A serious test for Joseph Muscat

Falzon’s resignation was crucial also because the issue exposed an endemic governance problem in Malta: the unhealthy proximity of business and politics.

Michael Falzon’s resignation this week came at a pivotal time for the Labour administration, which had raised high expectations of good governance before the last election.

Sadly, the reality experienced since then has fallen significantly short of earlier promises. Nonetheless, while the Muscat administration has undeniably bungled a number of opportunities to introduce more accountability and meritocracy, as promised, it cannot realistically be accused of not taking any action at all.

Falzon is the second government minister to have lost his Cabinet position in less than half a term, after Home Affairs Minister Manuel Mallia was sacked in 2014. It is regrettable that governance issues (of admittedly very different kinds) have already claimed two ministerial scalps in such a short time. This indicates a far quicker descent into maladministration than is normally expected from an incoming government… still less one elected on such an opposite platform.

Both cases, however, also gave Joseph Muscat an opportunity to show his mettle as Prime Minister. And while his handling of either case may not have been stellar, it did give the impression that he intends to change the way things work at sensitive government departments. 

Falzon’s resignation was crucial also because the issue exposed an endemic governance problem in Malta: the unhealthy proximity of business and politics. The Prime Minister’s internal audit and investigations department (IAID) found discrepancies in the valuations of lands transferred to Mark Gaffarena, a businessman with close associations to both parties.

A separate, concurrent investigation by the National Audit Office (NAO) likewise flagged numerous irregularities in the property transaction, in which Gaffarena was compensated with €1.65 million, for properties he had bought for little more than €150,000. 

From the outset, the transaction looked dubious. Gaffarena bought 25% of one of the properties a mere two months before a highly favourable (and questionable) re-evaluation. Suspicions of possible insider trading were compounded by the fact that a personal aide to lands secretary Michael Falzon even accompanied him to the Government Property Department. 

It further transpired that the process used to expropriate the land was highly unorthodox – described as ‘the first case of its kind’ by experienced civil servants – and it was clear that Gaffarena benefited far more from the resulting deal than the government.

Seeing as Falzon’s remit was to safeguard the government’s interest – as representatives of the true owners of the land concerned, the people of Malta – questions were legitimately raised regarding the motivation behind a transaction in which the Maltese people came out significantly poorer. Both the NAO and IAID report confirm that the government, in this case, was acting more on behalf of a private entrepreneur, when its real interest lay in the opposite direction.

From this point on, the machinery of the State kicked into action, and the conclusions of the IAID’s report eventually made Falzon’s resignation inevitable. It will be remembered, however, that the process took far longer than it should have: Falzon initially resisted ordering an inquiry into the affair, and it had to be the Prime Minister to step in instead.

From at least this perspective, Muscat’s reaction to the damning NAO report has so far been broadly commendable, losing no time in announcing Falzon’s resignation, and – arguably more important still – kick-starting a long overdue reform of the Lands department and associated policies. Although it is too early to comment on the reform process itself, it is clear that Muscat is taking the matter seriously. His plan to transform the department into an authority is a step in the right direction, and it is heartening that it is backed by the Opposition.

But efforts to turn this into an unlikely victory for the Labour administration run the risk of backfiring. As in the case of Manuel Mallia, Muscat allowed far too much time to elapse between public calls for Falzon’s resignation, the finalisation of the IAID report sometime during the summer of 2015, and the resignation itself after the NAO finished its report. So even if the course of action was correct, Muscat’s handing of the situation still left a sense of ‘too little, too late’.

In his defence, the Prime Minister may point towards the need to wait for both investigations to conclude before taking action. But long before the latest report, there was already more than enough evidence that Falzon’s position as Lands Secretary was untenable. His resignation should have been announced six months ago, when the IAID report was presented to the Prime Minister.

With that report in hand, Muscat already had the necessary tools to temporarily suspend Michael Falzon pending the findings of the NAO report; this could even have enabled the much needed land reforms to begin earlier.

So politically, Muscat’s much vaunted ‘decisiveness’ as a Prime Minister was not 100% in evidence here. Nor did it help that the press conference was clearly stage-managed to impart the impression of a united Labour Party.

This has clearly been a blow to Muscat’s government’s credibility when it comes to good governance – not a knock-out blow, perhaps, but enough to remind the Prime Minister that he still has a long way to go to make good on his electoral promises. And perhaps, that he needs to set the example for his ministers, and rein in their lackadaisical ways when it comes to good governance.

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