23 - 29 November 2000

Important weaknesses in 2001 budget

by David Kelleher

Although the budget for 2001 is welcomed in general, there are a number of weaknesses that have not been addressed, even though these are going to prove difficult to resolve in the short term, economist Prof. Lino Briguglio said yesterday.
Speaking at a business breakfast organised by Le Meridien Phoenicia and The Malta Business Weekly, Prof. Briguglio said the budget was positive in a number of respects although there were important weaknesses.
“All in all, however, the budget was welcomed and the weaknesses are all items which are difficult to resolve in the short term,” he said.
Prof. Briguglio said the main weaknesses were:
• Incentives for economic growth to boost the supply side were weak;
• The physical environment is still the Cinderella of public expenditure;
• No concrete proposals regarding the welfare gap were announced; and
• No concrete proposals for
the restructuring of SMEs were announced.
On the other hand, the government has ushered in:
• Tax compliance has been strengthen and will be further strengthened next year by the benchmarking of tax due;
• No new income taxes were imposed, and only minor indirect taxes were introduced;
• Fuel prices as from 2002 will be market determined;
• Minor incentives for alternative energy and private education;
• Financial allocations for the implementation of the acquis and for certain developments including roads.
Turning to the Maltese economy, Prof. Briguglio said that Malta has a miracle economy: “With few natural resources, but with ample human resources, we have managed to generate a good income for ourselves, all from our own production.”
However, despite having modernised the economy and aware of the challenges of globalisation, and having accumulated considerable wealth over time, the country still has a major problem with management in the public sector.
“This is where the haemorrhage is taking place. The workers we see wasting time on our roads will not do so if their foreman monitors their performance; and if the supervisor monitors the performance of the foreman, and if a higher authority monitors the performance of its subordinates,” Prof. Briguglio said.
Yet, he said, this was not done possibly because few managers were willing to cast the first stone. Most did not have a “clear conscience” (il-faham miblul) and this summarises the problem of management in the public sector.
“The managers themselves have their part-time jobs, they want to make an few errands during office hours, they prefer to let sleeping dogs lie,” he said.
Things, he added, were not facilitated by the proneness of some politicians to defend work evaders and close one eye to discipline.
Speaking about the role of the Social Partners and cooperation, Prof. Briguglio said the social partners, individually have different objectives, some conflicting and some overlapping.
“The three social partners have conflicting objectives and overlapping objectives. Government follows a political agenda involving constraints on public finances. The unions want to maximise their bargaining power, employers want to to maximise profits by containing increases and reducing inefficiencies, and reduce the bargaining power of the unions,” he said.
The common thread among the three, however, was the feel good factor which all agreed was essential. Prof. Briguglio said that it appears that the 2001 budget contained consensus points although divergencies also existed.
“All partners agreed that tax compliance is a must; they are all concerned about the growing welfare gap and need for pension reform, and that government expenditure had to be more effective and efficient,” he said.
“Then again they have disagreed on accession to the EU, the working of indirect tax especially regarding VAT refunds, the speed of removal of levies and, naturally, differing political agendas,” Prof. Briguglio said.
Concluding, Prof. Briguglio said he saw in many area a bright future for Malta.
“I think our bid to accede to the EU will open up new horizons for us. This will require the cooperation of all social partners and I hope this will be forthcoming. With the support of the business community and the Unions, the road towards EU membership, chosen by the present government, would be greatly facilitated,” he said.