Through the revolving door: politicians for sale at a discount

Barroso.GoldmanSachs

 

US Investment Bank Goldman Sachs announced last week that it had “hired” former EU Commission Chairman Josè Manuel Barroso as an advisor and non-executive Chairman of the Goldman Sachs International arm.

The New York Times quoting co-CEOs of Goldman Sachs International Michael Sherwood and Richard J. Gnoddle explained the relevance of the appointment as being “Josè Manuel’s immense insights and experience including a deep understanding of Europe”. Earlier this week, the EU Observer  further commented that Goldman Sachs hired Barroso “as it struggles with the fallout from Britain’s vote to leave the EU”.

Based in London but offering services across Europe, Goldman Sachs may be faced with limited or no access to the EU’s single market as a result of Brexit. Hence the need to hire Barroso as an advisor and lobbyist as the United Kingdom and the European Union prepare for the negotiations leading to the UK’s exit from the European Union which can be triggered any time in the forthcoming weeks through a declaration in terms of article 50 of the Lisbon Treaty.

Barroso’s engagement with Goldman Sachs is one which will be much debated as, like nine other members of the Commission which he led between 2009 and 2014, he has been catapulted into the corporate boardroom through the revolving door. His value to Goldman Sachs is his knowledge of the privileged information to which he had access during his 10-year tenure as President of the EU Commission and, the influence which he may still have on a number of key EU officials.  This gives great value to his advisory/lobbying role with Goldman Sachs.

European Union regulations on the possible activities of its former Commission members draw a cut-off line after an 18-month cooling-off period at the end of their tenure when, as stated by an EU Commission spokesperson, “there is a reasonable assumption that the access to privileged information or possible influence are no longer an issue”.   This is contested by the different political groupings in the EU Parliament who maintain that the cooling-off period for EU Commissioners taking up sensitive jobs after ceasing their duties as Commissioners should be extended from 18 months to five years as the present length of time is insufficient to ensure that the EU is really the servant of ordinary people and not of multinational corporations or international financial institutions.

This debate at a European Union level contrasts to the provisions of the Standards in Public Life Bill currently being debated by the Maltese Parliament which Bill, so far, does not make any provision on the regulation of lobbying in Malta in any form or format.

It is not unheard of in Malta for politicians to move through the revolving door from the Cabinet to the private sector boardroom or its anteroom, and back again. Three such cases of former Cabinet Ministers in Malta in the recent past come to mind : John Dalli and his involvement with the Corinthia Group and later the Marsovin Group, Karmenu Vella who similarly was heavily involved first with the Corinthia Group and subsequently with the Orange Travel Group as well as with Betfair and finally Tonio Fenech’s recent involvement in the financial industry.

Being unregulated, lobbying through the revolving door is not illegal but it can still be unethical and unacceptable in a modern democratic society as it can result in undue influence of corporations over the regulatory authorities.

Piloting the debate on the Standards in Public Life Bill on Monday 11 July, Deputy Prime Minister Louis Grech recognised the deficiencies of the Bill and declared that a register of lobbyists in Malta was a necessity. While this is a welcome statement and a significant first step forward, it is certainly not enough, as a proper regulation of lobbying in Malta is long overdue. This involves much more than registration of lobbyists or even the regulation of revolving door recruitment in both the private and the public sector.

If done properly, lobbying is perfectly legitimate. It is perfectly reasonable for any citizen, group of citizens, corporations or even NGOs to seek to influence decision-taking. In fact it is done continuously and involves the communication of views and information to legislators and administrators by those who have an interest in informing them of the impacts of the decisions under consideration. It is perfectly legitimate that individuals, acting on their own behalf or else acting on behalf of third parties, should seek to ensure that decision-takers are well informed before taking the required decisions.

However, for lobbying to be acceptable in a democratic society, it must be done transparently. In particular, through regulation it must be ensured  that lobbying should not be transformed into a  process through which the decision-takers make way for the representatives or advisors of corporations to take their place. Lobbying activities must be properly documented and the resulting documentation must be publicly accessible.

Hopefully, Parliament will take note and act.

 

published in The Malta Independent on Sunday: 17 July 2016

The citizenship bubble of Malta

Malta golden passport 1

Many issues are involved in the citizenship debate.

The government clearly considers Maltese citizenship as just another commodity, which it can milk. Initially it even removed the transparency rule from the statute book, which rule ensured the publication of the names of all those who acquired Maltese citizenship.

Whereas local public opinion was completely ignored, the Labour government reacted to the international media coverage by announcing that it will reverse its ditching of transparency. Yet its reaction may be too late as the damage done to Malta’s reputation is not easily reversed.

The international media queried the unconventional methods used to generate the finance required by the Maltese state.

Within EU circles it is clear that issues concerning citizenship are a competence reserved to member states. Yet the  Schengen dimension of EU citizenship cannot be ignored.

The citizenship scheme is attractive because, through it, the prospective citizen attains freedom of movement within the EU.

It is a very serious concern which can only be adequately addressed if the due diligence process is foolproof.

