Like us mortals, the Maltese economy has to undergo periodic check-ups to confirm its state of health. In its recent report on Malta the International Monetary Fund lists a number of recommendations it believes should be adopted by the Maltese government to strengthen the prospects of future economic growth.
No one doubts the IMF's experienced in the dynamics of economic activity, but its understanding of social and political realties is often less sharp.
The first point the report makes is that economic contraction this year will probably be higher than projected by the government, but somewhat lower than those of other major economies in the eurozone area.
We may start seeing growth again in 2010, but even here the IMF projections are couched in very prudent language. Much will depend on how fast other countries that import goods and services from us, move out of recession.
The IMF report also welcomes the temporary measures adopted by government to assist export oriented business in Malta, but warns that structural reforms should not be put on hold for ever.
Furthermore, structural reforms need to be audited to assess their effectiveness in reaching the intended objectives. Privatisation is a case in point.
A number of services and utilities have been privatised, but have consumers benefited from improved service? Do we have more competitive pricing and better competition, or have we simply transformed a public monopoly into a private one without putting in place the necessary safeguards?
Resuming fiscal consolidation once the recovery is established will remain a priority. This is very much in line with what the EU Commission has decreed when it started action against the government for breaching eurozone fiscal regulations in 2008 and 2009.
The IMF also draws attention to the need to address government bureaucracy when it suggested that 'the authorities should act swiftly to remove the bottlenecks that have so far held back EU fund absorption'.
Capital projects on the drawing board should be speeded up to generate much-needed local economic activity.
Weaning industries off state aid is a tricky recommendation. One hopes these industries will be able to survive on their own when state support is stopped: otherwise we will be just postponing the problem.
No less challenging will be the implementation of the IMF recommendation to reduce the size of the public sector. Public health, education and pensions are again appearing on the IMF's radar. We shall have to wait and see what measures of reform the government will come up with.
The IMF report diplomatically left out a clear reference to the need to address alleged corruption in the granting of large government projects. Corruption costs money, which ultimately comes from taxpayers' pockets.
It is a sad reality that we have become so used to alleged corruption that most have a fatalistic attitude to this dangerous cancer of our economy. This needs to change if we are to optimise the use of our limited economic resources.
The elimination of cost-of-living adjustments (COLA) is not a recommendation one can easily agree with since it is made outside the context of other measures that need to be taken to improve Malta's competitiveness.
We need to see what commitments the government will make to control inflation, eliminate time-wasting bureaucracy, and to increase public productive investment before replacing COLA with a productivity-linked wage increase mechanism.
Employers also need to be encouraged to invest in more modern technology and train staff to improve productivity.
Any option replacing COLA will have to safeguard employees' interests. Its removal will definitely erode the purchasing power of those within the lower- and middle-income groups.
The IMF's final recommendation is perhaps the most effective in the long term. We need to encourage more investment in qualitative human resources if we are to attract the new economy investment that demands highly qualified and skilled young and not-so-young people. This needs to be combined with measures that entice more women to enter the workforce.
The IMF's check-up revealed no surprises. It does, however, prescribe some bitter-to-swallow medicine that should lead to a better bill of economic health.
Dr Mangion is PL spokesman for finance.
cmangion@keyworld.net