While the Individual Investor Programme (IIP) remains a controversial economic strategy to attract investment, the use of the funds it has generated over the past few years has enabled the government to support specific social priorities that would otherwise not have been addressed.
As of 2020, the National Development and Social Fund (NDSF) has received 20 per cent of funds from the IIP whereas, previously, it received 70 per cent of the proceeds from Komunità Malta, the citizenship agency.
This decision was a wise one, given the money needed by the government to help save jobs and lives during the pandemic. Still, the NDSF has received a total of nearly €600 million since its inception to fulfil its mission of “contributing, promoting and supporting projects and initiatives of national importance and public interest”.
The latest initiative proposed for the NDSF is to finance the purchase of as many as 23 band clubs in a number of localities throughout the island. The funds from the IIP scheme will be used to try to lure landlords away from repossessing the properties. This follows recent court judgments that have considered previous attempts by the government to protect the tenancy of band clubs through legal amendments as “a clear abuse of power”. It is only a question of time before a number of band club organisations are evicted from their leased premises.
Band clubs in practically all towns and villages in Malta and Gozo are considered an integral part of the country’s social fabric. Their popularity, especially among younger people, may be waning but their disappearance as a result of legal decisions, however reasonable those decisions may be, would mean the permanent loss of an important part of our cultural heritage. Only the government has the financial clout to resolve this challenge while respecting the rights of property owners who, understandably, want to enjoy their assets to the full.
The NDSF, however, has extensive objectives that need to be achieved judiciously. The decision to rescue band clubs from eviction is arguably a forced move. Some would argue that it deprives other worthwhile social priorities from being addressed.
The NDSF was set up to promote the improvement of education, research, innovation, social purposes, justice and the rule of law, employment initiatives, the environment and public health. Good governance of a sovereign fund has to be based on reasonable decisions to ensure that it achieves as many of these objectives as possible. It is difficult, if not impossible, to get a broad consensus on social priorities.
For instance, farmers facing similar threats of eviction are justified in expecting the government to use agencies like the NDSF to safeguard their livelihood by acquiring their agricultural land from owners who want vacant possession. Given the importance of food security, this objective would have a strong element of common good attached to it.
It is unlikely there would ever be a broad consensus but the public ought to have a say on what social priorities need to be addressed with the sovereign fund.
The NDSF has a formal governance structure that is reasonable and modelled on good practice. It publishes audited accounts yearly and has well-defined guidelines of what it can and cannot do with the money it receives. However, there is a risk that the government will use the NDSF as a financier of last resort for quick, politically expedient solutions to complex social and legal problems.
It is unlikely there would ever be a broad consensus but the public ought to have a say on what social priorities need to be addressed with the sovereign fund.
The NDSF decision-making also needs to be transparent. This would add credibility to the process.