Chamber hopes business tariff reductions is ‘calculated risk’

The Chamber of Commerce wants lower electricity rates for its members, Malta’s major employers. But in the wake of a Fitch report reconfirming Malta’s ‘A’ rating, it has added a caveat to its demand: they hope the “risk” of lower tariffs is a calculated one.

Fitch has warned about energy price reductions that do not reflect costs sustained by the beleaguered Enemalta, which was recently buoyed by a €230 million capital injection by new Chinese partners, and the effects this can have on the country’s coffers and fiscal performance.

“Maltese business is burdened with the second highest energy tariffs in the European Union where the average rate is approximately half of that prevailing locally,” the Chamber said.

“The Malta Chamber hopes that the risk being taken by the authorities is a calculated one. This is because Malta’s export competitiveness cannot afford anything less than what was pledged by this government prior to taking office. In fact, even with an average 25 per cent reduction as promised, industrial electricity rates in Malta will remain substantially higher than those applicable, on average, in the EU which, in turn are more than 100 per cent higher than those applicable in the US.”

The Chamber also called on the Maltese government to shed light on claims in a European Commission report that Malta’s eventual connection to the European Gas Network would result in further price reductions for households, 25% on average in 2014, and businesses, 15% on average in 2015).

The organisation said the reconfirmation of Malta’s ‘A’ rating was no reason for the country to become complacent about its economic performance.

Fitch acknowledged that Malta’s rate of economic expansion, although higher than the euro area average, was generally attributable to domestic demand, something the Chamber said was “a note of caution”.

“Domestic demand on its own cannot sustain long-term growth for the country. Lasting economic growth needs to be driven by export-led activity and this requires the country to be competitive,” the Chamber said.

In the first half of 2014, Malta’s main productive sectors, namely financial services, manufacturing and agriculture, all recorded negative gross value added contributions to the economy, with industrial production data showing a significant drop when reviewed over a one-month or 12-month basis.

The Chamber pointed out that Malta had slipped six places in the World Economic Forum Competitiveness Rankings, down to 47th place, scoring weakly in terms of ease of doing business or business start-up procedures.

The Chamber also said that average compensation per employee had increased by 12% in Malta between 2008-2013, as opposed to 8.7 per cent in the rest of the EU, while real labour productivity per employee had declined by 3.3 per cent whilst increasing by 1.1 per cent in the rest of Europe.

“Future economic prosperity is dependent on courageous political decisions and reforms that Malta needs to undertake in order to rectify inhibitors to future sustainable growth. The Chamber therefore reiterates its urgent appeal for discussion on national competitiveness to be initiated in earnest at MCESD level in an attempt to resolve long-standing issues to ensure the right conditions for the generation of growth and prosperity in the country.”