F Eteoereport No

EA- 134b F ETEOEReport No. CEpoTS

Public Disclosure Authorized This report was prepared for u witHin an its affiliated organizations. They do not accept responsibilif or its accuracy or completeness. The report may not be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized

THE ECONOMY

MALTA Public Disclosure Authorized

August 5, 1963 Public Disclosure Authorized

Department of Operations Europe CURRENCY EQUIVALENTS

* 1 Maltese = E sterling * 1 = U.S. $2. 80 U.S. $1 = L .357 = 7s. 2d. CONTENTS

Page

Map

Basic Data

Summary & Conclusions

I. GENERAL 1 The Country 1 History and Government 1 Population, Emigration and Bnrloyment 2 Education and Living Conditions 3

II. STRUCTUE AND GROITH OF THE ECONOMY 3 National Income and Canital Formation 3 Balance of Payments 4

III, PRINCIPAL ECONOMIC SERVICES 5 Services to British & NATO Military Establishments 5 The Dockyard 5 Manufacturing 6 Tourism 8 Agriculture & Fisheries 9 Mining 10 Basic Services 10 Currency & Banking 11

IV. GOVERN4ENT FINANCE 12 Current Revenue and Expenditure 12 Development Emenditure 13

V. PROSPECTS FOR ECONOMIC DETELOPMLNT 15

VI. CREDITWORTHINESS 18

Annex A

Annex B

Statistical tables 古 BASIC DATA

Area: 122 square miles, of which Malta, 95 square miles.

Popuiati a, End of 1962: 329,000

National Acuounts Data (1961)

Per Capita National Income: U.S. $390 equivalent.

Gross Domestic Product (at Factor Cost): T452 million Agriculture & fishing 8% Manufactures & dockyard 13% Military services 17% Government 13% Commerce 22% Other 27%

Gross Capital Fornation ba of GDP): 18%

Annual Rate of Growth of Real GDP at Market Prices (1955-1961): 5.0%

Currency in Circulation, End 2f 1961: 123.4 million

Balance of Payments Q961) Current Receipts- T0.7 million Current Payments: 134.5 millim-, 15% Merchandise.0p0ts 84% Merchandise exports 16% Military services & dockyard 61% Other Investment income 13% Other 11%

Public Finance (April 1.7iTTarch 31, 1962) million Current Revenue W2.6 million Current Expjndjt;E2Jl2.9 bu-stoms duties 42% Administration 18% Income tax 10% Economic services 24% Revenue from government Social services 50% 8% enterprises 13% Other Other 35%

Developm nt Expenditure: 13.8 million financed from: Internal loans 39% United Kingdom grants 61%

Public Debt Sterling Assets (as of March 31, 1962, in (as of December 31, 1961, in U.S. $1000, net of sinking funds) U.S. $1000, net of sinking funds., at market prices)

58;226 External debt 7 Note Security Fund Internal debt 148 Governp;ent Savings Bank 26,488 Total 11,902 Government 6,46o Commercial Banks 90,74o Total 10,11, SUM11ARY AND CONCLUSIONS

l. The Maltese Archipelago, a British colony in the Mediterranean with a total area of 122 square miles and a population of about 330,000, is one of the most densely populated areas of the world (2,7C0 persons per square mile).

2. Since 1921, when the first constitution providing for an elected government was granted in Malta, progress towards democratically responsible government has been slow and uneven, In 1959, after the Admiralty announcement of its plans to close the Dockyard, the Maltese Government resigned, the constitution was suspended and the British Governor took charge of the country. Last March, following general elections, a new constitution came into force, under which the Governor became responsible for internal security, foreign relations and civil service matters. Although objecting to the new constitution, the Nationalist Party - which won a workable majority at the elections - has formed a government and conducted negotiations with the United Kingdom on a revision of the constitution and on further assistance by the United King- dom. As a result of these, the Maltese Government has obtained control over the police, but the negotiations broke in disagreement over the British Admiralty's announcement of a faster run-down of its military establishments in Malta. The Malta Government has, as a result, demanded independence within the Commonwealth, Negotiations are now in progrcs between the parties, and Malta may become independent by May, 1964.

3. The per capita income of the Maltese people (about $390) exceeds those of some other southern European countries, such as Spain, Greece and Cyprus, but is lower than Italy. The real national income has been growing at an average rate of 5% per annum, between 1955 and 1961.

