Government-owned companies to face the real world

By a staff reporter

Negotiations on Competition were closed at the fifteenth meeting in Brussels of the Accession Conference held at Deputies’ level between Malta and the European Union.

Core Negotiating Group Chairman Mr Richard Cachia Caruana said competition policy had proved to be one of the most challenging and politically sensitive of chapters.

"The EU has based its negotiations in this Chapter on the premise that a country can only be considered for membership if its companies and public authorities have become accustomed well before accession to a competition discipline similar to that of the EU.

"Malta has invested considerable effort and resources in the implementation of the regulatory and administrative measures required for this purpose. We are now confident that the adaptation and alignment of national legislation is rapidly reaching completion both in the field of anti-trust as well as in state aid control.

"In the field of anti-trust, the final step in this process is due to be finalised by the end of this year, where the application of competition law will be extended also to public undertakings", Mr Cachia Caruana said.

The EU competition regulations ensure enterprises in the EU market can compete on a fair and level playing field. Commercial practices that distort competition in trade between EU countries are prohibited. Excessive amounts of subsidies paid by governments to companies are therefore prohibited.

Following amendments in 2000, Maltese law is now in line with the EU. Mergers of large companies will not be monitored. If they have a negative effect on competitive forces, they are subjected to conditions or even prohibited.

State-owned companies will be subject to competition just like those in the private sector. By 2003, state-owned companies would have been gradually subjected to the rules of competition. Restrictions will only be retained with respect to services of a general economic interest, in line with EU rules.

A State Aid Monitoring Board was set up under the Business Promotion Act to oversee the compatibility of all state aid measures. All state aid must be notified to this board in advance. Since Malta’s level of economic development stands at just around 55% of the EU average, Malta may continue to grant aid to support certain objectives, such as investment.

Mr Cachia Caruana said that a transition period had been negotiated for state monopolies of a commercial character. The oil sector will be liberalised by December 2005.

"This is to ensure an orderly and complete adjustment of the market in the importation, stocking and wholesale marketing of petroleum products under Article 31 of the Treaty. This plan enables the economy to adjust gradually to the significant changes necessary before the elimination of trading restrictions, in view of the additional constraints on market forces posed by the small size of the Maltese market."

Mr Cachia Caruana also said discussions had been held to ensure companies previously enjoying state aid would continue to enjoy comparable incentives after accession.

As for SMEs, existing benefits could be retained until 2011 without a cap on the maximum aid amount permissible. A detailed scheme had been agreed for large companies enjoying incompatible aid benefits into a permissible arrangement, in accordance with specific ad hoc conditions.

"This arrangement enables Malta to grant state aid in favour of other investments and activities of the companies concerned in accordance with the limits set out in the relevant state aid rules", Mr Cachia Caruana said.

In order to facilitate Malta’s integration into the EU internal market, a five-year transitional arrangement has been negotiated, allowing an appropriate and proportional form of operating aid to compensate for the additional costs in question.

Mr Cachia Caruana said this was especially ideal for the specific circumstances of peripheral island economies by taking into account the structural handicaps arising from such constraints.