Delivering the Europe 2020 Strategy in Malta MBB recommendations for the 2013 General Election February 2013
This document is being presented by the Malta Business Bureau as the EU-business advisory and support office of the Malta Chamber of Commerce, Enterprise and Industry and the Malta Hotels and Restaurants Association.
Malta Business Bureau Head Office: Cornerline, Level 1, Dun Karm Street, Birkirkara BKR9039 21 251 719 | info@mbb.org.mt | www.mbb.org.mt
Foreword The Malta Business Bureau (MBB) has always sought to actively promote Maltese business interests in the European Union. We believe in enhancing European market access to facilitate cross-border trade in goods and services. This is the most effective means to achieve a balance between environmental sustainability and business competitiveness, whilst nurturing a dynamic, skilled and flexible labour market. The MBB is pleased to note the emerging political consensus on the need to bring Malta to the forefront of the European Union. In this regard, it would like to highlight the challenging obligations arising from the EU's long-term competitiveness agenda, as set out in the Europe 2020 Strategy targets. The MBB is committed to support the Maltese authorities in implementing the following recommendations as these would improve its performance within the European Union.
George Vella President Malta Business Bureau
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A. Towards improved business competitiveness A.1. Improving SME test evaluation Current Status: Locally, the current policy emanating from the EU’s Small Business Act with regards to the SME test is based around the submission of a Legal Notice Checklist for the assessment of financial and administrative impacts of the proposed measures. It is positive to note that this is currently being revamped to revolve around an impact assessment-based framework. Recommendations: •
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The results of the SME test should be rendered public prior to the start of the parliamentary discussions, specifically on the draft bills transposing EU directives or the subsidiary legislation incorporating EU regulations into the local statute book National parliamentary discussions particularly at committee stage within the International and EU Affairs sub-committee need to be better informed of the implications that new regulatory initiatives inevitably levy on business competitiveness Note: The MBB is willing to assume the responsibility for managing the impact assessment process on behalf of Government with the intent to provide an informed and timely delivery of the SME test results on EU pipeline acquis and/or related transposition instruments o The MBB is committed to engage in technical discussions with the European Commission’s Impact Assessment Board in conjunction with the competent local authorities to develop a robust SME test methodology. This would allow local consultancies to carry out the necessary studies following a public call to tender o The MBB would ensure a transparent, open assessment procedure engaging the viewpoints of the concerned stakeholders. It would also provide a timely delivery of the SME test results in order to ensure that there is no delay in the introduction and/or transposition of the requisite legislation
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A.2. Implementation of legislation Current Status: The practical difficulties generated by poor and staggered untimely implementation of European legislation, lead to operational burdens on businesses with minimal resources to adapt to inefficient implementation. Recommendations: Common commencement dates •
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This presents an efficient and structured way of transposing laws, allowing enough transitional time for incepting the necessary changes and staggered adaptation to the new legislative requirements. In this way, a greater degree of predictability is ensured The Common Commencement Dates can be implemented with an amendment to the Legal Notice transposing the Small Business Act into local legislation
Avoid gold plating •
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Gold-plating is the practice of exceeding minimum harmonization of EU legislation through adding clauses, many of which can be undue and unnecessary. This can often be one of the main causes of red-tape. Government must ensure that actions do not generate extra burdens for the business community It is important to protect competitiveness by introducing a mandatory SME test whenever new legislation is bound to impact business In this regard, public authorities should ensure to: o Not extend the scope of Directives and adding regulatory burdens beyond what is essentially required by the directive in question o Take full advantage of any derogations. Refrain from imposing national regulatory requirements that are more comprehensive than is required by the Directive in question o Steer away from using the implementation of a Directive as a way to introduce national regulatory requirements that actually fall outside the aim of the Directive o Avoid implementing the requirements earlier than the date stipulated in the Directive o Avoid applying punitive sanctions or other enforcement measures that are necessary to implement the legislation correctly
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A.3. Increasing Business Potential Current Status: A clear issue that is affecting Maltese business competitiveness is the lack of economies of scale that hinders their negotiating capability in international markets. In addition, access to finance is challenging for SMEs, particularly those based in Malta. The Maltese credit market is characterized by traditional retail loan banking activities and lacks adequate seed capital funds along with business angel-like credit support. This situation prevents prospective entrepreneurs from being able to tap into a variety of credit instruments that address the distinct lifecycle financial requirements of an enterprise. Furthermore, in light of the structural problem of connectivity to the European mainland markets, the accessibility and frequency of cargo traffic from Maltese ports should be addressed. Local SMEs are faced with excessive burdens of freight costs that undermine business competitiveness when compared to SMEs operating on mainland Europe. Recommendations: Business Clusters - Creation of a national clusters policy • •
Clusters provide quick access to specialized suppliers and increase productivity In light of the EU target for Research, Development and Innovation to represent 3% of EU GDP by 2020, business clusters will contribute towards increasing wealth generation from this particular industry which currently stands at only 0.73% of local GDP
Access to Finance - Increased number of grants / schemes aimed at SMEs •