The problem is that, to date, the Maltese Government has already signalled that it is not that much concerned by the impact of persons who are associated with a fraudulent past, a case in point being government advisor Shiv Nair who is listed permanently on the World’s Bank blacklist.

Another recent example is China Communications Construction Company Limited, also on the World Bank blacklist. This Chinese Company will carry out (gratis) the feasibility study for a Malta-Gozo bridge on the basis of the very friendly relations between the two republics, we were told. (I had the impression that countries had no friends, they just have interests!)

This follows the earlier selection of Lahmeyer International as an advisor to the Gonzi Government. Lahmeyer International too was on the World Bank’s  blacklist.

Past performance indicates that due diligence is not an area in which the Republic of Malta has excelled.

Is it a sale or is it an investment? In fact it is a bit of both. It is surely an unconventional way of raising finance. Its major characteristic is that it focuses on the short term benefits and ignores the long term impacts.  The selling price can give immediate results: it can finance the start-up of specific projects. Whether these will be successful is another matter altogether. The impacts of an investment scheme will take more time, its a long term exercise.

The method of payment selected for the purchase of citizenship is clearly based on the St Kitts and Nevis model in the Caribbean.  In St Kitts and Nevis, payment for citizenship is received by the Sugar Industry Diversification Foundation and, subsequently, invested. The investment made is not at the discretion of the applicant for citizenship but a decision by the country dishing out the citizenship.

Public opinion considers that citizenship should be acquired through establishing solid roots in the country. Establishing minimum residence criteria and committment to the economic development of Malta through investment and job creation are essential criteria to be linked to the award of economic citizenship.

Government has done well, even though late in the day, to declare that it will reverse its secrecy stance. The declaration by Deputy Prime Minister Louis Grech that the regulations being drafted to implement government’s proposal will ensure that the names of those granted citizenship under the new legislation are public is welcome. This new position adopted by the government links with and reinforces the public committments made on the need for more robust due diligence.

It is, however, clear  that regulations alone will not suffice to entrench transparency in the citizenship scheme.  Amendments will also be necessary to the main legislation, in particular to remove reporting restrictions imposed by Parliament on the regulator.

The citizenship debate was also characteristed by the radical position taken by the Nationalist Party that, once back in office, it would not only take steps to scrap the new citizenship scheme but that it would, moreover, withdraw citizenship granted under the provisions of the scheme.

The Attorney General has advised the government that the PN’s proposal would be unconstitutional and would infringe human rights. Such advice was confirmed by the Dean of the Faculty of Law and by constitutional expert Ian Refalo.

The PN has declared that it is in receipt of legal advice reinforcing its position on the withdrawal of citizenship granted.

Whilst the Prime Minister has published the advice received from the Attorney General, the Leader of the Opposition has failed to follow suit. The Leader of the Opposition needs to be consistent. He cannot chastise the government for being secretive whilst simultaneously withholding important information from the public. It is not just the government which needs to be transparent.

The availability of both government and opposition to meet and discuss possible modifications to the citizenship scheme is welcome. Hopefully the wider national interest will prevail.

published in The Times Saturday, 23 November 2013

Id-demokrazija tal-Labour …………… bit-telefon ta’ Joseph

telphone 3

Id-deċiżjoni tal-Gvern li jneħħi l-obbligu mill-liġi taċ-ċittadinanza illi jkunu ippubblikati l-ismijiet tal-persuni kollha li jingħataw iċ-ċittadinanza għamlet ħsara kbira lill-pajjiż.

Il-ħsara saret mid-deċiżjoni innifisha u min-nuqqas tal-Gvern li jkun sensittiv għall-opinjoni pubblika f’Malta stess. Ħsara li ġiet riflessa fil-kummenti fil-media internazzjonali.

Il-kritika li saret fil-pubbliku minn diversi kien obbligu. Kien nuqqas tal-Gvern li injora din il-kritika għax dehrlu li kellu s-saħħa li jirrombla minn fuq kulħadd.

Issa l-Gvern iċċaqlaq. Louis Grech Deputat Prim Ministru qal li ċempillu l-Prim Ministru Joseph Muscat u qallu bil-posizzjoni l-ġdida.

Possibli li l-Partit Laburista jaċċetta dan il-mod kif jittieħdu d-deċiżjonijiet? Dan hu l-mod kif jiddeċiedi il-Labour? Jiddeċiedi Joseph u jikkomunika d-deċiżjoni  tiegħu bit-telefon. Possibli li dan hu l-livell ta’ diskussjoni politika fil-Partit Laburista?

Sal-lum jiena kont qed inqis li l-liġi taċ-ċittadinanza hu kaz ta’ġudizzju politiku (tal-Labour) żbaljat. Imma issa jidher li hu ħafna agħar minn hekk. Donnu li fil-Labour Party ta’ Malta wieħed jiddeċiedi u l-oħrajn ibaxxu rashom wara li jirċievu telefonata.

Il-ħsara li saret hi kbira. Hu ċar kif il-Labour jiddeċiedi: bit-telfon. Imma agħar minn hekk ġiet imtappna r-reputazzjoni ta’ Malta. Din hi ħsara kbira li l-effetti tagħha għad irridu inħossuhom.