Issue link: https://maltatoday.uberflip.com/i/1097443
28.03.19 3 NEWS HAVING a metro in Malta would only be feasible if the is- land's population keeps grow- ing, or if taxation is increased, Prime Minister Joseph Muscat said on Wednesday. Muscat said that the decision on whether to construct a met- ro was by its very nature tied to the direction the nation wanted the country to move in for the future. He added that such a project would not be possible with the country's current pop- ulation level. e Prime Minister was speak- ing during a Q&A session with economist Stefano Mallia, at a conference on the state of the Maltese economy, organised by the Malta Chamber of Com- merce and the EMCS Group. e Prime Minister said the government had, in the past two years, started to examine the possibility of a metro seri- ously, and had commissioned a report which found that it would not be possible to have an underground system all over the country. "ere would have to be a mix-and-match between an over-ground and underground system. And, to have everything in place, we will need around 25 years." Muscat said it was not the right time to divulge the costs of such a project, but that they would be substantial in terms of their portion of Malta's GDP. "is does not mean we should not carry the project out," he said, "but the basic issue is not whether we have this al- ternative means of transport or not, but whether we agree if this country needs to grow or not. With the current levels of pop- ulation, a means of mass trans- port would only be feasible in the Sliema area. And what sort of metro would it be if it merely linked Sliema to St Julian's?" "Without growth in popula- tion, a metro can only happen through an increase in tax, be- cause no operator would be able to provide the service at a prof- it. erefore, we need either more economic growth or more taxation." He said that the government would be, within this context, initiating a discussion on how Malta should develop in the fu- ture. Lack of fear of reforming behind positive economic performance Asked about Malta's "spectac- ular" level of economic perfor- mance, and what this could be attributed to, Muscat said that it boiled down to being fearless of reforms. "I think that any government which stops reforming and changing will cause the econo- my to start to stagnate again. It's a state of mind – being restless in one's approach and saying the inconvenient truth." In terms of individual changes undertaken, Muscat mentioned the reforming of the energy sector, which he said would eventually need to be reformed again, in light of a future shift to electric vehicles. He said innovation was Malta's Achilles heel, and more focus had to be placed on research and development (R&D). How- ever, the country was making headway when it comes to reg- ulatory innovation, he under- scored. "My definition of innovation in the context of a member state is much more than what hap- pens in a laboratory. I think of regulatory innovation, which is not measured in R&D statistics. If you look at the areas which have boomed in the last three decades, these are sectors we innovated through legislation, such as financial services and iGaming." Malta not being singled out in financial-sector criticism e Prime Minister was also asked about the damage to Mal- ta's image and reputation, such as that referred to in Tuesday's European Parliament resolu- tion – classifying Malta as a tax haven – which was approved by MEPs. He defended his government's track record in this area, how- ever, saying that Malta was mentioned by the European Parliament together with other well-respected countries which deal in financial services. "We should take it within a context and outside the Maltese bubble. "e European Parlia- ment report, which labelled Malta as a tax haven, didn't only mention our country, but also mentioned countries such as Ireland, Luxembourg and the Netherlands." "We are not a tax haven, and the European Commission confirmed this. e European Parliament grouped together a number of countries. It does not single-out Malta, and any country which offers financial services was attacked by this report." Maltese tourism sector well- prepared for Brexit's effects Asked about Malta's level of preparedness for Brexit, in light of the uncertain way in which the United Kingdom's departure from the EU will happen, Muscat said that he didn't think any particular Maltese sectors would be spe- cifically impacted. "I don't think there are par- ticular sectors which are vul- nerable to a hard Brexit in Malta. It's more a question of individual companies, some of whom haven't properly thought out what the impact will be from a logistical point of view – such as having to deal with customs procedures which treat the UK as a third-country," he highlighted. In terms of the local pharma- ceutical sector – which imports a large portion of medicines from the UK – Muscat said that most importers had taken the necessary steps to ready them- selves for the eventuality of a hard Brexit. e other area which might be impact is tourism, he said, due to a decrease in consumer con- fidence in the UK, which would affect British people's travel patterns, and because of the weakness of the pound's value in relation to the euro, making eurozone countries more ex- pensive for Britain's tourists. e Malta Tourism Authori- ty has put in place measures to deal with this, however, he said, by ensuring Malta's product re- mains competitive in the UK, and through a diversification effort to attract tourism from other countries. Prime Minister 'Metro only possible if population grows or taxes increase' MASSIMO COSTA ADRIAN Delia, who participating in a similar Q&A session after Muscat, said that Malta was now unable to defend it- self against criticism on its taxation system from countries like Germany and France, because its financial industry reputation is in tatters. "Malta's intact reputation in the past gave it a robust defence for its attractive tax re- gime, but it can no longer do so, because its reputation is at risk," he said. He emphasised that in order for the country reputation to be protected against further harm, the necessary institutional restructuring had to be undertaken imme- diately. Regarding Malta's strong rate of econom- ic growth, the Opposition leader said that, although the economy was expanding and unemployment was at a record low, in ef- fect people's salaries had not increased. "e other side of the coin of the eco- nomic success is that, per capita, the work- force's earnings are not increasing. In the past six years, compared to the previous six, Malta had the lowest actual growth in wages." He went on to reiterate his criticism of the government's economic model based on population growth, which he said made no sense in a densely populated small is- land. As an alternative to this, he proposed fo- cusing on economic sectors which could be invested in without necessitating an in- crease in human resources. "Going forward, we should choose more wisely which kind of economic sectors to focus on, such as which type of manufac- turing we want in the country," he high- lighted. "We need to choose the model we want to follow to grow. Its' about choice. Which choices do we opt to invest in - sectors which are human capital dependant, or those dependant on structures, innova- tion, research and education, which do not necessarily require more and more work- ers?" Asked what he thought of the current size of the government workforce, which numbers some 47,000 state-employed people, Delia said that sectors like health and the police hadn't benefitted from the growth in size, and that instead govern- ment jobs had been "dished out" in areas they were not needed. Questioned on the topic of construc- tion, Delia said that the main issue with over-development in Malta was that there was a lack of planning on the government's part. He also pointed out contradictions in the government's transport plans, saying that while it wanted Gozo to be a testing hub for electric vehicles, it was also planning to build a tunnel to Gozo, which would be used by people coming from Malta driving conventionally-fuelled cars. Malta unable to defend its attractive tax regime's since reputation is in tatters – Adrian Delia Joseph Muscat said that the possibility of building a metro is strictly tied to the issue of whether Malta's economy and population should keep growing