The Federation of Industry, Malta Employers' Association and the Association of General Retailers and Traders have expressed contrasting opinions on the budget.

While the FOI and the MEA described it as positive and a reflection of the current domestic economic and social situation, the GRTU said the budget missed an opportunity to take the drastic decisions needed to make Malta competitive.

"The Malta Federation of Industry notes with satisfaction that government has not yielded to the temptation to use the Budget as an election platform," the FOI said.

"The signals given by the Minister of Finance mean that government is taking into account the problems that need to be solved in the coming years to make the economy, and industry in particular, competitive and to stimulate productive-led growth," the FOI said.

Considering the unfavourable international economic climate, "the Maltese economy has not performed badly and the foreign direct investment and creation of jobs has been maintained although at a considerably reduced pace to that experienced prior to 2001," the FOI said.

The federation said the budget did not appear to have added any further direct burdens on industry.

It was pleased the government had "proposed much needed increased spending to give technical education a boost; provided a stimulus to research and development activities; eased the pressure for high wage increases on the private sector through increased social benefits to lower-paid employees and lower rates of income tax; and encouraged married women with young children to return to their jobs by making available financial assistance for child caring expenses."

The employers' association made similar comments on these sections of the budget.

The FOI noted however that a lot of work needed to be done, "sooner rather than later" towards boosting industry's competitiveness.

"This includes the high costs for port handling and clearing of merchandise, the abnormally high number of public holidays, the sick leave burden and the welfare gap. However, this outstanding agenda requires the consensus of social partners in order to be successful," the FOI said.

On its part, the MEA said the previous relatively austere budgets had managed to reduce the fiscal deficit to 4.6 per cent of GDP.

"In spite of the fact that the economic situation is still not rosy, this has allowed government to put forward a budget that focuses on a more expansionary fiscal policy through moderate tax cuts and fiscal incentives," the MEA said.

"The budget contains measures that will benefit both consumers and the business community. The revised income tax bands are a modest relief to middle income earners. More families will benefit from the supplementary allowance because of the revised eligibility income brackets.

"The extension of the scheme for VAT refunds within 30 days to enterprises employing up to five people with a turnover of up to Lm250,000 (previously Lm100,000) is a step towards alleviating liquidity problems in small enterprises.

"The tax system for farmers also offers substantial benefits to the farming community. The allowance for research and development is important to foster a culture of innovation that is needed for our industry to face the challenges ahead," the MEA said.

The association said the new collective agreement for the public sector had implemented an important practice in that its increases included rises in the cost of living.

"This is an important measure that is needed to minimise pressures on national finances resulting from increases in labour costs in the public sector, as happened previously. "However, the impact of an increase in labour costs by Lm1.75 per week plus social security contributions might have an adverse effect on firms that are finding it increasingly difficult to compete in international markets.

"The proposal for a new retail price index for pensioners will benefit an important segment of Maltese society.

"Taken within the context of the challenges facing the country in view of the difficult international economic climate, the budget certainly proposes an optimistic vision for Malta's future. This needs to be supplemented with a strategy that addresses issues that will affect the country in the medium to long term.

"One such issue is attracting sufficient foreign investment to generate the economic growth that is necessary to continue to improve the national finances without resorting to tax increases. Another is social welfare reform, since it is accepted that the current system is not sustainable and requires modification to respond to the country's changing demographics.

Asked whether the association felt that enough had been done to promote investment and job creation, MEA director general Joseph Farrugia said:

"The budget has to be seen in the context of the previous budgets, which were relatively austere. This tried to open up a little. But this one would not have been possible without the previous budgets.

"The only thing I query is whether the budget has ignored long term issues such as social security and investment. The increase of Lm1.75 raises the question of whether Malta will remain competitive.

"Experience has shown that when factories closed down, employees were absorbed by other industries which expanded. The question is whether expansions alone are enough to keep absorbing the workforce," Mr Farrugia said.

In its own assessment of the budget, the GRTU said it measured it using two criteria: its ability to make products and services more competitive and the number of initiatives to encourage flexibility at the place of work.

"Recent budgets were dominated by the problem of deficit control. For the deficit to be controlled, the economy has to be given the chance to grow by over four per cent in real terms.

"This would enable the government to take a bigger bite to be able to make good for its expenditure," the GRTU said.

The GRTU said the finance minister "lacked the courage to take real drastic measures to reduce public expenditure, and give more space to the private sector to invest by lowering the tax burden."

The budget offered no incentives to the tourism sector, it said. The government had also failed to take measures to increase tax competitiveness of Maltese entrepreneurs who will soon start facing competition from European entrepreneurs, who had lower cost structures.

The GRTU said the government had adopted several of its proposals to help the self-employed but had ignored others and only implemented parts of other GRTU proposals, making them less effective.

The government had done well to reform VAT, especially the way fines were imposed, as well as income tax and other taxes.

However, the GRTU will be monitoring the impact of these government measures.

It also expected incentives to help job creation.

However, the GRTU also said that "most of the measures announced for small businesses are in the right direction".