The government will be discussing the shipyards privatisation plans with the European Commission in the coming weeks, and will be making a case for the commission to accept a plan which would probably see the government absorbing a debt of €100 million accumulated by Malta Shipyards since 2003, Prime Minister Lawrence Gonzi told Parliament yesterday.

Dr Gonzi insisted the government saw the current international economic scenario as being the best for the shipyards to be privatised. The government would have decided to sell the 'yards whether or not they were making a profit, because it believed that the government's role should be that of a regulator, not an operator.

However, shipping business was growing and so was the demand for ship repair facilities. Had the government not believed in a future for the shipyards, it would have closed them down and used the land for other commercial development.

Furthermore, in terms of the EU accession agreement, the government could not continue to subsidise the shipyards beyond the end of this year.

The people were currently shouldering a burden of €950 million in subsidies to the shipyards, which amounted to 30 per cent of the national debt.

In his 11-page statement, Dr Gonzi said the basic parameters which needed to be achieved from the privatisation exercise were that the best solution had to be achieved for the workforce; that the operations of the shipyards would be viable immediately and would be based on a capital investment programme; that subsidies would cease immediately the new investors took over; and that the country achieved the best return from the sale of the assets, the order book and the rents for the land and the docks.

Dr Gonzi said many other models had been tried to make the shipyards viable, but it was clear now that there was no option to privatisation.

With this background, the Cabinet had decided that the shipyards' privatisation would include docks four, five and six; the Marsa shipyard, excluding the left side of the dock which was planned for another maritime development; the Manoel Island Yacht Yard and the superyachts facilities.

Boiler Wharf would not be included in the privatisation because this was earmarked to be turned into a cruise liner berth so that even the Cottonera area would benefit from this ever-growing economic activity.

Dr Gonzi said that the privatisation process, which would be carried out by the Privatisation Unit within the Ministry of Finance, would be open and competitive. The main problem would be the yards' workforce, which stood at 1,726. Whatever the model chosen, it would not be possible for the new owners to employ all of them.

The Prime Minister denied that the government had hidden this fact from the people because of the general election. The government had informed the opposition, the workers' representatives and, when possible, the public, admittedly with certain reservations because there were also commercial interests to protect.

He had insisted that economic viability had to be based on greater productivity, partnership with world - known operators and that certain facilities, like Boiler Wharf, that could be more profitable if used for other activities, would be used for the cruise liners industry.

The Prime Minister said one must now look ahead. The Cabinet had concluded that this was the opportune time to take the plunge. While the government wanted to be transparent with the people, it must find the best solution for the workforce in an open and genuine discussion with the union. It was for this reason that the Finance Minister had started meeting with the General Workers' Union to discuss voluntary schemes that could be offered to all the workers.

The Privatisation Unit was preparing the necessary documents for an international call for expressions of interest to be issued as soon as possible, and it was hoped that the privatisation would be concluded by the end of the year.

Concluding, Dr Gonzi augured that all parties would work together on this delicate but inevitable process, so that it would be a success.

Opposition leader Charles Mangion said that this was a national issue and the opposition wanted a strong shipyard and the safeguard of workers' livelihood.

He asked if the government had any recent reports which showed what state the shipyards were in. While the prime minister was now saying that the government was subsidising the shipyards to the tune of €100 million, until 2006 it had been saying that the shipyards were getting encouraging results. What had changed? Why were these declarations still valid before the election but not now?

Dr Mangion said that the government should ensure that the shipyards' land would remain linked to maritime use. He asked what the government thought about security since the shipyards also meant access to the country.

He asked if the government had carried out any studies to see what capital commitment there should be at the 'yards to strengthen productivity there and ensure a greater development of the maritime industry.

The opposition leader asked if the jobs of those who would not accept retirement schemes would be safeguarded.

He said that the government, even through the European and Foreign Affairs Committee, should seek if there were some forms of EU assistance to the 'yards, even while the industry was managed by private owners. The opposition wanted a viable and successful industry, ensuring the jobs of workers for the benefit of the exchequer and the country.

Labour MP Leo Brincat said the opposition had been considerate in its criticism, and it would have been fairer for the government to have taken the opposition into its confidence and consulted it before announcing its decision to privatise.

