Beyond the budget: we must move from growth at all costs, to prosperity | Steve Ellul

Providing stability and visibility in such uncertain times is a commendable economic strategy. We could, however, truly capitalise on this by leveraging today’s stability and create the building blocks of tomorrow’s economy. One which delivers quality and prosperity rather than stand-alone economic growth.

In the weeks leading to the budget, it was clear that the government’s intention was to cement economic stability, all the while providing solid counter-inflationary measures to those who need them most.

This was achieved through the unequivocal commitment to maintain energy price stability for as long as needed. Undeniably, a significant segment of small and family-owned businesses would not have been able to cope with a COLA increment of €25 and larger entities in the tourism and manufacturing sectors would have been forced to scale back operations.

With this measure alone, the Maltese government has not just provided stability and visibility to our economic operators but very probably avoided stagflation – a bleak economic outlook coupled with high inflation and unemployment which is now the baseline for many European economies.

Today’s stability, tomorrow’s sustainability

It is on this very same stability that we should take the opportunity to uplift our economic model and invest in our own long-term competitiveness.

We need to effectively change the economic mantra from growth at all costs to prosperity for all.

We hear a lot about sustainability and the new green economy, but what this really means is that we need to ensure that our industries are all geared towards generating economic growth together with – and not at the detriment of – a better quality of life for our citizens.

We can only do so if we truly develop and transform existent sectors which can produce wealth by valorising the environment rather than polluting it. This can be intertwined with an economic model which champions fairness and quality careers rather than the dependency on cheaper sources of labour.

Numbers don’t lie

On the environmental front we have three sectors which can deliver a tangible positive impact on people’s standard of living if they are truly committed to this qualitative transformation.

Energy, Construction and Transportation alone add up to 75% of Malta’s carbon footprint. It is only by catalysing a transformative change in the way these sectors operate, that we can truly deliver on our ambitions for a better economic model.

The ongoing energy crisis exacerbates the importance of diversifying and investing in renewable sources. Undoubtedly, capital investment in cleaner and greener energy requires proper planning and a decisive commitment towards modern energy infrastructure.

We also have to be pragmatic. Our limited land-based capacity can however be overcome by our off-shore opportunities. Malta should lose no time to reap the potential of maximising its maritime territory by incentivising investment in the energy sector through our own exclusive economic zone.

This new sector can provide significant socio-economic opportunities including the creation of green jobs for our workers and improved local value chains.

Enabling a near-zero construction industry

Similarly, we need to drive a sustainable vision of our construction industry in a manner which would not stifle economic growth.

Just like with other industries, the profit motive will remain the driver for future projects, so we need to support the demand for truly green construction as opposed to conventional blocks of concrete.

One thing we must put on the agenda, is redirecting demand for greener and cleaner real estate. We can do this by halting our practice of treating CPE certification as simply a tick box exercise. Instead, we can convert this into a proper quality certification which measures the energy efficiency of buildings together with the level of sustainability of the construction material used.

This will provide a practical tool for government to effectively incentivise demand for property with near zero negative impact on the environment through the redirection of existent fiscal measures which are currently used to support home ownership to certified green construction as opposed to a carpet treatment of properties.

In a similar move, development rules should be changed to allow a level playing field for large real estate development to be contingent on net-zero certifications such as LEED and BREEAM. For large developments, this should become the baseline norm rather than the exception.

Maltese banks can play a huge role in transforming the property industry. Two thirds of their loan book and 90% of the collateral they hold is tied to the property market. Banks should stop giving lip service to their social commitment and tangibly commit to support near-zero construction by offering green loans with lower interest rates.

We hate traffic but we love cars more

Improving our road infrastructure, together with key incentives such as free public transport are undeniably good steps in the right direction.

However, this does not mean that we should simply stop there, and it starts with a gestation of a total mindset shift in our mobility culture.

The cold reality is that we all love our cars more than we hate traffic. Sustainable mobility can only be achieved if we, as individuals, start making choices that reduce the dependency on private car usage. One way of tackling this is by having local councils charge non-residents for parking spaces in urbanised village core. This is the same system used in every other European city.

The revenues collected, which in areas such as Sliema or St Julian’s could amount to millions of euros annually, would be used to fund the local council’s own budget and directly returned to the community.

An initiative like this will increase the opportunity cost of using a private car without imposing draconian measures which are realistically difficult to implement.

All of this is achievable. It all hinges on our willingness to drive positive change and taking our economy to this next level.

Steve Elllul is a financial consultant and a lecturer at the University of Malta