4,. The fairly high standard of living has been made possible mainly by British military expenditure which has been equivalent to about half of Maltaoa national income and accounts for about two-thirds of its foreign exchange earnings. The British military services, excluding a large Admiralty Dockyard, directly employ about 16,000 workers, or some 17% of the total labor force. A fairly small part of the Government's current expenditure and almost all of its capital expenditure are financed from the United Kingdom's grants and loans. Savings are high, representing about 19% of national income: they are largely invested abroad.

5. As a result of Malta's reduced importance as a strategic base, British military expenditure is declining. A large part of the Admiralty Dockyard remains on lease to a private firm which is the largest single employer (5,600 workers) in the private sector. An investigation of this company's financial affairs has recently led to the appointment by the Malta Government of a provisional Council of Administration which has taken over the management of the Dockyard. Alternative sources of income and employment are being sought for Maltese labor force, particularly by encouraging establishment o1 new industries and of tourism. Under the government's current 5-year Develop- ment Plan (1959/60 - 1964/65), high priority has been given to these sectoro, but the progress during the first three years of the plan has been rather sl'W.

6. Malta faces a major problem of reorientation and diversification Tie Maltese have a long tradition of hard work and industrial skills, but they may have difficulties in shifting from assured work for the military service, to the competitive world of producing for export. There are major political and economic uncertainties in making the adjustment and eventual success cannot be taken for granted. -ii-

7. At present, Malta's external public debt is fairly small (-3.4 million equivalent), but the Govermnent olans to borrow abroad an additional $18.1 million under the current Development Plan. The service payments on the present and prospective debt (averaging about $1.9 million equivalent a year) may account for about 20% of the domestic exports in 1964.

8. In carrying out its present reconstruction program, Malta will require substantial assistance from abroad. Lending by the Bank can assist in filling the present gap in the Government's development plan. In view of the magnitude of the adjustments faced by Malta and Mailta's continued financial dependence on the United Kingdom, the Bank in lending to Malta would be relying on a United Kingdom guarantee. I. GEVERAL

The Country

1. The Mialtese Archipelago, consistinu, of the islands of Malta, Gozo, Cominc and two other uninhabited islets, lies in the middle of the Medi- terranean, 60 miles from Sicily and 180 niles from the African nainlandt Its total area is 122 square miles (twice as large as the District of Columbia), of which the island of Malta accounts for 95 square miles.

2. Malta consists of a low plateau which descends gradually towards the southeastern part of the island. The coastline, 85 miles long, is indented and mostly rocky. The climate, equable and healthy, has moist., mild vinters and dry, hot swrimers. Rainfall occurs mainly from Novemner to January and averages 20 inches annually. Temperatures range on the average from a 0 maximum of 83 F in the summer to a minimum of 5 2 0F Ln the winter.

History and Government

3. Malta has a long history dating back to Phoenician times. Following the division of the Roman Erpire, it was ruled by Constantinople. It was conquered by the Moors in 870 A.D. under whom it remained until 1090. For the next five centuries it was ruled by French and Spanish feudal lords. In 1530, Emperor Charles V bestowed it on the Knights of the Hospital of St. John of Jerusalem, thereafter called the Kni7hts of Malta, who made it a stronghold against the Turks. It was taken over by Napoleon in 1800 and then by the British. At the Congress of Vienna (1315) it was recognized as a British Colony and has become an important naval base, Malta still remains a British base arid clays host to the HATO Xediterraneari command. Its strategic in- portance. however, has substantially declined,

L. The first constitution providing for an eleted novernrent was granted in 1921. Since then, tecauae of the need to reconcile sel(-overnent with t-he imperial interests in Malta as a naval base, there has been a series of constitutional crises. At a Round Table Conference held in 1955, the Malta Labour Party governrent, led by Mr. Dom Mintoff, put forward proposals which would have given Malta a constitution not unlike that of Nortbern Ireland, with Maltese representatives in the House ofl Cormors. The next few years were occupied in fruitless ne.otiations. The Admiralty announcement early in 1958 of its plans to close the Naval Dockyard brought about a breakdown of the discussions. There were widespread striKes and riots; the Govern-, ment resigned and a state of emergency was declared by the Govarnor, In April 1959, the constitution was suspel-ded an-d the Governor ran the country by decree until March 1962.

