The Shadow Minister of Finance Mario de Marco

Driving a thriving economy, enhancing well-being, and restoring Malta’s reputation

The nationalist party’s shadow Minister of finance Mario de Marco says that the Maltese economy is at a crossroad. navigating towards a sustainable and a thriving economy is a collective aspiration.

To walk the talk and send the right messages to all the stakeholders, especially beyond our shores, is a specific responsibility on those entrusted with the executive power to run the country.

The successful decisions we take today as a nationoughttoleaveanimpactonthecountry’s ability to prosper, and to enhance the wellbeing of its citizens over the forthcoming decade. Undeniably, the pandemic brought about unexpected economic challenges and health related risks. Yet, the economic challenges Malta is presently facing cannot be attributed entirely to the outbreak of the pandemic. The market dynamics in 2019 were already showing clear signs of potential misalignment in key economic sectors, namely tourism, retail and commercial property. Certain key drivers, namely the IIP scheme and the significant increase in population, which were also fueling economic growth between 2013 and 2019 proved unsustainable and short-lived. When the benefits of such schemes waned, the fiscal surplus was short-lived, and the fiscal deficit re-emerged and is expected to remain for the years to come. It is misleading on the part of Government to attribute the deficit as being caused entirely by Government expenditure on COVID related measures. Whilst COVID undeniably dented incoming revenue due to a contracted economy and increased Government expenditure through schemes aimed at saving employment and supporting the economy, a significant part of the deficit is structural and the result of a Government-recurrent expenditure which has been increasing significantly and perhaps unsustainably towards the last nine years.

Public debt is estimated to double between 2019 and 2024 from 5.3 billion euro to 10.6 billion euro. In the meantime, Malta lost an excellent opportunity to attract investors leaving the UK following Brexit, missing out heavily on what Ireland and Luxembourg managed to do. Government’s attempts to create new niches of economic activity, namely the hubs for medical cannabis and crypto currencies, were problematic, as the Government underestimated the risks and posed serious reputational damage on Malta as a reliable jurisdiction. Following the FATF decision, local businesses today were put in a position to incur hefty compliance costs in their day to day operations, denting significantly their international competitiveness. The health mitigation measures on international travel were and are still a challenge to our economy. Unlike other larger countries in Europe and beyond, Malta’s exposure to tourism is relatively high. By the end of 2021, Malta’s inbound tourism expenditure is still expected to be just 37% of 2019 levels.

is there light at the end of the tunnel? In compiling an economic strategy plan for the years ahead, we cannot cut corners and seek to address only the symptoms. A factual and unbiased assessment on the source of the challenging factors is the only responsible way to go. Implementing a smart action plan on how the inherent risks can be mitigated and the benefits from opportunities maximised, is a sensible approach to adopt aimed to secure a future for present and future generations. Government needs to get its house in order by restoring sustainability in public finances. Irresponsible expenditure and unaccounted

“All the professionals and practitioners, who are being urged to work towards a common goal in restoring Malta’s international reputation, should back this call by being a catalyst for change and to do what is right.”

transactions which shed light on serious corruption claims, besides being morally and legally deplorable, will pose higher Government induced costs on the industry if the public debt keeps on increasing at an alarming rate. During the past two years, outstanding debt increased by €2.4 billion and within two years, debt to GDP ratio is expected to reach 65% of GDP. Lower government deficit on the back of just economic growth is another risky strategy especially in the midst of economic uncertainties in the months ahead, and a clear sign of a lack of commitment by the responsible fiscal authorities to learn and act on past shortcomings.

Construction is a very important industry for a small island economy, such as Malta’s. Yet, pressing environmental issues and serious shortcomings in the working practices employed by the industry, cannot continue to be ignored. Demand for construction is a derived demand, i.e. aimed to satisfy other direct demands, such as residential, commercial and agricultural use. It’s high time for bold decisions to be taken. The country needs to undertake carrying capacity studies on the sustainable level of tourists it can host within a year, therefore ensuring that such activity will not negatively impact the environment or impinge on the wellbeing of its permanent residents.

