Category: Archive – 2009

The Tourism and Sustainable Development Unit is offering a €10 million Grant Scheme, co-financed by the European Union's structural funds, aimed at helping Maltese enterprises interested in doing a tourism related activity that falls outside what is the basic requirement by law.

The projects must specifically target tourism, a tourism attraction, getting more tourists to Malta, making your enterprise more attractive to tourists.

These are projects that in the end will strengthen Malta's competitive advantage, encourage the use of ICT while adopting good environmental practice.

Who can apply?

All enterprises wishing to do a tourism related project:

• Small, medium and large enterprises
• Group of companies
• Start-up enterprises

How much can the project cost?

• SMEs: €15 000 – €400 000
• Large: €58 000 – €650 000

What % will be financed by the scheme?

• Small Enterprise: 50%
• Medium Enterprise: 40%
• Large Enterprise: 30%

For more information on the scheme and how to apply an Information Session will be held where a detailed presentation from the authority in charge will be given. Details below:

GRTU has yesterday written to Honorable Ministers Tonio Borg and Tonio Fenech advising not to approve the Commission's proposal of further extending anti-dumping duties on footwear imports from China and Vietnam.

In 2006, during the period when it was discussed whether Malta should vote in favour or against anti-dumping duties on footwear imports from China and Vietnam, GRTU had made it clear that Malta should block this unjust European imposition.

Unfortunately, the authorities decided to ignore our advice and following lengthy political bargaining between Member States, the EU imposed these duties for a period of two years.  When the duties were set to come to an end last year, domestic producers requested an expiry review which is currently under investigation. As a result the duties are still in place and might be extended if the EU gives in to protectionist pressures.

GRTU today retains the same position held in 2006, we are not for protectionist measures, especially were Malta has only to loose. Anti-dumping rules impose duties on imported products deemed to be below cost price, thus making imports more expensive and driving up prices in our stores. In the current crisis, citizens are right to expect the EU to terminate these long-standing measures which artificially ‘protect' the footwear industry. For this specific sector Malta is certainly an importing and not an exporting country, therefore, our retailers and consumers are made to pay extra hefty costs to protect the few foreign European producers. Maltese traders should not have been made to subsidise the few footwear producers still operating in other EU countries.

GRTU also pointed out the following facts:

• In 2008 Malta imported €604,000 of footwear from China and Vietnam covered by the measures.
• These imports accounted for around 80% of the volume of Malta's footwear imports from outside the EU. It is highly damaging to place duties on these imports.
• Measures have had little benefit for EU producers. Overall, the value of Malta's imports from non EU countries were virtually unchanged 2005-2008; declines in imports from China diverted trade to other non EU countries: imports from Indonesia increased 115% and Brazil 13%.
• Malta's import bill increased by around €72,000 a year as a result of measures. Costs to consumers far outweighed any benefit to domestic producers.
• The result is that these measures, if extended for a further five years, could cost the Maltese economy at least €390,000.

The reason as to why members are now suffering from this great injustice is because the Maltese Government refused our strong advised to block this unjust imposition. GRTU in no way supported Government in the choice it then made.

The European footwear market has languished for years behind artificial trade protection.  It is now time, as was done in the textiles sector, to open up the market and allow the footwear trade to operate under normal market conditions. Another political compromise extending the duties would in no way encourage European manufacturers to carry out the necessary modernisation. Trade policy must not be ruled by political games: on the contrary, what we need is the abolition of such duties so promoting a truly competitive European industry, injecting momentum into consumer demand and giving the economy the boost it so badly needs.

Government today has given clear indications to the GRTU that it will this time vote against the unfair extra tariffs.

Taken from this week's interview with Charlot Zahra of Business Today 

What is the GRTU's reaction for the COLA increase announced for the 2010 Budget to make good for the inflation sustained by consumers during 2009? Is it justified or not?

There is a formula agreed by all social partners, GRTU being one of them, and that formula has to be respected. This year COLA has produced an increase for all employees (not consumers) of €6.06c per week. We are not so happy with the formula as it no longer reflects the situation today, but unless an agreement is reached on a change, it has to be respected.

The reason why GRTU says this is that, while many employees is the public sector and in other private establishments benefit from an annual cost of living, as a result of their collective agreement, many other people work in establishments where workers are not unionised and not subject to a collective agreement. Most times the only increase they enjoy is the COLA, it is also the only increase, and not even in full, that  pensioners and others on social income receive as annual adjustment.

