Malta’s Next Chapter

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by Lawrence Zammit | Director, MISCO Consulting

“Malta at the crossroads” might be considered as a political cliché mentioned by some politicians in the past weeks. Yet, these past two years were witness to events that in some way or other altered the way of life of those who call the Maltese islands home. Following the unprecedented events brought about by the pandemic and the war in South East Europe, Malta is faced with challenges that necessitate tangible actions on several fronts, including the preservation of our environment, the use of digital technologies to enhance our competitiveness, the upskilling and reskilling of our workforce and the polishing of our corporate governance framework. 

These unprecedented events can be turned into positive opportunities to accelerate action on issues which have been long overdue for action. Although constructive debates and content-heavy presentations during national conferences help in the trajectory of a country, I have hope that these unprecedented and extraordinary events will accelerate actions and help stakeholders walk-the-talk. 

In the years prior to the pandemic Malta witnessed an economic growth which was robust by any standard. A fiscal surplus was recorded for four consecutive years, while the main economic pillars of activity including tourism, the financial and gaming sectors and the construction and property market witnessed growth that translated into better working and living opportunities to many working in these sectors or in their multiplier activities. It also resulted in an influx of new talent through foreign workers as the local employment market was saturated, as evidenced by the low consistent unemployment levels. 

The reality of today is that after four years of fiscal surpluses, Covid-19 reversed the country to a fiscal deficit mainly due to the fiscal aid granted by the Government to the businesses and employees, the increase in the public health expenditure as well as the deferral of tax payments to businesses in order to help with liquidity. 

On a social level we have an increasing in-work poverty. The proportion of working people who earn less than 60% of the national median income has increased from 4.8% in 2015 to 7.0% in 2020. This is a poverty trap, with many instances of hard work not resulting in a decent level of income for a decent living. One cannot also omit the fact that 16.9% of the population live in households with a national equivalised income below the at-risk-of-poverty line. Although decreasing (albeit at a glacial pace) year on year, this is a substantial portion of the population, especially when one takes into consideration the rate of increase in the inflation in the last months, where the cost of necessities in a food basket has risen substantially over a very short of period time. The supply-chain disruptions have been greatly attributed to this inflationary increase, but it is a wrong assumption if one is to think that the inflationary increase in the basic basket will be reversed. 

This situation calls for action through tangible actions which have long been voiced by various stakeholders including the revision of the minimum wage, the pensions, and the adoption of the well-being index as an integral part of policymaking. It is evident that the most at risk are those with limited fixed income mainly the elderly who survive on their pension and have no additional income and those with limited opportunity of work including the long-term unemployed, those living off government allowances and single parents. 

The carbon-neutral targets set by the EU and the consumer sensitivity to climate change are also a game-changer which will trickle into actions that have a direct impact on our businesses and consumers. Malta committed to 19% reduction in carbon emissions by 2030. This will mainly be achieved through a series of actions related to mobility since transport is the main polluter in Malta. Government has already committed and is rolling out several schemes related to electrification of vehicles, popularisation of public transport and use of alternative transportation such as e-bikes and shared rides. The challenge in the sector is the availability of the infrastructure for electric transportation and convincing the locals to switch to alternative modes of transport. Another major challenge towards our carbon-neutral goals is the construction sector. The property boom experienced in the last ten years not only resulted in more build-up area in our towns but also had an impact on our landfill capacity and air pollution. Shifting to more sustainable buildings is no mean feat as the industry shifts to more sustainable building and insulation materials, which, as confirmed by the developers themselves, will increase the cost of building which will eventually be passed to the buyer. While at consumer level the Government – through various incentives – seems to be effective in switching households to more energy-

efficient methods, the delicate perennial challenge is for Malta to strike a balance between the influx of foreign labour and its corresponding demand for accommodation versus the need to contain the number of new build developments. 

The transition to a green and digital economy will require the mastering of new skills both by those already in employment and those joining the labour market. According to the UN Environment Programme’s Global Guidance for Education on Green Jobs Report (2021) the transition to a green economy will result in an estimated 60 million jobs to the market by 2030. The skills needed are not only those in low carbon and environmental goods but across all economic sectors as businesses switch to more sustainable ways of operating and use alternative resources. STEM skills will be in greater demand across multiple sectors. Such skills are in shortage 

across Europe, with Malta being no exception. The challenge will be to allow our children while still in mandatory schooling to develop creative, critical thinking and computational skills through new modes of teaching and learning. 

In the recently published Cedefop 2022 European Skills Index, Malta ranked 14th (out of 31 countries). Although Malta ranked very well (2nd) in matching the individual’s aspirations, interests and abilities to that of the labour market, action is needed in skills development where Malta ranked 26th. This indicator refers to the delivering of skills the country needs including re-skilling and up-skilling. The transition to meet the carbon-neutral targets as well as the adoption of technology across the economy requires a wide re-skilling effort involving various stakeholders including the private and public education institutions. The National Employment Policy 2021-2030 refers to the commitment by Government towards Green Jobs in order for the green economy to flourish in Malta. The dearth of skills is a major concern in all EU member states. 

This can be leveraged on by Malta were bringing all the right stakeholders across a table is facilitated by the size of the country. In a small island country with very limited natural resources, human resources are a major USP in our attractiveness efforts for foreign investment. The next steps in the realm of education and skills development can have a major impact on Malta’s propensity to attract new sustainable innovative investments which locate to operate from here to service the EU continent. One can also look at the potential of encouraging special groupings including women and early-school leavers to follow training programmes in skills which will be in high demand as the economy moves towards more sustainable revenue generating segments and more technology-intensive operations. 

As the mandatory ESG reporting for large companies comes into effect as of 2023 financial year, businesses are being driven towards more sustainable ways of operating encompassing the interests of a wider ecosystem of stakeholders. ESG reporting will be binding on a wider net of businesses including small and micro companies which make up most commercial enterprises in Malta as of financial year 2026. But the ESG way of doing business is not the future because of its mandatory obligations but also because the consumers, particularly Gen Z, are very sensitive to ESG principles driving businesses towards revenue generating activities that preserve the habitat, care for society and follow good governance principles. 

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