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GRTU director Vince Farrugia wants Government to pull up its socks and stop overspending, or it will be doomsday in 2012
The Malta Chamber of Small and Medium Enterprises (GRTU), “the voice of small business,” knows its strength. With 7,000 registered members, its ability to send government a strong message on voting day is not to be toyed with. The GRTU did it in 1996, and it would seem, it would be ready to do it again.
In the midst of a worrying economic scenario, everything seems to militate against the small and medium enterprise, which constitutes the majority of commercial life. The GRTU’s director-general, Vince Farrugia, is not one to mince his words – at times that means saying the wrong words, as happened during the time when the law related to sexual harassment at work, which rightly places the onus on the employer, was put into doubt by Farrugia not with the best of words, and he concedes that on certain occasions, the image has to be brushed up. “It takes two to tango – us to act better in a PR way, and for the journalists to quote us well. I was quoted wrongly and it was blown out of proportion.”
Most of the time however, he’s about to hit out at big government. And no opportunity is lost to stamp his foot – already Government had to buckle under pressure from the GRTU on two occasions, with the pseudo eco-tax and the controversial smoking laws having to experience postponement when the association cried foul. “We did not create smoking. Now they are loading the responsibility on businesses.”
With its host of members from the world of the self-employed, the GRTU hardly has any ideological pulse. It’s a question of profits, as Farrugia himself says, and when it comes to sending a message to government, the association will make its voice heard.
“This government has a problem of prioritising. It certainly has problems with us and small enterprise… we’re not afraid to say it: we had done it already in 1996 with VAT,” Farrugia says of the GRTU’s kingmaker role when the Nationalists were rudely kicked out of office a year after John Dalli’s VAT blitzkrieg. The GRTU remains a strong mobiliser of the ideologically-devoid, small entrepreneur whose political gauge is a profit-and-loss sheet at the end of every year, and whose vote can be the costliest ever for a government which makes life hard at shop-floor level.
Farrugia is especially angry with a new administration that seems to have lost the style which Eddie Fenech Adami presided upon. Consultation, it would seem, is pretty much in the doldrums, according to Farrugia, who believes the Gonzi administration has yet to learn the ropes.
“The government of Eddie Fenech Adami, of Richard Cachia Caruana, John Dalli, and Joe Borg, is no longer. Those people had learnt not to wake up in the morning and impose. Being tough means leading the social partners towards focused discussion and a quick solution. Borg’s new position in Brussels, and what he did with MEUSAC, represents a loss for Malta – he had the patience to wait for the smallest of partners who contributed to the EU debate. It’s a pity we lost him to Europe. Out of the team which took us into Europe, everyone is out of it except Gonzi himself.
“With all due respect to this cabinet, there is a mentality that consultation is a waste of time – you are summoned one bright morning, just as George Pullicino did in the case of the eco-tax and you are shown the raw deal. Granted we agreed on a timetable with former Finance Minister John Dalli in the previous budget. Nothing however happened since then. It was bad when it was given to us; it was improved upon just a little; it’s a lousy, bad law which is not an eco-tax. It’s a consumption tax designed to give Government an extra Lm5 million for its deficit. We can’t continue having bureaucrats untrained in the consultative process.”
So here is a Gonzi that Farrugia says is not ‘acting himself,’ taken over by an entourage of ministers and Party men who have betrayed the style with which Gonzi conducted himself admirably in his days as Social Policy Minister.
“I am lucky to have seen Gonzi working at close range, and I like his personal attributes too – he’s a man of consensus, of solutions, and who has the patience to lead to a solution. Unfortunately, people around him, in the party, government and Cabinet, are forcing him to act beyond his true self. He’s not the kind of tough guy who’s going to say “ha nkun sod, ha nkun sod” (“I’m going to be tough”) – now lately he’s saying “nkunu sodi fuq din, nkunu sodi fuq din” (“Let’s be tough on this”). That sort of language does not suit him, and it’s outdated. It’s blocking him and it’s ruining his image.
“There is a wrong interpretation of how a modern economy is managed. The successful leaders are those who managed to bring together the mechanism of consensus-building…”
So what about the MCESD, and the MEUSAC committees, and the many tripartite discussions which heralded the advent of legislation? “Take it easy… no we don’t have that. That is something we have to inherit from the EU – they may be slow in taking decisions, but they reach solutions, in a practical and consensual manner. In Malta, Tonio Fenech will learn that the advantages of this practice are tremendous.
