Economists view "development" as a positive force, signifying transformative change that fosters growth and progress to improve the quality of life for all citizens.
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, over-development of ODZ plots with its deleterious impact on society? Is it true that development has rendered Malta more beautiful in the past 20 years? Answer is 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 - take for example the demolition of barracks built during the British era at Fort Chambray to make way for a hotel and more villas. It is naive 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 over-crowded marinas and so on, all measured in monetary terms. Populist regimes do frame their political creeds in a way to appeal to nationalist sentiments and continue to try garnering support from voters.
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 actual behaviour, these regimes may effectively sugarcoat 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 a similar situation unfolding in Malta, given the unresolved brutal murder of a journalist and the recent allegations of the Attorney General's surreal stance on withholding the publication of a magisterial inquiry into 17 Black and the alleged corrupt practices linked to funding the Electrogas consortium? 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 GDP 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 easing. Observers pontificate, that since we were unceremoniously "greylisted" three 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 foreign direct investment is slowly returning and 2024 saw the highest tourism revenue in 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 placed 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 tourist industry generates ready cash, it also comes at a 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 a strategic location, yet the uptake of more AI high-tech industries and top pharmaceutical companies may be challenging perhaps 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 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 start-ups such as venture capital.
A venture capital fund of €10m announced in the last budget is a drop in the ocean and will not help us overcome our relatively inward-looking mentality for start-ups. Again, a meagre national budget of 0.7% of GDP for research and development, 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 such as renewables. Moving on to the need for skilled workers, it stands to reason, that the fourth Industrial Revolution commands higher investment in educational facilities.
Jobsplus is state-funded to help train more workers reach a higher standard of digital literacy. Training programmes for busy executives are gaining momentum, and while the efforts of Malta Enterprise are commendable, it faces significant challenges in building a comprehensive ecosystem and infrastructure to attract advanced tech industries.
In summary, it is time to shift focus towards a comprehensive ecosystem for advanced industries like AI and high-tech manufacturing but doomsayers may label this as a surreal dream.
George M Mangion is a Senior Partner at PKF Malta
gmm@pkfmalta.com