Gatt insists freight links to Europe safeguarded

Public Investments Minister Austin Gatt said yesterday that the government had decided to sell its majority shareholding in Sea Malta for commercial reasons, after having ensured that the essential freight connection with mainland Europe would remain in place.

What was absolutely essential for Malta was the service between Malta and mainland Europe, and not the company which provided it, Dr Gatt said during a parliamentary debate.

It was for this reason that the government had signed a six-year public service obligation contract with Sea Malta for the provision of the service between Malta and Sicily, even when this was not commercially viable and a subsidy by the government was needed.

Such an agreement could have been signed with any other company. Similar arrangements could also be found, for example, in the provision of services between France and Corsica even though France did not have a national shipping line. The same applied for Italy and its smaller islands. The difference was that in the EU, such contracts were awarded after a public call for tender.

Dr Gatt said the decision the government had taken was purely commercial. Sea Malta operated two routes - to Genoa and Reggio Calabria. It had a very low market share in the former and made losses from it. It has a good share of the market to Reggio and made a slight profit on this route, but it should be noted that the vessel employed here, the Zebbug, had no depreciation and was practically a write-off. The other vessel, the Falcon, was bought recently through a Lm2 millon bank loan which still had to be paid.

Competing shipping lines were far bigger, they enjoyed the advantages of economies of scale and their crews were paid, at best, half what Sea Malta paid its crews.

The government, he explained, had a 69 per cent shareholding in Sea Malta, the remaining shares being held by Libyan and Tunisian shipping lines and Maltese shareholders. Sea Malta employed 136 people, of whom more than half were shore based. Their salaries were high even when compared to the civil service. It was worth noting that the line had seen its complement rise by a third in 1986/87.

Sea Malta had, with few exceptions, been making constant losses and was expected to show a loss of Lm1 million for the year which ended last March.

The balance sheet showed that shareholders' funds were being endangered, with accumulated losses having reached Lm2.3 million last year.

Dr Gatt said the government could have opted to do nothing, in which case the company would have had a negative balance sheet and would have had to be liquidated.

It could have opted to capitalise the company, but that, including the purchase of a new ship, would have cost between Lm5-7 million. Projections showed such investment would have been lost within some six years if the current complement was retained.

So the only real option was to forge a public service obligation agreement to safeguard the country's essential requirements on the Sicily route, and then to sell the shareholding.

Dr Gatt said no decision had been taken yet on whether the government would dispose of all of its stake. That depended on the offers, but the government would certainly go into a minority position.

The government, he stressed, was not dismantling Sea Malta but wanted to sell its shares. The shareholding could not be sold to the Libyan or Tunisian lines which also held a stake. What the government preferred was to attract a large Mediterranean shipping line which could integrate Sea Malta's operations into its own.

Possibly, Malta could serve as a transshipment base for freight from the Eastern and Southern Mediterranean which would then be ferried to Europe through feeder services. Such a possibility would mean value added for Sea Malta.