GRTU on the other hand notes that households` take-home pay needs to be adjusted as otherwise not only do people suffer a consumption regress but retailers and service providers also feel this lack of disposable income adjustment in their sales. GRTU cannot therefore object to the full payment of COLA.

In the GRTU's view, is this COLA increase an excessive one or not, especially in view of the current economic situation facing the country in the midst of a recession?

The increase is not a question of judgement. It is what the current inflation rate justifies, and it has to be paid. The question really is whether employers can afford it, I believe that many of our members cannot, so the question really is how can employers be assisted to meet this necessary obligation.

We do not agree that Government should subsidise employers, as that would mean new tax revenue has to be obtained somehow. It often means that the middle income groups would have to fork out the money. This would be really unjust as for most middle income groups, COLA does not reflect a good enough adjustment for their extra household expenditure as a result of inflation and most times they do not receive sufficient salary increases to balance the difference, unless they are public sector employees covered by a collective agreement which already includes annual increments for beyond COLA levels. So at the end it would be simply robbing Jack (middle income groups) to pay Paul (lower income groups), this is not acceptable to GRTU.

How do you think that the COLA increase will affect small and medium-sized enterprises during 2010?

In the first instance they would see an increase in sales as households have that little extra income to spend. Cost wise however, it will effect them badly, especially if they are in a business where prices cannot be increased so easily or where incomes are subject to a fixed contract, which does not include a cost of living escalation clause.

Do you think that Maltese and Gozitan entrepreneurs can sustain more burdens in view of the recession that has afflicted the country and the high inflation rate that has impinged negatively on production costs?

The answer is of course not, but the issue is much bigger than COLA, GRTU has just presented Government with a booklet of proposals that should be included in Budget 2010 as a bold approach to support enterprise. The COLA negative impact can be mitigated if an agreement is reached with the Ministry of Finance to accept this year a discount on social contribution payment per worker equivalent to at least half the COLA payment per worker. This amount would be made payable to Government over the next 3 years. Effectively Government would be lightening the burden on employers this year as other burdens heavily impinge on employers for it to be redeemed in the future when things should look better. 

Was the matter discussed in the MCESD prior to this announcement or not?  

This issue was aired but no formal motion by members was ever presented, so no decision was taken. For a decision to be taken there has to be a complete process of negotiations as happened when COLA was originally introduced. Currently MCESD members are discussing a joint paper to be presented in connection with Budget 2010 and this paper may serve as a launching pad for eventual COLA restructure.

Has the GRTU made an analysis of how the proposed COLA increase will affect its members in various economic sector of the economy?

Yes.The sectors that are subject to a contract that guides their income and which contract is not renewable every year, other sectors in a highly competitive market where the pressure at the moment is for the reduction of prices to sustain market share. During the current economic slowdown, many firms are not in a position to put up prices to cover costs. Only firms in a monopolistic situation can simply pass on the extra cost. We will however in the next few months see price increases as firms adjust to cover the extra costs.

Which are those sectors that will be most hit hard by the COLA increase?

The firms especially in export trade and in tourism who's market is an international one, where competition is very tight and in view of the economic slowdown internationally will have to reduce prices to continue to compete, especially those firms with markets outside the Euro Zone, and who therefore have the double negative stroke of increases in costs in Malta, due to COLA among others, and are also suffering increased prices due to a hardening Euro exchange rate

How will job levels be affected in these sectors as a result of the COLA increase? Could you kindly state by how much?

I do not believe that COLA by itself will have a determinate employment impact. Employment will be effected if Government fails to come foreword with a bold enterprise driven budget for 2010.

GRTU has made a series of proposals for Government to sustain enterprise and we are confident that Government will not fail to be bold in its enterprise support initiatives. The problem is not one of COLA alone but more a question of the need for Maltese enterprise to be sustained to meet current cash flow problems and for enterprise to have enough funds to restructure and innovate. I do not think it is fair to identify COLA as a main problem in itself. The problem is bigger than COLA.

Sector – Vince Farrugia

Taken from  Raphael Vassallo's article in Business Today

In the press this week you were quoted saying that ‘bad planning had led to an oversupply of ordinary apartments, even in prestigious areas', which had negatively affected property prices in general. Could you give a few examples of what you consider to be ‘bad planning' in this regard?

