Like many other countries in the eurozone, Malta will be facing tough choices in the coming year or two in order to address the two-pronged threat of economic slowdown and spiralling inflation. These choices will not be easy, but it is vital for our long-term economic interests that we do not fudge the issues through incompetence or lack of political courage.
The enlarged EU offers international investors various opportunities to direct their investment to countries that are still relatively low cost, but offer an excellent pro business climate. Although the boom experienced by the Baltic States since they joined the EU is proving to be quite unreliable, because it was mainly based on expenditure in consumption and property speculation, the attraction of eastern European economies for new investment remains very real.
If Malta wants to be a serious contender for direct foreign investment, we need to prove that we are not only good at promoting our island, but even better at delivering a package of advantages to prospective investors. Our competitiveness needs to improve rather than deteriorate, as it has been doing in the last few years.
We need to ensure that we do not pay ourselves more than we can afford and also encourage major capital investment to prop up the productivity of our enterprises. We also need to tackle the problem of low educational achievement, which is one of the most serious failures of this Nationalist administration.
The spiralling cost of oil, food and other commodities is an equally daunting challenge for this administration. Rather than slamming more taxes on the indefensible people of this country, our government should be promoting better management of our limited resources.
Our government’s role in the economy is still huge compared to other eurozone countries. This means that any profligate public expenditure policies will ultimately have to be financed by taxes gathered from hard-working families. And here I am not just referring to the abusive use of resources, but also to wasteful expenditure that does not bring much benefit to our infrastructure.
Ireland, which has just seen a change in the political leadership of its government, faces similar problems. The new prime minister is reported to be seeking an agreement with the country’s trade unions to secure a three-year deal on pay in return for personal tax cuts. Exchanging wage moderation for personal tax cuts has been the cornerstone of Ireland’s social partnership economic models for some years.
Investors will welcome such agreements because they eliminate uncertainty, especially at a time when most western economies face more difficult economic conditions than they have done in the last 10 years. We need to remind ourselves constantly that we are now competing in a globalised economy, where business decisions are taken on purely cost and benefit considerations.
We need to go back to basics and examine what our competitive advantages are and also devise plans to address our weaknesses. More resources should be redirected from the public to the private sector to ensure that we raise the productive capacity of the economy.
It may be inevitable that, in order to do so, we will need to liberalise our labour market to ensure that those industries that are doing well
will find the workers they need to grow. Non-productive labour in the public sector should be either retrained to become productive, or else controlled in order not to create further inflationary pressures that have to be financed by the taxpayers.
The Labour opposition will keep the country’s long-term interests as its top priority when evaluating every proposal that the government makes to improve the economic performance of the country. We will also be as vigilant as democracy demands from an opposition party to ensure that the government’s performance and decisions are scrutinised, so that our people are informed at all times about how their money is being spent and how the country is being governed.
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