Friday, 30 October 2009

Cola Hard Choice

Cola Hard Choice

30th October 2009

The Malta Independent - Friday Wisdom

Alfred Mifsud

Whenever the Prime Minister makes a heartfelt appeal for yet another attempt for a social pact, then as sure as night follows day, continues that government is facing hard choices, the burden for which should ideally be shared out with the rest of society.

On the eve of presentation of the Budget for 2010 nothing presents a harder choice than the cost of living increase to be legally mandated through the out-dated Cola mechanism which has grossly outlived its purpose since it was introduced in the early 1990s.

To an outsider it probably seems odd that wage setting forms part of the public budget which itself is the main tool of fiscal policy. Budgets should deal with government expenditure, government revenues and the difference between the two and how such difference, which is normally on the negative side, is to be financed.

This on its own presents enough headaches to whoever is putting together a budget in a harsh economic environment which has depressed consumption for reasons beyond any government’s control and has shrunk the normal sources of fiscal revenues just at a time when automatic stabilisers triggered increasing social expenditure and subsidies.

In reality, the government has a basic but simple choice. It should place economic growth over budget deficit control and should take measures to ensure that the economy does not experience another bad year following the disaster of 2009. The government should not feel committed to meet any particular deficit figure for 2010 as the EU seem to expect and should let the deficit increase as necessary provided the expenditure goes into fruitful investment and not unsustainable consumption.

Equally the government should not feel committed to pre-electoral pledges. Promises made before the financial collapse of 2008 can hardly be considered binding in a world that is financially falling apart and in the midst of a recession which is likely to be deep and long. Obviously politicians will continue playing games with cheap demagoguery but leaders should rise above cheap party politics and do what is right for the country.

Leaders should take the electorate into their confidence, communicate effectively that suddenly the world has shifted from a growth trajectory to an environment of mere survival, relate the morass which is afflicting the citizens of US, UK, Ireland, Iceland, Hungary Latvia et al, and explain how we need to go through this hard period without blindly feeling straight-jacketed by promises made in a different world. Alfred Sant’s experience in obstinately persisting with the promise to dismantle VAT even though he inherited a budgetary financial crisis which was not at all evident when the promise was made, should not be forgotten.

Cola is however a different matter altogether. Although we have now embedded Cola into the budgetary process it does not merely affect our relationship with government like decisions involving taxes and subsidies do.

It affects the relationship between one sector of society with another. It affects how much wages employers should pay their employees irrespective whether they are affordable, justified by efficiency gains or otherwise.

Government argues that the Cola mechanism has brought industrial stability. I doubt it, but even if it did, just see where it has landed us now. In the midst of a recession when the risk of deflation is much more real than the risk of inflation, so much so that we are living with record low interest rates which will likely remain stable for a considerable time, the Cola mechanism has produced a proposed wage increase of e6.06 per week just at a time when competitor countries are forcing wage cuts and other drastic measures in a desperate effort to survive the crisis rather than be ‘Icelanded’ by it.

So on one hand employers, especially those whose fortunes depend on export markets (which includes our hotels and related tourist outfits) are sending serious warnings that such mandated wage increases in the midst of a recession will bowl them over and force them to either re-size or relocate. This will inevitably lead to higher unemployment and economic contraction at a time when growth and job creation should be our priorities.

On the other hand employees expect that a mechanism that has tended to work against them in the past should be sustained now that it is working in their favour mostly because government suppressed prices in the period around the March 2008 elections and then these prices snapped back with vengeance in the period after June 2008, once subsidies and price controls were lifted. It is such release from price repression that is being captured by the Cola mechanism that produced the e6.06 proposed increased. The unions can hardly be expected to make any unilateral gesture for national interest without losing their own significance in the eyes of their members.

If government really means to give substance to its calls for a new social pact it is pretty obvious that both employers and unions are going to shout ‘show us the money’. And I can see a valid cause for government to enter into the equation by taking onto itself a slice of the burden of the Cola increase as a one-off measure provided the social partners agree to dismantle the Cola mechanism and put back future wage setting where it belongs, in direct negotiations between employers and unions.

