Rapid economic growth, combined with lack of planning, have led to some of the difficult situations Malta is experiencing today, Chamber of SMEs president Paul Abela said, adding that better plans must be made when looking to the future.

In an interview with The Malta Independent on Sunday, Abela spoke about the budget, a recent survey carried out by the SME Chamber, as well as other issues.

Asked whether the government had prepared itself enough for the increasing workforce in the country, the SME Chamber president said that it all boils down to lack of planning.

He gave an example of how things are done abroad when planning, for example, industrial space. "I remember visiting an industrial estate in Ireland. The industrial estate was already equipped with everything – roads, water, power, etc. – and then factories are built while everything is already there in place. In Malta, when they give permits or build factories one needs to contact Enemalta to see if there is supply or if they would need to bring it from somewhere else. Then they would need a substation to cater for the project’s needs.”

“We need to start planning ahead."

 "When it comes to permits, if someone wants to construct a mega project, is all the infrastructure in place for it? If the infrastructure isn’t there, what should be done? There needs to be more planning."

Turning to the sewage infrastructure, he said the country will “definitely have a problem. When I was Swieqi mayor there were 6,000 inhabitants. Today there are over 13,000”. When he was mayor, he said, the council had installed new drainage pipes in some Swieqi roads. "There were 200 houses, nowadays there are 1,000 or 1,500 flats. Do you think it will cope?"

Abela confirmed that overpopulation is a concern. "In this budget, the government said that the country must start attracting skilled labour,” he said. But, the SME Chamber president highlights another issue. “At the end of the day the problem of lack of human resources for businesses is real. So while gearing up to attract skilled labour are we going to ensure that businesses still have access to the needed resources? Maltese don't want to do the basic jobs, but at the end of the day someone has to."

There are some operators, not necessarily based in Malta, abusing of third country nationals by luring them to Malta with a promise of a good job, yet these were phantom jobs, he said, highlighting this is a main problem.

Finance Minister Clyde Caruana had said that Malta’s population will have to increase to 800,000 over the next 17 years to keep the economy growing at the current rate, if nothing changes. “800,000 is impossible. We have a hospital that was built to cater for 300,000 to 400,000”.

During the interview he also spoke about infrastructure, which he said is already being stretched. “We have over 40 more cars on the road each day. I've been telling government that it must find ways to get cars off the road. I would suggest that it would offer pensioners a payment to garage their car for a year as a trial, and they would use public transport or chauffer-driven cars."

“People no longer experience traffic just at rush hour, it’s from morning till evening, and it’s everywhere.”

Asked whether he believes that more negative measures are needed to dissuade people from using their private vehicles, he mentioned that systems that simply rely on enforcement do not work in Malta, and that a number of measures can be put in place not only to address the current problem but to make sure that the situation stops getting worse by the day.
"We need to change the culture. You won't arrive anywhere with enforcement on its own. You need a culture change."

Abela was asked about the recent SME Barometer which saw 80% of respondents say that Malta is moving in the wrong direction. Asked about this, Abela said that part of this reason is that businesses don't understand where the government wants to lead the economy. 

"We are hearing from the government that we need a new direction," he said. But up until now, “we don't know which direction we are going towards".

"If you tell businesses that we want a new direction, but don't tell them what the direction is, then business people will be lost. Should they keep their business, change it, give it up?"

The SME Chamber president said the Finance Minister publicly states that businesses are the ones who have to decide about the direction and act accordingly. "This is not on, it’s not the sailors who decide where to sail to. The captain decides where the ship sails, and then the sailors will start moving. It is the government that has to tell us which direction it wants to head in, and small businesses will adjust to go down that route."

SMEs need to look and plan for the future, Abela said.

Turning to the idea of a new economic model, Abela said: "When we talk about having a new economic model, do we mean removing certain existing sectors? IGaming, financial services, manufacturing, tourism are all sectors that are working well. In my opinion, what we should do is improve every sector, or change them to fit in with today's scenario."

Speaking about tourism, his belief is that there will be too many beds available in the future. "Let's say we can attract a maximum of three million tourists. For the beds we will have, we would need around five million tourists to fill them,” he said, referring to a survey carried out by the Malta Hotels and Restaurants Association. “In the hotels sector, you need 60% occupancy throughout to make a profit, and if you don't reach that, then that business will have a problem. In the coming years, we will have extra beds available. So then, will we lower rates and lower quality? Is that what we want? I don't think we want that, but rather I think we want to upgrade the tourism sector."

