Editorial | Wednesday, 18 February 2009

No need to paint it black, just get real

We may not have all the information needed to ascertain whether the economic prospects for Malta are bad or worse. What we have so far is a series of contrasting information pointing at one side or the other like the needle of scales gone mad.
Judging by MIDI’s over-subscribed bond issue for example, it is rather clear that a good deal of investors have not lost their appetite to let their money grow. In contrast, property sales have taken a drastic slump. Some commentators argue that the downturn in the local property market may not be entirely attributed to the international situation, but is rather caused by a natural stall of a market that grew too much too soon. But some will go as far as claiming that this may be an explosive bi-product of irresponsible speculation, while others insist that property prices are going down as per natural market re-adjustment.
International demand has plummeted, causing direct and devastating effects on the local manufacturing industry and tourism. Factories have placed more than 1,200 employees on a four day week, and Malta’s largest employer will be cutting 450 jobs. Exports have taken a dip in Q4 last year, and a number of international firms may have understood that this is the right time to relocate to cheaper destinations as blame can now be entirely laid on the international crisis.
Conference and incentive groups are cancelling their bookings for this summer – putting in jeopardy a not-so-small number of five star hotels, destination management companies, transport providers, event organisers, restaurants, yacht charter companies, excursion organisers and many other service providers specialising in high-value entertainment. Whereas some may think that the crisis will be affecting low and medium range tourism, many others are now thinking again.
In contrast, GRTU’s Vince Farrugia called on government to build two five-star hotels and have them leased out to the private sector, an idea which was thrust aside even by an excessively optimistic Tonio Fenech.
The amount of restaurants being vacated over the past and the next few months has increased, but then again outgoing tenants seem to be finding successors at a reasonably fast rate. This may be due to cheaper and more flexible lease conditions – the practice of key money in retail subleases seems to be disappearing. The latter in itself constitutes another indicator of where the economy is heading.
Maltese and especially Gozitan investors lost big money in toxic investments abroad and Maltese banks are contributing less to national coffers. And yet, government is reassured by the liquidity and investment potential of the Maltese.
Tonio Fenech himself is subscribing to the Warren Buffet philosophy that there is no better time to invest than times like these. He will only consider helping on condition that he is presented with an investment plan.
On the other hand, industrialists are calling on government to invest in retaining the international firms on the island and to keep industry afloat until the crisis is over. They often blame the ill-timed hikes in utility tariffs as the root of the problem. Further utility subsidies are not on the cards.
Perhaps the most worrying of contradictions is the fact that influential industry players may not be looking at the future with rose-tinted glasses, while the Finance Minister insists that there is nothing to worry about and little to talk about.
As much as Fenech’s stance on keeping a low profile may be empathised with, there are still doubts on whether businesses in Malta will remain perky thanks to the strategy of silence and denial adopted by government. It may indeed have the opposite effect.
Crisis or no crisis, the call on government is not to force the Finance Minister to paint it black, but to be realistic, empathic and vociferous. Nobody asked for a prima donna, or a bearer of bad news. The industry is crying for good leadership in the hope that the necessary confidence is re-established. For every time the government is out of synch on the feelings of local businessmen, a cold shoulder is given to the industry and investors’ confidence takes yet another dip.



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18 February 2009

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