Business Projections 2020: ‘economic development’ vs ‘economic growth’

8th February 2020

In a feature published by the Malta Chamber’s annual publication, Economic Vision 2020, a number of business leaders share their thoughts for the upcoming year. This is the third part of that series.

For Bank Of Valletta’s former CEO, Mario Mallia, the main challenge for the upcoming year is “the sustainability” of Malta’s “economic model.”

He prefers the term ‘economic development’ to ‘economic growth’ because, rather than solely using GDP, it incorporates quality of life and the environment when measuring economic welfare. “Besides being an economic powerhouse, Malta must remain an attractive place in which to live and work. We need robust long-term planning, which promotes sectors that are sustainable in the long term and mitigates those that aren’t.”

Mr Mallia occupied the role of CEO of Malta’s largest and most important bank, BOV, between 2016 and 2019. He was also the chairman of the BOV Management Board and Asset Liability Management Committee.

“Overdevelopment could have harmful effects on physical and mental well-being,” Mr Mallia warns, as he calls for improved planning so as to avoid impoverishing resources to the detriment of future generations. “It’s foolish to believe that environmental degradation is the inevitable consequence of economic growth. Internationally, countries are leveraging their natural and artistic heritage, and attracting expats and tourists alike. Renewable energy, cultural tourism and environmental protection have themselves become generators of economic activities.”

As the Government steers the economy towards high-value, low-environmental impact sectors such as AI, robotics and blockchain, Mr Mallia says: “For proper long-term vision, we also need complementary strategies in education and training to secure the necessary resources to drive such activities both now and in the future.”

Mr Mallia also advises developing areas where Malta has a natural advantage: “Given our geographical location, we should focus on shipping and aviation registration domiciles and maintenance hubs.”

A well-diversified economic portfolio is invaluable, according to Mr Mallia. “Tourism continues to be lucrative, but it’s time to identify new niches. Health and education are also sustainable and value-adding. We must avoid over-reliance on a single sector, and sustainable sectors that are value-adding in the long-term should be stimulated.”

“However, as always, the financial sector is critical,” he maintains. “It’s often criticised as being too risk-averse, unsupportive of innovation, and overly insistent on customer due diligence procedures. Banks and banking regulators, however, must ensure a jurisdiction’s financial stability and reputation. The former is protected through sound banking practices, such as maintaining strong capital, liquidity buffers and prudence in lending, and the latter by anti-money laundering defences and customer due diligence.

“Malta must retain its name as a reputable financial centre and remain well-connected to international financial planning. The authorities need to showcase our regulatory structures, legislation and system stabilities to international regulators. And banks must invest heavily in skills and technology, and cooperate with regulators and educational establishments to prevent financial crime.”

This interview first appeared in Economic Vision 2020.

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Business Projections 2020: ‘economic development’ vs ‘economic growth’