As we are busy discussing parliamentary ratification of the EU Constitution, a project that by all counts seems dead in the water; as the headlines this week were occupied by the resignation of the chairman of Sea Malta over disagreement regarding the principle and/or the method for privatising this strategic national resource; as the government tries to impress on us the wisdom of past privatisations; as the Freeport’s new owner announces the intention of investing in new bigger gantry cranes – a mere recycling of one-year-old news and, when it happens, it will be little more than the replacement of equipment that has been used beyond its economic life – while all this is happening, we pay little attention to the more important reality that Rome is burning.
The increasingly efficient and reliable National Statistical Office issued the GDP figures for the first quarter of 2005 by means of a release on 9 June. The fact that the overall economy during this first quarter contracted by -0.1 per cent in real terms, compared to a real growth of 1.4 per cent in the previous quarter and 2.9 per cent in the same quarter of 2004, seems of no importance to national media and economic commentators. It received little more than passing mention in the press.
However this does not change the fact that Rome is burning and the heat is being felt, even if government-friendly media easily swallow the bait of diversion by such issues as entrenching anti-abortion measures in our Constitution – a no priority issue, to say the least.
Ask employees in the private sector whose organisations are finding it increasingly difficult to remain globally competitive from a Malta operating base. Ask them how worried they are about the security of their jobs, as their employers continue to squeeze the last drops of productivity by insisting on lower wages and inferior working conditions.
Unlike the public sector, the unions here are relatively powerless in such cases and will generally have to accept the introduction of inferior pay packages and conditions of work to safeguard jobs. In the first quarter, output in the manufacturing sector, mostly export oriented, fell by Lm29 million (more than 10 per cent) value added fell by Lm4.5 million (more than five per cent) and operating surplus was down Lm3.4 million (more than seven per cent).
The other pillar of growth, tourism, had a static performance, with no growth in nominal terms and a small reduction in real terms. So you have manufacturing and tourism, basically the bulk of the productive sector, in a growth crisis and the overall GDP figures are not worse only through growth in telecommunications, financial services and real estate.
To confirm that Rome is burning ask the small enterprises, mostly retailers, who are finding it increasingly difficult to keep their heads above the water as sales and consumption remain flat and profit margins at micro-level erode as a lack of employment opportunities forces individuals to try their luck in some self-employed activity which increases the supply offers in a stagnant market.
The basic truth, which we continue to obstinately avoid, is that our productive sectors, that sell their wares in the global market, are feeling the pain of loss of competitiveness and this pain unavoidably rubs off on employees in these private productive sectors who have to pay for such loss of competitiveness with their own skin. Compare this to employees in the public sector who not only feel secure in their jobs, quite irrespective of performance, but as usual have last week started enjoying their summer half-days.
With what moral authority can national institutions like the Central Bank preach from the mountain top about the need for restructuring at micro level (in simple language read reduced payroll costs and/or increased efficiency) in the context of stable monetary policies when, as an institution, it is itself a leading example of waste of resources and resistance to the change of restructuring? Now that Central Bank’s formerly quite labour-intensive functions related to exchange control and regulation have all but disappeared, what re-structuring has the organisation undertaken to ensure that it leads by example?
How long can the country support this apartheid in the labour market, where the most productive are the most penalised and exposed to global pressures while the least productive are the most protected and unaccountable for their performance? If we use the same argument for privatising a national strategic asset like Sea Malta, ie cumulative losses of some Lm3 million over seven years, we would have to privatise most, probably all, public sector departments, authorities and organisations if we submit their operations to the discipline of activity-based costing and rigorous financial reporting.
As Rome burns we continue to avoid the task with the highest priority – that of restoring competitiveness to operators in the productive sector by launching a national effort where the pain of adjustment is shared by all and not only by those directly affected that happen also to be the most productive.
www.alfredmifsud.com