The former chairman of Malta Drydocks, Sammy Meilaq, has raised questions over whether Palumbo, which bought the dockyard from the government, is following the conditions of the privatisation contract.

In an opinion piece in The Times today, Mr Meilaq also says that the privatisation of the dockyard has been 'another' of Lawrence Gonzi's exercises  in delivering the opposite of what he promises.

Mr Meilaq noted that the prime minister had said that the main criteria for the selection of the best bidder would be the company which offered to employ the highest number of workers, the company with the best reputation and experience, the company which offered the best commitment for investment, the company which made the best offer and the company which had the best business plan for the future of the shipyard.

The "best commitment for investment" was specified in the Investment Plan part of the award contract and comprised a development expenditure of €23.5 million over a five-year period. During the first year Palumbo was bound to invest   €5.45 million, subdivided into €3.45 million for plant and machinery, and €2 million for infrastructure. The expenditure for the second year should reach €5.3 million.

"But if one takes a quick look over the bastions surrounding the shipyard one finds it reasonable to conclude that no such amount of development has been carried out," Mr Meilaq said.

"Dr Gonzi is duty-bound to inform the public whether Palumbo is in default, as is visually evident. The Labour opposition would do well to demand from the government a detailed breakdown of the investment carried out to date, also ensuring that normal maintenance costs are not included under investment and development. After all, the lease contract conditions are an agreement between Palumbo and the people of Malta, as represented by the government."

As to the best business plan, Mr Meilaq said that after operating for 18 months Palumbo "has simply failed to make better utility of the existing capital facilities, netting only the smallest of contracts. Profitable major refits and major repairs are absent. This would now seem to be a company policy."

Mr Meilaq said ship repair profitability obeys the law of economies of scale, at least till reaching an upper limit.

"In ship repair the average cost per unit of production falls relative to increased scale. Unnecessary under utility of capital is nonsense, unless other latent objectives exist, in which case the matter, besides remaining within the domain of the employer, becomes also one of social concern. The situation seems even stranger considering that ship repair operations were already profitable before the yard was privatised and leased to Palumbo."

He said that the recovery in ship repair work during the last quarter of 2007 and the first quarter of 2008 was an average of 235 per cent on direct labour costs, which showed a clear net profit after allowing for all indirect and overhead expenses.

"In fact practically most of the subsidy of the last years of Malta Shipyards went into the coffers of the Fairmount sub-contractors. So much for Dr Gonzi's "best business plan"!

Mr Meilaq said the situation was simply incredible with regard to employment. "Did Palumbo offer Dr Gonzi to employ a squad of 50 men, as is the case, or is Palumbo in default even here?" 

"Palumbo managed to secure a 30-year tenure of the shipyard from the people of Malta through the government. Yet the company will only grant three-month or six-month contracts to its Maltese squad, who could very easily be employed on a permanent basis without Palumbo incurring any disadvantages at all. Worse still, Palumbo appears to have done away with the facilities that the workers had been provided with in case of an accident on the job, which, as is well known, can be very nasty in the case of shipyards. These included the services of a doctor, a nurse, a clinic and an ambulance. Even the British imperialists treated the Maltese shipyard workers with more respect in this regard because they provided these services as well."

Mr Meilaq criticised Palumbo for having failed to recognise the GWU as representative of the workers.

"Mr Palumbo's provocative behaviour leaves no option for the union except to react and oppose," Mr Meilaq said.

Full article at: http://www.timesofmalta.com/articles/view/20110922/opinion/Broken-promises-on-shipyard.385817

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