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Our View: Government must take a more resolute stand on privatisations

THE WAY the planned privatisation of the Limassol port has been going it would be no surprise if the government fails to find any investors to take over the commercial operations by the end of this year, which is the target agreed with the troika. An indication of what should be expected over the coming months was provided on Thursday by the legislature which approved the legislation that would change the legal status and the powers of Cyprus Ports Authority; this was necessary before tenders were invited.

Although the bill was approved by majority, parties also made amendments, one of which was that wages, work conditions and pension rights of Ports Authority employees would not be affected. The privileges of the workforce have to be safeguarded before any change is permitted by the political parties. The question is who would be paying the wages of the Ports Authority workers? Would it be the company taking over the commercial operations or the taxpayer, given that after privatisation the Authority’s ability to generate revenue would be severely restricted? And if it is the company that wins the concession it would be unfair to lumber it with extortionate wages and pensions.

Even more interesting would be to see how the political parties handle the issue of the so-called ‘licensed porters’ who used the licences issued by the state to establish a protection racket at the ports. A bill re-defining the status of the porters and ending the closed shop they have enjoyed for decades would eventually be taken to the legislature. Would AKEL not propose amendments to ensure that the closed shop enjoyed by licensed porters would be unaffected? Or perhaps the taxpayer would be expected to compensate them for giving up their licences.

The suspicion is that, in order to secure party support to get the privatisation bills through the legislature, the government has been watering down the provisions with the danger that the Limassol port would not be a very attractive investment for businesses. But even if investors are found, if they are lumbered with high operational costs or big concession fees they would impose higher charges on those using the port, keeping it as uncompetitive as it is now, with little prospect of attracting new business that would benefit the economy. This would defeat the object of privatisation which is to make the ports more competitive, helping local business and attracting new business.

For decades, the ports have primarily existed to serve their employees – the overpaid staff of the Ports Authority and the greedy licensed porters who were making huge amounts of money every year through restrictive practices and overcharging – at the expense of the economy. In the early nineties, Larnaca port ceased being a trans-shipment hub for Chinese companies, because of the restrictive practices and over-charging by the licensed porters, the companies taking their business to an Egyptian port. Licensed porters also contribute to the high prices Cypriot consumers pay for imported goods as a result of the monopolistic pricing for their services.

Nobody has ever dared to take legal action against this brazen abuse of monopolistic power which pushed up cost in the whole economy. The political placemen who run the Ports Authority never did anything about it even though it undermined the competitiveness of Limassol port. They were after all part of the union-party establishment that did not want to upset the apple cart and knew they would still receive their fat pay-checks at the end of every month regardless of how badly the port was doing.

The Ports Authority top brass, being public employees were never interested in making the port competitive and attracting new business that would have benefited the whole economy. For instance, Cyprus has seen the number of cruise passengers drop by 56 per cent from 2010 to 2014, to a paltry 139,623. While the main reason for this is the political instability in the region, the embarkation tax imposed by Limassol port is a big disincentive – it is €15.97 per passenger, compared to €2.30 at Piraeus. It is as if the Ports Authority does not want cruise ships to visit.

The prospect of privatisation created the hope that Limassol port would enter a new era, an era in which it was run by competent management that would do away with the porters’ restrictive practices, make it competitive and efficient and attract new business. The whole economy would benefit from a thriving port, instead of a handful of porters and self-serving Ports Authority employees. But for this to happen, the government must take a more resolute stand on the privatisation process because too many concessions or compromises would result in a privatised Limassol port – assuming investors are found – that is no better than the state controlled port.

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