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					BUDGET 2001 SPEECH BY THE MINISTER OF FINANCE JOHN DALLI
THE HOUSE OF REPRESENTATIVES
20TH November 2000

1. Introduction


Mr. Speaker,

Last year we asked the Maltese public to make sacrifices and carry burdens that were necessary to strengthen our
country. We were extremely careful that, when we made this request, we would not be asking anything that would
impede our economy from taking up again the rhythm of growth that had been stalled by a series of crises which it
had to face during the previous administration. We were also extremely careful to spread the burden across all
sectors according to their capacity so that we would not imbalance the social fabric of our country.

Today I feel satisfied to announce that the sacrifices that we made during the year were not in vain. Government
has worked incessantly to implement the plan drawn up in the budget of last year. In fact, we managed not only to
meet our targets but also to exceed them, in both the financial and the economic sectors.

Contrary to what some have been saying during the year, we have not created a social deficit, but we instead we
have created a large number of jobs, with the result that the unemployment figures have been considerably reduced
and this trend will continue. Also, despite the additional burden of substantial increase in oil prices, a steady rate of
growth of around 7% was registered in the local economy.

The financial deficit of Lm109 million that we had originally projected, will now be brought down to
approximately Lm95 million by the end of the year. This improvement occurred because we kept our
commitment to increase efficiency in revenue collection and because we were careful not to exceed our targets.
We are on the right track. We are proposing in this Budget yet another step forward through more discipline in the
use of our resources. This will take us further towards our target so that, in the shortest time possible, we will have
a financially viable position, a strong economy and a sustainable social system.
2. Confirmation of our aims and objectives


It is easy for politicians to think in terms of election periods with the sole purpose of seeking votes.

Experience shows us that this is the wrong approach.

Like any other organisation a Government has a mission to accomplish. The mission of any Government is surely
not that of making gains or accumulating funds. The mission of any Government is to create an environment that
provides incentives to its citizens to be more industrious. The mission of any Government is that of ensuring that
the distribution of the created wealth protects everyone within society from lagging behind. The mission of a
Government is that of promoting solidarity among all its citizens. This means that neither exploitation nor
scrounging will be tolerated.

We decide among ourselves the type of society that we want and we prepare ourselves for it. However, the cost of
this society will have to be borne by somebody someday.

We cannot, therefore, look at the decisions that we take, only from the fair and just way in which funds are
distributed. We also have to see that the funds necessary to finance this distribution are also raised in a fair manner.
We have to understand that what we need to collect relates to what we need to distribute. Besides we have to
ensure to what extent will the funds that we collect today are sufficient to meet present costs and what balance will
be left as a burden for the future. If such debt burdens would be covered by future investments then it would make
sense that such burdens are left to be met out of the yield from such investments. It will make no sense, however,
that we place debt burdens on those who come after us.
In my first Budget Speech in Parliament in 1992, I drew up our strategy and a number of targets that had to be in
place for implementation of the strategy. These were long-term targets.

I feel that now is the time to revisit these targets. This is because we should see what stage we have reached after
eight years. It is wise to ensure that what we have not achieved because of factors beyond our control, we renew
our commitment to achieve our targets.

I would want to revisit our targets also because, even lately, we have heard from those who, for their own end, speak
as they deem fit about these targets and try to convince others that we have failed in reaching them. The truth is that
we have made substantial progress.

The truth is that we have succeeded in registering progress has been registered on all fronts. We have implemented
most of the programmes which we had set out to implement. Action is required to attain the remaining targets.

We do well, therefore, to provide an overview of the results obtained which, besides being of satisfaction to us, will
spur us on to reach every other objective before us.

Thus,

Government‟s deficit is still above the 3 per cent of the Gross Domestic Product. Table 1, which I append to this
Speech, shows the recurrent imbalances and the structural deficit between 1985 and that in our forecast for 2001. A
recurrent surplus is foreseeable in the near future. Our revenue is at par with our recurring costs. No positive
balance, however, remains for future investment.




TABLE 1
The structural deficit as a ratio of the Gross Domestic Product has been brought down by half during the first two
years of this administration from the 11.7 per cent left by our predecessors to 5 per cent. There is still some way to
go, however, before we reach our target.

The rate of unemployment is higher than the 4 per cent projected in our target. This target was reached in 1996.
In October 1996, we left the unemployment figure at 3.8 per cent, but in October 1998, but when we were voted
back into government, we found that unemployment had gone up to 5 per cent. During these last two years we
have created new jobs and we are reducing unemployment to levels of below the 4 per cent as we had targeted.

Employment in the public sector has not yet been reduced, as we projected, to between 25 and 30 per cent of the
workforce. By the end of the year, however, the number of employees in the public sector will be brought down
from 39 per cent, as it was in 1992, to 34 per cent of the workforce. Our target remains to be that of privatisation
and creating jobs in the productive sector. In this way productive work will contribute to the creation of wealth in
the country and will reduce government expenditure.

In the agriculture and fishing sector there has still not been enough change in the work ethic leading to
modernisation. This is the only way that this sector can be strengthened and productivity enhanced. We would
wish, however, that many more operators would open up to innovative operational systems.




In Tourism, also, we have seen aggressive investment in high standard accommodation by the private sector. We
need to strengthen our resolve to develop our product within a structured plan. We have much to offer and our
country could be a favourite tourist destination both in summer and, even more, in winter. We have to make bold
changes in the strategy that needs to be in place in order to attract the right quality tourist and organise ourselves
towards achieving this objective. We observe with satisfaction that conference tourism has of late increased
substantially. This is a good example of what would be the best type of tourism for Malta.

We cannot say that we have contained the welfare gap. We have not yet succeeded in removing once and for all the
automatic trigger mechanisms that were created at a time when everything was centrally controlled and which today,
with the free market concept, are creating unnecessary pressures and great injustices. I shall speak later on about
this. One should mention, here, that those who point their fingers at us because we have not yet reached our target,
are those same people who, instead of working by our side to solve this national problem, instead put obstacles in
our path.

However, we have reached quite a good number of our goals:

The rate of inflation has been kept at between 2 and 3 per cent. We kept our promise to set up a Committee with
the three social partners to manage the Retail Price Index.

We removed a large number of price orders and plan to remove the rest soon.

During these past two years, the number of employed persons has increased by 3 per cent.

We have continued to focus on the training of workers and on the educational needs of our young people. Our
institutions have produced workers who are able to perform in a technological industry which produces higher
incomes.

All this has happened because Government‟s policy is not of competitiveness build on low-cost labour. We have
established an export sector for products and services based on highly qualified and well paid workers.

We removed the bulk buying system from all products except for wheat and cereals.

The prohibition on importation of certain products was removed and we put in place levies to protect those who
would be affected in the short term. The time is now ripe, however, to dismantle this temporary protection system.
Activity at the Malta Freeport has doubled compared to that registered in 1992.

Interest rates have been liberalised.

We have reformed the banking sector.

We introduced a Final Withholding Tax on bank interests. This measure has had a very positive effect on the
repatriation of funds deposited abroad.

We built a sound financial system which compares favourably with those of developed countries.

We introduced reforms in the taxation system.

We introduced the self-assessment system in the administration of Income Tax.

We introduced Value Added Tax.

We reduced the black economy.

We continued with the modernisation of the country‟s infrastructure in the economic, social, and cultural sectors.

We invested in the health sector through improvements and refurbishment at St. Luke‟s Hospital and through the
construction of a new hospital.

Another main target was the creation of a socio-economic order in the country. This is a never-ending process.
Our work should be a continual commitment so that our society moves forward in an environment that provides a
decent living to all. In this way, the Maltese people will be able to improve their quality of life and to pay for the
services of choice, which they expect, by right, to be of a quality at par with its cost.

We know that if this does not happen, the alternative would be for the public to pay for those same services from the
yield of direct or indirect taxes which would, therefore, stand to be increased.

Nothing comes for free.

Our vision of an efficient and free country converges with the policies of the European Union and should be
translated into the creation of more wealth and its better enjoyment.

This is what we still believe. This is the right direction for our country. The biggest investment in our children‟s
future lies in the efforts required to raise our standards to reach those prevailing in other E.U countries as soon as
possible. We should not be overcome by fear, selfishness and conservatism which would prevent us from reaching
our objectives. We are a dynamic and progressive nation and we have never been afraid to move forward.

We in the Government definitely do not shy away from a comparison of today‟s achievements as against the targets
set in 1992. We have made great strides and we intend to continue in this direction.
3. Year 2000 – Review of Public Finances


Introduction

The deficit is being controlled.

By the end of the year, the deficit is expected to be Lm95 million or Lm14 million less than what was originally
projected. This result was mostly achieved through an increase in the efficiency of tax collection in a forceful
manner during the year.

In November 1998, together with the budget documents for 1999, we published a plan of how we intended to reduce
the deficit to 4 per cent of the Gross Domestic Product by the year 2004. We also stated that we were expecting to
end up the year 2000 with a deficit of Lm122 million. These projections have been surpassed substantially.

Table 2 shows the position of the Consolidated Fund in 1999 and 2000 and the projections for 2001 as compared
with the projections for the same years that were published in the “Trends and Projections” which I mentioned
earlier.

Therefore, I think it would be useful if I were to give briefly an overview of our financial performance during the
year 2000.


Revenue

Total ordinary Government revenue is expected to increase from Lm595 million, as estimated at the beginning of
the year, to more than Lm611 million: an increase of Lm16 million. From this
TABLE 2
Table2
amount, Lm543 million will account for Tax Revenue while the remaining balance is expected to come from other
sources.


Income Tax

Revenue from Income Tax is expected to rise from Lm137 million, projected this time last year, to Lm150 million:
an increase of Lm13 million. We collected Lm22 million more than the previous year. The revision of income tax
rates announced in my Budget Speech for this year, contributed to Lm4 million from this increase. The drive for
timely payments on which the Inland Revenue Department focused in a revised Provisional Tax System for
companies and the self-employed, were the main contributors to this increase. The results of a re-engineering of the
working practices of the Department brought about increased efficiency.

During this year, Lm12 million will have been paid in refunds. Lm7 million was refunded in respect of base year
1998 in accordance with the new Self-Assessment System. In this way, all refunds that were due for that year are
now settled.

Another Lm5 million was also paid back as refunds from an „ad hoc‟ provision under the Department‟s Recurrent
Vote. These have reduced the pre-1998 arrears.

During the year, an analysis of the Income Tax returns for 1999 was undertaken. This revealed that no less than
30,000 forms contained under-declarations regarding interests received, income from the provision of goods and
services, sale of property, as well as income from employment and pensions. More than 1000 taxpayers have come
forward so far to amend their returns in order to benefit from reduced penalties according to the Income Tax Act.
Those who fail to comply with verifiable returns will be investigated and no consideration will be given to claims
for a review of penalties imposed.

A Tax Audit Section was set up in the Inland Revenue Department in order to examine Income Tax returns. This
examination is being carried out electronically so that faulty returns can be identified more easily and the type of
audit they would further require could be established quickly in order to ensure appropriate investigation.

Some investigations will be undertaken by the Tax Compliance Unit being set up to counter Income Tax, VAT and
Social Security abuses.

That Tax Compliance Unit is being staffed with professional personnel and appropriate information technology
infrastructure in order to be able to fulfil its functions more efficiently. This period of preparation was necessary.
Next year the Tax Compliance Unit will be fully operational. I emphasise that the objective of this initiative is that
we show by facts that the administration is well prepared to stamp out the tax evasion.

This should persuade everybody that it would be better for them to submit proper declarations.


Social Security Contributions

Social Security contributions are expected to amount to around Lm163 million as has been originally projected.
This year the contribution rates have been revised from 9 per cent to 10 per cent for employees while a uniform rate
of 15 per cent was introduced for the self-employed. The Inland Revenue Department, which is responsible for the
collection of Social Security contributions, has recently completed an exercise to identify those self-employed who,
during 1998 and 1999, failed to pay their contributions in part or in whole. Claims for the collection of these
arrears are expected to be raised shortly. The Social Security Act is expected to be revised in order to ensure that
all contributions are paid in irrespective of whether they are taken into account in the computation of pensions.
Additional contributions at 1 per cent per month will be claimed for late payments.


Consumption Tax
Consumption Tax is expected to provide Lm105 million or Lm5 million more than what was originally
projected. It should be noted that net receipts from consumption taxes in 1999 were Lm85 million. From this
increase, Lm6 million were due to the measures that were taken this year; the rest were the result of enforcement.

Various compliance measures are being enforced by the Department. Issue of fiscal receipts and keeping of
accounts are being monitored. The result can be measured in the increase in the compliance rate from 84 per cent
to 91 per cent for those who send in their VAT returns and their payment in a timely manner.

