Prime Minister: Metro only possible if population grows or taxes increase

Having a metro in Malta would only be feasible if the island’s population keeps growing, or if taxation is increased, Prime Minister Joseph Muscat said on Wednesday.

Muscat said that the decision on whether to construct a metro was by its very nature tied to the direction the nation wanted the country to move in in the future. He added that such a project would not be possible with the country’s current population level.

The Prime Minister was speaking during a Q&A session with economist Stefano Mallia, at a conference on the state of the Maltese economy, organised by the Malta Chamber of Commerce and the EMCS Group.

Muscat said the government had, in the past two years, started to examine the possibility of a metro seriously, and had commissioned a report which found that it would not be possible to have an underground system all over the country.

“There would have to be a mix-and-match between an over-ground and underground system. And, to have everything in place, we will need around 25 years.”

Muscat said it was not the right time to divulge the costs of such a project, but that they would be substantial in terms of their portion of Malta’s GDP.

“This does not mean we should not carry the project out,” he said, “but the basic issue is not whether we have this alternative means of transport or not, but whether we agree if this country needs to grow or not. With the current levels of population, a means of mass transport would only be feasible in the Sliema area. And what sort of metro would it be if it merely linked Sliema to St Julian’s?”

He said that it didn’t make sense to on the one hand argue that people don’t want more economic growth and foreigners, but on the same time say they wanted a metro.

“Without growth in population, a metro can only happen through an increase in tax, because no operator would be able to provide the service at a profit. Therefore, we need either more economic growth or more taxation.”

He said that the government would be, within this context, initiating a discussion on how Malta should develop in the future.

Lack of fear of reforming behind positive economic performance

Asked about Malta’s “spectacular” level of economic performance, and what this could be attributed to, Muscat said that it boiled down to being fearless on reforms.

“I think that any government which stops reforming and changing will cause the economy to start to stagnate again. It’s a state of mind – being restless in one’s approach and saying the inconvenient truth.”

In terms of individual reforms, Muscat mentioned the reforming of the energy sector, which he said would eventually need to be reformed again, in light of a future shift to electric vehicles.

He also spoke of the “game changing” improvement in female participation in the labour market, which came about after policies such as in-work benefits and free child care, which “cost a limb and an eye, but then make financial sense”.

“What really kick-started this economic growth – apart from the reform in the energy and labour sector – is that the economy’s players looked at government and noticed we wanted to get things going,” he noted.

“The best way to prepare for a rainy day is to work even harder and to be even bolder and more innovative, by finding other ways it can grow.”

He said innovation was Malta’s Achilles heel, and more focus had to be placed on research and development (R&D). However, the country was making headway when it comes to regulatory innovation, he underscored.

“My definition of innovation in the context of a member state is much more than what happens in a laboratory. I think of regulatory innovation, which is not measured in R&D statistics. If you look at the areas which have boomed in the last three decades, these are sectors we innovated through legislation, such as financial services and iGaming.”

He mentioned a vision for a national space strategy for Malta – which was meant to be launched today, but was cancelled due to the bad weather – saying he was at first sceptical on why a small island would need a strategy for space.

“But then I read more and realised that the only country which has a legislative framework for this is Luxembourg. This is where innovation comes in.”

Malta not being singled out in financial-sector criticism

The Prime Minister was also asked about the damage to our image and reputation, such as that referred to in Tuesday’s European Parliament resolution – classifying Malta as a tax haven – which was approved by MEPs.

He defended his government’s track record however in this area, saying that Malta was mentioned by the European Parliament together with other well-respected countries which deal in financial services.

“None of this is good news, but we should take it within a context and outside the Maltese bubble. “The European Parliament report, which labelled Malta as a tax haven, didn’t only mention our country, but also mentioned countries such as Ireland, Luxembourg and the Netherlands.”

“We are not a tax haven, and the European Commission confirmed this. The European Parliament grouped together a number of countries. It does not single-out Malta, and any country which offers financial services was attacked by this report.”

When it comes to other reports, such as those issued by the Financial Times listing major financial and money laundering scandals in Europe, it is not Malta which captures the headlines, but other EU member states, Muscat remarked.

“Within the Maltese bubble, we think we are the only ones being mentioned and that the focus is on us, when in reality the focus is on the financial industry, and on banks and institutions which are not related to Malta.”