French Lessons

31^st March 2006

The Malta Independent - Friday Wisdom

France is a nation afraid and divided. What has been hidden underneath the surface for several decades suddenly erupted in near volcanic terms over the last 12 months. This is forcing on the French to conduct a painful soul searching exercise to discover their identity whilst learning to live with their divisions.

Until very recently France was a champion of European integration project called EU that it tended to dominate through cosy entendre with the Germans. Their enthusiasm for the EU started to wane as the mega enlargement of 2004 towards the eastern and southern boundaries of Europe has effectively shifted the balance of power in a way that the French feel no longer in control. President Chirac’s admonition to the new Eastern States that in the run-up to the Iraq war they lost a golden opportunity to remain silent is symbolic of the French frustration at dilution of their control inside the EU.

Contradictions are challenging the French identity. How can they remain a champion of the EU if they reject through a referendum the Constitutional Treaty needed to maintain efficiency in an enlarged EU? How can they pretend to compete and win in the globalisation challenge if its traditional identity remains invested in the authority of the State that continues to use all the tricks in the book to prohibit foreign interests from acquiring French companies as was the case with Sanofi, Gas de France, Danone etc.?

These contradictions are not only restricted to France’s external relations but are also evident internally. French society continues to resist change whenever their government takes comparatively modest steps to change the status quo that is making the country inflexible and uncompetitive. French farmers occasionally take to the street whenever their gravy train from EU funding is challenged. Immigrant communities protest violently for feeling discriminated by the mainstream of society. And now students are emulating their 1968 predecessors in protesting against loosening of employment protection for young people aimed to promote easier hiring and firing mechanism to reduce the high unemployment amongst the under 26.

If we are to take any lessons from the French we need to admit that we also harbour the same divisions that at some stage could explode. We have the same divisions between the post-war baby boomers, reasonably prosperous with secure health and pension rights, and the younger generation who is being told that we cannot afford the same benefits that their parents awarded themselves.

We have the same divisions in our employment sector between those cosseted in public sector employments with solid job guarantees and grossly out-dated work practices and those employed in the private sector who have to compete against forces of global competition and be exposed to job losses without proper compensation in spite of efficiency levels well exceeding those prevailing in the public sector.

We also have divisions of our own that are getting more and more serious by the day. Those who work hard for their money and earn it to the last drop of their blood through hard work and dedication have to pay a fiscal contribution quickly reaching a maximum of 35cents for every additional lira of earning. Those who enjoy unearned income through their wealth at worst pay a withholding rate of 15 cents per lira but very often get away with tax free substantial earnings on stock exchange capital gains where quick millions are being made every week.

On this national day, being the 27^th anniversary of the closure of the military base, it is proper to reflect what sort of society we want to leave as a legacy for our children. When we closed the military base we pledged to earn our own living by being competitive in the world without relying on our defence values.

This pledge can only be sustained if we maintain and up-grade our competitiveness. We cannot do this the French way by trying to preserve the status quo. The French have the muscle to do it for some time although in the end the French government efforts to close the door on globalisation will be as futile as those of the students on the streets. We do not even have such muscle. When the French go against the rules they are tolerated and occasionally they even try to re-write the rules their way as in case of the monetary union. When we break the rules rest assured we will have the book thrown at us.

French lessons suggest that the best legacy we can leave to our children is not money in the bank, out-priced property or equity values that could well be transferring wealth from future generation to current consumption if ever the price bubble explodes; the best legacy is a vibrant competitive economy that excels on its natural and developed competences.

This cannot be achieved if we continue to build a society of divisions where energies are wasted in guarding what some have against intrusion by those who don’t have.

Tourism Washout

24^th March 2006
The Malta Independent - Friday Wisdom

This week, operators in the tourism industry could take it no more. Suffering under the pain of a very bad winter, the meeting called by the Malta Hotels and Restaurants Association to announce the results of the quarterly research study exploded into a chorus of complaints against the complacency of the authorities in the faces of a crisis developing in our major industry.

