News • December 07 2003

‘Agenda Malta’

John Dalli outlined the road forward in the Business Times breakfast organised at the Radisson SAS last Friday. The Business Times Radisson SAS business breakfast had the title: Budget 2004: Reform or restructure?

“We have entered a new area, where we must arm ourselves with new cultures, new tools and new structures, to face new obligations and new challenges and to exploit new opportunities.
This is a new era where populism in politics is anathema
This is a new era where business thrives on entrepreneurship rather than subsidies
This is a new era where labour must strive for productivity as a base for improved compensation
This is a new era where Bureaucracy must be results oriented, run by people who understand the implications of regulations and who are at the same time firm in enforcing a level playing field and practical in removing hurdles for efficient business.
This is a new era where the common good should take priority over sartorial interests.
This is a new era where dialogue amongst responsible social partners should be the way forward.
This new era will be one of sustainable welfare support in social benefits, pensions and health care, improved environmental policies, upgraded infrastructure for our productive sector, improved work ethic, innovative products and services, a better trained labour force, enhanced employee and consumer rights, reform in the public sector culture, consolidation of fiscal morality, increased accountability of politicians and constructive dialogue.
Over the years we have invested heavily in the infrastructure of our country which contributes to today’s standard of living. We believe that we need to continue to invest in the restructuring of the agriculture sector, in the productive sector, in the health sector, in education, and in the environment. The last budget lays out tangible actions in this regard with an investment of Lm12 million in Agriculture, Lm40 million for the upgrade of factory premises, Lm 10 million for embellishment projects and Lm 127 million in capital expenditure which partly covers investment in new high quality hospital facilities.
Lm 30 million, mostly financed by the European Union, will be spent in order to construct and operate the necessary infrastructure to be able to close down the Maghtab and Qortin land fills. We have also sought to introduce incentives for the adoption of more environmentally friendly policies by the private sector through the introduction of eco taxes.
We have also committed ourselves towards investing further in support to the self employed, research and education. We need to encourage research as it is very important for the competitiveness of our economic base. We also need to increase the amount of graduates in our economy.
We believe that this investment will result in greater competitiveness of our entire local economic base. The last couple of years have been very challenging for our private sector with the removal of protective levies in the domestic market and the slowdown in the international economy on which Malta’s economy is particularly dependent.

The economy was also negatively affected by the uncertainty surrounding Malta’s EU membership which has been prolonged even after a referendum which confirmed that the majority of Maltese wanted EU membership.
We heard about growth rates in the other acceding countries. These countries could start building up on the benefits of accession from the day they started negotiating. They did not have the political discord we had to face in Malta and which lost us so much time.
Competitiveness grows more where there is flexibility in the use of factors of production. Competitiveness can be attained by ensuring competition in all factor markets which leads to increased costs reflecting their increased physical output, reducing public sector induced costs, promoting labour market policies for optimal use of our human resources, strengthening the skills of our human resources and strengthening and improving production and marketing processes through innovation.
We have also sought to control expenditure in the public sector. During the year we exercised selectively great pressure on cost-cutting in Government Departments and entities. In this budget we continued with these restraints. Some have come up with the criticism that our expenditure this year will be 9% higher than last year. This is a superficial analysis as it discards the fact that this year Malta had to take in the new reality of EU accession with substantial flows in both revenue and expenditure which at the most cancel themselves out. Most of the increased expenditure, this year, is directly related to increased revenues received from the EU and Italy. Surely the hypothesis that this will be repeated for the next 10 year is totally inconceivable.
We have also introduced additional measures to decrease tax evasion so that we can move closer to a situation in which everyone carries an adequate burden and does not pass on his or her responsibilities to others. We are committed to continue stepping up our efforts in order to fight tax evasion. Everyone must also be responsible to see that VAT is not evaded by our suppliers and service providers as such evasion means that the availability of social protection to the weakest in our society is jeopardised.
Sustainable finances are important in order to exploit to the utmost the opportunities which will arise from EU membership as, for example, the adoption of the Euro. The adoption of the same currency as our main trading partner will mean that our businesses will not have to incur any longer any transaction costs associated with currency conversions.
This budget also takes first steps towards ensuring the long-term viability of our welfare system. Our demographics clearly show that the current welfare system is unsustainable and that we should take steps today in order to be able in the future to continue giving social benefits which lift from poverty the neediest in our society.
The message of dedicating the increase in VAT from 15% to 18% to our health system is loud and clear – for those who want to listen. There is no free ride; our contribution to society has to be commensurate with our demands on society.
We have taken the first steps in order to curtail abuse in the health system and to push it within the boundaries of sustainability. We have sought to rationalise government expenditure through, for example, having only central health centres open at night and during weekends. This will allow us to give a more efficient service during periods of peak use of the service.
We have also increased the percentage contribution paid by elderly persons who are recovered in publicly funded homes for the elderly and which are deducted from there pensions. Here again the objective is to focus assistance to those who need it. However, again we were careful not to decrease the standard of living of the neediest pensioners and so increased the minimum retained by the elderly. The increased revenue will be used for developments and improvements in this sector to provide more and better care opportunities also to other elderly who do not benefit from the care available in these homes for the elderly.
Unfortunately the Opposition’s reaction to this budget has shown that they are still equivocal on their position on the EU. There policy change is skin deep, and more time has to pass until they come around. As they did in all other important issues such as liberalisation, privatisation and VAT, to mention a few major policies that they were dead set against and those they now embrace. One would have expected the opposition to prove that they are an alternative government by offering alternatives. They did not come up with one alternative. They only proved that that are an opposition party by simply opposing.
It is very worrying that the Opposition has not up to now accepted the invitation to participate in the dialogue with our social partners within the Malta Council for Economic and Social Development to discuss possible paths forward towards allowing Malta to achieve higher economic, social and environmental standards within this new era. This dialogue is meant to give ownership to all stakeholders of the challenges ahead in formulating the solutions for these challenges. There was extensive consultation leading to this budget. This spirit of collaboration will hopefully continue during the discussions scheduled for the months ahead.
There are those who still choose to ignore the challenges ahead. Unfortunately this behaviour has led to a waste of time and resources as well as a loss of important opportunities for our country to move ahead at the pace that it should.
The Budget is a proactive agenda for the future. A future where we preserve our social safety net. A future where we cast a new social pact. To do this, our Agenda must be Agenda Malta.”