Gatt explains discrepancy in shipyards' projected and actual losses

Public Investments Minister Austin Gatt said yesterday losses by the shipyards had exceeded business plan projections by Lm6.7 million because reforms planned for the 'yards had not taken place yet.

Replying to a parliamentary question by Leo Brincat (MLP) said the business plan had assumed that there would be financial restructuring at the two years which would have included the writing off of the debts which the 'yards had with the government. Malta Shipbuilding alone was paying interest of Lm5 million annually on the debts it had accumulated over the past 20 years. Since this restructuring had not taken place yet, Malta Shipbuilding still had to meet this debt servicing cost last year. Had this not been the case, the deviation between the actual result and the business plan projections would only have been Lm500,000.

The business plan also assumed that 2002 would have seen the introduction of fundamental reform of work practices as part of a new collective agreement, but this had still not happened. As foreign experts had warned, the shipyards' results could not improve before these reforms were implemented.

It also needed to be pointed out that the shipyards were competing in a very competitive environment and even when they well organised they would still have to compete strongly against shipyards which were just as determined to win orders. The ship repair and conversions market in 2002 was more difficult than in 2001 and last year Malta's shipyards did not win major contracts which would have made a major difference to their financial results.

Dr Gatt said that in view of these reasons, last year's financial results came as no surprise to the management. The situation was being continuously monitored, but no one expected the results to improve before decisions on reform were taken and implemented. The stake holders involved in the shipyards had so far not agreed on the necessary reforms and unless agreement was reached very soon, it may become too late for the situation to improve.

Labour MP Charles Mangion also asked Finance Minister John Dalli whether instructions had been given to his staff not to process payments of wages for Malta Drydocks and Malta Shipbuilding.

Mr Dalli said Notary Mangion's information was mistaken. Before transferring funds to the dockyard, the ministry first asked to see the shipyard's accounts. It had been found that Malta Drydocks had received enough funds to cover its needs up to the end of the year.

Mr Dalli said the funds which the state was ready to provide to the shipyards were not infinite. They were taxpayers' money and therefore everyone had to ensure that they were used wisely in the national interest.