The Buyback that Didn’t Fly

Our media proved its worth by exposing government plans to quietly buy back shares in our national carrier without proper oversight.

By Osama al-Sharif

By now you would have thought the government should have learned its lesson regarding the need for utmost transparency when conducting deals that could cost taxpayer millions. Afterall, part of the financial crisis that gripped the Kingdom over the past few years is widely attributed to the misuse of public funds, lack of oversight, and the shadowy role of influential public figures. Trust in public officials has been shattered as a result of allegations of corruption and mismanagement that have swirled around many big deals, such as the privatization of the phosphate sector, telco license sales, and of course the so-called Dead Sea casino scandal.

The current government has stated on many occasions that it’s determined to uncover the truth about suspicious public deals and bring any culprits to justice. The head of the Privatization Evaluation Committee Omar Al Razaz, announced recently that lack of transparency and withholding information from the public created distrust and cast doubt over the entire sell-off of public assets. It’s worthnoting the value of privatization of public companies in the last two decades is estimated at JD1.1 billion, while future deals over the next decade should yield about JD 11 billion.

So this brings us to latest developments over the apparent intention of the government to re-purchase shares in Royal Jordanian belonging to Lebanese billionaire Najib Miqati. The government failed to inform the public of details of the proposed deal. Some details became public only when various local media outlets published them. This enraged Prime Minister Ensour, when really it’s the taxpayer who should be angry. Initial information published by the local media showed the government was about to buy Miqati’s 19 percent stake in the ailing airline for JD16 million – JD 6 million more than its current market value. Furthermore, the government would pay Miqati in stocks owned by the Social Security Corporation in local banks.

Why the overly favorable terms? Miqati’s share in RJ gives him a decisive vote in the board of directors. He has objected to plans to increase the airline’s capital in order to save it from bankruptcy. He has also objected to government interference in the management of the company which has incurred heavy losses for years; at least JD 38.7 in 2013, which brings cumulative losses to JD 96.6 in the last three years; exceeding RJ’s paid up capital of JD 84.3 million.

Aside from the question of whether RJ should be saved or not, the issue for now is why the government is trying to keep its deal with Miqati a secret. Prime Minister Ensour is said to be angry at his own ministers who apparently leaked information to the media regarding the deal. One can’t blame the media for pursuing the facts and informing the public. Such revelations have put the government under pressure. It now says it will re-negotiate with Miqati in an attempt to keep him on board and convince him of the need to raise RJ’s capital. If not, Jordan’s national carrier could face compulsory liquidation.

Naturally the government’s intervention is driven by political motives. Jordan can’t afford to lose RJ for a number of reasons; paramount among which is national pride, which still counts for a lot. But that could come at a hefty price. Regional and international crises have hurt the company in many ways.

But no matter what the motives are, the government cannot make exceptions when it comes to transparency and allocating public funds. The government, which owns 26 percent of RJ in addition to another 10 percent through the SSC, will have to find other ways to save our national carrier. Compounding this is the fact that a number of strategic industries in Jordan are also facing challenges and some are in dire straits as a result of rising energy costs. Which deserves priority over RJ?

Regardless of the answer, the government must adhere to its commitment to be both transparent and responsible with public funds at a time when the entire economy is suffering. We are yet to see what the government’s 10-year economic plan really entails. But the initial RJ deal with Miqati casts doubts on its ability to stick to principles. One wonders why the Lower House has failed to address this issue after the media exposed major portions of the proposed deal.

If there’s a winner in all of this then it’s surely the media, which has exposed details of the Miqati deal in spite of the government’s insistence on secrecy. This is a good example of the media performing its duty as the fourth estate, whether the government likes it or not.

At the end of the day, the government shouldn’t expect to be able to strike a secret deal with Miqati that involves public funds and a major company and get away with it.