A Budget that extends the safety-net for Businesses, more tax incentives should follow to enable new investments
19 October 2020
Budget 2021 The Malta Chamber of SMEs is pleased to see a number of its...
To state that the Maltese economy is not doing well is, statistically, an understatement. The rate of growth of the Maltese economy is at least 3 percentage points in real terms what it should be, did we heed in due time the clear signals that economic indicators were sounding to us since, at least, the early nineties. Malta by the early 1990’s reached the end of the mixed economy management that Maltese politicians became expert in since Independence. The Maltese market became too small for the number of economic operator supporting the local market while exports and tourism were not growing fast enough to produce constant and sustainable economic growth.
The end result was that for too many years the economy’s growth was sustained by a rapid increase in deficit financing with the resultant explosion of nation debt. Then the economy stopped growing in real terms as the pressure from Brussels became too strong for government not to take remedial action to curtail the deficit in public financing. The choice ahead of us was too obvious: Malta had to change course. The mixed-economy with a strong mixture of protectionism and trade liberalizations was no longer sustainable. Malta needed a new outlet. There was effectively only one alternative: The European Single Market. Whatever else anyone was saying Malta could only survive as a competitive unit within the European Single Market. Malta has already spent two years as a member of the EU, and government still has to define Malta’s new economic strategy within the EU. Simply stated the option is one and only. It is making, Malta the most competitive single unit within the Single European market.
For this strategy to happen we must first and foremost understand what the Single European Market is all about. If we want to export we need to know what they buy, if we need to sell them our services we must know what services they buy. Why join a single market as large as the European market and then continue to sell elsewhere.
This is exactly what we’re doing in tourism. We joined a market of 400 million, and growing, yet our tourism is effectively one that is geared elsewhere. The figures for continental European tourists are so small, if spread all over the continent, that we are effectively insignificant as a tourist destination for European travellers. Worst still those who know about us consider us to be out of reach. “Malta why Malta is beautiful, but how do you go there.” “Malta, ah, but Malta is so expensive.” These are two general comments Europeans express when you mention Malta. What are we really doing about this?
Our tourism strategy is still one based on sustaining our traditional tourist zones. By tourist zones we mean the places where the investor bothered to invest, be it Sliema, St Julians, Bugibba or Qawra. For most Maltese tourism hardly exist. They meet tourist at the beach, on certain bus routes or in cafes or bars when the average Maltese goes out to Sliema, Qawra, Valletta or Paceville. But the vast majority of the Maltese do not live in these zones. They hardly ever meet tourists.
Most Maltese pay the taxes that sustain tourism, share in services marketed for tourist, but do not benefit directly from tourism.
The Tourist today seek experience. It’s the tourism experience that matters. Tourist wants to live the life experience of the destination. Indeed the tourist who enjoys Malta best and goes home telling his friends what an excellent holiday experience he/she had in Malta is the tourist who has really enjoyed the Maltese way, the Maltese life. But he/she is not the British, German, Dutch or French tourist. Oh no. These tourist hardly talk to a Maltese and hardly ever experience anything Maltese. The tourist that enjoys Malta best and wants to return so many other times, is a different tourist. He’s the returning Maltese migrant the first, second or third generation migrant from Britain, America, Canada or Australia. This tourist does not go to the tourist zones highlighted by the tourism authorities. He/She goes to our villages, spend time in our piazzas, in our kazini, in our town pubs and eat in the Maltese diners. He/She enjoys our festas, our laughter, drinks and dines a la Maltese. Spend excellent evenings barbecuing, playing, dancing doing it a la Maltese. He/She is the one who really enjoy the Maltese experiences. The other tourists hardly know that a genuine, beautiful Maltese experience exists.
Yet do we sell all this. We don’t. Because our tourism policies are effectively an extension of the past. They are supply side oriented. We have certain hotels, we have certain investments, we have a national airline, we have tour operators that sustain us, and we have an airport that employs a lot of people.
