During the general election campaign a few months ago, Prime Minister Gonzi was persisting on the fact that Malta will be facing a number of challenges in the immediate future. The Prime Minister claimed, on several occasions, that we were facing a looming global recession, spearheaded by the recession in the US, the ever-increasing oil prices and increase in the price of cereals.
The scenarios mentioned by the Prime Minister are a reality. The whole world, including Malta, is facing a shocking situation whereby certain food prices are spiralling up. Economic statistics are alarming. Prices of major food crops have risen by 48 per cent since early 2007, partly reflecting pressures from increased world demand, rising biofuels production and drought, but also export restraints by some major food countries.
Basically, rising oil prices, environmental concerns and the desire to be less dependent on fossil fuels result in the advanced economies opting for well-intentioned, yet maybe misguided policies, to stimulate biofuels made from foodstuffs through subsidies and protectionist measures. Other factors, such as droughts, floods, and political instability have also contributed to higher food prices. The result was that barley, corn and other crops, which are fundamental in the food chain, are becoming scarcer.
For example, corn is used as fodder to animals, which in turn leads to higher raw material cost for the agricultural industry. Corn by-products such as corn starch, corn syrup etc are used in various other food items. Hence, the ripple effect is quite substantial.
Oil prices are currently at around $120 per barrel. The recent oil price this year has reflected financial and supply factors, and is coming on top of continued strong demand growth from emerging economies, such as China, India and Brazil.
These price increases have boosted headline inflation in many countries. The hefty increase in food and fuel prices caught many by surprise, raising the political stakes in various countries, along with concerns about the food situation of poor people in middle and low-income countries, about inflation, and in some countries, about civil unrest.
Malta is not immune to all these crisis. Today the economic scenarios can change at a much faster rate. Malta is net importer of food and energy, and hence can be affected negatively. Certain price increases are inevitable, namely milk, flour, rice, eggs and other farm food items. However, the government must ensure that no unnecessary speculation takes place. The government has so far proved that it is ready to roll up its sleeves to tackle economic issues. The budget deficit was a case in point.
This crisis might also serve as a catalyst for local opportunities in the agricultural sector and energy sector. The time might be right for Malta to maximise its agricultural output to reduce the dependency on food imports, even though local agricultural products are not a substitute for all food imports. This crisis might also induce investments in organic agriculture, which does not use any fertilisers, the price of which is going upwards too. As a small country, with a smaller scale agricultural industry, local farmers should look out for new opportunities arising from the global crisis.
The time is also ripe for the government to invest in alternative energies, such as solar energy and wind energy. Since wind energy is controversial, a deep analysis would be required. On the other hand, solar energy implementation is more immediate. Incentives to switch to solar energy and other environmentally friendly energy sources should be encouraged. Unnecessary waste of energy should be discouraged as much as possible. For example, systems can be introduced in public buildings, public offices, schools etc, whereby energy is switched off automatically when these buildings are vacant. Similarly other systems might be introduced to limit the waste of water (which needs electrical energy to be produced). For example, in public toilets, flowing water can be automatically switched off after, say a few seconds when one washes his hands. The list of ideas can be endless. Education is the key to success in this new venture for an environmental-friendly world.
Malta is no exception.
David Agius is a Nationalist MP
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www.davidagius.org