Malta performed worst in the macroeconomic environment, labour market efficiency, and innovation “pillars” of the report. Do you agree with this assessment and what steps do you feel are needed in these areas?

In terms of macroeconomic environment I would like to highlight the leap forward that Malta recorded. The 2014 Global Competitiveness Report ranks Malta in the 65th place compared to the 74th in the previous edition (2013). This clearly shows that Malta’s macroeconomic environment has improved considerably when compared to that of other countries. Government is committed and convinced that it will meet its targets with respect to the deficit and debt ratios to GDP. Let us not forget that Malta has the 35th best credit rating from all the 144 countries included in the GCR 2014.

With respect to labour market efficiency, Malta has lost a number of rankings and one should look at this in more detail. The main elements causing the decline attributed to this particular category were pay and productivity (15 places down), flexibility of wage determination (10 places down) and cooperation between labour and employers (seven places down). However, within the same indicator there were positive signs related to the effect of taxation on incentives to work (19 places up), the reliance on professional management (15 places up) and the women in labour force, ratio to men (nine places up).

Government is committed towards an improvement in Malta’s competitiveness. Of course, wages and salaries have to reflect such competitiveness, but one must also consider the fact that they are not the sole determining factors of competitiveness. Government is actively working to promote and improve Malta’s competitive advantages, including the investment we are putting into our educational system, infrastructural development and our energy policy, which in turn is part of a larger effort to reduce government induced costs on businesses. Government is also committed to reduce bureaucracy by 25% over the legislature and I am informed that the Commissioner for the Reduction of Bureaucracy is already working on various levels to reach this target.

In terms of innovation and sophistication factors Malta has been downgraded only by one place. This in itself should not be of consolation. The 2014 edition shows that Malta has lost places mainly with respect to the availability of scientists and engineers (15 places down) and company spending on R&D (six places down). These figures reflect trends that need to be addressed over a period of time, since they are mainly related to education and training. Government has already embarked on a programme to promote science and ICT education and induce more students to choose to pursue a career in these areas. Students who wish to pursue further education in these areas are also eligible for special schemes and scholarships.

 

At a macroeconomic level, do you share the WEF’s poor opinion of Malta’s low level of saving, as a % of GDP, and its high level of government debt, as a % of GDP? Do you think that more needs to be done here or is the government currently implementing the right measures?

Financial consolidation, adhering to the Eurozone criteria and improving the country’s finances are priorities for this government. I think we should see the picture more holistically. Government has managed to adhere to its goals when it comes to restraining its deficit; economic growth has been steady and thousands of new jobs have been created. If you take a look at what’s happening in the Eurozone you’ll find that Malta is one of the best performers. Can we do better? Of course, we can and we will. For example, we have some high profile projects for which we are seeking international investors to participate. These projects will increase jobs, elevate further the profile of the country and generate new income from abroad.

Then there are other measures of fiscal consolidation which my colleague, the minister for finance, will surely be glad to explain to you. I am very satisfied that, for example, we have managed to increase significantly the contribution to the Maltese economy of foreign direct investment coming from manufacturing. This is very important: industry is not as volatile as other economic sectors, so investment in industry is a rather long-term investment, which means that the jobs created and the wealth generated are there to stay for a long time.

The fact that the present measures are turning out to be fruitful is also reflected by the better rank that Malta was awarded in the 2014 edition of the GCR with respect to its debt to GDP ratio. Furthermore, Malta’s debt to GDP ratio for 2013 stood at 73% compared to 87.1% in the EU28 and 92.6% in the EU18. This clearly shows that Malta in this area is performing much better than other EU member states.

The markets have full confidence in how Malta is handling its debt situation. Every time that government issues bonds/stocks these calls are always oversubscribed. This clearly reflects the confidence that investors have in the government.

 

Examining “Goods market efficiency” Malta is again ranked poorly for the number of procedures to start a business and the number of days to start a business. Do you share these concerns and, if so then what should be done to address them?

We were already aware that Malta fares badly with certain competitors when it comes to the number of days it takes to start a business. That is why we have been implementing a number of reforms in the administration and running of Business First. Originally it was intended as a one-stop-shop for small business, in order to cut on the bureaucracy and help small business more efficiently. In reality, many of the original plans were not implemented in the way they were intended to be.

During the last year-and-a-half we have worked hard to make the original plans work. We have come a long way during these months and will soon be in a position to announce even more services than were originally planned. We also have plans to improve our business incubation facilities at Kordin (KBIC). Currently we are working with MCast in order to encourage students to start their own business ventures. We have allocated five units at KBIC exclusively for MCast students to launch their start-ups. The response has been very positive and soon we might have to think about increasing that space.

Here I must also add that, on average, to start a business in Malta it takes between 10 to 15 working days. However, it is true that there are other circumstances, which are usually associated with rather complex projects, which require a more complex bureaucratic procedure to process and take longer to commence. Our aim is to reduce further the number of days to start a business under both situations.

 

Ranking “Labour market efficiency” Malta scores badly for the number of women in the labour force, as a ratio to men.  What more needs to be done to address this?

Let me start by saying, that Malta over the last decade has made tremendous improvement in the area.

In the past decade a number of measures had been instilled to encourage an increase in the female participation rate. Although these measures to an extent did manage to stimulate a degree of increase in female participation, yet, we believed that more had to be done.

It was part of the Labour Party’s electoral programme to provide child care facilities to mothers who wish to leave the home in order to find a job. Government has not wasted time and that promise has been fulfilled. The first indications are that it is proving to be successful and it is being estimated that a quarter of the new jobs created this year have gone to mothers who have joined the labour market following the measures taken by government. In the last budget, government also introduced fiscal measures to incentivise more women to join the labour market. I think that we are moving in the right direction; of course, we cannot change the scenario overnight, but statistics are showing that we are managing to change things fast enough. Government will actively continue to monitor the situation and, if the need arises, further measures might be contemplated in order to facilitate the entry of women in the labour market.  

 

In the pillar of “Financial market development” Malta is scored badly against the “Legal rights index”. Are you confident that suitable legislation exists to protect investors and other market participants?

I think that Malta has a strong legal framework that so far has worked well. Do we need improvements? Sure, there’s always room for improvement, but we must also admit that this is a learning experience as other countries, even with a wider and more mature experience than us, have discovered. We are constantly on the alert to keep abreast with what’s happening in the markets around us. I am quite confident that we have the situation under control.