Sunday, 2 May 2010

If it Quacks

If it Quacks

2nd May 2010

The Malta Independent on Sunday

Alfred Mifsud

If it looks like a duck, if it swims like a duck and if it quacks like a duck then there must be a very, very high probability that it is a duck. If it is all huddled up, silent and motionless, it does neither prove nor disprove that it is a duck.

If it looks like a duck, if it swims like a duck and if it quacks like a duck, than whoever argues that this does not constitute scientific proof that it is a duck and vehemently concludes that it is not a duck, is only making a fool of himself.

This duck riddle came to mind after reading the NAO report on the Enemalta contract to extend the capacity of the Delimara power plant. What this report states in quite plain language is that if corruption were a duck, this one quacks, swims and looks like one even though it does not have scientific evidence that it is a duck.

The government’s general attitude that NAO’s statement that ‘it did not come across any hard and conclusive evidence of corruption’ sanitises the whole affair is as laughable as the winning bidder’s local representative suffering amnesia when questioned by the NAO. Does he conclude dozens of such agreements every week and cannot be expected to remember such details?

This one quacks and someone should pay the political price for it either now or later when the electorate eventually is called on to give judgement through the ballot box. Prime Minister, the choice is yours.

Government resistance to publish the full contract only makes the quacks louder. What sort of argument is it that government would only publish the contract if the winning bidder agrees to it? Are winning bidders starting to dictate our governance standards? If the government committed itself on contract to keep it confidential, then it went beyond its remit as it is spending taxpayers’ money, not its own, and taxpayers have a right to maximum transparency in matters other than crucial national security issues. So any such non-disclosure clause only adds to already serious, very serious, suspicions of corruption.

The events unfolding in Greece show how reality can be delayed but never altogether avoided. This Greek tragedy also shows that the longer reality is avoided the harsher the consequences when ultimately the chickens come home to roost. The Greeks and their children will now have to pay for the lack of governance with which their country has been governed. The bond market this week showed that it has no respect or appetite for political platitudes and for the games, which normally go on in countries like Greece, where problems are hidden, statistics falsified, and corruption and inefficiency are loosely tolerated.

Corruption and tax evasion are twin brothers. They reinforce each other as institutionalised corruption makes tax evasion socially acceptable. The argument tax evaders generally wash their conscience with is ‘why should I pay taxes if the government just spends it without due governance’. Tax evasion then feeds corruption as it becomes more economic to hide revenue rather than expose it to high tax rates which evasion enforces on the economy. The more people evade taxes the higher the taxes on those who have no option but to comply.

Once corruption and tax evasion become institutionalised they reinforce each other and gradually become a way of life; one does it because everybody does it. The last man standing would justifiably ask himself why he should be the only fool complying when all the rest, taxpayers and those in charge spending the taxes collected, are all at the circus.

When that is allowed to happen the country will gradually go to the dogs, especially if it has to finance its largesse through foreign borrowing. Is it not a humiliation for Greece to have its bond rating reduced to junk status, to have the yields on its bonds (resulting from a sharp fall in the prices of its sovereign bonds) higher than those of Venezuela and far, far higher than Nigeria’s?

What can be more humiliating for the Greeks than to see their country having to pay interest rates three times higher than Turkey pays on its sovereign bonds because the market is judging that Greece sovereign default risk is now much higher than that of traditionally junk-rated Turkey?

What has all this got to do with the Delimara power station contract? It has. If no one can explain why the Malta government should sign a contract where the penalty for cancelling the contract is atrocious and reportedly higher than the value of the contract, then this country is well on its way to Athens.

I remember a similar situation with the contract the PN administration had signed in the early nineties with Skanska related to the first San Raffaele contract, for what eventually evolved into Mater Dei Hospital. It would have been cheaper for the incoming Labour administration of 1996 to cancel the Skanska contract and plan afresh for a single project unifying the intended San Raffaele and the existing St Luke’s, except for the fact that the Skanska contract had huge penalty clauses in case of cancellation. Is this not a simple trick to ensure that contracts negotiated by one administration cannot be revised by a following administration? Where in the private sector do we see penalty clauses like these?

This one quacks, and if the government continues to defend the indefensible, then our country and the whole economy are well and truly en route to Greece. No long-term vision can undo the problem created by the abuses here and now, and by the present lack of governance. When the roof caves in, then there will be no doubt that we are well and truly surrounded by ducks.

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