Issue link: https://maltatoday.uberflip.com/i/1464558
R emember the heady election days when the electorate was busy counting pennies from heaven promised by the Labour Party in its co- pious 1,000 give-away manifest? e omens were good for the Abela adminis- tration carrying the flag winning with a majority of 39,400 surplus votes. Many rejoiced at how the island will now sail along the rivers of milk and honey promised by the red torch-car- rying brigade. Yet, the honeymoon is already over, and the lipstick has dried on the blushing bride. Finance minister Clyde Caruana ad- dressed the MCESD and cautioned members to tighten their belts for a bumpy ride. e war in Ukraine and the global sanctions on Russia's oligarchs and banks now mean that oil and food prices will shoot upwards and in the short term, there are no cheap substi- tutes. Malta imports many essential products from Ukraine and Russia, such as oats, maize starch and crude sunflower-seed oil, each making up a high percentage of total food imports. e prime minister last week said shortages of these products could have had a major impact on the prices con- sumers had to pay locally had it not been buttressed by direct subsidies. It could have also impacted other local industries such as herding and animal husbandry. But he calmed the party faithful saying "this is why it is so important to have a government that knows what it is doing, that has the experience, and the proven track record where it counts". And yet Caruana was more sanguine. He told awe-stricken MCESD members that government could not be expected to control the price of everything. Few of them remember how the Mintoff ad- ministration in the late seventies solved the oil embargo and scarcity of essen- tial items. He unceremoniously usurped importation of all essential products, disenfranchised importers and started a bulk buying scheme run exclusively by MDC. By comparison, the economy has more than doubled since then and it came as no surprise that Caruana warned his audience at MCESD that he can- not control everything as Mintoff did in the past. Readers may feel puzzled how the land of surplus budgets during the "Aqwa Zmien" has morphed into a Nicaragua in a few short weeks. Is this for real or is it a bad dream by Alice In Wonderland? In Lewis Carroll's "Alice's Adventures in Wonderland", the heroine falls down the rabbit hole which lands her om- inously in Wonderland. In our case, reading the tea leaves for our econom- ic future, it seems that the wicked lady of austerity is knocking on our doors. Some may label the tantalising experi- ence as if we woke up from a psychedel- ic dream. Going down the rabbit hole is a metaphor for a journey into the un- known, as Alice is now invited to com- ment how will the tiny nation is sud- denly facing rising inflation, scarcity of essential items like grain, wheat, cook- ing oil, and a lot of imported products. Domestically, prices are currently under control but how long can Cas- tille maintain the artificial one-time subsidies. ese cannot be maintained for two years as was the case with the lavish issue of free €100 vouchers, the €2 billion financial aid to hotels, res- taurants, English school services, fur- lough schemes and bank interest sup- port for ailing companies crippled by the pandemic. Like in the book "Alice in Wonderland", voters woke up after the election euphoria feeling blessed by a blitz of wholesome promises which if enacted will lead them to a new world of unknown benevolence. e manifests of both political parties they all cherished an invitation for all and sundry to set off on a quest to reach the golden pot at the end of the rain- bow. Let us try to compare and contrast the balance sheet of tiny Malta. At the end of October 2021, Alice discovers that the cookie jam is empty and ques- tions how solid were the election bites as Government debt crept up to €7,989 million. Turning to the Chamber of Com- merce, president Marisa Xuereb called for higher respect towards legal and regulatory frameworks and urged against taking advantage of loopholes "as is often happening when it comes to planning permits". She said, speculative development is allowing a few develop- ers riding roughshod over the nation's regard for the environment and cultural heritage. Certainly sugaring the pill of speculative development by promising a new Green ministry charged with sprucing small gardens in village cores and planting more trees will not be the right antidote. Another worry is the fragility of our financial services sector. e onslaught of new legislation aka transfer pricing, the banning of shell companies, impos- ing of a European common corporate tax, DAC 6 (7&8) and grey listing have all turned the tables against Malta as a preferred financial domicile. So far, Malta has successfully attract- ed key international players in Financial Services, supported by the continuous improvement in the ease of doing busi- ness, a strong regulatory environment, unhindered access to the EU market, a long tradition of business support ser- vices especially auditing and legal ser- vices, enhanced tax competitiveness and the availability of skilled and Eng- lish-speaking workforce. For a small is- land, it prides itself of twenty-six banks, including three branches of foreign banks and foreign-owned credit insti- tutions amid a number of international insurance and funds companies. Certainly, our future needs a strong direction to attract FDI and train our workforce to ride the digital bandwag- on. EU funds will be made available un- der the RRP scheme to improve mobile digital connectivity and infrastructure. is needs immediate attention as Mal- ta ranks low in the 2021 Digital Quality of Life Survey, taken among 110 coun- tries. Another face saver will be the planning to invest in Greening of the economy and waste-to-energy plant. is roadm- ap forms part of a series of ecological projects with an investment of around €200 million. When in operation, it will process waste that cannot easily be re- cycled. is treats 40% non-recyclable waste diverting it away from landfill disposal. is environmental marvel has an an- nual capacity of treating 192,000 tonnes of waste and one cannot not mention the corollary "Material Recovery Fa- cility" sporting an annual capacity of 70,000 tonnes. is machine also con- verts waste into biogas so farmers will be given free quality compost. All haz- ardous waste such as clinical and phar- maceutical material will be processed and free heat energy released. To conclude, readers may be invit- ed to contemplate this kaleidoscope of challenges arising from high oil prices (reaching $120 per barrel), the Ukraine war and spiralling inflation - all left Alice in a befuddled state. She will try to dig herself out of the rabbit hole to reach the surface where reality starts and Utopia ends. Down the rabbit hole: inflation, oil spikes and shortages George Mangion George Mangion is a senior partner at PKF, an audit and consultancy firm, and has over 25 years' experience in accounting, taxation, financial and consultancy services. His efforts have made PKF instrumental in establishing many companies in Malta and established PKF as a leading professional financial service provider on the Island 8 OPINION 14.4.2022