Obviously the government will keep a foot in the process firstly as a direct employer and secondly in the guardian of our social policy in regularly adjusting the national minimum wage to protect non-unionised employees.

Employers should be keen on such an arrangement as it gives them control over their costs. Unions should not scoff at it either. The Cola mechanism has usurped their role in wage setting and has reduced the incentive for union membership once wage increases get legally mandated rather than freely negotiated. But the real winner would be the general economy as it removes an inflexibility which is prejudicing our international competitiveness.

It’s time to move out from being trapped between a rock and a hard place

Friday, 23 October 2009

Throwing Stones

Throwing Stones


23rd October 2009

The Malta Independent - Friday Wisdom

Alfred Mifsud

Gospel, John (8) “However, when they persisted with their question, He raised Himself up and said, Let him who is without sin among you be the first to throw a stone at her. Then He bent down and went on writing on the ground with His finger”.

Those who are not satisfied with MLP’s leader expressed regret for the events of 1979 Black Monday, which events happened when he was a toddler, have started throwing stones.

There are no two ways about it. The events were a grave offence to democratic values. They were a denial of all that Labour had worked for in its quest to modernise the country, to up-grade its economy and to free it from its dependence on the economic value of the military base. The burning of The Times and the attack on the personal residence and family of the Opposition Leader are condemnable without reservation.

PL leader Joseph Muscat made a statement in this sense but some quarters who are never satisfied with whatever Labour does, expect him to walk on his knees till wounds expose his bones and beg forgiveness till he turns green in the face.

Analytical examination of why what should not have happened did in fact happen must adopt a broader view to understand why Mintoff, who had nothing to gain politically from these abysmal events, had either allowed them to happen or was careless or powerless in not preventing them from happening. One has also to configure what Mintoff had to gain by adopting a soft posture in bringing the perpetrators to answer at law for their misdemeanours.

These events in themselves weakened Labour and strengthened the national profile of the PN and of its (then) new and unproven leader. So while the immediate impact was shocking and fearful on Labour’s adversaries, on a longer perspective they were a month of Sundays which turned their political fortunes and gave them a near monopoly at the polls for the following 30 years, and still counting.

So I am still searching for an answer to a question which unfortunately few are interested to ask, let alone to discover a true answer for. I cannot for a single moment accept that Mintoff instigated, let alone master-minded, these and other similar shameful events. But being the strong leader he was, such an assertion leads to the obvious question of why he was apparently impotent to prevent these shameful events.

This is the crux. This is the question I continue to search a sensible answer to. I can only conjecture but I conjecture with logic that links the historical dots.

Chapter one of Mintoff’s political history spanned from 1947 to 1979. His achievements during this period need no recital. But in toiling to gain his achievements Mintoff had to struggle against a powerful network of interests that were bent on defending the status quo. This network include the colonial government, who wanted to give us independence on the least expensive terms, the Church, who wanted to retain earthly authority and privileges by invoking its celestial mandate, political adversaries, who wanted to see Labour as a permanent opposition, commercial interests, who traditionally cashed in their influence much more effectively with a conservative government, the media, who had commercial and political interests to defend, and the upper segments of society who had privileges to safeguard.

Mintoff’s first brush with violence was in the uprising of 1958. But this was clearly not a terror type of event. It was the violence of liberation forces against their foreign occupier. It was brief, proportionately dimensioned and it was led with bare faces from the trenches by Mintoff and his high ranking colleagues, many of whom were disciplined by prison sentences.

During the period between 1962 and 1971, when Mintoff was in Opposition mostly thanks to the mortal sin imposed by the Church, violence was no issue. It was after Mintoff gained government in 1971 that gradually violence started re-surfacing. And I can only conclude that it became a real issue after the conservative network tried to nullify his long fought and hard won political mandate by bribing one of his parliamentarians to cross the floor, just months after his June 1971 victory at the polls. I think that at that point in time Mintoff realised he needed his unofficial ‘republican guard’ as a threat to keep discipline and to protect his electoral mandate.

Keeping the ‘republic guard’ as a mere deterrent rather than as an executive force demands commitment and discipline. And in time the ‘republic guard’, who must by necessity be kept hot all the time, wrestled out of Mintoff’s discipline and switched from mere deterrence to actual execution. This happened in the celebration of the 1976 election victory and it certainly happened on 15 October 1979 when the ‘republican guard’ sparked from hot to boiling by the events which happened at Castille that morning.

