Shaping up for Europe

"Firstly, recognise and appreciate that you need the EU more than they need you. This stark fact means that very few concessions will be made in the accession negotiations," Mr Brennan said, providing a list of suggestions to Malta.

Another important tip from Mr Brennan was "Make the screening process as simple as possible, as the Cypriots are doing. The fewer complications you present, the quicker you will get in."

He urged the country to adopt a consensual approach. "This would really help the economy. It would frustrate the negotiators and send wrong signals to EU members if you keep giving conflicting messages," he cautioned.

In this regard, Mr Brennan recommended that Malta issue a White Paper on the consequences of EU membership. "Political ambitions to become and EU member state will come to nought if the electorate does not buy into the process." he reminded the floor.

He stressed the importance of "good intelligence about the EU" and directed participants to Malta's Business Bureau in Brussels, which he described as an "excellent resource".

"Do not wait for events. Anticipate them and make your plans accordingly," Mr Brennan advised in an inspiring address that focused on the many benefits derived by Ireland through becoming an EU member.

A valuable word of advice was that Malta should buy into expertise: "Do not try to re-invent solutions that have worked elsewhere. Do not try to do everything yourselves."

As he gave the Irish experience of EU membership, he stressed that joining the EU is all about change, challenge and chance.

"The secret of Ireland's success is based on an uncomplicated policy agenda. We keep our message simple," he said, also highlighting the importance of maximising Malta's share of funding.

One heartening aspect was the EU did Ireland's public sector a world of good in broadening its view and making it more professional and efficient.

One participant asked Mr Brennan who he would choose as part of his team were he to be appointed leader of Malta's negotiations with the EU.

Mr Brennan replied that the team would have to include representatives of the major sectors involved, such as the agriculture and food industry, with each person being fully conversant in the different aspects of the sphere being represented.

"You would need individuals who understand the Brussels acquis. You'd probably need to buy into that expertise, probably form Slovenia or Cyprus; and train civil servants accordingly," he said.

He also underlined the importance of the contribution of Malta's ambassador in Brussels and the EU ambassador to Malta in negotiations: "They have a critical role to play."

Mr Vella Bonnici told the floor that "shaping up implies a process of change" and opined that the most important factor to work on in this regard is the level of cultural adaptation.

"This is a lengthy process even within a small open society like Malta. It demands visionary leadership and political commitment," he said.

"The political class is duty bound to stop sending conflicting messages to people, which is creating confusion."

Noting that the change process inevitably implies some degree of discomfort and pain, Mr Vella Bonnici called on politicians to look beyond attracting votes and face up to the corresponding challenges ahead.

"The business community will require at least 10 years to realign - and 10 years is an eternity to politicians," he pointed out.

Mr Vella Bonnici bemoaned the fact that the Maltese do not seem to have a core competence in strategic planning and urged one and all to adopt this approach. "The ability to think strategically must be developed within individuals as well as a t a national level. Our enterprise needs an underlying strategic vision that does not change with every change in administration," he insisted.

"We must break away form the kazini (band clubs) mentality."

A key point made by Mr Vella Bonnici was that Malta should ensure that the divide between the information literate and those not in the know must be bridged and tackled.

"We have to move from competing on 'cheap' labour to competing on 'smart" labour," Mr Vella Bonnici suggested. "This demands that we have to change the way we think about learning, teaching and training."

It is vital for government to set up a competitivity council without delay in collaboration with the constituted bodies, Dr Mizzi said yesterday.

He reminded the floor that the conference theme has been discussed on the island for the past decade. "In these past 10 years, what have we done in terms of restructuring?" he asked.

Concentrating on the industrial sector, he observed that it has become more electronically based, but has not really advanced more than that in terms of gearing up to operate within the EU.

He identified a key problem area in terms of Malta's EU accession: As compared to other candidates such as Cyprus and Slovenia, Malta would require an adjustment period to get into line with basic EU requirements regarding policy areas as varied as telecommunications, fisheries, movement of goods, public procurement, and others.

The situation is exacerbated by the fact that the acquis communitaure is a moving target, he stressed.

