PM pledges budget policies to stimulate growth

In formulating the 2005 budget, the government was clearly and strategically ensuring that all measures were underpinned by a horizontal thrust to stimulate economic growth, Prime Minister Lawrence Gonzi said yesterday.

There was no other alternative path - addressing the budget deficit was a priority, Dr Gonzi said when addressing a conference organised by the Chamber of Small and Medium Sized Enterprises - GRTU.

However, this national target could never be achieved if it was limited only to cost-cutting and administrative reform, he said. More importantly, it must be an exercise that was forward looking and include policies for expansion, job creation and investment opportunity.

The conference, entitled Basel II for SMEs - the Future of Access to Finance for SMEs, was held at the Corinthia Hotel, in Attard. Basel II refers to the new Basel Capital Accord Initiative which aims at bringing order to international capital markets.

According to a survey, the results of which were announced by GRTU director general Vincent Farrugia at the conference, economic uncertainty and the inability to meet foreign competition are the reasons contributing to lack of investment by GRTU members.

Other reasons mentioned included an increase in costs, stagnant consumer demand and the attitude of government officials.

The survey, conducted by the GRTU, also shows that late payments by creditors, fuel price hikes and the recently introduced eco tax are a disincentive for investment.

According to those surveyed, there are also obstacles to bank financing which include too much collateral, high legal fees, long procedures, poor credit facilities, high interest rates and excessive bureaucracy.

Respondents were asked whether they had any plans for new investment projects in the next 12 months, to which 29 companies (45.3 per cent), employing 542 workers, responded in the affirmative. Thirty-five companies (54.7 per cent), employing 4,561 workers, replied in the negative.

The range of planned investment of 18 companies (28.1 per cent) is between Lm10,000 and Lm100,000. Five companies (7.8 per cent) have plans to invest between Lm150,000 and Lm1 million while six companies (9.4 per cent) did not specify how much they plan to invest.

In his opening, address GRTU president Charles J. Busuttil insisted that small businesses were extremely important for any country, most of all for small economies striving to catch up with larger, richer ones.

Mr Busuttil said that in Malta there was still a long way to go even though it was essentially an SME economy. "Unfortunately we cannot report much progress. We have worked hard together with other organisations representing business to establish Malta Enterprise as a focal point organisation in support of SMEs. But even Malta Enterprise is facing difficult times."

Bank of Valletta chairman Joe Zahra noted that simply providing credit did not generate a healthy economic growth. It was how credit was granted that mainly determined whether an economy developed successfully.

It is small businesses that truly generate long-term economic growth, Mr Zahra said. In fact, in Malta, SMEs account for 90 per cent of total economic activity. Traditionally, SMEs produce the most innovative technologies and create new jobs at a faster pace than large corporations, he said.