The Malta Chamber of Commerce, Enterprise and Industry has followed the European Commission’s communication to the EU Council on Malta, which made a number of recommendations on certain matters of economic priority. The Commission’s general positive macroeconomic assessment for Malta is welcome as is an acknowledgement of the country’s sound financial stability indicators.
The Malta Chamber was also encouraged by the Commission’s report emphasising similar recommendations to those it has itself been consistently making, in particular those related to age-related expenditure, the labour market and cost competitiveness of energy prices.
The communication mentions a number of urgent reforms the country needs to implement, which include measures related to the country’s fiscal consolidation, sustainability of pensions, early school leavers and enhancing the relevance of the education system to labour market needs, energy and increasing the efficiency of public procurement procedures.
The Malta Chamber has spoken consistently about the need for the country to put its financial house in order and to ensure that wealth generation precedes wealth distribution. It believes that Malta’s public finances need to be effectively addressed primarily through the strengthening of fiscal enforcement, market surveillance and a continuous fight against illegal practices and fiscal evasion.
To this end, the Chamber reiterates the importance that the planned amalgamation of the departments responsible for Inland Revenue, VAT, Customs and Tax Compliance progresses without further delay.
The Chamber has regularly placed its opinions on record about the need for urgent pending reforms.
The ongoing debate about the adequacy and sustainability of the current pension system is one such example. It is no secret that the Pay-As-You-Go system is unsustainable and needs to be at least supplemented by a voluntary third pillar.
The most recent Allianz Global Investors’ Pensions Sustainability Index places Slovenia, Malta and Greece as the worst-performing European countries in the sustainability index. Furthermore, the Chamber is in favour of the Commission’s recommendation to accelerate reform via a planned increase in the statutory retirement age and by consecutively linking it to changes in life expectancy.
At the same time, it is also in favour of a comprehensive reform in the public health system that delivers a cost-effective and sustainable use of available resources, such as by strengthening primary care.
The Malta Chamber is also in favour of enhancing efforts to reduce the current high rate of early school leavers and increase the female participation in the labour market.
The Chamber is in favour of enhancing efforts to reduce the current high rate of early school leavers
The World Economic Forum’s annual competitiveness index shows that one of Malta’s weakest points remains our labour market’s efficiency. The same report suggests that local businesses feel that the Malta’s workforce requires further applied training and education and this is a strain on our competitiveness.
The ratio of youngsters leaving school at the age of 16 or before – without obtaining minimum qualifications – needs to be addressed. Positive and encouraging results have been noted over the past decade.
Nevertheless, a third of Malta’s future workforce still opts against pursuing further education, and the country is faring poorly in relation to other European member states to the detriment of our competitiveness. The Malta Chamber is also willing to contribute to discussions and efforts to enhance the education system’s relevance to labour market needs.
With the competitiveness of the private sector in mind, the Chamber is concerned that – in a small, resource-constrained country such as ours – energy is becoming a limiting barrier for economic growth.
It therefore agrees with the recommendations being made by the Commission for a healthy diversification of the country’s energy mix. To this end, the Chamber recently proposed that the government channels more assistance from the European Regional Development Fund for the 2014-2020 period to support businesses to undertake critical investments in renewable energy sources and energy efficiency technologies.
At the same time, the Chamber deems it crucial for the country to maintain flexibility to increase the share of energy sourced via the interconnector in the overall energy mix should it be more advantageous from a cost perspective to source energy for the private sector from Sicily, or eventually mainland Europe.
The Chamber was disappointed to note that the Commission has dropped a primary recommendation on wage indexation that it had been repeatedly making for a number of years. The Malta Chamber continues to believe that the revision of the Cost-of-Living Adjustment (Cola) formula to include productivity as well as inflation is of a high and urgent importance for the country.
All in all, while being fair and objective, the need for the reforms and other measures suggested by the Commission was already known.
It is up to the country to take the necessary decisions and implement the measures without further delay so as to ensure that Malta’s economic progress is not undermined by internally-generated frictions and is therefore able to keep pace with that in other member countries of the European Union.
David Curmi is president of the Malta Chamber of Commerce, Enterprise and Industry.