During the period of consultations, on MEPA reform a strong point I made with Government was that the planning authority, in spite of the Structure Plan, operated in the absence of Development Strategies as defined by Government, and continues to operate as if the developments of the Maltese economy and the needs of the Maltese as a community were not priority items. Otherwise we would not have had the excessive construction of so many apartments aiming at a market that did not exist.

Marketing is about identifying needs and then producing solutions. MEPA simply reacts to developers. I am happy today that Government has accepted the proposal to have not just a mere Planning Unit at Castille – we had that at MEPA anyway – but a Strategic Development Unit.

The difference is that it is not merely a question of land use planning but more of a definition of what is best for us as a community living on these small Islands and how to meet our current and future needs through construction projects with the least negative impact on the environment in its widest definition.

If we had this strategic development unit properly manned and operating we would not have had so many construction projects built with little purpose, with the exception of speculation. Government would not have issued an amnesty on tax and foreign exchange frauds and evasion, allowing fund owners a free hand to invest wherever they wanted. Instead there would have been a policy guideline from the strategic unit, so that these funds would be utilised in areas of development that met specific needs of the Maltese community.

It is not a question of interference with the free market, but providing policy guidelines so that State Authorities follow intelligently what is strategically important for us as Maltese living in Malta today, and the needs of future generations in as far as these can be estimated.

Up to now we did not have strategic planning, but an insistence on a liberty which is too costly for a country with such limited territory, and with such high value patrimony to tolerate.

One of the decisions taken was to increase the development boundaries by 2.3% in 2006, resulting in the development of more apartments despite the low demand. And yet, the GRTU appeared to favour this initiative back then. How do you account for the change of heart with regard to such decisions?

GRTU, like many organisations, reacted and proposed solutions to problems as they emerged. This is precisely what I've been criticizing all along. Whether in economic, fiscal or special planning, we have been operating on short-term, stop-go policies without an underlying strategy longer-term plan. We as GRTU are players and we kick the ball when it comes our way; but it does not mean we are playing to our design.

Building height restrictions have been relaxed, in a move that directly resulted in more apartments, also in prestigious areas. Do you consider this to be one of the reasons for the present drop in property prices?

As already explained MEPA does not measure the impact of one-to-one planning decision making on the overall market. It leaves the question of investment and potential loss or profit to investors. It is all a question of strategic planning, and MEPA technically was not responsible for this type of planning. The issues you highlight are symptoms of a greater malaise, precisely what the MEPA reform is trying to remedy.

You were also quoted as saying that ‘80% of Maltese own their own home'. This is in stark contrast with the rest of Europe, where a majority tends to rent their homes, not own them, with ramifications that affect the price of property. Malta's unique situation is in part due to the rent law anomaly that has persisted since 1939. And yet, GRTU has criticised the present government's initiative to reform this rent law regime. Can you explain this apparent contradiction?

An important distinction exists between the situation of rented property for residential use and rented property for commercial use. GRTU has criticised, and still does, the rent reform when it comes to commercial leases. Therefore there is no apparent contradiction.

In addition, to further clarify, the rent laws were only partially responsible. I studied this phenomenon as a student. My first major study was in fact a study of the housing market way back in 1968/69. The basic truth is that the Maltese are not stupid. They know that we live on a small territory. They know that come what may, property prices will continue to rise due to scarcity of land.

Renting for the Maltese is only a short-term option. Incentives will help to encourage renting but the ideal economic framework where the cost of renting will equate the marginal cost of owning will not materialise. Even if it does, the Maltese will always perceive that the clever option is to buy.

You have often criticised the fact that, as a result of amnesties offered by government to people who had money deposited overseas, a large part of the re-injected capital was invested in property, resulting in the development of more units than could be catered for by existing demand. How do you propose to address this issue now?

Amnesties are always bad. When people breach the law they should be punished, not rewarded. However if an amnesty is to be given, then the community must benefit. In all the amnesties given so far, benefits were primarily directed at the defaulter. This is crazy. This is what I criticize. The funds that have been liberated as a result of these amnesties should have been used to have more housing for the needy, more affordable comprehensive estates for newly-weds, more retirement homes, and more projects in the harbour, among others.

There is so much there could be done in Malta if only we knew how to guide the private investors to the projects according to the need of the community.

What is GRTU proposing, in concrete terms for the immediate present, to address the issue of falling property prices?

The encouragement of first-home buyers. They are essential to boost the market. With a package of incentives directly aimed at this market, many new couples and families wanting to change their properties will have a one-time opportunity to obtain a decent home.

