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Urgently required: change in our economic model

Last week, Prime Minister Robert Abela gave a warning to businesses and the country in general, saying that, “government will not support operators whose business model is solely focused on the importation of foreign workers”.

This newspaper reported that in reaction to this statement, business owners have asked that before reducing the number of foreign workers in Malta, the authorities need to come up with a strategy that addresses a shortage of prospective employees. Businesses were quoted saying that the prime minister’s statement is a “knee-jerk reaction”. Others were quoted as saying that “the writing has been on the wall”.

I guess everyone knows which side of the political fence I am on. However, I would like to state at the outset that I agree fully with the prime minister’s statement. To those who do not agree with his statement, I ask the question: Do we or don’t we have too many persons living on this island?

My answer to this question is that we do have too many persons living in Malta, and the situation cannot be sustained for much longer from a social, economic and infrastructural perspective. My unqualified view is that we cannot increase our resident population any longer, we actually need to reduce it. But before someone starts to misrepresent and misinterpret my statement, some facts need to be pointed out.

We have too many persons living in Malta, and the situation cannot be sustained for much longer from a social, economic and infrastructural perspective

In 2022, the population increased by just under 22,000, when compared to 2021. There were 80 more births than there were deaths. There was a net inflow of Maltese migrants of 1,039. The rest of the increase is attributable to an increase of non-Maltese citizens. There was a net inflow of other EU citizens of 2,589. The rest, that is around 18,000 persons, are represented by a net inflow of what are  euphemistically called third-country nationals (TCNs). Immigration of TCNs was 25,988, while emigration was 7,865.

As such, the increase in the population has nothing to do with the free movement of persons within the EU. Moreover, how can we sustain yet another increase in the population of 22,000 persons this year, next year and the one after that?

Another point to make is that TCNs coming to Malta are not coming from North Africa on a boat. The latter need our help and we should extend our helping hand. However, the people coming to Malta are coming because they have been lured by businesses with the promise of a job, which very often does not exist.

Many will ask what this would mean for the economy. Growing the economy on the back of cheap imported labour was a short-sighted policy in the first place. Businesses that should have known better (because businesses should look at the long term), decided to make hay while the sun shone. That may be a very good strategy to adopt in agriculture, but it is not a good strategy to adopt in managing a business or in managing an economy.

The economic policy of successive governments since independence 60 years ago has always been moving up the economic value chain. We have been successful at it, as our economy went through a number of restructuring processes. We do not need to write Malta’s economic history since 1964 here.

We need to embark on that policy once more. The policy shift is not about limiting the number of TCNs coming to Malta, but it is about seeking to develop higher value-added activities. The strategy shift is not about limiting the number of TCNs, but about developing economic activities that are less labour-intensive. As a result of such a policy and strategy shift, we will need less people on our island.

Admittedly, one cannot have a blanket policy. There will be some sectors (the healthcare sector comes to mind first) that will require foreign labour to fill in certain gaps. However, this policy should not be applied to every economic activity.

Therefore, to answer the question as to what limiting the number of TCNs working and living in Malta will mean for the economy, the answer is that we need to change our economic model. The sooner we start this process, the better. As this newspaper stated in its editorial this week, nibbling at the problem will only make it more acute in the medium term.