In time somehow the network against Mintoff started trading fire for fire but in a finer less obtrusive manner. They did not attack Labour Party Clubs, the GWU printing press or the residence of Labour senior exponents. They attacked whoever was helping Labour to maintain its political power. This ranged from the case of Karen Grech, to bombs left behind doors of several non political executives serving under Labour, to confrontation with Labour’s republic guard at Zebbug, Rabat and Zejtun in the run-up to the 1987 election.

Thankfully we have matured enough to exclude violence or the threat of violence from our political exchanges. I am not sure we have matured enough to allow the proper alternation of power without sabotage by the network of power who traditionally support the PN to stay in government. The happenings of 1998 seem to indicate otherwise but there remains an element of doubt about contributory negligence on Labour’s part for the events of 1998. The true test will come next time Labour regains government.

Ok, Joseph, ignore the broader picture, get on your knees so that the network can throw their stones.

Sunday, 18 October 2009

When The Economy Implodes

When the Economy Implodes

 18th October 2009

The Malta Independent on Sunday

Alfred Mifsud

Never in a million years had I thought it possible that I could live to see three rich European countries experiencing an economic implosion. I am not talking about bottom-of-the-league countries like Ukraine or Albania; I am talking about countries that, before the financial crisis of 2008, were considered amongst the richest and most successful. Specifically, I am referring to Ireland, Iceland and Latvia.

Politically, these countries enjoy a different status. Ireland is a fully-fledged EU member that adopted the euro and transformed its economy through substantial financial assistance from the EU funds. Its GDP was among the highest in the EU and many referred to Ireland as a shining example of a country that made the best use of EU opportunities to attract huge waves of foreign investment and become leaders in financial services and back-office operations. This sparked massive bank-credit-financed investment in real estate, residential, commercial and leisure.

Latvia is one of the Baltic countries that regained its sovereignty after the collapse of the Soviet Union and successfully achieved EU membership in 2004, along with eight other eastern European countries and two Mediterranean countries, including Malta. Its economy was floating up nicely with improving GDP and it had attracted European foreign investment to the extent that its banking sector was practically dominated by acquisitions made by Swedish operators. Sweden acted as a sort of a sponsor for the economic development of the three Baltic states to ensure that they continued to distance themselves from economic dependency on their former Russian motherland and Latvia was in line to convert its currency to the euro around 2012.

Iceland was not an EU member, much less a member of the euro area. However, along with Norway and Liechtenstein, it was a member of the European Economic Area, which gave it many rights of freedom of establishment in other EU countries. It is a large country with a small population, very resourceful and having a thriving fishing industry that was one of the main reasons why it frowned on EU membership, which would have entailed opening up its territorial fishing waters to intrusion by other EU countries, particularly Spain. It had adopted a very aggressive international economic posture, punching well above its weight, with its banks opening operations to raise deposits from other EU countries in order to finance the boastful foreign acquisitions by its flamboyant entrepreneurs, which also included ownership of a local healthcare company Pharmamed.

The economy of three countries enjoying a different status collapsed as the plumbing of the world’s financial and credit system became clogged as a result of the US property sub-prime crisis. Their banking systems lost the confidence of depositors, domestically and internationally, and had to be supported by their states and, in the case of Latvia, by the Swedish owners of its banking system, following nudging at EU level to ensure that Sweden lived up to its moral responsibilities not to let Latvia implode. In case of Latvia and Iceland, the IMF had to be called in to engineer a rescue operation and basically take over the economic management of the countries from their governments to ensure that the necessary but hard adjustment decisions were taken.

Both Latvia and Iceland are living through a harrowing experience, with GDP contraction in high double figures and a brutal reduction in government spending, even in socially sensitive programmes, resulting in deep and sudden cuts in the standard of living of the ordinary citizen. Iceland has experienced a sharp devaluation of its currency and is now trying to embark on an EU membership project to bring back stability to its economy and inspire fresh confidence in foreign investors.