He said that over the past few years it has become clear that there are too many people. "Let alone if we attract more. So will we focus on getting more tourists? But then how will that affect the quality of our tourism product?" The best tourism model in his eyes would be to focus on upgrading quality. He believes that the old hotels which didn't refurbish will be the ones to suffer problems.

Asked about the announced changes for tourism sector workers, where skills cards will be introduced, Abela said that the "government is trying to start tackling issues sector by sector to improve them”. 

"The skills cards will be a step in the right direction," he said. "You can't go to a restaurant and have a waiter who doesn't even speak English. At the same time, however, we cannot ignore that we have basic staffing problems in this same sector and we need to make sure it is given the resources it needs to work."

Another part of the SME barometer says SMEs identify the most important issues that the country is facing that need tackling. The top two choices were the level of corruption and lack of good governance. 

The perception among SMES is clearly that there is this constant shadow of corruption in the country, and that this could be because they have encountered it themselves as well, Abela said. He said that corruption has been around for a long time.

Asked how the government should tackle these issues and what changes it should immediately make, Abela focused his answer on just one sector – Malta’s public procurement system.

The Contracts Department has been kept in an inadequate state to deal with the procurement needs of the government he said, adding that it should have a much greater role as watchdog for legal procurement practices, overseeing the direct orders and much more.
Asked whether the Chamber of SMEs receives many complaints about favouritism by government, he said that direct orders are part of the favouritism, and said yes, the Chamber of SMEs' members do complain "as they feel that direct orders are many times unjustified”.

"I understand the urgency. When it comes to direct orders, if it is monitored and one can easily see how a decision was made and check whether it was genuine or not, then it would be a different scenario. There needs to be more transparency. If a direct order was given to a company for something, and this is followed by an audit which finds that it was needed that's one thing, but if direct orders are the order of the day, then that's an issue."

The government has mentioned the existence of Cartels in Malta. Asked about this, he doesn't believe the word cartel was the adequate word to use but he understood what the minister intended. "Even words need to be calculated. When the Finance Minister mentioned cartels... having cartels is a very serious issue, the minister was rather referring to dominant players in many sectors, which given the size of the local market, is not surprising. We told the government we are ready to sit down with them and with wholesalers and see what can be done together, instead of shooting sweeping statements.”

“We are witnessing another wave of anti-business sentiment. It was the case 10 years ago, and then it changed, but if the government isn't very careful we would go back to that (…) The reality is that there is a lot of competition in our small market.”

Told that if there is profiteering, at a time when businesses have been given so much support from public funds, it would be wrong, he brought up the Malta Competition and Consumer Affairs Authority as an example. "The tools are already in the government’s hands and these could have been used whenever the government saw fit." He said that this authority can look into situations either on its own initiative or if someone files a report.

"MEP Alex Agius Saliba, instead of going to the European Commission to investigate our businesses, should have asked the MCCAA to establish if there is dominance and take the necessary steps from there. Prices vary greatly, there is no price fixing."

"When considering Malta's size, we have the largest number of retail outlets and supermarkets per capita in Europe."

Asked how happy he was with the budget, he said that the Chamber of SMEs had made many proposals that weren't taken up. "We voiced our opinion that the electricity subsidy was, for businesses and families, very important. The cost is quite substantial," he said, noting that the subsidy will be continued.

He referred to those who say the country could do without the subsidy. "You would need to conduct an impact assessment. If the €350m was burdened by businesses and families instead, what would that have resulted in? Unemployment would definitely have been a result."

"So this budget was positive, but there were other measures we thought the government should have included to assist SMEs. It was obviously a social budget, looking at where the increases are, and I don't think businesses really featured that much.”

Abela said he is not concerned that the subsidies would result in rising debt. "What the Finance Minister said is that the debt is below 60%. That is something which eventually will be somewhat offset by economic growth. I don't think it’s a major concern in these circumstances. We must keep in mind that we exited the pandemic, when we had the wage subsidy which resulted in jobs being kept.”

The Malta Chamber of Commerce, Enterprise and Industry had asked the government for a six-month advance notice before it reduces or removes the subsidies on energy. Asked if this would be enough for SMEs, he said that the government would need to look at the impact of removing such a subsidy and the minister gave the reassurance that the subsidies will be there for as long as necessary. 

"The Prime Minister also said we need to be more energy-efficient," Abela said, noting that Malta must look at becoming less dependent on fossil fuels.

He spoke about expanding solar panel infrastructure, mentioning the many factory roofs available for instance. "We need to do more. If we have more green energy, we would save on the amount government is spending each day on the subsidy." He said that the government should plan ahead in terms of incentives as, "if they tell us in six months’ time the bills will rise, what could an SME do within that period?"

"Inflation will skyrocket."