There has been heated debate in Parliament of late discussing the budget implementation measures. Both sides of the House argued that a great deal needs to be done to maintain and possibly improve our standard of living in these difficult economic times. The euro crisis is not over and, as a tiny island in the Med, our leaders have to stop bickering among themselves and focus on a sustainable plan to surmount the obstacles facing us.

Introducing the debate on the Bill implementing the budget measures, Minister for Finance Tonio Fenech said that despite the crisis the government took a cautious approach on how to solve various problems. Most expected a subsidy on spiralling energy prices but this would have only been a palliative without permanently solving the long-term viability of Enemalta. The harsh reality is that as oil supplies must be paid for at escalating prices, the government took steps to subsidise about 30,000 families to shoulder the burden arising from higher charges. As always, the top priority was securing sustainable jobs and no amount of debate will alter the hard truth that most neighbouring countries are struggling with record levels of unemployment. Therefore, amid criticism from the Opposition that the budget failed to attract new investment, Mr Fenech insisted that, in his opinion, the budget strategy succeeded by incentivising jobs, boosting the economy and creating an environment that was attractive to investors, despite current difficulties. The government’s ultimate priority was to safeguard employment, industry and businesses, so that the social framework could be sustained. Parliamentary reports show that the government had invested, over a four-year period, more than €42 million in various initiatives to help over 560 industries to procure new machinery, to develop export markets or establish contacts, or to invest in Research and Development, innovation and E-business. One may well comment that €42 million is such a paltry sum when shared between hundreds of beneficiaries. It looks more like a joke and definitely more effort is needed to cut waste and redirect any savings reaped to where our mouth is.

Granted that rhetoric in budget speeches comes easy to the Treasury advisers who draft them, and we have heard all too often that the budget is intended to boost the economy, offer incentives for industry and SMEs, extend assistance to the tourism industry and boost economic activity in new sectors, such as the ICT industry. In truth, each year the good intentions get mired in bureaucracy and excessive red tape slows down progress even though the good intentions are laudable.

Here we notice that much fanfare has been made of government agencies who announced with aplomb the introduction of initiatives – such as giving €300 a year to every elderly person living at home, various schemes to help SMEs and the one-year tax exemption for mothers returning to work.

Malta Enterprise (ME), which was created by merging three former agencies, the Institute for the Promotion of Small Enterprises (IPSE), the Malta Development Corporation (MDC), and the Malta External Trade Corporation (METRO), is run by the politically appointed CEO whose experience and good connections as an ex-member of the PR team at the Prime Minister’s office has guided him well to manoeuvre though the jungle of bureaucracy and a dirigisme attitude taken by the higher echelons within the government structure.

Following the enactment of the Small Business Act last year, ME was responsible for setting up The Business First initiative with 50 enterprises under one roof, purportedly to give new businesses a golden opportunity. Its role is to act as a single point of contact for enterprise in Malta and to provide cohesion to government policies and efforts relating to manufacturing and service enterprises in this country.

Practitioners can tell from experience the nightmare they face when applying for the necessary permits for international clients who choose to set up a manufacturing or service industry. Politicians play lip service each time at successive budgets, promising heart and soul to eliminate unneeded bureaucracy so that entrepreneurs would focus on their core work. This quest to fight bureaucracy has been an illusion although some progress has been reached within the public sector with computerising of some essential services. It is no secret that since its inception, Malta Enterprise has found it an uphill climb to attract high value added investors especially in the manufacturing sector. Part of the problem can been attributed to the delicate task of integrating the staff previously employed under three disparate institutions and partly due to the economic slump following the Lehman collapse.

The industrial sector has faced many challenges and the government has directly helped major players like ST and Trelleborg in the training of staff and retooling during times of international recession. Naturally, all this comes at a cost and one has to be careful not to overlook other sectors of the economy such as tourism, agriculture, energy and the upkeep of the environment. The years of profligacy, which saw plenty of prodigious projects sustained by public borrowing, are over and considering our debts and euro crisis, which is hitting exports, it comes as no surprise that Moody has dropped our credit rating one notch.

The European Commission has said that Malta is at high risk as regards sustainability on public expenses and forecast that, in 2020, the national debt would increase to 117 per cent of the GDP. Many times of late one reads about lamentations by the opposition saying the budget was flawed and economic development reached its economic targets except for 2011 after postponing certain payments to 2012. With a tongue in cheek they blame the government pointing out it had already exceeded its target for 2012 in the first two months. There has been a drop in FDI in the last five years, which does not help productivity. Statistics show how the recession has not left us unscathed and in 2006 when gross fixed capital formation was 22 per cent of the GDP it decreased to 21 per cent in 2007, 16 per cent in 2008 and to 13 per cent in 2011. Lack of investment in the last five years adversely affected Malta’s productivity. A recurrent jibe by the opposition party is the weakening of social cohesion as a result of poverty traps in some strata of the working population.

Last week, Caritas Malta published a study in which it said that a family of two parents with two children needed a minimum of €10,600 a year and that more than 55,000 full-time employees did not earn €9,000 a year. One suggestion to alleviate hardship is that government should increase the tax capping to exclude these people from having to pay taxes and increase the minimum wage. Ironically, banks are tightening credit to applicants of new loans and this is exacerbating the hardship by SMEs to penetrate new markets. Even in what is perceived to be the secure mortgage sector, the Caritas report says that help should be provided to house owners who are finding it difficult to honour loan repayment obligations.

So the immediate solution to our financial and social woes is the need to generate new wealth, inculcate an entrepreneurial spirit among our SMEs and encourage more women to join the work force, particularly those tertiary trained graduates who chose to stop working shortly after marriage. Can Malta Enterprise come to the rescue and motivate its trained staff to focus on job creation by helping the creative strata among our industrialists to seek new pastures? The answer comes in a recent tender issued by ME to help companies obtain better access to forms of finance, particularly equity capital. This is a novel idea that may have escaped the attention of MDC or METCO in the past. Its principal objective is to raise the quality of investment opportunities by coaching entrepreneurs and helping them to meet higher standards of accountability and corporate governance, thereby grooming them for better chances of attracting equity participation. The ME tender states inter alia that: “At present there exists no formal system by means of which entrepreneurs or businesses which have an innovative proposal may access equity financing for further development. This situation has resulted in local project ideas being developed in foreign countries, businesses having limited growth and concepts lying latent.” It is welcome news that the government is budgeting funds to be used for a competitive tender to select contractors organising training and awareness cessions over a two-year period aimed to ensure better prospects for equity financing. The plan is organise professional campaigns attended by entrepreneurs of eligible businesses to become investment grade.

Most SMEs in Malta are family owned and are traditionally averse to seek external equity finance, and those who are willing need some mentoring to properly understand the full potential of equity participation in their firms by local or foreign investors. For a start ME has taken a prudent approach and is only targeting a relatively modest injection of capital ranging from €50,000 to €1,500,000. This may be criticised as being spartan or too little too late since such funding in theory should be easily accessed through commercial banks albeit at a higher cost. To conclude, this tender needs careful handling otherwise it may be a superficial attempt in adding to the string of conferences and awareness workshops, which are organised regularly by banks, top audit firms and training schools. There have been many attempts that failed in the past to link progressive companies wishing to exploit new ideas and export their designs with a pool of private investors. Let us hope that Malta Enterprise will succeed where others have failed and in the coming two years manages to bridge the financing gap for our budding entrepreneurs.

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The writer is a partner

in PKF an audit and business advisory firm