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Schemes made available for local businesses such as MicroInvest and MicroGuarantee were very positive and highly welcomed. The continuation of such instruments will go a long way in ensuring availability of sufficient liquidity for businesses to undertake new ventures or develop existing ones. Schemes such as low interest rates for R&D initiatives, energy efficiency initiatives and others can boost local competitiveness Note: The MBB is, via an assessment study, proactively identifying alternate credit instruments available in the EU, mainly in the area of loan guarantee funds and securitized mezzanine finance. The final report will be presented to Government
Accessibility – In light of Malta’s Insularity •
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Government should incentivize private operators to produce new and more frequent air and maritime routes to Malta. This is crucial to have access to more time/cost effective routes for all economic sectors Liberalising the port-handling sector. It results that at times, handling imported products from ports to premises cost more than the actual freight
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B. Towards sustainable Human Resources B.1. Employment Current Status: While good progress has been made by Malta to achieve its Europe 2020 national employment rate target, which has been set for 62.9%, the European Commission believes that this target does not seem to be ambitious enough. Despite this, imbalances still exist. Maltese female participation in the labour market stands at 43.4%. Participation of elderly workers (55-64 year olds) stands at 31.7% of which elderly female participation is at 13.8%. Youth employment (15-24 year olds) stands at an approximate 15.2%. Moreover, females make up only 18% of all entrepreneurs. The participation of women in the labour market is seen as a key factor in achieving the EU’s employment goals. The Commission’s focus in this area is on ensuring that women have the opportunity to work and that they can balance work with other family responsibilities. Recommendations: • •
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Create national structures to support better work–life balance and family friendly measures Incentivise a flexicurity system for the private sector. A strategy to develop dynamic labour markets that offer good or high-quality jobs for all, attractive, fair working conditions and ample opportunities for professional and career development. This can be provided through more solid and improved structures for: o Flexible, yet reliable employment agreements; o Comprehensive lifelong learning strategies; o Modern social-security systems in line with our European counterparts; This will introduce the concept of flexicurity which is up to date to the new socioeconomic circumstances Provide sustainable childcare facilities for all ages Extension of school hours should be further developed and available throughout the country. After school activities can be provided by professionals in the subject provided Increase measures to eradicate discrimination at the place of work Put an active ageing strategy in place to increase elderly employment, as well as instilling an entrepreneurial spirit in elderly workers through tax credits and mentoring incentives Target early school leavers through exposing students to business via programmes whereby they understand how their studies can contribute to their future careers. This will also give business the opportuity to be better linked with education and the possibility to advise about future labour market needs
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B.2. Education Current Status: The quality of education and training is a critical factor for generating smart growth — training the staff needed for R&D&I, providing a highly productive, adaptable workforce. It is also instrumental for sustainable growth to off-set the impact of demographic ageing on the workforce by increasing employment, and reducing skills mismatches. The long-term strategic objectives of EU education and training policies are: 1.) Making lifelong learning and mobility a reality; 2.) Improving the quality and efficiency of education and training; 3.) Enhancing creativity and innovation, including entrepreneurship, at all levels of education. Recommendations: •
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Employability of specific groups such as female, youths, elder and low skilled workers by improving and adapting general and vocational training to new conditions and forms of work Giving greater importance to lifelong learning and to provide the necessary structure for developing tools to validate non-formal and informal learning which would make worker’s employability skills more visible and hence more employable (skills mismatches) The use of ESF funds to finance a dual system of Vocational Education and Training, whereby students would have to undergo a traineeship period within industry as an integral part of their post-secondary education, particularly for University students. The German VET system could be utilised as a reference benchmark To boost growth and jobs and to prevent skills bottlenecks and shortages, education and training systems have to deliver quality. They have to equip people with skills that pave the way for a smooth transition to the labour market. Public tertiary education institutions (University of Malta, MCAST, and ITS) need to take into account businesses views in the development of the subject-curricula relevant to their field of operations. This can push for the reduction of skills-mismatches, particularly in the fields of pharmaceuticals, and research and development-based industries The construction and maintenance of a Business Incubation Centre (BIC) at the University of Malta with the purpose to incept a dynamic industry-academia collaboration culture at tertiary education level. The BIC would serve to test-phase business ideas and serve as a hands-on "laboratory" for entrepreneurship skills tuition To introduce an overall assessment for the tertiary education system, in particular University of Malta degrees, whereby an "industry-fitness" check would be carried out periodically
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B.3. Pensions Current Status: As the number of pensioners in Europe rises relative to the number of people in employment, ensuring adequate pensions on sustainable basis is a major challenge. The projected long-term increase in age-related expenditure in Malta poses a risk to the long-term sustainability of public finances. According to Fitch rating agency Malta faces the most severe impact over the very long term which will hinder Malta from achieving safe and sustainable pensions. Recommendations: • •
