The State has long been accused of trying to ‘solve’ problems by throwing money at them; but few industries are as emblematic of this phenomenon as the Malta Dockyards. Matthew Vella traces how a once proud mainstay of the Maltese economy was reduced to a financial albatross around the country’s neck
To critics of State-aided enterprise, nothing might have been more representative of its desultory effects than the Malta Shipyards. It was once a Mediterranean force – the Knights’ corsair fleet – which Alexander Ball took over to start the British forces’ largest military docks outside the UK. It gave birth to the General Workers Union in 1943 in response to the mass discharges in the post-war rundown. And from then on, it was the political and social epicentre of a developing nation-state scarred by WWII and trying to overcome the strictures of a defence-economy, in the process defining the regional development for the Three Cities and the modern Labour movement.
But the ‘yards bled money, and for 50 years seemed only designed to support the working-class muscle for the Labour party. It was a bête-noire for the Nationalist administration, notoriously hailed by Karmenu Mifsud Bonnici’s oxymoron of oxymorons as the “aristocracy of the working class”.
Economic problems Essentially, the shipyards were always an economic problem. Beyond its role as GWU muscle and its debilitating potential to mobilise an army with 5,000 men, the shipyards found it hard to turn a profit. To the Nationalists, the solution was always eventual privatisation. By the 2000s, men like Austin Gatt and Lawrence Gonzi would devise a long match of divide-and-conquer, alienating the unpopular (but powerful) GWU from any form of popular support.
But what was the problem inside the dockyards? A former deputy general manager, Louis Ellul, blamed the “post-colonial mentality that made its workers feel far too safeguarded” giving then “false certainty of protection from the powers that be and the union”.
After WWII and the Suez closure in 1967, that removed 60% of the dockyards’ market, the yards registered its first ever profit to repair the Italian tanker Agip Genova, which had exploded in Libya. After nationalisation in 1975, with a management council elected directly by the workers, the dockyards faced a major crisis: in 1982 with the discovery of North Sea oil, the tanker market crashed. Previously tankers spent 30 days sailing from the Persian Gulf to Rotterdam, representing almost 70% of the drydocks’ turnover. Now that route was dead.
Essentially from 1987 onwards, the drydocks was headed towards a likely end. In 1987 the new PN government agreed to finance a 10-year restructuring plan, but in 1997 Labour prime minister Alfred Sant removed worker-participation. Labour MP Anglu Farrugia recently said Sant’s move “demolished” worker participation (after the Um El Faroud disaster), and that A&P Appledore, the consultants Sant appointed, had been responsible “for closing down, not saving” shipyards. As Farrugia himself said, Sant’s actions at the shipyards “cost him precious votes”, leaving the dock workers looking at the GWU as its sole political guarantor. To the Nationalist government, picking a fight with the GWU would remain one of the safest tactics in rallying support during difficult moments – as money continuously went down the drain of a financially unstable shipyard, the more incongruous the prospect of keeping the operation alive became.
The big pay-off In the end, Gonzi chose a familiar route: pay off the workers to buy the industrial peace. He couldn’t have closed down the shipyards, lest he was ready to take on the social unrest such a drastic option would have generated.
Paying out the workers was always something that Lawrence Gonzi never had a problem about. In 2003, he led a €750 million debt cancellation and restructuring of the dockyards, the financial aftershocks of which would later be discredited by John Dalli. Dalli, finance minister at the time, had not even attended the press conference in which Gonzi – as social policy minister – and Tony Zarb, GWU secretary-general, clinked their champagne glasses as they celebrated the momentous writing-off of debts at Castille.
In an attempt at getting the shipyards back on its feet, Gonzi created a surrogate entity, the Industrial Projects & Services Ltd (IPSL) to take in 900 shipyards workers who taken voluntary retirement. The workers were retained by government to be given alternative work in the public sector and public-private partnerships, meaning it was yet again the taxpayer to foot the bill for this “rationalization” of the bloated public sector. But as Gonzi had said back then, competiveness had to be achieved with some form of compromise. The IPSL was “much better than simply declaring 900 people redundant with the consequent economic and social implications that would inevitably result,” he had told MaltaToday.
When in 2009 the time came to buy itself out of the shipyards issue, the government preferred to front €60 million in redundancy payments and then hope for the best offer from the new owner of the MSL.
But could taxpayers feel relieved at this sort of ‘management by crisis’? In just seven years, the shipyards’ debt cancellation, voluntary retirement package, IPSL job allocation, and the new redundancy packages may have cost anything close to €900 million.
Add to that the Fairmount contract, a botched repair job alleged to have cost MSL some €80 million according to the GWU; or €37.7 million, if you believe the MSL shipyards’ claims. Fairmount was the conversion of two semi-submersible barges, the Fjell and the Fjord. The losses led to questions about the contract negotiated by UK citizen Graham Crouser (who eventually disappeared from the island) and what role chief executive Chris Bell played in the Fairmount fiasco. A PricewaterhouseCoopers audit laid blame on the shipyards over mismanagement, contract conditions, the way negotiations were carried out, and underestimations in quotes. The MSL directors were essentially let off the hook.
In the end, fraud was never proved even though the GWU alluded otherwise, and the improved retirement offers to the shipyard workers satisfied the GWU (offers improved after Tony Zarb insisted on the Fairmount inquiry). If Fairmount had been the last straw for an incompetent management at the shipyards, the Nationalist government never took any flak for having installed the directors there.
It wasn’t just government’s eagerness at paying off the workers that spelt the end of the docks. The workers themselves failed to heed any warning from the GWU itself, with Tony Zarb unsuccessfully exhorting shipyard workers not to accept government’s early retirement schemes before they know who the buyer for the shipyards will be, and what their future in the privatised shipyards would be.
The finance ministry claimed that without downsizing, the shipyards would not be an attractive buy to anyone. The writing was on the wall for everybody to see. Labour had long departed from the socialist fortress the shipyards represented. With the burly Tony Zarb and Sammy Meilaq leading the union down in Bormla, this was anathema to the new voters that the PL needed to attract if it wanted to be electable.
In the end, Gonzi opened his tax suitcase and made an offer that nobody could refuse. Almost every single worker at the 1,600-man dockyards took the payout. It took 20 years, and definitely anything close to a billion euros, to sell it off.
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