Nicosia.- By Lefteris Adilinis and Fiona Mullen
This week finance minister Harris Georgiades could face parliamentary rejection of legislation that would mark the first step towards privatisation of the telecoms operator, Cyta.
The bill will transform the semi-government organisation into a company governed by private law with the state as its full shareholder for the time being.
For Georgiades, privatisation is not an ideological end in itself. It is part of a broader effort to modernise the country and lay the foundations for sustainable growth.
“There cannot be one size fits all. Those entities which are essentially operating in open and competitive environments are more in need of privatisation than those which are monopolistic or which basically have a political or social role,” he told the Cyprus Weekly.
Georgiades said that the opinion of both advisers and troika was that the Electricity Authority of Cyprus (EAC) should not be privatised, for example. Instead, there are efforts to unbundle production and transmission operations.
Cyta on the other hand, faces competition not only from domestic competition but also from advances in technology.
“This will be an important reform on its own because it will allow Cyta to operate much more effectively, being a company and not an extension of the civil service,” he said.
“It will also allow us to move onto the next phase, which is seeking a strategic partner—someone who would invest in Cyta and take over the management and operations on private-sector terms … without the burdens of the public sector and the influences of politics.”
The finance minister sees the reform not as a fight between government and parliament but a joint effort.
“I do not want anyone to back down … The objective is to feel secure enough and to be able to be part of this important reform,” he said.
“The government has the first say when it comes to promoting reforms, but the parliament has the last say. Obviously our parliament must share the vision of promoting positive change, structural change which our economy needs. It is a shared responsibility.”
Georgiades insists that privatisation is not being used as a tool for cutting government costs.
Privatisation should be “neutral” for employees in terms of benefits, he says.
“I know that some our fellow citizens consider some of the benefits as excessive or too generous. They were not determined today and they do not apply to Cyta only. So if the issue has to do with employee public employee-related reforms that should be a different agenda, a different effort.”
Indeed, with rumours circulating that Georgiades will stand for parliament in May, it is clear that he sees reforming the public-sector payroll as a key legacy.
“The government wants to limit its own ability to start hiring people ahead of every election, to offer pay rises at will, to offer fringe benefits,” he said.
The main proposal is to tie increases in the public-sector payroll, which accounts for around 25% of expenditure, to the rise in GDP. Georgiades said the most damaging impact on public finances was an ever-expanding public-sector workforce combined with rising contractual and overtime pay.
“By limiting ourselves we can guarantee to the teachers and civil servants that we shall be able to offer sustainable salaries and pay rises which the economy can afford. And we shall be able to hire new teachers and civil servants whenever necessary, but not in a reckless and irresponsible manner.” The proposal, which Georgiades describes as “clean, simple, fair and efficient”, means that if one group gets a higher than GDP pay rise, others would have to get less.
“If we accept the claim or demand of one group of civil servants, for example, to upgrade their pay scales, we are eroding the space which is available in total to hire or offer pay rises. That is how it should be.”
The finance minister is therefore very concerned about demands from one teachers’ union to recover all cuts in recent years.
“If we do that the cost to the economy, including to those affected employees next time round, will be unimaginable,” he said.
Looking to the future, Georgiades says that the economy is doing better, but acknowledges the problems with non-performing loans (NPLs) and high unemployment.
“Those who are out of a job are paying the heaviest price”.
However, he says that the answer is “keeping it steady and working towards the further recovery of the economy and putting growth on a sustainable path.”
This requires a change in attitudes.
“There is another overarching problem which has to do with attitudes and perceptions.”
Unemployment will fall and NPLs improve, he says, if everyone “continues implementing a policy which is oriented towards reform, positive change and consolidation”.
“Everything will be put in jeopardy, however, including the hard-won recovery, if we fall back towards those attitudes which were responsible for the derailing of our economy in the first place,” he said. “This is a lesson which has to be learned by the politicians, by the unions, by the business community and by each and every one of us as citizens of this country.”