Latvia is desperately trying to avoid devaluing its currency and has shifted the adjustment pain to the real economy by cutting wages and other social expenditure. Currency devaluation would normally ease the political, if not the real, pain of adjustment. The US and the UK have embarked on a subtle programme of letting their currency devalue to regain competitiveness without having to cut government expenditure. Latvia cannot really do this, for two reasons. Firstly, because it would basically postpone its ambition to join the eurozone by at least a decade and, secondly, because many Latvian households had already converted their mortgages into euro or Swiss Francs to benefit from low interest mortgages, on the assumption that Latvia would simply sail into euro membership. Devaluing the Latvian currency would increase the burden of mortgages in local currency terms at a time when property values have collapsed, leading to massive defaults, foreclosures and more economic implosion.

Ireland has not so far had to seek IMF support. But it has had to nationalise its main banks, guarantee all deposits and, with credit in short supply, has experienced a massive collapse in its property market, leading to a substantial loss of revenue by the state, which is running atrocious deficits. The situation is untenable. This is what an Irish government minister warned this week:

“We’re spending e500 million a week more than we’re raising. If government hasn’t the capacity to do what’s needed then others will come in like the IMF and overnight they will make decisions. We can’t let the deficit drift past 12 per cent and 15 per cent next year and 20 per cent the next. Without reform, Irish public debt would rise from about e76 billion today to e160 billion by 2013 by when two out of every three Euros raised in taxes would be going to service the debt.”

Thankfully Malta’s position, whilst not comfortable, is not as bad as that. But we should not underestimate our exposure to the property market. Our banks are considerably exposed to the property sector and a collapse in property values could bring into question the solvency of our banks, which would require recapitalisations to avoid loss of confidence. So far we have sailed through the international financial crisis with minimum damage, but the over-exposure to the property market should be keeping our bankers and regulators awake at night.

If the 2010 Budget is to have a short-term objective, than this ought to be stabilising the local property market and fiscal measures in this sense should be seriously considered.

Friday, 16 October 2009

Freedom Press

Freedom Press

16th October 2009
The Malta Independent - Friday Wisdom
Alfred Mifsud

Real democracy depends on a free press. Yesterday’s 30th anniversary of the burning of The Times building marks the true beginning of the end of Dom Mintoff’s premiership.

This was given tangible meaning when his Labour lost the overall voting majority in the December 1981 elections.

These two events forced many level headed voters to re-assess Mintoff’s relevance for the country’s future in post Freedom Day Malta.

On this I had built my assessment that there are two versions of Dom Mintoff. Here is what I had written on 9 July 2000 in Labour’s il-Kulhadd in an article titled ‘Mintoff vs Mintoff’.

“The greatness of Mintoff for Malta until Freedom Day cannot be denied. It would be a grave error for anyone to belittle these achievements due to Mintoff’s subsequent disastrous performance.

“I maintain that for historical assessment Mintoff must be packaged in two very contrasting chapters. The first chapter ends on Freedom Day where Mintoff achieved all he had worked for in 32 years of political militancy. This chapter shows Mintoff was no ordinary politician but was the soul and conscience of the country. He was the inspiration to move out of our colonial mentality of servitude and really start thinking as members of a sovereign state.

“A glorious chapter of great economic straddles, intellectual liberation and the building of a social network suited for a modern society which made us proud to be Maltese. A chapter of great democratic achievements where the Labour movement neutralised the power network of capital which hitherto used to dominate with the Church’s support.

“This glorious chapter ended as an obscure one began. A chapter where Mintoff could not accept the consequences of the change he himself had brought about. Where he started restricting the liberty he had worked for by the dismantling of the colonial cage and instead expected that he decides what’s best for us even in such things as the nature of the chocolate we eat and the TV we watch. Where he failed to realise that the country needed leadership with a different set of skills in the post Freedom Day reality.

“This post March 1979 chapter is very dark indeed. Mintoff became a rebel without a cause.

“The burning of The Times and the violence on the private residence of the Leader of the Opposition were highly anti-democratic acts. In tolerating them Mintoff was betraying all that he had struggled for in the first chapter. The pinnacle of this betrayal was reached with the electoral result of the 1981 election.

