For some years, the Maltese economy lost its élan as well as its rhythm. It has experienced sluggish growth, investment fatigue, and its debt burden became unbearable.

The seeds of the prevailing predicament were sown when the Fenech Adami administration ushered in a politically-motivated money no problem regime, designed to create a feel-good climate, in support of its EU membership bid. The immediate objective was achieved. The sin has yet to be redeemed.

In the course of that maneouvre, Malta was burdened by an outsize national debt. Precious resources, which would otherwise have been disposable for productive purposes, were squandered. Government finances came under great strain. In turn, distracted ministers lost their concentration and their bearings.

The time came to pay the bill – and it is now being paid, not by the erring ministers, but by overtaxed taxpayers, who have to endure more and more austerity.

Moral of the story

The moral of this is that, once the economy was derailed, it has got to be put back of track. The task is time-consuming. And the time taken to put the economy once more on an even keel represents lost years.

Ever since Malta assumed independence, its vocation was to switch from a fortress to a market economy, and to earn its keep by its own efforts. The objective was to turn our sword into a ploughshare and to develop Malta into a hub for the Mediterranean region, serving and trading with all countries along the rim of the Mediterranean and beyond. Such development had to be promoted within the context of a fertile economic environment.

As long ago as l977, an Egyptian-born professor, who had held teaching posts in seven universities – Professor M. M. Metwally — produced a blueprint which could have been a useful star by which to navigate. Alas it was treated with hostility.

Professor Metwally was of the view that, although there was some scope for further development, it was not in the best interest of Malta to lay too much emphasis on manufacturing, and, in particular, to develop the manufacturing sector at the expense of the servicing sector, which offered potential for expansion and reward.

Competitive power

Statistics indicated that there was hardly any scope for import substitution because Malta was unable to replace imports whose production required large-scale operation to keep costs at the level equal to import price.

He held that, so long as the size of the domestic market was smaller than what might be considered as of minimum economic size, products should be imported. On the other hand, he held that exports from Malta were mainly of the labour-intensive type, which indicated that, if factor incomes increased sufficiently, Malta was exposed to the danger of losing its competitive power.

In order to maintain and enhance the prevailing living standards, and assuming that no solution was sought through migration, other avenues were indicated.

He advocated “home-based export services” – visible and invisible. This included tourism, services to permanent settlers, the development of international educational facilities, English-language teaching to foreigners, the development of an international conference centre, the provision of Freeport facilities, and the setting up of an international financial centre.

Hostility

Some of these were not brand new ideas; Professor Metwally raised the question why valuable years had been wasted, whether this was due to inertia, administrative narrow-mindedness or for ideological reasons

He asked whether it was desirable for the government to become an even bigger employer. He argued, from econometric exercises which he conducted, that the economy was not moving in the right direction.

Some economists who ought to have known better did not take kindly to Professor Metwally.

The murky waters of political partisanship were stirred and polluted even further. Some of the hostile arguments were lame, others were specious. Others still were astonishing — such as the rejection of the Metwally proposal for a Freeport on the grounds that this had been carefully considered and rejected by high authority.

Developments since l977 have given substance to most of the observations, findings and proposals advanced by Professor Metwally. Indeed some of his proposals were adopted and the ensuing progress that followed vindicated him.

Malta would have progressed far more, and the economy would have become far more robust, if past governments were quick in the uptake and capitalised on available opportunities when the time was ripe.

Time is a great teacher. The biggest lesson that needs recurring attention is that there is no greater hindrance to progress than the subordination of economic logic to party political considerations.

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