You hinted that government should reduce withholding tax from 35% to 12% in its forthcoming budget. Can you explain the ramifications of this decision, should your advice be taken up?

Owners refused to put land on the market and pay 35% of added value of the price of the property as taxation. The result was that there was a shortage of good property land for building, and as the volume of available money increased dramatically as a result of the amnesty, the price of apartments shot up as demand was much higher than supply. The 12% final withholding tax option was an incentive to cause more land to come on the market, and it worked.

The economic situation has now turned: there are too many apartments on the market and too many projects still in the pipeline. Those in the pipeline will not be finished before the lapse of five years and therefore developments will not benefit from the option to switch from 35% tax rate to 12% withholding.

This is why GRTU is proposing an extension of the five-year option to an eight-year option. GRTU is also proposing a reduction of the 12% to 7% for a period of 2 years and for certain projects so that buildings ready for sale will be sold.

For the people who have delayed their home purchasing due to the high prices and the tough taxation, GRTU is also proposing an even lower rate of taxation for first time buyers. It must be remembered that the final withholding tax essentially pushes up the price of the property irrespective if the market is moving up prices by the same margin. This simply does not happen when the market is over supplied. It will however happen if the supply is diminished. So the fiscal action recommended by GRTU will not only support buyers and relieve developers but will also stabilise property prices. And we are today all property owners.

Finance Minister Tonio Fenech recently lashed out at the banks, saying they could do more to help. Applying the same principle to home ownership, should home loan defaulters be assisted in view of the current economic climate?

GRTU is not recommending moratoria to loan defaulters. We are saying that under today's circumstances many have suffered loss of income due to loss of jobs, overtime and part time earning while many businesses are suffering drop in sales as a result of the dip in household disposable income. GRTU does not want people to default but in the absence of moratoria on loan repayments, people are being forced to curtail their consumption patterns suffering thus a lowering of standards.
The remedy GRTU is proposing is a temporary remedy, which is normal during a time of recession. The banks made hefty profit during the boom period, now it is only fair they bend backwards to help.

Considering that property prices are in no small way influenced by popular perceptions, is it wise to draw so much attention to the drop in prices, when this might compound the impression of a market in collapse, thereby hastening the collapse itself?
There is a lot of perception in marketing. One should be careful what words to use. Very often the words quoted are not always the words actually uttered. Unfortunately however markets do tend to take desperate upward or downward spirals if no option is taken. We have a habit in Malta to intervene with solutions when the underlying market conditions have already changed. It's the delayed process in decision-making. I'm insisting with Government to take action to correct the market with timely action.

Vince Farrugia*

Director-General GRTU, Chairman GreenMt

I stated last week that the Government must decide on Waste Management Compliance Schemes. I explained what unacceptable levels of tension and frustration exist in the private sector. This, I addition to the terrible high cost traders and manufacturers are suffering through eco-contribution at a time when things are far from bright for enterprise. I pointed my fingers at the bureaucrats in the central Government who continue to give more value to immediate loss of revenue, once the Exemption Mechanism under the Eco-Contribution act is put in place, than to the importance that enterprise is given a clear signal that on waste management compliance schemes Government really means business.

Today, I point my finger at MEPA. This Authority is at Law the guardian of the environment, the Public Regulator that approves Waste Management Compliance Schemes and provides the necessary and effective framework within which the Schemes can work. MEPA like all other public authorities falls under the operational systems applicable to all public bodies, especially that of ensuring that the country is managed with the least bureaucracy and with an effective decision making process. This organization falls directly under the responsibility of the Prime Minister. Dr Gonzi won another government mandate only a year ago on a program that highlighted the importance of private sector collaboration to ensure a better environment for future generations. Yet MEPA today is blocking the enthusiasm of private business operators lead by GRTU. MEPA's system of excessive demands, delays and bureaucratic practices make a sham of the Prime Minister's public commitments and beliefs. Where Waste Management Compliance Schemes are concerned, MEPA is cruelly a killing field.

I hate to say this as I really have a great personal respect for the MEPA Chairman, but what we know is on what we judge. I start with one bothering fact as it shows how the methods used by the persons responsible for administering the Schemes are really suspect. An existing Scheme, operating in the market had officially reported to MEPA that it represented just over 93 members registered by end 2007 stating that they place 2,808 tonnes of waste packaging in the market. The same Scheme stated that in 2008, its members grew to over 170 by end September but these together now placed 2457 tones of packaging waste in the market. Has MEPA assessed how come that firms in Malta suddenly go through a mentality change when it comes to packing their products? How is it that 77 more enterprises participating in the Scheme now produce less tonnage of waste packaging in the market?!

