NEWS | Wednesday, 09 March 2008

MCESD to meet soon to discuss social partners’ agenda

Charlot Zahra

The Malta Council for Economic and Social Development (MCESD) will be meeting soon to discuss a number of issues which have been put on the agenda by the social partners, Business Today has learnt.
Sources well-acquainted with the Council’s workings told this newspaper that there were “a number of social and economic issues” on the agenda of the next meeting, which will be held “in the next few days, definitely by the end of this month”.
However, when asked to comment whether cost of living was on the agenda of the next MECSD meeting, Chairman Sonny Portelli was mum on the matter.
“You know quite well that the agenda of the MCESD meeting is confidential and I will not divulge it to the press,” Portelli told Business Today curtly.
The first meeting of the MCESD was held last Friday in the presence of Parliamentary Secretary for Public Dialogue and Consultation Chris Said, who is politically responsible for the MCESD.
All the social partners contacted by BusinessToday, irrespective of whether they are a Trade Union or an employers’ organisation, were concerned about the recent increases in the cost of living. Only the MHRA was not worried about this matter.
However, not of them were in agreement that a meeting of the MCESD should be called to specifically discuss inflation. The GWU was outright in favour, the COC did not exclude it, while the UHM and the MEA questioned the wisdom of such a move.
The MHRA did not commit itself, saying it should be the Chairman of the MCESD to call the meeting.
On 31 March, the fifteen price stability agreements signed at the beginning of November by importers and manufacturers with the Euro Observatory covering around 350 different brands totalling over 6,500 fast moving consumer products came to an end.
On the same day, Government announced a €0.07c7 increase per litre in the price of diesel, a €0.11c4 increase per litre in the price of kerosene and a €0.16c0 increase per litre in the price of Light Heating Oil.
General Workers’ Union (GWU) Secretary-General Tony Zarb told Business Today that the GWU is “very concerned about the very negative effect that the increase in the price of diesel will have on the purchasing power of families and workers.
“This is due to the fact that it is being prospected that there will be consequential increases in the price of transport for families, especially for the transport of workers to their places of work and schoolchildren to their schools.
“The increase in the price of diesel will continue generating inflation and therefore will annihilate the impact of the cost of living increase that was granted in the last budget speech.
“Moreover, the GWU is also concerned and worried about the increase in the price of Thin Fuel Oil, which is used by a lot of industries. This will have a negative impact on the competitiveness of local industry, which could have an effect the employment and working conditions of workers in this sector.
“The GWU is also worried that now that the Price Stabilisation Agreements have expired, an explosion in prices is already being prospected, even of essential items, and this will have a very negative impact on workers, pensioners, and their families,” Zarb told Business Today.
Asked whether the GWU was in favour of holding a meeting of the MCESD to discuss the issue of cost of living, or not, Zarb said: “Surely. Not only that, but it should be the Governed itself that, before announcing an increase that has a drastic impact on the cost of living – especially regarding the price of fuel – should convene the MCESD to hold a discussion with the social partners.”
Asked by Business Today whether the GWU has requested a meeting of the MCECD about the increase in the cost of living or not and what was the response of the Chairman of the MCESD and the other social partners, Zarb said: “Until now, we have not know whether the Government is going to announce a meeting of the MCESD to discuss inflation after the increase in the price diesel was announced.
“In this respect, the GWU is saying that the MCESD should be convened urgently,” the GWU Secretary-General told this newspaper.
Questioned as to what actions, in his view, should the Government take to effectively curb the cost of living, Zarb said: “To alleviate the impact on the cost of living, the GWU believes that the Government should shoulder itself part of the increase in the price of diesel which has been announced and should also see whether a new agreement to keep prices stable could be reached.”
On his part, Union Haddiema Maghqudin (UHM) Secretary-General Gejtu Vella said that the UHM was also concerned about the increase in the price of living.
“The UHM is always concerned about the cost of living because it is a concern that affects the purchasing power level of Maltese workers, families and pensioners.
“We are living in a period where the increase of the prices of diesel, oils, together with the huge increase that there has been in the price of cereals, leading to a higher inflation rate than the normal rate of inflation that we usually have.