However, there is still much to be done, and during next year, we shall focus on strengthening the organisation and
the workings of this Department.


Customs and Excise

Revenue from Customs and Excise Duties and from Licenses, Taxes and Fines is expected to remain at the same
level as projected, i.e. Lm56 million and Lm69 million respectively. A drop of Lm1.6 million in levy on imported
goods has been offset by increases in Duty on Documents and in Motor Vehicles Registration Tax.

In the first ten months of the year, notwithstanding that the rate of duty on the transfer of property was reduced from
7 per cent to 5 per cent, we had an increase of Lm1 million in receipts. This was due not only to contractual
transactions increasing by more than 10 per cent, but also because the value of the property declared was more
realistic due to the controls enforced by the Department.

At the Customs Department, the Flexible Anti-Smuggling Team (FAST for short) was re-established. This is a
mobile squad which carries out extensive surveillance at various strategic sites around Malta and Gozo where there
is no fixed Customs presence. Moreover, the anti-Fraud Squad continued to receive further training. and plans are
in hand for training on counterfeit trade marks. New systems were installed to analyse data and control illegal
imports and to control the abuse against copy right.


Non-Tax Revenue

Non-Tax Revenue is also expected to yield about Lm67 million. This is some Lm1 million more than projected.
The net increase is being attributed mainly to higher dividends paid by the Malta Financial Services Centre and
Malta International Airport p.l.c.


Recurrent Expenditure

Government‟s recurrent costs this year are expected to reach almost Lm608 million, or Lm2 million more than what
was originally budgeted for. This increase is attributed to more interest costs on Public Debt arising from local
borrowing by Government in 1999 being paid this year instead of at the beginning of next year. The total Public
Debt servicing costs are now slightly more than Lm54 million and rigorous efforts are being made to borrow at
lower interest rates. This year, conversion issues of maturing Stock were issued at lower interest rates and this
continued to reduce public debt costs.


Personal Emoluments

The cost of personal emoluments, inclusive of allowances, overtime and Government‟s share of social security
contributions as employer is expected to be almost Lm172 million or Lm1.3 million less than originally
budgeted for. This is mainly due to a number of vacant posts not being filled during the year.


Operational and Maintenance Expenses
The costs for operations and maintenance are expected to increase by Lm4.4 million to Lm48 million. One major
factor that contributed to this net increase was the ever-increasing cost of medicines and medical equipment for
which this year no less than Lm14.4 million is being spent - Lm2.4 million more than originally estimated.


Programmes and Initiatives

The total cost value of programmes and initiatives is expected to reach Lm303 million for this year which is Lm2.6
million less than was originally estimated. However, there were higher costs registered in some areas but
substantially lesser expenditure in other areas. The financing costs of Church Schools went up in this year by Lm1
million to Lm8 million.

There were Lm1 million less payments made for Children‟s Allowance, due to the detection of means testing
abuses. In January this year, the Department of Social Security set up a Section to investigate abuses and fraud
with the purpose of ensuring that benefits would be paid to those who really need them. This initiative will be
consolidated during next year because there is a need for achange in mentality by those who are always eager to
cash in on benefits to which they are not entitled.

Lm1.9 million less will be paid by the Treasury in pensions. One possible reason for this was the fact that less
people retired this year, particularly for health reasons. 87 persons had retired by October this year as against 224
who retired in 1999.

Lower payments of Lm3 million will be made by the VAT Department by way of refunds, due to the payments
being effected by the VAT Department as provided for by the legislation.


Recurrent Surplus

This year we shall end up with a Recurrent Surplus of Lm2 million. This achievement gives us great satisfaction
when we were expecting to end up with a Recurrent Deficit of Lm11 million.

It would be useful to remember that the recurrent deficit in 1997 was Lm25 million. This more than doubled to
Lm54 million the following year under the Socialist Administration. In the two years of this Government we will
have advanced to the recurrent balance Lm56 million.
Capital Expenditure

Even in Capital Expenditure we have exercised strict control and this year costs are expected to be at par with those
originally projected. There were substantial payments made, such as an additional Lm1 million reimbursement for
the amount paid by Malta Freeport Corporation on behalf of Government in connection with the Kalaxlokk
workforce; and an increased Lm2.6 million paid out by the Government Property Division in connection with
compensation for land expropriation.

These higher payments were more than offset by lower payments, amounting to Lm3 million, being made than those
originally estimated on the construction of the Tal-Qroqq Hospital.

The construction of the new hospital was given decisive momentum when the Foundation for Medical Services,
after one full year of negotiations, signed the contract for Design and Build on the 29 February of this year. We
are confident that the new completion targets will be met and the new hospital inaugurated in the year 2003. The
Health Division is leaving no stone unturned in its efforts to reform the necessary management systems by that date.
By next year, we shall be drawing up plans for the move from St. Luke‟s to tal-Qroqq.

Less expenditure was carried out by the Public Transport Authority where an allocation of Lm1 million provided for
the payment of subsidy on the renewal of public transport buses is unutilised until an agreement is reached on the
best way forward for the implementation of the project.
In the Education Sector, works on various buildings within the University were completed including new Lecture
Centres and Halls, the extension of the Biology Department, Chemistry Building, the Maths and Physics Building as
well as the Administration Building. These works and the installation of various equipment and I.T systems
purchased mainly from funds provided under the 4th Italo-Maltese Financial Protocol cost Lm2 million.

Other expenditure of more than Lm800,000 was used for work on the rehabilitation of Bighi Hospital so it will
house the Malta Centre for Restoration as well as for the procurement of equipment for the same Centre. All
financing was from funds under the above Protocol.

More than another Lm600,000 was spent on works connected with the Malta College for Technology, Applied Arts
and Sciences.

Construction and adaptation works as well as refurbishment and maintenance of State Schools cost no less than Lm3
million this year. Another Lm1 million will be spent on the extension of Information Technology in State Schools.


The Position of the Consolidated Fund

The position of the Consolidated Fund by the 31st December 2000 is expected to show an ever-reducing budgetary
deficit of Lm95 million - down by Lm14 million from the deficit of Lm109 million that was originally projected for
this year. This deficit of Lm95 million represents 6 per cent of the Gross Domestic Product estimated for this year.
This is an improvement of 1 percentage point from the budget of November last year.

This is a satisfactory achievement and shows that we are addressing the situation of the financial deficit with
honesty and integrity. It also shows that, although there were some who disheartened and got discouraged, we
continued on our road ahead with courage and with fortitude, consistently and persistently.

A financial statement of the Consolidated Fund showing the actual closing balance for 1999 as well as comparative
statement between the original Approved Estimate for the year 2000 and the Revised Estimates are appended in
Table 3 which I request the House to be taken as read. Reasons for variations between the Approved and the
Revised Estimates are given in the statement attached to this Speech.


Privatisation

During the year 2000, after discussions were held on the White Paper published on the subject, a unit was set up
within the Ministry of Finance to manage the process of privatisation.

Preparations for the privatisation of the Freeport started in earnest and are now at an advanced stage. We had
hoped to conclude this project during this year, but certain organisational aspects held us back. We are hoping that
the necessary consultations and all procedures will be finalised in the first half of next year.

The work of the Privatisation Unit did not stop there, however. During the year it initiated intensive studies on
other possible entities for privatisation. The preliminary studies on the Public Lotto Department, the Mediterranean
Offshore Bunkering Company, and the Malta International Airport plc, are at an advanced stage and the
privatisation process of these entities will start early next year.




Table 3
The programme for the sale of 25 per cent shareholding by Government in the Bank of Valletta plc will be
announced very soon.

The effect of the liberalisation of telecommunications on Maltacom plc and on the progress of its subsidiary which
provides for mobile telephony are being observed so that the sale of Government‟s 60 per cent shareholding can
eventually take place. This process may also start during 2001.
 The Economic and Monetary Sector


The Local Economy

The financial sector can hardly be separated from the economic sector of the country. During the year 2000, the
economic trend of the country increased at a sustained rate. It is estimated that the national product will have
increased by 7 % nominal and in 4.3 % in real terms.

In the debate which followed the last budget, certain people came up with the idea that a social deficit would be
created – a slogan that kept being repeated like the shrill sound of a trumpet. In order to support their claim they
spread rumours that unemployment would rise.


Labour

In fact, employment opportunities were created, a large number of work opportunities. During the year up to
September 2000, 3,343 full-time and 3,750 part-time jobs were created.

These full time jobs became available primarily in the private sector and more than half of these were taken by
women.

2,095 new jobs were created in the services sector which is consistent with the trend experienced by developed
countries in the past years. In the production sector, an increase of 1,280 jobs was registered of which 570 were in
manufacturing and 592 in construction.

The number of part-time employees has now reached the figure of 36,687. The number of part-timers who found
full-time jobs increased by 4.9%, while the number of person who have only part-time jobs increased by 18.1% and
has now reached 19,105. When these statistics are closely examined, it clearly emerges that there is now more
flexibility in the labour market and more people, especially women, are seizing the opportunities provided. In fact,
the major part of the increase in part-time workers is attributable to women who have succeeded in reconciling their
family responsibilities with their job demands.

The factor of working women is also noticeable in the increase registered in the labour supply. As job opportunities
are created, the Maltese economy will be able to exploit fully its human resources for the wealth and welfare of its
people.

Unemployment went down by 1,417, and today the figure of6,594 on the employment register represent 4.4% of the
labour supply. This constitutes a substantial decrease from the figure of 5.5% in September of last year.


The Gross Domestic Product

In the first nine months of the year 2000, the gross national product increased by 7.0% in nominal terms and 4.3% in
real terms. This increase was achieved despite the pressure exerted on the economy by higher oil prices. In fact,
we can attribute this increase to investment in machinery and to a higher volume of exports in the form of products
and services.




Manufacturing

Sales by the manufacturing sector were 28% higher than in the first nine months of 1999. This was the result of a
35% increase in exports, mainly of communications equipment and other machinery. In the nine months up to
September 2000, exports went up to Lm688 million. This increase in production was also the result of substantial
investments made in this sector amounting to Lm56 million, a level which is more than double the amount of last
year.


Agriculture and Fisheries

The value of agricultural products sold through the Pitkali markets amounted to Lm5.4 million. In the case of
fisheries, a drop of 1.2% in the quantity of fish sold through the fish market was registered, while fish exports
increased by 14%.


Tourism

In the Tourism sector a slight drop in expenditure by tourists from Lm290 million to Lm204 million, which may be
because of the weakness of the Euro, was registered in the first nine months up to September. The number of
tourists visiting Malta remained the same although the number of nights spent was less. However, the average
expenditure per day during a tourist‟s stay increased from Lm22 to Lm25. The number of full-time workers in
this sector also increased by 198 and now stands at 9,963.

As stated earlier, it is important that we concentrate our efforts on those characteristics that distinguish us from our
competitors. We have has a lot to offer which other countries do not have. Malta as a tourist attraction can be
further developed so as to make it a favourite destination for prospective tourists both in summer and winter.


Financial Services

The financial services sector made great strides forward during the year and a number of initiatives were launched
which are bearing fruit. The increase in activity in the area of financial services has already been referred to. But
apart from these activities, this Centre has collaborated with the Ministry of Finance to start developing activities
connected with e-commerce. In fact, a number of back office operations were established which are providing a
strong added value in the economy through the creation of direct and indirect jobs.


The Freeport

In the first nine-months of the year 2000, the Freeport managed more than 700,000 containers, which is around 5%
less than the number managed in the corresponding period last year. There is an absolute need of a concerted effort
on the part of all employees in this corporation to increase productivity and thereby attain a higher degree of
competitiveness, the more so in the light of the strong competition from other freeports offering for the same
services offered by our Freeport.


Inflation

The inflation rate as established by the Retail Price Index Management Board was pegged at a level of 2.7% at the
end of September. In September, 1999, the inflation rate stood at 1.7%. Based on the level registered this year, the
cost of living increase was established at Lm1.50 per week.


Balance of Payments

During the period January to September, 2000, exports increased by Lm202 million to Lm776 million. Out of this
increase, an amount of Lm186 million is attributable to exports of locally manufactured products which has now
reached the figure of Lm703 million. A substantial increase in re-exports was also registered.
Imports increased substantially and reached a figure of Lm1,079 million. Imports of capital goods increased by
62%, reflecting investment made during the year. Importation of industrial products also increased by 35% mainly
as a result of increased activity in manufacturing, whilst imports of consumer products increased by 7%. The value
of imports of petroleum products amounted to Lm77 million more than last year.

This contributed to a widening of the commercial activities balance by Lm72 million to Lm303 million. The
Balance of Payments now shows a negative balance of Lm89 million.


