The Malta Employers’ Association (MEA) has warned that workers are already jumping ship from the private to the public sector, as the pre-election "talent drain" begins to take hold.

The MEA also called on the government to provide a Budget for 2022 which “concisely and concretely tackles the serious structural flaws in our economy”, rather than opting for a customary eve of the election three-hour speech about “five a side football pitches and [the] building of pavements”.

In a 12-page proposals document for the Budget which will cater for 2022, the MEA said that hope for a fully recovered economy by the middle of this year had dissipated owing to a “misplaced attempt” to kick-start the English Language sector and to the country’s grey-listing by the FATF.

“Consequently, against a hope that the economy will have been on the way to a somewhat normal situation by the end of 2021, the reality is that COVID is still a threat to our tourism sector, and the impact of the grey-listing will be felt across the economy in the coming months”, they said.

The MEA said that while Malta had a very strong vaccination programme and had well-designed fiscal support measures, its handling of the spread of the virus had cost the economy hundreds of millions and subsequently inflated the government deficit and public debt due to a shortfall in tax revenues.

Speaking about Malta’s grey-listing, the MEA said that the way out of the grey-list is not simply by increasing measures and more restrictive compliance systems, which have already caused added bureaucracy and costs.

“We have laws in abundance. This is no longer about ticking boxes - there has to be a determined, uncompromising effort to clean up this blemish in our history and source of added complications for business within the shortest time possible”, the MEA said.

“As things stand, we have politicians who are prepared to stubbornly safeguard their political survival, even at the risk of placing Malta on an extended stay on the FATF grey list”, they said.

They said that a reform is necessary to sever the link between party financing and business interests in order to create an environment that offers a level playing field.

The paper also underlines the need to “free and incentivise underutilised labour and channel it into more productive employment in the private sector” in order to deal with shortages in the supply of workers.

An essential short-term recommendation is to reverse the talent drain from the private sector prior to an election, they said, with many companies already reporting that this “migration” is already occurring.

The future of the Maltese economy will depend on the management of its human resources and the budget should plan for this in an appropriate manner, the MEA said.

The association included several points to this end, such as a concerted effort to reduce the incidence of early school leaving, channelling students into career-oriented disciplines such as STEM subjects and weaning them away from ‘soft options’ in their studies, and by reducing the gender pay gap by addressing the occupational stereotyping that still prevails in choice of career.

On the workplace environment, the MEA said that the new forms of work organisation such as teleworking and remote working mean that more flexibility is required on the part of all social partners.

A shift in mentality which will entail a more results-oriented approach rather than hours-based approach we are used to, they said.

On the environment, the MEA said that the Budget should include provisions that reflect the government’s strategy to address its own Low Carbon Development Strategy in the coming years.

The budget should also include multi-faceted measures, targeting businesses, educational institutions and even households, to continue to transform the economy to be more directed towards innovation and digitisation, they said.

They also said that the Budget must be designed to address the present and emerging threats to Malta’s economy, which include a rising deficit and public debt situation which they say is not exclusively Covid-related, the decline or complete halt of revenues from passport sales, and a slower than expected tourism recovery.

Global tax reform which may render Malta less competitive in attracting financial services, infrastructural bottlenecks and the problems of correspondent banks – which will be amplified by the country’s grey-listing – are other issues cited.

There is a need for a change in culture and to suppress the temptation to go for a populist budget which is customary on the eve of an election, they said.

“This is not the time to have a three-hour speech about five a side football pitches and building of pavements”, they added.

“What is expected by the business community is a budget that concisely and concretely tackles the serious structural flaws in our economy which, though resilient, also has limits to the blows it can take in the prevailing political and economic environment.”