Issue link: https://maltatoday.uberflip.com/i/1174220
16 maltatoday | SUNDAY • 6 OCTOBER 2019 INTERVIEW This week, accountancy firm KPMG issued a report suggesting that the construction sector – a significant contributor to Malta's economic growth, and also a cause for environmental concern – is experiencing a slowdown. Are you concerned about this? What effect do you expect it to have on the country's economy as a whole? I read the report yesterday. Its interpretation of 'slowdown' is that the economy is growing at a slower rate than before. It is one thing for the economy to collapse, and you have to start over from scratch; it is some- thing else entirely for an econ- omy that was growing by 6 or 7%, to now grow by 5%. That's a 'slowdown', too. and it is to be expected, because the supply is in the process of being met. I think everyone realises this, from all the construction that is going on around them. That construction drive was a re- sponse to a great demand that arose from a number of differ- ent sources: a foreign labour- force; tourism, which has now begun infiltrating private resi- dences; and also government housing schemes… Could it also be, however, that the rate of economic growth in this sector was too rushed, and not properly planned out? That, if we took a more prudent, reasoned approach, the construction sector could have been more sustainable? No, because they were trying to catch up. This is not a sec- tor where you can say, 'Let's get into construction, because there's lots of money to be made'. It doesn't work like that. The construction sector has to respond to an existing demand. This is why [before 2013] the sector was dying: because there was an oversupply, and no real demand. When, in 2013, the economy started to gain ground, new social phenomena were created… including new lifestyles. How many young people, in the past, used to leave the family home, and start living on their own? There was also an increase in separations, with individual partners looking for their own accommodation. These all created a new type of demand that did not exist be- fore: namely, a need for houses or apartments catering for sin- gle individuals. The market has to respond to these demands itself. We [government] did not fill those economic gaps our- selves; we did not interfere in property prices – even though there was a lot of grumbling, es- pecially about rising rental and properties prices. But that was a signal. So instead of stifling [the inflation], we tried to see where we could compensate for it through a number of subsidy schemes we created. But in the end, the market responded to those needs… also because it had the money to do so. Don't forget, too, that there was a lot of waste – something we used to talk about in the past, but which seems to have been for- gotten – in the form of houses which were much too large for the families they accommodat- ed. There was a lack of propor- tionality: a large family would live in three rooms, while a small family had a palace. All these properties are now be- ing demolished, redeveloped or restructured, according to the needs of today. But the KPMG report also comments about the low standards and quality of new buildings going up… as well as that the economic impact, or collateral damage, of this construction drive has been too negative. Looking back, don't you feel that you could have managed the sector a lot better in the past six years? One of the things that gives me hope is that the younger generations – and even our own, which is now learning – are much more aware of things like trees, congestion, the qual- ity of buildings, etc – than ever before. So people now see Bu- gibba as 'ugly'…. as if Bugibba suddenly became 'ugly' only yesterday. What is happening, however, is that it is only now that people are becoming aware of these things, and expect a higher quality of life. And we have to deliver on these expec- tations. Even the developers themselves are becoming aware that, to be successful in the long term, their developments have to meet certain standards. To me, even the fact that develop- ers yesterday met together in the same room, at the Excelsior Hotel, is already a step forward. They are clearly aware that it is in their own interest to boost their own reputation – which we all know is not very good, at the moment – and to be a little self-regulating in their work… to think long-term… and not to build skyscrapers out of just one room… and so on, and so forth… Before becoming Finance Minister you were (and still are) an economist. There is a perception that economists only value things in terms of the profits they generate, or whether they help to generate business, and so on. Is that really the only value, though? As an economist, do you not also see value in non- monetary considerations such as, for example, having more free time to spend with your family, or to go jogging, or to indulge in your pastimes, etc.? But these have always been concerns for economists. We [economists] created the term 'sustainable development' in 1992: I remember, because I had worked in this area myself. But it is the people, not just the economists, who have to be aware, and to put pressure on politicians by saying: 'Listen: this sort of thing is not accept- able'. Now: whether it comes from 'tree-huggers' or not, the point is that there has to be this form of pressure. Ten, 20, 30 years ago, we simply did not have this form of awareness on a large- scale. It existed only on an in- dividual level, and in NGOs like Moviment Graffitti, etc. And always in a minority. Today, there is this type of awareness; and I view that as very positive, myself. Malta's anti-money laundering capacity – if not its banking sector as a whole – has been in the eye of an international media storm for the past two years. But for Finance Minister EDWARD SCICLUNA, this represents an opportunity to strengthen our beleaguered financial institutions In the eye of the storm Saviour Balzan sbalzan@mediatoday.com.mt