Rating Malta

Wednesday's leading article in this newspaper dealt with Moody's report on Malta regarding our economic prospects and including the progress towards adoption of the euro. It is a matter that concerns us all.

Money is always the lowest common factor. None of us can do without it. It is the lingua franca which expresses the endless complexity of all our activities, our energies and our time, our lives. Man does not live by bread alone but by bread also and necessarily.

In recent years, the public's interest in economic matters has continued to grow not least because of the serious challenges faced by our economy. We have moved from the comfortable ignorance of a centralised economy, in which someone somewhere knew it all and saw to it somehow, to the clear sensation of vulnerability. It is growing on us that this complex beast we call the economy is not totally under the control of anyone; that the best we can demand from our governments is not to commit some folly as it tinkers with it.

Nobody expects or demands omniscience or omnipotence from governments although they do continue to perpetuate the idea that they are in charge, twiddling the knobs in a control room. They make plans and hope to carry them out. There are no certainties. The greatest effort is made in countering shifts in the economy, to keep it on an even keel and to avoid entering any zone which would expose us to turbulence.

Our common ambition appears to be to achieve the dynamic of a fully fledged Western economy, granted our peculiarities and so forth, a market economy. This is what gives us the constant giddy feeling. We are trying to learn to fly and every time we appear to lift off we miss the ground under our feet. In the end we will get used to it and fly greater distances and at greater heights.

Still, the giddy feeling makes sense. Nothing is more clear to us all than that the fact of the matter is public confidence, economic metaphysics. What anything is worth is not the effort put into creating it but what the buyer will pay for it. An ever greater proportion of buyers will pay more in the expectation that they will either have to pay more for the same product or service in future or that they will be able to sell at a better price in future. We are flying on confidence, it is the air under our wings invisibly keeping us aloft.

This is why it is such a mystery that absolutely nothing significant is done to end issues such as the Bical bank saga. It is only pinheaded political calculation that allows that hot potato to be passed on from generation to generation. It has been 34 years of cheating, fabrication, maladministration, misappropriation, incompetence and neglect.

Mistaken calculation gives the result that the only victims are the Pace family and a number of Bical depositors still awaiting payment of the last 20 per cent of the money they are still owed regardless of the fact that the funds to pay them were around long before their credits stopped accruing interest. It is assumed that all creditors can be safely ignored. It is calculated that the depositors consider the matter a bad debt and would wait indefinitely for the remaining balance. It is a serious mistake.

The Paces and the depositors are not the only possible victims. We all are. The perpetuation of the saga is a constant haemorrhage of confidence in the system. Avoiding a solution in order to avoid the fallout of a complete account of what has gone on in the past 34 years simply makes things worse.

In the meantime, we are trying to develop international confidence in Malta as a financial services centre. It is all threatened. The Bical saga is our Enron, our Parmalat. There is a major difference. In our case it is not a criminal entrepreneur who exposes public confidence to a major slap in the face but the government itself. Previously we had controllers appointed by the Central Bank. Now, 34 years down the line, the matter is in the hands of a controller holding office under the authority of the MFSA.

The following are questions asked by Cecil Pace to the present controller in a letter dated May 11, 2006 which I have been copied. We all await the answers not because we all have monies due to us from Bical accounts but because none of us can afford to live in a country where such questions have to be asked and, worse, where they go unanswered for more than three decades:

"Can you possibly come back to me with a list of all the proceeds collected from the sale and dissipation of our assets throughout these last 34 years of controllership? Please indicate date and which asset.

"Can you provide me with a list showing the yearly administration costs, fees and expenses for the bank and each and every company?

"Can you indicate the date (in which) each company became dormant?

"Can you tell me or, better still, provide me with a list showing your predecessors' borrowings from each and to which company?

"Can you furnish me with a list of uncollected debts of each and every company as well as of Bical?

"Can you provide a list of transactions involving the sale of assets where the proceeds were either not collected at all or only partly received?

"Can you indicate the personal loans made... and sums which have not been received?

"Can you list, on a yearly basis, the interest received on the substantial balances held by your predecessors and yourself from 1972 onwards to date?

"Can you indicate what professional fees come under the heading of administrative costs of each company? There are hundreds of thousands of liri charged under professional fees. I thought that would cover accountant's fees or whatever but apart from the yearly fixed controller's fee there are professional fees of about Lm190,000; legal fees of over Lm120,000; general expenses of some Lm25,000; office expenses of some Lm10,000; controller's expenses over Lm150,000. These only relate to Bical but similar but much lower appear separately for each and every company besides a long list of other charges."

The Bical crime did not happen 34 years ago. It is a political and economic crime happening today. It is not only a burden from our distant past but also a real threat to our future. Any enterprise can go belly up at any time. It is risk of life. All investors know it.

They also need to know that if the worst happens we will put the culprit/s in jail and not have our government turn a blind eye on the proceedings for generations. In other countries, the Parmalat and Enron scandals have shaken investor confidence and pointed out the need for better regulation. In our case, it appears that it is the regulator that is stonewalling and has been for 34 years. Disasters happen in the best of families but a refusal to face them and an obstinate refusal to resolve the problems they cause are far worse than the disaster itself. We need to show the world that we can handle worst case scenarios as well as anyone. So far we have not.

Dr Vassallo is chairman of Alternattiva Demokratika - The Green Party.

www.alternattiva.org.mt

www.adgozo.com

hcvassallo@kemmunet.net.mt