05 July 2006

The Web
Business Today

A leaf out of Prodi’s book

Government should take a hard look at the recently announced liberalisation policy of the newly elected Italian government. The proposed laws aim to open up the market to competition while focusing on the primary interests of the consumer.
The Italian government believes that by breaking up closed shops and liberalising the market new opportunities will be created for youths, employment will increase and services offered will be cheaper for the consumer. We cannot but applaud this initiative. Our government must take a leaf out of Prodi’s book and private enterprise should be throwing the Prodi book at government!
Italy, a founding member of the European union still has many outdated laws. It cries out for modernising its economic and social structures.
The taxi service is a closed shop, cars cannot be sold or bought without a notarial agreement and the running of pharmacies is an inheritance right. Services offered by the banks are extremely expensive, Italy is a country where one pays to shut a bank account and insurance premiums are extremely expensive too. These are but a few glaring examples of a web of conventions, laws and practises which have made Italy and the Italian economy uncompetitive and unable to keep up with modern practises in northern Europe. It is a laggard in the Lisbon strategy.
These examples look like a snap shot of Malta’s reality where red tape, bureaucracy closed shops restricted trade practises and unfair competition are the order of the day.
The motivation behind the Italian government’s legislation is simply to achieve growth by creating new job opportunities while keeping the social fabric in place. The task is daunting, yet if successful could well place the country on a more stable economic foundation. Our country needs to follow suit.
A quick look at our situation reveals absurd trading practises. The biggest economic injustice is that the law is rarely enforced and appears weak with the strong and strong with the weak. Out taxi service is the fiefdom of two hundred persons. Outsiders cannot apply for a license and interested persons end up buying a license for the incredible sum of around fifty thousand Malta liri. Licenses can be inherited from father to son, thus ensuring it remains the closed shop it is.
A similar situation exists in our public transport system where bus owners, no more than around five hundred persons, enjoy a monopoly with little respect shown to the commuter. Buses do not run at fixed and known hours, no times of arrivals or departures are exhibited at any bus shed and no service is offered in the early hours of the morning. The service runs to simply accommodate the owner and not the commuter. On any average day only half of the buses are at the service of the commuter. Close to little reforms have been made to the public transport system to put it in tune with the life style changes of Maltese youth.
Even undertakers are protesting against the issuing of new licenses and pharmacies remain a closed shop contrary to other retail outlets.
It all sounds and looks absurd yet this is the Malta we all live in even after becoming members of the European union.
Services offered by the major banks are also far too high. Charges seem to be set by one bank and then willingly emulated by the other. This flies in the face of free and open competition. We were all led to believe that once enterprises were no longer in the hands of government private ownership and competition would bring prices down. Nothing could be further from the truth. There are ample examples when costs shot up immediately once the enterprise turned hands.
The acquisition of Mid Med by HSBC is just one clear example.
Government also needs to lead by example and stop increasing costs of licenses and permits. Regulatory authorities too need to stop putting up their charges. All these increases simply leave less disposable income for companies to carry on improving their product and to carry on where available pumping back profits into the enterprise, the surest way of competing on a strong footing.
The Italian prime minister talks of containing the costs of politics by pruning expenses of government authorities by reducing the amount of consultancies, wastage and unnecessary government expenditure. This is the way forward here too. We look forward to seeing a strengthening and reinforcing of the government audit office so that extravagancies and loose spending are contained at an early stage and not simply highlighted afterwards with little remedial action taken. All expenditure should be approved on a strict value for money basis.
Beyond words of rhetoric this can only be achieved by carrying on the process of making government leaner and containing the costs of politics, by embarking on privatisation that aims to achieve value for money for the citizen.
The country also needs a big dose of liberalisation of all closed shops and restricted practises. No doubt vested interests will be effected and there will be the inevitable political fall out. As protests start in Italy Prodi is all too aware of the Pandora’s Box he has opened up. To his credit he has been savvy enough to introduce such changes in his first hundred days.
The Maltese government needs to take a good hard look at Prodi’s initiatives.
The consumer should come first and this can only be achieved by opening up the market and breaking trade barriers. This will provide the basis for economic growth and prosperity.

Business Today is published weekly on Wednesdays.
Website is updated weekly on Thursdays
Copyright © MediaToday., Malta
Managing Editor - Saviour Balzan
Editor: Kurt Sansone
Business Today, MediaToday, Vjal ir-Rihan, San Gwann
Tel: (356) 2138 2741 | Fax: (356) 2138 5075 | E-mail