Social partners tango to cushion utility tariff hikes

TThe midweek meeting of the Malta Council for Economic and Social Development seems to have gone quite better than I, for one, expected. The General Workers' Union decided to boycott the meeting. But those who attended had three solid hours of focus on what can be done, if anything at all, to soften the impact of the hike in utility tariffs on economic operators.

What cannot be done, as Austin Gatt made clear in a carefully timed article in The Times (January 14), is to revise the tariffs effective from New Year's Day, which purportedly went back to the October 2008 level, yet which for the economic sector went up much more sharply.

The long and the short of what took place, if I read the situation correctly, is that Finance Minister Tonio Fenech signalled he was prepared to find (limited) funds to apply a model similar to that which he announced for domestic consumers in his 2010 Budget speech.

Under that model €10 million was allocated, on a one-time basis, to be doled out to households according to a formula combining a flat contribution plus an add-up depending on household size. It is not clear how much the minister will be able to make available to the economic operators, given the parlous state of public finances and his responsibility to move the budget deficit towards three per cent of GDP. He will be discussing details separately with the bodies representing the various sectors of the economy.

Tourism, for instance, can either be helped in the same 'picky' manner that manufacturers were assisted to try to stave off the impact of the recession last year, or in a more general manner. The choice will probably fall on the second alternative. It will see an allocation of several million euros to help a low-cost airline base an aircraft here with a target of a specific increase of 100,000 in arrivals during 2010.

That will be a hard choice to make. Some of the smaller hotels will see their utility bill rising by between 45 and 50 per cent this year. Barely able to balance out in 2009, the additional cost will definitely push them into the red.

But it is likely that the reasoning will prevail that, while individual hotels will not be assisted, the overall industry and those depending on it will benefit from the spending generated by the additional arrivals.

When it comes to the manufacturing and commercial sector the recession model will probably be used. The government will give assistance on a case by case basis. This will not please all the operators in these sectors, but the Finance Minister will continue to stress that his hands are tied by the deficit-correction requirement - he can loosen the strings only marginally.

All of that might lighten the bad mood that has gripped economic operators. Nevertheless there will remain a cultural adjustment to make, with clear socio-economic implications. For the utility tariffs cannot be decoupled from the price of crude oil.

Once this year is over it is unlikely the government will extend the cushioning further should the price of oil remain high or even continue to rise in step with global economic recovery.

It is essential, therefore, that the respite offered by temporary measures this year will be used to full advantage. This will require two key lines of action, running in parallel. The government will need to speed up the implementation to link Malta to the continental EYU energy grid. There is some technical opposition to this proposal. Economic experts, however, see no alternative to early implementation of this plan.

The other line of action concerns the efficiency with which Enemalta operates as well as how effectively it covers its continuing fuel requirements. Some progress has been made re the former, but it is far from enough.

Little progress has been made, on the other hand, for Enemalta to convince that it covers its fuel requirements as effectively as can be, without anybody expecting it to inhabit the land of prophecy.

In this regard, I reiterate that benchmarking will be required, for instance with Cyprus. It may also be necessary to involve the Malta Resources Authority, the energy regulator, much more and earlier. For that to be done the MRA will need a new set of teeth as well as more and better human resources.

Moving on, the role of the MCESD should become more important. It has functioned comfortably under the chairmanship of Sonny Portelli. It also achieved a good measure of success when the social partners miraculously agreed on common ground in contributing their views for the Pre-Budget document. That showed that co-operation among the unions and by them with the employers was possible, after all.

It also confirmed that the true worth of the council is as a sounding and advisory board. Those among it who at times expect to be the decision-makers ignore the function of an elected and thereby accountable government.