Monetary Assets

Monetary assets at the end of September 2000 amounted to Lm2.5 billion, that is Lm122 million more than the
previous twelve month period. Money in circulation increased by 4.4% or Lm17 million to reach a figure of
Lm394 million. Fixed bank deposits went up by 6.6% to Lm1.3 billion. Deposits in Savings Accounts amounted
to Lm607 million whilst deposits in Current Accounts reached Lm216 million.
All in all, there was an increase of 5.1% in monetary assets this year as compared to a rate of 9.2% last year. This
difference reflects the far wider choice of investment opportunities available to the Maltese public. The time when
the only opportunity of investment was a bank deposit is now long past. Nowadays, the Malta Stock Exchange is
offering many investment opportunities varying both in terms of return on investment as well as risk. In the first
nine months of the year 2000, depositors‟ funds in Collective Investment Schemes nearly doubled to a figure of
Lm411 million.

I feel it is opportune at this stage to warn stockbrokers and other personnel connected with the Stock Exchange to
act in a prudent manner. It is the duty of those who deal in the sale of stocks and give advice to explain to
depositors all inherent risks in the investments on offer. On the other hand, depositors should ensure that they
receive all the information they require. In the area of monetary expansion one may highlight the fact that bank
loans to clients increased by 13.1%, slightly more that the rate of 12.5% registered last year. At the same time,
Central Bank reserves increased slightly to Lm698 million.

During this year, the banks implemented the directive by the Central Bank to discontinue bearer accounts. This is
proof of the Government‟s determination to ensure that banks operate at the highest standards when combating
money laundering.


The Monetary Sector

Price stability will remain the objective for the Central Bank. This is tied closely to the policy adopted by the Bank
with regard to the value of the Malta pound.

Given that the Maltese lira is tied to a basket of currencies made up of the EURO, Sterling and the US Dollar, it is
imperative that our inflation rate does not vary from the inflation rate in the countries using these currencies;
otherwise pressure will be exerted on Malta‟s balance of payments. The relationship between the basket of
currencies and the currency and the inflation rate should strongly influence our wage rates and prices.

Given that the weakness of the EURO could have kept inflation rates low during the year, it was felt that the Central
Bank should retain the same rate of intervention as last year, that is, 4.75%. Last April the interest rates within the
Banking Sector were completely liberalised, resulting in the creation of new products within the market. Given that
competition was intensified by means of this liberalisation, interest rates on house loans were lowered.

Investment was also positively influenced by the stability of interest rates, helping Government to carry out Stock
conversions at lower interest rates.


Developments within the Financial Sector
The financial sector kept on expanding during the year. In fact, various institutions, especially those involving
Fund Management and Insurances, introduced various financial services and investment schemes. This enhanced
financial activity within the Stock Exchange where there was a significant increase in the number of quoted
securities.

Various private companies were able to raise funds in the capital market by offering shares and bonds in their
companies. The financial market is developingin the proper direction. Other companies are creating investment
opportunities for the public by selling their shares. Maltese companies need to list themselves on the Maltese
Stock Exchange to increase their share capital and not their indebtedness.

During the year Government financed its needs by means of Treasury Bills and as promised last year no new stocks
were issued. This strategy allowed Government to test the short term market.

Government also tested the marketbyissuing the Privatisation Bond, offering preferential shares within companies
due to be privatised later on next year instead of interest payments. It is evident that interest rates play a very
important role within the Maltese market.

The Central Bank issued two new licences allowing the operation of new banks within our shores. The Maltese
Financial Services Centre had considerable success in the issue of new licences allowing companies offering
collective investment schemes and financial services to operate locally. No less than 409 companies registered with
the Financial Centre during the first nine months of the current year, an increase of 60 companies on the whole of
1999. Funds and subfunds licensed in Malta more than doubled during the nine months in question; increasing
from 132 to 298. Besides, 18 new licences were issued to operators of financial services.

Government is doing its best to develop the financial sector and ensure its stability and strong performance. Thus,
the regulators within this sector, the Central Bank, Malta Financial Services Centre and the Stock Exchange will
continue to monitor the situation as well as to ensure that standards are continuously updated. For this reason, the
Malta Stock Exchange introduced trading regulations regarding individuals who have access to sensitive
information. The Central Bank and Malta Financial Services Centre issued new regulations regarding the
prevention of money laundering. These two institutions are also working on establishing schemes to protect
investors within the financial sector. This should enhance confidence within the financial system.

One should also mention Malta‟s resignation from the Offshore Group of Banking Supervisors (OGBS). Given that
Malta has not issued permits to offshore companies since 1996 and that the few remaining companies will definitely
cease to operate during 2004, it was felt that Malta should not retain its membership of this organisation.

Various countries are creating what is called the Financial Intelligence Unit to intensify the struggle against money
laundering. The Unit co-ordinates information and activity within the financial sector as well as, within other
econmic sectors and within agencies whose function is to enforce the law. The Financial Action Task Force,
established in 1989 by the G7 countries and currently considered to be the main international organisation against
money laundering is ensuring that the Financial Intelligence Unit be set up and function efficiently. This process is
being carried out by means of various assessments in all countries. Countries which do not adopt these standards
are considered to be lacking the necessary controls, and consequently other countries may not allow their citizens to
invest in such economies.

A working group made up of representatives of the Central Bank, Malta Financial Services Centre, the Police and
the Attorney General‟s office has been set up to adopt the above recommendation. The group has prepared a report
which should be the benchmark for the setting up of a Financial Intelligence Unit in Malta. The necessary
legislation will be finalised during 2001.
The World Economy

Malta‟s econmic development is hightly dependent on economic activity in other countries. Past experience has
taught us that Malta cannot isolate itself from the global economy. When we tried the results were indeed negative.

 What is happening in the world‟s major economies?
The International Monetary Fund is rather optimistic about economic growth in developed countries. In fact,
economic growth is expected to increase from 3.2% in 1999 to 4.2% in 2000. Such growth is the result of
economic growth in the USA and Europe as well as economic revival in Japan. However, at the same time the
International Monetary Fund is also warning that various factors could threaten this process of economic growth.
An imbalance exists among growth rates of developed countries, together with large difference among major
currency rates, especially between the US Dollar and the EURO. Another factor which could cause concern is
characterised by the high interest rates within capital markets, especially the US.

The International Monetary Fund is also giving attention to various uncertainties concerning the level of monetary
control that is required to be exercised so as to control inflation in the United States and increases in the price of
fuel, which together are increasing risks and maintaining uncertainties on the economic expansion of advanced
countries.

In this context, the International Monetary Fund is forecasting that, for the year 2000, the rateof expansion in
advanced economies will decrease to 3.2%. In the meantime, it is envisaged that the rate of inflation this year in
developed countries will go down from 2.3% to 2.1% in 2001. The unemployment rate is expected to decease from
5.9% to 5.7%.
5. Economic Direction

The substantial leaps forward we have made this year fill us with satisfaction but not with over confidence. They
do, however, instil in us further belief in our ability. They will strengthen our resolve to increase our efforts to
move forward to reach our objectives. Next year, our economy is expected to grow by 7.2 per cent.

The world is getting smaller although it is not decreasing in size. Every corner of this world is becoming more
accessible within a short time. This is globalisation, which will certainly affect us. Whoever thinks that he can
remain ensconced in a shell without giving attention to what is going on around him as well as beyond, he would be
on the way to ending up out of business. Globalisation means access to previously inaccessible markets, access to
services and products which either were previously unknown to us or were prohibitive to use them. This means a
different commercial organisation, a price structure which is changing, and inter relationships between economic
and commercial operators which developed quite rapidly.

Globalisation could be of great benefit to us as it would reduce the disadvantages of size and distances. The global
economy would help in identifying and putting together niches of specialisation that would indicate to us viable
business opportunities. This is the European vision. Our country has to be a relevant member of the European
Union. It should participate actively in the shaping of the social and economic order being developed and draw up
a code of behaviour that would bind everyone‟s actions in this era of globalisation.

It is important that our economy would be one of the most competitive. We should exploit and make the best use of
all our resources. We should not allow, in front of our own eyes, pockets of inefficiency which sap the energy of
all the country. That is a better form of liberalisation. That is why we are embarking upon privatisation.

Throughout the coming year, the process of liberalisation will be continued. In the production sector, levies will
continue to be decreased as announced. We are already giving assistance where necessary to those industries which
have been operating behind the shield provided by levies to make the necessary changes, not least, in the change of
the existing operating culture, in order to enable them to operate in a competitive market which places choice right
in the hands of the consumer. The consumer, who has every right to expect both quality and a fair price. In the
financial sector, we will continue with the process of exchange control liberalisation as will be explained later.

We would keep insisting to ensure that Government operations will be limited to what is strictly Government‟s
responsibility. The economic operators should be left as far as possible in the hands of the private sector which
operates with more efficient criteria, with more flexibility and at a faster pace. Even here, the social partners who
form part of the MCED may participate so that formulation of this reform may be drawn up in a proper way to
everyone‟s benefit and as smoothly as possible.

Later on, I will be speaking about initiatives that emerged from discussions at meetings of MCED, like, for example,
benchmarking in the public sector, private public partnership schemes and a scaling down of bureaucracy. This
would strengthen the rhythm of economic development, reduce public expenditure and ensure value for money in all
the public sector operations.

The law that was recently enacted by Parliament concerning the control of electronic information, as well as the
White Paper regarding E-commerce will lend themselves useful for Malta to be considered as a country equipped
with the necessary legislation in this area. This forms the primary basis for expanding E-commerce in our country.
This sector, like the financial services sector, would draw to our country such an activity with a high level of added
value.


Small Enterprises

Small enterprises are a significant factor in the economy‟s expansion, not less in our economy. In Malta, we have
thousands of small enterprises which provide work for thousands, both entrepreneurs and workers. These
enterprises have a very important role as they can offer flexibility for bigger entities and provide services and
products which bigger enterprises cannot provide economically for themselves. They also carry out another
important function in the local market when offering personal services and specialised products where required.
Nowadays, the small enterprises sector is undertaking activities related to the new economy. Those involved in the
field of information technology, E-commerce, and communications should be given every assistance to enable them
to expand.

This Government has acknowledged the importance of this sector and set up a secretariat for this purpose.
Intensive work is being undertaken in consultation with this sector to improve the environment in which these
enterprises operate.
Work programmes are being finalised which would cater for the improvement of facilities under which small
enterprises operate within the context of the Private Public Partnership initiative. This includes the Crafts Village
Project at Ta‟ Qali. We are providing Lm350,000 for the improvement of the infrastructure in industrial zones
which do not fall under the responsibility of the MDC, as well as the development of an industrial zone so that a
small enterprise may have the necessary space in which to operate.

Small enterprises will be afforded preferential treatment under the Promotion of Business Act which will replace the
Industrial Developments Act.

During the year 2001, the revision of all bureaucracy procedures will be continued in order to release the pressure
and curb expenses which excessive bureaucracy entails. A small business unit has already been set up within the
Secretariat of the Ministry of Economic Services which has started examining existing procedures. This reform has
to be introduced with the cooperation of the sector itself.

The streamlining of bureaucracy should not be interpreted as a licence for a free for all. It means that higher
standards, discipline, seriousness and respect towards the consumer have to be strengthened.

One has to address the prevalent notion in the mind of the public that the small enterprise operator generally evades
paying tax and receives benefits to which he is not entitled. This notion in the mind of the people can only be
changed by appropriate action on the part of the business operators themselves, that is, when levels of reporting of
business activities and profit would not remain in the world of make believe.


Manufacturing

It is essential that the manufacturing sector continues to expand in those areas which contribute to the highest value
added possible. It was always the policy of the Government to ensure that our limited human resources be
concentrated on activities that create greater wealth.

Through IPSE, assistance is being given to the manufacturing sector, especially small enterprises, to help them raise
their standard to be in a position to compete and flourish in a free market environment. I repeat, there is no other
way. Anyone who is trying to induce some people to believe that they can continue to survive behind the shield of
protection is misleading them.

A draft law will soon be put before Parliament which will change completely the package of incentives. The new
package will be wider in scope than the one existing at present, and while focusing more on the sections which need
to be strengthened, would at the same time be more flexible. It should also provide more support to small
enterprises.

We strongly believe that this would attract more investment in the manufacturing sector. One has to emphasise that
investment is attracted to areas where there is no risk. The climate of controversy about the European Union is
considered internationally as a risk that hinders investment. Next year, the export sector is expected to expand.
We expect as well that the reform in the sector of enterprises catering for the local market would result in better
utilisation of resources and should increase efficiency. This would contribute to increased expansion in this sector.


Construction
Activity should be increased in this sector during next year. Projects that were in progress this year should start
functioning. This will provide opportunities to other economic sectors especially if the bartering system used in
this sector will not continue.


