We need these five things in place for a firewall between big business and politics

The arrest of Yorgen Fenech and the resignation of Keith Schembri have played out to an implosion in Maltese politics reminiscent of Italy’s Tangentopoli scandal. What kind of firewall can protect us from the risks of collusion between big business, politics and organised crime?

The money shot: Keith Schembri gave Labour a new pro-business mantra, which in the beginning of its first administration was exemplified by its alliance with citizenship experts Henley, here seen with Christian Kalin (right), to sell Maltese citizenship to high net worth individuals
The money shot: Keith Schembri gave Labour a new pro-business mantra, which in the beginning of its first administration was exemplified by its alliance with citizenship experts Henley, here seen with Christian Kalin (right), to sell Maltese citizenship to high net worth individuals

That businessmen trade in political influence is something which hardly anyone doubts and perhaps is unavoidable in a small island where everyone knows each other. Neither can one ignore the contribution of legitimate business groups to Malta’s economic prosperity as an independent nation.

As Malta faced the birth pangs of independence and struggled to break free of its dependence on British military spending, a crop of enterprising Maltese businessmen, hailed as captains of industry, were valued for creating jobs and growth, with politicians facilitating this by offering cheap land and other incentives to promote tourism and industry.  

Even under Dom Mintoff’s socialist government, businessmen who contributed to ‘national development’ and job creation were not shunned, even if they were subjected to higher taxation and greater social obligations.

Admittedly this was an integral part of our development as a nation, albeit in a landscape where politicians and businessmen either kept a degree of healthy distance from each other, or were simply less exposed to media and social media exposure.  

But since the 1990s, policies promoting job creation were extended to ones promoting rampant property speculation, which generate more private profit than social gains. And political parties became even more expensive machines to finance and run, becoming even more reliant on funding from the business class. The closer the links between them, the more difficult it became to disguise the familiarity – until the inevitable happened and some businessmen entered the corridors of power. The poachers were becoming the gamekeepers.

This has been increasingly the case under different administrations.

But Tonio Fenech’s unfortunate trip to watch an Arsenal game with businessman Joe Gasan on a plane owned by the late Tumas magnate George Fenech – father of Yorgen – now pales into insignificance against more damning connections exposed in the past three years, which include politicians setting up offshore companies with businessmen as their clients.

Now that the system is clearly broken, here are five things which need to be done.

1. Introduce state financing and ban private donations for parties and their companies

Party financing laws were reformed upon the election of a new Labour government in 2013 after years of procrastination.

Parties are now legally obliged to publish donations by any singular individual or entity of over €7,000. Yet the change has been largely cosmetic as only a handful of donors have been revealed. One reason for this is that donations to companies owned by political parties, including expensive to run TV stations, are not covered by legislation.

There are only two ways of addressing this: either oblige parties to declare any donation they receive, including to any company they own, or simply ban private donations and introduce a state financing mechanism through which parties are paid by the state for every vote they get in a general election.

In this way political parties will no longer have to beg for money in marathons, which may well be charades aimed at disguising more substantial donations and back-room dealings.

Parties may also be required to scale down operations to match the limited funding they get from the state. Closing down partisan TV stations may well be a blessing in helping reduce partisan tension in the country. Ultimately we have to realise that democracy comes at a price and we have to start paying for it, or else obscure and sinister forces may end up paying for it instead.

The question we must face is: do you prefer political parties to be financed from your taxes or by people, including shady characters, who expect a return on their investments?

2. Raise salaries if necessary, but ministers and members of their secretariats should completely sever business ties and the MPs scrutinising them should not be given government jobs

The code of ethics already bans ministers from continued involvement in business activities while serving in office but it does not exclude them from receiving retainers.