The declarations it had made in the Budget and the subsequent debate, in the run-up to the elections and later, had given no indication of its privatisation plans.

A month before the elections, the prime minister had said the government was intent on continuing the restructuring exercise. A week after the elections Dr Gonzi had said he would be starting immediate talks to find a solution to the problems. But the elections had come and gone and the sense of immediacy seemed to have blown away.

During a Broadcasting Authority programme the prime minister had said categorically the government had no plans to downsize. And just 11 days before the announcement of the privatisation plan, the government had said it was still exploring all possibilities for the shipyards.

On the professed interest in the shipyards, Mr Brincat asked why prospective buyers had changed their minds. Was it the size of the labour force, the lack of serious commitment by the government, the shipyards' management, arrogance on the unions' part, or the lack of agreement between government and union?

Could the prime minister confirm if talks with prospective buyers had shown that the workforce they had in mind was between 400 and 500 workers? Was this assessment still negotiable? Would the downsizing involve only shop-floor workers, or even the management?

Why had the shipyards' accounts not been published for years?

Did not the Prime Minister think that negative comments at this delicate moment could negatively affect talks or expressions of interest?

Concluding, Mr Brincat said the government had failed the shipyards' dependent families, the electorate and the taxpayer badly.

Nationalist MP David Agius asked how the government was thinking of becoming a regulator in the sector. Would the privatisation be related to just ship building and repair?

Owen Bonnici (MLP) asked if the government was disposed to divide the privatisation of the shipyards. How would it convince the people that the most lucrative sectors would balance others which made less business sense? Would the government accept change of genre, even partial, of existing shipyard sectors? What would happen to workers who did not accept voluntary retirement?

Labour MP Joe Mizzi asked if former workers who had taken up earlier retirement schemes would be affected.

Chris Agius (MLP) asked what would become of the tank cleaning farm at Ricasoli and other property owned by the shipyards. Was the government disposed to rent a dock exclusively for the repair of military vessels? And what would happen to ongoing inquiries once the privatisation process was concluded?

Labour MP Anthony Agius Decelis asked if the union's role in the negotiations was to be a monitoring one. He asked why the union's request for the setting up of a task force had not been accepted?

Nationalist MP Beppe Fenech Adami asked when retirement schemes would be issued. Carmelo Abela (MLP) asked who was responsible for the 'yards' present state. What had been the government's responsibility in attracting work to the yard? Who had been deciding on foreign workers and what were the criteria used? What were the foreign workers' trades, if any?

What had the government been doing to ensure that the 'yards became viable before the end of this year? Or had it been considering privatisation all along? Why had apprenticeship schemes been stopped?

Nationalist MP Joe Falzon asked what effect privatisation would have on the credibility of the sector because the call was an international one and there were other shipyards in Malta.

Another Nationalist MP, Franco Debono, asked what was the potential of developing a yachting industry and if there was a possibility for the government to retain this part of the yards.

Labour MP Joe Cuschieri asked which foreign companies had shown an interest in the privatisation of the shipyards. What had they proposed?

Investments Minister Austin Gatt said that between four and five companies a year used to ask him if the Maltese government was interested in selling the shipyards. Consistently, except for two instances, he always told them that the government was not interested because it was still too early. This was because the government, Dr Gatt said, wanted to explore all possibilities to help the shipyards become a success in line with the parameters agreed with the EU.

The GWU knew exactly what the government was doing and had publicly objected in writing when the government embarked on talks with an international superyacht company and when it spoke on its plans for Boiler Wharf.

Dr Gatt said that the union had not liked what a study concluded, that even if all docks were full 24 hours a day, 365 days a year and the 'yard charged market rates and used all its workers, it would still make losses.

The union knew that the government was seeing whether it could hive off certain parts of the shipyards, and workers were always told that one of the options was to include strategic partners.

Six-monthly reports always indicated that losses were made because of a lack of productivity.

He pointed out that the shipyards had always had work. The problem was that the more work they had, the more money they lost. All shipyards, even in China, used foreign workers because that was the nature of work today.

