A year of the interview
Now with 2003 safely behind us, The Malta Financial
and Business Times takes a look back and highlights a selection of interviews
carried out over the year, which was by and large dominated by the business
community looking forward toward Maltas EU membership and competitiveness
way forward for industry
Upon his election as Federation of Industry President, Anton Borg
spoke about a range of issues affecting Maltas industrial sector,
not least of which was, at the time, the EU membership question.
Asked how he sees Maltas industrial sector competing as an EU
member with fellow accession countries, many of which carry lower wage
bills, production costs and have overland transport to the rest of the
EC, Borg answers:
"Maltas competitiveness has been under threat for many years
and industry has been making an effort to overcome threats from wherever
"The same situation will continue and our enterprises will have
to continue with their efforts, whatever the outcome of the EU membership
"The increase in competition from Central and Eastern European
countries which will become EU member states is a further challenge.
Maltas industry would be in a better position to face this challenge
if the country takes the road to EU membership, as the countries of
Central and Eastern Europe are doing."
Asked what aspects of EU membership concern the FOI most and in what
respects he thinks Maltas industrial sector stands to gain from
accession, he replies:
"EU membership encompasses the whole economic and social life of
the country. It is, therefore, intrinsically linked to industry. It
affects its costs, its competitive behaviour, its relations with its
employees and its relations with society such as the environment
and the sustainability of its development.
"Through EU membership the industrial sector stands to gain from
access to new markets within the EU and to countries outside the EU
with which there are bilateral trade treaties giving free access to
products and services. The moment Malta signs on to the EU treaties
it will also sign to participate in these trade agreements and our industry
will become entitled to the same benefits.
"EU membership also means free entry into all member states for
Maltas processed food and beverage products. Industry stands to
benefit from all EU programmes aimed at supporting SMEs in their efforts
to grow, innovate and develop further. Part of the financial package
negotiated by Government is aimed at assisting industry directly.
"Indirectly, industry will also stand to gain from infrastructure
projects, especially those relating to the improvement of the environment.
Without the financial assistance derived from EU membership, Government
would need to raise financing for those same projects, which would mean
higher taxation for industry and the workers it employs.
"Competitiveness remains at the top of our agenda. We have been
saying, even in recent weeks, that the problems in the public sector
need a solution such as the overmanning in public corporations
and certain government departments.
"There needs to be control on public expenditure if taxation levels
are not to rise. There is the Social Welfare problem, which is also
linked to taxation and public expenditure levels.
"Maltas public debt needs to be brought under control if
Malta is to take its place in the Economic and Monetary Union, while
the Ports problem has also remained without solution.
"We want to see our economy stepping up its development tempo.
What concrete plans have the main political parties prepared in their
respects? Just like the rest of the country, we expect clear answers
to these matters. Industrys future depends on this. Workers will
depend on this. The future of the whole economy depends on immediate
solutions to these pending problems that hurt competitiveness."
a catalyst for change
Former Economic Services Minister Josef Bonnici earlier this year
spoke about EU memberships impact on trade and industry and the
recently launched National Industrial Policy.
Asked what aspects of the economy weigh most heavily on the governments
mind, Bonnici explains, "From an economic viewpoint one of the
most crucial aspects is certainly investment. There is a good deal of
investment taking place at the moment, partly as a result of the Business
"What we are looking at is the issue of investment and how it would
be negatively affected if Malta remains out of the European Union. There
is no doubt that the reaction from investors to such a development would
be negative, especially from those in the manufacturing sector.
The way in which many companies are structured today means that
their input originates from so many places that the conditions under
which one operates as an EU member are much easier to operate in than
if one stays outside.
"So if youre building a car, as in this example, and you
need to receive some parts from the EU and others from outside the EU,
its a definite disadvantage to not be an EU member.
"Apart from this crucial aspect, there is, of course, the question
of security in terms of forming part of a bigger block with known rules
and known conditions, which together create a known environment for
"The large amount of bilateral agreements the EU has signed with
countries outside the trade block is another crucial aspect.
"If you take a country like Malta with close to 400,000 people
and a country with millions such as Egypt, Algeria or Tunisia, our market
is so small to these countries that their priority lies in the bigger
markets that can have an impact on their activity levels.
"If one looks at the manufacturing sector there is no doubt that
the superiority of being an EU member is clear and could be so critical
for our future development. This is evident in terms of the upgrading
of our industry, in being able to attract new investment and in retaining
the investment we have attracted.
"A lot of investment has adopted a wait and see attitude. This
is because as an EU member Maltas attractiveness is higher, while
as a non-EU member it could very well be that such investors would be
reluctant to invest as quite much or that they might go elsewhere."
holidays and achievable targets
Former Labour Finance spokesperson Leo Brincat speaks about tax
collection in the wake of the partys now defunct tax holiday proposal:
"We think the biggest shortcoming of the government in terms of
ordinary revenue is tax collection. If one sees the report of the auditor
general, we realise the amount of overwritten taxes being at circa Lm47
million written off and around Lm400 million that are still due. If
there is a serious effort, by any government, to recover those funds,
that already is an adequate measure.
"I dont think the tax break should be seen in total isolation,"
Leo Brincat says, "We are being prudent in what we promise. Our
first priority is not to increase the tax burden, but actually easing
"We are placing emphasis on tax collection. This government had
a certain measure of success in tax collection. When Minister Dalli
consulted us on the creation of the Tax Compliance Unit, we had shown
our reservations that this was going to be a semi-autonomous unit easily
manipulated and misused by politicians.
"Our view is that throughout the legislation, we should explore
the possibility of having the TCU being gradually channelled into the
Inland Revenue, the latter having a more investigative role. This would
create one main source that would provide access to information on individuals
with regards to national insurance contributions, VAT, income tax and
"However, when we discussed this with the then-Shadow Finance spokesman
John Dalli during the Labour government, he pointed out that too much
information sharing could send a wrong signal to prospective investors,
when considering our financial services and double taxation agreements.
"Today, since the element of secrecy has been eliminated from government,
I see Inland Revenue assuming the roles of the TCU, with some legal
modifications. The TCU has unfortunately developed too much as a state
within a state. We have had reports indicating the application
of two ways, two measures and a stalling of activity in
the run-up to the elections. We also feel that certain fat cats are
not being investigated. Government has the priority to emphasise primarily
on those people with certain lifestyles and living beyond their means.
The tax holiday was also extended to the agricultural sector,
with a very generous exemption from five to ten years. The PN screamed
opportunism, the criminality of a pre-election titbit aimed
to satisfy the disgruntled voters."
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