Tourism

In last year‟s budget speech I emphasised that tourism, which is very important for Malta, should find new markets
and new openings. The Malta Tourism Authority which was set up last year made a full evaluation of our tourist
product in preparation for the programmatic changes that are to be made in this sector.

It should be stated that there was a strong response towards investment from the public sector so that we can say that
today we have better accommodations.

In the MCED meetings we have discussed the need that the whole country should upgrade in every section in order
to depend less on that type of tourism that is managed by large operators that are continuously getting stronger by
eliminating each other. We need a good product. We need a product that is familiar to the foreigner. The tourist
comes to our country because we welcome him and show him hospitality. Malta should give him good value for
every pound he spends; it is clean and organised; where he feels safe and enjoys himself. The tourist expects all
this but not by selling our country at a cheap price or at a discount.

After having listened to the representatives from the tourist sector, we have decided to postpone, even this year, the
increase in the VAT on tourist accommodation that we intended to introduce in 1999. We have also decided that
Government should join the Private Public Partnership in this sector so that projects for the development of products
that we think should strengthen our tourist infrastructure, should be taken in a viable way. We want to make Malta
a favourite tourist destination even in winter.

We have noted that the market for conferences is on the increase and this augurs well for us. This helps us to
acquire a better balance in hotel accommodation all the year round.

Although it appears that this year, like last year, more than a million tourist will visit us, we need to strive harder to
attract higher spending tourists.


Financial Services

Our financial services are getting stronger . Being scrutinised by international organisations such as the OECD was
of great help to us this year. It resulted that Malta is adapting a system and procedure which is acceptable in money
laundering, regulation and supervision and a taxation system. We still need to ameliorate. The Financial Services
Centre, with the help of other operators in this sector, is taking care to see that the necessary changes take place
gradually, in the opportune time, in the best way and without creating any problems.

The Centre is also revising all the legislation under its responsibility to ascertain ourselves that it is adjourned to the
present and future. After completing this exercise and after consultations with the Opposition and the parties
concerned, amendments will be moved in Parliament.

We have succeeded in reaching a high level of cooperation among everybody in this sector. If we are to move
forward and rapidly in other sectors, we should follow this example to reach the same type of consensus. In this
way we will be using all our energy to construct and not argue.

From time to time, the Financial Services Centre develops new products that can be managed from Malta to the
international market. This year it developed the Professional Investor Funds. Lot of activity is taking place so that
by the end of this year or the beginning of the next, another product will be introduced – the Retirement Investment
Fund.
Shipyards

The shipyards sector will still be considered as a big problem to us. Many are of the opinion that this sector is
extracting most of our resources. Most say that this should stop and these resources should be better used. Some
call us cowards as we do not take these drastic decisions. Today some people even use the shipyards as a good
excuse to clear their conscience when evading paying taxes due by them.

But those who look at the complete picture in the country as we see it would know that the drastic solutions that they
propose are not real solutions. These solutions do not have the financial impact which those who propose them
perceive and would greatly damage the social framework in our country. These enterprises should undergo a huge
restructuring. Those who are involved in these enterprises should make their best to lessen the burden on the
country. Every worker in this country is paying a cost through his taxes so that the shipyard will continue in
operation. Much less should someone expect that the country should disrupt its future and that of our children for
the privilege to continue to subsidise the shipyards forever.

During the discussions that we had at the MCED in preparation for the Budget it was rightly argued that all
subsidies to the shipyards and other enterprises should be conditioned to improvements in productivity and paid out
in a structured manner that would lead to viability.

Discussions have been going on for sometime in order to draw up such a plan. It is hoped that these discussions
will be completed as early as possible so that we can start on the implementation of a definitive financing
programme that would also cover past losses which are at present being shown as loans.


The Freeport

During this year the Freeport has gone through a period of consolidation so that the second terminal which was
recently constructed could start operations at the higher level of efficiency. There was more employment and more
extensive training was given to the new workers as well as others who had already been on the books of the
enterprise. Negotiations also took place with the union about the method of how the port workers would operate
within the Freeport.

Everything shows that next year the Freeport will attain the necessary efficiencies that would put it in a position to
attract new clients who would provide the necessary volume of work that would ensure the best profitability levels.

The process of privatisation of this enterprise will continue. Although it has not been completed this year as
desired, we are doing our best in order to conclude this process next year.


Inflation

As I have already said at the beginning of the speech, Government considers the control of inflation as the principle
objective of economic strategy. The process of liberalisation, most of all the removal of levies and the liberalisation
of the telecommunications sector, should lower the prices of relative products and services. The decrease in the
deficit helps to control inflation. Inflation which this year is expected to reach 2.8 per cent, should decrease to 2.5
per cent in 2001.


Employment

Above all, we are committed to providing employment. To us, the most important social service that we can
provide is a decent employment to workers. To us, the fact that a worker is in a position to change his job in order
to improve his position, to achieve job satisfaction or better conditions of work is the biggest power we can give
him. The ability to create work distinguishes us from those who only talk about it. We are expecting that by the
end of this year unemployment would have decreased to 4.3 per cent. In 2001 we want to lower unemployment to
4 per cent.
The Monetary Sector

During next year we plan to put before Parliament the necessary legislation to continue to empower the Central
Bank to monitor the political monetary sector of the island. With this in mind, the functions of the Central Bank
shall be revised and the manner in which the Governor and Directors are appointed or removed from office is going
to be amended so that the Board of Governors can act more freely. This legislation will also give the Bank more
power to supervise the payments system and to collect information and statistics from operators in the financial
sector. These changes will place our Central Bank in line with international standards.

The determination of the rate of exchange will still be decided by Government, even though, as happens at present,
this policy is formulated in consultation with the Central Bank. We do not intend to change our policy whereby we
stabilise our currency by dealings in the basket of foreign currencies. However, we do not exclude that if we
foresee an economic advantage for our country, the basket will be revised so that our currency will work closer with
other currencies belonging to countries with whom we are doing business or competing against.

While this year we have totally liberalised the rates of interest, we shall now concentrate on the transactions in the
capital account of the balance of payments. Although we understand the benefits that our economy will derive
from the total liberalisation of the rates of exchange, we shall go gradually about it to ensure that liberalisation is
effected when our financial system is being strengthened by the introduction of adequate regulatory and supervisory
provisions.

The Central Bank was cautious this year in its evaluation of the liberalisation effected last year. It resulted that
although there was an increase in the amount of money sent abroad mostly for investments, our financial system was
able to support it. In fact, as I have already mentioned, the balance of reserves did not decrease in spite of this and
the pressure of higher rates for the purchase of oil.

Therefore Government, acting on the advice of the Central Bank decided to move further in this process of
exchange control liberalisation to effect Government‟s objective of gradually removing all exchange controls
restrictions on the movement of capital. I shall now announce a series of measures that will come into effect on 1st
January 2001.
6.       Further Liberalisation of Exchange Control

The measures that we shall be taking are aimed at relaxing quantitative limits on remaining current payments and
capital transactions subject to control.

The Central Bank and authorised dealers will approve or effect the transactions only after the requested
documentation is provided to them as evidence of the purpose of the payment. It will be the responsibility of the
authorised dealers to ensure that the appropriate reporting forms related to certain transactions are no longer subject
to exchange control approval and that all regulations regarding the prevention of money laundering are strictly at
year two.

Full details of these changes that will come into effect on 1st January next year, are appended to this speech at
Statement A which I request the House to be taken as read. The main points are the following:

The limit for travel purposes is raised from the present level of Lm5,000 per person per trip to Lm10,000.

The limit for payments in connection with cash gifts is raised from Lm5,000 per adult person each year to
Lm10,000.

The purchases of foreign currency for export by residents who intend travelling overseas to make merchandise
payments is raised from the present limit of Lm20,000 to Lm50,000.

The importation into Malta by any resident/non-resident of any notes and coins, which are or have been legal tender
in Malta, is raised from the present level of Lm50 to Lm1000. The exportation from Malta from any
resident/non-resident of any notes and coins, which are or have been legal tender in Malta, is raised from the present
level of Lm25 to Lm1000.

The amount that residents are permitted to invest in real estate overseas is raised from the present level of Lm50,000
per year to Lm150,000.

The foreign portfolio investment allowance for residents is raised from the present level of Lm15,000 per year to
Lm30,000.

Fund investment schemes (SICAVs) which collect funds in Maltese liri from resident with the specific aim of
investing such funds in Maltese lira denominated securities on the local market are permitted to invest up to a
maximum of 5% of these funds in foreign assets.

Residents may retain up to Lm10,000 foreign currency instead of the current limit of Lm2,500.

The amount that a resident person may maintain in a foreign currency current (demand) account with local credit
institutions is raised to Lm10,000.

Bodies corporate and local retail outlets are permitted to maintain with local banks demand, savings and time
deposit accounts in foreign currency. The aggregate amount that may be placed in such accounts is being extended
from six months to one year but should not exceed Lm10,000. These accounts may only be credited with foreign
currency earnings generated through their business activities.


Lending extended by residents to non-residents is liberalised completely subject to the condition that such lending is
for maturity periods of over one year. Banks can now make loans to foreigners on economic activities in Malta even
on Capital transactions in the local market as long as this is for more than one year.

Borrowing by residents from overseas and the granting of guarantees by non resident in favour or resident are
liberalised completely. Furthermore, all limits on the amount of transfer of assests by residents in the event of
emigration, are lifted.
The following transactions have been completely liberalised –

All restrictions on payments by residents in respect of endowments to bona fide foreign institutions (that is
educational, charitable, cultural etc) are removed.

All transfers by resident persons in respect of dowry payments.

All restrictions on payments in connection with the settlement of debts by immigrants in their previous country of
residence are removed.


Repatriation of Capital

Residents may repatriate, through local credit institutions/financial institutions, funds invested overseas without the
need to submit declarations that such funds were registered with the Exchange Control Authorities. This does not
imply that such repatriated funds are exempted from any legal obligations in terms of the Income Tax Act and the
Prevention of Money Laundering Regulations.

These measures should continue to reduce drastically bureaucracy still existing in the economic operation of Malta.
7. Financial Estimates and Measures for 2001


During 2001, we shall continue to reduce the deficit. According to our estimates we are projecting that next year
we shall end up with a deficit of Lm83 million. This will represent 5 per cent of the Gross Domestic Product. We
expect to achieve this notwithstanding the fact that next year the cost of salaries and the social security benefits will
go up substantially.

During next year we will also attain our target of reducing our deficit by an annual Lm12 million. The stress will
be on the enforcement of tax legislation, on curbing tax evasion and on controlling Government‟s recurrent costs.
The Tax Compliance Unit is expected to be fully functional next year. The Departments concerned will be better
equipped to effect control and this should in time bring about a higher yield.

Our efficiency in tax collection is set to increase once the paying public understands that it should contribute fairly.
It is wrong for those who expect a lot from the country to collude with tax evaders. This is what actually happens
when somebody turns away or agrees not to ask for a receipt for the provision of goods or services. This behaviour
undermines our social system.

During the course of next year we shall be doing our best to control expenditure, even in small matters. We shall
ensure that management at all levels of the Public Sector understands the need for such control and co-operates with
us to succeed. The Directorate of Corporate Services within each Ministry will be strengthened. Between this
Directorate and the Directorate of Review which is being set up, every Ministry would have the administrative
capacity to formulate and implement new systems which would promote more efficiency from the expenditure side.

I repeat what I have stated over the years - that the largest portion of public expenditure goes towards wages and
salaries and social services.

Wages and salaries in the Public Service will now be increased considerably. In many areas these salaries compare
favourably with those paid in the private sector. More so, therefore, the tax-paying public will not allow abuses
from those who make out of a job with the Public Service a licence for skiving and a privilege for loitering.

The tax-paying public, therefore, expects that management at all levels within the Public Service realises its
responsibility and ensures that all their employees are giving a day‟s work. For that reason also, the general public
expects that all those who are paid public employees for their work should understand that they should be at their
place of work in working hours and not anywhere else.

Whoever has his country‟s welfare at heart should urge anybody whom he can influence to be more efficient at
work and give his country the full value for his pay. Shame on those irresponsible few who, because of their
partisan agenda, can persuade employees within the Public Service that they have some right to take without giving
back. Many state publicly their beliefs in efficiency, but sabotage those who industriously implement programmes
that promote efficiency.

The social services are another gaping hole in public expenditure. We reiterate that our interest is to secure social
services that are efficacious and efficient for everyone. „Everyone‟ should mean all those in receipt of such social
services at present and all those who will be needing such social services tomorrow and the day after tomorrow. It
is our duty to ensure this and that we meet this commitment.

We intend to stick to our projected deficit and we are determined to do everything necessary to realise these
projections.

We are determined to collect tax dues from all taxpayers.