Tourism is our bread and butter. It is difficult for statistical reports regarding economic growth to impress public opinion, unless tourism is a major participant and contributor to such growth. Tourism has the advantage of not only generating growth, but it distributes such growth widely so that the benefits are instantly felt. Per contra stagnation or outright contraction produce gloom and despair by express delivery.

The editor will permit me to re-produce the bulk of a contribution I had penned in this column just six months ago, exactly on 23 September, under the title “Re-inventing our tourism”. Given the events of this week, I feel it is worth re-reading and some further reflection.

“Just examine the following two facts. Firstly, we have what it takes to make a success in tourism and it should remain our major economic pillar generating growth capturing 50 per cent of our entire GDP.

Secondly, we have not been going anywhere with tourism for the last 10 years being jammed in terms of number of visitors, bed nights and earnings in spite of huge investment in hotel configuration made by the private sector.

So what are we doing wrong? It is quintessentially important to get a correct answer to this question before making big strategic decisions both regarding re-branding which the MTA is in the course of doing and before deciding on the terms being demanded by the low-cost airlines in order to generate the volume growth we are missing.

What we have been doing wrong is that we have been trying to be everything to everybody rather than accept who we really are and then research and access the markets that can be expected to buy into what we are and what we can offer.

The latest fad of the golf course is yet just another example of our determination to deform ourselves to ensure we have something to offer to everybody lest we miss out on anything. End result is that we are missing on most.

I have been saying it with increasing conviction that our most promising role in tourism is to position ourselves as the ideal location for a short break, three, maybe four-day holiday. Our marketing message should be “nowhere else in the world can you see what you see in Malta in three days”.

This marketing strategy builds on the three advantages, which nature and history have endowed us with. It builds on our geographical location in the centre of the Mediterranean not more than three hours flight away from most European cities – so near and yet, so different. It builds on our small size, which enables tourists to make the most from a short break visit. And it builds on our rich and varied history left behind over the millennia by the various civilisations that found it in their interest to occupy these islands.

Would such a strategy fit with international trends in tourism? Obviously, it would be much more difficult to go against the grain than it would be if the strategy can have a tailwind from international tourism fashion trends. There is no doubt that the strategy I propose is moving along the grain.

Many people would choose more exotic locations for their long main holiday. So much to see in the world, it hardly makes sense to be trapped for some two weeks on a densely populated island without any hinterland to go to. But apart from their main holiday, people are taking a series of shorter breaks. Working life has become too stressful to wait 12 months between one holiday and another.

And it is here where we have a comparative advantage. If we succeed in this market we can have all-year-round tourism with visitors here on short breaks whom it should be fairly easy to impress.

Our pre-historic temples, our harbours and the unique architecture of Valletta and the three cities, the mystic feeling of Mdina and the heart-warming scenery of Gozo are ingredients rich enough to make a short break holiday more memorable than any other location within a three-hour flight radius from most European cities.

This strategy can only succeed however if there is the necessary flight infrastructure. Firstly, there must be regular direct flights from a wide array of regional airports. Modern travellers tend to avoid major city airports for regional flights, as they are inconvenient, expensive and over-crowded. Regional airports are often closer to home, cheaper to go through and cheaper to fly from.

Secondly, the flight infrastructure must include low cost no frills flight content in the overall package. The shorter the holiday, the higher the relative content of the travelling cost and therefore the more important to provide low cost no frills airline services.

One should not run away with the idea that only “no frills” airlines are being sought only by low-class tourists. The business model is changing. The internet is giving the consumer the power and facility to compare prices with relative ease and in a flash following a few mouse clicks. Nobody likes to spend more if the same or sometimes better service is available for less.

The internet is changing customers’ behaviour and those companies that do not adjust their business model to take account of it are heading for extinction.