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Develop complementary private retirement schemes by encouraging social partners to develop such schemes and to optimise on tax and other incentives Develop financial literacy campaigns to educate consumers as to the need for new pension schemes, along with information on the different pension schemes available and how to choose the best scheme. This is to work in tandem with implementing a support structure for business and a transition period staggered according to targets Pursue a significant acceleration of the progressive increase in the retirement age and promote longer working lives, by linking retirement age with life expectancy, restricting access to early retirement and closing the pension gap between men and women Improve the transposition of Pensions Directive to make supplementary pensions compatible with mobility, through legislation protecting the pension rights of mobile workers and by promoting the establishment of pension tracking services across the EU
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C. Towards Sustainable Water and Energy Policies C.1. Water Framework Directive Current Status: Malta currently extracts nearly 50% more groundwater than is sustainable. Four of the 15 aquifers are over-extracted, while 11 of the 15 aquifers contain excessive nitrates. No environmental and resource cost has currently been attached to private or public groundwater. 31% of produced water is consumed without being billed. 18% of produced water is lost in distribution leaks. In accordance with the EU’s Water Framework Directive, the groundwater bodies must be restored to ‘Good Status’ by 2015, with extraction needing to be balanced with recharge and pollutants (such as nitrates) need to be limited to a defined quantity. According to the directive, the cost of water should reflect all costs of production, as well as an environment and resource cost. Recommendations: •
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To arrive at the real cost of water consumption, o Improve efficiency in billing o Reduce the amount of water lost through leakages in the distribution system o Introduce a resource and environmental cost To better understand current groundwater consumption we recommend the complete metering of private boreholes (estimated at 7000+ boreholes), whilst also allocating a price for the consumed water and invoicing consumers for consumption To promote sectorial water saving programmes to lower demand for water To promote rainwater harvesting at points of use and on a national level, where necessary upgrading or developing the required public infrastructure To provide treated sewage effluent for use as 2nd class water in industry and agriculture, as a substitute to mains water (or groundwater extracted for direct consumption)
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C.2. Renewable Energy Directive Current status The European Commission has already sent a Reasoned Opinion to Malta as insufficient progress has been made to reach the targets set out in this Directive. Under the Renewable Energy Directive EU Member States are required to invest in renewable energy and saving energy by reducing inefficiencies. This forms part of the EU-wide drive for increased sustainability under the 2020 targets. Malta has set a target that renewable energy sources will produce at least 10% of the total national energy requirements by 2020. Recommendations: •
While targets have been fixed into national policy and various projects undertaken, progress remains unsatisfactory. This is largely due to the small number and scale of projects initiated. Policy needs to be translated into tangible and effective projects within the next seven years. The next legislature will be crucial if Malta is to meet these EU targets. We therefore advocate an increased focus on the creation and implementation of the following projects: Wind energy projects, micro and macro Solar photovoltaic and solar thermal projects Biogas and solid biomass projects Public policy should also consider industrial areas as potential priorities, given the large amounts of space available for PV, wind, or other renewable energy projects, and an onsite demand for energy
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In addition, a policy needs to be set in place to improve the efficiency with which electrical energy is consumed, and a clear targetfor improvement in efficiency needs to be set. Although this forms part of the EU’s 2020 targets, no national deadline has yet been set Malta’s small size makes it an ideal market for transport powered by renewable sources. Unfortunately, only a negligible percentage of the transport fleet is powered by renewable energy. To meet this target within the next seven years we will need to gather sufficient information, adopt adequate policies, and upgrade or in most cases develop a suitable infrastructure
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D. Other Matters D.1. Parliamentary Reform National Parliaments have a certain degree of institutionalised influence in the EU which was expanded under the Treaty of Lisbon to include greater ability to scrutinise proposed EU legislation. The House of Representatives should be geared to deliver on its enhanced role granted to it by the Lisbon Treaty within the context of such legislation and decision-making procedures. This includes: • Right to information • Monitoring the principle of subsidiarity • Ability to veto proposals • Taking part in treaty amendments • Being involved in enlargement and dialogue with EU institutions Thus, Parliament can do more to fulfill such roles through being a policy maker and keeping Government in check. • Policy making: Parliament should have competence and resources to commission experts to provide advice as to how critical issues are to be dealt with • It is Parliament that should set the agenda and decide on policies, while Government executes the policy set by Parliament • Parliament should be the forum wherein Government’s accountability is kept in check • The President of the Republic, as Head of Parliament, should have a more active role in seeking to ensure that proper checks and balances are in place to safeguard our democracy • The Parliament should be able to form its opinions on the basis of detailed impact assessments • The Parliament should increase its operations within the Conference of European Community Affairs Committees (COSAC)
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D.2. Fiscal Discipline Enshrined in Constitution The Fiscal Compact Treaty was presented to the House of Representatives on the 5th of March, 2012, under Motion 294 • During Budget 2013, a decrease of budget deficit and debt was proposed, but rejected along with the rest of the Budget o To this end, the MBB would like to ensure that the new Budget will be presented and ratified with the required urgency to ensure the maintenance of a positive business environment • The MBB was pleased to note that the Government planned to entrench the ‘golden rule’ of balanced budgets from the Fiscal Compact Treaty in the Constitution, something which was pleasingly backed by both sides of the House o As this has also been postponed, the MBB would like to encourage the Maltese Government and Parliament to follow up on this issue with the possibility of constitutionalising appropriate fiscal discipline o This would ensure proper compliance with the EU’s obligations while safeguarding long term macro-financial stability, appeasing the minds of traders and investors
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