We are determined to ensure that the social services in our country will go to those who really need them.

We are determined to stop waste in all areas.
We are determined to introduce efficiency in the Public Sector.

We are determined to implement all necessary reforms in order to bring about social justice in our country while
protecting the future of those who will come after us.

We are also determined to make everybody understand that for each one of us to be well off, the country must be
well off as well.


The Malta Council for Economic Development

We are aware that in order to reach these objectives there must be the widest possible consensus in the country on
what needs to be done. This is what happened in other countries like Ireland where from a huge deficit they today
enjoy a financial surplus and a rapidly growing economy. This could take place not only because Ireland, as a
Member State within the European Union, attracted aggressive investment but also because all the social partners
acted in cohesion.

Last year we stopped the practice which over the years saw the social partners making their individual proposals
before the Budget and then discussing bilaterally with the Minister of Finance. We agreed that it would be more
useful if these proposals were discussed by the social partners collectively. We understood that these consultations
would bring the social partners closer to all the problems in the country rather than those only within their own
sector. In this way they could appreciate better the aspirations of all the sectors.

This year, this consultation exercise was carried out more intensely. We started in July with informative meetings
about the financial situation as it was unfolding. After each organisation that had shown interest in participating
had presented its views, sub-committees were set up to which the social partners could invite experts. These
sub-committees discussed direct taxation, indirect taxation, public expenditure, subsidies, welfare, the Public Sector
and the Economy.

The objective was to analyse together the best way forward to curb the financial deficit, to consolidate the economy
and retain our social fabric. In this way, everyone interested could go into details within each sector, understand
the problems which were faced by the other sectors, and provide solutions which satisfied the broad band of the
country‟s aspirations and interests.

I feel that it was a meaningful exercise and that it has had a strong impact on the lines of action and measures taken
in this budget. This should not be interpreted to mean that Government was abdicating its responsibilities or that
the measures published in this Budget received full consensus. It does not mean either that Government would not
move one inch if any measure does not receive full consensus.

We witnessed how a positive attitude rather than an attitude of shouting, obstruction and violence can produce
results. As we have always held, it is our duty to discuss and to listen, and it is our duty to decide and take
responsibility in all areas – social, economic, financial and environmental. I wish to express my appreciation to all
those who have participated and contributed. We have learned a lot from this experience. We hope that everybody
learned from it as well.

Currently Government is thinking of how best to restructure the Malta Council for Economic Development which
will, henceforth, be called the Malta Council for Economic and Social Development. We plan to give this Council
a legal framework so that its function will be a statutory one. It will be more representative and its workings will be
better supported by technical and professional input.


Projections in Public Finances - 2001

Next year, we shall continue to address the situation in public finances. We shall be closing the year 2000 with a
Lm14 million improvement on what we were projecting and with a deficit of Lm29 million less than last year. In
the year 2001 we want to end up with a Lm12 million improvement over this year. Hence, the structural deficit will
be reduced to Lm83 million or 5 per cent of the Gross Domestic Product. The surplus between recurrent costs and
revenue will go up to Lm13 million.

As we shall see these targets are being set without the need for new taxation. Instead, this budget will concentrate
on expenditure control and on enforcement of tax legislation.
Revenue

Next year, Government‟s ordinary revenue will increase to Lm666 million, or Lm55 million more than the yield for
this year. Lm345 million is expected to come from direct taxation, that is, from Income Tax and Social Security
Contributions, and Lm254 million is expected to come from indirect taxes such as VAT, Customs and Excise and
from Licences, Taxes and Fines. The rest, that is Lm67 million, is expected to come from other sources.


Income Tax

Income Tax will continue to be the major source for Government revenue. It is projected that next year the yield
from this tax will be Lm163 million. This adds up to a quarter of the total ordinary revenue. This increase of
Lm13 million from this year will come about mainly from the application of existing legislation and from better
enforcement by the Tax Compliance Unit.

The reforms already in place have reduced the excess bureaucracy in the Department.

Not only is the taxpayer receiving better service but the Department can now more clearly focus on the details of the
returns received.

Receipts from Income Tax will also benefit directly from the economic growth, which is gaining strength after two
years of stagnation under the previous administration. There will be another increase as a result of the new higher
wages and salaries under the Collective Agreement for all Government Employees.

Also next year, that part of the Act relating to tax on fringe benefits attached to income from employment will also
come into practice. Guidelines will be issued on this. Then there will be a new measure by which income raised
on Schemes of Collective Investment on the Malta Stock Exchange will be subject to tax.

We are expecting that from each of these two measures, which will come into effect as from 1 January 2001 the
yield will be Lm3 million.


Fringe Benefits attached to Employment

When the Income Tax Act came into effect in 1948 it provided that fringe benefits attached to employment,
whatever their kind, were to be considered as income for their beneficiary. It seems, however, that from the Inland
Revenue Department‟s end there were some difficulties as to how these provisions were to be applied. I remember
times when these were applied very vigorously. But, perhaps because their implementation meant an
administrative burden on enterprise and on the Department itself, enforcement started to ease back. The result was
that risks and abuse crept in.

At the same time these were some law-abiders who declared their dues in full. Some firms opted to leave decisions
to the employees themselves.

As I said before, we intend to crack down on tax evasion and have equipped the Department with the means to do
so. We can either remove this provision completely from the Act or else enforce it.

The removal of this provision would open up greater abuse. Who would be in a position to control the workings of
personal emoluments between payment in cash and payment in kind? Who would draw the line and where?
We observe that there has been a considerable increase in instances of splitting of salaries so that their recipients
could risk avoiding tax in full or inpart.. We hear about instances where fringe benefits in cash add up to the
value to the salary. This is an ever-increasing abuse. Now fringe benefits are even erupting in Collective
Agreements. On the other hand, we do not wish that implementation of this legislation would be introduced in
draconian manner envisaged in the 1948 legislation. We have chosen to enforce, but with the issue of
administrative guidelines, which would simplify the system, a considerable reduction in discretion, the removal of
the tax on some benefits, the removal of the tax on some benefits, and implementation of the same criteria with
everyone. We are limiting the benefits that have to be declared as part of the salary. This means that other
benefits that according to current legislation are taxable, will no longer remain so. The Department will be
following developments and may change the guidelines as necessary. I want to emphasize that it would be proper if
the practice of negotiating these benefits will be discontinued and that compensation for employment is paid in cash.

The fringe benefits that will be subject to tax will fall into three main categories:

the provision by the company or organisation of a fully expense covered car. This does not include commercial
vehicles and vehicles in use solely for work purposes;

the provision of company assets among them places of accommodation, property, boats, etc, and their use;

the provision of other benefits such as payment of school fees, membership fees, hospitality allowances, etc;

The guidelines, of which I place a copy of on the table of the House, provide for the methods that we propose for the
purpose of evaluating these fringe benefits. I am also appending to this Speech a schedule of the method of the
evaluation of the benefits attached to a fully expense covered car provided by the company, as an example – Table
4.

In the case of companies who provide a scheme by which a service that it provides to the general public is given for
free or at a discounted price to its own employees, the cost of those services under Lm300 will be exempt. Such
instances occur in the case of discounts on electricity consumption by Enemalta employees discount on air tickets on
Airmalta employees, soft
Tabella Numru 4
loans by Bank employees, on discounts on telephone use by Maltacom employees, and on discounts on prices of
products produced by the employer or the company.

Some benefits that so far have been considered as taxable under the Act will no longer be considered as such. For
example:

the provision of telephony, fixed or mobile;

meals at reduced prices or for free in the canteen of the company or organisation;

the provision of nursery facilities for female employees of a company or organisation;

the provision of free transport to and from the place of work;

the provision of free uniforms;

the provision of personal computers for work;

payment of health insurance cover.

The fringe benefits that would be taxable for the recipients will be considered as costs for the company which it can
claim in its accounts. Those benefits that will not be taxable for the recipient will not be considered as expenses for
the company.


Withholding Tax on Collective Investment Schemes

During these last years, investment opportunities for Maltese investors have increased and, as we have noticed, this
opportunity is being fully exploited.

The main fiscal incentives for investors in this area are:

tax exemption of Investment Collective Schemes that are licensed under the Act for Investment Services;

tax exemption on capital gains that are made on the transfer of securities traded on the Malta Stock Exchange. This
exemption is given both in regard to securities of normal companies and to local and foreign shareholdings in
Collective Investments that are on the secondary listing of the Malta Stock Exchange.

We observe that an anomalous situation has crept in between those who invest on the Stock Exchange and those
who invest in Banks deposits. For example, if one buys Government Stock directly he will be liable to tax. If the
same individual invests in an Accumulator Fund which reinvests in Government Stock then tax is not levied. This
is not correct. It is time that all types of investments are treated equally. Therefore, income to local residents from
Investment Collective Schemes both if they are traded on the primary listing in the exchange and if they are traded
on the secondary listing of the exchange will be subject to tax. In order to make myself clear these will include
distributing funds as well as Accumulator Funds.

The Fund Manager, or the local representative in the case of a foreign fund, which has a primary or a secondary
listing on the Malta Stock Exchange, can register with the Inland Revenue Department so that Income to investors in
the Fund will be subject to a 15 per cent final withholding tax. If this does not take place then the Investor will be
required to declare the income in his income tax return.

All income earned by persons or companies that trade securities will continue to be subject to tax at normal rates.
These include:
persons who are residents of Malta and who conduct a banking service under the Banking Act; 1994;

persons who are residents of Malta and who conduct an insurance business;
every company that belongs or that is controlled, directly or indirectly by persons mentioned above.

While mentioning trading on the Malta Stock Exchange I must say that tax exemption on capital gains from
transactions made on the Exchange will remain in force. However, as in other instances, such as, for example,
property business, not every transaction on the Exchange is necessarily of a capital nature. Whoever is considered
as a trader by the Inland Revenue Department, his transactions are considered as commercial and not as capital and
therefore are taxable.


Benchmarking for the Purpose of Tax for Self-Employed Persons

We shall pursue our efforts against tax evasion. Statement B which I append to this Speech shows analytically the
level of tax returns that were sent by different categories of taxpayers who are in employment, or pensioners or else
self-employed. This analysis is based on returns submitted in 1999. Figures speak for themselves. 69 per cent of
taxpayers declare an income up to       Lm4,000, 72 per cent of business operators, between companies and
self-employed and 69 per cent of employees and pensioners belong to this category. If one excludes more than
5600 companies which, either because they have stopped operations or because they do not pay tax, the percentage
of the number of operators who report an income of less than Lm4,000 stands at 64 per cent.
The first task of the Tax Compliance Unit will be to establish benchmarks for every line of business. These
benchmarks will relate to the total sales and to profits. The Departments of Inland Revenue, VAT, and Social
Services will be using these benchmarks in order to compare the returns that are received at their end. Those who
report below these benchmarks will be automatically subject to an investigation.

This system should be developed into a minimum tax system. We wish, moreover, that such a system would
involve a substantially less bureaucratic requirement for reporting. We want everyone to submit reliable returns.
We want, however, to implement this with caution as we do not want to saddle our economic operators with
disincentives.


Social Security Contributions

Although there will be no increase in the rates of Social Security Contributions, total receipts are expected to
increase by Lm19 million to Lm182 million. These figures include in each case the State Contribution which is
equivalent to the contributions from employers, employees and self-employed put together. As in the case for
Income Tax this increase will come about through better enforcement and as a result of the clawback on the new
salary structure of the public service which will come into effect on the first January of next year.


Tax On Consumption

Receipts from this tax are expected to amount to Lm116 million.

With effect from first January of next year we shall make some adjustments which will bring our system closer to
that of the European Union.

The Health and Education sector will continue to be exempt from VAT. These will be reclassified as exempt
without credit which means that the providers of such services will no longer be entitled to claim refund of VAT.
The mark-up on profits made by travel agents on tickets for travel abroad will become taxable at full rate.

The discrimination which we introduced in our system where catering establishments in factories, schools, and
industrial zones were exempt from VAT will be removed. These will now be treated like all other catering
establishments. Naturally, they will continue to be exempt if their income falls under the established threshold.
Food, medicines, books, newspapers and magazines will remain as they are, that is, exempt with credit.
Government decided that in the negotiations for accession in the European Union will request special treatment
given to other countries with traditions similar to ours so that there will be no change in taxation on these products.



Other Income

Customs and Excise

Receipts from Customs and Excise next year are expected to be a little more than Lm63 million, an increase of
almost Lm6 million on the yield expected for this year.
This will result from the following measures.

The first measure will be that of implementing the method of computing excise on alcoholic beverages, beer and
machine-made tobacco, applied within the European Union.

