A strange situation

 The political situation in Malta is at the moment, to say the least, strange.

We are less than 12 months away from the next general elections.  Some would argue we are probably 8 months away if elections are held next spring or just 4 moths away if they are held this autumn.

At this juncture in the electoral cycle,  an opposition which has roundly lost the last 2 elections,  would be gearing up to offer a real challenge to an incumbent government which normally after 2 terms in office would be suffering from electoral fatigue. 

Post independence elections record show that only twice was there a government confirmed for a third consecutive electoral term.   That was Labour government of 1981-1987 and a PN government of 2008 -2013.   In each case there were extraordinary circumstances which forced the electorate to depart from its traditional 2 term cycle of governments.

In 1981 the popular vote was effectively won by the PN so the electorate kept its rhythm.  It was only the strange provisions of the constitution plus an element of district gerrymandering that produced a Labour government with a majority of parliamentary seats through a minority of the popular vote.  A strange situation which on top of the world recession of the time produced a very tumultuous and unstable political situation which was only resolved by late changes to the constitution which gave a clear win to the PN in 1987.

In 2008 PN won a very narrow election victory which gave it a third consecutive mandate.    But in this case again it was only Alfred Sant, who obstinately chose to remain Labour leader in spite of  his policies on non-EU membership being roundly rejected in 2003, that forced the electorate to deny Labour from its rightful claim to govern.   Any PL leader other than Alfred Sant would have scored a handsome victory for Labour in the 2008 election.   Alfred Sant had lost all credibility to lead the country in its status as an EU member when he had fought the 2003 election on the claim of economic disaster falling on the country if it  chose EU membership. Reality was showing that the country could prosper as an EU member.

Yet here we are in 2021, a few months to the next elections and all polls and surveys continue to indicate that Labour still enjoys a commanding gap in ratings over the PN and if general elections are held now Labour would again win by a margin as big as 2013 and 2017. 

I scratch my head trying to understand why this is happening especially at a time when Labour has, since the Yorgen Fenench saga exploded in November 2019, been on the defense shouldering blame for irresponsible governance.  This has projected  a strong perception of corruption at its  highest ranks and it has now been formally declared responsible for nurturing an environment of  impunity which was conducive to the horrible murder of a prominent journalist and government critic. 

I can think of four reasons which, singly or collectively,  contribute to this unusual state of affairs.

1. Labour has cleaned its stables whilst in government in less than 1 year whereas the PN has not cleared its stables after 9 years in opposition

2.  For all Labour's faults as regards poor governance, Labour delivered economic growth which was widely shared and people care more about their pockets rather than  about strong governance.

3. Labour has handled the Covid crisis in an exemplary manner and the importance of a strong economy was brought in evidence by having the necessary fiscal space to protect the economy from a sharp crash in spite of over-exposure to tourism.

4.  The PN show no serious plan to become an alternate government and their eagerness to bismirch the whole country in international fora exposes their narrow mindedness.   People want positive approach to problem solving not just murmurs and complaints. 

Going by the very bad experience of governments when elected to serve a third consecutive term I would have thought that the PN should by now be flying much higher.     It  seems the country may yet have another opportunity to discover whether a third term government can work effectively or if it will again be a bad experience as in 1981 and 2008.    Probably this is Labour's major challenge as it goes to seek a new mandate from an electorate not used to successful third term governments. 

Over my dead body

   

I will not enter into detailed analysis of the Public Enquiry about the State's failure in fulfilling its duty that could have prevented the assassination of journalist Daphne Caruana Galizia (DCG). 

I would just say that I am in general agreement with its conclusions and the need to adopt the recommendations to ensure proper governance at all levels of government.  In particular I agree that ‘business friendly ‘ does not and should not mean undue familiarity between the powers of politics and business.   It should mean the adoption of business friendly policies which get executed with all governance precautions by the permanent executive of the civil service and public corporations.

