There we Go Again

 
15^th June 2007

The Malta Independent - Friday Wisdom

This week we have been informed that our Shipyards have lost the road to financial recovery and that the organisation is still bleeding losses with little prospect of reaching financial sustainability by 2008 when the State will be prohibited through EU rules from continuing to subsidise the Shipyards operation.

This is only surprising to those optimists who assumed that a solution could be found by throwing money at the problem and by making superficial changes without going down to the core of the problem.

To realists like yours truly it comes as no surprise as I have always maintained that without a culture change right down to the roots, the Shipyards will never be turned around and that a culture change cannot be brought about gradually when the old bad culture is so deeply ingrained. Culture change needs shock treatment which our political doctors never found the courage to apply.

Failure to execute a culture shock leading to effective recovery is costing the country very dearly. Not only are we subsidising the Shipyards with many millions each year that could be much more productively invested for the benefit of the general economy, but probably more costly are the opportunities being lost.

Great opportunities are being missed with shipping industry booming due to increased international trade brought about by integrating China and other Asian economies in the global economy. Ship repairing generally is now profitable with ship owners willing to pay top dollars for a job properly and expeditiously executed.

Why then are our Shipyards not participating in this international boom in the shipping industry? Why are we letting opportunities pass us by and continue to expect eternal state handouts at the expense of taxpayers?

Management has admitted that efficiency levels are still very low. Even though the union representing employees has adopted a very co-operative attitude in trying to achieve improved efficiency levels, yet reality is that these are hard to realise at the individual department and worker level.

Frankly, I think it is an attitude problem. For as long as the Shipyards remain in public ownership, management will find it impossible to extract the efficiency gains necessary for commercial viability. For as long as workers assume that in the end their wage and job security does not depend on their efficiency levels, the necessary step efficiency gains will just continue to be as elusive as trying to catch the wind.

Only shock treatment can deliver the bacon, and probably so much time has been lost that not even shock treatment can work now. And shock treatment must necessarily include in the equation that the government must not remain the direct or indirect employer of the work force. Employees must start believing that the security of their job and the prospect for better conditions is directly proportional to the efficiency levels gained in their individual and collective efforts.

This could be achieved in different ways. The government could offer the Shipyards operation, not the property title, to private investors who are willing to invest and install management systems to turn the company’s commercial fortunes around. This is what is happening in Italy with Alitalia which is being privatised after endless efforts by the Italian government to restore commercial success miserably failed for much the same reasons that our Shipyards have failed.

Government could promote the formation of the workers into a co-operative that would rent the immovable from government and run the operation on a commercial basis for their own benefit or risk.

Or government could retain ownership of the Shipyards property and the commercial departments but organise the workforce into clusters of co-operatives that will then compete among themselves to bid for work won by the Shipyards.

It was 22 years ago in distant 1985 that newly appointed Prime Minister Dr Karmenu Mifsud Bonnici asked me to spend some time studying why the then Malta Drydocks had last made a profit in 1981 and was bleeding losses which were consistent but small by today’s standard.

It has been 22 years since I gave the advice that the Drydocks, now Shipyards, needed shock therapy and that without such shock therapy the public cheque book will have to start writing fat amounts each year to keep the operation afloat.

One would be shocked to learn how many millions have since then been poured down the drain without actually turning the operation around. Whole communist countries have since changed their totally command economies into vibrant market economies growing at enviable rates and winning in the globalisation game.

But in Malta we continue to toy around with a relatively small problem which if subjected through proper shock treatment would have been sorted out in two years with great advantage to the workers themselves and to the country in general.

Then there are some who wonder why Maltese people hate paying taxes and are quite prepared to spend one lira to save one lira taxes.