With regard to alcoholic beverages, excise duty is worked out on the percentage of alcohol present in the beverage.
The effect of this change will bear on a number of beverage products. Hence, for instance, excise duty on liqueurs
will go down by Lm1.20 on one-litre bottles, while excise duty on whisky will go down by Lm0.20 on each one-litre
bottle. Excise Duty on Brandy and Vermouth will be increased. Excise Duty on beer will be 1c4 per bottle.
However, as the production of local breweries is under 200 hectolitres the increase in excise duty in their regard will
be half that amount. All in all, there is no change expected from this source in the yield to Government.

Even in the case of machine-made cigarettes there will be a change in the computing system for Excise Duty. The
result of this exercise will be an increase in the retail price of cigarettes of 5c in each category, that is, the King Size
will increase from Lm1 to Lm1.05 per packet and the standard size from 85c to 90c per packet. At the same time
there will be an increase in Excise Duty on tobacco used in hand-rolled cigarettes. Hence, Excise Duty on every 20
cigarettes hand-rolled will be 28c7 as compared to 60c3 on 20 cigarettes that are machine-made.

Another increase will be imposed on pipe tobacco. This increase will amount to 34c5 every 100 grams.

These measures are expected to provide an additional revenue of Lm1.5 million next year.

All details attached to the revision of these rates of Excise Duty on alcoholic beverages, beer and tobacco will
appear in a bill which will be published in the Government Gazette of tomorrow Tuesday 21st November and will
come into immediate effect.


Customs Rates

We shall implement a change in the Customs rate on goods imported from outside Europe. When the previous
administration disrupted the VAT system, it disturbed in the process the relation that existed between the Customs
rate on products imported from Europe and products imported from outside Europe. As a result, the European
Union imposed on the previous administration that Customs Duty would be increased on Non-European imports.
We shall roll back these increases and we take this opportunity to bring our rate schedule to that existing at present
within the European Union. This means, that a number of products will have their Customs Duty reduced although
there will be a slight increase on others. This will effect only importation from outside Europe.

No European imports will carry any Customs Duty. This means that there will be a reduction of Lm1 million in
revenue for Government.


Oil
Another adjustment will take place in the way that excise duty on oil products is calculated. This change will result
in an increase on excise duty on products and a reduction in others. However, these changes will not affect
EneMalta and, therefore, there will be no change in the price of any product.

In order for EneMalta to retain the current prices for next year, Government will grant an exemption equivalent to
Lm1.6 million on excise duty payable by the Corporation. At the same time, Government will carry the capital cost
and the consumption cost of public lighting, which have so far been absorbed by EneMalta. This amounts to Lm1.3
million. The responsibility for street lighting in non-arterial roads will be delegated to Local Councils and in order
to meet these costs they will be provided with the necessary funds. Therefore Government will be subsidising
Enemalta by Lm2.9 million in order not to increase prices on oil products.

As from 1st January 2002, a new system will be introduced for prices on oil products to be linked to international
prices. This takes place in almost all countries.

The current prices are based on the price of oil of about US$ 33 a barrel. Therefore, a system is being worked out
to provide for an increase in local prices when international oil prices go up and equivalently for reduction to the
consumer when the international prices go down.

In this way a mechanism will come in place that will encourage a reduction in consumption when there are price
hikes so that we will not suffer abnormal negative effects on our economy.


Levies

As we announced last year, the levies on many industrial products will continue to be scaled down with effect from
next Janaury. The reduction of these levies last year did not have the disastrous effect that many had predicted.

This reduction, which is estimated to reflect a decrease of Lm1.5 million in Government in revenue.


Licenses, Taxes and Fines

The yield from taxes and fines is expected to increase by Lm6 million to Lm75 million. We expect an increase of
Lm1 million from duty on documents due to the expected increase in the number of transactions and to a higher
value from that declared so far. Lm3.3 million is expected to come from the payment of licences from the
operations of telephony services, both fixed and mobile, which were granted earlier this year to Maltacom plc
Vodaphone plc, Go Mobile plc and Melita Cable plc following the liberalisation of the telecommunications sector.
Lm1.5 million is expected to come from licenses of betting offices that started operating this year.


Payment of Registration Tax on cars for hire or self drive

In order to help operators in the car hire business in the tourism sector the vehicle registration tax was reduced to a
preferential 30%. We are now observing that this concession is being abused and a large number of cars are being
registered for hire when in fact they are being put to alternative use. Some have organised themselves to further
this abuse permanently on a large scale. Some car dealers have even started to register as car-hire garages so that
the cars that they sell will be shown as leased to their prospective buyers and therefore benefit from the reduced
rates.

This abuse must not only be stopped but redressed. The preferential rate which was given so far will continue to
apply only in the case of chauffeur driven cars by authorised garages, that is, those carrying the “Y” number plates.

However, so that the tourism sector will continue to benefit as it has so far with regard to self drive cars, cars with
“K” plates, the Licensing Department as from next year, will be authorised to refund registration tax in the case of
bona fide car hire garages.
This refund will be considered only in the case of cars used in the tourism sector and it will not be in excess of the
difference between the paid rate and that rate at 30% of the value of the vehicle.

We will ensure that those cars carrying a “K” plate pass through this scrutiny when they come up for the renewal
of the licence. If it is revealed that the car is not used as a self drive car for tourists for hire, then the difference
between the rate already paid and the rate that should have been paid will become due. The law will give the right
to the garage owner to adjust the hire according to the final tax due.

It is expected that this measure will yield Lm1 million.


Proceeds from Investments

It is expected that proceeds from investments together with profits from public enterprises, such as Maltacom plc
and Malta International Airport, will next year remain at the same level as for this year except for a reduction of
about Lm900,000 from the profits of the Maritime Authority which will be retained for onward investment in capital
development in our ports, among them, Cirkewwa.


Recurrent Expenditure

Recurrent expenditure in 2001 is expected to increase by Lm50 million to Lm604 million. Together with these
there should be added another Lm54 million by way of interest on public debt. This level of interest is showing a
small change from the amount paid this year; a positive sign which can be improved upon whenever we start
bringing down on public debt.


Initiatives to effect control

We are increasing our efforts to introduce more discipline on Government expenditure. All decisions that are taken
should be seen in the context of value for money. All projects and programmes that are planned should show a
huge utility content that would eliminate all kind of excess expenditure. The level of efficiency that we expect from
employees in the public sector will be that expected of their colleagues in the private sector. All
Government-assisted schemes will be only given out to those in need. Government will once more take under its
full control all its recurrent cost and will review all inputs in the spectrum of public expenditure which are
automatically triggered off and which leave some form of decision on the level of the cost on agents outside
Government.

Extensive discussions on how this will be implemented were held within the Malta Council for Economic
Development.


Benchmarking in the Public Sector

Government today has an organisation which can develop such controls. We have the Management Efficiency Unit
within the Office of the Prime Minister which looks at changes within the Public Sector that would promote more
efficiency. In every Ministry there is a Director for Corporate Services who is responsible for looking into every
expenditure, its need and its proper accounting. In all Ministries a new Directorate will be introduced which will be
called a Directorate of Review whose work will be to plan and to programme the necessary implementation in the
current process of change within the Public Sector.

This organisation will be strengthened in order to provide for continued scrutiny on public expenditure at all levels
of operations. It will be instructed to look into the cost and into all practices even in cases of small amounts. This
because the accumulation of small amounts can add up to substantial figures.
This organisation should also see that efficiency benchmarks are established by which the results of individuals and
Government Departments will be measured. These benchmarks should create in the Public Service the pressure to
improve its efficiency which, in the case of the private sector, comes about through competition and from the need
that every enterprise reach projected profits. These benchmarks should start to be established during the year and,
if need be, expert assistance will be sought from outside the service.

The implementation of this initiative will be subject to the scrutiny of the social partners within MCED.

In order to demonstrate our commitment to this exercise, we have this year consciously reduced the allocation on
certain costs such as hospitality, travel, transport, etc. This year we are reducing the allocation for operations and
maintenance by Lm5 million. We are not going to allow anybody to ignore these instructions and tuck away
invoices when the approved allocations are already exhausted.
In general terms we are going to enforce on every public servant the disciplinary measures that are contained in the
Financial Regulations.


The Collective Agreement for the Public Service

The increases in the salary structure in the Public Service next year will be substantial. In January we shall be
carrying the financial burden of the collective agreement of Public employees. This will come about because when
we were elected in September 1998 we confronted without delay the situation which the previous administration had
ignored for the two years that it was in Government. The previous agreement had lapsed in December 1995 and,
among others, it provided for a new agreement with effect from 1st January 1996 that would have been valid for five
years and that this would be renegotiated after that period for another period of three years. This situation was
addressed in December 1998 through an agreement with all the Unions representing all employees within the
various sectors of the Public Service.

In order to reduce the cost on public finances we found complete co-operation by the Unions so that we were able to
create a bridge from that date to the present date during which time we made annual payments on a once only basis
and we postponed the implementation of the revised salary structure for next year.

We are now ready to put in place the new structure on the 1st January. This will involve an increase of Lm26
million, of which Lm21 million will represent an increase in wages and salaries, Lm2 million will be an increase in
the Social Security Contribution of Government as employer and Lm3 million will be an increase in the cost of
statutory allowances attached to the conditions of service of various grades of employees.

This means that the total cost of Government payload will go up to Lm199 million, or 12 per cent of the Gross
Domestic Product. This amount will also include compensation of the cost of living increase with effect from 1st
January which will cost Government Lm2.6 million.

This level of wages has a high ratio within the Gross Domestic Product. This made the Malta Council for
Economic Development concentrate on this cost during the preparatory discussion on this budget.


Private Public Partnership

During these discussions it was felt necessary to determine the number of under-employed public servants. It was
also felt that a scheme should be developed so that these employees, while retaining their employment under
Government, would be better utilised on Government projects and on projects carried out within the framework of
Private Public Partnership that would be managed by the Private Sector. We cannot say that we are in a position to
implement all the details of the scheme but we need to keep on working relentlessly to develop this concept and to
implement it without undue delay. We are providing in the budget a clawback of Lm2 million from the wages paid
to Government employees which are to be allocated for projects under this scheme.
We are also doing our best to control the performance of overtime and to see that this will be worked only as and
where necessary. Therefore, even if the rates of wages and salaries have increased, the provision for overtime in
many departmental votes have been reduced.


Increase in the Contribution to Church Schools

Another impact on public expenditure next year which will result as a spin off of the Collective Agreement will be
that brought about by the contribution of Government to Church Schools. Wages and salaries of employees in
Church Schools are related to those within the Public Sector with the consequence that the revision of the latter will
apply also to them. This increase is expected to go up to Lm1 million so that the cost of the contribution to Church
Schools will be Lm9 million.


Payment of Social Security Benefits

Another increase in the recurrent cost next year will be that attached to the payment of State contribution to Social
Security and to the payment to the Social Security Benefits. State Contribution to Social Security will next year go
up to Lm61 million – an increase of Lm7 million on this year‟s contribution. This is a direct consequence of the
increase in wages and salary which will be paid out to public employees under the collective agreement which I
have just mentioned. Government share will be equivalent to all contributions from employees, employers and
self-employed put together.

This year the Department of Social Security has set up a section to investigate abuse with the aim of ensuring
payments of benefits to all those who need them. This section will be strengthened and other positive results are
expected on the controls necessary to curb abuse. Besides this, other serious attempts are being made so that these
means-tested benefits will be based on income declarations in real time as much as possible.


Revision of Social Security Pensions

In the Budget Speech for the current year I spoke at length about the problems that arose out of the re-assessment
system that had been introduced in the pensions scheme in 1979.

I explained how this system took control completely out of Government‟s hands in the increases in pensions that
would have to be paid on decisions made by unions and employers. I reiterated that this system was creating
injustices as the increases in pensions were not related at all with considerations of social justice.

I then stated that the National Commission that we had set up to wake recommendations about social reforms had to
study in detail and in haste those same consequences so that we would be in a better position to establish without
delay a system that would provide for everyone in a more equitable manner.

Unfortunately, the Commission has not yet submitted its final report to Government. It is expected that it would do
so by the end of the year.

Studies were made on the effect of the increases which the new salary structure that would come into effect on 1
January next year would have on the system of contributory pensions of Social Security. These studies showed that
in the present circumstances, this revision would create big anomalies in the whole system.

At present there are 54500 pensioners. From these 15000 pensioners were former Government employees, 4500
pensioners were ex-services or former private sector employees and who are now analogued with the public
structure, 6200 are pensioners that retired from public or parastatal enterprises, 12600 pensioners that were
self-employed and 16100 pensioners retired from private companies.

