It’s refreshing to read a reasoned and expert analysis of the current state of the Maltese economy that doesn’t shy away from pointing out warts and all. In an article for Malta weatherAlfred Sant, MEP and former Prime Minister, produced a good analysis of the challenges of the new administration in the years to come.
The underlying theme of Sant’s article is that the current economic model, defined primarily by former Prime Minister Joseph Muscat and endorsed by Prime Minister Robert Abela over the past two years, is riddled with serious structural weaknesses. If these weaknesses are not resolved with determination by the new government, Malta risks seeing its economic growth stagnate.
Sant addressed various issues critical to future economic success. Perhaps the headline-grabbing recommendation is that the government should phase out investment passport programs. This harsh recommendation contrasts sharply with the attitude taken by some Labor politicians, in particular the former parliamentary secretary for citizenship, Alex Muscat.
The sooner the government adopts this recommendation, the easier it will be to convince the international community that, as the Prime Minister has said, Malta has indeed turned the page in its handling of relations with other EU Member States. EU.
Sant attaches particular importance to the underperformance of the education system.
He specifically points to the student stipend system, admitting that “restructuring this spending towards the achievement of improvements in critical areas of educational infrastructure would be decried by all and would be politically toxic”. Yet with the government’s kind of majority, now is the time to make tough decisions for the sake of future generations.
Another critical recommendation Sant makes is the need for governance reform in the public sector. He rightly argues that accountability and transparency should not remain mere buzzwords. He adds: “The sharing of responsibilities for ministries, projects, contracts and authorizations between multiple government entities – so that all have a finger in the cake but no one is fully responsible for a given decision – must end.” .
Sant also comments on the over-reliance on the construction industry, low cost imported labour, exploitation of the environment and the prospects of EU legislation making the financial services sectors and less durable games.
It is probably not easy to diversify into new economic activities with sustainable added value, mainly due to the weakness of the education system.
But the government would do well to abandon the mantra of continuity from Muscat’s high-risk economic model. Abela must develop realistic and ambitious new plans to underpin the economic strategy with solid and achievable targets. This will entail painful structural reforms.
Sant’s comments and recommendations gain relevance in the current international political and economic scenario where the outlook for stagflation is growing.
No country can aspire to strong economic growth for the benefit of present and future generations without keeping its public finances in good condition.
The pandemic and the war in Ukraine have significantly strained public finances over the past two years. Repairing the damage done must be carried out alongside the kind of structural reforms described by Sant.
The new Abela government has the formidable task of reforming the economy along the lines recommended by Sant. But he also has the political strength to advance the necessary reforms.
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