Mr Farrugia said that investment relies on the initiative of entrepreneurs and finance is obviously essential for investment. He said that in Malta, an anomalous situation existed because there are institutions that are awash with money with entrepreneurs full of interesting investment ideas. However the country was also facing rising unemployment and a drop in new investment per capita, Mr Farrugia said.

Citing figures from past NSO surveys, Mr Farrugia said that in the year 2000, new investment in Malta was on average: Lm3,460 per capita, but by 2001 this had fallen alarmingly to just Lm1,713 per capita, rising slightly to Lm2,026 in 2002 and to Lm2,064 in 2003.

Quoting from a recent survey conducted by the GRTU on SMEs, Mr Farrugia said that an encouraging 45.3 per cent of firms visited expressed plans to invest more in their line of business in the next year. The survey also shows that those willing to invest between Lm10,000 to Lm100,000 amount to 29 per cent while there are 10 per cent who are ready to invest without a proper business plan, Mr Farrugia added.

The survey results also showed that 18 firms out of 64 are willing to invest between Lm10,000 and Lm100,000, or a total of Lm 860,000 amongst them. Five out of 65 firms have more ambitious plans ranging from investment of Lm150,000 to Lm1 million.

Among the reasons cited by investors contributing to a lack of investment in the survey were economic uncertainty, absence of economic growth, inability to meet foreign competition, lack of sufficiently trained workers, excess competition, poor EU prospects and aging owners. Eco tax, fuel price hikes, Government bureaucracy, lack of incentives and stagnant consumer demands were also quoted as paramount in contributing to the lack of investment.

With regards to bank financing, major obstacles were: too much paper work, excess collateral, high legal fees, long procedures, excess security, high interest rates and poor assessment of entrepreneurial ability.

Opening the conference, Prime Minister Lawrence Gonzi reiterated in “the strongest terms possible” the Government’s commitment to stimulate the economy through supporting SMEs. “I am firm in the belief that SMEs are the major lubricant to the economic cycle and a significant catalyst to growth,” he said.

Dr Gonzi said in the formulation of the 2005 budget, government is “clearly and strategically ensuring that all measures which shall be announced are underpinned by a horizontal thrust to stimulate economic growth. There is, in my opinion, no other alternative path”.

“You have heard me and other Government representatives, stressing repeatedly that addressing the budget deficit is a priority. However, I must stress to you all that this national target can never be achieved if it is limited only to cost-cutting and administrative reform. More importantly it must be an exercise that is forward looking and that includes policies for expansion, job creation and investment opportunity,” he said.

With regard to SMEs, he said it is important that the commitment to provide and maintain a level playing field for this extremely vital component of our economic framework permeates all levels of policy making and administration, on a continuing basis.

“It is critically important therefore that, in line with the Lisbon Agreement, we continue to ensure that the competitiveness of SMEs in our country is not adversely affected by administrative measures and initiatives, even if these are taken in the general interest of our economic well being”.

“Indeed public sector organisations, whatever their role, also have a brief to ensure that the formulation and implementation of such measures adequately takes into account the interests of SMEs in this regard,” Dr Gonzi said.

The Prime Minister warned that at the same time as cutting bureaucracy, “we have to close the doors to the cowboys in the business”. He said the majority of businesses do not fall under this description. “These few who will not abide by the law need to find a strong regulatory framework,” Dr Gonzi warned.

He said the banking sector in Malta has improved efficiency in many areas, without sacrificing the stability of the sector.

“I am sure that Basel II will offer new opportunities for financial institutions, and these opportunities cannot but translate into efficiencies for the consumer, including the small businesses.”

He said that the MFSA will continue to consult with other regulatory agencies within the EU as well as with local financial institutions and consumers in order to ensure a smooth transition to the revised capital framework, mindful that continued access to finance is of vital importance to SMEs.

“On the other hand one cannot but stress the role that good governance plays in minimising all kinds of risk in our financial system in order that we can continue to enjoy the benefit of greater competition and wider choice, as consumers of credit and other financial services,” Dr Gonzi said.