Increasing utility rates helped us save factory jobs in 2008 – Fenech

Finance Minister Tonio Fenech has stood by a momentous decision to raise utility prices in 2008, declaring that subsidising the cost of fuel would have made it impossible to keep industry from relocating from Malta during the economic crisis.

Fenech defended his four-year record in achieving sustainable finances, which this year saw the deficit climb down to 2.7 per cent of the gross domestic product after announcing a €40 million cut in government spending in January 2012.

But he defended the decision to raise utility tariffs, saying government could have not sustained factory salaries in 2008 that prevented major industrial players from leaving the island.

"The most difficult moment I encountered was during the economic crisis when ST Microelectronics was close to leaving the island. I had even met up with STM's chief executive. Had we lost such companies like STM, Trelleborg and Methode, no amount of investment promotion would have got us such enormous industrial capacity back," Fenech said.

Responding to questions on the effect of utility rates on business, Fenech said business and industry had to respond to the challenge of energy costs by investing in alternative energy resources.

"The reality of the international price of oil is what it is... many of these factories were attracted to Malta because of the government's indiscriminate subsidy on fuel costs. But had we not raised the rates we could not have paid the salaries of so many factory workers whose employers were so close to relocating away from the island.

"Even businesses know they must reform with more efficient modes of production to save energy," Fenech said.

The minister said that with the impending coming into operation of the Delimara power station extension, and the eventual completion of the Malta-Sicily interconnector, the Marsa power station would be finally decommissioned in October 2013. "We will then look into European funding for the eventual conversion of Delimara to use gas for its fuel," Fenech said of the new turbines that will run on heavy fuel oil.

Fenech also said the government will be exploring more ways of outsourcing services it provides to the private sector, in a bid to reduce its complement and curb government expenditure on the public sector. "We have already stated doing it in the sector for elderly care through public-private partnerships, and we recently took the decision to replace just one of every two government employees who retires."

The finance minister said the European sovereign debt crisis that followed the financial crisis of 2008 had been precipitated by "politicians who strayed from the line of sustainability to dish out more money than they could possibly afford."

Fenech said Malta had managed to achieve economic stability through a programme of financial sustainability, drawing comparisons with other neighbouring countries that were experiencing high levels of debt and debt servicing problems.

"You cannot have economic growth without financial stability... our sustainable finances were the sole recipe for economic sustainability. Today we see the serious consequences of what too much borrowing can wreak upon a country.

"Not so Malta - the corrective measures we took in the last Budget to cut down spending, means investors don't need to expect any unexpected shocks."