The last four years have been good for Maltese businesses. In 2016, according to National Statistics Office data, Maltese businesses had an operating surplus which was €1.5 billion, 30 per cent, higher than 2012. In real terms, investment in 2016 stood at €2.3 billion, or €1 billion higher than it was in the last year of the previous administration.
There are nearly 25,200 more full-time jobs in the private sector than in 2012, and yet Eurostat reports Maltese firms having the highest rate of unfilled jobs in the EU, with some 4,200 vacancies waiting to be filled.
In four years the number of firms rose by 23,300, or nearly seven times the increase seen in the previous administration. In 2016 there were 4,000 more firms in the professional and technical services sector, an increase of 55 per cent over 2012.
In financial services the increase in the number of firms stood at 6,000 firms, a rise of 62 per cent; while in administrative services the rise was a staggering 68 per cent over 2012. The dynamism of the Maltese economy is increasing consistently. Consider that last year it was as if a firm was established every hour, as we had an increase of 7,153 firms.
A lot of this has reflected local investment, but there was also a very substantial turnaround in foreign direct investment. In 2016 the stock of foreign direct investment was €465 million, or nearly 20 per cent higher than it was in 2012. The number of approved foreign direct investment projects was equivalent to one per every two weeks of this legislature.
Today business sentiment as measured by the European Commission’s monthly survey shows an index value of 114. This is one of the highest levels on record, and is also among the highest in the EU. Compared with the same month in 2012, business sentiment in Malta is now 23 per cent higher.
These results are not the result of chance, but rather of the hard work of this administration. Starting with income tax cuts, reductions in the cost of electricity, efforts to decrease bureaucracy and active labour market policies that have attracted thousands to the labour market, Joseph Muscat’s government has meant a complete change in climate for businesses in Malta. Besides lowering burdens, this administration has focused on ensuring stability and confidence.
This has resulted in rating agencies revising upwards their assessments of Malta. The European Commission also dropped the number of its country specific recommendations for Malta to just two, from five in 2012. Last year the World Economic Forum in its report on global competitiveness showed that Malta was among the top five in terms of gains in competitiveness rankings. Whereas in 2012 we were in the 71st place in terms of economic environment, we are now in the 21st place.
Joseph Muscat’s government has meant a complete change in climate for businesses in Malta
There has been undoubtedly lots of progress in this aspect, with this administration being dubbed repeatedly as being pro-business. However we believe that a lot more remains to be achieved if Maltese firms are to continue flourishing. This is why we announced some headline measures in this regard.
The first proposal of Muscat is to ensure that small and medium firms have the required amount of access to banks. Our country, thanks to strong economic growth, has a lot of liquidity. Our banking sector is awash with deposits. To be precise, there are now €11 billion deposited by families with the banks. This marks a 41 per cent increase since the change in administration.
Yet, the commercial banks have restricted access to the finance of firms, due to rising regulation and less risk appetite. This is why we put in place the legislation of the Malta Development Bank – the most important new government agency in recent decades. Through this Development Bank and also using much better EU funds, we will ensure that in the coming years our firms will face less hurdles when they seek to grow and need finance.
The Micro Invest scheme will be extended and improved. For firms based in Malta the scheme will increase from €30,000 to €50,000. For those setting up in Gozo the scheme will more than double to reach €70,000. Fostering investment is the way of ensuring that Gozo remains a vibrant place.
Just giving a costly hand-out to a handful of settlers, as in the scheme invented by Simon Busuttil, is a waste of money compared to the incentives for businesses proposed by Muscat.
Similarly to ensure women get represented more in businesses and to help female entrepreneurs, the Micro Invest scheme will also be expanded to €70,000 for firms with majority female shareholding. It is fine to state principles like Simon Busuttil does. It is much better to actually present policies that help bring about more gender equality in the economic sphere.
Another proposal is to implement the Late Payments directive so that firms that work for the public sector receive payments in a timelier manner. This will improve firms’ cash flow and reduce their reliance on costly bank overdrafts or short terms loans for working capital.
A significant number of businesses face a degree of uncertainty due to the rent laws as reformed by the previous administration. Muscat has promised a reform in this area that takes into account the substantial investment and goodwill that tenants have accumulated over the years.
Finally, Muscat is proposing to raise the threshold for firms to be tax exempt from VAT from €14,000 to €20,000. This threshold had been left unchanged since VAT’s reintroduction, 18 years ago. This measure will benefit thousands of small firms and professionals who could save up to €1,080 in tax. Besides this tax saving, this measure would bring about a substantial reduction in bureaucracy for them.
I am sure that Simon Busuttil, faced by these excellent proposals, will dream up some hare-brained proposals that cost an inordinate amount of money but favour few or none. I am however convinced that business owners, on the back of the track record of this administration, will choose to support the roadmap of Muscat towards better times for our country.
Manuel Mallia is Minister for Competitiveness and Digital, Maritime and Services Economy.