To restore a Maltese at-inistration, a -onstitt.ional Commission was appolnted in 1960 under Sir Hilary Blood. This commission sub'oitted report late its in the year and a new constitution, based almost recommendations, entirely on its was proclaimed in October 1961. General elections were held in Ftbruary and the new constitution became effective in March 1962. it, the Colony is known as Under the State of Talta. The Sovernor, as rer.resenl>tyt of the Crown, is the Head of State and normally acts on the advice of the ul ultimateainsxe executive utivHoweero control theGovenori,over and not the Prime iinister, retained the police anad civil service. R3e has the -2-

ri-ht to reserve "for the signification of Her Majesty's pleasure" any Bill which, in his view, affects internal security or amends or appears repugnant to the new constitlition.

6. The United Kingdom Government is represented by a High Commissioner, who has concurrent powers with the Maltese Government on questions of foreign affairs and defense. The United Kingdom also retains the right "to amend, add to, revoke, or replace" the present constitution. A Consultative Council, under the chairmanship of the Governor, is set up to enable the High Commis- sioner and the Maltese Government to discuss matters of mutual concern.

7. Although unanimous in rejecting the new constitution, Malta's six political parties participated in the elections. The Nationalist Party, led by Dr. Borg Olivier, won 25 of the 50 seats of the new Legislative Assembly, Dr. Borg Olivier, who seeks eventual Dominion status for Malta, formed the Government and, after extended negotiations in London1was able to obtain concessions on the new constitution. Control over the police has been transferred to the Maltese Government and the recommendations of the Public Service Commission are directed to the Prime Minister, rather than to the Governor. Mr. Dom Mintoff's Labour Party, which has received about 56% of the total vote at the 1955 elections, polled only 33% (16 seats), mainly as a result of strong opposition to his party by the local Catholic hierarchy. The Labour Party stands for complete independence for Malta and a secularized government, Of the remaining four smaller parbies, two are breakaways from the Labour and the Nationalist Parties, with four seats each in the new legislature. On economic policy, Dr. Borg 0livier's Nationalists can be broadly defined as liberals, while Mr. Mintoff's Labcur Party stands on their left.

8. Last summer, when Dr. Borg Olivier was conducting financial negotiations in London, the British Admiraly announced plans for a faster rate of run-down of the British naval base in Malta, involving a possible discharge of about 5,000 men during the period 1963-67. The London discussions broke in disagreement and Dr. Borg Olivier has asked for independence within the Commonwealth. Discussions on this matter, which are now taking place in London, indicate that Malta may become independent by May, 1964.

Population, Emigration and Employment (Table 3)

9. At the end of 1962, the Maltese Islands had a population of 329,000, about half of which was concentrated in or around Valletta, the capital city. With an average density of about 2,700 persons per square mile, Malta is one of the most crowded areas of the world. The death rate has been halved between 1931 and 1948, while the birth rate increased considerably in the immediate post-war years, decreasing afterwards. In 1962 the natural increase in population was about 1.4% but, as a result of emigration of about 5,000 people, there has actually been a decline in the total population. During the last decade, emigration ranged between 10,000 and 2,000 people a year, with a declining trend. The emigrants went to Australia (58%), the United Kingdom (22%), Canada (12%) and the United States (8%). Australia has fixed a quota of 2,000 Maltese a year, and contributes to the cost of passage for the emigrants; Malta, however, bears most of the cost. Skilled workers represent a high proportion of the emigrants (8% in 1960). Emigrants' remittances amounted to about =l million in 1961. -3-

10. Malta enjoyed full employment for many years, but recently unemployment has begun to rise;by December 1962,it exceeded 6% of the labor force of about 94,000. Primary production employs 8% of the labor force, manufacturing and construction 26%, government 18%, military services 17%, commerce 12% and other services 15%. The low ratio of labor force to population of working age (about 5h%) is due to the small number of women in the labor force (18% in 1960). There is evidence, however, that more women are now entering employment, mainly because some of the new industries can use them.

11. Malta has an advanced social security system. The National Insurance Act provides benefits for sickness, old age, injury, etc. The minimum wage for an industrial worker in the government or working for the military services is L6.0.9 per week (equivalent to U.S. $0.38 per hour), considerably less than in most industrialized countries of Europe, but more than in Spain or Southern Italy. In private industry,minimum wages are somewhat lower. Malta has an active trade union movement. The General Workers' Union, with a membership of about 17,000, is the largest and covers most public and private enterprises. Since the violent strikes of 1959, labor relations have been reasonably good.