The tourist that we want is the one who dances to our tune. We mighty little Malta, want to tell the market what we want and it is up to the market to respond to us. Did we bother to understand the travelling patterns of the majority of the European Union millions who travel by air? Do these people travel on 9 days holidays to the Mediterranean or do they leave these longer holidays for the new destinations much further away from the Mediterranean. If these people often travel on a three day holiday, how much are they prepared to pay for a flight which is not exorbitant compared to the short stay. A three day/four day holiday tourist cannot afford the steep taxation we so haphazardly imposed at the airport. He/She cannot afford the current cost of coming to Malta. If a hotel, service provider is catering for a three nights tourist do we really need to make so much fuss about the impact on the infrastructure if effectively it’s the same accommodation used more frequently and employing more labour. If there’s so many in continental Europe that seek a real life, lovely experience, what’s so wrong in abandoning the ill-thought policy of supporting only the tourist zones and opening up the rest of the Island for tourism.
With an aging population and 26% of built-up homes empty, we can, indeed should, extend lodging to all the towns and villages of Malta who, with an intelligent programme of investments support can sustain a much greater volume of tourists. And what’s so wrong about volume anyway? Why have we made a tourism volume a dirty word? Who on earth has thought out this silly economic concept of tourism carrying capacity? Why limit ourselves to 1.5 million tourist as some God imposed ceiling? Again here we are little mighty Malta telling the world what we want. Don’t you dare come to Malta above the magic figure of 1.5 million. And what do we do if we are so successful that we get more of these then we planned? Will we close the gates and impose a tariff?
Again, I say, that this supply side non sense must stop. We joined the European Union to enjoy the benefits of the Single European Market. Tourism is the sector that can grow most of if we learn to be competitive in a Single European Market. But we cannot do it with a financially weak national airline and with half hearted support of other airliners who are so frightened to risk any further on Malta’s future potential. Whatever else is said our airport costs per passenger are excessively high. I don’t blame anyone; it’s just a fact that no twisting around of statistics can hide. What I do know is that this country cannot grow touristically to supply the occupancy rates in hotels and other accommodation facilities and give economic viability to so many thousands of small businesses unless we find the means to get more and more, much more European Tourists. These tourists definitely cannot come with the excessively high costs of traveling to Malta as it stands today.
Why join the European Union if we do not gain in the economic activity that can really sustain us and give us back rates of economic growth that this beloved county of ours deserves. The European Union means above all more potential tourists coming to Malta. If we fail on this we’ve failed to get the best of the EU. Let’s make no mistake about it: Its tourism that has to sustain us above anything else. We have the product. The product is all Malta. All Malta can be opened up to tourism and there will be no tragedy either to our social fibre or to our infrastructure. We need tourism in our villages, in our towns, sharing the excess capacities in our homes, occupying our hotels, creating new investments all over Malta and Gozo. A successful tourism policy is the one that gets to Malta 2 million tourists a year over the next 5 years and two and half million over the next 10 years. Yes, and 3 million in 15 years time. What’s wrong with us becoming the destination that everyone else in Europe want to visit?
We do not control the market, but the market is telling us what it wants: individual Internet booking, low-cost flights, and short holidays. And, yes, also boarding cruise liners from a fantastic port like our Grand Harbour, provided the flight to Malta is not more expensive than the cruise.
What the people that matter should have been doing these last months is finding a solution to this problem. We need more, much more tourists. We need low cost flights to get them here. Protectionism, negativism, fear of the unknown, what about this, and what about that, are no solutions.
We’ve done this in the past. This negativism has in the past costs this country dearly. Afraid to open smaller shipyards because of the dockyards, afraid to open up the market because of unemployment, imposing levies to protect our local industries, inventing how to project the past into the future. Always looking for solutions based on fear.
Can we afford to face the future with policies based on fear, on protectionism. There’s a great future out there. We only have to grab it. We do not have much choice but to grab the challenges and the opportunities in front of us. It is incredible that we have taken so long to solve this low cost airlines issue. I represent thousand of small businesses all over Malta. They cannot just close down and send everyone on the dole. And they cannot cause the Maltese to breed more and quicker. Yet the market of 400,000 is too small for all of them. The answer is more tourist. Much more then what we are getting today. That’s why the answer is low cost airlines.
If the low cost airlines did not come by themselves to knock on our doors we would have had to lure them to come. It’s the best solution we have, yet the big brains that govern us cannot come forward with a decent conclusion after months and months of deliberations. Government must now act. Unless, of course, they are so tired of governing that they strongly believe that a successful low cost airlines policy will put them back in power for another 10 years. Because for this country, it’s tourism that matters. It’s the one that gets the feel-good factor. And people want to feel good. They deserve it. That’s why they want a solution to this issue now. And NO, is no solution. It means defeat. And we must win.
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