Fenech Adami sees future of stability for Malta

Prime Minister Eddie Fenech Adami said yesterday that he saw a future of stability for Malta, a key ingredient for economic growth, following the opportunities lost because of the uncertainty stemming from Labour's opposition to EU membership.

Speaking in parliament during the budget debate, Dr Fenech Adami said these were new times where even the manner of doing politics was changing, the accent now being on ongoing consultation. The government was therefore inviting the opposition to do its part in a new social pact which would also include the social partners. Unfortunately though, the opposition had failed its first test, as evidenced in its destructive comments following the budget.

Dr Fenech Adami said Malta was in interesting, difficult and certainly new, times, a transition period for a better standard of living for the people.

Malta's accession to the EU would be the culmination of a process going back to at least 1990 when the membership application was submitted. Now there was an air of expectancy that following this long process, the country in the next five years would make another leap of progress as had been the case following Independence in 1964 and the change of government in 1987.

Of course, for a tree to bear fruit, it had to be tended and watered, and this was what the government had done in the budget.

This was a phase of new political and economic stability which Malta should make use of to exploit all the opportunities available to it through EU membership, something which both the government and the opposition wanted.

The budget measures, Dr Fenech Adami said, were decided after extensive consultations with the social partners. They were aimed at tackling the financial and economic problems Malta faced, not just because of EU membership, but because of the new scenario which emerged as a result of globalisation and the collapse of the iron curtain.

The government also wanted to ensure that social welfare remained sustainable. In this area too, the government intended to continue in-depth consultations. Clearly, social reforms should be based on as wide a consensus with the social partners as possible.

This budget was an exercise which objectively gave a positive message - it sought to encourage everyone to achieve a social pact as had been achieved in several other countries. All should discuss the problems the country faced and see how they could be tackled, not to reduce social welfare but to make it sustainable for future generations. This was the context within which the budget had been prepared.

Dr Fenech Adami said he had not expected the leader of the opposition to agree with everything the budget laid down, but at least he had expected him to agree on the need for as wide a consensus as possible on the policies the country should adopt. But Dr Sant on Monday was totally negative. He showed no vision or courage for the future and had given mistaken interpretation of facts.

Dr Fenech Adami recalled that he had said that this budget would be a test for the opposition. But instead of looking to the future and setting out the MLP's vision of Malta within the EU, Dr Sant had failed to turn a new page. So far the opposition had failed the budget test and Dr Sant had not been able to rise to the challenge of the new times. Instead he painted a picture of gloom and doom.

Dr Fenech Adami said he could see a future of stability for Malta - a key ingredient for economic growth following the uncertain 13 years of the accession process. That was a period when Malta lost many investment opportunities because of the instability caused by the MLP's policies. That was something other applicant countries had not gone through since their political parties were largely in favour of their countries joining the EU.

The MLP therefore should shoulder its responsibility for the investment opportunities Malta had lost and it should apologise to the people for what had happened.

Nonetheless, was Malta in as bad a situation as Dr Sant said it was? Perhaps the people could care to see how the number of mobile phones had mushroomed, and how restaurants were full. Clearly the people's living standards had continued to improve. GDP had also grown, though not at a rate one would have wished. The country could have done better had the opposition not been so negative in its actions.

Unfortunately the MLP, even now, was unable to convince its supporters about what EU membership would mean.

The main purpose of the EU was social progress, and that was what the government wanted for Malta. Membership did mean certain financial burdens, but those burdens were being assumed for the people's own benefit. For example, Dr Sant viewed certain authorities as a waste of money, yet their duties were to raise the people's living standards, such as by improving the environment and occupational health and safety.

Laws enacted because of EU membership were also benefiting the people in general. Consumer legislation and the new employment law were examples of how the people were now enjoying rights they did not have before. All these benefits should be explained to the MLP's supporters.

Another important purpose of the EU was economic growth. All countries, and not just those of the EU, now championed trade liberalisation. In this context, it clearly suited Malta economically to form part of the EU in order to be competitive and to exploit new markets.

