The Malta Independent on Sunday
I am extremely grateful to the webmaster of my private web-site where I keep a library archiving all my past writings. He makes it so much easier to refer to what I had written about events which in time take certain quite predictable twists.
I had occasion to refer to my past thoughts and writings this week when it was announced that the NZ minority shareholders of Maltapost will be terminating their 2 year management contract which was extended only by 6 months to enable a smooth transition to internal management.
The performance of Maltapost under NZ management was to say the least unimpressive. They lowered postal standards to which the consumer was long accustomed to even when the postal service was run as a government department, milked monopoly profits through exorbitant management fees and expenses, increased monopoly prices for a deteriorating service, sent back to central government excess labour at taxpayers` expense, abused philatelists` loyalty through excessive volume and value of new stamp issues, and failed to pull in any international business as they had promised. And in spite of all this the company, at least going by their own corporate mutterings, has still not achieved operating profitability levels.
Permit me to quote from articles on the matter I had published when the deal was struck some two years ago when the then Parliamentary Secretary had defended himself from wide public criticism on the basis that he has put into the deal corporate vision which critics lack.
And again:
I hate to say it but this is exactly where we stand today. I applaud the current Minister who had the guts to start unwinding the mess by terminating the Management Agreement though he still has to unravel the equity tangle that he is locked in.
In the same week we had this rewind to the privatisation of Maltapost we have also had the formalisation of the privatisation of Public Lotto through a seven year monopoly licence to a foreign dominated privately owned consortium of investors. There are too few details in public domain to permit passing objective judgement on this deal though I have sympathy with the structure of definite time license.
However I have reservations on two points which do not seem to have been addressed at all in the privatisation process of the Lotto. The first is whether it makes sense for us to allow foreign investor domination in what is effectively a captive domestic market. I maintain that it is far more economically efficiency to buy in technology and know-how rather than to barter it for equity. Natural monopolies should be reserved for majority control by domestic investors with strict provisions for State regulation to protect from abuse of monopoly and minimum quality standards.
But even more worrying in the Public Lotto privatisation is the social and macro-economic implications it may have. Exposing a captive domestic market to the exploitation by private investors needing to maximise the return of their investment over a rather short time of 7 years unavoidably leads to the over-exploitation of the gambling trait in the Mediterranean culture.
This will not only lead to social problems which will make Caritas and such like organisations work overtime to cushion the social disaster that the State is abetting to build, but will also lead to serious distortions of consumption patterns leading macro-economic unpleasantries. The retail community can relate such stories whenever the Super 5 snowballs to high figures.
Could we be perpetuating such experience every week? What provisions have been included to guard against such over-exploitation which will cost society much more than we would be gaining through the Lotto privatisation?
I am extremely grateful to the webmaster of my private web-site where I keep a library archiving all my past writings. He makes it so much easier to refer to what I had written about events which in time take certain quite predictable twists.
I had occasion to refer to my past thoughts and writings this week when it was announced that the NZ minority shareholders of Maltapost will be terminating their 2 year management contract which was extended only by 6 months to enable a smooth transition to internal management.
The performance of Maltapost under NZ management was to say the least unimpressive. They lowered postal standards to which the consumer was long accustomed to even when the postal service was run as a government department, milked monopoly profits through exorbitant management fees and expenses, increased monopoly prices for a deteriorating service, sent back to central government excess labour at taxpayers` expense, abused philatelists` loyalty through excessive volume and value of new stamp issues, and failed to pull in any international business as they had promised. And in spite of all this the company, at least going by their own corporate mutterings, has still not achieved operating profitability levels.
Permit me to quote from articles on the matter I had published when the deal was struck some two years ago when the then Parliamentary Secretary had defended himself from wide public criticism on the basis that he has put into the deal corporate vision which critics lack.
It is strategically wrong and economically hopeless. Strategically wrong because it is crazy to buy technology through equity. It is expensive and locks the company into the technology of one provider without the possibility of seeking technical inputs from other more reliable economic sources.` The future as it unfolds brings changes to` the economic fortunes often` turning giants into dwarfs and vice-versa.
It is economically hopeless because selling a 35% stake in Maltapost with a guaranteed monopoly on UPU postal service, with the assurance of 17% increase in postal rates and declaring willingness to privatise the rest in a fractionalised manner leaving the foreign minority shareholder` in the effective control of whole company,` and all this` for a mere` Lm1225000 payable just Lm490,000 in cash and the rest bartered in instalment over highly over-priced technical services, is daylight robbery. Effectively the NZ company are investing part of the profits from the technical services in the cash element of the transaction and securing themselves the right to control Maltapost for posterity.` In` the process they will comfortably` keep charging sizeable technical services each` year to the detriment of the small shareholders and the consumers who will eventually foot the bill through monopoly driven rate increases
And again:
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
I hate to say it but this is exactly where we stand today. I applaud the current Minister who had the guts to start unwinding the mess by terminating the Management Agreement though he still has to unravel the equity tangle that he is locked in.
In the same week we had this rewind to the privatisation of Maltapost we have also had the formalisation of the privatisation of Public Lotto through a seven year monopoly licence to a foreign dominated privately owned consortium of investors. There are too few details in public domain to permit passing objective judgement on this deal though I have sympathy with the structure of definite time license.
However I have reservations on two points which do not seem to have been addressed at all in the privatisation process of the Lotto. The first is whether it makes sense for us to allow foreign investor domination in what is effectively a captive domestic market. I maintain that it is far more economically efficiency to buy in technology and know-how rather than to barter it for equity. Natural monopolies should be reserved for majority control by domestic investors with strict provisions for State regulation to protect from abuse of monopoly and minimum quality standards.
But even more worrying in the Public Lotto privatisation is the social and macro-economic implications it may have. Exposing a captive domestic market to the exploitation by private investors needing to maximise the return of their investment over a rather short time of 7 years unavoidably leads to the over-exploitation of the gambling trait in the Mediterranean culture.
This will not only lead to social problems which will make Caritas and such like organisations work overtime to cushion the social disaster that the State is abetting to build, but will also lead to serious distortions of consumption patterns leading macro-economic unpleasantries. The retail community can relate such stories whenever the Super 5 snowballs to high figures.
Could we be perpetuating such experience every week? What provisions have been included to guard against such over-exploitation which will cost society much more than we would be gaining through the Lotto privatisation?
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