While Malta's economy continues to grow, deep-rooted challenges - from bureaucracy, to clientelism and weak governance - are undermining the country's long-term competitiveness, CEO of The Malta Chamber of Commerce, Enterprise and Industry Dr Marthese Portelli said.

Other pressing issues that need to be tackled are connectivity, transportation, logistical challenges, human resources and technology uptake.

In an interview with The Malta Independent on Sunday ahead of the upcoming Budget 2026, Portelli

"Government acknowledged 95% of our proposals - 5% were implemented and the remaining 90% are still at implementation stage," she said.  Portelli noted that progress had been made, with the implementation rate of measures rising from 2% last year to 5% this year.

"Sometimes politicians do not like to rock the boat, and this slows down implementation." Asked about the possibility of an early election, Portelli replied that the Chamber advocates for a full mandate because early elections cut short implementation even further.

She said that populism is another factor impinging on policymaking. "Sometimes, it is a race of who is going to promise most and what is most populist.

"Take for example, people's current sentiment towards the lack of proper infrastructure and solutions, poor planning, and poor waste management to cater for the increase in population we experienced over the last years," Portelli said.

Referring to Government's Vision 2050 exercise and given that this document is seen as the blueprint and way forward to ensure a co-ordinated and consistent approach by the government, the Chamber's pre-budget document presents a focused selection of proposals, aimed at facilitating adoption and execution.

Government debt and spending

Portelli was asked if it is concerned about rising government debt, which has increased by €6 billion under Robert Abela, more than double what it was when he became Prime Minister in 2020. She was asked whether the Chamber's fiscal incentives could support growth or risk worsening the situation.

"This is why, in these last years' budget documents, we have insisted that we need to be looking at more capital expenditure which has a good return on investment, and which will address the challenges I mentioned earlier, and do away with recurrent expenses that add little or no value or that are counter-productive," she said.

When mentioning the recent increases in government payroll, she acknowledged the role of the public service "as long as it translates into more productivity and less bureaucracy," arguing that there is still a lot to be done.

Portelli criticised wasteful spending on image-building, suggesting that funds could be better utilised elsewhere.

Productivity, skills, and the public sector

In its pre-Budget document for 2026, the chamber highlights how Malta is not achieving its productivity growth potential.  

When asked whether this gap could be linked to Malta having one of the highest numbers of public holidays in Europe, including 14 national days plus annual leave, Portelli said the issue was more complex.

"There are multiple factors which impinge on productivity. There is the level of skills and expertise; the more skilled you are, the faster and better you deliver, which naturally translates into higher output," she said.

Other obstacles, she explained, include excess bureaucracy and poor coordination between departments.

"For example, you may need clarifications on which form to submit and what information is required, or how to navigate through certain complexities and various government departments. Getting the right information and a non-conflicting reply can take time. These are all added administrative burdens which cost money and ultimately reduce profitability," she said.

"Departments need to improve their communication and, most importantly, ensure they are all aligned. Currently, we still receive queries from our members because different departments provide conflicting answers, and this reduces productivity," Portelli said.

Public sector hours, she said, often do not align with those of the private sector.

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She clarified that this does not mean reducing half-days for employees; rather, alternative shifts could be added together with better use of AI.

Technology uptake is also lacking, with Portelli saying that the Chamber feels that take-up of digitalisation, both within the public and the private sector, is not progressing fast enough.

"In our pre-budget document, we propose incentive tax credits and voucher schemes tied to automation, CRM, guest platforms, cyber-security infrastructure, and tech training Technology is always evolving, and by the time you master something, a new development is already underway," Portelli said.

R&D investment, she continued, should be scaled up, targeting at least 2% of GDP, and increasing the current 150% tax deduction to 200%.

"These measures, when considered holistically, would boost both productivity and profitability," Portelli said.

 "The issue of productivity goes beyond the number of public holidays. It is also a matter of having the right vision and strategy for the country addressing the issues effecting productivity, the courage to implement the necessary reforms even if unpopular and to take difficult decisions in a timely manner when necessary."  

Procurement reform and transparency

Public procurement is one of The Malta Chamber's "sore points," with Portelli highlighting that Malta's current system does not provide businesses with enough clarity and transparency they need.

"We've been emphasising that we need a public procurement reform since 2021," she said, putting forward three immediate measures.

The first is the publication of a procurement outlook at least six months in advance, ideally 12 months.

"Currently, the government maintains an internal procurement outlook. Instead of keeping it internal, we propose publishing it, at least, on a six-month period. This would help bidders plan and tender with the best solutions, products, and services. They would have time to research, negotiate the best pricing, and find the best solution. This measure alone would save the government money and provide a better return on investment," Portelli said

The Chamber also wants a far more detailed public register, for all contracts including direct orders, and covering also milestones, deliverables, payments, variations and the grounds on which those variations were allowed as well as disputes registered. "All this will increase transparency and ensure a fair level playing field," Portelli said.

The third proposal is to introduce whitelisting and blacklisting effectively.

"We support ethical businesses that operate fairly and pay their dues on time. In fact, we backed the Finance Minister's initiatives to collect owed taxed and to deploy AI tools to combat tax evasion. The public procurement reform is equally needed to achieve a more equitable playing field," Portelli stated.

Planning and the environment

Portelli was equally critical of the state of Malta's planning policies. She was asked if the Chamber was happy with the government's current planning reforms.

"We have submitted 15 recommendations on how the proposed laws can be improved. The long-promised review of the Strategic Plan for the Environment and Development (SPED) has not materialised either. It was due for revision in 2020 and to date we still operating under a planning framework which has a number of unclear and ambiguous policies as well as policies that contradict each other," Portelli said.

Portelli said.

The Chamber is also calling for tax incentives to reward higher environmental standards. She said that lower stamp duty should apply to buyers of sustainable properties, while developers using sustainable building materials should benefit from lower final withholding tax.

Similar measures, Portelli said, could also apply to landlords leasing out premises having an energy performance higher than the minimum required.

Other Chamber proposals include introducing interest-free renovations loans similar to the ones for buyers of electric vehicles, for properties within the UCA, and incentives to preserve Malta's traditional stone architecture even for non-UCA properties.

Governance and clientelism

On governance, Portelli was asked how much corruption in government entities or those linked to the government is affecting the flow of businesses in the private sector.

"Corruption and clientelism always impart a negative implication, especially with those who do things correctly. Quality requires proper governance structures in place. There should be a zero-tolerance policy for any kind of abuse that is facilitated by those entrusted with political or administrative responsibility," Portelli said.

She said that clientelism exists either because politicians use it as a tool to gain votes or because systems are so bureaucratic that people give up and turn to personal contacts to get what they are entitled to.

"Let us rehash the way government and the public service operates. Let us give them the tools they need to operate correctly and efficiently. Corruption will always impact the country negatively, both in terms of perception and in terms of the appetite to invest," Portelli said.

Ethical businesses, she added, will invest in sound environments, and this applies whether they are local or foreign.

Asked why the Chamber's pre-budget document gave little mention to Gozo, Portelli said the proposals were intended for the whole nation.

"As the national Chamber of Commerce, we are duty bound to provide policy ideas that are in the best interest of the entire nation, rather than regional. There are other organisations that focus specifically on Gozo, such as Gozo Business Chamber and Gozo Tourism Authority, with whom we have an excellent relationship. However, most of the issues are common to both islands. Take infrastructure as an example - both Malta and Gozo are facing similar infrastructural issues," Portelli said.