01 February 2006

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Business Today

Commission calls for more competition as government keeps taxis monopoly

James Debono

Economist Edward Scicluna notes a dissonant note between the European Commission’s call for more competition in Malta and government’s uneasiness to link reforms in various sectors to a decrease in prices.
While sharing the priorities identified by the government in the National Reform Programme, the European Commission added in its statement last week that “it would tend to place more emphasis on competition issues.”
The Commission's assessment, known as the National Report Programme, was published in Brussels together with the assessments for the other 24 member states.
In its assessment on Malta's plans within the Lisbon Strategy, the European Commission calls on the Maltese government to strengthen competition and to improve the quality of its regulatory system.
But is Malta rising up to this challenge?
Not according to economist Edward Scicluna. He argues that competition issues should be a priority and should be faced both on the macro and micro-economic front.
Scicluna concurs with the Prime Minister who has gone on record stating that Malta has too many cartels, which are keeping prices high.
In order to reduce prices and in the process bring down costs, one needs to break cartels, Scicluna says. For the professor, the benchmark measuring the success of reforms aimed at increasing competition should be “the measured reduction of costs.”
But the proof of government’s intentions to bring about this reduction in costs lies in the pudding.
Scicluna mentions three recent examples in which government failed to create competition and lower costs; the plans for the liberalisation of fuel distribution, the liberalisation of port services, and the recently announced reform of taxi cab services.
Scicluna expresses his disappointment that despite all the studies undertaken over the last three years on these three reforms nobody has “publicly and consistently guaranteed that prices and costs would be reduced.”
“I shudder when I hear somebody in the know whispering that actually one might even expect prices to go up following liberalisation.”
Scicluna also refers to the much acclaimed white taxis reform, which has failed to bring about a liberalisation of this sector.
The promise of courteous taxi drivers, in uniform, who do not over-charge does not impress Scicluna.
“We have lived with similar platitudes and exhortation for years on end.”
The reform fails to fulfil the basic requirement of liberalisation in economics, that of easing the restriction on new-entrants into the industry.
The taxi reform has taken eighteen months of discussions to see the light of day. But according to Scicluna it is unpardonable that so much energy could be spent on planning and undertaking a reform which does not deliver the basics: “cost and price reductions.”
“What liberalisation is that? Where is the beef?” asks Scicluna.


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