However I take strong objection to a recommendation on page 434 ( out of a total of 438 page report) where it is stated:

Ġie suġġerit ukoll illi ma kienx hemm lok ta’ kawżi ta’ libelli kontra ġurnalisti jkomplu wara l-mewt tagħhom.

To this I say over my dead body.   I have been libeled by DCG and she caused pain and harm to my reputation and to my career.  My libel case is proceeding at a glacial space.  But I live in the hope that in the end truth will prevail,  so that the allegations DCG made about corruption and money laundering I was accused of having committed in 1997/1998 are proven libelous and untrue. I want no pecuniary compensation.  I seek merely official removal of the slur on my character and personality which DCG, without any evidence, threw upon me just 3 weeks before I was supposed to be appointed Governor of the Central Bank.

Let’s ensure that as we protect freedom of the press, we don’t create injustice to victims when such freedom is abused.

Grey DNA

It's been some 15 months since I last posted anything on my blog, which has largely assumed the role of a library rather than a live blog.   You may correctly say that I lost the verve to express any opinion  as a combined result of the consequences of the pandemic as well as political developments, which to say the least,  have turned me largely uninterested in what's going on in the local political scene. 

The recent grey-listing by the FATF sort of tickled me to revive my interest and express an opinion, and finally I have been overcome. But I will keep it short and cryptic.

What has been grey listed is not the government, the financial sector or the country.  What has been grey-listed is our deep-rooted DNA;  our strong inclination to approach corporate governance and self-discipline in general in a tick box manner.  We do what needs to be done on the surface by building institutions and passing laws, but in general it is all skin deep.   There is generally no inner conviction to render these institutions and laws truly effective where it matters, in their impact on what actually is going on the ground.

It must be more than 5 years since  I attended a seminar where the then head of the FIAU warned that the next Moneyval inspection will not be a tick box exercise, but we will be judged by how many cases have been investigated, charged and brought to courts' judgment.  The warning went unheeded for several years before we were shocked by the first thumbs down by Moneyval. 

Then we truly started throwing resources into building institutions to render them duly effective but this can only be done over a period of several years; resources have to be recruited and trained, and systems have to be built to detect suspicions and convert them into cases that can standup in a court of law that has to deliver judgments in matter of months not years.

So when the matter went in front of the FATF it was always going to be a 50:50affair.   Were we to be judged by the considerable effort done during the previous 2 years to build institutions and structures or by the fact that such efforts are yet some distance from being sufficiently effective to deliver the expected results?  While Moneyval seemed willing to give us the benefit of the doubt by opting for the first fifty, FATF, where politics get in the mix more than at Moneyval, thought we deserved the second fifty to ensure we keep up with our efforts until they can see results.  The length of time we spend in the grey depends on how long we can show such results not in one or few particular cases, but in a normal business as usual rhythm.

I personally was quite sure  that FATF will hold us more to account than Moneyval.  And I can hardly blame them for harbouring doubts about our true intentions to carry on with the job till we really have a functioning AML system.  I base my views on two simple examples.

First: it took us years to introduce cash limits for commercial transactions and when we did it was set at a very high threshold of Euro 10,000.   Do you ever see anyone who has no tax evasion/money laundering  in mind paying for anything over say Euro 3,000 in cash?   Many countries have limits as low as Euro 1,000 but Euro 3,000 is somewhat the acceptable limit.   So why we kept Euro10,000 if not in clear demonstration of our willingness to tolerate a brisk dose of tax evasion/money laundering?

Second: We maintain the system that whoever pays 15% of investment income/bank interest will not be subject to automatic disclosure to tax authorities.   But if tax is being paid what's the scope of non-disclosure if not to keep out of tax enforcement sight the capital which is generating such income?  Why have we rendered the offshore onshore?

Such and other instances shows that our DNA is still largely oriented to skin deep changes but we are not yet sold on the need to get serious and build  a truly functional tax efficient structure and AML system.