Our View: State-backed Cyta could threaten free market competition
It is astonishing how fast the government and legislature work when it is necessary. In a few days this week, the government drafted a bill that would expand the business activities Cyta would be able to engage in, submitted to the legislature as a matter of urgency and on Thursday it was discussed at the House finance committee and forwarded to the plenum which approved it on the same day.
The reason for this sense of urgency was a contract Cyta was awarded by the EAC for the supply of 400,000 smart meters, a decision that was ruled null and void by the administrative court on the grounds that the law defining Cyta’s scope of business only permitted it to provide telecommunication services between persons. Smart meters involved communication between devices. For the government there was a pressing, financial reason for the contract going to Cyta – without the installation of at least 50,000 smart meters this year it would lose a €35 million grant from the EU’s Recovery and Resilience Facility.
After the passing of the bill, Cyta will be able to use its assets, capital, technical capabilities, services and know-how “for work and activities related to the sectors of telecommunications, communications media, IT and other related technology sectors.” Deputies decided not to approve the part of the bill, which would have allowed the Authority, with the approval of the finance minister, to engage in any business activity it chose to; the decision was to revisit this part of the bill at a later stage.
It was the correct decision by deputies, because the last thing the economy needs a big state organisation, using its capital reserves and ability to raise finances to compete with less well-resourced businesses. That would not be a positive development for the market, because, usually, the big company wipes out the competition. And the politicians would be applauding the state organisation for being big and profitable, regardless of the consequences.
As for the provision giving the finance minister the power to greenlight new business activities by Cyta, it is straight out of a command economy manual, giving the state the power to use its corporation in any sector of the economy it chooses. No finance minister should be trusted with such powers in a market economy and nor should the legislature, which was an alternative suggestion when the bill was being discussed.
Cyta should stick to the work and activities stipulated in the law that was approved on Thursday, which are more than enough to help it grow and increase its profitability. The government and the parties should put aside any ideas of giving it licence to enter any business sector it chooses, as this would be detrimental to the operation of the free market.