The Malta Independent 19 April 2024, Friday
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A surrealistic dream about a rock in the Med

Sunday, 18 February 2024, 09:30 Last update: about 2 months ago

Economists define “development” as a force for good, implying change resulting in growth and advancement to improve the quality of life for all citizens. Written by George M. Mangion

Sustainable development can be given an economic definition: one that makes a country wealthier, better educated, healthier.

If this is the case, why do we have so many dissenters voci­ferously complaining about excessive property development, destruction of ODZ plots and its deleterious impact on society? Is it true that development has rendered Malta more beautiful in the past 20 years? Answer yes, if development was a force for sustainable property expansion, the converse is, it is harmful to ecology and undermines the quality of life.


Property magnates and others label NGOs and activists of being deadpan against unbridled development. This is not true. It is naïve at best to argue that activists are against a regulated growth that betters society as a whole and makes it more prosperous. Populists embrace another definition of growth, one which targets rises in gross domestic product. Our economic model is primarily based on numbers - more cars, tourists, building permits, hotel rooms, property sales, yachts in overcrowded marinas and so on, all measured in monetary terms.

Populist regimes do frame their actions as necessary for appealing to nationalist sentiments and garnering support from patriotic citizens. Overall, some regimes that engage in nepotism and cronyism often rely on a combination of ideological rhetoric, gas lighting material benefits, media manipulation and demonisation of opponents to maintain continued support among hangers-on and voters.

Despite the contradiction between their professed principles and their actual behaviour, these regimes may effectively sugar-coat their actions to maintain their grip on power. One example of a regime in the European Union that has been accused of effectively sugar-coating its actions to maintain power is the Fidesz-led government in Hungary. The Fidesz government has frequently used nationalist rhetoric to rally support and deflect criticism. Despite allegations of corruption and cronyism, the Hungarian government has implemented unprecedented social welfare policies aimed at benefiting certain segments of the population, such as pensioners and low-wage families.

Such benevolent policies, including tax cuts and subsidies, have helped maintain support among those families who benefit from them. Is there a similar stance happening in Malta, having endured the non-closure of the brutal murder of a journalist and the alleged surreal attitude of the police commissioner and the attorney general?

The latter are seen as sympathetic with the government to promote its narratives, shape public opinion and maintain loyalty among followers. Yes, party apologists hail the party leader as a pragmatic and innovative politician who fought the dire years of the pandemic and is now riding the crest of an economy boasting full employment with the fastest rate of GPD growth in Europe. Our deficit is under control and plans are in force to reduce it over five years to go down to the EU's target of 1.5% of GDP.

Exports have plateaued but demand through the domestic market is high, albeit inflation is eating out a larger slice of family finances. Critics pontificate that since we were unceremoniously grey-listed two years ago, considerable progress was achieved to regain our hitherto spotless international reputation. The island has made strides in developing its infrastructure and business environment while FDI is slowly returning and 2023 recorded the highest tourism takings for years. More than three million arrivals have left rich pickings in our national coffers. But all this comes at a cost.

The heavy influx of tourists put a strain on the environment, particularly in sensitive areas such as scenic regions and natural reserves. Increased waste generation, higher energy consumption, power cuts and pollution from transportation can degrade ecosystems and harm biodiversity.

High tourist numbers can exacerbate traffic congestion in urban areas and popular tourist destinations, leading to longer commute times and reduced quality of life for residents. With the rise of short-term vacation rentals, facilitated by platforms like Airbnb, it can exacerbate housing shortages and drive up property prices, making it more difficult for local residents to find affordable housing.

So, while the industry generates ready cash, it also comes at a high cost and it is about time that alternative sources of revenue are generated with less painful scars on the environment. What are the alternatives? Malta offers several advantages for foreign investment, including favourable tax incentives, a skilled workforce and strategic location, yet the uptake of AI, high-tech industries and top pharmaceutical companies may be subdued due to intense competition from other established locations in Europe. Some reasons for this subdued uptake include the lack of a comprehensive ecosystem and infrastructure necessary to support advanced industries.

Established tech hubs in other European countries such as Silicon Valley in the United States or tech clusters in Germany, Switzerland and the United Kingdom, offer more extensive networks of research institutions for startups such as venture capital. A small venture capital fund of €10m, announced in the last budget, is a drop in the ocean and will not help overcome the relatively inward-looking mentality for start-ups. With a meagre national budget for research and development, we cannot attract unicorns looking to establish manufacturing facilities or research centres. It is true that over the years, Malta offered favourable tax incentives for businesses, but in the past decade there has been no serious attempts to fine-tune and recalibrate such incentives. Regulatory complexity and bureaucracy now deter some companies from establishing operations in the country. Other European countries with more streamlined regulatory frameworks and clearer pathways for investment may be more attractive destinations for foreign investment.

It stands to reason, that the fourth Industrial Revolution commands higher investment in educational facilities. Jobsplus is funded to help train more workers reach a higher standard of digital literacy. Training for busy executives also lack top notch levels. While the efforts of Malta Enterprise are commendable, it may face several challenges in building a comprehensive ecosystem and infrastructure to attract advanced tech industries.

One of the causes of such limitations is the dirigisme attitude of its board. Shifting focus towards a comprehensive ecosystem for advanced industries like AI and high-tech manufacturing may be labelled as a surreal dream. It demands a reallocation of scarce resources and a reorientation of budget priorities, which could take time to implement effectively.


George M. Mangion is a senior partner at PKF Malta


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