Recently I was invited to a conference that revolved around the Government’s economic vision, and given that the Minister responsible was previously responsible for technology, and had the economy added to his portfolio, one could evidently sense the highlight on the economy and digitalisation.
Usually when I attend such conferences, I end up emphasising that digitalisation is the key driver for economic growth through improved production and better use of resources which ultimately enhances a country’s prosperity. Some might say that this is obvious but in fact I have my doubts whether policy makers truly value the significance and impact of digitalisation. There is a big difference between acknowledging this notion and actually truly committing to implement this concept through robust investment and policies. In this case, I must admit that the Minister does not need a lot of convincing in this area and that is why I feel that he is the right man for this role.
Once the proposed economic vision goes through public consultation and feedback is analysed, I anticipate concrete policy proposals, tasks and realistic milestones to be implemented to achieve the objectives indicated in the economic vision. Implementing tangible and effective actions will forge a drive to achieve the objectives.
During this conference one could also note the issue of grey listing behind some of the contributions. In this regard, I would like to immediately clarify that I believe that there will be minimal effect in the first one to two years, and one must see whether there will be any long-term negative effects. Some are saying that all sectors of the economy will be hit but this is highly questionable. Are we saying that a tourist will check whether we are greylisted or not before coming to Malta? Are we perceiving that before one buys property in Malta one will see whether it is greylisted or not?
Are we saying that a tourist will check whether we are greylisted or not before coming to Malta?
The sectors which will be affected are the banking sectors and companies that require funding. Notwithstanding, it is pertinent to note that the banking sector has been working in similar circumstances for more than a year now and they stood up well in the face of challenges. The issue of funding is not a real issue because Maltese banks have billions of idle Euros which they can utilise to support funding. All of this is being confirmed by credit ratings organisations such as Fitch which stated that:
We believe that contingency planning, combined with the banking sector’s sound credit metrics and its generally reduced risk appetite, will contain the overall impact of grey listing.
The only sure damage that could be done is through local baseless scaremongering articles that are quickly forecasting doom and gloom without providing any scientific evidence. After all, only time can tell us the effect of such greylisting and in a year’s time one would be in a better position to observe the change in the country’s GDP and only then, one can comment.
Another topic which I discussed with some of those attending the conference is the international tax harmonization system being proposed. Well, if I feel that greylisting will have little or no effect at all on the economy, international tax harmonisation will be problematic and may have a devastating effect on Malta’s economy. Therefore, Malta should stand its ground on this issue and be uncompromising unless Malta is given a robust long-term compensation package. After all, Malta’s tax regime had been approved prior to EU accession and is necessary considering the size and resources of the island. Malta’s financial sector exists primarily because of the tax regime that we have and other factors which may be also considered as important such as a skilled workforce, a user friendly, English-speaking country and a robust regulatory framework are all peripherals.
In conclusion, I am confident that the Government is committed to pursue in further enhancing the reforms it introduced so that Malta is removed from the grey listing as soon as possible. This is very likely to happen if the grey listing issues were solely of a technical nature. On the other hand, if the grey listing was more of a political nature, the Government will need a different approach and not only keep on strengthening the effectiveness of the institutions but also address diplomatic requests from several foreign countries. In the meantime, let us focus on the basic principles mentioned in the economic vision, namely, sustainable economic growth, infrastructure, education, good governance, and the environment and complementing this with tangible actions to achieve the objectives. One thing is certain, Malta has always been flexible to adapt bravely in face of challenging circumstances which, in the long run and without fail, have served as a stimulus for our island to move forward.