14 - 20 December 2000

Adopting ‘new’ economic features

The following are excerpts from the speech given by the President of the Chamber of Commerce, John Sullivan, at the Chamber’s annual general meeting on Monday

by a staff reporter

At the start of this term of office last January, the incoming Council and Officer Group immediately set out a plan of action to fulfil during our 12-month tenure. Constant dialogue with government and with members, particularly on the subject of Malta’s EU membership bid, featured prominently in our programme. Other aims included the strengthening of the Chamber’s internal set-up of Committees and Trade Sections as well as consulting national authorities over a variety of issues of
particular interest to the business community and to the Chamber membership.
With regard to the strengthening of the Chamber’s internal set-up, we immediately established the Trade Sections Action Committee under the able chairmanship of vice-
president, Louis Apap Bologna. The aim of this committee was to:
Gather feedback from the 11 trade sections;
Identify proposals to strengthen and improve autonomy of trade sections; and
Coordinate the activities of trade sections.
Due to the particular national circumstances, this Committee as expected, focused mainly on EU matters. In fact, it engaged in spreading the Chamber’s internal EU structures lower down into the membership grassroots through the various trade sections while channelling important feedback in the opposite direction towards the Chamber hierarchy.
This year we were particularly active on the EU front. Apart from its continued participation by Chamber members and staff in MEUSAC discussions, the Chamber submitted feedback on both versions of the NPAA as well as other government generated documents.
Following the setting up of an EU Help Desk with the Malta Federation of Industry (FOI) in 1999, this year we started to organise a series of much needed Information Meetings for members concerning Malta’s adoption of the Acquis on various topics including competition policy, health and safety, taxation, SMEs and industrial policy and several others.
Furthermore in May, we sought to launch a survey on the European Union in an effort to keep a continuously updated record on the views of our membership. Such feedback was necessary for us to have a better understanding of the members’ views and their preparations for the country’s eventual accession to the EU. This proved extremely useful in rendering the Chamber better able to make representations on their behalf during consultations with various authorities. In fact, almost 30 per cent of our members responded to the survey.
Consequently, we discovered that two-thirds of respondents claimed that they had taken the initiative to assess the potential affects on membership on their business. Out of this number, 45 per cent stated that the result of this assessment was positive, 22 per cent claimed the contrary, while 33 per cent said that the effects on their business would be neutral. These results were also analysed on a sectoral and employment size basis.
I must also mention that for the first time ever, our Chamber was invited to participate in the Eurochambres Economic Survey 2001 and the Chamber Ratio Analysis – a benchmarking exercise for European chambers. The results of the Survey – which will be published by Eurochambres in January next year – will enable us to gauge our members’ economic performance with that of their counterparts throughout the rest of Europe.
All these initiatives taken in the EU direction follow the Chamber’s tradition as a forerunner in Malta-EU relations. We believe that Malta should join the European Union under the right conditions. We augur that future negotiations of subsequent chapters are concluded to the satisfaction of the business community, the government and the public in general.
With regard to domestic affairs, our Chamber endeavoured constantly throughout the year to make its voice heard with the powers that be in a serious commitment to fulfil our duty of influencing economic policy.
In my opinion, this dialogue with Cabinet ministers is a highly useful and practical exercise for both
government and the business community. In this way, our Council was presented with a unique prospect to air its views directly to the policy makers on behalf of all the entrepreneurs we represent.
This year the Chamber has striven to give its full and active contribution on a number of national affairs through its direct representation on the Malta Council for Economic Development (MCED). In fact, the Chamber believes strongly in the role played by the MCED in bringing all social partners together to discuss present and future economic policy for the Maltese islands.
Among the main issues on this year’s agenda were the strengthening of the MCED itself, the setting up of the Tax Compliance Unit, Industrial Relations, Industrial Policy and the Business Promotion Act as well as the National Budget for the Year 2001.
Our reactions to the budget this year were, in the main, favourable. We congratulated government for curtailing the deficit figure to Lm95 million or five per cent of GDP and for declaring that it is determined to: “Collect tax dues from taxpayers; ensure that the social services in our country will go to those who really need them; stop waste in all areas; introduce efficiency in the public service; and implement all necessary reforms to bring about social justice while protecting the future of those who come after us”.
All these government objectives are entirely in line with our Chamber policy. In fact, we have been pleading to government to this effect for years and years.
The objectives for the consolidation of public finances published in 1998 rest on clear GDP growth assumptions. The private sector must be assisted in creating the level of national wealth required not merely for the attainment of public finance targets but also for employment, investment, balance of payments and standard of living considerations.
The reactions to the 2001 Budget also included clear remarks on the issue of taxation on fringe benefits. While expressing ourselves in favour of measures aimed to curb evasion, the Chamber called for caution in the approach towards taxing those benefits which are genuinely intended towards employee training/education or management incentive rather than tax evasion or the creation of an unfair competitive advantage.
We stated specifically that the decision of “where to draw the line” is subject to further consultation and debate. In certain areas, an incorrect approach in taxation may cause high social implications in exchange for a marginal increase in tax revenue. It may also be argued that a gradual phasing in of at least those measures which have been on the statute book for a long number of years and never enforced should be made to avoid unnecessary social and economic jerks.
Apart from these issues we raised at Budget time, I must add that throughout the year the Chamber expressed itself vociferously about certain hindrances inherent in our economic system. Among these, we continued to highlight our misallocation of resources stemming from a high government participation rate in the economy.
Malta’s most important resource is its human one. Our public sector is largely over-manned in many areas and hence accounts for a vast proportion of the labour force which is working under “less than efficient conditions”. If released to more productive use in the private sector, where they are badly needed, they would invariably enhance their contribution towards a further strengthening of Malta’s competitiveness in the globalised world.
However, for Malta to integrate itself more with the globalised world, it needs to exploit its strengths better with a view to penetrate the lucrative markets lying outside its shores. To succeed in this however, local firms must shed off their inward-looking mentality which many continue to manifest – particularly those who benefited from a protectionist trade policy in the past decades.
This argument holds even stronger nowadays with the penetration of the so-called “new” economy involving a fervent utilisation of information and communication technologies. I have recently had the opportunity to look into the characteristics of the “new” economy and found that they are most suited to our country. The “new” global economy is becoming ever smaller to the advantage of small island economies such as Malta’s. The adoption of modern tools brings the Maltese business community closer to its foreign counterparts thereby overcoming geographical restrictions which posed stronger obstacles in the past. This development is of particular importance to small local companies which, in the main, constitute our membership.
The sooner Malta adopts these new economic features, the faster it can reap the rewards. Nevertheless, this is easier said than done. The transformation of the country into one which is compatible with the “new” economy requires considerable effort in the elimination of those factors which hinder the country’s future economic progress.