Dr Sant had mentioned factories which were in difficulty. But Dr Sant should know that the current situation was such that certain manufacturing industries needed to emigrate. This was nothing new, and it was not caused by the EU. What Dr Sant should recognise was that factories which could have faced problems did not have the disaster which he had predicted. For example, Dr Sant had predicted a disaster for the woodworking sector after the lifting of levies, something which had not happened.

Dr Sant had not even been satisfied with the progress of the financial services sector. Yet this sector now contributed 12 per cent of GDP, from nothing up to some time ago.

These were new times also in the way politics were conducted, not just in Malta but everywhere. Opposition parties were not there to incite the people against governments by telling them to take to the streets if the governments did not heed what they said. Dr Sant could take to the streets if he wanted. But that would only serve to keep Labour in opposition.

In contrast, the Nationalist Party had for years promoted the policy of dialogue, a policy which had taken root as evidenced by the high level of consultation in the budget. That was what the new form of politics was all about.

But Dr Sant was clearly still bound by the vice-grip he had got himself into when he opposed Malta's EU membership. According to him, the government had attained its aim of joining the EU, and it had no further purpose. Yet EU membership was not the end. It was the beginning of a process which would see Malta reap the fruits of accession.

Dr Sant had listed the government's grants to farmers as one of the costs of accession. But the government wanted to help the farmers to enter the modern era without the need for import protection.

Dr Sant should admit the progress that was being made. For example, income from employment had risen by 3.8 per cent this year over 2002. Gross trading profits had risen to nearly Lm300 million in the first nine months of this year.

Private sector investment had risen by Lm44 million.

It was true that the number of gainfully occupied had dropped by some 300, but it was worth pointing out that since the 1998 election, employment had risen by 3,400. The number of people registering for work had dropped from 8,306 to 7,900 during the same period. Bank deposits this year had risen by Lm290 million.

The main thrust of Dr Sant's argument was the deficit. It was true that the deficit this year was Lm33 million higher than projected, but at Lm107 million, it was lower than the Lm150 million in 1999.

Dr Sant was ignoring the fact that the main reason why the deficit projections had not been attained this year was lower than projected revenue growth. A notable exception was revenue from income tax, which had risen by Lm5 million more than projected. Had there been the disaster Dr Sant had spoken about, who would have paid this tax? This higher income tax revenue was also due to the fact that efforts to cut down on tax evasion were bearing fruit.

It was also worth remembering that funds from the new Italian financial protocol had not been available this year.

Dr Sant had also said Malta was unlikely next year to receive as much funds from the EU as had been promised. But, Dr Fenech Adami said, Malta would not lose a cent of the pre-accession funds allocated to it and could use them up to 2006.

As for the period after accession, Dr Sant had argued that Malta would end up paying out more than it would receive from the EU. The flaw in his argument was that outlay on, say, farmers, would be for the benefit of the Maltese themselves, not the EU.

Of the funds allocated to Malta, Lm20 million were in the form of grants not linked to any project.

Another source of funding from the EU would be through free participation in EU programmes, which Malta had to pay for to date.

Dr Sant had claimed money was being wasted on Malta's Brussels embassy, yet it was essential that Malta had a strong presence in the EU. How could Malta get the best of the EU if it was absent?

A small but significant development was that even though it had not yet joined the EU, Malta was expected to receive €1 million as compensation for the damage caused by the September storms. The formal decision was expected to be taken by the Commission on December 10.

The explanations given by the government about the deficit showed that, despite the deficit growth, the government retained control of the situation, Dr Fenech Adami said.

Turning to the labour sector, he pointed out that according to ETC figures, new engagements by employers totalled 51,244 in the year up to October. In contrast, terminations, including both redundancies and job changes, totalled 49,220. That figure, however, showed a high rate of job mobility, in line with the restructuring process.

