Malta Enterprise has unveiled measures aimed at enhancing economic growth.
TheIsland.Mt sat down with former Labour Party MEP and now cabinet minister Miriam Dalli.
The economic effect of the pandemic was a surprise, ten times that of the 2008 financial crisis. Enterprise and Energy Minister, Dr. Miriam Dalli, is of the strong and firm opinion that it would have wreaked havoc on Malta based companies and, as a result, on the local workforce if left unchecked.
Why was there the need to extend the aid extensions announced to businesses further?
“We are constantly discussing with our entrepreneurs and businesses and so we know and understand that there are companies that due to the restrictions and mitigation measures – which were necessary to control the pandemic – they have seen and are seeing a negative impact on their revenue. The help is being given because we do not want to lose good businesses due to short-term shortages. But even here, aid is meant to go beyond welfareism in itself. Entrepreneurs not only want help, but they want to work and create wealth, and we are doing just that. We are helping them in their gradual opening by for example paying them half of the costs of the electricity bills for the first three months after they open.”
If anybody’s memory is short, two years after the recession, the number of limited liability partnerships being wound down was only 25% higher than before the crisis. The local industrial workforce was 10% less, or about 2,000 fewer employees. Firms’ bank deposits dropped by 15% between September 2008 and April 2009.
The logic remains perpetually the same throughout time: when businesses fail, so do their employees. Household deposits dropped by €110 million in the wake of the 2008 financial crisis. Unemployment soared from under 6,000 to almost 8,000 in the first year and a half since the recession.
Malta’s rate of extreme material deprivation now exceeds the EU average for the first time, having previously been half that of the EU.
The Maltese Government could not let anything like this happen again, and so it introduced one aid package after another in 2020, resulting in the biggest financial injection of companies and families in Malta’s history, totalling more than €1.3 billion.
Malta Enterprise (ME) has been pushed at the forefront of this meted out aid, disbursing about €500 million to companies. This assistance has offered a shield of protection of sorts to 17,700 businesses, recruiting more than half of the local private-sector workers.
When drawing comparisons with other European Union member states, the German system once covered 15% of all workers, but now just 5% are covered. Although the Maltese pay supplement guaranteed 100% replacement for low-wage jobs, workers in Spain were only guaranteed 50% of their salaries.
When or how are the wage supplements expected to stop?
“So far we have already invested almost half a billion euros in wage supplements and other measures that were indispensable to keep workers with their employers.
This is an important investment in our economy because when we are protecting jobs we are making sure that we have a rapid and healthy recovery after the pandemic.
That is why we are also reassuring that workers and their employers that the aid will remain there until the end of the year for all companies, especially the most affected ones.
With all this, I look forward to the fact that as the economic cycle turns, this assistance will become less necessary and instead we will assist companies by helping them to invest in their future stress.“
The Maltese Government’s policy has always had two pillars: protecting productive potential and incentivising re-engineering and post-pandemic recovery, which is expressed in ME’s schemes and initiatives.
The policies which Government have recently announced have two key goals: immediate liquidity injections and incentives to boost economic growth. This represent an additional €20 million injection of companies, who would be willing to roll over tax credits of about €80 million. Another €100 million in aid has been pledged.
Firms who were closed due to pandemic-related constraints will be allowed to use the rent support system again in the coming months, but with help topped up by 50% over and above what they got in the first rent scheme. Over the summer months, the power subsidy programme will be reissued, paying up to half of electricity bills. Businesses who stay closed after May 10 will receive a €1,000 grant.
Government is revamping its market re-engineering scheme to make it more available to self-employed and microenterprises, with assistance doubled to a limit of €10,000 for businesses ready to adapt in order to expand. It has launched the ‘Restart Incentive Scheme’ to pay consultancy expenses up to €10,000 for companies who have faced serious difficulties in continuing to operate.
To help businesses get started with investment and to demonstrate Government’s contribution to improving the Maltese economy, it has developed the ‘Smart and Sustainable Investment Scheme’, which will include grants of up to €50,000 as well as an additional 20% in tax credits.
These benefits would be improved for developments in Gozo, start-ups, and the development of new green jobs.
Additionally to all this, Government is widening the time span during which previously granted tax credits will be used for another three years. This will support almost 9,000 businesses.
Many may question whether such assistance is long-term. One needs to look back at Malta’s past, when the penny saved in 2008 resulted in a pound wasted in subsequent years, the year when the budget shortfall was €255 million, and in 2012, it was €249 million. Around the same time, the number of people registering for jobs in 2012 was a quarter higher than in 2008, although the number of people receiving social services increased by almost a quarter to almost 12,000 people.
So measures will there be to boost investment by companies?
“We have announced a number of new measures that will help all companies in different sectors to invest heavily in niches that will be important in the future. We want more modern, more digital companies with more efficient and sustainable operations.
In broad consultation with the stakeholder we have understood the importance of helping the investment in a tangible way. These incentives will in fact be very healthy, with high aid intensity and a combination of cash grants and tax credits because above all we want to see the implementation of this investment.“
The best way to ensure the long-term viability of public finances is to ensure that businesses prosper and thrive. Furthermore, strong companies are needed if Malta is to accomplish the necessary transition to become a carbon-neutral society.
At the launch of these measures, you also insisted that they are giving an economic direction of where Government wants to see the country in the coming years. How will these measures achieve this goal?
“These measures were studied and designed with the help of a well-meaning but above all a clear signal to a Maltese entrepreneur where we want to go.
We are investing in this aid because we truly believe in what we say when we say we want a stronger, more sustainable economy that leads not only to economic growth but above all to new prosperity.
So we are saying to our companies, ” you’ll find us supporting you, we will help you and help you a lot to change, and above all strengthen your businesses”. This is because we want truly future proof companies, with new products, with efficient operations so that they can meet what the Maltese consumer wants and, why not, even the international market.
That is why we are helping companies to invest in their ‘electronic touchpoints’ as well, which basically means that we want them to be more visible on the internet because today it is clear to everyone how important this is.“