Green Mt has over 300 members who have signed a letter of intent stating that they will be Scheme members once they are exempt from Eco-Contribution. Together they state that they place 10,500 tonnes of Packaging on the market. We are still in the early stages of taking companies and traders on board.  Up to end May 2008, 1646 producers of Packaging waste had registered with MEPA, the competent Authority responsible for implementing Legal Notice 277 of 2007, which transposes the European Directive that imposes on business owners considered as responsible for placing packaging materials on the market to be registered by the competent authority. Together they place 60,000 tonnes of packaging waste on the market.

GRTU has been pushing MEPA for a whole year to ensure that the Register is updated and that figures are evaluated and proper inspections are carried out so that official figures are what they are supposed to be, official and therefore, correct. We expect a competent authority to be just that, competent. In itself this lack of interest by MEPA has not been a help to Schemes. Traders and industry operators peep into these registers from time to time and continue to see the same number of registrations so they think that no one is actually registering. It is truly a shame. Hopefully the Reform at MEPA would include the provision of a Data inputting clerk even if the expense is paid by Schemes through their registration fees, to be established by MEPA.

At GRTU we are doers. I may have many defects but failing to drive my people to ensure that we deliver and deliver competently and in time, is surely not one of them. If only other Government Authorities like MEPA had the same will power and drive!

The CEO of Green MT Joseph Attard who spends so much time and energy chasing MEPA and all other bureaucrats responsible for waste management rather than doing what he loves best and who's task it is, to really manage our waste management compliance scheme and not waste time chasing public officers to do their job, would if I were to give him the power do it, kick some asses to the gutters. The point is that MEPA needs people who perform and are optimistic towards a better future for our generations to come. There are people at MEPA who arrogantly believe they know it all, the truth is, however, that these people should not be responsible for our future since they do not carry these attributes.

It is time to move on. Schemes need to be allowed to work. Schemes need to obtain finance from their members whilst their members are exempted from Eco-Contribution. Businesses cannot be expected to carry their responsibilities according to the polluter-pays principle, banded about by environmentalists, if the authorities do not give them an efficient mechanism to make it all happen.

Businessmen on their part are willing to do their part. They love their country as much as anyone else. But they cannot act when we have an eco-tax regime that discriminates among products and among enterprises. Some businesses pay through their noses while others pay nothing. 

The state gets moneys above what they budget and cares not about the illicit trading and evasion of eco-taxation that goes on creating a grossly unfair competitive market. They expect those who meet their fiscal obligations not only to keep carrying the burden but to pay twice, one direct the taxmen and the other to the Scheme to which they belong. Then they expect business to beg for a refund. 

Some sectors are bleeding through excessive payments of Eco-Contribution.  Yet MEPA adds insult to injury by permitting those who conjure ways to further avoid tax to enjoy additional competitive edge within the unleveled playing field so grossly created by eco-tax. Business in Malta cannot be treated like this anymore. We deserve better. 

All the Cabinet of Ministers know that I'll do all I can to ensure that the business community gives it's full share and guarantee a better environment for all of us. But this country needs to be fair. They want to help the environment but not an expense to their business that would send their enterprise to the receiver.

One final point. The press reports that Malta has been ranked No1 by transposing 1611 EU Directives out of 1616 EU Directives. A good score. Two of these Directives are the Waste Packaging and the Waste of Electrical and Electronic Equipment Directives. (LN 277 of 2006 and LN 63 of 2007).

It is time for someone up there to get everyone responsible to stand up and be counted. Government cannot allow incompetents to continue to take it for a ride. People complain because they see wrong things happening or inaction that frightens and those on top appear powerless. We need to implement these Directives. Our country demands it. Our membership in the EU ensures it.

This is the second wake up call I'm sounding in less than a week for those who in joining the European Community believed that it's now easy for them and tough on others. We need to face realities, one after the other, a no to plastic bags, a yes to Waste Management Compliance Schemes…we need to start.

LETS GET MOVING.  