It is no longer the case that Malta tourism is dependent on Air Malta. That was 30 years ago, 20 years ago and maybe 10 years ago – but now it’s different. Air Malta does not have what it takes to operate a wide array of regular services from regional airports and its cost structures do not permit it to make an economic return by competing in the no frills sector.”

Tourism has great potential and so does Air Malta if it can re-design its business model. But it is no longer the case that what is good for Air Malta is good for tourism and sacrificing the wider interest of such an important sector to defend the narrow interest of the national airline makes as much sense as including Maradona in Argentina’s world cup team.

FISIM

The Malta Independent on Sunday
19th March, 2006


In a desperate attempt to clutch at any straw to prove that its unpopular prescriptions being applied to stabilise the economy are starting to deliver the expected results, a lot of hoopla was generated when the National Statistics Office published the data for the National Account ` GDP for the whole of 2005. 

  Contrary to previous expectations the NSO reported that the economy grew by 2.5% in real terms during 2005.` As late as last Budget presentation on 31st October 2005 the government had announced real growth of 1.7% for the first 9 months of 2005 and projected a real increase of only 1.1% for 2006.

So if it results that the average for the year was pushed up from 1.7% for 9 months to 2.5% for the whole year then it means that real growth in the last quarter of 2005 must have been to the order of 4.9%.` If it were so we should celebrate as this rate is nearer to our potential and to the sort of growth we require to match the performance of competitors in Eastern Europe who were in the same pack of EU accession countries in 2004.

In such a case the projections for real growth in 2006 seem pretty cautious and could be revised upwards to a more realistic level.

But the message from the real world we live in does not corroborate such economic impetus and therefore this makes you search beneath the surface to try to bridge the gap between the real world and the statistical output.` This is where FISIM comes in.

FISIM is the acronym for Financial Intermediation Services Indirectly Measured. An explanatory note on page 21 of the NSO release provides boring reading for technical experts let alone for the man in the street.` I personally have not understood much of what it says and need to delve further into it and get more clarifications to understand the principles if not the detailed mechanics of what is explained therein.

But the essence of such note is that certain economic activity previously captured statistically as intermediate consumption is now being re-allocated to final consumption and net exports. The explanation proceeds to say that `as a consequence (of the change in methodology) all data in this news release is not comparable to data published previously and supersedes all National Accounts news releases so far`.

What this is saying is that there has been a technical change in methodology which is capturing data which previously escaped GDP measurements and therefore the sudden surge in GDP growth is more likely to be attributable to such change of methodology rather than to actual real growth in the last quarter.

Apparently this gap between the real world and the statistical output has been perceived by more authoritative sources including the Governor of the Central Bank.` He has once more shown his concern at the excessive growth in consumption credit which is facilitating unsustainable over-consumption culture which temporarily but unsustainably gives a boost of economic activity.

Indeed this gives rise to whether we have proper orientation in our monetary policy. Our monetary policy is totally linked to sustaining the exchange rate peg i.e. the fixed exchange parity between the Maltese Lira and the Euro. This is founded on the dogma-like belief professed by the Central Bank of Malta, a dogma which I do not entirely share, that through the intermediate objective of fixed parity with the Euro, monetary policy will automatically deliver the ultimate objective of maintaining domestic price stability.

I find it quite questionable that our monetary policy seems disinterested in addressing the asset price inflation which is nonetheless eroding the real value of money. Other Central Banks, particularly the Bank of England and the Federal Reserve of the US, do include asset price inflation in the conduct of their monetary policy. After all the need to safeguard the value of money should not be exclusively restricted to prices of recurrently acquired products.` It should also apply to the one- off acquisitions of investment type, including real estate and financial market products.

It is in this context that one can understand the subtleties contained in recent press communications of the Governor of the Central Bank that local interest rates will probably have to rise pretty soon given that EUR interest rates have been edged up twice in the space of four months and the signals are that there are more EUR interest rate hikes are` in the pipeline.

