George Mangion
Our finance minister is squeezed between a rock and a hard place when faced with the problem of how to bail out 600 surplus workers at Air Malta.
Certainly, good wishes alone may not be enough to bring in the bacon. The country has an option to pay severance pay after discussions with the GWU, but many ask can it afford to dole out an exaggerated €50m.
Certainly, Air Malta’s administration is running on hot coals and may not last beyond the winter season (assuming aviation tax is introduced). Compare the reform of Air Malta with past attempts to bail out a bankrupt Enemalta (main electricity State provider). This was successfully privatised. Here, it sold one third of its assets for a cash injection by the state of China. Later, it invested blindly in a controversial wind-farm situated in Montenegro. Following a clandestine meeting with state dignitaries at Azerbaijan, which saw Cabinet ministers sign a MoU to attract a private consortium which three years later build Electrogas running on LNG.
This move anticipated future savings and in retrospect the Labour government, elected in 2013, could, ahead of the completion of Electrogas, afford a generous 25% cut on electricity tariffs. Nine years later, the Chamber of Commerce thinks that another cut is overdue. With hindsight, hands on heart, we concur that such cost-cutting measures increased consumers’ purchasing power and boosted business competitiveness.
As a developing country the emphasis was always to spend the highest amount possible to educate and train our workers to international standards. Yet an EU report found that “the performance of Maltese students in international assessments remains poor”. Passes in foreign languages, Maths and science subjects are below EU average (latest results show only 20% passed Maths “O” level). Notwithstanding this drawback, for a small island with no natural resources located at the periphery of Europe, it is welcoming to read that it ranked as the ninth highest spender on education (per capita) among the EU28. Regrettably while spend on education is set to increase yet the amount spent on innovation is a mere 0.6% of GPD (mostly on government salaries) which is the lowest in Europe (Finland reaches 3.3%).
The Opposition say temporary state capping of fuel costs for Enemalta is only a paper thin move and decrees that the economy has started to de-accelerate. They expect more investment in waste management, more cleanliness, upgrading the frail road infrastructure and combatting the phenomenon of acute shortages of skilled workers. In their opinion, the 2023 budget can act as the enzyme in the Petri dish acting as a catalyst to facilitate faster reactions among economic agents. Only thus can equilibrium be reached.
The Chamber of Commerce notes how the menace of gentrification has mutated – just watch how rents in the past seven years have skyrocketed. A generic mood seems to be for speculators (some brandishing close ties to Castille) to splash their egos building concrete and glass units in every corner of the island. This building frenzy came under heavy attack from environmentalists, Caritas and Church authorities lamenting that confidence in Dubai-ification can only be a symptom of wanton greed.
In other countries, it led to the ruin of traditional core values and way of life. A recent study reveals inter alia, how speculators cream the top strata of profits whereas the multiplier effect is negligible. Sceptics retort that we are in a time warp painting a fairy tale picture about the feel-good factor but deep down foundations are weak. At this juncture, can we assess if really and truly our economy is firing on all cylinders or on the contrary it suffers from such latent fragility?
Castille says it is not all doom and gloom as growth potential has been highlighted by favourable grades in ratings by Standard and Poor’s. A 2023 budget top priority is to increase R&D spend as €260m are needed annually to upgrade universities and colleges. Having a mere 30 PhD’s graduating annually is not enough to populate an ecosystem let alone succeed to open flood gates for Unicorns to gate crash MDIA to exploit a potential quest for AI.
Regardless of our tribulations and weaknesses, may we praise the Lord for showering on us a cornucopia of delights, seeing the country is truly prospering following two dismal years of furlough subsidies which inevitably pushed the debt towards the 9 billion mark. Men of good faith pray that the 2023 budget will succeed to distribute benefits in an ongoing effort to expand our economy and secure a better tomorrow, particularly for the marginalised, pensioners and low-income families. Sadly, a mere €10 Cola weekly grant will not cut the biscuit.
George Mangion is a senior partner of an audit and consultancy firm and has over 25 years’ experience in accounting, taxation, financial and consultancy services. His efforts have seen PKF instrumental in establishing many companies in Malta and placed PKF in the forefront as professional financial service providers on the island.