Finance Minister Edward Scicluna has singled out bureaucracy as a major obstacle to economic growth, saying he spent “at least two-thirds” of his time trying to overcome it.

Speaking at the Hilton during a presentation on the EY Eurozone and Malta forecasts, he gave as an example a 10-hour debate at committee stage in Parliament, merely to adjust administration fees.

“Administration fees are not an exercise in cost recovery. These fees are there so we do not provide services free of charge as this would mean, in economic theory, that there would be infinite demand, which is simply not acceptable. Instead of just agreeing that we could increase them all by 10 per cent – and some of them have been there since 1974 – we debated till 11pm!” he said.

The minister said he was reassured by the growing rate of investment as a percentage of GDP, which he said had fallen to 17.4 per cent from a high of 30 per cent in the 1970s and 1980s, but had finally started to grow again, by 1.4 percentage points last year.

 

Professional cartels would do anything to obstruct initiatives as the previous government had itself realised

 

The minister praised the EY initiative, saying it was the first time a private company had commissioned a forecast, adding that this had long been one of his dreams as it provided independent analysis.

During his intervention, Opposition spokesman Claudio Grech gave a fairly positive overview of the way the party saw current economic performance.

“There is a positive economic story to tell. But we cannot be complacent. The country has managed to survive the recession elsewhere by riding on an economic crest – but it now needs to create the conditions for the next crest,” he said.

“The first crest was created by new sectors that we attracted 10-12 years ago. But these are not necessarily the sectors that will create the crest for the next 10-12 years.

“No new sectors are being set up, and without these there will be no new economic growth, which is what is needed to face economic challenges.”

Prof. Scicluna reacted to Mr Grech’s comment about new sectors by referring to the new hospital in Gozo and investment at Smart City, but warned ominously that “professional cartels” would do anything to obstruct these initiatives, as the previous government had itself realised.

 

 

Tom Rogers, the senior eurozone economist at Oxford Economics, said one of the factors which could limit Malta’s economic growth was the tight labour market.

“The solution is to improve the labour participation rate [the number of people who work],” he said, noting that in spite of significant improvements over the past years, Malta’s rate was still 10 percentage points below that in northern European countries.

Asked whether the high levels of imported labour in sectors like i-gaming and financial services would reduce this pressure, he warned that Malta could not import labour indefinitely, due to availability of housing and infrastructural concerns.

“This could have a negative impact on the quality of life,” he said.

He said another worrying trend was the drop in fixed investment, which he blamed on difficulty in accessing finance.

Its forecasted GDP growth in Malta will be 2.7 per cent in 2015 and 2.3 per cent in 2016, with unemployment at 5.7 per cent this year. The forecast, done by Oxford Economics on behalf of EY, said it expected the fiscal deficit to narrow to two per cent of GDP.

 

– Friday, 27th March, 2015