Top News | Wednesday, 19 September 2007

A ‘welcome’ and a ‘warning’

Federation of Industry reacts to pre-budget document

Charlot Zahra

The Federation of Industry (FOI) has generally welcomed Government’s Pre-Budget document, saying that it contains “a number of worthy initiatives” but has warned against any measures which would hinder further growth of the Maltese economy.
FOI President Martin Galea made this warning during a press conference at the Federation’s headquarters in Floriana yesterday morning during which he presented the Federation’s position about the Pre-Budget document.
“In the current state of the Maltese economy, the FOI expects the Pre-Budget Document for 2008 to place a greater emphasis on the implementation of growth-inducing measures, including those identified in other policy initiatives,” Galea said.
Although economic growth has registered improvements in recent years, it remains below the potential that may be achieved by the economy. “While Malta’s foreign direct investment is encouraging, the creation of new physical business investment is lagging behind,” he said.
Galea explained there exists a potential for growth not only in “new economy” activities but also in more “traditional” areas, provided that they can restructure their business operations towards knowledge-based activitie Economic and social development hinges crucially on the activation of human resources, further training and education of a life-long nature, and measures which make work pay.
He said spending on human resource development needs to be further increased and directed towards areas that are more likely to engage in research and innovation.
Galea said the costs of network services, particularly energy, are however denting price competitiveness. Moreover, from an environmental perspective, Malta needs to reduce the energy intensity of its productive activities.
“The fiscal balance should be thoroughly monitored to bring about improvements based on sustained productivity and efficiency gains in public sector activities. At the same time, welfare programmes in Malta need to be reviewed so as to directly target poverty more effectively,” he said.
One of the priority aims for the 2008 Budget, according to the FOI, should be to generate economic growth through the implementation of measures which achieve the objectives set out in the Industrial Strategy (IS) document.
The FOI believes that the policy approach towards the implementation of IS should be overarching and coherent, aimed to unleash the potential of all sub-sectors of industry.
Galea said key priority measures which are being proposed by the FOI within this context include the deployment of public resources towards the incentivisation of networking and cluster development, support to industry in international demand identification, business intelligence, operational upgrading, brokerage services and on-field support, and support to Business Angels in Malta.
Moreover, the process for the setting up and operation of the Venture Capital Fund needs to be expedited and arrangements for the provision of micro-credit through EU Structural Funds need to be put in place.
“Regulatory and public administration functions need also to place stronger emphasis on worker flexibility,” Galea insisted.
Other priority measures for the FOI with respect to the implementation of the IS include the introduction of a Preferred Goods and Services Suppliers Framework in public procurement practices and the implementation of a Business Entry Portal within e-Government services.
It also looks forward to an effective head start in the area of research and innovation by the deployment of public funds to support research and development and innovation projects, granting tax relief to businesses making donations to science popularization and related activities, and setting up a Research and Development and Innovation Fund.
“The FOI believes that investment in human resources has the potential to be one of the primary pillars through which Government can support enterprise growth in Malta,” said Galea.
Priorities in this area include the allocation of sufficient resources for the effective implementation of the National Qualifications Framework and the strengthening of the system of student apprenticeships and placements in industry.
In order to promote energy conservation and the use of renewable resources, particularly in industry, the FOI sees a potential for realising competitive gains and positive environmental impacts though a variety of measures.
“The deployment of public funds to support the undertaking of energy audits within business and the implementation of the recommendations arising therefrom is seen as being more cost-effective than the introduction of general subsidies on technologies as proposed in the Pre-Budget Document 2008,” Galea insisted.
Other measures proposed by the FOI in this regard include the introduction of double tariff rates for electricity, the extended use of solar water heating either through information campaigns or through regulation, the granting of development permits upon the use of energy efficient building practices and the extended use of public transport through an improvement in the efficiency of the system including measures which increase the degree of competition in the market.
“It is also of crucial importance that the system of maximum demand metering in industry be reviewed so as to take into account unintended and exceptional peaks in energy use, particularly following power outages,” Galea added.
The FOI urged the government to keep to the Convergence Programme targets involving lower Gross Domestic Product (GDP) ratios for fiscal expenditure and budget deficit. Monitoring the implications of the euro for inflation and financial costs is also a key priority.
“In addition, further progress in fiscal performance should be sought in the medium term through a system of effective redeployment of underemployed public sector employees and the role of taxation and business support should be developed towards Malta’s investment attractiveness,” Galea said.
As to the long term sustainability of the pension system, the FOI said it should be further promoted through the provision of tax relief on third-pillar (voluntary) contributions effected into recognized schemes.
In line with EU practices, both efforts towards better regulation as well as market surveillance need to be strengthened. There should also be careful monitoring to prevent from discrimination against local industry in the use of export-oriented cargo services.
“It is augured that the analysis, evaluation and recommendations presented in this report constitute a valid contribution to a productive social and civil dialogue in Malta, and contribute to the formulation of measures conducive to the socio-economic development of the country,” Galea concluded.

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