Finance Minister Edward Scicluna had much to smile about at the press conference called last week to present the pre-Budget document. The 86-page document, entitled Delivering Our Vision, was studded with charts showing positive trends, with unemployment, inflation and deficit sliding gleefully downwards and gross capital fixed formation, employment and gross value added, to name but a few, striding confidently upwards.
Fitch Ratings was just about to confirm credit rating, reflecting the gradual improvement of Malta’s public finances, helped by strong economic growth and lower nominal interest expenditure. Forget what the minister said; it is always nicer to hear it from someone independent: Fitch said the headline fiscal deficit should fall to 1.8 per cent of GDP this year, with total revenue/GDP reaching a record high of 42.8 per cent.
The document outlined more of what we heard last year: tweaks to successful and less successful programmes; projects to ensure that people are weaned off dependency and are helped to help themselves. The measures introduced in the past two years may not have been lavish or dramatic. But look at the unemployment register and the female participation rate to judge whether they worked or not.
The minister made one telling remark: you don’t always need to spend money to improve things. That does not necessarily mean, for example, that providing free child care does not cost the government. It means that it recoups what it spends on the service through direct revenue like tax and national insurance from the working mother (not to mention a host of other indirect benefits like more disposable income for the family).
The same thinking works for training the unemployed, preventative medicine and public-private partnerships. The age-old cliché holds: you need to break an egg to make an omelette.
Unfortunately, the slow and steady improvement in macroeconomic indicators is being completely eclipsed by the shenanigans of other ministers, and incredibly short-sighted lapses in governance of staggering cheek that will not easily be forgotten by the electorate. And there are far too many projects which are simply ‘missing in action’. There was hope that this government would succeed where its predecessor had so dismally failed, but half way through the legislature, there is still no sign of progress at either White Rocks or Marsa Shipbuilding, no matter how many reassurances we are being given that all is in hand.
There was one other shadow cast across the press conference: the news that manufacturing gross value added in the electronics sector was down by 40 per cent. A little digging revealed that this was the result of a downturn in ST Microelectronics’ performance. Imagine. One of Malta’s leading exporters, which employs 1,600 people, and represents a staggering 47 per cent of the island’s exports, reports a loss of $26 million in 2014. And the only comment from the government was a trite comment that “ST was expected to weather this phase”.
Consider that this company reported a profit of $145 million in 2011 and an income of over $1.1 billion. Last year revenues dropped to just $707 million. The financial report gives little clue as to what caused this massive drop. The global group reported fairly stable revenues and profits for 2014 – so the downturn does not seem to be due to structural changes in the market or prices of semi-conductors.
The General Workers’ Union is currently at advanced stages of negotiation of the collective agreement and this is undoubtedly a sensitive time for this company which has always had the power to wag the government’s tail, so important it is to the Maltese economy.
The company has failed to reply to questions from The Sunday Times. The government’s assurances are woefully inadequate.
What is going on there?