*Vincent Farrugia is a candidate for the European Parliament Elections on June 6, 2009 for the PN/EEP-DP

By Vince Farrugia Director General GRTU, Chairman Green MT

GreenMT is GRTU's commitment for a better environment for all of us. As a business organization we could have done what comes natural to most businesses chambers, criticize, propose and then leave it to the state bureaucrats to implement. GRTU's experience with issues effecting waste management, whether on the packaging waste or on waste of electrical and electronic equipment, has proved that when the businesses community leaves all to state bureaucrats, businessmen will end up paying the bill and receiving a shabby service. More than that the tax-men find the most comfortable way to achieve their Budget revenue target irrispect of discrimination among enterprises and impact commerce in general. This happened most grotesquely when the Eco-Contribution was introduced. This eco-tax is nothing but a farse. All the promises made on refunds and on promotion of compliance schemes never materialised. This in spite of GRTU's persistent and regular pressing and direct action to get the government moving.

This time round GRTU advised businessmen that it is best we do things ourselves. We took the laborious task of establishing Waste Management Compliance Schemes both packaging waste and for WEEE. The Schemes are registered GreenMT. This is a company owned 100% by GRTU on behalf of the business community. It is a not for profit organization. GreenMT's Schemes will be managed on a transport basis so that Scheme participants can control that it is run efficiently and with full accountability to business owners themselves. This is a fundamental difference from the competing schemes. GreenMT is accountable to its members and any surplus of revenue on cost will be transmitted immediate in reduced chargeable rates to Schemes members and all accounts and management papers and submissions are subject to the scrutiny of members subject only to the strict rules imposed on GreenMT management on confidentiality and impartiality. 

GreenMT is a best practice way of how to manage Waste Compliance Schemes. It has the full support of the Minister for Resources and Rural Affairs. GreenMT is a ready – to – go organization. Over the last months GreenMT has been the main instrument assisting government to build sound waste management and alternative energy and practical environmental policies. As a business concern it will go into action as soon as government decides to implement Legal Notice 74 of 2008 and releases participating enterprises from the double burden of paying Eco Contribution and also Scheme Contribution.

GRTU has, on behalf of the Maltese business community, providing the best tool possible to prove that "yes Maltese businesses are for a better environment for all of us."

* Vince Farrugia is a Candidate to the European Parliament Elections on June 6^th 2009 for the PN/EPP-ED.

 By Vince Farrugia *

There's a lot of bad news on the business front. But it is not really all that bad. An interesting set of statistics came out of the G20 meeting held in London last week. It shows who's faring most badly and who's feeling that things are changing.

The Japanese appear to be in the worst shape of all. Japan's gross domestic product will this year go down by 6.6%, below zero, and by 2010 it will remain at -0.5%. Germany is also faring badly. It looks like 2009 will be closing at -5.3%, however it is believed that the green shoots of growth will appear in 2010, albeit at a meager 0.2%.

Italy will also do badly this year. They are moving to close the year at a GDP of -4.0% and will remain under the water in 2010 at -0.4%. The US will also suffer a -4.0% drop in GDP this year but is looking forward to at least a 0% growth rate in 2010. Britain, who before the G20 was considered to be the sick man of Europe, will end the year at -3.7% GDP and will still not see any green shoots in 2010, staying at a growth of -0.1%. France does slightly better with -3.3% GDP for this year and -0.4% in 2010. Canada will be another lucky country that will see the beginning of positive growth with -3.0% for this year and a positive 0.3% growth in 2010.

Depending on how one sees the world, these figures may be taken as positive for next year and dismal for this year. Those of us who were reading the right (as it turned out) economic books, are not so shocked at the figures for 2009. The indications of those who last year were called the professors of doom were that the leading economies would be in an even worse shape and they surely were not projecting that 2010 may, for the USA, Britain, Germany and Japan, close to something near 0% growth rather than further a down-slide. So overall this is not a bad scenario compared to expectations.

In the European Union, many economists where caught on the wrong foot. I listened, attentively last October and again in November last year, to the leading economists of the Maltese Government and was shocked to learn that the figures they were working on in the Economic and Financial Committee (EcoFin), the EU Commission's economic top brass, were still based on growth prospect for 2009. I was even more shocked however when the Budget 2009 was announced in the first week of November 2008 and heard the Minister of Finance Tonio Fenech say that he's basing his work on a 2.5% GDP growth for 2009.