The Governor must not only be `concerned that the evaporation of the premium between the Maltese Lira and EUR rates could challenge the sustainability of the exchange rate peg, but also because the over-consumption generated by the lax monetary policy is leading to unsavoury increases in asset prices and uncomfortable deficits in the balance of payments.

Given the delicate stage which we are entering into for the execution of monetary policy in the context of rising Euro interest rates, politicians would do well not dwell on illusions of economic growth and face reality whilst allowing the Central Bank good space of true independence in the execution of monetary policy.` FISIM adjustments produce no real growth, only statistical ones.     

A Good Week

The Malta Independent
17th March 2006
 

It was an unusually good week for my two non-core interests in life (non-core meaning excluding family and profession) being football (read my favourite team FC Internazionale of Milan) and local politics (read Malta Labour Party where my heart and political philosophy still reside).

It is quite unusual for Inter to cut down in one swoop two points of the difference between them and both Juventus and Milan in Italy`s Serie A league competition and in the same week qualify for the quarter finals of the Champions league. It is even more unusual that in the same week, in a direct head-on contest in local elections MLP beat PN 54% to 43%, the widest margin ever recorded in a direct clash between the two political camps.

What is the significance of such events for the longer term when more important issues are at stake Cutting Juventus lead from 14 points to 12 points with nine games to go does little to enhance Inter`s near zero prospects of winning the Scudetto. Cutting Milan`s lead from 4 to 2 points is more meaningful in that it opens reasonable prospects for the second place to avoid an early round in next year`s Champions League competition which would give the players practically no break following the World Cup competition.` Getting to the quarter finals of the Champions league is necessary if Inter are to lift the Champoins League Cup in Paris come 17th May but such success needs more consistency and better finishing apart from a generous dose of luck.

On the political front both Labour and PN need to reflect on the local election results.` An easy common conclusion should be that irrespective of the local elections outcome, the challenge for the great prize of 2008 will have to be fought day by day over the next two years probably right down to the last vote.

Labour have good reason to be happy with their performance. It is clear that at local level they are the automatic choice having beaten the PN in the last three rounds with increasing margin.` Is this a trend where the electorate is apportioning the democratic checks and balances by giving local control to Labour and central government control to the PN in a curiously consistent trend emerging since 1998` Or is the trend of local election results 2004-2006 a new beginning that has momentum that could lead to Labour`s success at the next big test of 2008`

You can argue it anyway you want and if a week is too long in politics two years would be an eternity. But certainly the percentages of the local election are not representative of a general election contest given that the voter turnout of 66% will undoubtedly grow into robust nineties in a wide general election contest.

Apart from the fact that voters are generally more willing to switch sides in a local contest than in a general election, the crucial issue for the general election will be the evolving attitude of those representing the 30% odd section of the electorate who stayed away last Saturday.

The PN need to muse long and hard on these non-voters.` In one way or another they showed either lethargy towards the entire political corps or, more probably, as a protest against the way the government is handling local and/or national issues.

It is quite in the ordinary run of things for governments to touch their lowest point in the popularity cycle at the mid-term phase of a legislature.` Claims that the deficit is being controlled and is reducing in line with the Euro accession programme are good food for economists and credit rating agencies but they do little to warm the heart of the electorate. On the contrary utility bills with huge surcharges impact the electorate in a direct manner with little sensitivity as to whether such charges are avoidable or beyond anybody`s control.

After all in 1998 Labour lost out mainly due to similar utility rate hikes and certainly it was not a pleasure for Labour to enforce such hikes to stabilise Enemalta`s financing.` It is in fact curious how the Gonzi administration seems to have learned nothing from Labour`s 1998 experience and is allowing utility rates to take on the brunt of oil price fluctuations rather than cap surcharges on such socially sensitive consumption at a reasonable level and transfer the excess load on fuel prices at the pump where there is more discretion of use and the impact is instant but gradual rather giving a shock every time the utility bill slips through the letter box.

