghandhom magguranza ta` hamsa. U issa dal-limitu qabzuh hafna izjed meta jidhirlhom li l-ligi tax-xandir ma torbotx lilhom izda biss lil partit laburista, anke meta kien fil-gvern fuq issue (VAT/CET)` ferm anqas sostanzjali minn ta` l-UE.

Taht cirkostanzi bhal dawn il-partit laburista ghandu jesponi l-abbuz tal-poter mad-dinja kollha u ghandu joqghod attent milli jservi ta` staffa biex il-gvern jaghmel referendum meta l-poplu mhux jithalla jisma z-zewg qniepen.` X`se jaghzel il-poplu -` UE jew bahh`

Il-poplu mhux referedum ivvizjat ghandu bzonn.` Il-poplu jrid elezzjoni ha jaghzel gvern gdid li jkollu mandat twil ta hames snin li fihom jista jwettaq dak li tassew jiddeciedi l-poplu anke rigward l-UE.` Jien nemmen li jkun ghaqli li min jirbah l-elezzjoni imbaghad jaghmel referendum biex quddiem il-poplu titpogga l-ghazla bejn shubija shiha tal-partit nazzjoanlista jew partnership tal-partit laburista.`

Izda dan isir wara li z-zewg partiti jkollhom access indaqs ghal media u l-istess rizorsi biex iwasslu l-messagg taghhom. U jsir ukoll wara l-elezzjoni biex ma jkunx hemm dik il-qasma, dik it-tensjoni li hija ineveitabbli ftit xhur qabel l-elezzjoni.

Jien naf nazzjonalisti kontra l-UE daqs kemm naf laburisti li jissimpatizzaw mal-kuncett tas-shubija. Il-poplu jehtieg jaghzel fuq bazi nazzjonali wara li jkun spjegat lilu sew il-menu u mbaghad la jaghzel il-poplu il-gvern jimxi skond l-ghazla tal-poplu anke jekk ma tkunx dak li jkun jippreferi l-gvern.

Dik hija demokrazija. Din li ghandna bhalissa hija biss kopja falza .