Over the past week, two very good pieces of news for Malta went almost completely unnoticed.
One can understand a certain reticence by the government in announcing these items for they confirm the good work done by the previous administration.
One can understand rather less the fact that the media in our country has not seen fit to notice it. Mostly however, both government and public opinion are focused on other issues that may not be as vital as these.
On Thursday the National Statistics Office published its first estimate as to GDP in the second quarter. Now that may be revised later, upwards or downwards as the case may be.
But so far, the NSO tentative figure for GDP growth in Q2 means Malta enjoyed the highest growth in the entire EU.
This is what NSO said in its statement: “Provisional estimates indicate that the Gross Domestic Product (GDP) for the second quarter of 2013 amounted to €1,747.4 million, an increase of 3.4 per cent compared to the corresponding quarter last year. In real terms, GDP went up by 1.7 per cent.”
And this is what Eurostat had said the previous day: “Among Member States for which data are available for the second quarter of 2013, Portugal (+1.1 per cent) recorded the highest growth compared with the previous quarter, followed by Germany, Lithuania, Finland and the United Kingdom (all +0.7 per cent). Cyprus (-1.4 per cent), Slovenia (-0.3 per cent), Italy and the Netherlands (both -0.2 per cent) registered the largest decreases.”
The second item of good news regards the position of Malta in the Global Competitiveness Index 2013 – 2014 from the World Economic Forum (WEF), a useful tool used all over the world in the marketing of any country.
This is where it gets funny. I reported in The Malta Business Weekly that Malta had retained the same ranking, 41st out of 148 countries as it had last year, up from 47th the previous year, while a competing paper, determinedly optimistically now, said that “Malta climbs six places in Global Competitiveness Index report: Yearly competitiveness index report published by the World Economic Forum ranks Malta 41st, up six places from previous year.”
Another paper did not even report the news, although it had carried a small item on its online version, later removed.
The news was briefly reported on TVM but there has been no public comment on this all-important issue, although there is a vociferous debate going on in the country about various other issues.
Beyond the ranking, it is what the report says about Malta that makes very interesting reading. It is also very depressing reading because the WEF has been saying practically the same thing for years now with only a very modest improvement registered by Malta.
There is no doubt that the present government has been elected on a platform of quite clear commitments, especially as regards electricity rates, and there is no doubt of its determination to implement this commitment.
At the same time I believe that unless Malta improves its competitiveness, it will not be able to improve the quality of life and attain sustainable growth. Reducing energy prices can, of course, help, but unless accompanied by a quantum leap, will be clawed back with no appreciable results.
For instance, the WEF Index lists very clearly that the ‘most problematic factors for doing business’ are, in this order:
? inefficient government bureaucracy (25.4 per cent of respondents)
? access to financing (14.8 per cent)
? inadequate supply of infrastructure (9.9 per cent)
? insufficient capacity to innovate (7.6 per cent)
? tax rates (7.1 per cent)
? tax regulations (6.4 per cent)
? corruption (6.2 per cent)
? inadequately educated workforce (5.2 per cent)
? poor work ethic in national labour force (5.2 per cent)
? restrictive labour regulations (5.2 per cent)
? inflation (4.7 per cent)
? and other causes each under one per cent.
When a company thinks of relocating to Malta, it looks, I say, at the details of this Competitiveness Report rather than at the price of electricity.
We have been carrying this particular albatross – inefficient government bureaucracy – for years and years. The Fenech Adami administration came up with a plan to improve government bureaucracy but it does not seem that it has improved sensibly. The present administration even has a man for it: “Dr Michael Farrugia, MD, MP, Parliamentary Secretary for Planning and Simplification of Administrative Processes in the Office of the Prime Minister.” A mouthful, which in other countries has been the surest bet this will not lead to the slashing of red tape but to actually increase it.
One other unreported bit of news last week also came from Eurostat. On 5 September, it issued a study on people outside the labour market.
Here again, a statistic that is vital to our interests did not even get the glimmer of a mention.
The study says that since 2002 and despite the economic crisis, the share of the inactive population in the total population of working age has fallen from 31.4 per cent to 28.3 per cent in the EU-28.
But not so in Malta.
“The prime working age in the EU is between 25 and 54 years. This is also the age when families are started and children are raised. It is in this age group that the gender differences of the inactivity rate are more pronounced. In 2012, 8.4 per cent of men in this age group were inactive in the EU-28 compared to 21.1 per cent of women. The inactivity rate of men was lowest in the Czech Republic (4.5 per cent) and Luxembourg (5.2 per cent) and highest in Croatia (16.3 per cent) and Bulgaria (15.2 per cent). The inactivity rates of women aged 25-54 ranged in 2012 from 10.9 per cent in Slovenia and 11.0 per cent in Lithuania to 41.6 per cent in Malta and 33.6 per cent in Italy. Turkey recorded 63.3 per cent of women aged 25-54 being outside the labour market.”
As for the age group 55 to 64, “The inactivity rates of men were highest in Slovenia (56.4 per cent), Hungary (53.6 per cent) and Belgium (52.1 per cent) and they were lowest in Sweden (29.1 per cent) and Germany (26.4 per cent). On the women’s side, the inactivity rates were as high as 83.2 per cent in Malta, 73.5 per cent in Slovenia and 70.1 per cent in Greece, and as low as 27.0 per cent in Sweden, 35.3 per cent in Estonia and 37.9 per cent in Finland. Inactivity rates are particularly low in Iceland: only 12.9 per cent of men and 22.0 per cent of women in this age group are inactive.”
We knew this but we may not realize that if the Maltese workforce gets to the same levels of other countries, our GDP will shoot up. The question is: where will these people find employment? What will motivate people who do not work now to go out and contribute to the national good?
Past governments have half-heartedly offered child-care facilities, with all the problems associated with this venture, and there have been some good results, but mostly people who are having it good without working will not readily go out to find work.
When month after month Malta reports it has one of the lowest unemployment figures in the EU, it hides the accompanying factor that a huge chunk of the potential labour force is just not interested in working.
Now that they will get electricity at a cheaper price, will they be motivated to go out and work? Hardly.
The present administration is being hard-pressed by its ally, the General Workers Union, to ban all kinds of precarious work. It would seem that ethically this is the right attitude. But caution, according to Adam Posen writing in last week’s Financial Times about Germany: “Since 2003, a falling unemployment rate has been the consequence of the creation of a large number of low-wage and part-time or flexitime jobs, without the benefits and protections afforded earlier post-war generations. Germany now has the highest proportion of low-wage workers relative to the national median income in Western Europe. Average wages increased by more than inflation and productivity growth in the past year for the first time after more than a decade of stagnation.”
If not even mighty Germany found it could find growth without allowing low-wage, part-time, flexitime or what have you, what chance does small Malta have to be right and virtuous and protect full employment without scaring off investors and entrepreneurs from employing people they would find difficult to hive off if they find themselves in difficulties?
Lastly, the present administration seems to believe with some reason that a good chunk of the government bureaucracy that people blame derives from Mepa and it has directed the Parliamentary Secretary to cut bureaucracy and sit on Mepa to get it to process (and approve) Mepa applications as soon as they’re in.
Fine. This means that while we already have 70,000 empty dwelling places, the numbers will get bigger and bigger. The banks are holding off from lending to construction projects but the building still goes on and the Mepa applications flow.
This short-termism is alarming. In the medium to long-term it will make the viability of the Maltese economy more and more uncertain. It will only increase the pressure on our infrastructure and on our roads. It will not solve any of our structural issues regarding competitiveness. It will be even more difficult to climb out of when, if ever, we realize we have taken the wrong turning.
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