Preserving our Options

The Times of Malta



The Times editorial `No to the status quo option` (4th November 2002) is a typical exercise is subjective opinion shaping, shorn of any attempt for objective analysis.

It makes three points which I challenge.` It gives undue merit to the Minister of Finance for controlling the deficit when facts and figures prove otherwise. It says that Malta is still competitive internationally and is successful in drawing foreign direct investment (FDI). And finally as its core argument, regarding Malta`s relations with the EU, it writes off the status quo option and concludes that membership is inevitable.

I maintain that the deficit is not being addressed ` it is just being hidden. Of course the Minister will proclaim that the Lm78 million target for this financial year has been achieved.` But this was only after inventing Lm21 million revenue through a structured MIA deal. Such revenues, at best extraordinary, are being treated as ordinary recurrent revenues - which of course they are not.

`I maintain that the deficit is not being addressed ` it is just being hidden` There is then the social expenditure on school up-grading for which the Foundation for Tomorrow`s schools is borrowing Lm15 million from APS Bank against government guarantee.` This is a brave attempt to have the cake and eat it. Government is going ahead with expenditure it cannot afford from the consolidated fund, by borrowing off -budget enjoying the benefit of spending while leaving the burden of repayment to its successors.

No Press can carry out its duty to inform the public if it closes its eyes to this deception and sing glory to fudged published figures. Real figures shows that for the first nine months of this year government had ordinary revenues of Lm123 million more than the same period of 1998 and yet the true deficit increased by Lm24 million to Lm106 million. (for detailed analysis refer my article `Making the point ` financially` in Maltastar of 28th Oct 2002).

`The core argument that status quo is no option and that EU membership is consequently inevitable embodies government`s new battle cry for making its case for EU membership` `In proving that Malta is still competitive in attracting FDI you cite cases of Baxter, De La Rue, Menrad and ST Microelectronics in extending their operation here by transferring operations from other countries. All four cases mentioned are investments that originally came here under Labour administration of the seventies and eighties.` `The fact that industries established here continue to expand whilst Malta scores no successes with totally new FDI is a point that merits reflection on the effectiveness of our promotion. Those that know us already continue to invest, whilst FDI of those that do not know us well enough, continues to escape us. This can hardly be considered as a certificate of our competitiveness especially when overall, manufacturing employment is contracting.

The core argument that status quo is no option and that EU membership is consequently inevitable embodies government`s new battle cry for making its case for EU membership. Having lost all hope of proving that EU membership is good on its own merits (mostly because the funding aspect has proved to be a mirage) government can only sustain its arguments by denigrating the remaining options, saying they are no options at all. EU membership is thus justified by the case of inevitability.

While it is fairly easy to denigrate Labour`s partnership policy because Labour cannot prove it until it is given the chance to negotiate it (although as events are turning out the structure for such partnership deals is taking shape in the EU itself as an alternative to membership) it is not as easy to denigrate the feasibility of status quo.

`The real test for such grand vision is whether EU membership can attract more FDI than the status quo in our relationship with the EU` `So we are fed such platitudes as a arguing that a `no` would anchor us in the status quo whilst a `yes` will open the window to a new vista, new opportunities for us and for generations to come.

The real test for such grand vision is whether EU membership can attract more FDI than the status quo in our relationship with the EU. I maintain that as membership takes away the possibility to differentiate ourselves from other candidates physically located closer to the core EU markets, and as it removes the flexibility to grasp opportunities as they arise, we will be more successful in attracting FDI outside membership by preserving the properties of differentiation and flexibility.

By up-grading the status quo to a contractual free trade area, by sharpening our investment promotion efforts and by offering flexible benefits to prospective investors to suit their particular requirements, by giving the country macro-economic stability which is being prejudiced by lax financial controls in spending our tax money, the status quo plus free trade area option for our relationship with the EU offers far more economic advantages than the platitudes of vistas and opportunities which in membership will prove as elusive as the funding.

Alfred Mifsud