INTERVIEW | Wednesday, 27 February 2008

A one-nation government

With contrasting tones to what is often seen of him on TV, for this occasion Labour Deputy Leader Charles Mangion clearly swept his trademark political emotiveness aside. Purging the mass meeting jargon and choosing his words carefully, he clarifies some of the questions raised on Labour’s economic proposals with DAVID DARMANIN.

Mangion started by describing the thesis of low-unemployment being a possible indication of economic growth as an “over-simplified statement”. With regards to employment figures “we need, among other things, to compare ourselves to other countries within the EU to see whether we are being sufficiently successful both in creating new employment, as well as generating economic growth,” he said.
“For instance, Eurostat shows that between 2000 and 2006 the rate of job creation in Malta was only 1.1%, while in the rest of the EU this growth rate was of 3.7%. Even since we have joined the EU we are falling behind other countries like Estonia, Latvia, Poland, Slovakia and Slovenia, who are all creating jobs at a much faster rate than Malta.”
Stating that “most of the jobs being created are part-time jobs”, Mangion expressed serious concern on the state of affairs of Malta’s current productivity. “There is nothing wrong with part time jobs,” he said, “unless it is a sign that the economy is incapable of creating better paid full time jobs because productive investment is insufficient. I fear that this is what is happening in Malta at present.”
The Labour Party is promising an economic development policy that gives particular attention to manufacturing, a sector that is clearly In decline in Europe, but in Malta especially. Why does Mangion insist on manufacturing?
“As a small country it is important for us to have a diversified set of economic activities,” he answered. “Not all manufacturing is in decline as you state. Most European countries have vibrant manufacturing activities despite competition from low cost countries like China, India, and Mexico. The secret of success is to identify those areas where we can have competitive advantage. For instance, in Malta we have a very successful pharmaceutical industry. Should we abandon this sector because manufacturing is not fashionable?
“We should not only support such existing successful manufacturing activities but identify others that can set up shop in Malta and be successful. Malta Enterprise will have an important role to focus more specifically on industries that can be successful in Malta. What we need to remember is that such industries will demand a workforce with higher educational skills, more intensive capital investment, and a true commitment to Research and Development. In return they will produce higher added value and better paying jobs for our young people.”
One of Labour’s major policy planks is to de-tax overtime. He insisted that a Labour Government is committed to eliminate income tax on overtime. “Overtime will continue to be paid at whatever premium rate being currently paid and defined in each and every collective agreement. This is a measure which we believe is needed to stimulate economic growth and it won’t put pressure on competitiveness.”
While the MLP costed this proposal at €4.7 million, government’s estimation worked out at €28 million. On the otherhand, according to NSO statistics the lost revenue could amount to €14.7 million. Who is right?
“The Labour Party’s estimates were in fact confirmed by a statement made by the Prime Minister himself in his last budget speech,” Mangion said. “The government of course has every interest to spin stories on how expensive this measure could be to try and convince people that the MLP measure is unaffordable. The NSO needs to work much more to strengthen its credibility which at times is not at all clear.
“Putting more money in the pockets of families will have a cascading effect on the economy. Some of the income tax foregone by government will be recouped, because it is inevitable that part of the extra money earned will be spent on goods and services to improve the quality of life of our families.”
The overtime proposal is aimed at encouraging people to work more. This contrasts with Labour’s other proposal to reinstate the practice whereby public holidays that fall on a weekend are added to an employee’s vacation leave entitlement.
“It is a fact that since some public holidays were eliminated, Malta’s competitiveness has fallen behind. The Global Competitiveness Index issued by the World Economic Forum shows that Malta has fallen from the 51 place in 2006 to the 56 place in 2007. “The Nationalist government for once should be honest and admit that our loss of competitiveness is a direct result of wrong economic decisions taken over the past years. For instance, in the first nine months of last year productive investment in Malta fell by over € 460 million. If we do not invest more, we will fall behind other countries that are doing so.”
And ‘falling behind’ in Mangion’s point of view is also linked to corruption.
“The increasing perception that Malta is becoming more corrupt is a serious problem. According to Transparency International in 2007 Malta dropped from 28 place it registered in the previous year to the 33 place in the Corruption Perception Index,” he said. “Good quality investors will shy away from investing in countries that are increasingly perceived as being corrupt.”
The Labour Party is consistently drawing a direct link between employment and education. Mangion insisted that one of the main reasons why we are falling behind in competitiveness is the lack of results in education.
“Almost half of our young people are leaving the educational system without skills or qualifications. This is the biggest threat to our economic future,” he insisted.
Asked whether he is aware that many employers often find it difficult to employ the personnel they are looking for, Mangion agreed.
“Many entrepreneurs whom I meet with complain that they do not find the right kind of applicants to employ in their business.
“This is a gross failure in our educational system. We have one of the worst records in the EU for young people who proceed to tertiary education, or who follow science and technology subjects in University. We have the highest record for youngsters who leave the educational system without qualifications and skills. We also have the lowest rate of female employment in the EU.
“The Prime Minister should be honest and admit that he and his party has messed up the educational system in the last 20 years,” Mangion said, provokingly.
“Political success in the educational field should be measured by the level of achievement of our students and not by spin like calling already existing schools ‘colleges’, or boasting on how many facelifts our schools are being given.”
Going back to employer realities, how does the Labour Party propose tackling the problem of not finding the right personnel?
“The Labour Party is determined to strengthen those sectors of our educational system that are working well and producing high quality graduates, who are among the best in the world. But we will not shy away from making the necessary reforms to rescue the other half of our young people who are destined to the human scrap heap and a desperate future if we do not help them become high achievers. Of course, all changes will be made in consultation with parents, educational experts and other interested parties.
“Every one agrees that it is imperative that each one’s potential is developed to the full. This can only be achieved by improving our educational processes. However every proposed reform requires the consent of all interested parties, be they parents, teachers, or educational experts. Thus consultation and structural preparation will definitely precede any reform under a future Labour government.”
The International Monetary Fund last year lowered economic growth forecasts for Malta, whereas the EU commission lowered them for all countries forming part of the Eurozone last week. In this scenario that signals a global slowdown, MLP’s economic growth projection of four to six percent may seem a tad optimistic.
“I admit that our projections are ambitious,” he said, “but I also believe that we need to be ambitious for our country. These targets can be reached because other countries that joined the EU with us are achieving much higher economic growth than us. Of course, we cannot shield ourselves from what is happening in the economies of other countries, but we believe that with a more dynamic approach to investment we can stimulate higher economic growth.
“We believe that we have major competitive advantages that we are not exploiting well enough. I’ll just mention the maritime services that are not generating sufficient economic activity in Malta. Cyprus, another island similar to us in the Mediterranean, is doing much better in this area. We need to exploit this potential to create jobs, for clerks, lawyers, technicians, insurance specialists, financiers, blue and white collar workers, IT operators and specialists, and trainers, among others, so that our young people will have better job prospects and the economy will grow. We can achieve this if we work hard and involve everyone, whatever their political belief, in our effort to attract new business to Malta.
“Furthermore we have to exploit and develop our national assets so as to attract private direct and productive investment which will create more job opportunities. We have to ensure that our workforce is skilled and better equipped educationally so that we maximise the value added per job created. This will translate itself into better earnings for employees. We will be a one-nation government. This is what we will do when in power.”