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Way back in the late eighties, exactly on 11 January 1986, I wrote in the now defunct English language newspaper, The Democrat, a full-page article advocating privatisation.
Then, the concept must have been deemed a cry in the wilderness. But with a slow change in mentalities, and probably with a lot of pressures from the EU, the wheel of change had to start rolling, if for no other reason, to satisfy EU directives to enable us to ride on the Union’s bandwagon.
In principle, I was then and still am now, in favour of seeing government let go of the many businesses it controlled. In other words, my criticism of privatisation was never based on the actual privatisation of government’s commercial entities but purely on the methodology government applied in releasing its grip on state businesses.
It can be said that what I wrote then, still holds water today, and the sooner I see government relieve itself of activities it is neither geared for, nor qualified to handle, the better. On this point, I wish to pay tribute to Minister Austin Gatt, who publicly admitted, time and again, government’s lack of credentials and business acumen where commercial matters are concerned. He had been proved right on this statement on more than one occasion.
The selling, a few years back, of government’s 71% equity holding in the then Mid-Med Bank plc, and very recently its 60% equity holding in Maltacom plc, can be described as falling short of rendering the best possible benefits to the local economy, due to the strategy adopted by government in both issues.
In both cases the authorities made quite an emphasis of the term ‘strategic partner’. As far as the Mid-Med Bank sale is concerned we all know how strategic the foreign partner proved to be. It neither improved the county’s economy nor did it help to get foreign investments our way. On how truly strategic the new partner, in the Maltacom case, is going to be, one still has to wait and see. At this point, we only have to rely on Dr Austin Gatt’s assurances.
When I first criticised the Mid-Med Bank deal in April of 1999, at the time the news of the sale was announced, I entitled my article “Good move, bad deal” to signify my principle in favour of privatisation, and at the same time register my disapproval on the manner the deal was concluded. I criticized the deal mainly on three counts.
Firstly, I felt that government sold its holding at a relatively give-away price. Secondly, for selling its entire holding to the foreign entity, thus giving it absolute power over the local company and thirdly, for its lack of sensitivity where the private local shareholders’ interests were concerned. Suffice to say, that the newcomer to the local banking scene attempted to acquire 100% ownership of the Maltese bank, even before the ink on the acquisition document of government’s 71% interest, had dried.
Had it not been for the front, five brave men and a lawyer put up then, I wonder whether there would have been one single native holding any shares in the bank today. It would be superfluous to delve into the Mid-Med Bank plc affair any further, other than to say that had government been wise enough, it would not have sold more than 50% of the equity of the bank to the foreign entity. The rest could have been either retained by government, or alternatively disposed of on the local market. In that way, millions of liri in dividends would have ended up in local pockets, rather than in pockets abroad. I am not saying this with hindsight; that was, in fact, one of the observations I made then. Time has also confirmed that in a matter of a few years the foreign investors had recouped the original capital invested, and much more.
Though full details of the Maltacom deal are not yet available, government once again seemed to have failed to learn from its past mistakes. It has again ignored the local investors in offering them further participation in the local economy, and it side-tracked the fate of local shareholders, at least beyond the three years ahead. Government chose to sell all its 60% interest in the venture rather than give the opportunity to the people, to invest further in their own land. This hefty shareholding once again gave the foreign investor absolute power in the local company.
With deals of the magnitude mentioned above, where one is not merely buying an investment, but actually acquiring total control of an enterprise, it would not have been out of place for government to negotiate a price marginally higher than the price of the share quoted on the stock exchange. Not only did government fail to do that in both instances, but to stick to the more recent sale, it agreed to sell its interest (or rather the people’s interest) in Maltacom plc, some 30 cents per share cheaper than the price quoted on the Exchange, thus forfeiting some Lm18m in the deal.
Now that the deal is signed, sealed and delivered, one hopes that the new partner in Maltacom plc will uphold the title of a strategic partner, in the true sense of the word, in the interest of the company and the economy.
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