A document by the Malta Hotels and Restaurants Association in the run-up to the Budget reinforces a view shared by many that the island needs to think ahead and shift the focus on long-term economic development rather than just short-term growth. It is not bedtime reading material but its analysis of the situation and the recommendations it is proposing make a great deal of sense.

Appropriately calling its document ‘Beyond growth’, the MHRA argues that, though the growth registered today is welcome, the country needs to fine-tune its economic policy and national strategies to start achieving economic development. In its view, “economic development is only possible if the economy generates enough resources that can be reinvested to ameliorate the general well-being over time. For development to take place, the future cannot just be an extension of the past. Development is about a leap forward from the existing structures”.

It makes a number of useful recommendations and speaks of the low level of investment. There never appears to be any shortage of interest in property development but, overall, local entrepreneurial spirit is relatively low. Malta is sitting on a mountain of cash, waiting to be put to good use. Any new investment bond or government stock that is issued is heavily oversubscribed.

Firms that may be ripe for expansion are taking long to take the plunge and go public, sometimes holding back the development of their own enterprise. The local stock market may have grown but there is a huge potential waiting to be tapped. If a fraction of the idle capital was used for development in existing or new economic activities, this will help the country make the kind of leap forward the MHRA is talking about.

The association is suggesting fiscal incentives to promote investment. The government may argue that there are already such incentives but a greater push in this direction could perhaps help unlock some of the capital and entrepreneurial spirit for further development.

In the MHRA’s opinion, economic growth will not necessarily lead to economic development. It argues that Malta risks ending in the “middle income trap “This is a situation where a country reaches a particular level of development and gets stuck relative to other countries. Low levels of investment and human capital, together with the inability to access markets of high value added are part of the dynamics of this trap.”

The government may well say it is seriously attempting to create other economic niches by promoting the development of the health, education and maritime sectors, all of which have great potential for expansion. However, in the process of doing this, greater attention needs to be given to improving vital infrastructural works that would sustain such development.

Only recently, the Prime Minister said the sewerage system in some areas is under pressure and there is shabbiness in other localities as a result of a growing tourist influx. Replacing or expanding old works would need to be given priority. As to shabbiness and, equally important, cleanliness, the government is taking painfully long to come to grips with the problem.

Malta still has a very long way to go before its public infrastructure reaches the high standard that is acceptable in a country that has tourism as one of its main revenue sources. It is a pity so many of the recommendations made by business organisations are forgotten the moment the Budget is presented.

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