Education and Living Conditions

12. Maltese - a language of arabic origin - and English are the languages mostly spoken by the population. Italian is also used. Compulsory education up to the age of 1 was introduced in 1947 but illiteracy is still fairly high (about 30%). School attendance is now very high (9b%), and illiteracy should almost entirely disappear in the future. Technical e0ucation is being stepped up, mainly to serve local industries. Malta has a University - one of the oldest in Europe.

13. There is little poverty: living standards are among the highest in southern Europe, and are rather evenly snread. Despite concentration of people in townships, there are no serious problems of housing, but water is very limited.

II. STRUCTURE AND GRO JTH OF THE ECONOM11Y

National Income and Capital Formation (Tables 4-6)

1. The present prosperity of Malta depends heavily on foreign (mainly British) military expenditure. 'This expenditure has averaged in recent years L19 million per annum (while domestic exports have amounted to less than L2 million), equivalent to about half of the national income and has provided the basis for most tertiary activities. With the transfer of the Naval Dock- yard to civilian use, the contribution of manufacturing to GDP increased from 8.7% in 1958 to 12.6% in 1961, although about 80% of the work of the docks isstill provided by the British Navy. The Government ts efforts to develop industries under its current Development Plan (1959/60-1963/64) have made only a small contribution to GDP. In 1961, the share in GDP of distribution and commercial activities was 22%, services to the military establishments about 17%; government contributed 13%, construction 9% and agriculture and fishing 8%. -±4-

15. Between 1955 and 1961, real national income has increased by 5% per annum. Per capita income in 1961 was about M139 ($390 equivalent) and has since 1955 been rising at an annual rate of h.2%. It is higher than that of Greece, Spain, Turkey and Cyprus, but lower than that of Italy. At current prices, consumers' expenditure rose at a lower rate than that of national income (6.0% per annum as against 6.5% per annum,respectively), while government consumption and capital formation progressed more rapidly (8.1% and 8.0%, respectively). During the past few year (1959-1961) the rate of growth of national income has been slightly less than previously, owing to a gradual readjustment of the economy from heavy dependence on the United Kingdom expenditure into a more diversified civilian economy.

16. The Maltese are a thrifty people. In the period 1954-1961, net national savings were, on the average, equivalent to about 19% of national incore. Hoarding of currency is also prevalent as is indicated by a high ratio of money supply to gross national product (about 56%). This strong propensity to save has not been fully reflected in the level of capital formation. Although gross domestic investment has been rather high (22% of GDP), it has been financed mainly from foreign sources (about 60%). A much greater mobilization of local savings might be possible since substantial amounts of capital are transferred abroad each year. The main limiting factors to investment from local savings have been a lack of confidence in the island's future and the absence of local initiative.

Balance of Payments (Tables 7-10)

17. The structure of the balance of payments shows clearly the degree of dependence of the economy on British military expenditure. In the period 1954-1961, while domestic exports averaged about 1 million per year, merchandise imports averaged L26 million, most of the difference being made up by expenditure in Malta by the service departments and non- Maltese servicemen (L19 million). That the current balance has shown a small surplus throughout the period, is due mainly to British military spending.

19. The savings of the Maltese people transferred abroad (averaging about 1.5 million per year between 1954 and 1961) consist mainly of private holdings of British securities and of commercial banks' deposits in London. The outflow of capital assumed the character of a flight in 1959 and 1960, when private purchases of British securities reached an all-time record. This was due to the prevailing political uncertainties and to a movement away from the Government Savings Bank deposits. Capital inflow consists mainly of official grants, but in recent years direct foreign investment has shown a remarkable increase: in 1960 it was L3 million as against 1,0.2 million in 1958.

19. In 1955-62, imports have risen at an annual rate of 4,,L%. Imports of capital goods and raw materials have increased more rapidly than those of consumer goods and, in 1960, represented about a quarter of the total. Imports from continental Europe have sharply increased during the last decade mainly at the expense of those from the dollar area and, to a lesser extent, from the sterling area; in 1961 the share of the latter 47%. was about 20. In 1955-61, current receipts have risen at a rate of 5.3% per year. Merchandise exports represent only about 15% of total current receipts, and domestic exports are only about one-third of merchandise exports - the rest being re-exports, mainly bunkers. In 1955-.62 , domestic exports have been growing at a rate of about 1% per annum, due to increased shipments of agricultural products, such as potatoes and flowers, scrap metal, edible oils, tobacco products and some manufactures. The Dockyard's contribution to foreign exchange receipts can be estimated at about L2 million in 1960. Most exports are to the United Kingdom and other sterling area countries.

