FOI recommendations to promote socio-economic progress

At a press conference last Tuesday at the FOI premises in Floriana, president Martin Galea delivered a presentation highlighting the salient points of an FOI report containing various recommendations submitted to Tonio Fenech, the Parliamentary Secretary within the Ministry of Finance.

Mr Galea explained that the FOI document not only presented the Federation's reactions to the recently published pre-Budget document entitled "Families growing stronger", but also outlined FOI recommendations for the National Budget 2008.

In the strategic assessment of the Maltese economy, the FOI president stated that the Federation expects the 2008 Budget to place due emphasis on the implementation of growth-inducing measures, including those identified in other policy initiatives. Although economic growth has registered improvements in recent years, it remains below the potential the economy can achieve. Mr Galea thus stressed that, among other aspects, there exists a potential for growth not only in "new economy" activities, but also in more "traditional" areas, provided that they can restructure their business operations towards knowledge-based activities.

Following this assessment, the FOI president went on to highlight FOI proposals for substantive measures for the National Budget 2008. One of the priority aims, according to the FOI, should be to generate economic growth through the implementation of measures that achieve the objectives set out in the Industrial Strategy (IS) document. The FOI believes that the policy approach towards implementing the IS should be over-arching and coherent, aimed to unleash the potential of all sub-sectors of industry.

Key priority measures proposed by the FOI within this context include the deployment of public resources to incentivise networking and cluster development, support to industry to identify international demand, business intelligence, operational upgrading, brokerage services and on-field support, and support to Business Angels in Malta.

The process for the setting up and operation of the Venture Capital Fund needs to be expedited, and arrangements to provide micro-credit through EU Structural Funds need to be put in place. Regulatory and public administration functions need also to place stronger emphasis on worker flexibility.

Other priority measures to the implement the IS include introducing a preferred goods and services suppliers framework in public procurement practices, and implementing a business entry portal within e-government services.

The FOI also looks forward to an effective head start in the area of research and innovation through the deployment of public funds to support research, development and innovation projects, granting tax relief to businesses making donations to science popularisation and related activities, and setting up a research and development and innovation fund.

The FOI believes that investment in human resources has the potential to be one of the primary pillars through which Government can support enterprise growth in Malta. Priorities in this area include the allocation of sufficient resources to effectively implement the National Qualifications Framework and to strengthen the system of student apprenticeships and placements in industry.

To promote energy conservation and the use of renewable resources, particularly in industry, the FOI sees a potential to realise competitive gains and positive environmental impacts though a variety of measures. The deployment of public funds to support the undertaking of energy audits within business and the implementation of the arising recommendations are seen as being more cost-effective than introducing general subsidies on technologies as proposed in the pre-Budget document.

Other measures include introducing double tariff rates for electricity, promoting greater use of solar water heating either through information campaigns or through regulation, the granting of development permits on the use of energy-efficient building practices and promoting the use of public transport by improving the efficiency of the system, including measures to introduce more competition in the market.

It is also of crucial importance that the system of maximum demand metering in industry be reviewed to take into account unintended and exceptional peaks in energy use, particularly following power cuts.

Other policy issues that the FOI would like to highlight in the process of the pre-Budget consultations aim to sustain progress in the areas of macroeconomic management and market regulation. In this context, the FOI urges the government to keep to the Convergence Programme targets involving lower GDP ratios for fiscal expenditure and budget deficit.

Monitoring the implications of the euro for inflation and financial costs is also a key priority. In addition, further progress in fiscal performance should be sought in the medium term, through a system of effective redeployment of under-employed public sector employees. The role of taxation and business support should be developed towards Malta's investment attractiveness.

As to the long-term sustainability of the pension system, it should be further promoted by providing tax relief on third pillar (voluntary) contributions paid into recognised schemes. In line with EU practices, both efforts towards better regulation, as well as market surveillance, need to be strengthened.

There should also be careful monitoring to prevent discrimination against local industry in the use of export-oriented cargo services.

As to FOI feedback on measures proposed in the pre-Budget document, Mr Galea said that this document contains several worthy initiatives. However, he emphasised that improvements to social cohesion should be primarily attained through incentives to stimulate the labour market, reduce tax burdens and target the genuinely needy. He also stressed the importance of reducing environmental impacts and energy costs, optimising the results of innovative financing schemes, as well as the continued investment in the upgrading of existing and in new industrial zones.

It is hoped that the analysis, evaluation and recommendations presented in this report constitute a valid contribution to a productive social and civil dialogue in Malta, and contribute to the formulation of measures conducive to the country's socio-economic development.