The one economic problem everyone is talking about but few have a clear solution how to overcome it, is Malta’s dwindling competitiveness. We are not alone; competitiveness is a problem faced by many nations.

Malta is indeed losing its competitiveness. Proof: this year our exports will have plummeted some seven per cent compared to 2004, while over the last five years we have experienced a drop of some 28.7 per cent. Tourism, our main services export, is stuck in a high-fixed-costs-dwindling-arrivals spiral, while other countries like Croatia, Tunisia and Cyprus are racing away at breakneck speed. What has happened? My analysis is that throughout the 1970s and 1980s Malta was prospering in an economic cocoon. Our island was not only an ideal place to invest in, it was in many ways one of the only places to invest in. Remember that during this period, Eastern Europe was caught behind the Iron Curtain, North Africa was closed to business, while the Middle East was (and in many cases, still is) caught up in armed regional conflict. Malta was one of the few spots on Europe’s economic map that was economically competitive and socially stable, at least compared to Lebanon. So what went wrong? In the 1990s Eastern Europe opened up, North Africa invested heavily and overtook us in tourism, while the East became a threat to everyone; Malta was caught with its pants down! We have lost competitiveness not only because of the plethora of new competitors, but also because of an increased cost base and a chronic skills-shortage.

The government and the opposition spend countless hours debating and writing about Malta’s competitiveness, blaming each other for lack of productive investment and depressing tourist arrivals. Sadly, few solutions are put forward. Unions and employers participate, but almost inevitably blame each other for Malta’s plight; the unions pick on tax evaders while employers nag about social security abuse and the folly of compensation unaccompanied by productivity. They are all right. However, tinkering about with Cost-of-Living Adjustments of 50 miserable cents a week, or burdening Enemalta with more irrecoverable loans to camouflage the real cost of energy is just not sufficient. We need to affect something more radical. The following is the Green contribution towards the competitiveness debate.

The government is right in identifying that a quantum leap in education and training is the key medium to long-term solution to diminished competitiveness. The opposition is also right harping on the need to attract more foreign direct investment – I am personally also keen on the promotion of local investment. However we believe that there exists an opportunity to improve competitiveness specifically and standard of living generally through a paradigm change in the cost of living. We need to look clearly at two cost items in which Malta has built for itself a gigantic competitive disadvantage; housing and transportation. The cost of housing over the last 15 years has skyrocketed. While it is true that a few of us have become (or feel) very rich on this property bonanza, with the government cashing in big time, the rest of us have been left to finance properties with prices that have lost all relation to our well-below-European-average wages. What use is it improving a factory worker’s wage by 50 cents a week (before tax, allow me to add) to cover energy bills when the two-bedroomed flat he is interested in this year will cost Lm5,000 more come 2006? The additional five grand is going to require an additional monthly loan repayment of Lm25, after taxes that is, for the next 40 years. Give the guy a Lm6 per week increment and he breaks even! While Lawrence Gonzi will insist that buying a two-bedroomed flat is a great investment, Alfred Sant will tell you that the problem is that there is not enough overtime available in factories – because of the European Union, Manwel Cuschieri will promptly add! In Malta’s stale political reality, being caught between a red rock and a blue hard place is a sad, daily fact of life. The Green solution is to re-invent the property market by ensuring that every property on this tiny island is put to use – we cannot afford to leave any property idle. A reform in the rent laws is the first move. Not only will it rectify a 60-year-old injustice that has been dealt to many people, but it will also put every property on the same legal and economic level playing field. Ideally everyone should own his/her home. This is not and will not be always possible. With the right incentives and disincentives directed towards renting (a measure government mentioned in its pre-budget document but very conveniently forgot when drawing up the budget), we could ensure that there are enough properties on the market, available and affordable for those for whom outright purchase is simply unaffordable.

The second cost we should tackle is transport. For many in Malta, two cars per family seem to have become a necessity. Our public transport system has serious deficiencies; the Maltese are simply put off, Gozitans switched off decades ago! Of course this country’s 30-year-old love affair with the automobile is not conducive towards kick starting a national drive to give our public transport a serious re-think and a much-needed shot in the arm. The government must be the prime, albeit not sole, mover. Few of us ever factor in the real cost of private transport. I reckon that an average car costs you between Lm4 to Lm6 per day – with two cars in a family that is a cost of between Lm250 to Lm350 per month; almost a wage! Malta needs to invest heavily in public transport; we need to give people a credible and affordable alternative to owning two cars. We will not be able to do without cars, but we can realistically work towards eliminating the requirement of having two cars per family. “One car for your family’s weekend enjoyment” could be the vision. The cost savings per family are phenomenal. Imagine another Lm125 per month in the pocket of every family. That’s equivalent to an additional Lm28 per week that will not come out of the profits of our businesses, but will be spared from our import bill.

Edward Fenech is spokesperson on Finance, the Economy and Tourism of Alternattiva Demokratika – The Green Party