Finance Minister outlines vision for healthier enterprises

Finance Minister Tonio Fenech yesterday highlighted the government's vision and listed its priorities to create healthier enterprises in a dynamic economy such as Malta's.

Mr Fenech was speaking during the first of two business breakfasts organised by his ministry in the run-up to the publication of the pre-budget document.

The event officially launched the budget 2009 consultation process.

He said the first pre-budget document, prepared for the 2006 budget, laid out the government's vision of a dynamic, high value-added economy founded on competence, skills and excellence and capable of sustaining a high standard of living for the Maltese citizens. In line with this vision, he mentioned a 20-point action programme to implement the government's strategy of having a diversified and productive economy that uses all its available resources effectively to generate economic and social wellbeing.

The government's action programme included an extension of the business incubation centre, improved incentives to attract more films to Malta, the reconstruction of the Ta' Qali Crafts Village and the upgrading of five industrial zones, the promotion of the financial service sector and incentives for businesses to invest in research and development, among others.

Mr Fenech said the key element of achieving these aims is to deliver and ensure economic stability through low and stable inflation, a fiscal policy framework designed to achieve sound public finances and through the introduction of the euro.

Echoing Central Bank Governor Michael Bonello's call for increased productivity, Mr Fenech said this could be achieved with increased investment, skills and human capital, through research and innovation and through the improvement of public services with reduced bureaucracy. "Productivity improves our national competitiveness," he said.

On inflation, Mr Fenech said that, while it was difficult to control it, there is a way of controlling the second-round effects and, for this reason, the government had implemented measures to raise people's purchasing power by lowering income tax bands and increasing children's allowance.

This strategy has to be seen within the context of the international situation, he said. Along with the pressure on the price of oil, which increased to $124 per barrel, there is also the drastic increase in the price of food, the global financial turmoil contributing to economic slowdown and the situation of the US economy.

Mr Fenech touched upon the economic results achieved last year and the beginning of this year mentioning the four per cent economic growth, a low unemployment rate and a 4.8 per cent rise in merchandise exports in January and February this year. He also mentioned the good results in the first quarter of this year in the tourism sector when the number of tourists rose by 22 per cent, tourist nights were up by 13 per cent and tourist expenditure grew by nearly five per cent.

Speaking about the country's enterprise profile, Mr Fenech said 95 per cent is composed of micro enterprises that employ fewer than 10 people, four per cent consisted of small businesses, one per cent of medium enterprise and 45 large businesses. Enterprise contributes to 60 per cent of gross value added and to 88 per cent of total employment.

While insisting that problems enterprises face in Malta are similar to those encountered by businesses all over Europe, Mr Fenech outlined the government's proposed action programme to create healthier businesses in a dynamic economy.

Among others he mentioned a review of better regulation policy by cutting red tape, a reorganisation of tax departments, a review of Value Added Tax, income tax, eco-contribution and legislation on public procurement. Referring to fresh calls for a social pact, Mr Fenech argued that one could not propose a quick-fix, homogeneous solution because different sectors of the economy had different needs.

What was important was that the social partners tackled each sector according to its needs and proposed solutions accordingly.

He also spoke on the need for a fresh look at the taxation regime, especially to deter tax evasion.

Among suggestions made from those present, Pierre Fava, President of the Malta Employers' Association, said Malta was suffering a skills shortage in various sectors and the government needed to regularise the importation of foreign employment.

Paul Abela, from the Chamber of Small and Medium Enterprises - GRTU, said the GRTU was sceptical about a social pact, adding that political parties should stay out of such a process.

Entrepreneur Anġlu Xuereb called for departmental heads to be given more elbow room so as to cut bureaucracy and Ray Cassar, a representative of the cooperatives sector, called for the creation of an institution to provide market intelligence for small businesses seeking export growth.