“One can bring a million excuses but it will not change the fact that a majority of the electorate had chosen a Nationalist government. Had Mintoff recognised the sign of times his stature would have become gigantic if he had found a way to give practical significance to the electorate’s decision of 1981. Instead he did the opposite and he started dismantling his democratic credentials by adopting a more repressive posture while governing without a moral mandate.

“The contrast between the Mintoff of both chapters is clearly borne out by his intervention in a press conference in the 1976 election campaign. A journalist had asked him a question using the phrase ‘your party’. Mintoff was quick to correct him that he belonged to the party not the party belonged to him. Mintoff of the second chapter seemed to think otherwise when he brought down a democratically elected Labour government in 1998”

I am reviving all this because I maintain that Mintoff’s downfall started through his mild reaction to the serious offences against democracy executed by people in his fold 30 years ago. The freedom of the press and the opposition’s right to criticise freely, its right to due access of information, and its duty to watch over the government workings are treasures to be well guarded.

This brings me to the revelation this week about the alleged impropriety by the Minister of Finance in accepting an invitation to travel for leisure with members of his family with two prominent businessmen who paid for or procured the travel and the entertainment.

Politicians live in a glass house and the press would be failing us all if such facts are not brought into public domain.

I happen to think that the Minister was naive rather than corrupt in accepting the invitation. Ministers should bear in mind Friedman’s dictum of no free lunch and conduct a life style which matches their income. Tonio Fenech is one such Minister.

He is to be admired for pursuing policy objectives he believes in and which are needed to correct a gaming situation which got out of hand in spite of his being threatened by exposure which in the very least shows his political naivety. But he cannot blame the press for doing its work.


Friday, 9 October 2009

Rio Has Got It

Rio has Got It

9th October 2009

The Malta Independent - Friday Wisdom
Alfred Mifsud

During the week I tend to jot down bullet points with ideas to consider for this column. This week’s jotter note reads: Oil price and US$ value; Brown and British Labour; Power moves east; Jobs jobs jobs; Rio for 2016.

These are prima facie unconnected topics but on deeper analysis they are different parts of a complex collage which makes up the current state of affairs of the turmoil in the financial and economic world.

Let me try to pass the common thread while discussing these separate topics.

The oil price has topped US$70 per barrel from the below US$40 it had hit during the worst of the financial turmoil last December. The obvious conclusion is that if oil is commanding US$70 in the midst of a recession it is pretty rational to expect the price to go well north of US$100 when the economy recovers. Two factors influence most directly the price of oil. First is that its price is directly and inversely correlated to the fortunes of the US$. As oil is internationally traded and priced in US$, its price moves inversely to the foreign exchange value of the dollar in an effort to maintain real value. If the dollar falls the price of oil goes up and conversely if the dollar rises the price of oil goes down. The other factor is the strength of demand from China who seems on a mission to secure their energy supplies by stockpiling reserves and buying strategic oil related assets.

The US$ is suffering from a denied policy of benign neglect by the US Treasury and the Federal Reserve. The US economy is under so much stress following the disastrous handling of Lehman’s collapse last year by Hank Paulson, the most irresponsible Treasury Secretary the US has ever had, that it requires ultra loose monetary policy and low interest rates for as far as the eyes can see. In the context of other countries that have not been as damaged by the financial crisis, countries like Australia who are confident enough of their economic recovery that they already started raising interest rates, the US$ harbours very grim prospects for its external value. Indeed it is even clear that the US economic recovery depends on a substantial downward adjustment of its currency and ideally without such adjustment being reflected by pegged currencies like the Chinese Renminbi and other Asian currencies.

Whoever is in charge of oil procurement should adopt some longer term hedging of the oil price without hedging the US$ currency exposure.

The financial turmoil has seriously hurt the British economy which had grown addicted to a raving financial sector and a strong property sector. Both sectors were deflated by Lehman’s collapse. With an election due within nine months Prime Minister Brown and his Labour Party are badly trailing the Conservatives in the polls as people tend to judge their government’s performance by the money in their pocket.

Yet Gordon Brown is accredited as the person who led the financial world from the brink of collapse when he gave a lesson to Hank Paulson that significantly important banks that get into trouble should be recapitalised by the State, as happened in case of Royal Bank of Scotland and Lloyds Bank/HBOS, rather than allowed to damage the system by filing for bankruptcy as in the case of Lehman.

