8 - 14February 2001

The economy – quo vadis?

Next week’s Federation of Industry annual conference will pose a very important question to its members and industry at large: The Maltese economy, is it delivering?
The various speakers – ranging from politicians to industry leaders – all will give their views on whether the local economy is in fact performing as it should. While government figures give the impression that the economy is slowly gaining momentum, the same does not occur for local industry and Maltese businessmen who feel that the situation at present is not any better than it was last year. It seems that Malta is stuck in a rut and coming out of it will not be easy.
In Parliament on Monday, Finance Minister John Dalli said that the estimated GDP for this year was Lm1,660 million, an increase of Lm110 million compared to last year. However capital and recurrent expenditure will total nearly half this amount or 45.14 per cent. Although this is lower than the 45.53 per cent and 46.74 per cent recorded in 2000 and 1999 respectively, much more has to be done to bring this percentage down to respectable levels.
This year’s budget did not hit the working class, yet new measures such as taxes on fringe benefits will hit hard the middle class and middle management. Come April we will know exactly the effects this new tax will have on people and on the local economy.
In his Budget speech last November, Mr Dalli said the government was going to ensure that enforcement and cutting down on expenditure would be high on the agenda. The Malta Business Weekly agrees with Mr Dalli and hopes that this is being done. However, there are so many areas that Mr Dalli is failing to tackle head on that one gets the impression that once again the middle class is going to suffer.
Let us take one common example. A medical specialist charges Lm25-Lm30 for a specific test. In one afternoon, he sees an average of 25 patients. Thus, in one day, he would have earned around Lm750 or Lm3,750 per five-day week. In a year this works out at nearly Lm170,000. Take off Lm25,000 in expenses. That leaves Lm145,000, taxable at a maximum tax rate of 35 per cent. Thus, the government should be receiving approximately Lm50,000 – from one medical specialist alone. In reality, the Inland Revenue Department, if lucky, might receive Lm5,000.
Mr Dalli said that income taxes this year should total Lm599.7 million or 36.13 per cent of GDP. What percentage of GDP is not being collected because certain working groups have become “untouchables”? Does the Finance Minister have an answer? When will those who should pay more be made to do so? While the Minister and the Inland Revenue continue to debate a suitable answer, the middle class will continue to pay more for less.
The feel good factor that was so evident in the early 1990s has disappeared completely. The people’s spending power has diminished to the extent that there is little liquidity in the market. Even those who have money are slowly moving it abroad. Very few people still have faith in the local economy and it is showing. Is the local economy delivering? We doubt it!

Blessed ‘La Salle’!

The Labour Party on Monday reiterated its opposition to the possible signing of a contract for works on a US naval vessel because it goes against the Constitution. On the other hand, the government has emphasised that according to advice from the Attorney General, work on the La Salle is not in breach of Article 1 (3).
At risk is a lucrative contract worth $7.7 million, money that is greatly needed by the Dockyard. On Monday, the Prime Minister suggested to Dr Alfred Sant that discussions be held to amend the Constitution. However, all Dr Sant did was refer the Prime Minister to an interview in The Sunday Times on 14 January.
Giving Dr Sant and the Labour Party the benefit of the doubt and that work on La Salle is in breach of the Constitution, The Malta Business Weekly asks: Why refuse to sit down with the government to discuss amending the Constitution? Is the Labour Party worried about principles or the livelihood of the Drydocks’ workers? The role of the Opposition is to reach consensus – where possible – on issues affecting the national interest. Does the Party no longer believe this is possible?
In a democracy, Parliament is elected to safeguard the interests of the people. It seems that the Labour Party is more interested in safeguarding its non-alignment principles that disappeared with the fall of the Berlin Wall 11 years ago rather than safeguarding a lucrative contract that could help get the Dockyard back on its feet.