Is Malta's Increasing Population Reaching Boiling Point?

Sarah Micallef - 15th September 2018

With Malta's population increase mainly due to net migration, the experts weigh in on the benefits for local business, as well as the challenges Malta faces as a result.

“The fact that Malta’s population grew 1.2 percentage points higher than the EU average translates itself into about 5,500 persons. I do not think we need to panic because of that,” begins Finance Minister Edward Scicluna when faced with the issue of Malta’s increased population growth. “One has to put this into the context of our increasing labour force and various residency schemes, whose beneficiaries do not necessarily stay on the island throughout the year.”

Affirming that the local business community “not only wants but needs foreign workers” the Finance Minister posits that the main complaint is the speed with which they can be brought over, with the community asking Government to facilitate the procedures necessary to bring foreign workers from around the world.

Indeed, as economist and lecturer at the Faculty of Economics, Management & Accountancy Marie Briguglio maintains, in principle, the fact that Malta attracts foreign workers is great news. “It effectively relieves a really important constraint that hamstrings our economy and our potential to develop more broadly. When our population grows, we get bigger – despite the limits of our physical territory. I also consider the influx of foreign people to be very refreshing socio-culturally, for our diversity, possibly relieving some of our political bi-polarity, our homogeneity,” she says.

And, as economist at E-Cubed Consultants Amanda Borg argues, a growing population means greater demand, but it also means a greater supply of labour, bringing with it significant economic benefits to local business. “The increase in the population gives rise to higher aggregate demand, inducing consumption and spending on goods, services and housing, which have a positive impact on Maltese businesses by ensuring a steady flow of new customers,” she explains.

Amanda Borg

Amanda Borg

Going on to further highlight that the higher labour supply is welcomed by businesses, Ms Borg maintains that it enables them to fill the gaps within the supply of labour of Maltese workers, both in terms of numbers as well as skill deficiencies, to respond to the higher demand. “Today, around two out of 10 workers in Malta are foreign nationals, thereby enhancing the human capital stock with new skills as well as proliferating knowledge that is shared with the local workforce. The development of new industries is enabled, which otherwise would be bottlenecked by skills shortages. This leads to a more diversified economy, including multiplier effects that spill over to other business.”

Still, as Malta Chamber President Frank V. Farrugia points out, it is no secret that steep increases in population will invariably lead to strains on the local infrastructure, as well as introduce new hardships which Malta previously has not experienced. “In certain areas which are most exposed to this reality, the country is already experiencing severe issues with cleanliness and order. Certain tourist areas, which are meant to be the showcases of the country, are often seen to fall into disrepair, while cleansing services struggle to cope with their increased demands,” he warns, adding that the traffic situation, together with all its ancillary issues such as parking, quality of air and noise pollution, is also an issue that ranks high on people’s minds – “as more cars are registered every day, commuting times get longer, which also leads to loss of productivity.”

“An increase in population size will also mean a greater stress on the country’s few natural resources such as demand for land, water and energy, while leading to the inevitable generation of more waste. This will also lead to an impetus to the construction industry, which may not necessarily be sufficiently supported by the right infrastructure and urban planning. The lack of housing stock available at present is also leading to inflated rents and buying prices,” the Malta Chamber President continues.

Ms Borg seconds this notion, stressing that the influx of foreign workers and their families brings with it a number of challenges to the social, environmental and infrastructural facets of the Maltese economy. “Within a context where the physical territory is limited, changing landscapes within Malta’s unique character, waste from construction projects, affordability of housing, traffic congestion and multi-culturalism must be properly managed,” she maintains, going on to expand on the traffic and transportation issue in particular. She called on policy-makers to increase capital investment to enhance the infrastructure. “This should contribute to supporting the growth in the economy on the basis of a medium to long-term Masterplan covering the economic, social and environmental aspects, to minimise external costs as much as possible.”

Marie Briguglio

Marie Briguglio

Indeed, the problem, according to Dr Briguglio, is that “we are simply not prepared.” “Sure, huge infrastructural expenses (often with EU money) have been incurred, educational campaigns have been run and hand-outs in the shape of all manner of grants are designed. But that is not enough. We seem to be afraid to bite the bullet, to enforce with laws, with real penalties, to tax and to actively discourage negative impacts of traffic, of waste (including by business), of construction, and of destruction of the countryside,” she quips.

