Malta’s profitability 'not only down to tax incentives' – Louis Grech

The Economist’s business roundtable with the government of Malta kicks off at the Hilton.

Deputy Prime Minister Louis Grech addressing the Economist Roundtable with the Governemnt of Malta at the Hilton. (Photo: Ray Attard/MediaToday)
Deputy Prime Minister Louis Grech addressing the Economist Roundtable with the Governemnt of Malta at the Hilton. (Photo: Ray Attard/MediaToday)

Malta's profitability was not only down to tax incentives but also through a right mixture that attracted foreign direct investment, deputy Prime Minister Louis Grech said.

Addressing a business roundtable discussion by the Economist organised for the first time in Malta, Grech described stable ratings and higher inflows of foreign direct investment as the result of a sound regulatory environment, a good communications and physical infrastructure, a skilled and educated workforce, a population that is largely English-speaking, reasonable labour cost, a sound banking system, social cohesion and a good quality of life.

"It is not only tax incentives that make Malta a profitable place to invest in," he said. "Through perseverance, resilience and positive thinking, we have broken through barriers, both real and imaginary."

Addressing the audience and a panel that included former Italian premier Mario Monti and former EU Commissioner Lord Peter Mandelson, Grech said if the European Union wanted to be successful for its citizens, it had to show greater commitment, leadership and ownership.

"The EU can be seen as one continuous development. The historical continent embraces a mass of divergent views, inconsistencies, contradictory thoughts and vested interests - all of which have somehow been able to function together in a dialectically consistent and successful development."

Grech said that any relaunch of the European economy should not be wholly dictated by the financial and economic downturn.

"All those who are involved in the shaping and implementation of economic and financial strategies need to adopt a more holistic approach that integrates the specific realities of member states and its citizens," he said.

He called for a "pragmatic and comprehensive deal" supported by all the EU member states to revive the European economy. He insisted that the major challenge was to address the inherent weaknesses in the member states' economies.

With several countries having resorted to austerity measures in light of the financial crisis that afflicted them, Grech said a balance between austerity and growth must be struck.

"There has to be an economy capable of stimulating growth and investment and one which is able to provide the necessary social safety net to its citizens," he said.

With elections of the European Parliament round the corner, euroscepticism is on the rise. Acknowledging this reality, Grech said the major real challenge was to "restore" the Europeans' trust in the union's economic system and market.

"Our institutions need to take concrete action on this sensitive development since an element of economic protectionism and nationalism seems to be taking hold. In this environment, the winners will be those who can understand the evolving scenario and public mood and change their stagnant structures and methodologies in good time."

A reflection of the government's economic policy, Grech told the international audience that Europe should concentrate of growth, investment, economic stability, employment and social inequalities.

The deputy prime minister said that at times, seemingly important issues overshadowed more fundamental ones: "A case in point is the huge topic of migration which, for many years, was not given the concrete and urgent attention it deserves. So, we need to concentrate on those policies that really matter and come out with real solutions."

Grech insisted that growth must come with investment, and no long-term solution will come without growth. The Single Market, he added, was still suffering from market fatigue.

"The Single Market could be the main catalyst to achieve a competitive social economy and it will prove yet again to be the most powerful engine for reviving growth and investment. The Single Market has to be accepted by citizens as championing their interests and protecting their rights, and by SMEs as giving them the right incentives."

Driving home the message that SMEs are the backbone of the European economy, Grech said small and medium enterprises are the main drivers of job creation and investments: "SMEs should be given the opportunity to play a prominent role in the shift towards a green economy."

He said that investment and growth across the European Union could not be reinvigorated unless SMEs were given the tools to expand: access to finance, simplified access to public procurement and smarter regulations that cut red tape.

The EU, he underline, has fallen behind in vital sectors like research and innovation, knowledge economy, green economy and digital economy.

Studies show that the development of the digital economy, coupled with the online single market, could increase the EU's GDP by several hundred billion.

"unless SMEs were given the tools to expand: access to finance, simplified access to public procurement and smarter regulations that cut red tape." << >> This funding should be sourced by eliminating the public sector's annual budget by 5 to 7.5%; as well as trimming all those social service benefit fraudsters by increasing enforcement of regulations and vigilance on benefit seekers. These funds would then be turned into incentives to enable SMEs to grow.