This is because the code of ethics states that a “minister who before his appointment was self-employed, exercised a profession or was in business… is not bound to dispose of his interest or shares, but must make the necessary arrangements immediately, to ensure that he disassociates himself from the direction or management of the office, trade or business, make arrangements in order that he can get paid for any work previously done or the profits due to him and do not continue to participate in the payments or profits due for work done after his appointment as minister, except for a fixed sum each year considered as due in return for his previous investment”.

Moreover, the code of ethics does not sufficiently regulate financial interests like investments, possibly in suspicious offshore activities like those involving former minister Konrad Mizzi and the PM’s chief-of-staff, except for calling on them to “to avoid speculative investments about which they have or may be thought to have by virtue of their ministerial office, early or confidential information likely to affect the price of those investments”.

As suggested by former Labour leader Alfred Sant before the 2008 election, this should change and ministers should be required to relinquish any interest in businesses and partnerships set up before becoming public officials.

To maintain a healthy separation between Cabinet and backbenchers who should be scrutinising them, MPs should not be eligible to serve as government appointees in public authorities and boards, something which is resulting in the occupation of the state by party functionaries. The implication of all this is a substantial raise in the salaries of both ministers and MPs to enable them to act as servants of the state.  

3. No place for businessmen among persons of trust

Upon his appointment as the PM’s chief-of-staff Keith Schembri resigned his company directorships in his companies, which include Malta’s leading paper supplier Kasco Limited, but retained his shareholdings.

But it was never clear how far he had severed his links and his planned offshore activities, which included Yorgen Fenech’s 17 Black. The events after the 2017 election suggest otherwise. Even short of any involvement in the Daphne Caruana Galizia’s assassination, Schembri’s secretive business ties with Fenech have cast a dark shadow on Joseph Muscat who had chosen him as his most trusted public servant.

This is also the main reason why questions have been raised on Muscat’s role in the entire affair.

The unfolding of events in recent days should act as a clear reminder that businessmen should simply not be appointed in positions of political office. This is because the entry of businessmen in the political corridors inevitably raises suspicions that they are doing so to further their own business interests, as Silvio Berlusconi had done in Italy.

Moreover, positions of trust need to be regulated by a stringent code of ethics which acts as a firewall against all sorts of conflict of interests, including familiarity with friends who are in business. Then again, politicians must abide by the golden rule set by Muscat himself in other cases – including that involving former minister Emmanuel Mallia  – which is that ministers are directly responsible for the actions of their appointees. An error of judgement which lets corrupt people walk in the corridors of power, should be reason enough for a resignation.

4. Government officials should be legally obliged to minute their meeting with lobbyists and proponents of projects

A law regulating lobbying is needed.

The European parliament already obliges MEPs acting as rapporteurs, shadow rapporteurs or committee chairs to publish their scheduled meetings with special-interest representatives on Parliament’s website. Other MEPs are also encouraged to publish online information on such meetings.

A similar law may require ministers and members of their secretariat to record all meetings with lobbyists including businessmen pushing forward their projects. Failure to record minutes of such meetings should be illegal and subject to penalties and sanctions. There may be cases where minutes of such meetings may be withheld for a period of time in view of sensitive information, but records should still be kept for posterity. The use of private emails in connection to communication with lobbies, should also be banned.

5. There should be an overhaul in the way planning decisions are taken

The Planning Authority was originally set up to reduce ministerial discretion in the issue of planning permits. Yet, planning decisions taken over the past three decades have been marred by the suspicion that political appointees on the PA boards dance to the tune of developers.

One way of addressing this is by introducing a new selection process. One way to go about it would be to increase representation of local councils and the Environment and Resources Authority. One may also consider a different selection process for the other board members through a public call, after which candidates will be assessed for their eligibility, with those that are shortlisted being subject to parliamentary grilling in an open sitting, following which a 2/3 majority would seal their appointment.

Other democratic safeguards may include giving residents of localities impacted by the development the right to challenge any approved permit for a major project in a popular referendum, if an established number of signatures are collected within an established time frame.

If residents vote against a permit issued, the decision may be taken back to the Planning Board for a second and final decision.