The Malta Chamber of Commerce and Enterprise and the Malta Federation of Industry participated in the pre-budget consultation process and are pleased to note that some recommendations made by them were taken on board and are reflected in the 2009 Budget Speech. The Chamber and FOI have viewed the budget speech within their prudent evaluation of the medium-term economic projections. The fear of international economic slowdown seems to be a reality and the possibility that this could have negative effects on local production cannot be ruled out. In this context, the Budget efforts towards stimulating externally induced cost-cutting in business to meet short-term difficulties fall short of any tangible measures.

That said, the Chamber and FOI appreciates the fact that Government opted for a sustainable development approach. In representation of the local business community, the Chamber and FOI believe that at the current juncture, business initiatives would be more productively directed to consolidate current activity, rather than at attracting new investment in an uncertain international market place. Further, they advised government to ensure that adequate resources were made available to ensure enhancement in competitiveness and to enable local entrepreneurs to be aggressive in seeking export-led growth.

The investment measures announced for infrastructural works: environmental projects: re-skilling, education and training: alternative energy projects and business incentives in a variety of sectors including SMEs, start-ups and tourism should also support economic activity. What one expects from these outlays is an enhanced human and social capital development and not mere increases in monetary outlays. With regards to fiscal and financial incentives the Budget falls short of setting performance targets of the incentive effect that such schemes are designed to create.

Considering that the Government is embarking on the Vision 2015 to achieve a number of Centres of Excellence, there was no mention of what existing as well as new growth sectors the Government intends to target. Coupled with this, there is an absence of new access to finance tools, such as micro credits, proof of concept funds and venture financing that go hand-in-hand with such developments, particularly with the noted bio-technology park.

In terms of export-led growth, the organisations welcomed the measure to incentivise participation in trade missions and the identification of markets abroad, though the two organizations must point out that in the latter case, an eligibility criteria narrows possible participation to restricted sectors.

The two organizations are disappointed at the fact that there is a complete absence of measures aimed at reducing costs to enterprise. It was expected that in the light of the difficult economic climate which enterprise is facing today, Government would have introduced a mix of measures which produce results both in the medium and long term, but more importantly in the short term to ensure that manufacturing in particular would be able to mitigate the additional burden they have been made to carry as a result of the new energy tariffs. In terms of the announced schemes for business, it is noted that these could fall short in mitigating the effect of the increases in utility tariffs.

In terms of competitiveness enhancing, the Chamber and FOI also welcome the announced measures to promote a higher take-up of energy efficiency and renewable energy generation equipment.

The measures announced for industry, whilst positive, are expected to give results in the longer term once more holistic planning is completed. Examples of these include measures to incentivise Research, Development and Innovation and the development of commercial zones and parks, including a bio-tech park.

In terms of tourism, the Chamber and FOI noted the announced increased allocation in MTA marketing budgets and the €120m fund for capital projects aimed at enhancing the tourist product through revamping coastal areas, regenerating sandy beaches and restoring bastions.

Government’s decision to reduce excise duties on spirits was perceived as a step in the right direction but it would have been preferable for the gap with nearby countries to be closed further. After all, this measure was not intended to encourage alcohol consumption but to combat illicit trading from abroad. At the same time, it is expected that such a measure be complemented by stronger market surveillance to eliminate abuse across the board, particularly with regards to food and beverage products.

The organisations noted the announced revision in income tax bands for individuals. Whilst this is positive in theory, this latest adjustment for 2009 is perceived as marginal and will have a relatively minor effect on household saving and consumption given the increase in utility prices which is being projected.

In the coming days, the Chamber and FOI shall be examining the contents of the budget speech in greater detail and in the context of the set of budget documents published. The Bodies will then be in a position to ascertain the effects of the announced measures in the context of medium and long term economic and social objectives.