In presenting its pre-Budget 2025 document, the Malta Chamber of Commerce, Enterprise and Industry asked for a shift in the country’s economic strategy towards high-value industries, improved governance and more prudent management of public resources. It said that, as a country, we need to take and implement decisions in the interest of Malta, some of which may not be popular immediately in the short term but will be of benefit to the country in the longer term.
The Malta Employers’ Association is very much of the same mind. They stated that Malta should refocus its economy towards more productive, higher value-added and sustainable activities. The economy is overly dependent on construction, which is affecting the environment, people’s well-being and Malta’s attractiveness for tourists. There is a need for a gradual but immediate altering of Malta’s economic course that considers the country’s carrying capacity. Malta’s future economic prosperity needs to align with its physical limits, they said.
In a nutshell, the emphasis is on a change in the economic model and the need to focus on sustainability. If changing the economic model sounds too harsh, then we can use a more euphemistic term like re-balancing the economy to achieve sustainability.
The Minister for Home Affairs, Security and Employment was quoted saying that decisions on work permits for third-country nationals will be tied to the needs of the labour market. However, the needs of the labour market are determined by economic policy and the type of economic model we adopt. Therefore, it all boils down to how we wish our economy to evolve moving forward.
Looking back on these 60 years [since Independence], not only have we survived but we have also thrived
Today we celebrate 60 years of independence. At the time, there were many who thought that Malta would not be able to survive without financial assistance from the UK as a significant part of the economy depended on the presence of the British services here in Malta. Looking back on these 60 years, not only have we survived but we have also thrived.
We have re-balanced our economy as the circumstances of the time dictated. We have moved from a situation of little to no tourism to a situation where tourism is one of the mainstays of the economy. We have moved from a situation of low-cost manufacturing to one of high-end manufacturing. And whereas we had an inexistent financial services sector, we now have a vibrant financial services sector. We have developed new activities from nothing, such as aviation maintenance and transhipment.
This did not happen overnight and neither did it happen at one go. We have been through various iterations of re-balancing our economy. We have moved from nationalisation to denationalisation, from protective tariffs to trade liberalisation.
All it took, to put it simply, were people with foresight who charted a way forward, taking decisions which at times were unpopular.
After independence, we did have other occasions when our economy was at a crossroads, and again there were persons who were afraid we would not make it. One example is when we came to deciding on membership of the European Union and joining the eurozone. Even here, we made it. We needed to re-balance the economy and we succeeded.
More recently, talk about changing our economic model started just after the two years of the coronavirus pandemic. We did nothing then although we did have the opportunity to start afresh. The calls for change have grown more insistent and we are now at a stage where any further delays could cause some irreversible damage.
Policymakers need to decide on the kind of economy we want to have in five years’ time. We can continue with our current policy of relying on low-cost labour from outside the EU, or shift to a higher value-added economy, relying on the skills of the Maltese. I have long made it known that I prefer the latter.
If we need to sweeten the pill, then let us call it re-balancing the economy ‒ a policy which has been adopted by the US and the UK since before the coronavirus struck.