First of all one should note that the Maltese Economy, in spite of all our efforts, has over the last 10 years grown at an average rate of 1.9%, which is more or less the same rate (2%) of the 15 leading EU economies during the same period. For this reason, no economist could have predicted that as the EU economies go down Malta could really get the chance to out pace them. Secondly, I believe that at EcoFin they had more down to earth facts and figures to know already, in November 2008, that things were pretty bad. Even if the EU economists did not take head of stern warnings and econometric scenarios, presented by leading star economists like Profs Roubini of New York State University, but the indications emerging from what was happening in the financial markets were already very close to home in Britian, Brussels, Frankfurt, Amsterdam and in Paris.

The U.S.A as usual sprang quickly and took action. The E.U Commission, and now what we are calling the G20, bringing together leading economies from all over the globe, are also taking action.

Practicing economists know that more is needed, but the first strong interventions by the USA, Britain, EU Commission and Japan are already having an impact. The worst may not be past though. A US $5 trillion fiscal stimulus as announced at the end of the G20 is a lot of money, nearly a tenth of global GDP. None of it is really new and most is coming from the so called ‘automatic stabilizers', that is the natural way that government financing works, where governments receive a lot of revenue when the economy is growing so they effectively mop up the extra moneys that may cause inflation and the resulting problems, and for state revenue to go down when the economy is down and therefore governments appear to be funding the economy exceptionally.

More impressive, however is the G20's success in building a $1.1 trillion package which is independent of the fiscal stimulus. The international monetary fund is trebling its available resources from $250 billion to $750 billion, with $250 billion additional reserves in the form of special drawing rights. All this means that the world emerging economies will be assisted not to fall under during the worst and most damaging phase of the recession.

The figures go along to prove that America and the leading economies are not ready to let the world economy sink and then expect it to rise again some years forward into the future. If that were to happen many economies would have gone under and the effect on employment in all countries would have been disastrous. One wouldn't have been able to imagine what political upheavals this would have brought about.

The world has now been used to years of non-stop growth and political and economy stability in most of the leading countries. We in Europe have enjoyed the longest period of economic growth and stability ever known. We in Malta have enjoyed 20 years of unparalleled growth. The stability made us all take so many things for granted. We hardly realized how much in fact did change. The Maltese economy up to some years back depended on textiles, the dockyard, British tourists, certain leading industries, large state corporations and government employment. Today what sustains the economy are private enterprises. Malta's economy is essentially an enterprise-driven economy with the private sector responsible for practically all economic activity. The drydocks is a small part of the economy, textiles are gone, new private investment in new areas like electronics and pharmaceutical dominate the export scene. Tourism is a completely different package from what was constant up to 10 years ago and most of the hotels and accommodation facilities are new. New and privatized are the airport, the Freeport, telecommunications, the Banks and the port. Retailing and trading has been transformed with larger and more intensive investments. Even Government's approach to the economy has changed completely.

The impact of the world economy remains strong. Indeed we still have to restructure more, so that we can become less susceptible to world events. New business keeps flowing in the form of finance, gambling and insurance companies, but above all Smart City. The general picture is one of constant transformation.

We have learnt also how to react to world events. The task force which is currently working behind the scene to help enterprise face the world turmoil is doing excellent. Everyone involved is trying to hold the danger away from our shores. This is in the right spirit.

The recession is not over. The world job market remains weak. In Malta the job market is holding on. It is important government and state bureaucrats understand that enterprise – large, small and medium – is facing problems and that we together can force the economy to grow again and sustain each other as other economies fall back.

The indications are that if we all put our head to it, we can win. We can foment division among ourselves, and argue on silly issues that have nothing to do with the real national challenge, but that of beating the recession, so that in 2010 our economy will be one of those that will start growing again, is the real, top-most urgent issue. Those who are not seeing this so clearly, have their head examined. When the storm is over those who now seek to divide will be left as bitter losers.

When the economy starts growing again we will all recognize those who when the going was though, they shouldered the burden. Yes shoulder to shoulder we can get out of it sooner.

Shoulder to shoulder to face the storm and win.

*Vincent Farrugia is a candidate for the European Parliament Elections on June 6, 2009 for the PN/EEP-DP

After the strong Yes vote in Ireland last weekend, the EU Treaty ratification shall go ahead if the Treaty is ratified in Czech Republic and Poland, whose parliaments have already approved the Treaty. After failing to ratify the EU Constitution in France and Germany in 2005, the new proposed treaty shall amend previous EU treaty rulebooks, and the EU flag and anthem shall not be formally recognised. So what does Malta stand to gain and lose? The following are some salient points.