Pointing to Finland's project to carry our impact studies on a sectoral level, Dr Mizzi urged industry to conduct its own in-depth studies on the impact of the EU on different local sectors.

The Economy Factor

"The early adoption of the euro cannot substitute structural reform," Mr Carre warned, receiving the history of Malta's application.

Accession begins as soon as a country can assume membership conditions, including the market economy, ability to cope with competition, and an adherence to the rules of political and monetary union, he said.

He recalled that the 1993 Malta avis had recommended a root and branch overhaul of its regulatory framework to transform and open the economy.

"Despite a high growth and a number of positive steps, little progress has been made as regards economic criteria," Mr Carre noted. He observed that Malta is the same size of Luxembourg but said its developments were more at par with Portugal. "Since 1993, Malta has not followed the policy lines once these have been set out," he said, referring to the country's U-turns in economic policy, such as the changes in which taxation system to adopt.

Listing problem areas on the island, Mr Carre mentioned the size of the public sector, the deficit and public debt.

Recommending constant vigilance on inflation and strict budgetary discipline as vital, he called for further structural reforms coupled with a sustainable economy and financial framework. Besides, he believes that rigidity in the labour and capital markets are very evident.

One of the many conditions which Malta fails to meet is that its central bank is not fully independent, he told the floor. Full liberty of capital movements do not exist.

Yet, he acknowledged that few countries in the euro zone have a balanced budget and some have high debt levels. "Economic and monetary union is the catalyst for reform," he insisted.

Speaking during the discussion session that followed, the governor of the Central bank of Malta affirmed that because of Malta's size, the central bank here adopts certain roles that its foreign counterparts do not need to.

The CBM has been responsible for setting up capital and money markets in Malta, he said. However, it only holds one per cent of government long-term paper, and three to five per cent of Treasury bonds, mainly bought from other banks.

The CBM is currently seeking other commercial banks to take over this aspect, while capital and exchange controls are gradually being dismantled.

Referring to the conference theme, "Shaping up for Europe", Minister Dalli said it would be worth noting that "we are shaping up for our own sakeŠ not to please anyone else but for our own survival." The reform will entail a new way of thinking and doing things and a reallocate of resources: "These are the main issues to discuss," he said.

The minister emphasised that the country cannot continue accepting the inefficiencies inherent in the monopolies present in both the public and private sectors.

A major aspect for Maltese SMEs to tackle involves identifying who their customers are - and who they should be, the minister said. "Our SMEs are consumer-oriented and this creates problems, so they are much more open to competition when one talks of liberalisation. SMEs overseas supply larger companies." Restructuring is not simply a matter of pushing one's products to new clients, Minister Dalli insisted; it also entails moving to new concepts and practices.

"Do we realise that one of the sectors to be most affected by restructuring is the furniture trade," he asked. "And yet our trade schools keep churning out carpenters and mechanics." Minister Dalli expressed optimism that Europe will give Malta a standard, time-frame and discipline.

Mr Spiteri too found fault with the conference title. "We should not shape up for Europe but for the future." He suggested that the need to do so is being politicised in the EU issue, which is in turn alienating public consciousness.

He considered the various options available to Malta as the way ahead apart from EU membership, after first examining internal parameters - such as a need to enhance exportation of manufactured goods, financial services, tourism and ship repair; and the need to upgrade the labour force - and external parameters - such as the falling trade barriers and increasing competition.

"Irrespective of which arrangement we choose as our best alternative, we must shape up to face external factors."

Mr Spiteri expressed disagreement with Mr Carre's assertion concerning Malta's U-turns.

"We have changes within our economic policy because we live in a democracy," he affirmed, defending the people's right to change their mind. As he did so, the former finance minister made it a point to state that the people had given their full, legitimate backing to the present government - the word "legitimate" struck a chord among listeners as referring to the recent claim by the leader of the opposition that the presnet adminsitration is illegitimate.

Expressing concern that the present economic situation is clouding our vision in the formulation of strategy, Prof. Scicluna made it his vision to shed light on some "economic myths" currently circulating the island.

