The role of the state in ensuring a clear path for future growth is essential. The decisions taken by current leaders and policymakers have an impact on the future outcomes of the country. In this sense, today we derive benefit and shortcomings from past decisions.
The role of the state in governing the nation catches the people’s attention during budget week. During that time, both local and foreign observers form differing sensations and ideas on the government’s policies for next year. It is a summary and a snapshot of where the country’s finances stand.
The financial allocations for each and every ministry within the sphere of EU regulations on budgetary discipline possibly gives an overview on how the government would like its ministries to induce other related entities to perform.
The changes in the tax brackets on wage remuneration and the reduction in utility prices from next March will definitely affect the basic pillars of the economy. From the income point of view, income earners will be taxed less. Then, on the expenditure side the decrease in electricity and water bills will reduce utility bills for households and business.
Conventional economic theory implies that households and industry owners’ purchasing power will be boosted. More funds will be available in people’s pockets for consumption and for savings purposes.
The micro improvement of each unit in the economy will have an impact on the macro aggregates of the country. Households will consume more goods and services, businesses will employ more people and government’s revenues will increase. Wise financial policies support future growth possibilities.
We need to consider other key contextual areas that have an impact on the structure of the country. A mismatch between structure and governmental strategy can lead to slower growth or no growth at all. Governmental institutions, culture, income distribution and the level of corruption among others are key variables in this regard.
The World Economic Forum yearly competitiveness index reports key data on all countries worldwide. In essence, countries compete with each other for a share of global foreign direct investments and exports market. Local manufacturers and service providers compete with foreign ones for the domestic market as well. Thus, the local factors that shape the local companies cost structures have a bearing on Malta’s competitiveness position.
The government’s role is to ensure that factors within its control are well tuned in favour of local playmakers while assuring a favourable competitive landscape for foreign companies that would like to inject funds in the local economy.
The competitiveness index for this year Malta ranked 41st out of 148 countries. Macro economic data on gross domestic per head ranked 37th place while the debt burden as a percentage of GDP ranked in the 120th place. We scored first on the inflation statistics, the index that measures the overall increase in prices. This suggests that local firms are more likely to compete with foreign ones since inflationary pressures on their cost structures are very low.
Malta’s score on the transparency of government policymaking stands in 60th place in view of the high problematic factors for doing business, which follows the same trend. As a matter of fact, the inadequate supply of infrastructure together with government bureaucracy is seen as major obstacles for doing business in Malta. This confirms the importance of government’s role in ensuring optimal business environments.
The report highlights Malta’s success in attracting international financial firms and how Malta’s financial structures cater well for both domestic and foreign clients. We rank 17th place for availability and access to loans. In financial circles, this component is considered vital for the liquidity of firms and for new investments.
On the negative side, Malta scores very low on labour market efficiencies. This index tracks flexibility of wage determination, reliance on professional management and others. Malta ranks very low, in 123 place, on the ratio of women to men who are in the labour force. The government’s budgetary measures to incentivise women to seek work and enter the labour market would address this gap.
On the good side, Malta has a good track record on health and primary education. Prevention is better than cure claim some. In fact, the high level of education in the initial stages of a person’s development is considered essential to maintain high standards of living. On the quality of education Malta stands in an impressive 16th place.
On technology, probably the highest contributor for economic growth prospects, Malta is also well prepared to compete on technological frontiers. Malta stands in the 21st place for the availability of new technologies. We assume that local firms embody within their systems new technologies in the least time period possible. Placed 15th in broadband Internet subscriptions makes the Maltese people some of the most proficient users of Internet services.
The report defines competitiveness as “the set of institutions, policies, and factors that determine the level of productivity of a country”. In my opinion, Malta has what it takes to become one of the best places to live. If our leaders can make the necessary commitment to reform a number of areas, then it should be possible for us to create better structures and strategies for future generations.
Clint Camilleri is a Labour Party candidate in the upcomig European parliamentary election