The Malta Employers’ Association (MEA) said that the number-maximisation trajectory that Malta’s economic and social model is built on is not suiting the country well, and the country is also suffering a decline in labour productivity.
MEA Director General Kevin Borg addressed a press conference during which the association’s 12 proposals for the upcoming Budget for 2025 were discussed. He also said that the MEA has an indication that the next Cost-of-living Adjustment (COLA) will amount to either €5 or €6 per week.
Borg said that the MEA is also insisting that the COLA should not be taxed, and should be given fully to the employee, as it is not payment for work, but compensation due to the higher cost of living.
MEA President Joanne Bondin said that the MEA has already had a meeting with the Prime Minister and government representatives where it presented its proposals, and appealed for good use of public money, while acknowledging support needed for employers.
The MEA said that the country is at a crossroads, where it must clamp down on misuse of funds, make better use of its local resources, and provide employers with further support when it comes to carrying the cost of social measures.
It presented a comprehensive set of proposals, which are a result of internal consultation with members of the MEA, research, and internal discussions within the team, Bondin said.
Borg detailed the 12 proposals, with the first and most important one being that the country’s economic model must move away from a “number-maximisation trajectory,” where competitiveness of businesses is based on numbers, and not quality.
“This is leading to the deterioration of people’s quality of life, mental wellbeing, motivation, which is leading to a worsening situation with worse restrictions on the labour market,” Borg said, adding that now, the country has a situation where both foreigners and Maltese workers are leaving the island to work elsewhere.
“We need to climb up the value chain, and do more, not less. Malta’s future economic prosperity needs to be aligned with its physical and demographic characteristics,” Borg said.
He called for economic transformation as the MEA’s second proposal, and for the next Budget to give direction and reconfiguration of priorities, where companies will be incentivised to concentrate less on critical mass, and more on quality and innovation.
Borg said that there is a strong dependency of economic growth on construction, with its environmental impact being felt on people’s wellbeing, as well as Malta’s attractiveness as a quality tourism or expat destination.
He also said that Malta should be in a “pole position” to attract high tech investment to revive the manufacturing base, as well as potentially grow the maritime and aviation sector.
On taxation, Borg said that the MEA believes Prime Minister Robert Abela’s announcement of substantial tax cuts for middle-income workers in the next Budget is important, as revision in tax bands may encourage more compliance and actually increase tax revenue, but it also highlighted some risks.
“If the increase in disposable income will be channelled on private spending in an overheated economy, the measure will be short-lived, as it will be eroded by inflation,” Borg said, adding that an important consideration is the tax elasticity of changes in tax bands, for example the impact on government revenue.
The risk of reduced tax revenues may also aggravate Malta’s excessive deficit procedure in the European Commission, with the MEA warning that caution must be implemented when revising tax bands which could increase deficit.
The MEA asked government to conduct and publish a study that defines the reasoning and objectives of the tax revisions before they are implemented.
The MEA’s fourth proposal is to focus on capital expenditure on essential infrastructure, with construction activities shifting from projects which take up land to strengthening infrastructure.
Borg said that the focus should be on energy supply and distribution, water resource management, intelligent traffic-management systems and an upgrading of drainage systems in many parts of the country, as they are more important priorities than grandiose projects that are unlikely to materialise.
Borg said that its fifth proposal is for Malta to have a comprehensive plan to maximise the value added of its human resource, and rationalise its labour force.
The MEA appealed to government to introduce AI and automation strategies to move people into more productive employment.
“The public sector is riddled with underutilised personnel that can be more productively employed. Such a rationalisation will also reduce the dependency on imported labour,” it said, adding that increases in pay packages in the public sector need to be accompanied with measurable key performance indicators to justify such expenditure.
Borg also called for more adoption of robotics, automation, big data, augmented reality, AI and internet of things, which can all help humans, and create wealth with less dependence on workers, as there is not enough.
Companies can also reach out to new tech to help further their business models, he said.
The MEA is also asking government to remove fiscal anomalies which are discouraging people to participate in the labour market beyond retirement age.
“People who reach the age of 61 should really be encouraged to remain working, as currently they are being discouraged because of issues with the pension. Once they leave, they will be very unlikely to return at 65 when they are cleared,” Borg said, adding that early retirement should be discouraged.
The MEA is calling for pensions to be completely tax exempt for employees and self-employed, and there must be education and awareness raising on the importance of further contributing to the labour market.
It is also asking government for incentives to adapt work environments/ergonomics, as sometimes, workers may feel discouraged of remaining in their place of work due to unattractiveness.
The MEA also advocated for further robust career guidance structures and an injection of resources in the nest Budget, which empower young people to take better informed decisions about their future for their own benefit, and that of Malta’s labour market and economic prospects.
The MEA’s sixth proposal focuses on better governance and full disclosure and transparency on government contracts, and expenditure of specific projects.
“Government should publish a list of all persons holding positions of trust and their renumeration packages,” Borg said, adding that it is unacceptable for such information to only be available through Freedom of Information requests.
Its seventh proposal focuses on tourism and catering establishments, where Borg reiterated that the “numbers game” applies fully in tourism. “The MEA makes a very strong call for direction, to do more with less,” he said.
He added that government must address the carrying capacity of Malta and Gozo to have a sustainable and profitable industry, by being more selective in the segments it wants to attract.
The MEA also said government should consider reducing VAT on catering in return for better regulation and standards, and to improve competition.
Borg said that the association is also calling for the re-establishment of the National Maritime Authority, which would solely focus on the maritime industry, as well as the establishment of a National Maritime Transport Strategy to give direction, as Malta is losing out on competition and attractiveness.
The MEA is also asking for more resources to increase agricultural output and improve Malta’s food security, while addressing shrinkage of agricultural land due to overdevelopment.
On the financing of political parties, the MEA said that there is the need for political consensus to address party financing. “The current dependency for donations, by businesses in particular, is serving as a hotbed for corruption,” Borg said.
The MEA’s 11th proposal asks government to invest in capacity building for social partners, to enable them to grow and achieve their objectives more effectively, with social dialogue and engagements and participation with their EU or international constituents in international for a needing support from government.
Borg said that the MEA’s last proposal has already been accepted and implemented by government, which is the assistance to private schools to cope with the collective agreement for teachers in the public sector.
Consultant Joseph Farrugia replied to a media question on the policy for the labour force, where he said that while Malta will surely continue needing foreign workers, the country must utilise its local human resource in the best way possible first.
He said that where there are high-skilled professional jobs, third-country nationals should have longer working permits, to get the best productivity. Farrugia said that the policy cannot be a “one-size-fits-all” and there must be certain controls.