Wednesday, 11 September 2013

Chinese blessing

A report in The Times of today carries the best news the new Labour government has come up with in its 6 month long tenure so far:

"State-owned China Power Investments is to inject millions of euros into cash -strapped Enemalta and become a minority shareholder.
A memorandum of understanding signed today between Malta and China provides for the Chinese energy firm to inject 'tens of millions' into Enemalta, which has a debt of €800 million.
Reliable sources close to the Maltese Government told that around €200 million will go to reduce the corporation's debt.
The announcement was made today following a meeting between Prime Minister Joseph Muscat and his Chinese counterpart Li Keqiang in the Chinese city of Dalian, which is hosting the Annual Meeting of World Champions organized by the World Economic Forum."
China has a strong balance of payments surplus and countries in the developed and developing world make strenuous efforts to lure Chinese investment.    The US government would have serious difficulty to finance its budget deficit if the Chinese were not active buyers of US Treasuries and US dollar interest rates will c shoot up if China were to withdraw from investing in the US.

So Chinese investment in Enemalta is more than welcome.

For me the benefit and blessing of such investment goes beyond the headlines and the popular comments in the blogs.

The benefit is that with a minority shareholder of substance within Enemalta who can provide much needed external equity capital, the Corporation will be set on a serious road to recover its financial sanity.   Minority shareholders will impose discipline of governance and efficiency and Enemalta will no longer be perceived as a government corporation with a big daddy always ready with the cheque book to pay for its inefficiency.

Furthermore the news that:

"The agreement which is set to be finalised in six months' time also includes the setting up of a joint venture company in Malta specialising in the manufacture of photovoltaic panels with the objective being to enter the lucrative EU market."
and that

"In return the Chinese company as well as its subsidiary Shanghai Electric Power will be able to service its plants in Europe by calling upon the expertise of Enemalta employees."
means that Enemalta will have an avenue to re-deploy productively its surplus employees into export activities capable of making a significant contribution to new sources of economic growth.

There is no denying that the agreements, apart from aspects of political co-operation and nostalgia between the respective governments,  have  dimension of strong mutual economic benefit.   For Malta it is much needed foreign direct investment.  For China it is a smart and inexpensive way to penetrate EU markets with an investment which by China standards is pretty negligible but by Malta's standards is huge.


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