“We have a Prime Minister who has the ability to conduct this practice, as was experienced in the reform of the Employment and Industrial Relations Act – he can play that game. John Dalli also learnt from imposing VAT in 1995 that the ‘big bang’ does not work – that is not only social and economic disaster, it’s also political disaster.”
Farrugia says Tonio Fenech, Gonzi’s parliamentary secretary and stand-in for finance, is ‘lucky’ to be at the centre of the learning curve of tripartite discussion at the heart of economic uncertainty. “He is a junior minister loaded with the responsibility of being practically the Finance Minister, and he’s taken on board the discussions and negotiations of the social contract, the longest and most extensive negotiations in Malta at tripartite level. I can tell you it is a very heated debate, but we’ll emerge with a solid deal for three years. There’s a learning curve we all have to go through. That’s why I’m happy for Fenech who so early in his political career has had this tremendous opportunity to go through all this – only John Dalli had such extensive experience.”
Now, following EU accession, also supported by the GRTU, things are still not rosy. Whilst the government has paid lip-service to assisting the small business sector, Farrugia says that despite the efforts of parliamentary secretary for competitiveness Edwin Vassallo, a ‘friend’ of small business as described by Farrugia, SMEs are still being left in the lurch.
“He doesn’t like it when I say it, but he’s a businessman and a part-time politician.” I tell Farrugia that Edwin Vassallo is continuously lamenting the attitude of the Nationalist government with respect to the small business sector. “They don’t here him out. Not enough at least. The core problem is that the small business community moved in favour of the EU as the only alternative, because the other alternative had not been provided with a sufficient package to prove that it would work,” he says about Sant’s Partnership.
“The GRTU is still fighting for the money promised to it by Government before the EU referendum for us to support our organisation and to finance projects designed to enhance our efforts for the private sector. Do you know why the money never came our way? It was given to the Malta Business Bureau in Brussels which the Chamber of Commerce and the Federation of Industry.
“It was a farce – the Chamber and the FOI told the government we were part of the same initiative, which we’re not, and the money was given to the MBB… all the EU money the government is receiving is being channelled into its deficit. If the organisations want money they have to stop knocking at Government’s door. GRTU is teaming up with a Polish organisation to get EU funds which will be extremely helpful to us. Of course, as we say in Maltese, we’ll only get the bone from the meat – but their bone is good enough for us.”
Farrugia says the next step in economic reform is to reduce government expenditure as fast as possible. As part of the MCESD’s National Competitiveness Working Committee, he was part of a team that drew up a checklist of bureaucratic costs and public expenditure items which should be crossed off.
“The major economic problem we have today is very simple: our level of production is not high enough to generate that GDP growth we need to meet our current public expenditure. Without GDP growth, and it’s hardly moving right now, by 2012 public debt will have reached the staggering figure of 101 per cent of GDP. We are loading on the next generation all the trouble we took to grow comfortably over the last 50 years.
“The major problem is how to make GDP grow. Firstly we have to give more space to the private sector: Government cannot continue eating away at the private sector with its current expenditure of 50 per cent of the GDP – that is far too high because it is leaving little space for the productive, private sector. And there’s hardly anything productive left in the public sector because all that is productive is being privatised. In such a small economic pool like Malta, government is too big.
“Secondly, we joined the EU so we could extend our limited market and enjoy the benefits of the larger EU market. We, who are used to living on the fringes of such an enormous corporation as the government is, now can turn to the European Commission to take up contracts issued to the European private sector. If we can reach out to that market, we can grow beyond our limits.”
Farrugia notes that unfortunately, the country’s restructuring process is moving too slow, because business is shackled: “The private sector needs to be trained, helped and assisted to get these opportunities – and when the private sector really needed that kind of nurturing, it was decided that IPSE, MDC and METCO would be dismantled and conglomerated into Malta Enterprise (ME) – so time has been lost, although ME is now on its feet. In such a process where we should be moving faster and becoming leaner so that we can compete, Government is imposing a lot of costs and taxes on business in order for it to finance its deficit that we have now fallen in a vicious circle. We are in a race which we need to win before 2012.”
That race, he says, will not be one before small businessmen can see some veritable profit. “Businesses can only pay income tax if they make a profit. If the economy is sliding backwards and there is no demand, whilst taxation and the cost of labour grows, the result is less profitability. If people make profit, people pay tax – so first and foremost, let’s help people make a profit.”
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