One hopes for a rainbow once the storm subsides

Dark clouds overshadow our reputation as a top financial services sector as a result of allegations of corruption and cronyism which this week culminated in the resignations of two Government Ministers and the Chief of Staff. The constituted bodies joined

Mrs Caruana Galizia was vigilant in her regular contributions, exposing alleged tales of corruption and sleaze in top circles. Two years ago, her investigative skills led to the sensational scoop regarding Pilatus Bank (audited by KPMG), money-laundering allegations and the fact that two secret Panama companies were registered by Nexia BT. The latter gained prominence in Castille circles acting as personal advisers to the Energy Minister and the Chief of Staff.

At that time, the Opposition demanded resignations, but none followed. In the midst of this acute uncertainty, one hopes that the controversy will quickly resolve itself and that closure is reached to the satisfaction of all those who are concerned about the rule of law and justice. People of goodwill pray for an immediate return to business as usual and for political serenity to return to the island. It goes without saying that achieving exemplary economic results will not be guaranteed in the near future until normality returns.

Not surprisingly, the business community insists that no effort is spared by the political class for an honourable solution and that justice is seen to be served in apprehending the mastermind behind the macabre killing of Mrs Caruana Galizia. In the meantime, the majority wish to continue unfazed in their daily life and each in their way pray for the quick resumption of calm after the storm. Christmas is coming late this year.

As always, it is not all doom and gloom and the untiring efforts of Malta Enterprise in its mission to attract new industries in diversified areas is bearing fruit.

This includes aviation, oil rig repairs, medical Cannabis, Blockchain, A.I, Fintech, generic pharmaceuticals and high security currency printing. The typical attraction of a unique aviation cosmetics company that spray-paints aircraft (such as the A380) is commendable. Massive strides forward are being made in technical services such as the repair and maintenance of complex aircraft engines. Lufthansa Technic is reported to have invested a substantial amount to build additional hangars in order to expand its aircraft repairs facilities.

It appears that, as if by stealth, the economy is undergoing a revival and this can be complementary to our expectation of continued high employment. The number of expats continues to rise on a daily basis and Fitch agency even warns us that the ongoing labour shortage is likely to put pressure on wages. Be that as it may, we are trying to upgrade productivity and the 2020 budget predicts a modest national account surplus.

At this juncture, many ask how much of the exemplary growth of six per cent in GDP recorded last year was due to the export of goods and not predominantly due to a hike in domestic consumption. The answer is that it was the latter that contributed the lion’s share of GDP growth. This prosperity is headed by the Finance Ministry, which made a serendipitous switch to a Keynesian policy that resulted in considerable funds being allocated to large infrastructural road projects and higher welfare subsidies, in addition to a new electricity plant running on LNG.

The feel-good factor encouraged unprecedented capital investment by the private sector in luxury construction projects. On the education front, we note how MCAST and the University are eager to work closely with industry and this is yielding results.

MCAST has reached a high standard in teaching technical subjects and proudly reported hundreds of graduates enriched with quality diplomas and degrees. It has revived apprenticeship schemes in various technical areas and is also making steady progress in respect of vocational courses as a catch-all for early school leavers.

Still, however, we clamour for a higher number of trained workers with skills involving science, engineering and maths (STEM), as the facts show that we have not yet achieved our targets. It is true that we invest millions in education – from kindergarten to tertiary levels – and yet we still have some way to go to solve the skill mismatch in particular sectors – such as Igaming, Fintech and Life Sciences. Indeed, one acknowledges the advantages of a paradigm shift in Malta Enterprise’s policy to provide custom-built factories. The recent building of more custom-made factories such as the extension of PlayMobil, Lufthansa Engineering and Crane Currency speaks volumes on this positive aspect.

It goes without saying that modern, large-scale manufacturing survives competition due to the use of robots and automation. Malta Enterprise helps directly in reviving manufacturing prowess, as the sector is seen to be more resilient to the fledging financial services sector (lately under water due to adverse MoneyVal comments in its recent report).

This begs the question as to whether the government-induced PPI policy is working. Should the government continue to attract interest from international public institutions/utilities by entering into Public Private Partnerships (PPI)? Last year, we read about the collapse in the UK of Carillion (the second largest contractor and health services provider) which entered into a private public initiative scheme – regrettably propelling it into a legacy of a debt.

This PPI routine was popular in Britain in order to attract fat-cat investors to run big spending departments such as roads construction, healthcare and schools. The policy was in vogue at a time when overcrowded public hospitals in the UK necessitated huge expenditure at a time when austerity measures were de rigueur.

The smart antidote on the part of the Conservatives was not to burden the country with debt in order to manage new hospitals but to sub-contract such onerous projects to the private sector. As can be expected, due to creeping inflation in the cost of medicines, health services in the UK – which were procured at cutthroat prices – saw the private sector sweat under rising costs. Such losses could not be relieved due to fixed rate contracts. This sent Carillion running penniless into the arms of the liquidator.

Back home, the state has suffered heavy losses as a result of signing the ill-fated Vitals Health Scheme (mysteriously waived to Steward Care US) which was a PPI intended to run and renovate three major public hospitals.

On a positive note, we will prosper – provided that we bite the bullet and pay more attention to the way in which PPI are fine-tuned and adequately monitored towards achieving KPI aided by programmed research and development.