The Minister of Finance had a ‘Road to Damascus’ moment recently; acknowledging that our economy relies too much on construction. Great! Better late than never. Now if the Minister is willing to use his power to do something about it, starting from the budget in a couple of weeks, I’ll be impressed.

With circa 13,000 development permits issued by the Planning Authority since 2013, triggered amongst others by the relaxation of height limits introduced in 2015, the construction industry has been busy making hay while the sun shines. The immediate and visible impact of this construction frenzy has been a degradation in quality of life in most localities, and an erosion of the tourism product in terms of noise, disruption, and the constant presence of cranes. This sorry situation was, until recently, not only tolerated, but encouraged as our measure of economic growth is based solely on GDP and every sack of cement sold contributes to that, even if people see less sunlight and inhale more dust.

Malta needs to quickly shift its focus on building a ‘real’ economy, based on outward-looking value-added activities and not the expansion of domestic consumption. A real economy is built on companies selling products and services that buyers outside the country want to buy. We are lucky that we have great success stories to build on, especially in knowledge-intensive industries like software, financial services and education, as well as in tourism. Companies that are created around innovations and that grow incrementally, one opportunity at a time. We need government intervention to nurture these industries as they grow and to encourage large commercial organisations to invest in them. Even here, construction has unfortunately proven to be a curse in long term economic growth as the industry seduces investors large and small into it, in lieu of export-oriented industries that are sustainable and circular.

Not all is bad with construction of course, and any future economic roadmap for Malta needs to include the construction sector. But as Minister Caruana rightly pointed out, we need to resist the temptation of stimulating Malta’s economy just by pressing the construction button. Indeed, such exclusive focus is now standing in the way of Malta developing the diversified, innovation-based economy we really need now, as the world out there is changing beyond recognition.  

So Minister Caruana has my admiration in terms of the vision explained during that Gozo meeting. Yet, we will be convinced he meant what he said if he uses the power he has as holder of the public purse, to walk the talk. When he stops the bloating of the public sector with jobs he knows we do not need; when he gives local councils adequate funds so they can effectively keep developers in check and act as guardians of residents; when he clamps down on direct orders and tax evasion for which we end up paying so dearly; when he stops the sale of passports, and steps out of the comfort of that windfall revenue so we redirect our drive to selling real product and services;  when he pushes for the revision of DC15 and we revert to the building heights of pre-2015; when he invests real money into the regeneration of urban areas, and not just the €300,000, tokenism just announced by his colleague; when he ups the investment into the tourism experience in general, starting from the small things like effective enforcement; and when he channels incentives so investors can fund Maltese start-ups and innovative companies in need of capital.

The shift from construction to the ‘real’ economy requires tangible actions that are within the powers of the Minister for Finance. They just take will, and the presentation of the national budget next week is an opportunity to demonstrate the first steps in this direction. I really hope Minister Caruana finds the courage to do what is right, even if it means taking on powerful interests, including within the government, who represent the continuity of our recent inward-looking efforts.

Dr Joe Schembri is a lecturer at the Faculty of Economics, Management and Accountancy at the University of Malta.