Despite the EU Parliament shall have 35 less members, from 785 down to 750, Malta will acquire a Sixth Seat at the European Parliament with the ratification of the treaty. This seat shall be taken up by Joseph Cuschieri. When the sixth seat shall be assigned to Malta is still unknown yet. The treaty is expected to come into force as from January 2010, however, an approval of a procedure by the European Parliament and a new protocol which will have to be ratified by the EU27 states is needed before.

As a corollary of ratifying the treaty, the National Parliament will gain a stronger say in the EU decision-making process. A new right to be informed on the evaluation of policies conducted in the area of freedom, security and justice, has been assigned to the National Parliaments. Furthermore, the Members of Parliament can now be informed on proposals to amend the treaties, and the new candidate countries' application to join the EU. Moreover, together with the European Parliament, the National Parliament acquired rights to control Europol and Eurojust.

Malta will still be able to nominate a Maltese person for the post of the EU Commissioner. Each member state has the right to nominate one Commissioner no matter the size of territory or population. Each Commissioner holds a specific portfolio and is led by the President of the European Commission. A Commissioner is equivalent to a National Minister. Currently, Joe Borg is the Maltese Commissioner whose portfolio includes the Fisheries and Maritime Affairs.

The Charter of Fundamental Rights sets out the range of civil, political, economic and social rights of EU residents. It is divided into six sections, dealing with dignity, freedoms, equality, solidarity, citizen's rights, and justice. It will be legally binding in Malta and other 24 member states apart from the UK and Poland who have opted out.

A European President shall be chosen by EU leaders for a maximum of a 5 year term. The role shall include chairing EU summits, facilitate cohesion and consensus, and represent the EU abroad. This will replace the current systems in which EU leaders rotate into the president's post every six months. Malta's turn would have been during the first six months of 2017.

Now, the member states shall be given the opportunity to preside over EU Councils at a ministerial level for six months on a rotation basis. Within the EU Council, the treaty gives the EU27 the power to take decisions by majority rather unanimous voting in 50 new areas, including asylum and immigration, education, and economic policy. Malta's vote weighting will amount to three votes, one less than Luxembourg.

Malta still has the right to decide solely on taxation, foreign affairs, including sovereignty, defence, and social issues. However, under the EU Treaty Malta together with the EU27 will lose its Veto right in around 50 areas of EU Policy making. The veto gave the right to Malta and the other EU27 states to stop unilaterally a piece of legislation. Despite, this power has been rarely exerted by the EU27, however, it is still considered to be a potential safeguard.

With regards to the Foreign Affairs, the EU will start being represented on an international level through a representative for foreign affairs. Prior to this, the EU worked with a two-post system divided between the current high representative for foreign and security policy and commissioner for external affairs.

As part of the EU Structural Funds 2007-2013 for Malta, the European Regional Development Fund has financed a grant of €10 million towards the Grant Scheme for Sustainable Projects by Enterprises.

The scheme directs funding towards achieving Sustainable Tourism Development. Tourism development is sustainable through the principles of: Environment Sustainability, which ensures that development is compatible with and respects biological diversity and natural resources; Social and Cultural Sustainability which ensures contribution towards the development and protection of the cultural identity; and Economic Sustainability that ensures the development of the society in conditions of adequate management of resources by obtaining economic benefits today, as well as in the future.

The scheme has five intervention areas where applicants are able to direct their projects for funding:

• product upgrade and investment in equipment,
• investment in environmentally friendly measures,
• investment in ICT,
• investment in entrepreneurship and
• investment in marketing.

The aim behind the project proposed for funding should be that of enhancing the competitiveness of both the tourism industry in Malta as well as the competitiveness of the enterprise.

The scheme aims at financially helping holistic projects to develop their project and contributing towards achieving a sustainable tourism industry in Malta. For this purpose, the scheme will help enterprises by giving them 50%, 40% or 30% of the project submitted for funding, depending on whether the entity is small, medium, or large. The smaller the size of the entity, the greater the proportion of the subsidy.

The second call has opened on Thursday 1st October 2009 and applications will be accepted until Monday 30th November, 2009 at noon. All entities engaged in economic activity and wish to propose a tourism related project, are encouraged to apply.

For more information, kindly contact Abigail Mamo @ GRTU. Source: Funding 4 yEU-MEUSAC