Indeed, redundancies on their own had during the same period totalled only 2,473. In the previous year, that figure had been 3,168. Wasn't the opposition seeing these figures?

The number of gainfully occupied in September this year had risen by 2,662 compared to September five years ago. The number of people whose part-time work was their principal occupation had increased by 7,336 during the same period, so that total employment growth was of 10,228 since 1998. So where was the disaster that Dr Sant was seeing?

The opposition liked to quote the Labour Force Survey figures, even though that was a survey, not a head count as conducted by the ETC. Yet the opposition did not say that according to the survey, the labour force was bigger by 12,000 than the ETC figures!

Dr Fenech Adami said that in October, the number of people who had been registering for work for over a year was the lowest since 1997, and 1,000 less than in 1999.

The number of unemployed persons aged over 45 had also dropped to the lowest level in five years, to 3.6 per cent in October from 4.4 per cent in October 1999.

The rate of youth unemployment had dropped from 7.4 per cent in 1999 to 6.6 per cent this year.

In Gozo, the highest rate of unemployment was in 1997 at 635, when the MLP was in government. It was now 598.

Turning to the budget measures, Dr Fenech Adami said the government had declared it did not want stopgap measures but it wanted to plan for the future. Difficult decisions were taken, such as the raising of VAT to 18 per cent. This would mean Lm21 million in revenue next year. However it should be pointed out that upon accession on May 1, VAT would not be charged on imports at point of entry but at the point of sale. This would mean a shortfall in VAT revenue of Lm15 million next year. But that amount would remain in Malta and not go to the EU, as Dr Sant had said.

Dr Sant had pointed out that VAT on yachts would be only five per cent. This, Dr Fenech Adami said, was an incentive up to March to encourage yacht owners to register their yachts in Malta and generate activity.

After the impact of the VAT increase and the impact of other elements on the cost of living were considered, the government had decided to grant a 75 cents weekly wage increase and a special bonus of Lm39 in March.

It was true that residents at government old people's homes would be required to contribute 80 per cent of their pension. Facilities in such homes had been substantially improved, and the government wanted to be able to provide more places in homes. Yet the minimum to be retained by the elderly would be raised to Lm600.

Turning to tax on property sales, Dr Fenech Adami recalled that when succession duty was removed in 1992, the sale of property which was inherited was not taxed. But with property prices having since exploded, was it fair for capital gains tax not to be charged on the value of property which would have risen considerably since it was inherited?

Turning to the new hospital, Dr Fenech Adami said it seemed Dr Sant had still not recognised that the people deserved and would get a modern hospital. The government was being careful in its spending and contracts were awarded transparently, as current procedures on the contract award showed. He augured that this process would yield the best deal for the Maltese people.

Referring to Dr Sant's criticism of civil service head J.R. Grima, Dr Fenech Adami said Mr Grima was being treated like other people granted an extension of service after their retirement age. Indeed, he could mention several people who enjoyed the same financial benefits when Dr Sant was prime minister. Clearly Dr Sant needed to do something about his credibility.

Indeed, credibility was the biggest test Dr Sant was facing. The country was going through a change in the way it operated and the accent was increasingly on consultation. Substantial progress had been made on this road, and everyone was invited to join in, including the opposition, within their respective roles.

Near the end of his speech, Dr Fenech Adami again referred to Dr Sant's criticism on money being wasted on the opening of embassies. He said that when Labour was in government, Malta's ambassador to Spain was withdrawn, whereupon Spain promptly closed its embassy here. Now he had been informed that Spain had decided to reopen its embassy in Malta.

It was important that Malta's voice was heard everywhere, and if Dr Sant thought the deficit problem could be solved by Malta losing part of its voice, he had not understood anything.

Malta now enjoyed respect and its presence was sought. On May 1 it would take its place as the smallest country in the EU, with a voice that was heard as loudly as that of the other member states, Dr Fenech Adami concluded.

A motion for the House to resolve itself into committee of supply to consider the budget estimates was then approved with 28 votes in favour and 24 against.