Politics and business

Recently, a comment was made that politicians are not entrepreneurs. The apparent reason is that the politicians want to disclaim responsibility for our country's lack of economic development and growth. While agreeing that business is not politics, it is generally held that modern governments are responsible for the economic prosperity of their country.

When one follows world economic news it becomes amply clear that the major headaches of modern governments are related to the national economy. Governments are concerned with planning, economic trends, competition, education, health and human resources development. They are fully aware that they are directly responsible for these economic and social activities; if they do not provide the services, both in quantity and quality, the national economy will not flourish.

The wealthier and more industrialised the economy, the better developed is the private sector. The reason is that governments running such countries endeavour to build the infrastructure required to cater for all its needs. They are fully aware that when the private sector has the space, facilities and more elbow room at its disposal, the entrepreneurs and all the people making up the private sector will take calculated risks in the hope of better returns. In this way the economic environment will lend itself to the inculcation of new investment ideas that, in turn, are conducive to greater output and more employment opportunities, thereby contributing to the generation of national wealth.

Governments of smaller countries have to play a larger role than the wealthier and more industrialised countries. Generally, they have to carry the stiff costs of administration, enforcement and security as the relative cost of each operating function is higher than that of larger countries. To cater for the needs of the executive and judiciary functions, the civil service is likely to be manned by a larger proportion of the gainfully occupied than the more advanced countries.

Despite these factors, small-sized countries have their own advantages that, if exploited to the full, can be of immeasurable benefit to their national economy. It should be easier to collect and collate statistical data and formulate policies on hard facts than taking action based on hunches and perceptions. It would be worse still if small-sized countries were to emulate measures taken by G7 countries. In small countries, people with pertinent skills can be more easily identified and they can then be deployed in the productive sector in no time. Experiences can have spillover effects because knowledge can easily be transferred to more people and applied in the shortest time possible.

The worst mistake that governments of small states can do is to plan short term and then try to remedy matters when unlooked for problems crop up. Education is a typical example. It is crucially important for the creation of new business leaders, entrepreneurs and investors. It is not enough to brag about the number of university graduates. The question to ask is how relevant is the academic knowledge obtained contributing to the national well-being.

Again, it is not enough to create the mechanism for a stock exchange. One has to ensure that it is giving results to the country's economic development. Thus, one has to establish whether the incentives given to industries and firms are attractive enough for them to consider stock exchange listing. In addition, enough information ought to be given about the listed companies so that private investors may be morally confident that they are making the right decisions.

There are companies listed in the Malta Stock Exchange that boast that their value of their holdings is increasing. Yet, the value of their shares on the stock exchange is declining. Something is certainly not functioning properly. Despite all this, no remedial action seems to have been taken. It is not enough for shareholders to raise complaints at general meetings. The issues raised can easily be dismissed; suffice it to say only a limited number of questions is allowed to be aired.

If the government concentrates on building the right and adequate infrastructure, creates the business environment by nurturing an investment culture among the people and provides the information to the public, particularly that emanating from EU institutions, the people will be prepared to take the calculated risks to part with their money in the hope of enhancing financial returns. Furthermore, political contacts, professionally employed, contribute enormously to new ventures.

Unfortunately, however, the political system in Malta is more concerned with political polarisation than with economic development. One must not forget that Malta lost the UN seat for the Sea Bed Authority (a Malta seminal idea) because of political pique, frittered the opportunity of attracting offshore institutions with the fall of Lebanon (Cyprus was the main beneficiary), did not succeed in having the EU frontier agency because the government did not have enough solid arguments and political support from the other EU members and lost a number of opportunities to create economic liaisons with North African countries even though we seemed to have close political relationships.

If we really want to succeed we have to ensure that our politicians create the means, plan the strategies and allocate resources for the continued expansion of the national economy to ensure that Malta can compete in world markets and its businesses prosper.