He said that apprenticeship schemes had been opened three times. Four people had applied the first time and all left within six months, one person applied the second time but never turned up, and no one had applied the third time.

Finance Minister Tonio Fenech said it was positive that the leader of the opposition had confirmed in the House that this was the right time to proceed with privatisation. There were good prospects for the shipyards because there were meaningful expressions of interest.

It was a wonder that the opposition and Super One were aghast as to why he had not divulged any plans before the Cabinet had discussed the topic.

The report which was handed to the opposition at the end of last year had said that privatisation of the shipyards was on the cards, but it seemed that only Mrs Helena Dalli had read this report. The government had not hidden anything.

Mr Fenech said that if the government did not continue to help the shipyards they would have gone bankrupt.

On the question of the profitability of the yacht repair sector, Mr Fenech said the people should not continue to be asked to subvent the shipyards if they were no longer viable. This was what the government had promised in the electoral manifesto.

He confirmed that the government was currently discussing with any party that was interested in the shipyards. The process would be led by the very technical team of the government's privatisation unit.

On the question of whether part of the shipyards would go to real estate, Mr Fenech said it was the government's intentions for the shipyards to be sold for business related to maritime work.

It was the government's wish to attract the best prospects to take over the shipyards, especially if they were already operating successfully.

The shipyards' assets, land area and docks, would continue to remain public property but would be rented out, much like the Freeport model.

The meeting with the GWU had shown that there were good prospects of working together in full cognisance of the problems and the consequences of what was to be done. The current process was a discussion of what schemes could be announced.

If the privatisation did not go ahead the government would no longer be able to subsidise the shipyards.

The GWU was fully aware of this. Agreement had been reached between the two sides that no statements would be made at this point.

Any further assistance that the shipyards could have from the EU was limited to training aids, same as private enterprises.

Mr Fenech said the government had considered that, by all indications, the EU had no intention of budging from the restructuring programme already decided.

The government could easily have sold off the shipyards area and let it be transformed into hotels, yacht marinas and similar projects, which could well have been profitable. But the government had committed itself to seeing that Malta would continue to have shipyards, even after it was no longer responsible for them.

On what would be the ideal size of workforce for the shipyards, Mr Fenech said this would be left for discussion with interested parties in the best interests of the shipyards' commercial success. But he confirmed that the figure of 400 to 750 workers had already been mentioned.

On how the shipyards would be privatised, he said the government was not committing itself on this point, but would be keeping the door open to bidders for different parts of the shipyards' activities or the whole enterprise. The same attitude would be taken as regards tank cleaning, which would no longer be done at Ricasoli.

Concluding, Mr Fenech said only the private sector could go for the major investments that the shipyards really needed. The government was only concerned about the 1,700 Maltese workers currently at the shipyards, but not about foreign workers.

Rounding off the question and answer session, Dr Gonzi said he was doing his utmost for the issue not to become a political ball. There were 1,700 families who were worried but if the right decisions were taken, what the country had not managed to achieve in 60 years, it would achieve with privatisation.

There were people who believed the 'yards should have been closed down. The government was saying it believed there was potential for the 'yards but not with the government's management.

Successive governments had tried to make the 'yards viable and failed, pumping €1 billion in the process.

Results were being achieved until 2005, but two big contracts in the following years had put the 'yards on their knees.

He pointed out that the opposition was acting as if it had not known anything about the restructuring plan and was washing its hands of what was happening. It was true that the government was responsible, but the opposition had known what was happening all along.

He said that when the party's deputy leader Anġlu Farrugia spoke after his news conference, he had understood that the opposition was in favour of the 'yards' privatisation but had questions. But Dr Farrugia had changed his position in 24 hours. He would like to know what the opposition's position was exactly.

On a point of explanation, Dr Mangion said the opposition had not expressed itself against the privatisation in principle but it could not be expected to endorse a contract which it did not know anything about. Its questions had been aimed at seeing what criteria the privatisation unit would be following.

Dr Gonzi said that now that answers had been given, what was the opposition's position? He was not expecting the opposition to give the government a blank cheque but wanted to know if it was agreeing that the way forward for the 'yards in the present circumstances was privatisation.

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