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Stephen Muscat
In his last budget, Prime Minister Lawrence Gonzi had identified seven targets for 2006, the first of which was to balance government’s finances over a period of time and gain the flexibility required to kick-start the economy.
While Gonzi may well be on target to change red-ink figures to positive ones, he was bang on target on stating that all would depend on the price of oil. As the price spiraled in the past year, the Israeli-Lebanon conflict now promises the situation will not improve the price for oil purchases.
The Maltacom privatization may have proved to be a good boost for the reduction of government’s costs on debt, but whether the deficit will continue falling is still to be seen. The cycle for infrastructural investment still has to be set off, and if the target is that this will be carried out solely through EU funds, then we can expect a promise to be kept. Otherwise, everyone is consigned to keep on living beyond their means.
Monetary policy
All the sweat poured into balancing out the public finances can be seen as positive for Malta’s eurozone bid, but how much this hard work will pay off is yet to be seen: Malta’s candidacy is far from complete.
Gonzi had also promised a commission that would analyse taxation, and which by June 2006 would advise him on the revision of the legal setup for having less workers on the dole. The revision has seen attempts by government to change the way earnings on property are calculated. This has turned out to be an ill-conceived idea – the uncertainty experienced until the new law was finally agreed upon, was the reason why the Malta Stock Exchange experienced a boom earlier this year. Of course, without anywhere else being viable enough for investment, the MSE index shot up – with a level of certainty now finally achieved, the index has evened out.
Public sector
The second aim was targeted at human resources in the public sector and how this can be used as a tool for economic growth. With the Maltacom sale having been finalised, and nothing new yet achieved over Bank of Valletta’s impending privatisation, the government might well revise its strategy on how to best dispose of these shares. There is an intention to liberalise the energy sector, but this industry shows how weak the regulator is when not even the costing on the fuel surcharge has been worked out correctly.
Still in the offing is the privatisation of the yacht marinas, as the Malta Maritime Authority wastes time fire-fighting following promises that sea cargo tariffs would be lowered.
The government has been adamant not to continue to subsidise those entities that were a burden on society. This commendable move should not be compounded by the invention of new white elephants, even those under the guise of a new hospital or a ‘much-needed’ investment in the energy sector. With the equipment at the Marsa power station clearly aged, it would take some serious handling to get the sector out of the doldrums.
Even the public-private partnership for the rehabilitation of the Delimara fort and the crafts village at Ta’ Qali, which look like a derelict ghost town, have to be given their due attention. With the signing of the preliminary agreement on the Holiday Inn hotel in Tigné, it is expected that the sale is finalised shortly, with the proceeds serving as a windfall gain for Air Malta, the owner of the hotel. Still, the government must progress on two other tracts of land at Swatar and Birzebbugia.
e-Government
One of the thrusts of this government is a review of the various regulations to ease the burden on private entities. Again, a smart move – only that no one has yet come out with any update on this issue. Another proposal relates to the increased offerings of eGovernment services, clearly a positive move which needs some momentum to continue. Here the results have been visible, and certainly there are no letters to the editor complaining about the long queues for car license payments.
Research and development
Government also promised a series of incentives for research, the setup of back office operations, and to promote eBusiness and scholarships for doctoral studies in sciences. The generation burdened with the study of systems of knowledge has come of age and ready to take up this incentive. It is again expected that in the next budget, a stock-take of how much of these incentives were taken up by the private industry is revealed.
A vote was also allocated for micro-enterprises and SMEs. The ever-increasing number of unemployed demands that these funds are passed on to the ETC to bring on a fresh generation of entrepreneurs.
Tourism
Here is one main area of criticism being levelled at government. At this point, the only area where growth can be expected is in cruise liner visitors, whose average length of stay is low, and English-language students, who are even filling up some of the four-star hotels. It’s a good thing the debate on golf courses no longer sets the agenda.
In the meantime, we can expect an explanation of why the number of tourists is decreasing because the Mediterranean is getting hotter as a result of global warming, and because of the conflict in the Middle East.
Gozo
If there is a locality affected by Malta’s economic stagnation, it’s the sister island. With the world’s ‘local’ bank, HSBC, opening up a call centre in Malta, it would have been well spent money had the back-office incentive fund been used to ask HSBC consider Gozo as the location for the call centre. Today, Xewkija industrial estate is reminiscent of the vacated barracks upon Britain’s departure: a cluster of buildings with no occupants or activity.
Education
Education is a lifelong issue, and this had better be understood. It is not just the young generation that have to be well educated before joining the labour force, but also the workers that have to understand that jobs for life are diminishing and everyone will have to work for a longer period before reaching retirement. There must be ongoing reforms and some well-planned exercise to have the skills to meet the job requirements Smart City is expected to generate.
Environment, agriculture, roads
The above may have little in common, but they are areas where tangible results can be measured. Has the environment been improved with more land for construction released under the development schemes? (Incidentally why was nothing mentioned in the Budget speech on this issue?). The incentives to have families using alternative sources of energy have not had the desired effect. Maybe a proper communications campaign would help. Is there any less costly agricultural produce, or is the termination of the lease for agricultural land making arable land a premium site? Are EU funds being used for better fishing boats? And will the new road projects under the EU structural Fund 2007 cause the least inconvenience to commuters?
Private sector
Government also had to ensure regulatory bodies would become facilitators in an economy driven by the private sector. The contribution of these entities has to be assessed by their contribution, and it seems that certain bodies should be integrated in a bid to oversee areas which require heavy investment. An example would be that of the financial and gaming sectors.
Government also wanted to address market flexibility, and get the economy to adjust better to circumstances and increase productivity. This sounds idealistic: major manufacturing plants have closed down, and as the trade missions continue, it still remains a highly competitive market where not only the fittest will survive, but also those changing their services and products to meet the demand.
Social policy
The Pensions saga will remain a problem that has to be faced and the least vociferous is the age group that will be affected. With regards to healthcare, the issue under scrutiny was the bill for free medicines and who is eligible for them. Throughout the year, government issued its position on the high prices of medicines and the registration of new drugs. It’s essential to remember that a thriving pharmaceutical export business is a headache for those that have to pay for the same pills ‘discovered’ in Malta.
Elsewhere in this area, society is still pampered. Free healthcare from cradle to grave, free education, free medicines, home help and subsidised utilities.
Is everyone entitled to all for free? The answer is supposedly no. There is the means test. But this exercise practically allows all beneficiaries to go along without ever being struck off even when circumstances improve.
If there is one accurately predicted was the rise in illegal immigration, which remains a burden to be shared by the EU, and a topical subject that should be raised with frequency in state meetings.
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