III. PRINCIPAL ECONOMIC SECTORS

Services to British and NATO Military Establishments

21, As already mentioned, in 1961 income from services rendered to the United Kingdom and, to a much lesser extent, NATO military establishments represented about 17% of GDP. In addition, purcl-ases by the military services and non-Maltese servicemen and their families.,also make a substantial contribution to the economy. Total goods and services imported from or through Malta provided, in 1961, about 55% of the island's foreign exchange earnings. The services directly employ 17% of the labor force and have been instrumental in the formation of a body of technical know-how and skills transferable to other industrial activities. While there is no doubt that, should the military suddenly depart, the economy would be completely disrupted, much of the capital embodied in equipment and instal- lations could gradually be converted to civilian use.

22. The strategic value of Malta is rapidly decreasing with the advent of modern weapons, and expenditure by the military establishment will gradually diminish. After the transfer of the Dockyard in 1959 to the private sector, about 900 workers, out of a total dock labor of about 6,500, lost their jobs; but the loss of their wages to the economy was more than compensated by an increase in 1960 in wages and salaries both in the Dock- yard and in the military services. This trend should be reversed in the near future. Already in 1961, some adverse effects became evident as the contribution to foreign external earnings of the military establishments declined by about 3%. As already mentioned, the British Admiralty intends to discharge about 5,000 men during the period 1963-1967, or one third of its total labor force, The economic imlications of this reduction are being reviewed in discussions between the United Kingdom and Malta. The Dockyard

23. Malta's fine natural harbor is one of its major assets. The Naval Dockyard, which dates back to the 19th Century, played an important milibary role until the end of the Second World War. Its strategic value has since diminished and in 1957 the authorities decid.ed to divide the facilities into two parts: one to service the fleet and the other to dock and repair commercial ships. After lengthy negotiations, the United King- dom Government in March 1959 leased the civilian part for 99 years to Bailey (Malta) Ltd., a subsidiary of the South Wales ship-repairing company -6-

C. H. Bailey Ltd., which undertook to convert the Dockyard into a viable commercial enterprise.

24. Pending a financial settlement between the Company and the United Kingdom Government, no major contracts for the conversion of the docks were awarded until mid-1962. However, some work was done in reorganizing and re- locating ancillary facilities and in training workers. Ship-repairing activ- ity continued, mainly for the Navy but also on commercial ships, although at far below capacity. It is estirated that, in 1960, the Dockyard contributed about 5% of Malta's gross domestic product and 6% of its foreign exchange receipts. The Company also engaged in some industrial ventures, such as manufacture of metal furniture, fiberglass, plastics, yacht building and a bacon factory.

25. The conversion of the Dockyard is estimated to cost over U10 million. The United Kingdom Government, which had originally agreed to lend the Company 16 million, subsequently increased this amonunt to L7.25 million. The conversion program consisted of two phases; the first, to be completed by January 1961, included the conversion of three dry-docks (one of which to take tankers of up to 85,000 TDW), a new steel shop and relocation of existing plants. The second phase included the conversion of two more dry- docks. A floating dock, capable of taking ships up to 50,000 tons has also been contemplated. The program aimed at making the Dockyard a self-contained unit, capable of repairing 400-500 ships annually. Ship-repairing, including servicing of oil tankers operating through the Mediterranean, is expected to provide most of the Dockyard's turnover.

26. This program may now be reviewed. Last February, the Malta Legis- lative Assembly passed an act to entrust provisionally the administration of Bailey (Malta) Ltd. to a new Council of Administration, appointed by the Maltese Government. This action follows the publication of an investigation by the British Government of the Company's financial affairs. Bailey (Malta) Ltd. has initiated legal proceedings against the decision. The measures, however, have come into effect and the Council of Administration early in May 1963 engaged the British shipbuilding group of Swan, Hunter and Wigham Richardson, Ltd. to act as managing agents. The British Navy, which shortly before the change had suspended its contract for ship-repairing works with Bailey, is placing new orders with the Dockyard. The labor unions have expressed their satisfaction with the new measures. It is yet too early to see the long-term implications of the present changes.