Brown has a mountain to climb if he is to win the next election. However I don’t share the view that the election is already lost and that Cameron can order the drapes of his taste for No. 10. As we approach decision time Brown can show the international recognition he earned for saving the world’s financial system and expose his conservative opponents as having no serious policy to get the economy out of recession. It may well be, especially if Brown breaks the tradition and engages Cameron in televised direct debates, that British voters in the end will decide that the more serious the economic problems, the more risky it is to leave the country in the hands of the untried and untested.

The financial crisis has brought a steep change in the redistribution of regional political power. There is no doubt that this has shifted towards Asia and other developing countries. The transformation of the G7 into G20 and the redistribution of power within the IMF and World Bank structures are symbols of such power shift.

Equally symbolic of this shift is the decision to award the 2016 Olympic Games to Brazil’s Rio de Janeiro, shrugging loaded competition from Chicago, Tokyo and Madrid which used their big chips to lobby for the award. The US first couple, the Prime Minister and the King of Spain and the Prime Minister of Japan with US$4 billion already in the bank in support for Tokyo’s bid, could do nothing to thwart the strong appeal by Brazilian President Lula da Silva:

“It’s Brazil’s time. Among the top 10 economies of the world, Brazil is the only country that has not hosted the Olympic and Para-Olympic Games. For the Olympic movement, it will be an opportunity to feel the warmth of our people, the exuberance of our culture, the sun of our joy and it will also be a chance to send a powerful message to the whole world: The Olympic Games belong to all peoples, to all continents and to all humanity.”

It is almost unbelievable that as recently as August 2002, just before Lula was elected president, Brazil’s bonds were priced for a default. They are now investment grade! Brazil has come a long way under Lula and they deserve the Games.

Coming nearer home the international financial crisis has caused a sharp slowdown in the economy, a considerable price drop in certain sectors of the real estate market and a destruction of a substantial platform of government revenue leading to increase in budget deficit well in excess of that planned this time last year. Yet this is not the time to worry about the deficit. Priorities demand that the 2010 Budget addresses the economic slowdown not the deficit. The deficit will correct itself when the economy eventually recovers. The priority now should be jobs, jobs and jobs which depend on government investment in infrastructure and stimulation of private sector investment.

Sunday, 4 October 2009

Those Who Floored Shipyards

Those Who Floored Shipyards

4th October 2009

The Malta Independent on Sunday
Alfred Mifsud

There could be an argument about who floored the shipyards. But there is no question about who floored me last Wednesday when I started reading the papers with my morning coffee.

Minister Austin Gatt had an op-ed in The Times with the same title as this contribution and its opening paragraph was an absolute political blowout, which confirmed beyond a shadow of a doubt that this government has lost it.

Read this infamous opening paragraph:

“The Leader of the Opposition has challenged me to state who is politically responsible for the Fairmount losses. I have no hesitation in answering that if you look beyond your nose the political responsibility falls squarely on the Labour Party, The General Workers Union and the party militants who were employed at the shipyards ... some political responsibility falls as well on different Nationalist administrations for having failed to come through earlier with the privatisation of the shipyards, although I fail to see the political possibility of doing so prior to 1996 while the 2003/2008 Administration was rightly focused on joining the European Union.”

With an assertion like that one is left breathless and seriously worried that this country is being managed by an executive unwilling to take responsibility for its decisions or non-decisions, and wastes its energy blaming others, even if to do so involves extreme mental gymnastics to link present effects to distant causes way, way back in time.

Governments are meant to govern, leaders are meant to lead and managements are meant to manage. When you are at the top the buck stops with you. It is offensive that a leading executive of a government that has been in power for more than 22 years is unwilling to take responsibility for all the pain the taxpayers are suffering because of the losses at our shipyards, and in particular the losses resulting from the Fairmount contract. At the very least, if the government as the ultimate underwriter of the shipyards’ losses was not satisfied about the shipyards’ competences and resources to make a commercial success out of the Fairmount contract, it should have vetoed management from taking it on board. This was not exactly a two-and-a-half penny contract and the Minister is known to keep organisations responsible to him on a short lead for much less important matters.

