Years have gone by since Government confirmed its intentions of disposing of its 25 per cent equity holding in the Bank of Valletta. In actual fact, to be fair with Government, the process of selling the country's heirloom commenced with the sale of the country's largest bank, Mid Med Bank plc, or better still, the former Barclays Bank.
Since then, other items pertaining to the "family silver" were sold to what Government representatives described as strategic partners. These included the postal and telephone services, the country's airport, the lotto department and the national shipping company. I need not remind readers of how economically strategic the partners selected by Government proved to have been.
I have, time and again, aired my opinion on this very important subject. I have advocated the privatisation of state enterprises as far back as the mid-1980s. I never criticised Government's objective of associating the local businesses with true strategic partners, in an attempt to give them a much needed international dimension. It was Government's approach to implementing this so-called 'strategic partners' tactics that cast doubt on its intentions to accomplish the desired economic results.
From past experience, one regrets to note, it appears that the appointed strategic partners have added little, if any, value to the investment they acquired. All the foreign investors acquired a 'bed of roses', and have reaped hefty returns, both in the form of dividends, and capital appreciation, without putting much effort, let alone value added, into the various businesses they acquired. Enough to say, that in some instances the capital invested has been recouped many times over in a few years, not to mention the capital appreciation the entity has registered to date.
The country's bad financial situation has certainly put a lot of pressure on Government to make an effort to honour its EU financial obligations and make it eligible to join the Eurozone.
A lot has been said and written on the current anticipated sale of Government's shareholding in Bank of Valletta. The longer the sale takes to materialise the more desperate Government is likely to become to sell off this investment and reduce its deficit.
It is being said that local stock market 'forces' are manipulating the bank's equity price downward to attract potential buyers for both Government's (25 per cent) and Capitalia's (14.9 per cent) shareholding in the bank. I hope that such rumours are unfounded, though it is somewhat strange that despite its recent announcement of such excellent results, BoV's share price continued to decline.
Stock markets are said to be perfect markets. One trusts that the local market is not the exception. The BoV chairman's remarks, a few months back, that the bank's equity is overpriced must have influenced the drop in the shares' value. After all, a few years back, equity prices on the Malta stock exchange also fell sharply after a Government minister expressed a similar opinion on local stock prices generally.
People in authority should exercise utmost care whenever they make statements of such a delicate nature. Investments Minister Austin Gatt was recently reported to have said that "unfortunately, the market in Malta is very prone to speculation and speculative interests". He is not quite correct. Stock markets all over the world are very sensitive markets, and not just the local market. They are all very prone to rumours of whatever nature.
I think it is high time that Government reviews its strategy without further delay. Two years back Government and Capitalia decided to jointly sell their shareholding in the Bank of Valletta and appointed Rothschild to help them in their endeavours. Yet, so far, attempts to find a strategic partner have apparently failed. Why? What is Rothschild's opinion on the lack of interest? Do the advisors consider the price to be too high? What, in their opinion, is keeping the potential strategic partner away?
The economist Karm Farrugia, whom I know from my Central Bank days, has made a few suggestions which merit serious consideration by those that matter. I totally agree that Government and Capitalia should seek different avenues to dispose of their holdings. It also makes a lot of sense to review the bank's statute to limit any person or corporate body from holding, whether directly or indirectly, a controlling interest in the set-up.
Experience has also proved that the majority shareholder in a company usually decides who chairs, and sits on, the board of directors.
It is useless to draw up rules and regulations and/or insist on good corporate governance, when at the same time the authorities allow individuals or corporate bodies to have absolute control of public entities. No corporate governance can stop absolute power from being abused.
Recommending, or insisting, that the powers of the chairman and those of the chief executive of public companies should be separated, to mention just one issue, and then refuse to restrict the holding of the majority of the equity in a company to be held by a single person or corporate body, is a joke.
Capitalia, or Banco di Sicilia before it, never proved to be a strategic partner in the local bank. So it would not be a bad idea to allow it to sell its holding in BoV on its own. This would probably be an easier way for both Capitalia and the Government to sell their investment.
Bank of Valletta could consider buying back one half of the equity held by Government, thus alleviating Government's dire need for cash. Subsequently, and within a well planned framework, Government's remaining 12.5 per cent shareholding could be placed on the market for sale to the public.
With Government's holding substantially reduced, it would automatically follow that it would no longer have the right to appoint the bank's chairman. This in turn should also reduce drastically Government's power to interfere in the bank's business.
Naturally, Government's say in the running of BoV would end once it sells the remaining 12.5 per cent of the bank's equity which it would still hold.