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FOI annual conference – “The Maltese Economy:
Is it delivering?
The shades of the Maltese economy
by Joseph Ghio
Maltese industrialists yesterday heard colleagues, ministers
and members of the Opposition describe the Maltese economy as
black, white and shades of grey in between.
Speaking at the annual conference of the Federation of Industry
(FOI) which posed the question is delivering or not, Prime Minister
Eddie Fenech Adami said the economy was doing well, although
it could do better.
On the other hand Opposition leader Alfred Sant gave a much
bleaker view and said the economy was failing to deliver on
various fronts.
Dr Sant accused government of failing to attract foreign investment,
to restructure the local industry, to upgrade tourism services
and to curb public spending. The MLP leader also accused the
Nationalist administration of insisting on using Value Added
Tax even though International Monetary Fund experts had told
the government that this form of indirect taxation was inappropriate
to small, open, island economies such as Malta’s.
Dr Sant heavily criticised the statistics issued regularly by
government about the performance of the economy, describing
them as “quirks” and “subterfuges”, adding
the exceptions to what he defined as “economic stagnation”
only occur when “friends of friends” are concerned.
He called on government not to introduce new taxes and, with
reference to the Nationalist pursuit of European Union membership,
urged “the ongoing effort to spread a complex of inferiority
among our people and enterprises” to stop.
The Prime Minister, however, painted a different picture altogether.
Dr Fenech Adami said there had been real and tangible progress
particularly through well-developed mechanisms that turn economic
growth into improvements in the quality of life.
As an example he said the average annual income of Maltese people
increased by almost Lm500 compared to 10 years ago. This contrasted
with what Financial Services Minister Josef Bonnici said in
his opening speech. According to Prof. Bonnici, after inflationary
corrections, the average income increased by Lm1,000 and not
Lm500.
“The economy is delivering, and will continue to do so
as long as we cooperate in the delivery of the policy decisions
that would unleash our resources,” Prof. Bonnici said.
He praised the performance of the manufacturing industry but
complained there was not enough debate on mechanisms of wealth
creation and economic growth. EU membership, and also the accession
process, would herald enormous economic benefits.
Membership of the EU and its benefits were also highlighted
by the FOI’s President. Mr Joseph Zammit Tabona highlighted
the advantages of the government’s ambitions to become
an EU member-state, yet he complained that the local political
parties’ “inability to agree on whether to join the
EU or not” was making the country more unattractive to
new foreign direct investment. Mr Zammit Tabona expressed his
satisfaction at the performance of the manufacturing industry
although he was concerned about lack of competitiveness in the
tourism industry.
Joe V. Tabone, chairman and CEO of the Malta Communications
Authority said he will have a very important role in harnessing
the potentials of the New Economy.
Finance Minister John Dalli spoke about what should be the optimum
role of government in the Maltese economy.
Dr Anton Felice, Governor of the Malta Financial Services Centre,
was the first speaker on the problem facing Malta due to the
widening of the welfare gap. The amount of money spent by government
on welfare and health was far higher than the revenue from social
security contributions.
The UHM’s secretary general Gejtu Vella started by listing
figures of revenue generating from national insurance contributions
and what is spent by government on health services and pensions.
Mr Vella’s concerns echoed those of Dr Felice before him;
the present Maltese welfare system is far from being self-financing.
If action is not taken immediately by government, this problem
will risk growing quickly out of hand. The UHM secretary general
was also worried about the projected demographic changes, with
an increasing percentage of the population being above the age
of 60.
“From the UHM perspective, all retired persons should continue
to receive an adequate income to enable them to love with dignity
at all times and to share in the benefits of economic growth,”
Mr Vella said.
Social Policy Minister and Deputy Prime Minister Lawrence Gonzi
said the results achieved during the past two and a half years
have proved that problems can be addressed with what he called
a “positive outlook”.
The minister said the welfare gap problem could be summarised
in two challenges; the need to regenerate human resources bringing
them in line with modern realities and strive to ensure the
effectiveness and sustainability of the domestic welfare system.
The relationship between the environment and the economy, with
emphasis on tourism was also addressed by the conference.
FOI vice-president Ian Mizzi estimated that not less than Lm400m
will be required to clean the existing waste dumps and develop
new effective methods for waste management. In view of Malta’s
EU accession process, Mr Mizzi said, the island must implement
European environment directives. The environmental problems
faced by the country can be tackled by transposing EU law to
domestic legislation and thus adopting tried and tested principles
such as that the polluter has to pay for the environmental damage
caused, he added.
Malta Tourism Authority chairman John C. Grech reiterated that
Malta can no longer persist in offering a mere “sea and
sun” package to visitors to the islands and seek to attract
tourists, not necessarily in greater numbers, but who will spend
more during their stay. He stressed this was the best way to
deliver an added value to the economy. A new kind of tourist
will choose Malta for his holiday if he can find a cleaner environment,
and for this to be achieved the entire population has to contribute.
Tourism remains the most important industry in Malta, Dr Grech
said. The return from investing in tourism would be great, he
continued.
The MTA chairman mentioned how a central problem in the environment
issue was the tremendous lack of space available on the island.
The relationship that exists between the limited space and the
care for the environment was also addressed in the Planning
Authority chairman’s delivery during the conference.
Christopher Falzon listed some of the problems faced by the
Planning Authority, particularly in view of the increase in
the population estimated for the next 20 years, and the inevitable
decrease in the amount of space available.
By 2020 there will be a need for some 40,000 housing units but
at the same time government still has to find a better use for
the estimated 36,000 vacant houses present in Malta, Mr Falzon
said. The Planning Authority has to reconcile conflicting demands
by the public who wants to build higher but not quarry deeper,
more car and wider roads but a pristine countryside to drive
“away from it all”, preserve landmark buildings but
preferring to buy and build houses outside the existing villages,
he explained.
Environment minister Francis Zammit Dimech stated government’s
case and said there can exist no distinction whatsoever between
the national and the European environment agendas. “In
matters of environment, Europe today leads the way, and we should
therefore be guided by EU standards,” the minister said
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