Editorial

Addressing a business breakfast organised by the Labour Party last Tuesday, Opposition Leader Alfred Sant correctly identified achieving a higher rate of economic growth as the first priority facing the country. To do this, he explained, it was important to have fixed targets and to incentivise three sectors - tourism, industry and financial services.

Although it was recently announced that Malta's GDP growth last year was 2.5 per cent, Dr Sant insists that the real figure is lower and that we are still lagging behind the other new EU member states, while Adrian Said, who spoke earlier at the seminar, said that we need to double the actual rate of growth if we are to catch up with the EU average in 25 years' time.

Achieving higher growth should be any government's target, especially in a highly competitive world and an increasingly globalised international economy. The problem is that even the best laid plans can go astray when unpredictable factors weigh on a country's economy.

The Maltese government is striving to cut the deficit, reduce the national debt, curb inflation and create more jobs, and seems to be making headway in meeting its convergence objectives in order to qualify for adopting the single European currency by January 1, 2008. However, the galloping international price of oil, on which we are so dependent, is a serious drag on our economic progress. Any growth risks being stunted by ever higher fuel prices.

Therefore one cannot speak of prioritising economic growth without, at the same time, giving priority to an alternative energy policy to reduce our dependence on imported fuel and cut fuel consumption - without endangering economic expansion.

One cannot overemphasise the importance of dealing urgently with this problem, which our political parties ignore at their peril, since it poses a challenge to both the present administration and to the Labour Party, as the alternative government.

Paradoxically, soaring oil prices are not affecting some other economies as much as one would expect, but ours is a wide-open economy, totally dependent on imported fuel, and therefore more sensitive to higher prices. Encouraging a wiser use of energy by domestic and commercial consumers, and promoting alternative energy sources should therefore be a priority.

On the other hand, there have been some positive developments which should bolster our economic growth. The 300-million dollar SmartCity@Malta project, which the government is putting on the fast track, should start functioning in about two years' time and eventually employ 5,600 persons. Also, last week's news that HSBC is investing seven million euros in a call centre employing 350, to start operating in November, is welcome indeed and shows foreign investor confidence in our economy - an essential factor for economic growth.

Yet Dr Sant was right in saying that investment in tourism would yield obvious returns in a relatively short time. He warned that unless we make a concerted effort to upgrade the physical environment and offer a better product generally, we cannot compete.

Some progress has been registered in this area too, though, such as the recent paving of Mdina, the restoration of church façades in Valletta, the opening of public gardens and the embellishment of promenades. But much, much more remains to be done. The replacing of the disastrous pavements in Valletta, for one thing, comes to mind. It would be unfair to saddle the local council with this expenditure. This should be a 'capital' expenditure which our capital deserves. Some have estimated the cost at Lm1 million. Well, that is a substantial sum, but it will surely pay for itself many times over and add to the intrinsic beauty of our baroque capital city.

Then there is the "permanent building site" image which we must seek to remove. Building contractors should be obliged to adopt practices followed abroad, if only for the sake of the health of residents and passers-by. And why do several streets have to be dug up at the same time?

Dr Sant also promised that a Labour government would set up a task force to evaluate the impact of taxation on the tourism sector. One often hears complaints that tourist services in Malta are overpriced compared to other destinations. Certainly, government-induced costs can contribute to that perception.

In Malta's case, achieving economic growth depends on many other factors, including industrial performance, the right physical work environment, producing a highly educated workforce, and being motivated by a desire to succeed. Government's role is to offer the right incentives and remove obstacles to growth.