“The way I see it,” Dr Briguglio continues, “the increase in people is not the problem. It’s the lack of management of our capacity that is. Think of it this way: a small sink can receive hundreds of litres of water if the drains function well, but if the drain is blocked, even drops totalling a few litres will be a problem. Right now, we are like a small sink with a blocked drain. We are not managing flows well. If we get our act together, we can receive many more people. The question is, will Government do the dirty work like a good plumber to fix the pipes, or will it wear kid gloves when handling polluting activities?”

On the part of Government, Minister Scicluna admits that Malta’s infrastructure needs to rise to the challenge, and in his view, it already is. “Malta is transforming itself. Better office buildings, better roads and better infrastructural projects. The next challenge is a greater fastidiousness with better quality. We need more foresight, better planning and long-term visions not just by the central Government but also at the local level, at the businesses level and all around,” he says.

Edward Scicluna

Edward Scicluna

Asked whether Malta ought to increase its net expenditure and level of capital investment to ensure the economic momentum is sustained by enhanced infrastructure, Mr Scicluna maintains that this is already the case “We are already doing that. The 100 million a year investment on roads sounded over-ambitious when it was announced, but today, we realise that nothing less can be spent to cope with the wear and tear of today’s growing economy.”

As for whether the country can continue to sustain such major increases in migration flows in the long term, the Finance Minister believes that the situation will stabilise, arguing, “human beings are rational. They adapt. They react. The market responds in a similar manner. This doom and gloom idea of a population moving blindfolded towards a precipice may seem to occur for a while, but experience shows that this will correct itself. Having said that, Government is carrying out studies and simulations under various scenarios which help the policy-maker in the planning process.”

On behalf of the Chamber, President Frank V. Farrugia explains that the Malta Chamber has, for the past years, called on authorities to address the Budget from a multi-annual perspective. “This would be closer to what happens at a European Union level, where a multi-annual financial framework is drawn. This would entail planning well ahead on what is required in the medium to long term rather than looking at the Budget as purely an annual fiscal exercise,” he says.

“The Chamber recommends that in the Budget, Government initiates a thorough impact assessment of the country’s ongoing growth with a view to set sustainable targets for maximum carrying capacity in the country’s economic segments,” Mr Farrugia continues, adding that the study would consider the areas mentioned and examine the extent of sustainable growth that can be expected of each. “This will give us a clear view of the investment required, as well as a way forward towards reaching the set output levels and maximising returns with the highest efficiency of resources. Once this analysis is concluded, the Chamber further proposes that Government initiates a national debate on a new long-term economic, societal and environmental master plan for the country post 2020,” he affirms.

Frank V. Farrugia

Frank V. Farrugia

Attesting that the Chamber has continuously advocated the need for the country to invest the proceeds of today’s positive economic performances to future-proof the economy, the President goes on to explain that this can only be achieved by “investing in education, training and labour market reforms to secure a domestic pool of workers that are able to adequately fulfil the demands of an innovative and dynamic economy in the medium to long term.”

The Chamber’s proposals are primarily focused on maintaining the importance and relevance of the country’s domestic workforce, while only resorting to foreign workers to supplement areas of domestic shortfall, Mr Farrugia states. “Active labour market policies have proven successful in attracting dormant resources back into the workforce, but the Chamber believes that additional initiatives may attract cohorts wherein there still exists potential to increase employment rates. The Chamber also acknowledges the vital role that incentives for active ageing can play due to the fact that Malta’s population is an ageing one,” he says.

Other proposals Mr Farrugia highlights focus on implementing best practices observed in advanced economies, such as the introduction of sector specific working groups wherein industry and academic experts collaborate by forecasting the direction of the industry, identifying gaps in the labour market and proposing workable solutions to mitigate those gaps. “The Chamber has also offered to play an instrumental role in conducting the reforms necessary in the country’s education and career guidance systems, as well as proliferating work-based learning as a way to improve the education of soft skills and a better cross-communication between education and reality,” he continues, before adding that “the Chamber is also well aware that the recruitment of foreigners will always be a necessity, and an important solution available to employers to address the vacancies generated by the current growing economy.”

The full version of this article appeared in The Commercial Courier


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