The PN ought to wonder whether the four consecutive defeats suffered under Gonzi`s leadership, admittedly for a prize much less important than a general election, could be stamping on the Prime Minister the perception of that he is the PN`s version of KMB (who never won an election); or whether this forms part of some grand plan where the fruits of the unpopular measures will be reaped in good time for the next election proving that Gonzi can win when it matters whilst allowing space for his supporters to let their steam off where losses in smaller contests can be soaked without long term damage.

In the end what will decide Inter`s fate will be the ability to focus on the reachable prize and the team spirit that need to be fostered for their key players to keep or reach top form over the next 2 months.` What will decide the next general election is firstly whether Dr Gonzi can translate the technical progress being registered at macro-economic level into tangible benefits that the electorate can identify it and enjoy in time for next election in order to ensure that Labour won`t win by the PN`s mere default. For Labour it is important not to be carried away by simple and vain assumptions that the electorate has already decided their way and to talk positively about the country`s problems impressing that they can measure up to the challenge.

Alfred Mifsud

Who Wants to Live Forever

10^th March 2006

The Malta Independent - Friday Wisdom

This is not about Queen or Sarah Brightman. It is about a question which, in the 1994 Miss America competition, was asked to the Miss Alabama contestant who gave a convoluted answer that has become a quotable quote:

“I would not live forever, because we should not live forever, because if we were supposed to live forever, then we would live forever, but we cannot live forever, which is why I would not live forever.”

There are some who firmly believe that one day, science will be able to advance enough to extend human life to infinity and people regularly sign up for the services of an Arizona-based company for their body to be cryonically frozen upon death, so as to preserve it for when the life extension technology becomes available.

Aubrey de Grey, a bio-gerontologist at Cambridge University maintains that the first person who will live forever is probably already alive. Such predictions are dismissed by many scientists as mere fantasy. Yet, our longevity is a reality and that it is accelerating is widely accepted. So much so that retirement age is being extended in most countries and a famous British economist, Samuel Britain, argues that the retirement age should be indexed to longevity to keep our pension system sustainable.

Isn’t it funny? While longevity is putting pension systems, especially those with defined benefits, under severe financial stress, if living forever were to become possible we would solve the pension issue in the simplest of manners. Everlasting life would mean that pensions would become irrelevant as we will never retire. Nobody would need to save for retirement.

Can you imagine the social consequences of substantial life extension, perhaps into infinity? Would humans continue to reproduce if they can live forever? What about marriage? Even the “anti-divorcists” may feel uncomfortable to share an interminable life with the same partner. They had promised till death do us part when they calculated 50 at most 60 years of marriage. Can they be held up to their promise for 500 or 600 years?

And how would eternal life on earth square up with religious beliefs that promise eternal life after death? What would happen to moral and social values if people know that they will only be judged by the Creator if they are involved in a bad traffic accident?

How will our attitude to risk change when human life is extended well beyond present expectations, perhaps to infinity? The cost of loss of life through accident would increase exponentially, as such cost is often calculated on the basis of expected lifetime at the time of the accident. If human lifespan increases exponentially, the cost of human life would rise to the point at which people will become very wary of taking any sort of risks. Driving, flying and even merely stepping outside could be considered too risky. Would we be condemned to eternal life watching TV and communicating electronically?

I am pretty sure that if one were to make a survey today and ask people if they really want to live forever, the great majority would unhesitatingly answer no. But if medicine advances enough for people to have a real choice, not just a hypothetical one, hesitations would creep in.

Maybe living forever is unappetising, but a couple of decades more would be interesting or may be a little bit more to see how the grandchildren develop and see them get married. And once at it, one could take a couple of centuries more to see if the democracy will ever take root in the Middle East and to see of the Israel and Palestine will ever learn to co-exist peacefully. Or may be once at it, one could stay a bit longer to see the millennium out. But forever, surely not.

Can you count how many silent Fridays I would have to deal with writing about matters that do not even remotely touch upon the local political scene?

Mixed feeling on pensions

5^th March 2006

The Malta Independent on Sunday

The announcements made by government this week on pension reform left me with mixed feelings.

