26 JUNE 2002
Finance Minister John Dalli speaking last Friday at the annual dinner of the Malta Institute of Accountants said that all sectors of Maltas economy are quickly modernising and have coped with the after effects of 11 September
Malta is presently in a fast modernisation mode. In all sectors, social, economic, environmental and institutional, we are building the structures, setting the mechanics, training people, and allocating the necessary resources that will thrust our country into the league of developed countries.
Our economy has been able to cope with the negative effects of the tragic events of 11 September 2001. These have left their mark on Malta, but I am pleased to say that our forward-looking economic policies have allowed us to weather the storm reasonably well in the light of the circumstances. Economic growth has been sustained, the employment growth trend has resumed, and inflation is within reasonable limits. Our efforts to control and mitigate the public deficit are on track and notwithstanding the economic impact of September 11th, we are working hard to ensure that we keep within the budget targets that we have set last year
Malta is moving forward fast. We are not intimidated by our size. As much as this gives us some disadvantage of critical mass, it gives us advantages of flexibility. We believe, and have so believed for some decades, that Malta as a member of the European Union will not only do justice to its heritage, culture and values, but it will also enhance our agility and capacity for economic build-up. Smoother cultural interaction, guaranteed respect for the citizen, and economic wellbeing all contribute to an improving quality of life for this generation and for future generations.
It is becoming more and more evident that this is the only viable option. We are fast approaching the day when we have to take a collective decision of the way forward.
Much work has already been done, but we must redouble our efforts not only to sustain the momentum but also to make the changes that must be made in those policies and practices that are proving anachronistic to a modern state.
Let me address a couple of issues that I feel are important for our national well being and at the same time have a direct relationship to our profession. These are the issues of investment and cash flow.
I have often stated my belief that in many sectors in Malta we are over invested. The lack of entrepreneurial creativity and flare and weak advice are resulting in capital being sunk in expansions and greenfield projects in sectors where we are already experiencing an oversupply. It is evident that no care is being given to the macro situation of the economic dynamics either at the conceptual stage or at the design stage of these projects.
Rather than concentrating on creating new markets or expanding existing ones - through improved added value or through acquiring overseas clients we keep increasing capacity and disperse existing demand. This not only affects the new investor but also all other operators already operating in the particular sector as they experience pressure on their turnover and profits. This in turn affects cash flow.
Another negative effect on cash flow is the practice of barter which, to finance projects in an overtrading position or to implement practices of tax evasion, are being practiced in various areas. Barter has a decelerating effect on the economy. It has a devastating effect on the cash management of any company but especially on the smaller sub-contractors who end up having to pay cash for their supplies and receive bartered good as payment of their efforts.
Our profession has to shoulder some of the responsibility of this. Some consultants are too concerned with quantifying and packaging dreams into colourful, neatly bound business plans, rather than ensure that their client is brought down to earth, shown the full consequence of his actions and is made to look at possible bleak scenarios that may result. Some accountants are more intent to find short term solutions rather than construct a robust financial regime and well controlled operations.
We can do a lot, through objective and strong advice, to avoid catastrophes. We can do a lot to speed up the build-up of an entrepreneurial class that is proficient and efficient, and that considers itself competent to venture in the regional and global markets.
A considerable public service obligation is vested in our profession, and this position of trust cannot be allowed to erode. On the contrary, each and every member of the profession should be deeply aware of the responsibilities posed, and should contribute towards further strengthening and inspiring the position of trust which the profession enjoys. This trust is based on the competence exhibited by the professions members, and for this reason, I fully support the Institutes mandatory requirement for ongoing continuous professional education backed by an ever increasing range of CPE events organised by the Institute for its members.
In addition, I understand that the Institute and the Accountancy Board will implement the new Code of Ethics applicable to accountants working in the profession recently updated by the International Federation of Accountants in accordance with its obligations as a member of this body. This Code has tackled the issue of auditor independence in a comprehensive manner.
The existing working relationship between the Institute and the Accountancy Board will be further developed once the review of the Accountancy Profession Act currently under way, is completed. At the heart of this initiative is the definition of the respective regulatory and operational roles of the Accountancy Board and the Institute. The review is being undertaken by the Board in close liaison with the Institute. The key reforms include legislative changes to ensure that the Board is autonomous of Government and, as is the case with other professions, is more representative of the profession by right. Other changes will allow the Board to delegate certain regulatory operations to the Institute while retaining responsibility for policy and for overall supervision.
I congratulate the Institute and the members of the profession on the high standards of professionalism and integrity established and achieved over the past years, and I am confident that these developments will continue to enhance our standards in the future. On behalf of Government, I look forward to further co-operation in the years to come.