Red tape strangling post-COVID recovery

A dark cloud floats over the island. One waits for it to disperse to let in the sunshine. Realistically, we know that living in hope is a chancy habit so let us collectively take the bull by the horns and start analysing the media reports that stole the headlines this week.

In particular, the surreal revolt by 19 Opposition members who rose against their leader and outvoted him. At present, the Opposition party is not only fighting the government in Parliament but is almost split down the middle choosing a young lawyer to lead them. This creates a confusing scene in a time when a post Covid recession needs every hand on deck to fight for a quick recovery.

Add to this the shocking revelations out of the Public Enquiry (headed by three independent senior judges) on the assassination in 2017 of Daphne Caruana Galizia (a journalist) allegedly masterminded by a property magnate with close links to a top team at Castille.

This year, we witnessed a number of resignations such as that of the chief police Commissioner, and sacking of an ex-tourism minister Dr Mizzi not forgetting the expected voluntary resignation of ex-prime minister Joseph Muscat towards the end of summer.

It is true, that the government acted promptly to borrow €2 billion so as to set up a Covid recovery plan of many facets which now sees €44 million in faceless cash vouchers distributed free of charge to the plebs (a food gifts and circuses theme to inspire a good feel factor).

Despite politicians insisting that “we are all in this together”, their pay and allowances remain the same while 230,000 people have had to telework during the lockdown and another 20,000 have since lost their jobs. This dichotomy, where the private sector is paid on a furlough basis while the public sector remains unscathed, cannot go unnoticed, if there is to be a fast, economic recovery.

The private sector accounts for 80 per cent of economic activity, and it is only by taxing this activity that we can afford public services such as roads, security, schools, and hospitals – including ICUs for coronavirus patients. Government argued that it cannot pay wages for all (except the public sector) so it drew up a list of hotels, restaurants and some self-employed owners who were offered €800 monthly to retain idle workers during the 4 month Covid-19 pandemic.

This has created an artificial scenario of low unemployment but purchasing power in the community has dropped - many cannot live on €800 monthly and without extra revenue from alternative jobs - at this rate it is difficult to bring food to the table.

This lack of feel good factor has been exacerbated by the closure of ports and airports (recently opened) and the arrival of a small trickle of visitors - mostly arriving on bucket and spade budgets. Retail has taken its toll and shops in Valletta and Sliema struggle to keep up with costs and most prefer not to open due to low business.

The latest discovery of an ugly demon in our cupboard is mounting bureaucracy. Ever, since the entire government workforce have been cocooned at home (with full pay and annual bonuses) it appears that there is an invisible hand (not Adam Smith) which is fanning the fire of red tape.

Only recently Malta’s development lobby has warned that red tape has become overwhelming potent following the COVID-19 pandemic and that business owners are “almost giving up” when faced with the additional paperwork.

“The country is seriously risking a total collapse in investment, as overwhelming bureaucracy by various government departments, authorities and the banks, are becoming next to impossible”.

Is this a familiar warning sign that echoed so forcefully during the last financial meltdown? A feeling of deja vu sinks in. Can the commercial community thrive when banks are becoming impossible to approach?

The access to finance for SMEs is tough. They are being asked too many questions and feeling the full brunt of a risk-averse atmosphere.  Remember how since 2013, this government appointed a Simplification Czar at Castille to try untangle the Medusa’s head of serpents?

What ever happened to such an appointment? Professionals are seeing FIAU, MFSA and MGA plying more layers of red tape ending in duplication of work, and conflicting information requests.  Is this the “tell tale” sign of a pre-Moneyval indigestion?  Can the patient be given some respite?  Many did augur last January, that the new cabinet headed by Robert Abela will be bold enough to cleanse the Augean stables.

Party apologists and other cronies (with snouts deep in the trough) warn us to be patient - Rome was not built in a day.  Indeed, the splendid work done by the health ministry to calm down the spread of Covid 19 is exemplary.  We are now cheekily telling BBC and SKY News that Malta is the safest sea resort in the Med - we do not mind that you are sick as your money is healthy (which is paramount) - come along and enjoy cheap beer and friendly hospitality.

The marketing may be crude but slowly we get there. More international marketing is necessary once the airports are returning to normal activity.  Practitioners, who tour the world promoting the island are now feeling the cold blast of negative publicity (are the agencies shell-shocked – Finance Malta, IFSP, Trade Malta, Tex Malta, Malta Enterprise, etc).  Another aspect is the passport scheme.

This was criticised at European level where media sources reported on the adverse comments by the Chairman of the PANA Committee who claimed that the IIP should be stopped.  Alex Muscat - the parliamentary secretary responsible for MIIP has announced that the original version is being “scrapped”.

He lauds the millions collected since 2014 (about €1.3 billion) of which Henley & Partners the exclusive concessionaire, earned roughly €36.8 million and the rest about 70%, has been deposited in the National Development and Social fund.  Another plus was the heavy financing two years by the government of Malta as a “Blockchain island”.

This was heralded by government which sponsored mega conferences since September 2018 but alas the vim seems to have pattered down.  The fact, that no bank dares open an account for such crypto business has resulted in entrepreneurs seeking other shelters such as in Estonia - which has a friendly touch to the sector.

Not everything is doom and gloom - progress was made on a reform of a number of institutions yet the experts did not mince words saying inter alia that Malta “clearly lacks an overall strategy and coherent risk-based approach when it comes to integrity standards for government officials”.

On a positive note, it reported that for a country of Malta’s size, it had an “impressive arsenal of public institutions involved in checks and balance”.

Another smart move was the appointment of Dr George Hyzler as a Commissioner responsible for Standards in Public Office.  Back to the main theme, one hopes that the resurrection of the Office of Simplification will arm the Czar with nerves of steel to fight the creeping levels of red tape.

The slogan “Sorry we’re closed” needs to change to “Yes we can help”.