In his budget speech, the Finance Minister painted a rosier picture than the situation warranted. There was too much stress laid on the negative effects of the global recession, as if quite a few of our ills are not of our own making. Malta is in a difficult financial situation because of past mistakes, ill-advised policies and a lackadaisical approach to problems.
The recession has merely brought to the fore past defects. Some people who should know better speak about our resilience. The truth is that we have not been hit as hard as other countries. Had we been, the country would have found itself unable to bail out industry on a large scale to maintain employment without dire long-term consequences. There is a reason for this: the government has wasted a good deal of treasure.
Debt: from e163 million to e4.6 billion
When the PN took office in 1987, the National Debt was e163 million (Lm70 million). There was a Posterity Fund of e70 million (Lm30 million+). Erring on the side of generosity, let us say that the net national debt then was e100 million. By September 2009, that figure had exploded to e3.9 billion.
Of course this is not the whole picture. The government is the guarantor of loans with foreign and local banks taken out by such corporations as Enemalta and the Malta Freeport for investment. Such loans cannot possibly total less than e800 million. So Malta’s total indebtedness comes to around e4.6 billion. Thus each man, woman and child has a debt of e11,750 hanging round their neck.
There is more to this horror story. During the period 1987-2009, governments also received e450 million in grants from Italy. They have also privatised – to use a simpler and less emotive term than saying “selling the family silver” – the whole, or substantial portions, of Mid-Med Bank, Telemalta, BOV, Middle Sea Insurance, Malta Freeport, Malta Airport, Tug Malta, Public Lotto and various smaller entities and enterprises. It has sold public land and properties for tens of millions of euros. Let us be conservative and say that in total, privatisations and such sales yielded a further e750 million.
Malta a possible paradise?
Since 1987 therefore, administrations had e5.8 billion to play with in addition to ordinary revenue. For over 20 years of this 22-year period, government was entrusted to the PN. e5.8 billion of capital expenditure, even over such a period of time, should have resulted in the conversion of a microstate such as Malta into a paradise. Is it?
At this point, it is pertinent to ask what the country has to show for this capital expenditure of e5.8 billion. Mater Dei Hospital with its waiting lists and far from efficient administration; an airport and a Freeport both enjoying long leases for a relatively low rental; most of the reverse osmosis plants; the Delimara Power Station; new ships for Gozo Channel and an improved water distribution system which still leaks substantially. Admittedly, there was the loss sustained through various attempts to put the Drydocks back on its feet – or entice it over the edge of a cliff.
Malta’s white elephants
Millions of euros have also been spent on “investments” in property overseas. I have put the word investments in quotes, as from my corner some look more like white elephants. The property that immediately springs to mind is the building housing Malta’s embassy to the EU in Brussels. Cabinet’s, or the Prime Minister’s, inability to appreciate the incongruity of the EU’s smallest state having one of the larger embassies reflects the money-no-problem mentality of our political masters.
The EU itself teaches us otherwise. At the opening of Europe House, Julian Vassallo, the head of the EP in Malta, is reported to have said that the building was deemed by European officials to be the least expensive of all Europe houses at e5 million. It is also evident that a part of this e5.8 billion, which other countries would normally use only for capital investment, was in fact used to meet shortfalls in recurrent expenditure.
The list on the debit side is terrifying. The country has an atrocious, badly designed and badly maintained road network, a pitiful public transport system – now being tackled at an additional cost to us, the taxpayers – and has only just started sewage treatment and waste separation. Oh yes, we have started to think about doing something about alternative energy sources. These debits are compounded by a mammoth public sector with corporations, foundations, outsourcing and political contract staff equalling, if not out-numbering, the public service proper.
Gone AWOL – value for money
Unfortunately, the same approach can be seen in the case of recurrent expenditure. The concept of value for money is a case of Absent Without Leave. Ministers seemingly see nothing wrong in outsourcing services when staff for them is already in position. Security and cleaning at Mater Dei are cases in point. Nor do the same ministers seem to have any objections to outsourcing warden services and leaving millions of euro – all taxpayers’ money – in the pockets of the operators. Similarly, the public-private partnerships entered into, benefit – and substantially so – the private party. The list is almost endless.
In stink up to our necks
Why has the country come to this pass? The short answer is the money-no-problem mentality of the leadership of the PN. The intellectual rigour and the steely resolve to tackle problems head-on (the Drydocks is a classic case) were almost always absent. The thinking was, and still seems to be, to throw money at problems. This works for a time – at a cost of course. Malta has now reached the end of the line as money now IS the problem: e4.6 billion and rising.
A lifeline?
In the budget speech presenting the estimates for 2010, reference is made to a number of initiatives for which various amounts are being allocated. Some of the amounts earmarked for certain new initiatives appear to be on the low side and insufficient to make a real difference. Time may of course prove me wrong. The one single initiative, which might really make a difference to the economy of the country, is the e10 million credit-line for seeding money to SMEs. At last the government seems to have heeded the advice of Muhammed Yunus, a 2006 recipient of the Nobel Peace Prize: “Those who believe that growth and development are synonymous, or move at the same speed, assume that the economic layers of society are somehow linked to each other like so many railway carriages, and that one only need stoke the engine for the entire train and everyone in it to move forward at the same speed.
“But in the case of human society, each economic entity or group has its own engine. Therefore, it is the combined power of all the engines together that pushes and pulls the economy forward. If society fails to turn on some of the engines by simply ignoring some of those strata, the combined power of the economy will be much reduced. Worse still, if the engines of the social groups at the tail end are not turned on, those carriages may start sliding backward, independently from the rest of society, and to the detriment of everyone, including those who are better off.” (The Banker to the Poor)
One hopes that this year’s budget will be well coupled to this train of advice.
Dr Muscat is leader of Azzjoni Nazzjonali
