No economy can move ahead by just standing still. The only imperative is to grow as standing still will only mean regression, recession and unemployment.
All through the past decades of Malta as an independent state, the search was on for drivers of growth.
The first years after Independence saw an emphasis on changing from a sea base of a naval power to the first timid steps towards industrialisation and tourism.
These two drivers were retained, with adjustments, in the next period which saw Malta push for more industrialisation and tourism. This was accompanied by unorthodox if not downright pillage as last week’s long-awaited judgement on the legality of the National Bank takeover reminded us.
For a long time, our economy resonated of a centralised economy with strict controls on importation and import substitution. But in the third phase of our independence, this was removed and the country allowed to breathe as an open economy. Importation was liberalised and the country soon adopted all the trappings of an affluent society.
Industrialisation and tourism were still the main drivers of the economy, accompanied by a very strong presence of government employment. Contrary to many promises, this strong presence of the government in the economy was increased rather than decreased’.
Yet a plateau was reached. Tourism figures remained high but flat at a high level, with annual fluctuations up and down. Then, after many years of searching for the right policy driver, low cost airlines were allowed in and tourism suddenly took off as it has in these past months. So the right driver had been found, although of course this had a negative effect on the national airline.
Another driver for growth was found in the ICT sector with financial services being the first to proliferate accompanied later by online gaming and similar ventures. From next to nothing, this has now become a strong component of the national economy.
Over the past months, the new administration which was elected after a phase of political if not economic stagnation, has tried to find new drivers for the national economy. The other driver of growth – industry – has suffered from stagnation as witnessed by the carcasses of old and unused factories in the industrial estates. A search is on for new drivers of industrialisation, partially found in the past years in the pharmaceutical industry.
As the banks (even here banks have proliferated on the back of the financial services growth) say, the problematic part of the Maltese economy is construction with its over-reliance on more and more land being given out for development and with the concomitant problem of then not being able to sell its finished product. The result has turned Malta into an agglomeration of buildings and a glut of unsold properties.
There is a need here to find a growth engine, which may be the reason for this government’s insistence on the controversial IIP proposal, or the sale of Maltese citizenship. Finding opportunities for the construction industry to sell its unsold properties may be one cogent reason but another reason may well be to heal the national finances, under attack from the Commission for going below the Maastricht Treaty benchmarks.
The events of the past hours, and maybe even the hours to come have brought attention to Malta of the worst kind, culminating in the strictures by European politicians, Commissioners et al.
Yes, Malta needs to find new drivers for growth as it has done in the tourism sector, but this search for drivers needs to be one that is strategic, well-baked, and without any negative impacts on the general picture. It is equally clear that the one driver for tourism growth, while good in itself and promising more results in the future, is not enough.
It is not enough to oppose IIP as bringing negative repercussions on the country as a whole. The search must be on for more and more sustainable drivers for growth.