This is the third and final article in a series which I started some weeks ago. The first was about the need for an economy to operate within an international peaceful environment if it is to thrive. The second was about the need to have economic activity based on strong ethical principles. The third pillar is respect for law and order. Even the strongest economies flounder if economic operators do not continually seek to operate within the parameters of the law, in all their activities.

As happens on the ethical issue and on the peace issue, there are some economies and, in particular, some operators who thrive when there is war and political uncertainty, when ethics are ignored, and when there is no respect for law and order. In such situations the law of the jungle would prevail, and it is known that serious, bona fide economic operators shy away from these situations.

Economies function best and more wealth is created when there are clear rules and when economic operators abide fully by those rules. I do not believe that the severity of the rules has much to do with the issue, because we are witnessing strong economic growth in countries which have rules that are far less tolerant than those we are accustomed to in Europe.

When we speak of the need for respect for law and order, we need to appreciate that such respect is not only required from economic operators, but also from the regulators and from the social partners. For example, it is useless having clear rules regulating investment activity but having unclear rules regarding industrial relations; or having tax rules that are applied rigidly, but having health and safety rules that are applied in a lax manner.

Regulators also need to appreciate how critical their role is in promulgating rules that are relevant to today's economic realities and to apply these rules, and to be seen to be applying them, consistently.

No direct or indirect reference is being made here but I have consistently experienced situations in this country where these points are not appreciated by one and all.

One typical example that one encounters is something which is referred to as temporary policy or temporary scheme. A policy is temporary by its very nature and schemes are expected to be temporary.

But the minute rules are applied according to such temporary policies and schemes, they are being entrenched into the legislative framework. And regulators in Malta have not yet fully understood this.

It is accepted that discretion is part and parcel of regulation. The problem lies in the fact that there is still too much left to the regulators' discretion. Thus it should be equally accepted that discretion, although being part and parcel of regulation, must be kept to a minimum.

In this regard, the rules related to inland revenue are a very good example.

It is the law itself that establishes what penalty needs to be paid if there is an underpayment of tax. Neither the Minister of Finance nor the Commissioner of Inland Revenue can exercise discretion as to what the fine should be. This is the correct way of doing it as it creates trust in the institution responsible for tax collection.

On the other hand, there are regulators who, in the same letter, have written that the regulations have not been breached but have equally admonished the operating company concerned.

What can this be called - inconsistency, incompetence, discrimination, injustice?

A law is either breached or not breached, depending on the facts of the case. Admonishing someone who has not breached the law is excessive use of discretion, which causes economic operators to lose trust in institutions.

Full respect for law and order in an economy is never easy to achieve, even if we can make it simpler. The ways to achieve this can be several.

There are those who ask for more regulation, a bigger requirement for permits and licences and stronger supervision by the regulators.

There are others who argue for simpler and clearer regulations coupled with a strong dose of self regulation and monitoring by the regulators.

Frankly, I prefer the latter approach. However, what I prefer more is recognition by the social partners and civil society in general, that our economy can only thrive if we fully respect the rules of the game. This ensures a level playing field.