There we all were thinking that Sandro Chetcuti is a developer/ghostly presence on the Labour Party headquarters’ legendary fourth floor/power behind the Labour throne.
We were all mistaken. Or rather we were not fully appreciating the multifaceted aspects of the president of the Malta Developers Association. What we did not realise is that Chetcuti is also an economic theorist and an astute milker of the political price war.
This was made manifestly clear just before Chetcuti’s recent meeting with the Opposition leader. During the meeting – which took place in typical Maltese fashion with two contingents gazing at each other across a mile-long table – the PN’s “business-friendly” members made smiley faces to the developers’ posse.
They were probably unaware of what Chetcuti had said to a journalist on his way in to the Stamperija. On being asked if he would like to have the same type of access to the PN as he has with Labour, Chetcuti replied that yes he would. He added that for developers and entrepreneurs, the PN and the PL were just like two big shops. Sometimes they shopped around at one shop, sometimes at the other. That’s all there was to it. No more no less.
For this simple statement of facts, Chetcuti was raked over the coals by many. However, his description – rude and crude as it may have been – is a truthful one. And in his less than poetic way, Chetcuti has crystallised the state of play in Malta. The developers’ lobby has no brand loyalty. It aligns itself to the party which is most likely to be in power and which offers the best deals (policy and permit-wise).
There is absolutely no regard for any other aspect, principle, ideology or value. This is a simple commercial transaction where developers/consumers finance the party which gives it the best deal.
Now here’s where the economic theory comes in. Both the PN and the PL seem to accept that the major lobby worth courting is the developers’ lobby (this in turn will finance the huge media campaigns needed to persuade other voters).
So both are doing all that is in their power to attract the developers’ custom, offering policies which effectively signal a free-for-all to the construction industry. Both parties are carrying out the political equivalent of undercutting each other – always offering better deals.
In his less than poetic way, Sandro Chetcuti has crystallised the state of play in Malta
The problem with price-cutting is that, at one point, it is going to become impossible to offer better deals at a lower price.
One ends up without it having a devastating effect on profit. In the long run, retaliatory price slashing proves to be disastrous for most competitors.
The history of businesses the world over is replete with examples of competitors who crashed and burned because of unsustainable price wars. One outstanding example is the American airline price wars of 1992, where several US carriers went toe-to-toe in matching and exceeding one another’s reduced fares, resulting in record volumes of air travel – and record losses. The same thing is happening in the local political scenario. How long can the PN and PL continue to offer ever-sweeter deals to the developers’ lobby, without crashing and burning?
At this point, perhaps the question is more pertinent to the PN. The PL has cornered the market in cut-price deals to the construction lobby. How can the PN possibly offer anything further? Permits on roundabouts? Land reclamation? ODZ eradication? Labour has been there already. There is no remotely reasonable way in which the PN can further appease the construction lobby.
With this in mind, perhaps the PN should change tack and adopt other tactics used to fight price wars – such as product differentiation or offering some form of quality to the segment of the electorate which does not consist of Chetcuti and his ilk.
It beats me, how the PN refuses to see, recognise or represent the remaining percentage of the electorate. Even if we ignore all other considerations pertaining to values and principles, if we are talking in purely commercial terms, it would make good business sense to try and offer something to a market segment which has been totally ignored by your competitor.
The other option is to stubbornly insist on the race to the bottom, selling out at ever diminishing prices.
cl.bon@nextgen.net.mt