Prendi Brindisi

It was difficult last week not to feel amused at the contortions that the Gonzi administration went through over the Brindisi fiasco as managed by Malta Freeport. True, some media reporters fell for the misinformation dished out by the minister responsible for "investments" but that approach is increasingly subject to a short shelf life. People are getting wiser to the PR tricks by which this administration, like its predecessor, tries to deflect attention from problems caused by its own incompetence.

The Brindisi story sounds all too familiar. In 2000, the Malta Freeport, then chaired by Marin Hili, invested in the Brindisi port. Between 2000 and 2003, the Brindisi port became embroiled in a tangenti scandal, was run very badly and made big losses. The Maltese partner apparently just picked up the tab. In February of this year, Malta Freeport bought all the shares of the other stakeholders at Brindisi, by then an insolvent operation.

So the story was spun that the project was hatched under a Labour government between 1996 and 1998. You must know that everything that goes wrong under the Fenech Adami/Gonzi administrations is always the fault of the Labour government, even if it was there for under two years. And, of course, there is much, too much that is turning out wrong under the Fenech Adami/Gonzi rule.

Yes, the strategy to arrive at a commercial arrangement with Brindisi was elaborated between 1996 and 1998, following guidelines established by Malta Freeport to set up partnerships with other Mediterranean ports back in 1995 (under a Fenech Adami government and with Marin Hili as chairman of the Freeport). But once a joint venture was set up in 2000, when Dr Gonzi was deputy PM, all the responsibility for what went on rested with the PN government. They had to monitor the investment at Brindisi and they had the responsibility to take corrective action if it went sour.

By 2003, the Brindisi operation was bankrupt. When, in February 2004, Malta Freeport bought out the remaining shareholders, it could only have done so because it was caught with its pants down. If Brindisi was declared bankrupt, liabilities would have rained down on the Maltese shareholder at a delicate point in time - when the "privatisation" of the Malta Freeport's own terminals was being negotiated. By buying up the residual shareholding "cheaply" - for some Lm150,000 - Malta Freeport could stave off bankruptcy at Brindisi... for a while.

Presumably this was the government's strategy. Presumably, because by October of this year, Prime Minister Gonzi, who doubles up as Finance Minister, still did not know that Malta Freeport - meaning the government - fully owned the Brindisi operation. Yet somehow last week, the Prime Minister also declared that Brindisi shares had been bought following a Cabinet decision!

In August this year, further action followed. In a rushed decision, the state investments agency Mimcol persuaded Bank of Valletta to issue a short-term loan of €10 million (circa Lm 4 million). These monies would be transfered to the Brindisi operation. The transfer was guaranteed by the Permanent Secretary at the Ministry of Finance, both for interest payment and for repayment of the full amount by the end of this year. Bank of Valletta and Mimcol were in no doubt that the Lm 4 million would shore up the capital (?) of the Brindisi operation and that the repayment would come from the government budget. By any measure, it was new investment in Brindisi, even if government misinformation now calls it just a "refinancing".

When I described this operation last Sunday week, an elaborate game was played by the government to confuse people. They claimed I had said the Lm4 million were meant to buy up shareholding in Brindisi. (I never said anything of the sort.) That ploy hardly changed the underlying reality. While the government was forking out some Lm 10 million to buy the Malta embassy in Brussels, they were pumping Lm4 million into the failed Brindisi venture. Why?

In part excuse, the answer came that the Lm 4 million were not an investment but simply replaced Italian bank lending with lending from a Maltese bank ("refinancing"). Brindisi is so bankrupt that no bank would oblige, unless it knew that the deep hole it was bridging would be filled up by the state in quick time.

However, there is no provision in the government's 2004 budget for a capital allocation of Lm4 million to Mimcol. The same had happened when the government came to spend Lm10 million on the Brussels extravaganza. For Brindisi, the plan is probably to allocate the funds when the supplementary estimates for 2004 come up at the end of the budget debates. Unless, for instance, there is some idea to pay in the Lm4 million through what are called "below the line" transfers from the Treasury Clearance Fund and wait for better days...

The question remains: Why throw good money after bad at Brindisi? One still awaits a reasonable reply. It could be that we have only seen the tip of the iceberg in so far as concerns bank guarantees issued by the shareholders at Brindisi (they are now constituted by the Maltese government). Possibly, the payment of Lm4 million was carried out to postpone a call on such guarantees.

That one is forced to make these conjectures illustrates the sorry way by which the Fenech Adami/Gonzi administrations have managed public monies. Millions get committed and spent, while goings on remain blanketed in fog. Nothing demonstrates this procedure so well as the situation at Malta Freeport, for long touted as a huge success story but where the reality is of a big, quasi-bankrupt system. Brindisi is part of that failure. Which is why no doubt the other shareholder at Brindisi, in a parody of the dictum "see Capri and die", told Malta Freeport: by all means, take Brindisi and...