The Chamber of Commerce and Enterprise, together with the Federation of Industry, the Malta Hotels and Restaurants Association and the Malta Employers Association, addressed a Joint News Conference to give their first reactions to the Budget for 2008.

Mr Martin Galea and Mr Josef Formosa Gauci, Presidents of the Malta Federation of Industry and the Malta Hotels and Restaurants Association respectively: Mr Charles Mercieca, Vice-President of the Chamber of Commerce and Enterprise: and Mr Joe Farrugia, Director-General of the Malta Employers Association, addressed a News Conference jointly held by the four organisations, to announce their preliminary views. They stated, as an overall comment, that the budget provides a sense of continuity for the country to progress in its convergence to EU levels of development in the medium term.

The organisations noted with satisfaction the ongoing recovery in economic activity over the past year, based on business investment. They also reiterated the need to continue focusing on the imperatives of increasing the resources available in the economy and their productivity as the only viable means to secure continued economic growth.

They expressed their satisfaction that this year’s deficit is at 2.1% of Gross Domestic Product: and next year this should be reduced to 1.2% in 2008. It is of paramount importance that government continues to maintain the trend of decreasing the fiscal deficit and indeed aiming at a surplus within two years. All this is very important when one puts it in the perspective of Malta’s adoption of the euro as national currency and enhancing the efficiency and effectiveness of resource use in our country.

The four constituted bodies are also encouraged by the fact that the above mentioned consolidation in public finances has allowed government to once again – and in accordance with their suggestions to alleviate personal income taxation through adjustments in the income tax brackets which the bodies consider as a measure which should lead to further economic growth.

The organisations expressed their disappointment that government has once again opted to ignore their representations within the MCESD to honour the COLA agreement between the social partners by awarding an additional Lm1 in advance of next year. This is an addition to the 50c being awarded by the current mechanism of determining wage increases is linked to RPI, and has no correlation to productivity gains.
The bodies believe that all increases should be linked to productivity and not to the COLA mechanism which has a negative effect on unit labour costs and competitiveness and may jeopardise long-term employment in those sectors which are still undergoing restructuring and facing stiff competition from abroad.

The four constituted bodies reiterate that the policy of granting cost of living increases across the board should be reviewed, and appeal to all involved in the decision making process to facilitate all measures leading to enhancements in labour and capital productivity.

The importance of education has been well reflected in this budget with an increase in utilising mostly European funds across the educational spectrum from kindergarten to tertiary education and beyond, including life-long learning. This augurs well for the future of the country to be in a better position to compete in higher value activity.

In line with their recommendations to government, they welcome the budget measures announced, especially the adjustment in the tax bands, which will result in increasing disposable income and consequentially should reduce pressure on wage bargaining. Other initiatives welcomed by the four organisations include:

? the investment of Lm13 million in new factory stock:
? the NI credit to be afforded to newly-registered self-employed aged over 45 years and who are unemployed:
? the Lm19.3 million incentive under the new Malta Enterprise Act:
? the measure wherein people can keep on working after 61 years without losing their pension.
? the compulsory ETC training for specific unemployed persons:
? the measures announced regarding the children’s allowance reducing the disincentive for women to work and increasing the spending power,
? the elimination of succession duty for the surviving spouse:

On tourism, the CoCE, FOI, MEA and MHRA were also encouraged by the announced increase in the MTA’s budget to Lm10.5 million which include incentives for low-cost operations to fund the new routes as well as an increase in marketing funds. Indeed, they are still of the opinion that the tourism industry deserves continuous attention in terms of ascertaining the quality of the product on offer. In this regard, the allocation of Lm5 million for improvements to the tourism product is very welcome.

The four constituted bodies will be analysing the Budget Speech in more detail over the coming days within the context of the Economic Survey and other available information. Their formal reactions will be made public in due course following ratification by their internal structures.