The Chamber of Commerce believes that Malta’s economic model must be changed from one which is input-driven to one which is growth-driven and more based on value-added, CEO Marthese Portelli said.
“The Malta Chamber of Commerce believes that Malta’s economic growth model needs to be put on a more sustainable footing. Economic growth based on less labour input will help improve the quality of life and rein in the stress of Malta’s infrastructure at all levels,” she said.
In a wide-ranging interview, the first part of which was published in The Malta Independent on Sunday yesterday, Portelli acknowledged that this cannot happen overnight, but it must certainly start to the addressed without any further procrastination.
Over the past 10 years, Malta has seen a large surge in population – which now nears 550,000 – after the government employed an economic growth based largely on population increase. Some weeks ago Finance Minister Clyde Caruana said the population will have to increase to 800,000 if the current economic model is to be sustained. He argued that the model needed to change to remain competitive. The Malta Chamber of Commerce has spoken regularly about the need to prioritise quality over quantity.
“This year’s budget cannot be simply more of the same. It needs to set a new direction and clearly lay out how the necessary changes, reforms and initiatives to shift to a well-being economy are actually going to become a reality,” Portelli said.
Asked about foreign nationals she said “we will always have foreign nationals working in Malta. However, this is where we need to think outside the box. We need to incentivize a shift away from labour-intensive activities towards an economic model which is not dependent on increasing the population. We need to move away from the tendency to depend on utilising inexpensive labour and instead move to a higher calibre of skilled workers coupled with increased investment in technology.”
“For example, is the construction industry using modern methods and practices at large? Or are the majority still using methodologies that are way past their expiry date?” Portelli said, adding that the answer is the latter. She explained that there should be a new regulatory framework for construction and demolition waste which facilitates the transition to a more circular economy and the development of secondary markets for end-of-life resources. Incentives to opt for dismantling instead of demolition, for investment in technology advanced recycling facilities and depots including digital deconstruction, as well as for research and development and obtaining the respective CE Marking and patenting, would help.
“Furthermore, is the manufacturing industry investing in the latest technology? Is the tourism industry well-geared for today’s digital world? Is the services industry agile enough to adapt to today’s fast pace?" she added, explaining that government needs to enable this transition.
“Our value-added will also increase if we focus on getting in more highly skilled resources, both Maltese currently working abroad, EU nationals and TCNs who have skills and expertise which currently as a country we do not have,” she said. The Chamber is proposing a tax exemption for the first 5 years of employment for highly qualified Maltese working abroad to entice them to return to Malta. It is also proposing revisiting the criteria of the key employment initiative to attract the more highly skilled foreign resources.
Portelli continued that in line with that vision, the Chamber’s pre-budget document highlights the importance of research and innovation.
“Our competitiveness hinges on the extent the country supports and enables successful innovation-based growth, for both start-ups and established businesses. In fact, we are proposing increasing the 150% tax deduction of R&I expenditure to 200%,” Portelli said.
When it comes to tourism, we need to look beyond the number of bed nights and the amount spent per head, and drawing up simple comparisons to previous months, quarters or years. If we want to get the true picture, we need to look at the real per capita expenditure and the real per night expenditure – official NSO statistics confirm that although the number of tourists may have increased, their spending power has decreased in real terms. We also need to benchmark ourselves against our competition. “Some Mediterranean countries we compete with had percentage increases much greater than Malta’s,” Portelli said.
She said that Malta offers a Unique Service Proposition in terms of history, culture and character. “We need to protect it and nurture it – this is what ensures quality experiences to tourists. We must also address mobility, utility supply, urban planning, waste management as well as regular and proper maintenance and cleansing of public areas. This is what will help us remain competitive amongst other competing Mediterranean countries.”
“The quality experience experienced inside our hotels and holiday accommodation is not enough to earn us good reviews and get return customers. Quality needs to be felt everywhere, not least in public spaces. This is the frame of mind that our policy makers must adopt,” Portelli said.
Another proposal the Chamber is putting forward is that a percentage of the VAT generated by a locality is re-invested back into that locality’s product development, including its upkeep.
She said that enforcement and good governance are key, as she spoke about the four main points which sum up the chamber’s pre-budget document.
The first is efficiency and efficacy of the labour market, shifting away from labour-intensive to improve quality of life and reign in stress on the infrastructure. The document explains that the country needs to move towards a “well-being economy.”
The second point is tackling structural problems, be it mobility, energy and water provision, sewage, waste management, planning and over-construction.
The third point is to seriously address the fundamental strategic areas of uptake of digitalisation and the transition to becoming environmentally sustainable.
“Last, but not least, we need to truly embrace good governance,” Portelli said.
“We need to have an agile administration, an agile government and an agile parliament that take correct, timely decisions and move fast on implementation and execution. Otherwise we will continue losing our competitive edge and we will continue scoring low on our productivity,” Portelli said.
“This budget needs to ensure that there is proper proactive enforcement across the board, rather than reactive enforcement based on a pick-and-choose approach.
Everyone should be subject to the same level of enforcement. If people know that there is enforcement across the board which is being done in a proactive fashion, rather than reactively, everyone is more likely to obey the rules, Portelli noted.
Portelli spoke about the traffic problem in the country. It affects everyone – business, the employees, the elderly, students, those running errands and shopping, those on vacation, etc. – apart from time lost, traffic also contributes to frustration and increased levels of stress.
“This is an issue which cannot be tackled by taking one simple decision. A strong infrastructural foundation is essential to address the root of the problem. There are a number of measures that need to be implemented. Some of them might not be popular,” Portelli said.
In order to be effective these proposals need to be implemented together, she said.
“We have 18 proposals aimed at reducing traffic whilst also helping the shift towards greener transport,” she said.
Portelli explained their e-mobility wallet solution, which involves the introduction of an e-mobility wallet with government allocating an annual amount to every e-wallet to be used on various environmentally sustainable or shared transportation options (by land and sea). This would be coupled with the introduction of parking fees in central urban areas with fees paid being immediately refunded back into the e-mobility wallet for use of sustainable means of transport.
“The minute you park your vehicle in a heavy-urban area, the fee that is paid for on-street parking goes back into your e-mobility wallet and can be used on sustainable means of transport such as shared transport, ferries, public transport and others,” Portelli said.
While some of the proposals cannot be implemented overnight, there are a number of proposals that can, such as that of lowering the passenger thresholds stipulated in the Employee Transportation Deduction Act to encourage more car-pooling, she said.
She also mentioned making better use of technology such as smart parking technology and a centrally managed permitting system (instead of the current local council based permitted system). Smart parking technology would notify drivers of closest available parking spaces - this would avoid having vehicles going round in circles trying to locate a parking spot. A centrally managed permitting system would be able to intelligently manage multiple permits for concurrent activities in same region, with minimum disruption on traffic flow.
She also mentioned revisiting the current school transport system to maximize pooling efficiency whereby pooling should be organised by zone and not by school.
Portelli said that another point the Chamber is insisting on is tied to planning. The chamber is insisting on the introduction of obligatory off-street car park spaces tied to permits issued for new buildings, which obligation should not be allowed to be offset against a payment of fees (previously known as the Commuted Parking Payment Scheme, later absorbed in the Development Planning Fund). “The clearer the roads, the faster the traffic flow. This proposal, coupled with more underground parking spaces and the introduction of Regional Underground Mass Parking facilities with green public spaces as proposed in the National Strategy for the Environment 2050 will help ease congestion.”
The first part of the interview was carried yesterday on The Malta Independent on Sunday
The third and final part will be carried by The Malta Business Weekly on Thursday