Election manifesto – separating the wheat from the chaff

Looking up the manifesto for the Labour and Nationalist parties one discovers that the PL has published a 178-page document while the PN has chosen not to publish one as yet but has given some information on a number of proposals. The section on Gozo by the PN hits a record 100 proposals.

It is interesting to note that both major parties are quite generous in their wish list and are bending over backwards to please the electorate. It makes you wonder how the mere announcement of a general election in our national milieu will qualify us for such a rich harvest of goodies.

For those of you who question how this sudden bonanza can be financed, it remains a mystery. As always, most party faithful are gullible and will never doubt the provenance. Under basic economic theory, if all the promises are honoured there can only be two ways how they can be financed – either through debt and more taxes or a windfall (such as a miraculous superior growth in GDP).

It is now a given stance that the country cannot resort to wanton issues of unsecured government bonds as this is strictly controlled under the EU’s Excessive Deficit mechanism. The other money spinner is the revenue from cash for passports which has been criticised heavily by the PN and may have its wings clipped next month.

The creation of new revenue streams depends on the creation of new niches such as aviation, Blockchain technology, turning the island into an LNG hub, attracting Innovation by granting tax concessions and the taboo subject of discovery of hydrocarbons in our Continental shelf.

All niches take time to reach fruition and time is not on our side so the elected party next month will have to seriously roll up its sleeves and come up with a realistic plan.  The various welfare benefits that are being promised by both political parties are pie in the sky and can never materialize unless there is superior growth in employment, and faster utilization of the factors of production. Imagine for a moment if our expectations are unrealistic and a sense of déjà vu sets in – can we aspire that as part of the EU family our standard of living, our environment and our free health facilities, pensions and salaries must reach that of advanced economies such as Luxembourg and Germany.

Our political leaders are on a spending spree and have altruistically decided that we deserve the best. Perhaps the manifesto which speaks of this vision is that of the PL which under sections 39 to 41 promises a new start for oil and gas exploration.  Already in the 2017 budget there was a promise to form a National Oil company (NOC) which will be responsible for attracting investors in exploration and eventual drilling.

The subject has long been considered a taboo by voters who are lured by the advent of sudden riches every time an election is announced but then the project is abandoned once the victor takes the incumbency of Castille.  Really and truly this time one hopes that a serious diplomatic effort is made to solve the disputes with neighbouring countries over delineation of the seabed.  This project is ambitious and cannot be seen as a short-term solution to earn precious pennies from heaven. It needs professional and experienced leadership at the helm of the NOC and cannot succumb to the temptation that its management falls in the hands of political protégés as was the case with AirMalta. The writer has been passionate in attending various oil conferences over the past decade and educates himself on the workings of a service hub such as that of Aberdeen but found little or no solace from either party. It seems that the PN in their 25 years of government had only paid lip service to the prospect of exploration and when one digs into the reason for such a nonchalant attitude the answer is always that the chances to reach diplomatic consensus with our oil rich neighbours for joint drilling is fraught with problems.

Now is the time for a fresh start to tackle the problem and seriously devise a concerted plan to attract multinationals to seek out the black gold. Armchair critics say that the lure of oil riches will bring corruption and sleaze oozing from the woodwork. Readers may question that with the price of oil being in the mid fifty dollar per barrel we face an uphill climb to attract investors when other countries in the Med are in full production.

Notice how Egypt has recently discovered huge gas reserves in offshore waters. Lebanon is also seeking investors whereas Israel has discovered three good locations in the Levantine sea. Moving on, political parties have upped the ante to promise generous handouts based on tax free overtime, higher minimum wages, better pensions, subsidized public transport, and a concerted drive to help the poor and underprivileged.

Various new measures, including new allowances have been introduced aimed at reducing the number of persons on the poverty line specifically assisting working single parents who are low-earners, as well as married couples and women who do not qualify for a pension, minimum wage earners as well as recipients of a minimum pension. Amongst commercial services to be introduced is the novel hub of a maritime repair centre which includes rig repair and re-certification, storage facilities for machinery and equipment, as well as tailored logistical assistance to entities active in the exploration of the oil sector.  

A key player of all manifestos is Betterment of Accessibility to Finance for SMEs via the Malta Stock Exchange (MSE) and alternative trading platforms using the services of a development bank (MDB). In parallel to this comes this exciting electoral announcement by the PL of Malta’s first international accelerator for start-ups, aimed at attracting foreign investors to support innovation based locally and help the same expand and raise funds. For example, South Korea launched its own first international accelerator focused on gaming, finance, bio-tech, software, and information and communication tech. Fintech is the new buzz word and Big Four firms are clamouring about its introduction.

Malta appears geared up to position itself as a potential innovation centre, especially where R&D is concerned and the writer has approached an American organization of global repute which will be sending its managing director as a keynote speaker next month. Both parties have shown interest to support this initiative.

Mention of a sub-seabed tunnel between Malta and its sister island was also included in manifestoes by both parties, as geological assessments have started and are at an advanced stage of interpretation. Naturally serious money must be found to finance the project and one hopes that a private public partnership agreement can be signed with investors by the winner of this snap election.  In the wake of continued debate on ageing populations and decreasing birth rates, the issue of public pensions remains a sore one, hence each manifesto makes emphasis to incentivise the increase of private pensions through incentives to employers and employees alike.

Among the fiscal considerations common in the party manifesto is the introduction of a newly set up think tank (composed mainly of selected professionals on the IFSP committee) to revise and renew our old age tax refund mechanism and having it replaced with a modern and more transparent system. This in terms of increasing pressures from the European Commission through anti-avoidance measures such as Base Erosion and Profit Shifting (BEPS) which in the last year seemed to hint towards a potential revamp of Malta’s imputation tax system, owing to parts of the same potentially being caught within the BEPS definition of a ‘hybrid instrument’, used to assist in tax avoidance.  The advent of Malta Files has added pressure on a restructuring exercise.

Last though not least, the environment seems to be the darling subject of both party manifestos and one expects more emphasis will be placed to control excessive gentrification of Sliema/St Julians precincts following the publication last year of the Mott McDonald study on how best to redevelop the Paceville area. One hopes that this snap election will serve as an eye opener to citizens to make an effort to read the manifesto of all parties and after carefully removing the wheat from the chaff reach a responsible opinion to vote for the better candidate. As always the country gets the government it deserves.

George Mangion is a senior partner of PKF audit and consultancy firm, and may be contacted at [email protected] or on +356 21493041