Steering through the economic challenges ahead
Since the November budget more information emerged on the local and global economic situation and the challenges for the next 18 to 24 months have been crystallised. Government statistics for October showed a decrease of 9 per cent of tourists when...
Since the November budget more information emerged on the local and global economic situation and the challenges for the next 18 to 24 months have been crystallised. Government statistics for October showed a decrease of 9 per cent of tourists when compared to the same month in 2007. The manufacturing survey conducted by the National Statistics Office for the third quarter of this year also showed that sales of manufacturing firms fell by 7 per cent.
The impact of the economic downturn in Malta has been slightly delayed while a reduction in order books and tourists from overseas ripple through.
However, the signs of economic challenges are now being felt and these effects will intensify as more bad news will hit our main trading partners.
It is clear that the growth assumptions which underpinned the government's budget projections on revenues, deficit and the borrowing requirements have changed. This requires strong national leadership to re-adjust government's priorities and plans for the year ahead and provide an adequate response to the challenges we are facing.
Governments worldwide have all set out initiatives to stimulate the economy and consumer spending and safeguard jobs. However different countries have different industry specific issues and the state of public finances vary across countries. Hence solutions need to be tailored to Malta's needs to ensure that we are positioned to emerge out of the current economic woes as rapidly as possible.
In principle I am of the view that public sector spending should be kept at reasonable levels to ensure that tax increases will not be required in the near future which would constrain future economic prospects.
However I strongly advocate that the government immediately sets up a task force led by government with nominees from the opposition, employer bodies and the unions which by late January 2009 should review public sector investment projects and expenditure with a view to re-prioritise government spending to areas which will have the greatest effect on the local economy and which should be of an investment nature to ensure that such projects support Malta's future focus.
I would expect the task force to consider terminating initiatives which should no longer be priorities and also recommend investment projects which are either new or which may be brought forward.
Such investments may include projects forming part of the Grand Harbour Regeneration Plan which will improve our infrastructure and will boost the future economic growth of our maritime and tourism sector. Current emerging plans on the regeneration of the Valletta City Gate would be consistent with this approach.
I would advocate that where possible the re-prioritisation of government spending is undertaken within the limits of the budget's projected spending given that it is also likely that government revenues will decrease over the next year.
While re-focusing public spending on initiatives which support the economy is important, it is also critical that the government supports and encourages investment by private enterprise and foreign investment. For instance it is critical that the pressure is increased on Smart City to where possible accelerate their development plans. Initiatives by large foreign countries to develop embassy complexes should also be supported given that this will not only support the local construction industry but will also strengthen trade relations for the future.
I also urge the Prime Minister to ask Malta Enterprise to engage with exporters to understand their immediate needs. Large manufacturing firms also tend to foster a competitive climate between their operating sites based in various countries.
As these firms reduce their workforce it is critical for Malta Enterprise to support the business case for these companies to minimise lay-offs from their Malta based operations.
Another critical economic driver for the Maltese economy is the electricity and utility tariffs. Most of the debate on the tariffs has been focused on the current price of the Utilities.
An important factor that is not being debated enough is the future tariffs that the consumers and businesses will have to pay. The electricity tariffs will be based on Enemalta's fuel procurement decision-making.
In this respect I would encourage government and Enemalta in consultation with the Malta Resources Authority to consider offering customers the option of future fixed price contracts based on hedging at current advantageous oil prices. This may ensure that in the next 18 to 24 months the Maltese economy will not be subjected to major shocks in the price of oil which will make it difficult for Malta to come out of the economic downward more rapidly.
Such an approach requires bringing in commercial expertise that Enemalta does not possess with immediate effect.
I stress that these recommendations will not produce results unless the government, opposition, employers' organisations and unions are all part of such solutions. A call has been made by the opposition and the government to adopting a bipartisan approach to the economy. It is now time to make it happen.
Mr Mizzi is a senior programme leadership professional.
The impact of the economic downturn in Malta has been slightly delayed while a reduction in order books and tourists from overseas ripple through.
However, the signs of economic challenges are now being felt and these effects will intensify as more bad news will hit our main trading partners.
It is clear that the growth assumptions which underpinned the government's budget projections on revenues, deficit and the borrowing requirements have changed. This requires strong national leadership to re-adjust government's priorities and plans for the year ahead and provide an adequate response to the challenges we are facing.
Governments worldwide have all set out initiatives to stimulate the economy and consumer spending and safeguard jobs. However different countries have different industry specific issues and the state of public finances vary across countries. Hence solutions need to be tailored to Malta's needs to ensure that we are positioned to emerge out of the current economic woes as rapidly as possible.
In principle I am of the view that public sector spending should be kept at reasonable levels to ensure that tax increases will not be required in the near future which would constrain future economic prospects.
However I strongly advocate that the government immediately sets up a task force led by government with nominees from the opposition, employer bodies and the unions which by late January 2009 should review public sector investment projects and expenditure with a view to re-prioritise government spending to areas which will have the greatest effect on the local economy and which should be of an investment nature to ensure that such projects support Malta's future focus.
I would expect the task force to consider terminating initiatives which should no longer be priorities and also recommend investment projects which are either new or which may be brought forward.
Such investments may include projects forming part of the Grand Harbour Regeneration Plan which will improve our infrastructure and will boost the future economic growth of our maritime and tourism sector. Current emerging plans on the regeneration of the Valletta City Gate would be consistent with this approach.
I would advocate that where possible the re-prioritisation of government spending is undertaken within the limits of the budget's projected spending given that it is also likely that government revenues will decrease over the next year.
While re-focusing public spending on initiatives which support the economy is important, it is also critical that the government supports and encourages investment by private enterprise and foreign investment. For instance it is critical that the pressure is increased on Smart City to where possible accelerate their development plans. Initiatives by large foreign countries to develop embassy complexes should also be supported given that this will not only support the local construction industry but will also strengthen trade relations for the future.
I also urge the Prime Minister to ask Malta Enterprise to engage with exporters to understand their immediate needs. Large manufacturing firms also tend to foster a competitive climate between their operating sites based in various countries.
As these firms reduce their workforce it is critical for Malta Enterprise to support the business case for these companies to minimise lay-offs from their Malta based operations.
Another critical economic driver for the Maltese economy is the electricity and utility tariffs. Most of the debate on the tariffs has been focused on the current price of the Utilities.
An important factor that is not being debated enough is the future tariffs that the consumers and businesses will have to pay. The electricity tariffs will be based on Enemalta's fuel procurement decision-making.
In this respect I would encourage government and Enemalta in consultation with the Malta Resources Authority to consider offering customers the option of future fixed price contracts based on hedging at current advantageous oil prices. This may ensure that in the next 18 to 24 months the Maltese economy will not be subjected to major shocks in the price of oil which will make it difficult for Malta to come out of the economic downward more rapidly.
Such an approach requires bringing in commercial expertise that Enemalta does not possess with immediate effect.
I stress that these recommendations will not produce results unless the government, opposition, employers' organisations and unions are all part of such solutions. A call has been made by the opposition and the government to adopting a bipartisan approach to the economy. It is now time to make it happen.
Mr Mizzi is a senior programme leadership professional.