“We have to be careful how this inflationary increase, which will lead to a decrease in the purchasing power, will be addressed. Definitely this increase must not be hidden.
“While we say that nowadays the era of price controls, where police officers would check prices, is really over, nonetheless we insist on the need of a Consumer Division which is well-equipped to prevent anybody from abusing from prices.
“During the last months of the outgoing legislature, there were clear indications that there were people who were abusing with regard to medicine prices, which led the Government to revise downwards the prices originally indicated by medicine importers.
“The UHM is very concerned at the fact that there are instances where those offering products or services to the public abuse from their prices either due to a monopoly situation or the establishment of cartels.
“However, one has to say that the Government had already given an additional Lm1 in addition to the sum indicated by the RPI mechanism in this year’s COLA to make good for the increased inflation rate.
“Moreover, although the country was converting its currency to the euro at the beginning of this year, this did not have any effect on inflation - it was rather the importation of goods from abroad that led to the rise in the cost of living.
“What is important is that we take stock of the situation and monitor it, either in the MCESD or in the tri-partite committee which monitors the Retail Price Index, so that the consumer pays what is really needs to pay.
Asked whether the UHM has called for a meeting of the MCESD to discuss the recent cost of living increases, Vella did not exclude such a meeting but said that the MCESD was not the right forum where inflation should be discussed. “I think that in the next few weeks or days the MCESD will be meeting to discuss this issue.
“What is important in this respect is that the MCESD does not have the necessary tools to combat inflation. It is the Retail Price Index committee which checks and keeps surveillance on prices,” Vella told Business Today.
On his part, Malta Employers’ Association (MEA) Director-General Joe Farrugia told Business Today that inflation was “of concern to everybody, and employers are no exception.
“It is common knowledge that, mainly due to developments abroad, there are inflationary pressures in Malta and the increase in the price of diesel will definitely affect the operating costs of many companies in Malta.
“Employers are being hit with the increase in energy costs, with increased process of imported products and raw materials, as well as the fact that the impact of inflation on COLA will lead to an upward pressure on labour costs,” he said.
Farrugia said the perception the price stability agreement could in any way result in any permanent curtailment of inflation was mistaken. “The idea behind the price stability agreement was to ensure that prices did not increase as a result of the euro changeover. In general, I believe that there is consensus that the business community did not abuse of the change in currency.
“However, the agreements can never hedge against imported inflation and other cost push factors, and importers and producers have to factor the increased costs in their pricing strategies.
“Part of the inflationary pressure may not be passed on the consumer because of competitive constraints, but there is clearly a limit to the extent that profits can be eroded without resorting to price increases,” Farrugia waned.
Asked whether the MEA agreed that a specific meeting of the MCESD should be held to discuss the issue of cost of living, or not, Farrugia was dismissive of this idea.
“The MCESD regularly includes items of national economic importance on the agenda. This is not the first time that Malta has seen inflation, and will certainly not be the last.
“What is important is that the economy can bear the brunt of inflationary pressures through increased productivity and competitiveness.
“Many of the items that are contributing to our inflation, notably energy costs and grains also affect other economies, although perhaps not to the same extent that they affect us,” the MEA Director-General said.
Asked whether the Government was going to hold a meeting of the MCESD on this issue or not, Farrugia told Business Today: “It is anticipated that the government will launch a pre-budget document for discussion at MCESD in the coming weeks, and during such meetings there is also a discussion about the major economic indicators, such as inflation.”
Asked whether the MEA has requested such a meeting or not, and what was the response of the Chairman of the MCESD and the other social partners, Farrugia told Business Today: “Thus far, the MEA has made no such request, for reasons explained in the previous questions.”
Quizzed by this newspaper as to what actions should the Government take, in his view, to effectively curb the cost of living, Farrugia said: “Rather than curbing the cost of living through price stability agreements, which in the case of imported inflation is like trying to stop the wind, measures should be taken to avoid a wage price spiral which will erode competitiveness and lead to a loss of jobs.
“MEA has always contended that wage increases should be pegged to productivity, and not inflation. Increasing wages to compensate for inflation, without a corresponding increase in productivity can be dangerous concoction, that, rather than relieve the effects of inflation, gives rise to the mother of all economic evils – stagflation.
