Fear of Reforms

Joseph F.X Zahra's article on Newsbook

Why are we so afraid of economic reforms? There is no need of much probing into this. Simply, politicians don’t want to step upon the entrenched interests of their electorate. This means that the difficult decisions are continuously postponed and society suffers for it. There has never been any serious debate on economic policy in Malta, and it is the time for us to have one.

The Nationalist government could not be criticised for not turning the country’s economic future after the stalemate of the eighties through its bold decisions of reformation starting by opening up the economy, diversifying its base,  and drastically improving the infrastructure. It faced the serious problems head on, including tackling the dockyard, telecommunications, the public service, the airport and public transport. Most of these were hot-beds of the socialist past and were considered to be untouchable. The economy grew as new foreign direct investment was attracted to Malta in the financial services and business/IT sectors, while embedded manufacturing firms were investing in technology and research and development. The policies of joining Europe and the euro zone, shrinking the state’s role in the economy and diversifying into new sectors, contributed to the relative stability of the Maltese economy when the world was experiencing the deepest recession since the nineteen thirties. It was wise for the new Labour government proposing before the election that it will not touch the previous government’s economic policy, but improve upon it.

My take on this is that this is not enough. Economic policy should be continuously challenged as the context changes and new risks and opportunities arise. We are living in a different world from that of the pre- recession and the countries that we consider as our markets are still facing social and economic paralysis. Thinking outside the box may include the present administration’s  ideas like the Individual Investor Scheme, or boosting incentives aimed at appeasing the construction lobby, however, these should go much beyond short-term and quick-returns tactics.  What is being proposed here is an economic strategy that is radically different and innovative, and which is aimed at mobilising the real economy. Even the Economic Vision for Malta 2014-2020 document published by the Malta Chamber of Commerce, Enterprise and Industry is disappointing in this respect. We cannot go on regurgitate the same ideas. The main point therefore is that of understanding what makes us different from our competitive set. What is the country’s leading edge? Unfortunately, even our edge over other countries of being English speaking is being gradually eroded as our education system is not being synchronised with what is needed to attract investment. Do you remember the Nationalist government’s Vision 2015 document?  We cannot speak of “centres of excellence” if we are not yet sure whether we are nurturing the competencies that will maintain and sustain them in the longer run.

But reforms are waiting in the more sensitive areas of social policy. Dependency on government jobs and state hand-outs will go on crippling the economy as public expenditure goes on growing and so does government debt. Foremost on the priority list are pensions, health and social services. Tackling these three priorities is both unpopular and thankless. Government needs to pull the bull by the horns before we reach the point of no-return. Add to this the environment issue which needs to be tackled without delay before the nourished entrenched interests of the various electorate segments reach the stage of a complete anarchy. 

To react constructively to my initial question on fear of reform, we need boldness and bravery and more concern with substance rather than form.

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