Certain assertions made by the Minister beg logic. Why was there no political possibility of privatising the shipyards prior to 1996? Was there any constitutional provision that prohibited government using its majority for this purpose? Was there any supernatural edict stating ‘Thou shalt not privatise the shipyards’?

The truth is that two consecutive Nationalist administrations spanning nine full years between 1987 and 1996 did nothing to knock the shipyards into shape that would permit privatisation. They were always ready to buy industrial peace by writing taxpayers cheques and cultivating the ruinous industrial culture prevailing at the shipyards – that they were too big or too important to fail and that change can be resisted with impunity, because in the end the taxpayer would always bail them out.

The first steps to bring some order at the shipyards were taken in the short Labour administration of Alfred Sant between 1996 and 1998. Prime Minister Sant immediately changed the composition of the council of administration to bring back authority and responsibility on the same page. Before that, a council of administration elected by the workers managed the shipyards, but the government underwrote the cost of their incompetence. What the two PN administrations could not do in nine years Alfred Sant did in the first few months of his administration.

Alfred Sant also did something else that unfortunately was not taken on board by the Nationalist administrations that followed. He wanted to limit government’s annual subsidy to a few millions that could be counted on the fingers of one hand, and if the shipyards could not operate within these parameters then the onus was on their management for force cost cuts and efficiency gains to come within these parameters.

The argument that the Nationalist administrations between 1998 and 2008 were focused on the run-up to EU membership and adaptation in the post membership phase does not hold water. Could not the government also proceed simultaneously with the privatisation of the shipyards? Is there some law that says we should do things in series and not in parallel? Obama does not think so and he is handling a financial crisis of grotesque proportion inherited from his predecessors simultaneously with reform of the US healthcare system, regular G20 meetings and an aggressive foreign policy that includes Iran’s nuclear ambitions, reviving the Middle East peace process, administering the rundown in Iraq and the build-up in Afghanistan, while engaging other major powers like China and Russia to gain their support for the success of these initiatives.

If Minister Gatt wants to know how our shipyards were floored I suggest he reads my article ‘Death by a thousand cuts’ published in my Friday column of The Malta Independent on 27 June 2008. This is a small taste of it:

“If the economists and logical thinkers would have had their way, the solution to the shipyard’s problem would have been arrived at much more quickly and with much less resources and it would have benefited everyone including the workers themselves. A small part of the resources burnt in arriving at a death by a thousand cuts would have been sufficient to retrain workers and re-employ them profitably in new processes that are managed with optimal efficiency and which are well integrated with our ability to compete profitably in a global economy. They would have earned more and enjoyed it more than living all these years with insecurity about sustainability of their employment.

Politicians work differently. As their primary objective is to obtain and retain power they prefer a tactic of making gradual changes over time so that nobody notices, or those that do notice do not raise much of a protest. It does not matter to them how much resources and time are wasted to arrive at their objective provided they get there without compromising their position in authority.”

There was once a politician of a different kind. In 1973 he had the necessary leadership skills to face the workers directly and telling them in no uncertain manner that unless they had the balls to make a commercial success of the shipyards they couldn’t count on government subsidies. After exacting painful concessions to generate efficiency gains, the shipyards stayed in the black until 1981, which incidentally is the last time they made a profit since Mintoff wasted no time and energy blaming third parties. He did what leaders are meant to do and tackled the problem head on.

Today’s politicians are made of a different fabric. They prefer to devote their energies to finding scapegoats rather than engineering true, hard and often painful solutions, as true leaders are expected to do.

Politicians come and go but unfortunately the bill still has to be paid by the taxpayer


Friday, 2 October 2009

Where Has Quality Gone


2nd October 2009

The Malta Independent - Friday Wisdom

Alfred Mifsud

I am two days short of my 58th birthday. Something strange is happening to me as I approach retirement age. I am becoming more cynical, restless and hard to please.

Whether this is due to my accumulating age or whether there is a bug which is affecting everybody irrespective of age I am not sure, but I am suspecting it has much to do with the latter than the former.