As a result of the revised wages and salaries structure, there will be a revision of the pension of 15000 former
Government employees and 4500 pensioners who are analogued with the public structure. From these 19500
pensioners, 5100 will not receive any increase, 2400 will have an increase of Lm100 per annum, 3000 will have an
increase of between of Lm100 and Lm200 per annum, another 3000 will have an increase between Lm200 and
Lm300 per annum and another 6000 will have increases ranging between Lm300 and Lm800 per annum.

These increases will amount to Lm5.5 million. From these, Lm3.3 million, of 60 per cent, will be distributed
amongst the last mentioned 6000 pensioners who make up 31 per cent of the total pensioners covered by this
revision. This means that the largest portion will go towards the few.

Surely the distribution of the common wealth, more so at a time when the resources are so scarce, should be better
applied. One should remember that when an unmanageable expenditure takes up this level of resources, the
possibility of taking up other measures that could be of great benefit to those who really need them cannot be
realised.

During the coming days, Government needs to meet with the social partners sitting on the Commission for Welfare
Reform to see with them how the funds that will be spent in this way can be utilised in a more equitable manner. In
Statement C attached to this Speech I am attaching details of the analyses made.




Medicines

The procurement of free medicines is another cost which is increasing without control. This year it is estimated that
the cost of medicine will be Lm12 million.

The procurement of medicines by Government is done under the provisions that were put in place in November
1982 under the Supplies and Services Act 1947 which provide for a 15 per cent profit on CIF price to the importer.
It is a system which, although it regulates the margin of profit, does not leave any measure of control on the
manufacturing price of medicine or that declared on the relevant invoice.

This is a situation which we need to address by formulating a Pricing Policy for medicines and pharmaceuticals that
would provide for;

the interests of the operators in the sector;
the public and social interest of consumers;
the impact on the balance of payments and on public finances particularly on the provision of free medicines under
the National Health System.

The procurement of medicines is only one side of the story. To it one needs to add the management of Government
Pharmaceutical Services, among them the controls or lack of them in the distribution of medicines in State
Hospitals. We also mention the schemes covered by the pink card and the yellow card which are administered
respectively by the Department of Social Security and of Health.

The manner in which these two schemes are administered certainly calls for serious attention. The distribution of
free medicines under the pink card is patient-prescriber driven which means that the system moves along
unmanageably with medicines and other related products being prescribed by medical practitioners often on the
persistent demand of the patient. It is an open secret that many patients who are eligible for these medicines try and
succeed in acquiring more medicines than they actually need and which they subsequently hoard. This is leading
both to abuse and to wastage and we need to cut down on them both. Inmates of Homes for the Elderly among
them Saint Vincent De Paule as well as those who are at the Corradino Correctional Facilities are all eligible for free
medicines under this scheme, that is under the pink card when all of them are 100 per cent under Government care
and all medicines which they require would be made available to them by the same institutions. Members of the
AFM and the Police as well as their families are also eligible to free medicines when these can be provided to them
under a separate scheme.
We need to go into all this and make better sense out of the provisions of these two schemes. I want to make
myself clear that Government will in no way be depriving anybody or reducing the right to free medicines that
anyone needs for his or her care. This will continue in place but we need to rationalise the way and the procedures
of how to provide for this right. This will bring with it greater efficiency and savings on public funds.


Local Councils

The allocation of Local Councils for this year will be Lm9.7 million. This is expected to be increased by almost
Lm600,000 next year in order to help Local Councils, as I have already stated, in their commitment to ensure
adequate lighting in the streets of their localities. This is another function of the responsibilities, together with
others that have been transferred to the Local Councils during this year.
Compensation to Parents of Children in Private Schools

In the Electoral Programme we had promised assistance to those parents with children in private schools. It is
estimated that the fees paid for these schools amount to about Lm5 million. We are providing Lm500,000 to
promote a scheme of assistance as promised.

The Ministry of Education is still awaiting a comprehensive report which the parents‟ associations in these schools
are drawing up. As soon as this report is finalised this assistance scheme will be worked out.


Developments in the Education Sector

The opportunity for Education from the lowest to the highest level is available to all Maltese children. In this way,
society has been enriched in all sectors and we have been able to ensure an independent democratic nation and
socio-economic development that has provided us with the highest standard of living that we have every enjoyed.

Presently, industrial society is being replaced by a new society – an intelligent society – an information and
economic society, for the past years, different Governments endeavoured to lay the foundations for the renewal and
for the necessary changes required in our countries education, so that now since September, we have started
implementing the new National Curriculum “Building the Future Together”.

For the year 2001, we are voting Lm77 million that will benefit education directly from kindergarten to university to
state and church schools. This means an additional Lm11 million over the current year. Apart from the current
costs which I have just mentioned Government is again providing the sum of Lm300,000 for the training of
educators for lateral thinking, strategy, and the implementation of the new curriculum.

In this manner, this Government will be allocating Lm600,000 over a period of two years for teacher‟s training;
clear evidence of our commitment to provide the tools to carry out the necessary changes in the Education system.
Moreover, we are also providing the sum of Lm150,000 for the implementation of various initiatives connected with
the implementation of the National Curriculum.

Over the years, we have undertaken various initiatives that schools will be inclusive and we have provided
facilitators for children with special needs. We set up the Institute for the Educational Support of Children and
Parents mostly those exposed to serious risks in order that they will be able to cope with learning and not be allowed
to fall behind. During next year we will undertake a pilot project that will compliment the education and the
teaching of students that need special report.
The reform in technical studies in secondary schools will continue with the upgrading of the necessary equipment
and apparatus. For this purpose a curriculum is being developed that would ensure that technology studies will be
taught in the primary level. This is a vital initiative that will provide both trainable and employable youths in a new
world where education and learning have to continue throughout a life time.

After having established the legal framework of the College of Arts, Applied Technology and Sciences we are
engaging the administrators and specialists. This will enable the college to expand gradually and set up a number
of Institutes which should consolidate and widen the choice of courses that would lead to vocational careers in
different levels that will be instrumental in the economic development of the country.

This year we are allocating funds for the implementation of the National Curriculum and in order to extend the
Information Technology laboratories in secondary schools.


The Recurrent Balance

In 2001, we shall retain the recurrent surplus which will be about Lm12 million. We want to see this surplus
between Ordinary Revenue and Recurrent Expenditure, including Public Debt Servicing increasing.


Capital Expenditure

Capital Expenditure in 2001 will be Lm95.7 million.

Subventions and subsidies on their own will make up Lm35 million; a considerable sum which can and should go
down particularly with the preparation which is in hand for the viability of certain public enterprises towards
privatisation.

However, let us provide an overview of what and where are these subventions are applied:

The Housing Authority is receiving a subvention of Lm1 million towards operating costs together with Lm100,000
in various subsidies to pass on to the public on the payment of reduced interest on Bank loans.

Another sum of Lm8.5 million will next year be allocated to The Malta Tourism Authority. This is an increase of
Lm1.1 million on the normal subvention. Government committed itself with the Malta Tourism Authority for the
provision of a subvention at this level for the next three years so that it can project on a medium term base. Lm4
million will go towards a results-oriented subsidy scheme for tour operators that will depend on the number of
tourists they send for their vacation to Malta. This scheme will replace the Tour Operators Support Scheme which
was linked to a provision of a fixed rate of exchange for the Malta pound. Another Lm4.5 million from the
subvention will be used by the Authority towards the operations and towards a marketing campaign overseas that
would help us to promote Malta in a competitive way as a tourist attraction.

We are providing a sum of Lm5.8 million to the Malta Development Corporation.

The new Business Promotion Bill which has been drawn up will provide among other things for new incentives to
both existing and new companies in specific sectors, there will be other assistance in other areas in research and
development; in the protection of the environment and for training and creation of new jobs. Small and medium
enterprises will be given importance in the provisions of the new law.

The objective of the new bill is to give more flexibility and to make it easier to implement incentive schemes, as and
when the necessary funds will become accessible from the structural funds of the European Union.

Part of this subvention, that is Lm3.6 million will be allocated towards improvements in factories, in the
restructuring and maintenance of industrial zones and for training grants to employees.

The Malta Freeport Corporation will also receive another subvention next year of about Lm3 million to enable it to
pay its servicing costs on bank and other credit facilities.

The Malta Government Investment Management Ltd (MIMCOL) will receive Lm4.2 million in subventions next
year to be able to administer and manage various public enterprises through investment and servicing financial
facilities.
The parastatal company Gozo Ferries Ltd will also receive from Government financial assistance which next year is
expected to amount to Lm4.6 million. Lm3.2 million of this will be paid back on the procurement of material used
in the building of the Gozo vessels while Lm1.3 million will go for the payment to the local shipyards for labour
costs for the building of the same vessels.

The second vessel is almost 90 per cent complete and is expected to be finished by the end of the year. Delivery to
Gozo Ferries is expected in January. The third vessel is 35 per cent complete and is expected to be launched in the
second half of next year.

Malta Drydocks will continue to receive the amount of Lm5 million next year on the same basis on the existing
Agreement with Government and which lapsed in December 1998. This amount will serve so that the Drydocks
will be able to pay its servicing costs on loans, to support early retirement schemes, and to repay other expenses.

The Marsa Shipyard also next year will continue to receive a subvention of Lm3.5 million with which to subsidise
the payment of interest and its operations.

As already stated, it is important that a financial programme will be drawn up for the shipyards so that the correct
level of subsidy can be established. This plan should not be just a simple quantification of the present position of
the shipyards but should contain new methods of controls and changes in the organisation of work practices and
identify new markets which would enable these industries to become viable.

On the subject of subsidies and subventions, it is also pertinent to mention the subsidy of Lm8 million which the
Water Services Corporation will receive next year to finance part of the expenses for the water production. Even
here we would like to identify what is happening in this Corporation and establish why the cost of water production
is so high.

Use of Information Technology by Government

Yet again the Government will next year allocate the sum of not less than Lm7.6 million to continue increasing
investment in information technology in Government departments. This is another substantial contribution towards
the development of the evolution of the technology of information in the workings of Government – an effort
which is viewed with pride in the context of the wilderness in which we were as a result of the bad policy in this
sector adopted by various administrations prior to 1987.

In the Public Service the Government showed foresight in the building of an integrated and coherent technological
infrastructure which would give access to functionalities and applications which are not easily found in other
organisations. The target of Government is that in the near future electronic technology will come in the basic areas
of the administration and will reduce bureaucracy, while improving the efficiency in the services to all consumers
including operators in commerce and industry. Hence, the Public Service will become accessible from homes or
offices of those who require them.

In order to launch this programme we are allocating the sum of Lm350,000. Other administrative systems of which
we shall continue to develop will be those in the Health sector where we are allocating the sum of Lm1 million.
This vote will go for the completion of the development of the Patient Administration System in all state hospitals
and state centres and the Cardiac Investigations Systems and the Child Health Electronic System as well as the
Intranet System in the Health Division. A new system will also be completed which will provide for computerised
accounting on expenditure in all state hospitals by which all details of the costs of treatment for each patient at St
Luke‟s Hospital will be known.

Other systems which we shall continue to develop will be those in the financial and fiscal sectors where we find the
ASYCUDA Customs System and the Department Accounting System which is currently in place across
Government. DAS will accommodate the international classification of revenue and expenditure under the
European System of Accounts 1995. This development is expected to cost Lm1.4 million.

In the Education Sector works will be continued at the University at Tal-Qroqq. This will include the Sports Centre
on which works started some years back but was discontinued, and other construction works to house the
Departments of Biology, Mathematics and Physics, Chemistry, Education and Administration. Many of these
works are expected to be completed next year. Works will also continue on the rehabilitation and improvement of
the Complex where the Junior College is sited. These works are estimated at Lm800,000.

Works will also be continued at the Complex at Paola which will house the Malta College for Technology, Applied
Arts and Sciences. Next year the cost will be around Lm500,000 for these projects. This College will set up other
institutes which will include the electronic and engineering, business and commerce, arts and design and maritime
studies.

The construction and improvement programme as well as the maintenance of state schools will continue at the same
rate next year as well and we are allocating in this regard a sum of around Lm3 million. Among the main works
that are in progress, one will mention the girls‟ Junior Lyceum at Pembroke, which will cost overall Lm3.5 million
and which for next year we are allocating Lm300,000 and those of the primary schools at Fgura and Sliema for both
of which we are allocating Lm400,000 for next year.

Agreement was reached with the Ministry of Education on a programme of refurbishment to acceptable standards of
state schools. Where necessary new schools will be constructed. This extensive project is expected to cost Lm60
million and we plan its implementation over a period of 8 years. A full inventory of Government schools has
already been drawn up. A plan of the whole project will be drawn up in 2001 and decisions on the method of
financing will be taken. This would be an ideal project for excess labour with Government to work in under the
direction and supervision of the private sector in a Private Public Partnership.

With regard to equipment we are allocating a sum of Lm500,000 to provide for the requirements of state schools,
kindergarten centres, primary and secondary schools.

