Malta Chamber hits back at Clyde Caruana over ‘cheap foreign worker’ claims

The Malta Chamber has rejected a claim by Finance Minister Clyde Caruana that many businesses are opting to hire third-country nationals rather than engage in capital investment because it is a cheaper option.

In a recent Times of Malta interview, Dr Caruana said that businesses must take responsibility for Malta’s rise in population, arguing that many opt to hire cheaper labour rather than invest in costlier means of increasing their productivity.

He added that Malta’s population is set to reach 800,000 by 2040 unless businesses take action to stem the tide.

However the Chamber said the Minister’s remarks “misdiagnose the root cause of Malta’s economic bottlenecks” and shifted the onus of responsibility onto the Government. 

“The Finance Minister is well aware of how the current labour market framework was built – it was a PL administration that pushed for economic growth based on foreign labour,” it said.

“Businesses are currently operating within a regulatory and administrative environment that was designed for volume-driven growth, and that model has not been reversed in any way, even though there have been multiple calls over the years to move from quantity to quality and more value-added.”

“It is neither fair nor accurate to place the full burden on employers now that physical and infrastructural limits are being reached.”

The Chamber argued that the recruitment of TCNs can hardly be considered an easy or cheap option, given the costs the process entails in terms of HR administration and time. 

It also pointed out that the Government’s own Malta Vision 2050 document acknowledges the need to pivot away from labour-driven growth towards higher productivity. 

“We must now ensure that its outlined KPIs are rigorously tracked and achieved, rather than merely remaining aspirational talking points,” it said. 

The Chamber said that if the Government had truly been pursuing a different course, it would have decisively tackled power cuts, traffic gridlock and disruption caused by abusive planning and construction practices, while also advancing effective digitalisation across the public and private sectors and investing in reskilling and upskilling. 

“We have not seen any of this,” it said.

"Instead, we had initiatives being delayed from one budget to another – this undermines corporate budgetary planning. 

It went on to say that all fiscal incentives and grant support measures must be available at the outset of the budgetary year, coupled with clear and unambiguous disbursement timelines. 

“Existing fiscal and financial frameworks actively actually discourage the much-needed productive investment. Until state policy de-risks productive capital investment compared to flexible labour and speculative assets, businesses cannot realistically be expected to alter their behaviour in the quantum needed to bring real effective change,” it said. 

“If Government really wants to bring about a difference, it must focus on a budget where government incentives, funding mechanisms and tax structures are decisively realigned to reward automation, digitalisation, and upskilling, which results in enhanced productivity.”

The Malta Chamber also rejected the narrative that local businesses continuously demand foreign labour because of a reluctance to modernise. 

"Businesses that have optimised their internal operations through automation, lean processes, and digital tools are seeing their localised efficiency gains frequently eroded by systemic bottlenecks in the wider economy,” it warned.

“Private firm optimisation is being neutralised by public infrastructure deficits, such as public administration delays in processing of applications/queries/paperwork, inconsistencies between one department and another, and the lack of One-Time-Only solutions, amongst others.”

It added that reliance on TCNs is further aggravated by constant aggressive public sector labour absorption, “which spikes higher closer to elections”.

“It would be useful if Government were to commission an independent, third-party audit of all government departments and entities to identify structural redundancies, streamline bureaucratic layers and uncover surplus capacity, with the objective of improving efficiency rather than expanding headcount,” it said. 

"This should include a thorough review of human resource requirements and resources within the public sector, complimented with a transition programme to support the secondment and redeployment of surplus public sector personnel into the private sector.”

“The Malta Chamber stands ready to work with Government and Opposition on an evidence-based plan that combines infrastructure investment, simpler administration and well-designed incentives, so that Malta's growth is driven by productivity rather than headcount.”