Last month the government launched the Pre-Budget document 2012. The Minister of Finance held the routine press conference and the Department of Information duly issued the usual press release. Then the document was practically forgotten.

Pre-Budget 2012 fails on many counts; not least being the lack of proposed solutions- Joseph Vella Bonnici

The Minister of Finance’s opening statement in his foreword reads: “The pre-Budget process is a unique opportunity for all of us, policymakers, the social partners and other stakeholders to critically evaluate our economic and social situation and to discuss the policy problems”. Amen. So why the indifference? Is it because the Maltese are not concerned about what is happening to our economy or is it because they have lost trust in what the government has to say?

Year after year, it is becoming increasingly difficult to determine why the government bothers to present us with a pre-Budget document. The few worthy considerations seeping through the document’s political rhetoric are immersed in technical jargon. Surely a document meant for popular consumption and consultation can be more public-friendly.

Pre-Budget 2012 fails on many counts; not least being the lack of proposed solutions. Perhaps, the author(s) felt that it does not really matter, given that any measures proposed by previous pre-Budget documents were conveniently ignored by Budget time. The document’s biggest merit is its macro-economic analysis. Pre-Budget 2012 confirms that our society keeps borrowing to finance its way of life; its indebtness is at the limit. Government debt at plus-€4.5bn is already too high while private debt is fast rising into the danger zone. Not so long ago, we Maltese used to pride ourselves that we were among the highest savers in the world.

Now our incomes are not enough to support the standard of living we have become accustomed to. Both government and society are increasingly living for the day. We are pawning, and eating into, our future incomes.

Pre-Budget 2012 also hints at another growing concern: the ever-increasing foreign ownership of our economy. Since the 1960s, foreign direct investment has been a key driver of local economic growth. But two decades of privatisation and liberalisation have enabled foreign direct investment (not the millions that are going into financial services) to permeate throughout economic structures from retailing to banking to airport management. Now it is time to pay back as more profits made in Malta end up overseas. The result is an ever-widening gap (estimated at five per cent of GDP) between what we Maltese produce and what we earn.

The document gives prominence to the financial intermediation sector. This is understandable, given that this sector has become, together with remote gaming, the silver lining of our economy. It is to the merit of the government that it has exploited our tax jurisdiction to expand these tertiary activities. Now we have to ensure that these relatively “footloose” industries stay here. The document notes that “the growth of the financial services industry entails certain risks that need to be properly identified, measured and monitored”. The sooner this is done the better, especially in view of increased pressures for tax harmonisation within the eurozone.

Of comfort is the fact that in 2010, our economic growth was driven primarily by international activities. This reverses a trend whereby our economy was growing through our doing more business among ourselves rather than with the outside world. The slowdown in domestic activities resulted from a “subdued increase in the rate of growth in employee compensation” (in simple language falling purchasing power). It is leading to stagnation in critical sectors such as retailing and construction.

Pre-Budget 2012 is poor on matters relating to the strategic management of our economy. It makes a vague reference to Vision 2015; but it seems that even here the government has lost its enthusiasm. At this rate, the only thing that is likely to be implemented by 2015 is the plan itself. Just like Brand Malta. And when will the Eco-Gozo strategic plan be completed and presented to the public? The government continues to play for time almost convinced that it will not be there to face the consequences of its indecisions.

Pre-Budget 2012 completely ignores a number of critical challenges facing our economy. One would have expected an analysis on the possible impact of the euro crisis, what the political crisis in Libya means for Malta, the situation at Air Malta and the government’s ideas on low-cost airlines, the reform of the Malta Environment and Planning Authority and the future of the construction industry, the liquidity problem being faced by our enterprises, government-induced costs especially the continued heavy taxation of fuels and the ever-growing national debt. Is the government so far removed from these realities?

How can we take stock of our social situation when Pre-Budget 2012 tells us nothing about the measures the government intends taking to lighten the burdens being carried by Maltese families? It is not good enough that the government keeps telling us about the situation in Greece and Ireland. We should look at those many other economies, both within and outside the EU, that are doing better than us; economies which are strong as they were not propelled by “a-money-no-problem” culture.

Dani Rodrik, Harvard professor, recently wrote “politics, it is said, is the art of the possible. But possibilities are shaped by our decisions as much as they are by our circumstances” (September 19). It is unfortunate that our government insists otherwise.

fms18@onvol.net