I felt good that at least after a lot of talk, studies, white papers and other forms of consultations decisions have been taken to reform the current pension system (generally referred to as a first column PAYG – pay as you go – system). This is the first real comprehensive reform of the pension system since 1979, a well overdue exercise, which attempts to make state pensions more affordable and less inadequate.

I felt bad because the chosen tempo for shifting to the new system is too slow and over-cautious, even slower than that included in the final recommendations of the Pensions Working Group which had suggested a rise to the maximum pension-able salary from the present Lm6750 to Lm9000 in 2007 whereas the government has extended this process to 2014 lest it would suffer any political unpopularity.

Those who go on pension in the meantime are facing the prospect of receiving a state pension which at its maximum is nowhere near sufficient to keep the standard of living achieved during their working career; at a time when it is too late for persons in this category to build sufficient savings to generate additional sources of income to top up the state pension.

I felt even worse as the decisions to introduce state sponsored or fiscally assisted supplementary pension funded schemes (generally referred to as second pillar for occupational funded pension schemes and third pillar for personal funded pension schemes) has again been postponed to the future.

The conclusion is therefore that whilst the announced changes to the pension system are good in so far as they go in making the present first pillar more sustainable and less inadequate, they certainly do not go far enough.

Let me explain what I would have expected to pass my test for a real comprehensive review of the pension system.

In think firstly we need to give attention to those over 55 that will not be affected by the proposed changes. Not being affected does not mean that their prospective pension will be rendered any more adequate. Many of these people are facing the prospect of inadequate state pension and unless they have already built supplementary savings they could even face poverty during retirement.

I would expect that this category be offered the option to continue working beyond 61 years without losing entitlement to their state pension at 61 provided they continue to pay social security contributions till age 65 or till they stop working whatever comes first. In addition I would expect this category to be given the facility to enter into annuity type of contract with licensed institutions to generate tax-free revenue streams by selling equity in their residence while continuing to live there if they so desire.

Then I think we have to be more categorical about the introduction of second pillar – occupational pension schemes. The prospect of introducing such schemes on a compulsory basis could act as a disincentive for attracting foreign investment. The government is right in arguing that present economic conditions are not conducive to the introduction of such schemes on a compulsory basis. I would add that economic conditions will probably never be right as such introduction will inevitably dent the competitiveness of our productive base and therefore I would prefer an outright statement that such second pillar will be on a permanent optional basis. In order to promote their take up on an optional basis, government could then offer fiscal incentives to employers who fund such schemes for which nationally sponsored and protected funding should be considered to give a choice of underlying investments but not such a wide choice (as in Sweden) as to make the selection process too complicated.

Rendering the second pillar permanently optional will also give the opportunity for government to render private sector employment more attractive and thus facilitate the process of slimming down the public sector. With heavy commitments to maintain our health system government should be extremely wary of adding to its own payroll expense particularly as unlike private employers, government will have no tax rebate to gain for contributing to such second pillar schemes.

Lastly I think that government must not delay much further the announcement of fiscal incentives for individuals who take on third pillar privately funded pension schemes. To be fair probably government is leaving this component for incorporation in tax system review that has been promised by next June. It should however not be allowed to drag on as it is clear that state pension, no matter how reformed, will on its own not be sufficient to offer adequate pensions down the line and those who are still in time must start thinking as of now to build alternative savings which can provide supplementary income during retirement.

The announcements of this week can only be considered as a necessary but too small a step in pension reform. Other steps must follow and soon.

Smart and not so Smart

3^rd March 2006
The Malta Independent - Friday Wisdom

The announcement made by Minister Austin Gatt about a foreign investment for the creation of SmartCity@Malta in Ricasoli, modelled on the Dubai Internet City concept and financed by the same state-owned Dubai investment company, is the best news we have had on the economic front for a decade or more.

