Weathering the perfect storm

A few days ago, the Gozo regional committee within the MCESD in which the GWU is a member, presented a package of measures to the government which aims to address the short-term pressures and the medium to long-term development goals of the economy.

This committee, under the guidance of economists Gordon Cordina and Stephanie Vella, is to be commended for coming out with a set of concrete proposals in a relatively short period of time.

Among the short-term measures contemplated is one for government to give targeted assistance to industry to weather the current economic crisis. A few months ago, the GWU also presented the government with a set of 14 proposals to stimulate the economy. One, which was accepted and implemented, was for the government to assist industries that fall on a four-day working week. Another proposal to stimulate the economy was for the government to lower the VAT rate on restaurants which, so far, has not been put into action. Although this measure, if implemented will affect government's revenue in the short-term through reduced VAT revenue, it should have a positive multiplier effect by creating more jobs, reducing unemployment benefits, increasing social security contributions and taxes and boost the economy through more consumer spending.

Perhaps the government could consider reducing even further the VAT rate for restaurants in Gozo. This will surely contribute towards boosting the internal tourism sector on the sister island. France has recently reduced the VAT rate to 5.5 per cent from 19.6 per cent and this is expected to generate some 40,000 new jobs.

The main lesson to be learnt, however, is that Malta's MCESD should emulate Gozo and come up with a set of common proposals as a basis for an action plan. The plan would be managed and controlled by a high profile project manager with strict deadlines and with the appropriate structures and resources in place. A structure with resources similar to the successful euro conversion project would be ideal.

The tourism sector is currently going through a bad patch with a decrease in tourist arrivals of 14.3 per cent in the first five months of this year when compared to last year. Hotel rates have been slashed, but so far it seems that this summer will not be as good as last year. While it is partly true that the recession is having its effect on the tourism numbers, it is also very true that our tourism product needs a general re-vamp. Our roads still leave much to be desired, Paceville and other tourist areas need an emergency maintenance programme. All this has been said over and over again, and yet very little has been done.

While in a recession, it is to be expected that prices are slashed to try to maintain our market share, we should not, in normal circumstances, compete as a low-cost destination. This is next to impossible. Malta is surrounded by very popular destinations in North Africa where wages are still very low. We should compete on the quality of the product so that we will be able to charge a premium. A premium can only be charged if the product is superior to other competing products or services.

This is very similar to selling tyres: some customers want to buy the cheapest tyre on the market, others would like to buy a good quality brand as they feel that the product adheres more to safety standards and will also last longer.

Fortunately, there are employees in certain sectors who have not been affected with the recession and do not feel threatened about their job prospects. Therefore, the market for a premium tourist product is there. What we need is to tap this market and upgrade our product on offer.

The Parliamentary Secretary for Tourism, Mario de Marco, is doing his best to turn the situation around. He is on the ball and supports new ideas and initiatives. However to improve the product he needs the coordinated support of other ministries.

Mr Carachi is president of the General Workers' Union.