Straight into the action

Malta has striven hard over the past two decades to achieve the continuously improving standard of living we are experiencing today. Throughout the previous legislature, the Nationalist Administration has been successful in attracting record levels of new foreign and local investment, in generating new jobs, in maintaining a generally low level of unemployment and in establishing a sense of well-being that has reached levels never experienced before. We have also reduced taxes in order to improve the citizens' spending power and, thus, reward hard work. We have significantly reduced our budget deficit, so much that we are now planning a surplus. We are decreasing our public debt and yet, at the same time, strengthening the government's social obligations, such as healthcare and education.

On this platform, the Nationalist Party has been given another mandate by the electorate. We now have an opportunity and the responsibility to build on the success of the previous legislature.

We must not rest on these results. Reaching this level has been tough. Maintaining, sustaining and improving it is a much harder task. It is harder not only because expectations have been significantly increased, and we continuously need to surpass previous achievements, but also because the basic rules of the global economy have been changed completely over the last years.

The continuous increases in the prices of oil and food keep providing us with fresh challenges every day. Inflation is indeed one of the most important challenges for this legislature. This is no easy task, but I am confident that we will be able to overcome this hurdle too.

As a practical example, despite all predictions to the contrary, the euro changeover had a very limited effect on inflation.

Indeed, recent statistics published by Eurostat indicate that the euro-induced inflation was limited to about 0.2 per cent and 0.3 per cent while headline inflation is on similar levels with EU/euro area averages.

Many factors contributed to this result: the ever-increasing competitiveness in our economy; the active participation of the local importer, producer, distributor and retailer industry through the price stability agreements and the FAIR initiative but also the effective, regular monitoring of prices carried out through the Euro Observatory and the Consumer and Competition Division.

The government's intention, as promised prior to the election, is to strengthen both the competitive and the consumer protection authorities so as to ensure that this method, which has proved so successful through the changeover period, is maintained and strengthened in the immediate future.

To a certain extent, not all changes in the world economy have been negative to our country. The good news for our country is that the global economy is now more than ever dependent on people, on the hard-working individual. Now, we have to keep working hard to create the right opportunities for success. One of our main strategies towards achieving this success rests on the concept of reducing income tax.

Fiscal policy is an ideal solution to spur economic growth. That is why the tax reductions in the last budget were no electoral ploy; rather, it was the second consecutive budget with no tax cuts and the fourth consecutive one without new taxes. The positive connotation is that lower taxation does not imply less revenue but, by encouraging people to work more and earn extra money, we would then be recouping the lost income.

Moreover, lower taxation would also serve to attract new tax payers that would emerge from the undeclared world and, thus, serve two objectives rather than one.

Naturally, this also applies to small businesses. Small and medium-sized enterprises, including the self-employed, account for the largest contributors towards local GDP and employment and, thus, need to be supported; the recent drastic reduction in licence fees was an important step in that direction.

Our objective is to keep a tight control on government expenditure. This does not involve a reduction of social obligations, such as education or health. Rather, I would definitely want to see them strengthened and improved. To the contrary, it is a question of putting the available resources to better use, if possible, by giving more to those that are really in need.

Finally, we need to keep attracting investment. Competition is very harsh; China, India, Latin America, North Africa and Eastern Europe, to different degrees, are all providing businesses with new and cheaper options through low-cost labour. But we have the means to attract further investment, through a strong and stable economy and government, an ever-improving telecommunications and transport infrastructure and a highly-educated and trained workforce that is flexible in adapting to the needs of the times.

This big challenge necessitates a unified government strategy. I have the responsibility to ensure stable and sound finances that put investors' minds at rest when considering investing in Malta. Surely eurozone membership goes a long way in achieving this aim. Official statistics keep providing encouragement: Eurostat has just confirmed that the Maltese economy has grown by 4.3 per cent in the last quarter of 2007, eclipsing the euro area average by 1.5 per cent. Considering the lacklustre performance of many economies around us, this is indeed positive news.

These are only a few examples of the tasks facing us in the years ahead. I am sure that we have the means available to achieve the desired results. Now that the dust has settled, we can keep working on making Malta a better place for all.

Mr Fenech is Minister of Finance, the Economy and Investment.