News | Wednesday, 23 September 2009

Social partners call for reforms in stipends and social benefits

Karl Stagno-Navarra

Social partners have called on government to implement reforms in student stipends and social benefits and to ensure the sustainability of the fiscal financial position and the effectiveness and efficiency of the use of fiscal resources as key tenets of economic growth and development.
In a common position paper compiled by economist Gordon Cordina after having individually consulted with all social partners within the MCESD in preparation for Budget 2010, government has been urged to consider more effective ways of inculcating positive work ethics within the culture of students and better approaches towards making appropriate choices of education and career paths.

“While stipends are considered as a part of public investment in education, it is to be ensured that they are operated in a financially sustainable manner and that sufficient resources are made available for the education system to operate effectively to develop further,” the document said.

The sustainability of social welfare programmes will be an important challenge in the coming years, and the social partners have pointed out to government about the crucial task of preventing poverty, especially amongst the more vulnerable social groups.
While it was noted that Malta has a comprehensive mechanism for social welfare and cohesion, including the public health system, whose sustainability in the coming year will require the continuous pursuit of efficiency gains, elimination of waste and abuse and better targeting of available resources to achieve the genuine objectives of the welfare system.
The social partners are in favour of the private-public partnership model, and stressed that it could be further developed as an efficient means of providing service in kind.
They also insist that “an over-arching mechanism for ring-fencing specific revenue sources to be directed towards the financing of the welfare system, whose design should furthermore contemplate the realization of surpluses in periods of strong economic growth so as to create reserves for the future financing of the existing commitments under the welfare system.”
In their document, the social partners are also warning that a “freeze on the objectives to be achieved by welfare system such that the objectives envisaged under the system currently in operation are attained without entering into additional commitments which would deprive the country of resources to be used to sustain the present system into the future, at the same time that efficiency gains on the achievement of these objectives are being pursued.”
Social policy should further enhance the role of the family as an important means towards sustaining social cohesion – at the least, government should re-assess the usefulness of welfare instruments which are detracting from the role which can be potentially played by the family in the provision of social cohesion.
The safeguarding of social cohesion is an area which all social partners agree that any debate or consideration necessitates political consensus in the best national interest.

The social partners are recommending ongoing commitments by government towards better regulation and more efficient and effective governance structures, in particular, they highlighted the urgent need for the continued pursuit of efficiency and low cost in the delivery of government services, including through the introduction of improved management and organisational setups, with focused and directed efforts towards the resolution of bureaucratic inefficiencies.
Another call is being made for further rationalisation of use of resources, the orientation of government strategies and structures to the specific needs of business organisations, and the operation of regulatory systems on a fair and level playing field and on bases which have a better degree of proportionality in relation to the size and nature of the activity being regulated, (one size does not fit all).

Tourism remains an important pillar of the Maltese economy which must continue to undergo a process of restructuring towards servicing higher value-added market segments, and which is currently facing particular difficulties, wherein a manageable number of well-targeted and directed interventions – including for example, the maintenance and upgrading of the rural and built-up environment, tax issues, focused marketing support, air route capacity, skills availability and labour costs. All this, the social partners said – could have a significant impact on the sectors competitiveness.

Policy by sectors
The social partners have stressed that it is desirable for economic policy to take sectoral approaches towards enhancing the competitiveness of Maltese business, catering for the specific needs of individual sectors of economic activity which may range from training support to transport issues to international marketing intelligence and with renewed efforts towards the establishment of clusters.

Specific measures are needed to continue favouring the competitiveness of small and micro enterprises, particularly those intended to reduce costs of operation, including those of a bureaucratic nature, provide easier access to finance and engender start-ups.

Corporate and other tax systems should be fine-tuned while remaining consistent and predictable over time so as to further promote productive investment.

EU funding
The availability and accessibility of EU funding to business should be facilitated and positively encouraged.

It is essential to ensure that in an open economy such as Malta, international access and transport facilities operate in the most effective way possible and at the lowest possible cost.

The opportunities available for the development of environmental industries and the creation of green jobs across all sectors of the economy should be exploited through a supportive and positive policy approach.

At regional level, there exists significant potential in the sustainable economic development of Gozo, on the lines recently established through a process of social dialogue undertaken within the Gozo Regional Committee of the MCESD.

The document invites government to tripartite social dialogue at the “highest possible level” within MCESD in order to establish agreement on each of the key priority issues facing economic policy which are to be addressed in a holistic manner.
Also, the social partners have asked for the sequencing and adequate balancing on interventions to address each of the individual essential key priority issues over a medium term horizon, together with measures for the formulation and implementation of specific measures.

The economy
With Malta’s GDP estimated to fall by one per cent in real terms during 2009, social partners reiterate that the tourism and mass-market oriented manufacturing are the most vulnerable sectors.
The downturn in the most vulnerable sectors can be expected to have adverse multiplier effects on the rest of the economy.
However, there are pockets of high-productivity economic activities, particularly those established in recent years, which continue to thrive in spite of recessionary conditions.
The social partners recognise the fact that the recession in Malta will not be as pronounced as that in its major trading partner economies.

The financial sector in Malta remains stable and liquid, with no evidence of a significant credit crunch. There may exist potential for domestic financial institutions to provide further support to businesses and households within the current economic scenario.

Fiscal policy
Fiscal policy remains expansionary, with the fiscal deficit supporting domestic demand and with directed fiscal interventions to protect jobs and economic activity in specific circumstances, which do not cover all vulnerable but viable sectors of activity and whose effects would have been more beneficial had the fiscal position been more sustainable.

Unemployment is increasing but employment levels continue to rise, albeit at a slower pace compared to recent performance.

Income from employment continues to increase thereby supporting domestic demand, but at a slower rate with the effects of recession translating into lower business profits.

The relatively high price inflation in Malta compared to that of the euro area countries is especially detrimental in a period of recession. While recession may retreat significantly in the coming months, the adverse social and economic effects of cost and price level increases following inflationary episodes tends to be permanent.

The factors which are attenuating recessionary tendencies in the short run cannot be expected to sustain economic development in the medium to long term, where Malta must rise to the challenge of converging to the EU level of per capita income by increasing employment and the productivity of each job in the economy.

Human resources
Human resources in the entire economy are to be employed more productively requiring: a focus on the effective and productive education of the younger generation, together with efforts towards re-skilling, multi-skilling and effective enabling of labour market participation of persons who are of working age.



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23 September 2009


Malta Today


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