Issue link: https://maltatoday.uberflip.com/i/1510993
maltatoday | SUNDAY • 5 NOVEMBER 2023 9 INTERVIEW The following are excerpts from the interview. The full interview can be found onmaltatoday.com.mt as well as our Facebook and Spotify pages. One of the biggest, most expensive measures com- ing out from the budget is the fuel and energy subsi- dy, which will see the government work out €320 mil- lion in 2024 alone. Is it conditioning the government's economic manoeu- vres? When you don't have the full natural resources to gen- erate energy, your energy component is a huge cost of economic activity. The government decided to al- locate the lion's share of its war chest to protect the Mal- tese economy towards this component of expenditure, which is the fuel subsidies. The government took on it- self that burden to protect Maltese families and indus- try from this spike in energy prices. You have an inher- ent cushion that is being built which ultimately leads to also the continued com- petitiveness of the Maltese economy. There is an opportunity cost because that €300 million could have gone somewhere else, but there's also the oth- er opportunity cost. If elec- tricity prices had increased, then what would have been the impact on families, on purchasing power, on exter- nal competitiveness of mul- tinational firms. There is not much governments can do to tackle infla- tion, especially governments that don't have mon- etary autonomy. But could the gov- ernment have done something on food inflation? Say, commit itself to investigate cartel practices? At the end of the day, you have discrimination hap- pening in the local market in terms of costs and tax- es. There are so many com- plex issues that need to be investigated. There's a sort of discrimination from a tax point of view, right. You have the large foreign players set- ting up shop that are paying a reduced rate of tax com- pared to the Maltese busi- nesses. We need to have an evidence-based discussion with proper studies trying to see what the pass-through to the end consumer is and what the cost structures are, what the tax structures are, and try to see if there are solutions to this. The Nationalist Party's first reac- tion to the budget was that people are feeling the burden of overpop- ulation of an eco- nomic model based on low earners and cheap labour. The crux of the economic analysis is that economic growth is being driven by popula- tion growth. Is this a realistic analy- sis? We've seen a boom in con- struction activity that is extremely dependent on human resources. It's not service-based whereby your productivity per employee is much higher. There was an increased supply of build- ing, there was an increased demand for building, ergo you need builders to build. This increase in the market size led to more purchasing power, to more domestic demand, and that is where economic growth has been coming from. If you decon- struct our GDP, domestic de- mand is a huge component of that. Ideally, we start see- ing a shift and making sure that our export activities become much more com- petitive and productive so that we can generate much, much more wealth per em- ployee and then you need less employees. How important is it for Malta to continue building these new eco- nomic sectors and where could we be missing out? Economic sectors take time to materialise. And econom- ic sectors never reach an end. The aim needs to be to transform them, to transi- tion them into much higher value added. If we look at financial services over time, the Maltese sector has trans- formed to offer different ser- vices or types of services. Today we're a jurisdiction that offers funds, virtual as- set licences, EMIs, PSPs. So, the reality is, how do we get this body of legislation to continuously make it more attractive and carve out new sub sectors within an over- arching sector. The budget is not the be all and end all of a gov- ernment's economic pro- gramme. What I really be- lieve is that we should have a discussion the long-term vision. There have been, but I think we need, an articu- lated vision of where we see ourselves going. It can't be a vision that straightjackets us because the environment is what it is. What I think we need is to consolidate and streamline; a vision of where we aspire to be. Not only economically, but also so- cially. PHOTO: JAMES BIANCHI / MALTA TODAY