Dad, political sociologist, local councillor, drummer from Malta

Monday, June 05, 2017

Sustaining the economy

One of the main challenges of Malta’s newly elected government will be to sustain the country’s economy. This requires a proper balance between economic, social and environmental priorities.
During the last decade or so, Malta registered relatively fast real GDP growth when compared to most EU member states, with growth accelerating during the past four years.
However there are various weaknesses in the economy, mostly associated with impacts on people’s quality of life, social disparities and weak governance. I will give a few examples.
The rapid rate of increase in construction permits by the Planning Authority has led to deterioration in the quality of life of many residents, mostly due to lack of control over the malpractices of various building contractors.
This has led to increased emissions of dust, discomfort for the neighbouring residents, rubble and building debris strewn in the streets, and uglification of the surroundings due to the ramshackle manner in which hoardings are made.
In addition, the unregulated use of old polluting equipment by building contractors, further contributes to the bad quality of the air we inhale. The intrusion of construction developments into ODZ and green areas has led to a reduction of open spaces.
Another economic activity with impacts on the quality of life relates to excessive dependency on private cars. It would be politically suicidal to expect people to do away with their cars, but governments have an important role to play to provide viable alternatives. Thus, modal-shifts to alternative means of transport should be prioritised to mitigate against excessive emissions and traffic congestion.
If we now turn to non-polluting economic activities, such as financial services, we also observe problems due to lack of regulation. Malta’s rate of growth in the financial services was accompanied by a deterioration of the country’s reputation due to matters such as Panama Papers and the Pilatus Bank controversy.
It is vital that institutions such as the Malta Financial Services Authority are reformed so as to enjoy universal trust by economic and political players.
The igaming industry, which has attracted so many foreigners to Malta, has mostly grown as a result of fiscal attractions. If such attractions cease to exist, possibly due to pressure from the EU Commission, the industry could be highly negatively affected.
Therefore, while Malta should seek to maintain its competitive edge in this industry, it should not have excessive dependence on it and should continuously seek to diversify its economy.
It is also important to note that one unintended side-effect of the growth of such industries, also due to lack of proper regulation, is that the inflow of highly-paid foreigner workers has led to a rapid increase in rent of residencies, with spill-over effects on the whole rental market. As is well known, this in turn has led to major social problems for low-income earners.
Similar social problems are also the result of economic disparities such as giving lower wages to workers who do identical work as others. The new government should ensure that regulatory institutions are properly equipped to investigate and enforce on such matters.
Another problem relates to the selling of passports. This practice has indeed generated funds for Malta, but it has been criticised as lacking proper oversight, as selling access to the European Union, possibly undermining the Schengen system, and as associating Malta with shady deals. This approach is not a sustainable way of generating economic growth and is not helping much to improve Malta’s reputation.
Economic good governance has deteriorated during these last four years, with an unacceptable degree of ‘anything goes’ practices, sometimes explicitly or implicitly condoning corruption.
Malta’s new government should address these shortcomings so that Malta’s economic growth will also be sustainable and inclusive. It should lead to factual and tangible improvement in the quality of life and social well-being of residents in Malta.
This requires good political, social, economic and environmental governance, which should be built on sound regulatory frameworks. Such a direction is imperative for the restoration of Malta’s reputation.

1 comment: