No to turning back the clock

I refer to the article "No to unfair tactics" (June 14) by the chairman of Sea Malta, Marlene Mizzi. While questioning the prudence of submitting articles to the media at a time that the case is still being investigated by the Office of Fair Trading, unfortunately the contents of the article leave us no option other than to reply through the same medium.

We are glad to note that Mrs Mizzi admits that the trailer operators are enjoying the lower freight rates that the Bulgarian line is offering. In fact the rates that the Bulgarian line is applying are exactly the same as those Sea Malta themselves used to charge until April 2001 which is hardly evidence of 'dumping' or unrealistic pricing.

The reality of the fact is that in April 2001, the two operators on the route Genoa/Malta/Genoa, Sea Malta and Grimaldi, agreed to quote the same rate to all trailer operators that in effect resulted in increases in freight rates and additional surcharges of approximately 30 per cent.

Contrary to what Mrs Mizzi tries to imply, we are not seeking to portray ourselves as saviours of the economy. We have simply endeavoured to redress the market balance in favour of the trailer operators after the two years of market distortion that resulted from the pricing policy of Sea Malta and Grimaldi.

Nobody is questioning the fact that Sea Malta has contributed to the Maltese economy over the years, nor can we deny that they offer a good level of service on the various routes they operate.

However, this does not give Mrs Mizzi the right to demean the valid contribution of private shipping companies to the growth and development of our economy over many decades.

Our group of companies employs a similar number of people as Sea Malta. The combined employment of other private shipping companies is substantial and exceeds Sea Malta's tenfold.

Unlike Sea Malta, most private shipping companies did not benefit from the infamous "conference cartels" which meant that the Maltese business community was forced to pay freights about 300 per cent higher than our friends in Cyprus.

This alone cost the Maltese economy at least $20 million per year. We are still grateful to the then Minister of Transport, Francis Zammit Dimech, for his sterling work in removing these cartels, despite the fierce opposition of Sea Malta.

The elimination of these cartels, combined with the development of the Malta Freeport, has meant that a multitude of shipping lines now call at Malta. This offers the local business community an impressive range of ports that connect directly with Malta.

The fierce competition has meant that the freight rates to and from Malta have remained enviably low. Many of the lines calling at Malta Freeport employ Indian, Philippine and Chinese seamen. Is this price dumping? Should we ban all these lines and turn the clock back to 1987?

During this period of protection, Sea Malta had the opportunity of developing into a dynamic regional or even global carrier competing effectively against the world's best.

Unfortunately, this did not happen. Sea Malta claim that they were hindered by the fact that they offer a "social service" to the economy by maintaining services on unprofitable or strategic routes.

This is a lame excuse and in reality should Sea Malta suspend any of their "unprofitable" services, an alternative carrier would immediately offer the same service with competitive freight rates. Their argument about having a special licence to carry hazardous gases is a smokescreen as this permission is relatively easy to obtain. Their failure to develop dynamically lies elsewhere. The stark economic reality is that Sea Malta is competing against large shipping lines that are able to divide their fixed costs over a large number of services and ships.

Unfortunately, Sea Malta have to divide their costs over two ships and three or four different services. This does put them at a cost disadvantage but there is no reason why the Maltese trailer operators should be forced to pay higher freight rates to compensate for this disadvantage.

On May 1 , 2004, we will be joining an enlarged EU that will include several Baltic and central European states with a substantially lower cost base than ours. It seems that Mrs Mizzi is suggesting that imports from these countries should be considered as unfair trading or dumping because of the lower wages prevalent in these economies.

This is a controversial argument to say the least. In reality, Sea Malta, as well as all other players in the economy, will have no option other than to improve our competitiveness in order to compete effectively against all players in the European and global economy.

Costs in Malta are lower than those of some of our northern European trading partners. Should this give them a reason to consider imports from Malta as unfair competition?

Mrs Mizzi tries to give the impression that the Bulgarian shipping line is simply calling at Malta on an ad hoc basis without any long-term commitment to the market.

This could not be further from the truth. The Bulgarians have been calling at Malta on a weekly basis since 1988. They are clients of Malta Freeport and have 21 vessels totalling over 230,000 gross tonnes registered with the Malta flag.

The company has been in existence since 1897, it owns 93 ships and employs 4,000 seamen, who are paid according to international marine wage levels.

The company is profitable and is in the process of privatisation. It does not receive any state aid or other subsidies. It has demonstrated its commitment to Malta on other routes and intends to remain dedicated to serving the route Genoa/Malta for many years to come.

I must again stress that their freight policy is realistic and in line with rates being quoted by Sea Malta and Grimaldi (who have EU flagged vessels) up until April 2001. The line is offering fair and welcome competition on this important route. This is a crucial trade route and there is plenty of room for three carriers to operate successfully and profitably on it.

Bulgaria is an EU candidate country and will join in 2007. It has already started implementing the necessary legislation to prepare itself for accession. Mrs Mizzi's comments about this country are disparaging and unfair.

We welcome Mrs Mizzi's declaration of her intention to compete vigorously on this route. This can only serve to improve the service levels and minimise freight rates.

However, we would like to remind her that Sea Malta is no longer exempt from the Competition Act. This Act clearly defines the parameters of fair competition, particularly with regard to companies that enjoy a dominant position in the market.

If she persists in breaching these parameters, we will continue to vigorously defend the interests of our principals and clients.

Mr Parnis England is managing director, W.J. Parnis England Ltd.