It is absolutely a dream investment fitting perfectly within our capabilities and avoiding our disadvantage in competing for material-based industries that involve expenses of shipping in raw material and shipping out finished goods. On the foreign investment front, it is comparable to the attraction of ST Micro, but even better in that it avoids concentration on one particular corporation and could roll out much quicker than was the case with ST – which rolled out gradually to its present state over a quarter century.

Anybody who has Malta’s interest at heart cannot but be overjoyed that finally after years of drought in foreign direct investment, we seem to have hit it big in an industry of tomorrow with substantial value added that rewards Malta’s youth and others seeking re-employment.

Such investment makes restructuring that much more manageable. Because restructuring involves the closure of companies that cannot remain competitive in our evolving economic environment and their replacement by new projects based on current technologies, which can deliver value that keeps us competitive in spite of our increasing costs. Projects that are modelled on our brain rather than our brawn power. Well-done Malta Enterprise! Well-done Minister!

So what is not so smart, you are probably asking me?

To start with, I don’t think it is very smart to announce the project when negotiations with the investors are still proceeding. Clearly, the minister felt comfortable enough to present it as a fait accomplit, when in fact it is still not so. Is this not exposing us to the risk of other locations making more advantageous offers to attract the investment to their shores? And it is obvious that by going public rather prematurely, the minister has weakened his position in negotiating the outstanding issues, as the investors know that the minister would lose political capital if he does not accommodate their additional demands.

Just recently, I was involved in negotiations for sale of land in high six-figure digit to a very esteemed and financially solid organisation. The parties had shaken hands over the deal and I attended several meetings with the legal counsels of both sides to agree on the draft of the preliminary agreement and we had basically dotted all the I’s and crossed all the T’s.

Then, a simple email informing us that the organisation was reconsidering the acquisition changed what seemed a done deal into a dead end. And the prospective acquirer was a licensed credit institution (a bank in layman’s terms) where the term my word is my bond used to be sacrosanct.

Even if such suspicions are unfounded and all goes through as planned, there is another “not so smart” aspect to the wider issue of privatisation. With very little dedicated infrastructure, we have managed to attract a US$300 million investment in IT, which should attract the best names in the industry to locate their regional centres in Malta. Now, compare this to the Freeport privatisation where again we have natural advantages of location and natural harbours. There we had excellent infrastructure costing billions of dollars and an operating track record.

How can anyone explain why the privatisation process did not attract interest from the big players in the industry like Hutchinson of Hong Kong, PSA of Singapore and DB World of Dubai and we finished farming out operations to a second rate shipping line rather than a global port operator? In a recent contest to acquire P&O, DB World was forced to pay top dollar to pip out PSA in the acquisition race. Why were we not seen as an attractive prize by the big players in the industry? Could it be that the Freeport, under irresponsible Maltese management that led it to financial distress, had tied itself into unprofitable long-term capacity commitment to the second rate shipping line, which thus secured for itself a one horse race to acquire Freeport on the cheap?

If we are able to secure huge investment to start a virgin operation in IT, why were we not similarly able to secure a better deal for our Freeport where we had already investment billions over the years? The Freeport investment is too big to be brushed away under the carpet without proper explanation as to why we did not achieve anywhere near our full potential.

Not so smart is also the hike of the surcharge to 67 per cent at the same time when fuel prices at the pump have been reduced. The system makes no sense.

The shock absorber of price fluctuation should be fuel at the pump not utility bills, which lack the benefits of immediate impact and discretion of use. For the sake of social correctness, the price adjustment mechanism needs reconsideration.

Totally void of smartness was the shocking news of the passing away of Alfred Mallia, former chairman of the Malta Stock Exchange and a colleague in the profession. Alfred was the first person I had the privilege to work with when as a lad of 17, I joined Barclays Bank nearly 37 years ago. Over the years, when our paths crossed in diverse ways, we always enjoyed reminding ourselves of how different it was back then. We lost a gentleman and a fine banker. God bless his soul and condolences to his family. Till then Alf!