Challenges of economic success

Challenges of economic success

It must be every finance minister’s dream to present a budget in the context of an economy that is growing at above-average rates, with low unemployment and with significant direct foreign investment. This is the kind of environment that will put wind in Edward Scicluna’s sails when he presents the Budget for 2019 in a few weeks’ time.

Economic success can never be absolute, as the cost for achieving success is often high and has to be managed diligently. Prof. Scicluna was right not to indulge in hubris when giving a preview of what we are to expect in next year’s budget. The most significant comment made by the minister is that it is crucial that we build economic, environmental, human, social and institutional capital. Only when a proper balance between these different elements is achieved – all of which affect the lives of most people – can we say that the country is on the right path to making a success of itself.

Budgets are, by definition, short-term business plans that should link with longer-term strategies to promote sustainable social and economic prosperity. Prof. Scicluna gave some indications of the priority areas that will be tackled in the next Budget even if the details will only be known on Budget Day. The strong economic growth experienced in the last few years is no guarantee that in future we can continue to rely on substantial expansion.

Many will be relieved to hear that “the government is aiming for a balanced budget rather than a surplus”. There is evidence that the gap between the haves and the have-nots in our society is widening. The promised redistribution of excess revenues will hopefully help many to climb the social ladder.

But social mobility cannot be achieved solely by wealth redistribution. More needs to be done to ensure that our educational system improves the achievement levels of our youngsters who so far are lagging behind those in most advanced EU countries. Future economic growth should not be dependent on an ever-increasing inflow of foreign workers while many of our younger generations remain underqualified for the kind of jobs on offer.

Another goal mentioned in the pre-Budget document is the improvement of the infrastructure. Significant investment has already been made in this sector with the upgrading of essential arterial roads.

But the combination of a substantial backlog of road improvement priorities and the increasing number of cars on our roads necessitate a significant focus on physical infrastructure. Considerable progress in the way our main tourist areas are maintained is another priority that needs to be given more attention.  Public transport is still not as efficient as it needs to be to lure people to use it rather than travel by car. The free public transport scheme for private school children is welcome even if the planning and execution of this project have so far been mediocre.

Prof. Scicluna rightly commented on prioritising environmental issues. The waste-disposal facilities need a significant upgrade as was so dramatically demonstrated in the recent fire at Magħtab that could have resulted in a major health hazard for many communities living in the vicinity. The commitment to a greener economy has so far been just wishful thinking as more building projects encroach on agricultural land and as the deterioration of the urban environment in some areas continues to increase. Pious declarations of intent will only bring about real improvement in people’s lives if the government has the political will not to sacrifice the health of our environment on the altar of economic growth.

A critical comment made by the Minister of Finance relates to the strengthening of the financial and gaming services regulation and institutions. Malta continues to suffer from bad press as a result of a perceived laxity in the implementation of anti-financial crime regulations. The EU’s increasing determination to get tougher on local institutions responsible for implementing anti-money laundering regulations will leave the government no option but to go beyond enacting good legislation to empowering autonomous regulators to see that the law is respected by all operators.

The social capital that the country needs should be invested to provide social and affordable accommodation to those who are really in need of support and to young couples who cannot afford to climb the first step of the property ladder. The building of 700 new social housing units in the coming few years will ease the problem, but much more needs to be done to ensure that those who are destitute will have a roof over their heads.

One hopes that the next budget will also introduce measures to help the thousands of migrants and refugees who are now part of Maltese society integrate into the communities they live. This integration will help to avoid social tensions that are already a reality in some parts of the island.

The pre-budget document has positive elements that should underpin sustainability in our social and economic infrastructure. The details that still need to be announced will indicate whether the way forward is just paved with good intentions or reinforced with a steely commitment to promoting prosperity in all sectors of society.

This is a Times of Malta print editorial

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