Malta tops EU subsidies scoreboard

A new European Commission report unveiled yesterday shows that Malta gave the highest proportion of state aid among EU member states in 2000 - 2003 and far above the EU average.

The State Aid Scoreboard was published in Strasbourg following a formal discussion during the weekly Commission meeting.

According to the scoreboard, Malta's rate of subsidies to state-run corporations and other businesses amounted to 3.86 per cent of GDP in 2000 - 2003. This was by far the highest among the 10 new member states and soared well above the average 0.39 per cent given in the same period in the 15 "old" members.

In total, between 2000 and 2003, Malta granted €158.7 million in state aid, or €404 per capita. The report says that due to a number of measurement difficulties it is not possible to provide an accurate forecast of future aid expenditure levels in Malta, especially as the latest data refer to 2002.

"However, by looking at the situation in 2002, it can be observed that €84 million (48 per cent) of total aid was awarded under measures that will not continue beyond accession."

The Commission also notes that it is still assessing four new schemes submitted by the Maltese government for state aid during the current year. No decision has been taken yet about them.

The Commission said that a relatively high amount of aid (€86 million or 49 per cent of the total) was awarded under the transitional arrangements foreseen in the Treaty of Accession.

"The latter figure implies that aid levels are likely to remain relatively high up to the end of the transitional period but may well decrease thereafter."

The "relatively high level" of state aid in comparison to other member states can be explained by two aid schemes, the report says. Firstly, the manufacturing sector, which is assisted by means of a scheme of incentives under the Business Promotion Act and which absorbed 39 per cent of all the state aid. Secondly, the shipbuilding and repair sector which between 2000 and 2002 absorbed an average of €81 million per year.

The Commission said that "the acceptance of Malta's request for another transitional arrangement concerning its shipbuilding and repair sector is and will be reflected for the coming years in Malta's relatively high state aid level".

"The shipbuilding and repair sector is the biggest individual industrial sector on the island characterised by overcapacity, insufficient financing facilities, increased labour costs and insufficient productivity levels."

According to the Commission report, Malta was also subsidising tourism. The tour operators' support scheme absorbed €9 million a year in the period under review. The Commission noted that this was phased out in the second quarter of this year.

State aid as a percentage of GDP, 2000 - 2003
EU 15 0.39%
New member states 1.42%
Czech Republic 2.80%
Estonia 0.11%
Cyprus 2.85%
Latvia 0.26%
Lithuania 0.24%
Hungary 1.04%
Malta 3.86%
Poland 1.29%
Slovenia 0.69%
Slovak Republic 0.51%