One of the subjects tackled during the budget speech presented by Prime Minister Lawrence Gonzi last Monday was privatisation.
Dr Gonzi made it clear that the government will continue with its policy of privatising companies it currently holds a shareholding in.
After the examples in recent years of Mid-Med Bank (which was sold to HSBC), the Freeport, Malta International Airport and, only recently, Sea Malta, the government will continue to try to find buyers for other companies it owns or has a big shareholding in.
In the budget speech, it was announced that the government will finalise the privatisation of Maltacom plc, in which the government still holds a 60 per cent share, and the Bank of Valletta, in which it has a 40 per cent stake. Strategic partners will also be found for Tug Malta and the Corradino Grain Terminal, while the privatisation of yacht marinas will also be considered by the government.
During the past weeks two companies were in the news with regard to privatisation. The first was the financially-struggling Sea Malta, which has been taken over by the Grimaldi Group. The move has already been described by The Malta Independent as having been the right one in the circumstances. The second was the MIA share issue, which was oversubscribed by 22 per cent, a clear example that the Maltese have full confidence in the company.
Privatisation is an issue that has always grabbed the headlines in Malta, and this is largely because the two major political parties have completely different views on the matter. While the Nationalists have made it their policy to release companies under government control – believing that they could be run better as private enterprises – the Malta Labour Party has repeatedly criticised the government for wanting to get rid of its assets. The MLP has said these deals were not in the national interest.
Of course, if one sells something at a particular price, you will always find someone else who says that he or she would have got a higher price. The cost of a company when it is being sold will always be debated but this is not really the point.
The privatisation of a company is very often crucial for its survival and, better still, for it to do better than when it was under government control. Added to this, private management makes the same company more efficient, and this happens even when it retains the same employees. This is all because changes in work practices and changes in management often give a new impetus and the much-needed lease of life to the entity.
Added to this, privatisation often also means that the new owner invests in the company, be it in equipment or human resources. Such an investment would have probably not been possible if the company had remained under state-control, and the result would have been a company that loses its competitive edge. Under private owners and with fresh investment, companies that are in financial difficulty receive the boost they need to get back on their feet.
The Freeport is an excellent example. As Industry, Investments and IT Minister Austin Gatt said, at a time when government is rationalising its expenditure, it would not have been possible to give the Freeport the financial boost to move
forward.
By privatising it, the company is getting an investment of E40 million to increase its handling facility and, as a result, expand its work. Such an investment would not have been possible if the Freeport remained under the government’s wing.
As Minister Gatt put it: “although the government may be good at running things, the stark fact was that the private sector ran things much better and therefore privatisation was not only inevitable but essential in today’s globalised market”.