Social partners 'were not told' of Enemalta's Lm50m hole

The social partners were not even given an indication of the Lm50 million hole in Enemalta's finances as a result of oil price hikes during the recent MCESD discussions on the government's pre-budget document, Small and Medium Enterprises Chamber - GRTU director general Vince Farrugia charged yesterday.

The GRTU, in fact, rejected the measures proposed by the government during Monday's meeting of the Malta Council for Economic and Social Development, which met to discuss what to do to pay for the sharp rise in the cost of oil.

Mr Farrugia said that during the discussions on the government's pre-budget proposals, the problem was not even mentioned to the social partners.

"We knew that there may have been a shortfall of some Lm15 million but not that we would have to figure out how to plug a Lm50 million deficit. We were actually discussing whether it was possible to lighten the tax burden in order to boost disposable income.

"Last year, when we were in talks on the first utility bills surcharge (17 per cent surcharge) we were told that a committee of experts would be set up to advise on how Enemalta could buy oil in the cheapest possible way.

"Since then we have not been given any information on the committee's recommendations, what steps were taken, if any, and what effect they had. Yet now the government has come back to us with a bottom line, telling us that we have to carry the burden... well I'm sorry that's just not good enough," Mr Farrugia insisted.

The GRTU and the IT and Investments Ministry exchanged press releases yesterday precisely on this point. In its statement the GRTU said that when it asked for this information it was told that it should sign a disclosure agreement against a hefty bank guarantee in case the confidentiality was broken.

The ministry said the government did not have any problems with the GRTU's request and only asked for it to sign a confidentiality agreement which if breached would incur hefty penalties.

The ministry also said that during the meeting Mr Farrugia had said he understood the need for such an agreement and agreed to sign it.

The GRTU however, denied this later, saying that although they confirmed that Minister Austin Gatt had laid down this condition, nobody from the GRTU had indicated agreement. "When there were sensitive discussions on the lira's pegging to the euro nobody was asked to sign any confidentiality agreement," Mr Farrugia said.

Controversies apart, Mr Farrugia said the social partners and the people generally were owed an explanation about what was done to cushion the strain of international oil price hikes on the local economy. The GRTU had told the government to go for the hedging option a year ago. "Why wasn't this option taken?"

"In a similar way, what is the government doing about the inefficiencies of Enemalta? Dumping the problem onto the laps of consumers is the easy way out," he insisted.

Meanwhile, The Times spoke to a number of local financial advisers regarding the hedging agreement option. Besides hedging there are other financial risk instruments but hedging is probably the most commonly known since it was the subject of political controversy when it was dropped in 2000.

International analysts are divided between those who say that the price of oil is expected to rise in the foreseeable future to reach some $100 per barrel and those who believe it may decline in the next two years given that China in particular is developing energy production technologies which do not depend on oil. If China shifts at least part of its demand to another source its demand would drop and so would the global one.

People holding such a theory advise against a hedging agreement.

During Monday's Cabinet meeting, the possibility of hedging part of the oil supply and buying the rest at market prices was considered at length, government sources said.

Foreign Minister Michael Frendo clarified in reply to a Parliamentary question yesterday that the Libyan ambassador had not said in a newspaper interview that Libya was ready to supply oil to Malta at below commercial prices. What the ambassador had told the interviewer was that his country was prepared to talk to Malta on what could be done.

Dr Frendo told Labour MP Noel Farrugia that he had followed up the remarks made in the interview and a meeting was held between the ambassador and Enemalta during which the corporation's officials explained what their fuel supply needs were. The ambassador was now giving the details to the Libyan national oil company so that talks could be held directly between the two organisations.