The impotence of this government seems a perfect recipe for cynicism and restlessness. We are having day to day proof that this government is expired, rotten from the core with internal disagreements and has lost the zest to execute its election mandate. Open criticism from normally friendly quarters is becoming all too frequent to disregard as mere personal grievances.

This is not an easy time to be in government. That is granted. The sudden onset of a very deep recession has eroded government’s normal sources of revenue leading to structural deficits in the context of a weak economy which allows little room to manoeuvre with tax increases. However the results of elections last weekend in Germany and Portugal show that electorates can still reward incumbent governments for doing a decent job in difficult conditions. But over here the electorate is approaching a state of despair with government’s inertia. The warning the electorate gave to the PN in the March 2008 elections seems to have been completely lost. The wafer thin majority was meant to warn government to pull itself together and put on its best act if it means to stand any chance of re-election by 2013.

The opposite happened. Internal strife has reduced government manoeuvrability to zilch and it seems that government has practically abandoned all hope of getting re-elected. PL Leader Muscat is astutely adopting a low key critical poise letting the PN stew in their own broth rather than unite the warring factions by giving them a defiant common enemy. In so doing Muscat is avoiding the need to spell out in detail his own policies, allowing the spotlight to remain on government’s deficiencies rather than on the merits or otherwise of the opposition’s alternatives.

It takes only a short walk from the Floriana car park to the Main Guard Square to understand how government lethargy is rubbing on poor quality standards everywhere, even on our primary Main Street.

Trash cans are infrequent and where found they are in disgusting state. On the Floriana side trash cans are rusty metal bins set in tatty wooden structures that have not seen a lick of paint for ages. Outside City Gate the bins are dirty twisted sheet metal cans covered in pigeon droppings. Inside Valletta the structures are solid cast iron which must have looked nice when new but they have not been serviced or washed since they have been fixed. I long for Stockholm where you can find a trash can with monotonous regular intervals not exceeding 50 metres and believe me, you could eat dinner from them. Heavy cast iron cans get regularly replaced and sent for re-painting so they look permanently clean and shiny.

The pavements at City Gate bus terminus are not even third world standards. Does it take the world to keep the pavements in this most critical spot outside our main city gate in decent shape on a continuous basis? And does it take a Ph.D. to enforce regulations so that pedestrians can walk normally into the city rather than having to zigzag between taxis, horse cabs, and merchandise irregularly overflowing from the kiosks to the pavement?

But the cherry on the cake is found in St George’s Square (Main Guard) which is currently undergoing major upgrading works. I know the design has received mixed reception and there are many others much more qualified than I am who have expressed serious reservations on the suitability of the modern uniform being vested on this historic piazza. But that’s not what irks me. I am prepared to accept new ideas and to judge on completion.

What irks me is the boundary protection that is surrounding the site whilst works are going on. The intentions are good. To make the boundary attractive it is covered with large photo-boards showing details of the architecture in the square and some finished product simulation of the project. If it were done professionally enough it could have been an attraction requiring only some legend or narration to explain each photo-board in different languages.

I could not find a single photo-board hanging properly as it should be. Many photos have come off the metal structure and are just standing idly against it. Others have lost one or more of the make shift plastic belts so most photo-boards are hanging lopsidedly rather than horizontally.

How can such lackadaisical approach be tolerated when we are talking about the main square in our capital city standing right in front of the Presidential Palace and Parliament building? Where has our pride gone? Or have we all become so used to low standards that we have lost all sense of what genuine quality really is?

If government cannot keep decorum of good quality standards on the Main Street just imagine how much we can expect it to perform the restructuring that our economy badly needs. This is a hard job in the best of times and much more painful during a recession. If government has lost zest for keeping our Main Street looking decent can it conduct effective restructuring to keep our health services and pensions sustainable, or can it undertake capital project with good transparency standards in the adjudication and award stage and constant invigilation in the execution and delivery stage? The ramblings at Enemalta regarding the extension of the Delimara power station is not exactly a certificate of efficiency and good governance.

The unsuccessful attempt to move the national agenda to discuss choosing 21 September as the national day shows how desperately government is trying to regain control of agenda with superficial issues, and how incompetent and pitiful these attempts are.

If we have three more years of this inertia you will have to forgive me for turning more cynical, restless and hard to please.