Labour MPs against government pulling out of BOV

Labour MPs yesterday spoke against the government selling all its shares in Bank of Valletta, saying the government should not give up all the reins in the banking sector as that would prevent it from promoting policies to help specific sectors, such as for social purposes.

The comments were made by Charles Mangion and Jose' Herrera when the House of Representatives debated a bill to amend the Malta Membership of the European Bank for Reconstruction and Development Act.

Dr Mangion asked what the government's plans were regarding the total privatisation of Bank of Valletta. This move, he said, would mean that the government would lose its remaining tools to direct basic economic structures. Would the government's shares in the bank be sold to the public or to a strategic partner?

Bank of Valletta was the last remaining bank where the government could have influence. Such important decisions should be taken after very careful consideration, not the other way around. Throwing to the wind all remaining government influence on the banking sector was not the way to serve the national interest. The government should therefore reconsider its plans.

Dr Herrera said it was rumoured that one major reason for the resignation of former BOV Chairman Joseph F.X. Zahra was the fact that he could not agree with the government's plans on how to privatise the bank. If the government let go of its reins on the banking sector it could never again influence decisions by the bank.

Replying, Parliamentary Secretary Tonio Fenech said he was worried by the Opposition's comments. It had long been said that the government and Banco di Sicilia intended to jointly sell their shares, totalling some 40 per cent, to a strategic partner.

This was not a decision which was being taken hurriedly to reduce the national debt, as had been implied. Had that been the case, the easiest thing the government could have done was to float its 25 per cent shareholding on the stock exchange and get an immediate return.

As it were, the method the government was following gave no guarantee that the government would even be paid for its shares in time to make any impact on the convergence plan.

Clearly, finding a strategic partner for Bank of Valletta was the best option for the economy. The bank also needed such a strategic partner so as to be better able to face competition in the banking sector, which would grow more fierce once Malta adopted the euro. A strategic partner would enable the bank to remain relevant, sustainable and profitable.

The Opposition speakers had spoken in the sense that the government should retain control or influence on the banking sector or at least on Bank of Valletta. But the fact was that the government already did not have such control or influence. Nor did it wish to have any. Much progress had been made and things had changed considerably since the banks were nationalised.

Furthermore, according to law, the directors of Bank of Valletta could not look at the interest of any individual shareholder but all the shareholders.

Mr Fenech referred to comments that Bank of Valletta should remain Maltese and said one needed to understand what that meant in a liberalised environment where 60 per cent of the bank's shares were already privately owned and any foreign bank could seek to buy shares on the stock exchange.

Mr Fenech said he would not comment on why Mr Zahra had resigned, but he would say that Mr Zahra was widely respected by the government and there had been no major disagreements.

Earlier, when moving the bill, Mr Fenech explained that Malta, as a member of the EBRD, needed to approve a resolution to admit Mongolia as a country of operations by the bank.

The bill would also give enabling powers to the Finance Minister to ratify future decisions of this nature by the bank without further need to amend the bill.

Dr Fenech explained that the bank was one of the tools the EU used to fight poverty all over the world. That, he said, could include assisting countries whose economic situation had deteriorated so much that many people left and ended up being illegal immigrants to EU countries.

In this case, Malta and the other member states of the bank had been asked to ratify an agreement for the bank to be able to help Mongolia. This country, he said, had launched a series of free market reforms and its economy appeared to be heading in the right direction, but needed assistance which the bank could provide through low interest loans. Ultimately, such economic development would translate into wealth for the region and greater peace and stability, Mr Fenech said.

Dr Mangion spoke in favour of the bill but said the Opposition disagreed with the second amendment, empowering the Minister of Finance to ratify future EBRD agreements without going before the House. Indeed, those powers already existed, so why was this amendment necessary?

The Labour deputy leader spoke on the work of the bank in the former Eastern bloc countries and said that now that the economies of those countries had picked up, Malta could tap into their tourist potential.

He also spoke on the Maltese economy, insisting that the government should help existing companies consolidate and expand their operations while also seeking new investment.

The government also needed to put more focus on innovation, a sector where the island was lagging.

Dr Mangion said it was unfortunate that Malta could not benefit directly from the EBRD. The government needed to show even more initiative within the Euromed Process, which would benefit Malta directly.

Dr Herrera said Malta's shareholding in the EBRD was very small and the Opposition had no intention of obstructing a decision taken by the bank to include a new country in its operations.

However, Malta's Constitutional system rightly required that treaties should be ratified by the House. But the Bill was now giving the Minister the power to approve the future inclusion of new countries of EBRD operation without submitting it to the House's ratification.

The inclusion of Mongolia would not rock the Maltese economic boat, but could this new Ministerial power be extended to the government's negotiations with other European countries to the exclusion of Parliament's involvement?

Dr Herrera said the long-established Euromed Process was one area that Malta could really benefit from, but there seemed to be no international enthusiasm for this process. With its keen interest Malta seemed to be the odd one out, and its small size did not help to move things along.

Now that Malta was a member of the EU, it should do all it could to ensure that the Mediterranean region would have sources of financial aid similar to what other countries had with the EBRD.

Winding up, Mr Fenech said there already existed other world and international institutions that could help countries that were still under a certain level of development, even in the Mediterranean.

Malta had applied for and been accepted as a member of the International Finance Corporation (IFC) . The IFC is a member of the World Bank Group which finances and provides advice for private sector ventures and projects in developing countries. Mr Fenech said a bank which set up in Malta recently was interested in participating in IFC activities.

Mr Fenech said it had been the Attorney General's advice that the wording of the Act was rather restrictive and this was why the amendment had been brought before the House. The present Bill was to widen the scope and improve the method, not to give the Minister powers beyond what already existed.

The Bill was then given a second reading.