The long-term strategy document published by the Malta Financial Services Advisory Council (MFSAC) recommends 175 initiatives to revitalise the financial services industry and ease fiscal pressures on the government.
Some of these initiatives have been debated for several years but are still valid. If implemented, they would contribute cutting-edge strategies towards securing the country’s economic future and the prosperity of its people.
The proposals on pensions are a case in point. The state pension scheme is no longer fit for purpose. It leaves thousands of elderly people facing financial insecurity at a critical phase of their lives.
Pension reforms in the last two decades have mitigated the problem mainly by raising the retirement age and encouraging voluntary savings for retirement. More needs to be done.
The MFSAC is recommending the introduction of a mandatory occupational pension system for all employees. While this initiative would undoubtedly have significant merits, it would not be a silver bullet to resolve the challenges many face in retirement. Low-paid workers, for instance, cannot reasonably be expected to put aside part of their regular income to build a pension pot for when they retire. Yet, these workers will be the most exposed to poverty as they near retirement age.
Most mandatory pension systems also require employers to fork out a part of the regular contributions in their employees’ pension pots. Different administrations have been reluctant to increase employers’ labour costs so as not to jeopardise their competitiveness.
However, it is unrealistic to expect that mandatory pension schemes will be propped up with taxpayer money. Employers must work with the government to make the introduction of mandatory private pension schemes fair and sustainable for all employees.
Revamping Malta’s judicial system is another initiative that needs to be pursued with more determination. The country’s legal system is slow and often ineffective at promoting a quick and fair resolution of disputes. This weakness affects business operators, including direct foreign investors. It damages the perception of the ease with which economic activity can be conducted in Malta.
The lack of political will to engineer and enforce change in the way our laws are administered has persisted for far too long. For how much longer are urgent calls going to be made for a more efficient administration of justice?
The limited financial and human resources that are sometimes highlighted is only one factor contributing to this deplorable situation in which cases drag on for years on end.
The reform of the country’s judicial system should not be controversial; a bipartisan approach would help in its quick implementation.
Malta’s image has also been heavily tarnished by several incidents that confirmed a lax attitude to money laundering and other forms of financial crime. The damage to our reputation was evidenced by the Financial Action Task Force’ greylisting. Significant improvements in enforcing the law were made lately but there is a long way to go before Malta’s name is no longer automatically associated by many with shady dealings.
Introducing a single due diligence process to vet the suitability of individuals and businesses to engage in economic activities would be a crucial step forward. The fragmentation of the current due diligence processes managed by different stakeholders is not conducive to promoting legitimate business activities.
The MFSAC strategy document can promote cutting-edge strategies only if it is backed by the government’s political will to implement it and economic operators’ willingness to share in the responsibility and the cost of making it work.