The European Commission yesterday said that the measures contemplated in the National Reform Programme “do not in all cases appear sufficient to achieve the objectives, prioritisation is limited and integration and coherence across policy areas is not always evident.”
The European Commission stated this on Malta in the latest Annual Progress Report on the Lisbon Strategy, the partnership between the EU and member states for growth and more and better jobs.
The five main challenges identified by the Maltese government were sustainability of public finances; competitiveness; the environment; employment; and education and training.
“The programme contains clear information on budgets and time schedules for measures in the micro-economic and employment fields, though this is not the case for the macro-economic section,” the Commission said.
Implementation will be facilitated by the clear and inclusive governance structure and the continuity envisaged.
The programme’s strengths include the emphasis on improving human capital by raising educational levels and participation in training and lifelong learning and the emphasis given to environmental sustainability.
“Among the points requiring further attention, are strengthening competition and improving the quality of the regulatory system; and reducing the tax burden on labour and making work more attractive through a comprehensive review of the tax and benefit system,” the report said.
On the question of employment, the report notes how reforms set out in the NRP seek to attract and retain more people in employment and to expand labour supply, mainly by increasing employment rates for women and older workers, which are particularly low at 33.7 per cent and 32.6 per cent respectively.
The proposed measures target these groups and, by changing the impact of the current tax and benefits systems, aim at setting the appropriate incentives to increase participation. Making unemployment benefits conditional on participation in a mixture of training and community service is an important step in that direction and should also help increase the mobility of labour.
“While the approach is generally sound, reviewing comprehensively the incentives resulting from the tax and benefit system is still not a sufficiently high priority, given the Maltese labour market situation,” the Commission said.
Dealing with the macro-economic policies, the report says the policy objectives and targets set out are coherent with previous government commitments. Reaching them would mean good progress towards addressing the fiscal sustainability challenge successfully.
However, the report notes that “budgetary implications of the macro-economic measures are not spelled out. In some cases, such as the tax and pension reforms, the absence of a clear time schedule raises questions about the effectiveness of the overall macro-economic strategy.”
With regards to micro-economic policies, the Commission notes that research and innovation policy has a low profile in Malta’s NRP. “While a target for public R&D investment of 0.2 per cent of GDP is presented for 2007, the NRP does not include an integrated R&D strategy aiming at an overall R&D target for 2010.”
“Although the need for a strategy on innovation is recognised, the schedule and process for developing one is not clearly set out. The programme highlights the objective of furthering the use of ICT but adds little detail. In view of these weaknesses, the effort on R&D and innovation may not be sufficient to make a substantial contribution to business competitiveness,” the report noted.