For the information technology sector in schools Government will continue its investment programme which was
originally estimated to cost Lm11 million and which will be spread over a number of years. Next year we shall
continue to provide Lm1 million towards this programme mainly to complete the IT project in primary schools as
well as to set up more computer laboratories in secondary schools. We are also providing the sum of Lm300,000 to
state secondary schools. This should provide another instrument of learning for teachers and students and use of
internet in the community by the people will continue to be facilitated and extended.

I have already spoken about this aggressive investment which Government is making and will continue to make in
the area of information technology. This is because it believes in the powerful revolution which this sector on
making in our lives. We want to ensure that our education system will produce young who will be IT literate and
who can take full advantage of it both for themselves and for our economy. We need to continue to ensure the
efficacy of the information technology education.

In the Cultural Sector Government is allocating the sum of Lm500,000 for the maintenance, restoration and
development of museums and historical sites among the new conservation projects of the meghalitic temples and of
other archaeological sites.

In the Sports Sector we are providing the sum of Lm300,000 towards a programme of works that will include the
National Pool Complex at Tal-Qroqq and the Canopy at the National Stadium at Ta‟ Qali.

With regard to the Environment next year we shall be allocating another sum of more than Lm3 million to continue
among other projects the implementation of works scheduled under the Sewerage Master Plan for the North and
for the South of Malta, improvements and extensions to the Sewerage Network. We are also allocating a sum not
less than Lm900,000 to continue improving the main touristic areas, among them Qawra and Bugibba, Birzebbuga,
Marsascala and Marsaxlokk, Sliema and St Julians. We will have spent Lm7.5 million on these works. We will
also continue on the works of the rehabilitation projects in Valletta, Mdina and Cottonera. For these works we are
allocating the sum of Lm600,000.

In the Transport Sector we shall continue to allocate more funds, this time of Lm6.6 million in order to complete
restoration development works, which among them will cost Lm2.2 million as well as the levelling and asphalting of
roads. Works will also recommence on the construction of a new road, the Gzira Link Road which will cost no less
than Lm4 million. This road is linked to the development project of Manoel Island.

With regard to the area of Internal Affairs we are allocating the sum of Lm900,000 in order to continue the works at
the Kordin Correctional Facilities particularly to the Remand and Administration Building.

We are providing the sum of Lm450,000 for the payment of compensation of acquisition by Government of private
property. For this year, this will be revised upwards as required and according to the number of contracts that will
be finalised. We felt that it would be more meaningful to apply the strategy because it would be difficult to project
the compensation cost that could be paid in the incoming year. This also was done this year when the original
allocation of Lm600,000 was increased to Lm3.2 million in order to meet the total cost of compensation
contractually paid.

In the Agricultural and Fisheries Sector, we are providing an allocation of more than Lm1 million in order to meet
the various services and needs administered by the Ministry concerned, among them those at the Central Pitkali
Market, the Research and Development at Ghammieri, Aquaculture and Fishing and the development of land and
water resources. Another Lm1 million will be provided to enable the Ministry of Agriculture and Fisheries to carry
out initiatives connected with the National Plan for the Adoption of Acquis. Among these initiatives are the
Integrated Administrative System, upgrading of the Fish Market Centre and of the existing fishing port facilities, the
provision of an incineration plant and the animal monitoring system.

For Gozo we are also providing another substantial sum of Lm1.8 million in order to meet various services and
works that fall under the responsibility of the Ministry for Gozo, including improvements, restoration and
asphalting of roads for which we are providing the sum of Lm500,000. For the extension of the sewerage system
and for the procurement of the necessary equipment, construction of new pumping station and the laying of new
sewerage works we are providing another sum of Lm500,000. Works will also continue on the sewage schemes
and the Sewage Treatment at Ras il-Hobz.

We are also allocating the sum of Lm140,000 on various work phases of construction of state schools in Gozo and
for their equipment.

For the Health Sector in Gozo we are providing the sum of Lm100,000 for general works, maintenance and the
purchase of equipment for the General Hospital.

In the Health Sector on a national basis, then, we are providing the sum of Lm17.1 million. Lm16 million of this
sum will go towards the completion works at the new hospital at Tal-Qroqq which is now accelerating.

On the other hand, we are also allocating Lm670,000 for St Luke‟s Hospital where Lm370,000 is expected to be
spent on equipment which can be reinstalled at the new hospital later on.

Also next year with regard to the Ministry of Justice and Local Government work will commence on the building of
new offices for the Advocate General of the Republic in Strait Street Valletta. These works will consist of the
demolition of the internal parts of Casa Corania, on the construction of the new offices on the site, in the restoration
of Casa Viani and the installation of security of fire detection equipment. The project will cost Lm1.5 million and
we are allocating Lm200,000 to start these works.


The National Plan for the Adoption of the Acquis

As part of the preparations for accession to the European Union, Government has drawn up a National Programme
for the Adoption of the Acquis. This Programme provides for the timeframes and requirements for Malta to
converge the Acquis during the Pre-Accession period.

After internal consultations with the Ministries, Departments and Parastatal Entities concerned, a final draft was
drawn up last January. This identified a number of studies which were deemed necessary in various areas in order
to examine the impact of the adoption of the parts of the Acquis and to throw more light on what should be the
negotiating position of Malta in these areas.

This draft was approved in Cabinet, and published in this form as a basis for public consultation. After that it was
distributed among all members on MUESAC for their comments and the response was very encouraging. A
number of studies were commissioned with terms of reference which highlighted the need for consultation with all
interested parties. The reaction of the MEUSAC members and the results of studies were inserted in the final
version of the year 2000 which was discussed in Parliament last September. The final version covered five areas,
that is, the current situation, short terms priorities (up to the end of the year 2000), medium term priorities (up to the
end of the year 2002), the administrative machinery required and the financial aspect.

In order to implement the projects and plans appearing within the National Programme for the Adoption of the
Acquis Government has allocated the additional sum of Lm10 million of which Lm3.1 million is part of the capital
expenditure and the rest is recurrent expenditure.

These funds are expected to support the administration in consolidating various institutions:

Where these do not exist, to set them up

To review relevant legislation and regulations

To employ human resources and provide necessary training

To provide material resources, including equipment necessary to the implementation of relevant legislation

To acquire the necessary technical and professional assistance from experts provided in the state members of the
Union.

Among these we find expertise required by the Malta Standards Authority and the setting up of the National
laboratory, the workings of the State Aid Monitoring Board which was set up earlier this year, the working on the
Central Office of Statistics which next year will fall within the Statistics Authority Exchange Management plan,
Customs, the Directorate for the Market Surveillance in the Health sector, the efficiency unit for small enterprises,
participation in the Education Programmes Socrates, Leonardo, Youth for Europe and that for research and
development, the Fifth framework Programme, various initiatives in the Sector of Agriculture and Fisheries, the
Data Protection of Privacy Authority, the Office of Regulator in the Communication sector, the Schengen
Information System which provides for controls of the entry of persons in Malta and for immigration, security and
health on work, control on the registration, and entry of medicines, and last but surely not least on the environment.

These elements are all characteristics of a modern, progressive and efficient economy which I presume everyone
wishes for our country.


Financing

The Financial Year 1999 ended up with a deficit of Lm123.6 million. From these Lm118.7 million were financed
from the receipt of assets sales from local borrowing and from various grants. Lm4.87 million remained uncovered
and this was brought over to that expected for this year.

The financial deficit this year, as already stated, is expected to be Lm95 million. Part of this financial deficit was
financed by Lm10.7 million which will be transferred from the Sinking Funds for Local Stocks that have been
converted this year, Lm10 million from foreign grants under financial protocols and Lm12 million from the sale of
shares in Mid-Med Bank which were paid up in June of this year.

Originally Government planned to finance the balance from the receipt of assets sales according to a privatisation
programme that it had launched earlier in this year.
Therefore, Government was trying to avoid going to local loan long term borrowing in order not to increase the
public debt burden.
However, the Privatisation programme did not move on at the expected pace notwithstanding, as already stated
earlier substantial work has already been done which will bear fruit next year. Therefore a greater use was made of
treasury bills issued.

Therefore the uncovered cumulative balance in the Consolidated Fund is Lm81 million.

Next year the deficit is expected to be Lm83 million from which Government is expected to finance Lm41 million
mainly from receipts of sale of assets.

Next year Government will be issuing stocks up to a maximum of Lm100 million to cover this year‟s balance and
part from that of next year.

For this purpose I am proposing the first reading of a bill entitled the Local Loans Act of 2001 which provides for
local Government facilities that may be needed by Government.

As one may see the programme which Government has drawn up for next year and for the subsequent years is a
demanding one which is evidence of Government‟s commitment to proceed with the renewed energy every year
galvanised by the positive results achieved year after year.

All in all, if one were to exclude the measures aimed at tax collection enforcement, the new measures announced in
this Budget result in a net increase of Lm 600,000 in Government revenue.

I am providing a financial statement for 2001 in Table 5 which I ask the House to be taken as read.
Table 5
8        The Environment

The environment is a sector whose importance will continue to increase. Unfortunately, the economic advances in
our country, and in the world at large, are changing the environmental and ecological systems.

We are consuming more. As a result, more waste is generated. Dirt is even polluting the air which we breathe.
Not to mention also the pollution of supposedly clear water in our water table, of the sea which surrounds us and
which provides entertainment as well as sustainability to our economy, while the countryside is being littered with
waste, making it look like a body full of sores.

Use is being made of materials that pollute the environment we live in. We are introducing systems, which, while
making our life more comfortable, are leaving their effect on the environment.

The Government fully understands that the environment issue is a priority. It knows that this means that we have to
fix new priorities on how to use our resources. It appreciates that there is the need for more human and financial
resources to be applied to protect the environment, to clean it where necessary and embellish it.

The Government will provide assistance for environmental initiatives. We want to encourage all those people, who
at great personal sacrifice and definitely without any private interest, offer their services because they believe that
the environment plays a major role in our quality of life.

During the year, we will explore how Enemalta can provide fuel products that have the least possible negative effect
on the environment. We will also examine how in the area of waste management, we can speed up the process to
reverse as far as possible the damage done in past years and set up new systems which will not create problems in
the future. For this purpose, the Ministry of the Environment will issue a public call for tenders for a modern
system of waste management, which would be an environment-friendly system conforming to the standards of
developed countries and to those of the European Union.

It is indispensable for everyone to foster a mentality contributing to a life style where the negative impact on the
environment would be reduced to a minimum.

As a concrete step in this regard, after consultation with the Ministry of the Environment, the following measures
will be taken with effect from 1st January, 2000.

VAT on equipment for the generation of alternative energy, like solar heaters and solar panels, will be reduced from
the present rate of 15 per cent to 5 per cent.

Registration tax on battery-operated vehicles will be reduced to 16.5 per cent from the normal rate of between 50 per
cent and 75 per cent. Registration tax on battery-operated motor cycles will be reduced to 6.5 per cent from the
present rate, which today stands at between 28 per cent and 42 per cent. These rates will be reviewed after two
years in accordance with market changes.

We need to protect the environment with deeds, and in this area, everybody has to make his personal contribution.
9.       Conclusion

Mr. Speaker,

Government has taken with great seriousness the responsibility which the electorate placed upon it in 1998. After a
short experiment that failed, the electorate wanted a Government of deeds and not of words. It wanted a
Government that would perform in a proper manner and not haphazardly.

That‟s what we have done, and the results show for themselves: in the first two years of this administration we
reduced the deficit by Lm55 million, while our predecessors increased the deficit by Lm50 million in two years.
That is perhaps why, like in the fable where the wolf which cried sour grapes, such people invent all sorts of stories
in order to dampen our success.

We are determined to continue to lead as the electorate wants us to. The great and silent majority which knows
how to think and understands that there is a need in our country to find a balance between economic growth and the
distribution of wealth. The great and silent majority wants our country not to be ruled by those who shout and
threaten.

We are determined to continue leading the people even through rough paths as long as we succeed in strengthening
our country for the benefit of all.

In this way we open to our people new horizons of great opportunities which can be found by those who seek new
pastures in the new reality which is called Europe with the same rights as other people.

The Europe which opens up markets for us. The Europe which bolsters our security. The Europe which
consolidates our social framework. The Europe which helps us to look at our environment. The Europe which
offers our youth the opportunities of education, training and experiences which they do not have today.

Mr. Speaker, yes, we are moving in the right direction. I am sure that the best thing which we have acquired this
year is a strong dose of confidence which will assure our people that we are going to solve our problems. The
courage required to continue strengthening our country so that it can compete with the best in the world. Those
with weak dispositions mock this prospect of our country. We, because we believe in the Maltese and Gozitan
public, will implement it.


END

				
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