Marisa Xuereb, an economist and former president of The Malta Chamber, has called out the 2015 decision to change allowable building heights as one of the main reasons for the low wages in the country, with the policy funnelling investment towards speculative assets than those involving a higher degree of human capital.

The argument is likely to be seen as controversial, especially by the ruling Labour Party that was responsible for the change, which led to a wave of construction that has significantly altered Malta’s skyline.

Addressing three MEP candidates during a debate organised by The Malta Chamber, Ms Xuereb pointed out that Malta’s GDP per capita is larger than the EU average, even as salaries remain among the lowest in the bloc.

“What this tells us is that GDP is not being generated from employment, but from other sources – and we all know what those sources are,” she said.

“What we have done as a country over the last few years is that we invested a lot more in property and construction than we did in people, with the result that Malta is today a lot more attractive for whoever wants to invest in property than for those who want to build a career.”

Referring to a prior discussion about the difficulty businesses face in finding the right human resources, Ms Xuereb said Maltese firms “cannot choose who to employ,” because “as they say, beggars cannot be choosers.”

She stressed that Malta must “correct the earthquake we caused in the property market when we said that three storeys could become five overnight, or five become seven,” saying that the country has been “carried along” with the momentum of that decision.

That decision, included in the Development and Control Policy, Guidance and Standards 2015 (better known as DC15), changed the way building heights are calculated and led to the properties of many Maltese effectively being turned into goldmines.

This led to a property boom as many existing terraced houses were ripped down and replaced by blocks of apartments, while in other cases new floors were added to already-constructed buildings.

The renewed focus on property – long Malta’s favourite investment – came at the same time as Malta’s population increased dramatically, partly due to the number of foreign workers coming to work in the country’s construction sector. These people needed places to live, leading to an economic cycle that has boosted Malta’s GDP but also led to popular frustration.

Economic arguments against the policy and its impacts, however, are less common, making Ms Xuereb’s comment something of an outlier.

“We can continue discussing problems which are frankly secondary, but the reality is that this country is not as attractive for whoever wants to build a career as it is for who wants to buy property,” Ms Xuereb concluded.

The candidates’ response was mixed.

ADPD candidate Ralph Cassar criticised both the lack of a tax on empty property and the 2006 rationalisation scheme, and said that the country would have been better served with a proper long-term plan for its economic development than a sudden increase in building heights.

Former Project Green CEO and PL MEP candidate Steve Ellul said he “very much agrees” with the point raised by Ms Xuereb, sharing his belief that Malta’s economic development needs to be supported by a better mix of sectors.

“We cannot have an economic model that is too tilted towards a limited number of industries, and it pays us to have better diversification,” he said.

PN deputy leader and MEP candidate David Agius was blunt in his response: “You reap what you sow. 20 years ago we planted a seed that led to us becoming members of the European Union,” he said with reference to the 2004 election that continued the PN’s dominance of local politics and served as a final confirmation that Malta would indeed be joining the EU.

“However,” he continued, “11 years ago we planted a seed that led to the environmental earthquake Marisa mentioned” – a reference, this time, to the 2013 election that brought the Labour Party to power for the first time since 1998.

“If we want to fix these problems, we need to have a different politics to what we currently have. We need to change the model economic development, and correct the mistakes made along the way. And we need to see where and when these mistakes happened and by who.”

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