If the government goes ahead with the introduction of dual pricing on 1 January 2007, it will be risking an unnecessary and totally unwarranted clash with retailers who are already making sacrifices to make ends meet, Chamber of Small and Medium Enterprises director General Vince Farrugia said yesterday.
Mr Farrugia said the GRTU was one of the first bodies that approved 1 January 2008 as a good date for Malta to join the Euro. However, with its ‘head in the sand’ decision on dual pricing, the government risked burdening small traders and businesses with extra costs that they cannot afford to absorb now.
“Our members are not involved in exchange risk as their main line of business, as the vast majority of them are into buying and selling. We have said time and again that we believe in the potential of the European market and we are also strongly in favour of a single currency but if this is implemented incorrectly then we risk losing our competitive edge especially if inflation increases.”
Mr Farrugia contended that if dual pricing is introduced on 1 January 2007, retailers will be faced with extra costs owing to exchange rate fluctuations and bank charges for converting Euro cash received in payment from tourists.
He said that although the government is reducing the budget deficit, GDP growth had stalled and dual pricing would continue pushing inflation higher.
“Do not implement decisions that will hurt the economy. The energy surcharge was not introduced in a manner that would have a minimal effect on inflation rates. If this same thing is going to happen with dual pricing, then we can say goodbye to the proper introduction of the Euro.”
Mr Farrugia also criticised the various authorities, saying that solely creating stringent regulations were dampening the economy. He said the high price of diesel was having a negative impact on those industries that used this type of fuel.
He added that he could not understand why a representative of the retail sector had not been invited to sit on the National Euro Changeover Committee’s board of experts.
“There has never been a government that was so accessible to businesses, however this government either takes decisions when it is too late or it takes the wrong ones. If the government goes ahead with dual-pricing on 1 January 2007, then we will issue an order to all our members to ignore the directive,” Mr Farrugia said.
GRTU representative Ruben Buttigieg said the impact of dual-pricing would be greater on the services sector than on retail. He explained that faulty exchange rate mechanisms could give the impression that prices had increased when this was not the case. This, he said, happened recently in Italy where the effect on inflation was a minimal 0.29 per cent.
GRTU’s spokesperson on IT affairs Marcel Mizzi explained that dual pricing on the current cash registers was ‘out of the question’. The additional costs could cripple the retailer, he added.
When asked by The Malta Independent about the estimated effects of dual pricing on inflation, Mr Farrugia said that this had not been calculated but it would definitely be enough to push the figure above three per cent if the issue was not managed properly.
“The retail industry currently has room for another 1,500-2,000 jobs however businessmen are doing their best to work with limited resources due to the punishing cost structure. We also agree that excess cash should go upstream and not remain in the black economy.”
He suggested that the government should introduce bonds at lower rates than those offered on the market. This would encourage people to buy euro denominated financial instruments with their excess cash.