“On the other hand, government should rightfully control abusive practices where they occur,” the MEA Director-General told Business Today.
Likewise, Malta Chamber of Commerce (COC) Director-General Kevin J. Borg told BusinessToday that the Chamber “is concerned about all factors which can influence the economic performance of individual companies and the country”
Borg said the increase in diesel prices would surely adversely affect the operating costs of business. “All businesses have energy costs. These vary according to how energy-intensive their operations happen to be.
“All companies, however, use transport, heating, lighting, and machinery operation, among other things. The international crisis of soaring oil prices means that now, Maltese businesses need to increasingly implement innovative ways to conserve energy as well as streamlining further their business operation in terms of energy efficiency.
“Energy conservation means the adoption of alternative technology with lower fossil fuel consumption. Most of all, the way forward lies in breaking away from old methods, and being open to new methodology in so far as the way we run our businesses on a daily basis,” Borg told Business Today.
Regarding price stability agreements, he said the Chamber had always argued that these were “voluntary and intended towards a smooth euro changeover. Their intention was not to attempt to curtail inflation.
He explained that the best safeguard for price control was “free and fair competition. With the current cutthroat competitive scenario, businesses would not risk abusing of prices as any immediate gain would surely be lost, even in the short-term.
“The Chamber is confident that the businesses it represents would not be interested in adopting such a short-sighted approach,” Borg insisted.
Asked whether the COC was in agreement or not with the proposal of holding a meeting of the MCESD should be held to discuss the issue of cost of living, Borg said: “In line with its national role, the Chamber is always ready to discuss issues pertaining to the business community and to the general economic performance of the country.”
Asked by this newspaper whether the Government was going to hold a meeting of the MCESD on the recent increases in the cost of living or not, the COC Director-General said: “As yet, we have no official information on this matter.”
Questioned by Business Today as to what actions should, in his view, the Government take to effectively curb the cost of living, Borg said curtly: “Make sure that the Office of Fair Trade is resourced enough to ensure that competition is free and fair. From then onwards, let competition take its natural course.”
Finally, Malta Hotels and Restaurants’ Association (MHRA) Chief Executive Officer George Schembri told Business Today that the MHRA was not excessively worried about the increases that there have been to date.
“The MHRA would certainly be worried if there are extraordinary hikes in the cost of living, but to date and according to the NSO reports for January and February this does not seem the case.
“We are aware of the increase in oil and food commodities as a result of this on the international markets and as a consequence there would be increases in the price of fuel and similar commodities on the local market.
“We do not feel that now that the price stabilisation agreements have come to an end, there will be extraordinary prices increases since we are sure that those businesses who had entered into such agreements are aware of the market forces and would want to remain competitive on the local scene,” Schembri told Business Today.
“Of course, concurrently like all businesses no one celebrates when their cost base increases for whatever reason and hence we urge every entity to be responsible in any pricing decisions that are being taken,” he added.
Asked by this newspaper as to whether the MHRA was in favour of the proposal of holding a meeting of the MCESD to discuss the issue of cost of living or not, Schembri said: “The MHRA is confident that if the chairman of MCESD deems fit to call a meeting if the situation warrants such a meeting. To date we do not have any information for such a meeting.”
Asked by this newspaper wther the Government was going to hold a meeting of the MCESD on this issue or not, Schembri told BusinessToday: “We are not aware of such a meeting. it would probably be best to direct this question to government.”
Asked whether the MHRA had requested such a meeting or not, and what was the response of the Chairman of the MCESD and the other social partners, Schembri said: “No, the MHRA has not requested such a meeting. “However, as always, we will continue to monitor the situation and take action as we deem fit in a responsible way and without causing any unnecessary panic. These are very sensitive issues and one has to act with utmost responsibility,” he told Business Today.
Finally, asked what actions, in his view, should the Government take to effectively curb the cost of living, the MHRA CEO said: “MHRA is confident that there are enough Government agencies monitoring the situation and if there are any particular increases Government should investigate and publish its findings in the shortest possible time.
“At the same time we operate in a free market and the market players have to shoulder their own responsibility,” Schembri told Business Today.

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