Socio-Economic Impact Assessment on Malta's Term Paper

Excerpt from Term Paper :

It is therefore generally feared by the Maltese that the widespread privatization of public companies is only an excuse to raise the necessary money to make up for the domestic spending like unemployment benefits, pensions etc. Consequently, these measures decrease the scale of investments and thus reduce chances for the dynamic development of the Maltese economy.

Background and Motivation:

This topic was chosen in order to research the socio - economic effect of privatising previously government owned companies on the Maltese economy. Since this research incorporates both the social and the economic aspect of privatisation this would therefore include the carrying out of surveys, interviews and questionnaires. However for this part of the research I am limiting myself to statistics and other data obtained from various sources, compare these local data, analyse and disseminate it according to the needs in order to compare like with like to other countries that have already joined the European block before Malta.

To achieve this target I am focusing on two major companies in Malta, Mid Med bank that was privatised and became HSBC and Air Malta, which has privatised core sections within the company. However, for the final research other companies would also be considered in order to span the research and achieve a better objective result.

An overview of the Maltese economy:

Going back to the 1950's the Maltese economy was basically to service the British forces that had been stationed on the island. Over the years, the forces have gradually declined, and so also the importance of Malta in the global power outlook. The country became independent in 1964, and from that time, the concentration of the government has been to make the islands into a viable economic unit based on tourism and manufacturing. In the running of the country, there have been two parties- Labour and Nationalists. Their views of the role of the state in the development of the economic activities have been different. The fait of labour was in the direct involvement of the state, whereas the Nationalists were favouring the private sector. Yet, development in terms of GNP has taken place, and risen to Lm364 million in 1991 from Lm108 million in 1971. The major part of the growth has taken place from the contributions from the government. The political aspect of this is clearly understood when the chief economic advisor of Malta in the seventies was Lord Balogh, and he believed totally in Keynes. The influence was so high that commodities were being imported by the government and sold at discounted prices. This naturally led to a large growth in the public sector and controls, and that in turn led to a loss of private initiative. This could be seen in the employment positions, and the growth was only in the public sector, whereas, the jobs physically decreased in the private sector. There was also lot of growth in organizations like Tele Malta Corporation, Ene-Malta Corporation, and Air Malta Sea Malta etc.

The policies that were used in Malta were unsuited to the country and the concept of economy, efficiency and effectiveness did not exist in most of the government owned enterprises, which were over manned, and the corporations were protected through restrictions of imports. In certain sectors, the public sector organizations helped as in the cases of banking, telecommunications, ship repair, and energy procurement. They were also of help to the economy due to the small size of the economy and the importance of the functions to the country, but at the same time they imposed a heavy burden on the resources that were available to the government and causing a lot of deficit to occur in the budgets of the public sector. It was also seen that the functioning of the government owned firms has been poor whenever they faced competition. Over a period of time, the government realized this, and this started off the company called Malta Investment Management Company Limited.

They were given the responsibility of managing, monitoring and rationalizing the investments, which had already been made. This led to the efforts for privatisation and commercialisation program in Malta, as mentioned in the President's address to the Parliament on 4th April 1992. The concentration of this program has been through two methods and these are to increase the private shareholding in

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