The government needs to clarify its decision to use money raised through the IIP programme (the sale of passports) to purchase shares in Bank of Valletta, Nationalist MP Mario de Marco, shadow minister for finance, said today.
Times of Malta reported yesterday that €21.8m raised by the government through the sale of passports were used to buy Bank of Valletta shares, despite being ring-fenced under a national development and social fund.
READ: €21.8m of passport cash used to buy BOV shares
Dr de Marco observed in a statement that according to Legal Notice 2/2015, the funds collected from the IIP programme were to be used for 12 specific purposes. These ranged from helping stakeholders deliver social, employment and educational projects, to fostering initiatives that support better governance, and to initiatives for the improvement of health and care for the elderly.
"These twelve specific purposes do not allow for the purchase of shares by the government. By using funds collected from the IIP for the purchase of shares in BOV, the government went against the provisions of the above mentioned Legal notice. The matter is further compounded by the fact that the government has a vested interest in BOV, it being a significant shareholder in BOV and appoints its chairman," Dr de Marco said.
He noted that the government had defended its decision by stating that in terms of the legal notice it is “obliged to undertake initiatives for the benefit of future generations”.
The purpose of such a clause however, was to allow the fund to be used to support and finance projects that have long-term goals, Dr de Marco said.
"The purchasing of shares falls beyond the definition of “undertaking initiatives for the benefit of future generations”.
The government, he said, had used this clause to award itself unfettered powers to spend the IIP money as it so wished and then justify its actions by stating that it “benefits future generations”.
He also pointed out that the government kept this course of action hidden from the public eye. No public announcement was made by Government or the bank and taxpayers only found out through the media.
He said the Opposition is calling on the government to publish all correspondence and documentation relevant to this expenditure including the cost benefit analysis that was done to ensure that this public money was spent in the best possible manner.
"If the government fails to publish this documentation then the Opposition will call on the Auditor General to investigate this expenditure," Dr de Marco said.
In a reaction, the National Development and Social Fund said that on December 1 it had issued a media release to announce that it had acquired the Nil Paid Rights issued to UniCredit S.p.A. and that this investment was a long-term investment that would form part of NDSF’s long-term Directed Investment Portfolio, and would result in the Fund acquiring around 2.91% of BOV’s total shareholding. This media release was issued a week after the transaction was completed.
It said the investment proposal received from UniCredit S.p.A. fell within at least three of the functions and duties of the NDSF, namely: to contribute to major projects of national importance; to support enterprise and business in improving its competitiveness; and to undertake initiatives for the benefit of future generations.
Moreover, it said, the overarching objective of its investment policy was the preservation of capital with real expected returns over the long term.
"This equity investment by the NDSF in Malta’s largest investment grade-rated institution was considered by the Board of Governors to yield a relatively high return to the Fund in the current market environment, which will in turn contribute to the Fund’s sustained long-term growth for the benefit of future generations," it said.
It insisted that it was accepted practice for sovereign wealth funds to hold equity investments in the leading corporate entities of their own countries.
The Fund said that by virtue of the founding regulations, it would publish its audited accounts and report to the Minister of Finance.
"The Fund is therefore committed to high standards of transparency and accountability."