Editorial | Political stability, country reputation and naivety

The business community cannot forget the five years between 2008 and 2013, which were characterised by continuous parliamentary uncertainty that left its impact on business confidence.

Already under pressure from the world economic downturn, businesses were at the time reluctant to invest as government’s political programme kept being undermined in Parliament.

The experience of those five years was an eye opener because economic activity does not happen within a vacuum, and is dependent how a country is governed.

There is no doubt that the first biggest change that happened after the 2013 general election was the return of political stability. The new government’s parliamentary majority was in itself a guarantee that the experience of the previous five years would not be repeated and that raised confidence.

The business community also found a government with a can-do attitude that was willing to listen to its plans and ideas.

Stability and certainty are good for the country and the economy because they enable businesses to plan ahead with serenity.

But having political stability alone is not enough in a competitive global environment. This is where reputation plays an important part.

Over the past few years the country’s reputation has suffered, primarily because of misdeeds - alleged or real - in the financial services sector.

The perception that Maltese regulators and law enforcers have a lax attitude towards money laundering was strengthened when the Panama Papers scandal outed Konrad Mizzi and Keith Schembri.

Some of the international criticism Malta has received is unfair, misplaced and disconnected from reality but some of it was justified and hard-hitting.

The Moneyval report released last month gave an impartial snapshot of the situation, flagged the deficiencies and proposed a way forward.

Malta is slowly trying to up its game, and the recent ringing endorsement of the Malta Financial Services Authority’s transformation plan by the chief of the German federal regulator, BaFin, is testament to this change.

Even the Financial Intelligence Analysis Unit has increased its resources to fulfil its duty better after coming in for a battering from the European Banking Authority.

More has to be done though to ensure prosecutions do take place in money laundering cases.

The government’s commitment to create a financial crime agency distinct from the police force is to be applauded but the move must not be stalled because of puerile turf wars. Additionally, it must be given all the necessary resources to go after the big fish without fear or favour.

Fighting money laundering and other financial crime is a business-friendly measure because it ensures a level playing field for companies competing in an open economy.

It would be a mistake for the government to ignore the reputational aspect of its actions, or lack of them.

The situation is not as bad as the Opposition would like to portray it, but it is neither as good as we would all like it to be.

The Opposition does well to maintain vigilance but it must also be careful of not riding every foreign battering ram that comes Malta’s way.

Competing jurisdictions may have an interest in undermining competition, and while the criticism may be directed towards Malta on issues of concern, the real target could be the advantageous taxation system and a drive towards EU tax harmonisation.

The Opposition must not act naively in these circumstances. Malta will be losing an ally in the EU when Britain exits and the least the country can do is project a united front to defend its taxation system.

Within this context, the country needs an Opposition that does more than offer pointed criticism. The Opposition has to up its game and show it can be an alternative government, something that has so far been missing.