26 JUNE 2002
Economist and Malta Development Corporation founder Karmenu Farrugia believes that Malta could lure more investment to its shores but has to be more professional in its work. He speaks to RAY ABDILLA about what it would take to heal the countrys ailments
What are your views about investment in Malta?
Malta could attract more investment but unfortunately it is not currently in a position to do so because the Malta Development Corporation today is not competent enough. Today the MDC has extra manpower but lacks the right attitude and experience to attract foreign investment. The best times for the Corporation were between 1969 and 1972.
So whats wrong with the MDC at the moment?
Both governments had staffed it with political appointees, which was when the MDC, such an important part of our industrial set up, started to go downhill. Its qualified people that are needed, not political friends.
Was the climate difficult when you had founded the MDC?
Yes it was. Despite the fact that Malta was independent, everything was still controlled by the British. As such, moving towards other countries was not easy. However, we did succeed in bringing over some good German companies.
Can you recall your biggest disappointment in in your post at the MDC?
Yes. I remember that the company Motorola were interested in coming over to Malta and was interested in a very large tract of land at Hal Far. At the time, no one had even imagined that Hal Far would be turned into an industrial estate. Motorola had wanted practically the whole area, not only to build a factory but also to build a village for the residents working at Motorola, as is the practice abroad. Initially they were going to employ some 1,000 workers, with the number going up to 2,500. Although this was in the early seventies, Motorola were already thinking about making mobile phones.
But unfortunately everything turned sour at the last moment and the deal was not sealed.
You were also at the Central Bank, how do you recall your time there?
As at MDC, it was a tough job. It was in 1973 that I left the MDC and took up the post of Deputy Governor of the Central Bank. I thought I had done away with Mintoff by then, but I was mistaken. With the sterling going down, Maltese industries were affected by the cost of the lira and we had to do something.
We had to devalue as well. We were considering devaluing the lira by between two and three per cent, but surprisingly Mintoff wanted a devaluation of five per cent. He was the prime minister after all, so we had to abide by his decision. To my surprise about four months later Mintoff spoke to me and told me to follow my own advice because he thought that he had made a mistake, that was a real surprise.
What about the MLP today?
Although I do not see eye to eye with Dr Alfred Sant on many issues, I had voted against the party only during the Mintoff days when things were getting out of control. Alfred Sant, I believe, showed his inexperience by going to the polls just two years after taking office.
He knew he was not popular anymore. He also knew that the people did not like some measures he had taken and he knew that fighting Mintoff was not a good move.
After winning by a majority of 7,000 votes in 1996, he then invited a heavy defeat by 13,000.
The water and electricity bills were also completely mismanaged - it was a political suicide, but Dr Sant thought otherwise.
What is your stance on the European Union?
It is an important issue but not the only one. Because of the EU debate we are leaving many other issues under the carpet. Regarding Dr Sants U-turn in scrapping the idea of partnership for Europe, at least for the first couple years in office we had to take care of our internal affairs first. So yes, I would agree with that.
In or out of the EU there wont be much difference. We would not die of hunger by staying out, just as we would not change anything if we do go join.
So you may ask whether I am in favour of EU accession or not. Yes, Im in favour but only just. I favour accession because there are several measures we would have to adopt, such as those concerning the environment issue, the roads etc... We would have to abide by EU directives and regulations. Outside the EU we just promise, promise and promise - without doing anything.
What if we were to miss the boat again?
Europeans would still respect us. If the MLP wins the next general elections, both parties (the EU and the MLP) would reach agreement on Maltas relationship with the EU.
If the Nationalists win, then we would continue on the road to accession.
But the best move would be if both parties were to abide by the referendum result and dance to the music it plays.
You worked under four prime ministers: Borg Olivier, Mintoff, Mifsud Bonnici and Fenech Adami. Who was the best?
It may sound strange but Dr Karmenu Mifsud Bonnici was undoubtedly the prime minister who worked most for industry. I don't know what he did in other fields, but towards as far as industry is concerned, Dr Mifsud Bonnici was in a class of his own. Even industrialists who supported the PN used to say so.
Back to the MDC, how did it come about?
In March 1968, the Malta Development Corporation was officially established. It replaced the Aids to Industries Board and I was appointed Manager of the new body. This was during George Borg Oliviers administration.
In June 1971 Mr Mintoff took office and I was appointed General Manager of the MDC, my English predecessor was given the red card and John Mizzi was appointed Chairman.
Why did you leave the MDC?
In 1973 I was offered the post of Deputy Governor of the Central Bank and I felt that it was a way to get Mintoff off my back. I was mistaken.
The sterling was losing its strength compared to the dollar and devaluation was imminent. Mintoff continued to take all the final decisions and when things started to get out of hand I decided to leave the Central Bank on pension.
What did you do then?
I was on the Board of the General Workers Union and I also started to work as a consultant with several companies, including the Jodic diamond factory where I was also Managing Director. Later I moved to Valletta Light Clothing, where I stayed for 12 years.
We spoke about the loss of Motorola coming over to Malta. But we did bring over some big investors such as STMicrolelctronics, how was the latter attracted?
The ST factory, which came to Malta in the eighties, was one of the biggest foreign investments ever brought to Malta. Without any doubt this factory came about thanks to Mr Mintoffs dealing with the Italians.
Mr Mintoff was the architect of the Malta/Italian protocol and Im sure that ST, or the then SGS, came to Malta as part of a deal between Mintoff and Italy.
Do you think that new investment is failing to come to Malta because we no longer offer cheap labour?
No, I do not think that is the case. Malta was never, or rarely, sold as a cheap labour country. Anyone knows that Malta has good workers who produce well and we have a country in which one can easily invest.
What about Maltas currewnt deficit, can we ever balance the books?
It can be done but it is very difficult. What has to be done is that the party in government must first and foremost be patriotic and plan on only one legislature - hold office for five years and then lose the elections.
Thats because whoever wants to put the house in order has to tighten the belt. The people should all carry the burden. Obviously it depends on ones pockets. You cant expect equal taxes, tariffs etc... from all. That was one of the MLPs mistakes during the last elections. The pity is that I do not think there is a party that would sacrifice an election to see the deficit decrease substantially.
What about the cash flow problem at the moment?
I do not agree that there is no money at hand at the moment. Just look at the bonds. Even the Bay Street bonds, which were a clear risk, were taken up.
People dine out and they all pay in cash for entertainment. So whats happening? Everyone wants to do business on credit. What should happen, and Ive heard that talks on the issue have already begun, is to pass a law setting a 30-day limit on invoices. After that interest would be due. A similar law was passed recently by Tony Blairs government in the UK.