The fighting in the Middle East has rendered once more the international situation very unstable. From a humanitarian point of view, we have been able to witness the horrors of war yet again, and in a manner that has been hitherto unknown to us. Internet, breaking news and other tools have made sure that we not only find out in real time what is happening three hours (as the crow flies) away from us, but also view it. That is how close the war is to us in Malta.
The wars in Africa, Kosovo, Afghanistan and Iraq still had a feeling of being too far away from us, mainly because we got to know things the day after. Now we find things out instantaneously.
It may appear to be a useful exercise to some to seek to determine who provoked who, and who did what, and whether the reaction of one party has been exaggerated or not. One may also want to analyse whether third countries are sending arms to Lebanon to arm one of the parties involved in the conflict. In effect it is a totally useless exercise, because what counts is that a country (Lebanon) has been reduced once more to a battlefield and many (it is immaterial whether we are talking of tens, hundreds or thousands) civilians, certainly harmless and without any fault, have been killed.
However, my point in this week's contribution is another one. It is a point that may sound callous as it may appear that economic issues are being given more importance than humanitarian ones, or that Malta's only concern in this matter is how the war may affect our economy.
I believe that the humanitarian aspects of this war must always take priority and that our concern should not just be economic. Our concern should be primarily for the civilian population and we should only give a little thought to how war may affect our economy.
The point I wish to make is that we, in Malta, need to understand that, for our economy to thrive, there needs to be peace. Since our economy is a very open one, then it needs international peace and not just peace at home.
The scenes of war shock us greatly, and rightly so. However, we tend to sleep at night with the peace of mind that this is not happening in Malta or just beyond our horizon. So we may feel that such conflicts do not affect us. It is about time that we accept that wars do affect us, and they affect our economy negatively for a number of reasons.
One of the most obvious ones is the impact of war on the price of natural resources, notably oil. The price of oil was expected to go down and it in fact did for a few days. However, the turmoil in the Middle East in the last two weeks has caused the price oil to shoot up again.
Moreover, war tends to create uncertainty and, in consequence, to dampen demand for certain goods, even if it creates a demand for other goods. However, we do not have an economy that produces armaments and, as such, any possible increase in demand for certain products is not likely to filter into our economy.
War also tends to make investors think twice about moving capital from one country to another. They want to wait and see how things are going to develop. Investment decisions get delayed. For an economy that requires foreign direct investment to continue growing, like a person requires water on a hot sunny afternoon, this is not good news.
The impact on tourism should also not be minimised. This year's tourism numbers are not impacted by the war in Lebanon; however, a prolonged struggle there would tend to make people stay at home, or at best, move around as little as possible. We have experienced this after the September 11, 2001 events. The international economic slowdown in 2001 and the following two years hit hard on our economy, and one of the causes of that slowdown was the terrorist attacks and the uncertainty they created.
I believe that the war in Lebanon should stop forthwith because it is leading to the massacre of civilians. However, even if we were to look at things selfishly, war does not do any good to our economy, because our economy needs peace in order to grow.