"Indirect taxation is not inflationary by nature, contrary to current myths. I disagree that VAT is inflationary. The uncertainty leading to a tax change is inflationary, with people trying to hedge against risks and increasing profit margins," he explained. Prof. Scicluna predicted as there was greater familiarity with the VAT system this time round, the change in prices should now be less remarkable than before.

The inflation rate quoted by official sources does not reflect reality and is misleading, he accused. "Since 1993, the inflation rate has been falling. It now stands at 1.2 per cent, but official figures quote inflation at 2.6 per cent; but this is actually the average over 12 months."

Turning to interest rates, Prof. Scicluna said one must take into consideration the real interest rate, that is, the interest without inflation. "It is not right to say that inflation rates in Malta should be low simply because they are low in EuropeŠ You can't compare our interest rates with those of a country where inflation is lower than ours."

Describing credit crunching as a symptom of the crowding out effect of the public sector, Prof. Scicluna asked the floor: "Why should we be surprised about credit crunching?" He explained that deficit financing is the tactic through which the public sector took a bigger share yearly "while pretending to leave the same share for the private sector", leaving an inflationary effect on he budget.

He added that we must not adopt the approach that harks back to colonial times and despise rating agencies.

"We must be clear on what is causing sluggishness in the economy," he concluded.

As a result of liberalisation, there will be heavy causalities in those industries which have been protected to date, Mr Galea predicted. "Tough times lie ahead for about 900 companies and 10,000 workers in these sectors," he cautioned, mentioning among others, the food and plastics spheres.

"There is no option but to change, but there is a high social cost within the transition period, he said, opining that liberalisation is the main stimulus for restructuring the private sector. "Liberalisation is no longer linked specifically to joining Europe." He expressed dismay at the length of time taken by the Institute for the Promotion of Small Enterprise to develop its programmes and by the Malta Development Corporation to process applications for assistance.

FOI President blasts political parties

In a powerful speech, Malta Federation of Industry President Joe Caruana Curran lambasted the political parties but also the constituted bodies, the unions and the media for creating confusion on the EU issue.

"We have all contributed to promote a confused state of mind across the nation. We had our fill of never-ending discussion and conflict. It has to STOP. Enough of this prevarication! Enough of this fuzzy sense of direction! Enough of these arguments about us and Europe across political divides."

The FOI president said that what was worse was that the effects of confusion are not only felt in Malta. "If we are confused, I leave it to your imagination to work out what kind of messages the world at large is getting from us." He pleaded to the Prime Minister and Leader of the Opposition to stop and stop now.

"Our reading of the situation is that the party in government and the party in opposition have no conflicting views on the further development of our political and economic relations with Europe. The conflict is about the nature of the relationship."

Mr Caruana Curran said the two positions of the parties are based on facts, not dreamed upon just to be different. "But what are these facts? Where are the facts which support the points of view? We want to know so we can make up our minds."

The FOI president said that the citizens were not mushrooms and did not flourish on a diet of misinformation, disinformation or no information.

He said the citizens were ready for the truth. "We have all grown up. We can handle the hard facts of the pros and cons of EU membership."

Mr Caruana Curran said the studies carried out by the FOI have ascertained the situation arising from EU membership and how the interests of our members, the economy, workers and citizens will be effected. This is not enough."

The government should go for immediate impact assessments and work to gain a more complete understanding of the precise economic implications of the acquis communautuire. He said that IPSE was established but then the substance seemed to disappear. "If 1998 was a year of progress, 1999 almost went down as the year of stagnation." He asked how somehow, the IPSE funds disappeared from this year's government estimates.

Mr Caruana Curran said the government had to start by making changes at Water Services and Enemalta. "Now is a good time to solve the technical inefficiencies and overstaffing of these two essential bodies. We already pay more of our money for the high costs of these services."

He said this has been going on so long that if Shakespeare were alive he would have written a play about it. "It would have ranked high along-side other tragedies - like Hamlet and Othello."

Mr Caruana Curran pleaded for entrepreneurs to make things happen for industry's sake and for Malta's sake. "We are industry and we make a difference in this country. Be proud of that."