Updated 11.37am with minister's reply

Nationalist MP Ivan Castillo demanded government action on Tuesday as a new EU emissions tax on shipping looms, and which is expected to raise the cost of imports.

Speaking during the budget debate in parliament, Castillo said the situation was hugely worrying and could have a wide-ranging impact.

Shipping lines were planning to move their business from Malta Freeport to North African harbours, he said, causing the Maltese facility to potentially lose hundreds of millions of euro per year.   

At the same time, the shipping companies were raising charges to ferry containers to Malta, mostly through feeder services. Consumers would end up having to pay an additional €10.8 million.

Malta, he said, was therefore at risk of losing direct connections to 165 harbours. It also risked losing its business competitiveness.

Times of Malta reported on Monday that the cost of transporting shipping containers between Malta and four Italian ports is set to rise by up to €90 per container from January.

The announcement came ahead of the EU’s Emissions Trading System being extended to include shipping next year. Under the scheme, carriers will be obliged to purchase ‘allowances’ to offset their carbon emissions when travelling to EU ports.

This directive, Castillo said, had been negotiated by the EU institutions for the past two years. Why had the government failed to do anything about it? What would it do now? What did the future hold for the workers of Malta Freeport?

Replying later, Economy Minister Silvio Schembri said the freeport remained very important for the economy and essential for security of supplies, including food and raw materials.  

He said Malta was working with other EU countries including Italy, Spain, Portugal and Croatia to pressure the EU to reduce the impact of the new directive. 

Action in Malta was being jointly handled by the ministries for energy, transport and the economy. He believed that the pressure being put on the EU would lead to measures to reduce the burden, particularly on countries which depended on the maritime sector for much of their imports. 

Problems impacting the economy 

Earlier in the debate, the shadow minister for economic affairs, Nationalist MP Ivan J Bartolo, called for action to tackle problems impacting the economy.

He said the budget, while not totally wrong, was lacking and incomplete.

Bartolo said it was wrong of the government to have ignored advice not to tax the cost of living adjustment (COLA). Furthermore, with inflation having persisted, this measure while burdening employers, was not enough for workers.

What was happening in many cases was that whenever COLA was imposed, private companies either raised prices or reduced their workforce.

What was needed was action at source by having a government fund to bring down the prices of imports.

Bartolo also noted that next year, while capital expenditure would drop by 15%, debt would continue to rise steeply as would debt servicing costs.

At the same time, infrastructural problems were worsening. A short drive on Malta’s congested roads proved that simple fact, causing lost production time and pollution. It was good to see the success of the Sigma event last week, but the fact it caused a nationwide traffic jam could not be ignored.

The PN, he said, was advocating an economic model based on quality, not quantity. It was a model based on business continuity where the population did not continue to grow, work permits were better regulated and induction courses were held for imported workers.

Brand Malta, Bartolo said, also needed to tackle its reputational challenges, which, for example, had caused a situation where local banks were having problems to be sold. He feared Malta was not being seen as business-friendly as it used to be.  

Economy doubled in 10 years 

Winding up the debate, Economy Minister Silvio Schembri said the Maltese economy had maintained its momentum despite global challenges and was projected to grow by 4.4% next year, the fastest rate in the European Union.

He said the economic model criticised by the Opposition had led the Maltese economy to double in the space of 10 years. Productivity was up 50% and foreign direct investment in 10 years had also doubled.

The rate of formation of new companies had increased by nine times in 10 years.

It was not true that capital expenditure was reduced by 15% as Ivan Bartolo had claimed.

Schembri said confidence in the Maltese economy remained high, as seen by the way bond issues were scooped up within hours.

In his address, the minister highlighted progress and investment in various areas, particularly in the digital innovation sector and technology.  

Schembri said the gaming sector had grown fast, generating €1.5 billion in value-added, or 10 per cent of GDP. Growth was 6% in a year. Malta was being promoted as the ‘Home of gaming excellence’, he said, and talks were continuing with stakeholders for further improvement in the sector, including regulation.

The e-sports sector was also growing, he said, attracting top pro leagues.

More companies were also being attracted to video game development. A contract had been reached with Unity to enable 400 Maltese to study game development, opening the way for the future of this sector in Malta.

Another edition of the Playcon conference would be held next week.

On startups, he said the government would continue to create the environment and provide generous incentives including venture capital and tax credits for start-ups in innovative projects, known as unicorns.  

Schembri said consultation was also being held with the banks for easier access to banking services.

He said Malta would see huge investment in the microchips sector next year thanks to ST, putting Malta on the map in this sector. 

Work was also in hand on more space to accommodate new pharmaceutical firms and a major pharma firm, which already has a presence in Malta, would double its activities with an investment of some €74 million.