Likewise, the same type of professional exercise needs to be undertaken in determining the sustainable population level this country can accommodate. From a planning perspective, it is high time that what is Outside Development Zone should be treated as such. Although landowners have the right to build their properties in line with the local plans, likewise they should similarly be held responsible to build their developments which respect aesthetical guidelines given to them by the Planning Authority, including the construction material to be used, the colour and design of fixtures and fittings.

Arts, culture and entertainment is another area requiring special attention as the country moves forward to recover post-pandemic. This sector forms the backbone of our identity and innovation and going phygital (physical and digital experiences combined) is the way forward, if we are seriously aspiring to attract more value-added tourism to Malta. The main challenges for next year revolve around the country’s ability to preserve its competitiveness. We are experiencing constant increases in inflationary pressures, explained by cost-push factors such as increase in international energy prices and logistics. Being an island, our country is already disadvantaged by its insularity. The opposition had already dished out proposals on how a fund can be set up and sustained to alleviate this natural barrier and put our local industry at a level playing field with their European counterparts. Moreover, we need to find new sustainable niches in our economy that could take over part of the slump tourism is expected to be facing during the coming two to three years.

The Opposition sees a lot of potential in the maritime sector, the green economy and related activities which could see thousands of green jobs created. In addition, sustainable development, renewable energy sources, novel technologies to be installed in shipping vessels, remote working visas and longer-term working tourists, innovative pharma products, the creation of an innovative education hub in Malta are all tangible examples of the direction we are aspiring to take the country forward. We need to pay beyond lip service to research and innovation and give the necessary support to start ups and young entrepreneurs who represent the economy not only of tomorrow but even more so of today. The FATF grey listing complicated the competitiveness issue even further, as the amount of regulatory and compliance costs are spiraling as we speak, at the detriment of local businesses, especially small firms and startups. Although a restricted number of political individuals are to blame for the fate of this undesirable state, the country needs to get its act together and all the stakeholders involved need to work towards a common direction. That of returning to the white list as soon as possible.

All the professionals and practitioners, who are being urged to work towards a common goal in restoring Malta’s international reputation, should back this call by being a catalyst for change and to do what is right. Besides the challenges the pandemic brought with it, there are also opportunities that the country can embark on in paving its economic strategy for tomorrow. Consumer’s expectations and preferences changed significantly during the past 20 months. Technology helped to bring new practices which a couple of years ago no one would have expected. The digital transformation increased its pace in every facet of our daily needs. Remote working, on-line orders and deliveries, the concept of blended education and telemedicine are some examples. With these constant and fast-moving changes in our modus operandi, lifelong learning and the reskilling of our human capital became a paramount need to maximise the potential of our only resource. The rethinking of our education system is an important component of the Opposition’s economic vision. Our education system needs to be more in accord with the needs of our fast evolving industry, to empower individuals with the necessary skills being demanded by employers.

The need for the country to reintroduce the trade schools is currently being evaluated. In addition we can aspire to internationalise our vocational institutes with the help of apprenticeship schemes to be operated by the industry. Against this economic backdrop, our education needs to reflect the importance of Science, Technology, Engineering and Mathematics (STEM) in its curriculum.

The next milestone that this country can achieve during the new norm is a shift from measuring economic benefit to wellbeing. This is a paradigm shift in mentality, where economic benefits are not restricted to monetary value but include concepts such as work-life balance, quality time with family, better state of the environment, open spaces for recreational activities, more value to health and safety. The list is endless, but we are determined to achieve it if the people entrust the Nationalist Party back in government.

To achieve all this as a nation, we need the society to stop and reflect on the need to be agile and able to decipher what is morally good and what is not. To understand and advocate sustainable and long-term growth over exponential growth, with immediate returns but short-lived. A fiscal morality of doing more with less to keep public debt within sustainable levels. I firmly believe that this is the direction the country urgently needs to embark on, sooner rather than later. Bold and timely decisions will put us in a position to give back a thriving economy to our people and enhanced wellbeing to our society. Finally yet importantly, putting Malta’s reputational stand where it belongs for the benefit of current and future generations. n