Way forward

Last Updated on Thursday, 9 May, 2024 at 12:32 pm by Andre Camilleri

The recently published annual national productivity report for 2023, concludes that “The study reveals a positive and significant correlation between labour productivity and wages in key sectors of the Maltese economy. A €1 increase in productivity is associated with a €0.2-0.5 increase in average wages per worker. However, this relationship is weaker than the EU-28 average, suggesting that wages and productivity in Malta have been weakly linked. Potential factors include divergent productivity growth across sectors and the prevalence of collective bargaining, covering around 50.1% of workers. The accuracy of productivity indicators in the public sector, where collective bargaining is common, also poses challenges and influences wage-setting dynamics in the private sector.” In fact the same report includes the following as one of its recommendations “The primary recommendation emphasises the importance of consolidating and developing key productivity sectors such as ICT, financial services, and professional services. Policymakers are urged to support consolidation through tax incentives and regulatory measures, fostering a thriving business environment. Collaboration among companies within these sectors is encouraged to enhance global competitiveness.”

Within this background it was refreshing to see that main drift behind the newly launched Malta Enterprise Business Schemes, was to incentivise and assist businesses that invest in sectors that can provide more value added per person employed and hence are able to boost economic output through the employment of less people. In a country with virtually full employment and with a huge stress on our infrastructure due to the increase in the resident population this is surely the ideal way forward.

Just as a brief overview, of some of the schemes launched by Malta Enterprise, these include a Business Development scheme offering a cash grant and/or tax credit of up to €300,000 for eligible projects, whereby this scheme would support a number of business development projects such as setting-up, expansion, modernisation, upgrading of industrial sites and hotels, business re-engineering, digital transformation and environmental projects. The eligible costs are this scheme include wage, rental costs and advisory costs and also the acquisition of tangible and intangible assets. This scheme falls under the provisions of the De Minimis scheme and provides a cash grant and/or tax credit of up to 75% of eligible costs, capped at €300,000 per single undertaking over 3 years, with an approval from Malta Enterprise Corporation needed before the commencement of any project.

Another scheme is the Smart and Sustainable Investment Grant scheme. This scheme offers a cash grant of up to €100,000 for each project. The aim of this scheme is to support businesses investing in a project of at least €10,000 aiming to achieve sustainability or digitisation. Eligible investments include waste minimisation, sustainable materials, energy efficiency, water efficiency and sustainable digitalisation. This scheme is also covered by the De Minimis provisions and the aid covers up to 50% of eligible costs, capped at a cash grant of €100,000 per project. It could be, that a further tax credit may be granted, with a possibility that the total aid reaches 60% or 70% of the eligible costs.

Finally another Scheme, which I believe, should appeal to every business in Malta is the Skills Development Scheme. Through this scheme business are supported to provide training with the scope of developing and updating the skills and knowledge of their workforce thus aiding them to perform more efficiently. Thus the training has to provide an upgrade in employee skills, address skills shortages, facilitate re-skilling, tackle skill gaps and strive towards developing a knowledge-based workforce. The eligible costs include wage costs of trainees, wage costs of internal trainers, hourly costs of external expert trainers and air travel expenses of trainers and/or employees.

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