Manufacturing (Tables 11-12)

27. Income from manufacturing industries - excluding the Dockyard - has increased at about the same rate of gross domestic product over the past few years: in 1961, it represented about 8% of GDP. Manufacturing employs about 11% of the labor force and includes food processing and beverages, textiles, printing, cabinet-making, and a wide range of otier consumer gocds almost exclusively sold in the local market. Most enterprises are controlled by Maltese. The results of industrial censuses appear to show that, in establishments employing more than 10 men, productivity has increased about 14% per annum between 1956 and 1900. This increase was also reflected in tie -7-

A). of distributed profits by these establishments (see Annex growth larger establish- Productivity in small establishments is about half that of ments and has increased at a much lower rate.

28. Under the Government's current Development Plan high priority has alternative in- been given to manufacturing industries, in order to provide come and employment for workers to be released by the Services. New legis- investment. lation was introduced in 1959 to encourage foreign and local The incentives provided by the government include:

a) income tax holidays of up to 10 years;

b) exemption from import duties on capital goods and, in some cases, raw materials;

c) anti-dumping duties;

d) grants and loans up to one-third of fixed capital expenditure and, in some cases, up to one-half (additional loans can be made in special instances);

e) fully serviced sites and ready-built factories at the government's Industrial Estate (at a nominal rent).

These measures anply to new or expanding enterprises which are likely to create emrloyment or increase the national product. An "Aids-to-- Industry Board" considers applications for aid and coordinates administration of the incentive legislation. An Industrial Development Board was also established in London to advise the Malta Board and the Government on general policies to be adopted in the granting of aid.

29. An allocation under the current Development Plan of =3 million for industrial development has later been raised to L4 million. Government grants and loans, including those for tourist development, account for L2.3 million of this amount, the remainder being expenditure on infrastructure (Industrial Estate at Valletta). The Government is now preparing a new customs tariff which will be more favorable to industrial development. Company laws, at present out of date and inadequate, are being revised, Price and import controls are to be progressively abandoned. Technical education is planned in accordance with the needs of new industries. The g7overnment's own commercial undertakings, such as the Electricity Depart- ment, are to be reorganized as statutory bodies.

30. Although these measures have already produced some results, the establishment of new industries has been far short of the original expecta- tions. The government's capital expenditure on industrial development during the first three years of the plan was about 11.5 million as against a forecast of L2.9 million. Overall sales of new industries amounted to only about T0.3 million in 1961. This lag was partly due to the investors need for time to ascertain business opportunities in Malta and also to initial delays in the processing of their applications for aid. Industries aided -8- under the new legislation include textiles, mattresses, paints, plastics, car assembly (Rambler), diamond cutting, flower cuttings and a variety of handicrafts. The new enterprises were able to adapt the local labor to their requirements.

31. The government ;ives special help to export industries. In 1960, a British consulting firm, which reported on potential export markets for Malta, recommended that priority should be given to industries producing consumer goods with reasonably assured markets in the United Kingdom or elsewhere (excluding goods depending for their markets solely on the Middle Eastern and the Mediterranean seaboard) and to production of semi-capital goods which "are not high consumers of electricity or require special raw materials or are uneconomic on a small scale". The Government's ability to implement these policies has, however, been limited by a lack of adequate number of suitable applicants, particularly large firms. So far no applica.- tion has been received for producing semi-capital goods (such as hand tools). The majority of the new enterprises are rather small and produce consumer goods both for the local market and for export, mainly to the United King- dom. In 1961, about half of total sales by the new industries were made in the local market, partly cultivating local taste for new consumer goods. It apoears that some foreign firms, which may be interested in establishing themselves in the island prefer waiting until a decision is taken on a possible association by Malta with the European Economic Community.

32. Grants and loans given by the government to the new enterprises have been very generous and the funds provided by investors constituted only a small proportion of the total capital invested. Of a total capital requirement of about ;2 million by the end of 1961, only about 28% was put in by the investors themselves; the government provided grants and, to a lesser extent, loans for about 35% and the remainder was supplied mainly by commercial banks in the form of loans secured by the assets concerned. In spite of the advertising campaign conducted in London and elsewhere, so far only one relatively large foreign firm with assured export outlets has decided to invest in Malta. The automobile assembly plant had serious financial difficulties and was shut down. Despite these difficulties, the number of applications for establishing industrial plants in Malta is increasing, and more factories will be built to accommodate new investors.

Tourism

33. Until very recently, tourism contributed very little to the economy and it may still be a deficit item in the balance of payments. In 1960, exnenditure by Maltese travelling abroad exceeded the amount spent by foreign tourists in Malta. In the past, little attention was paid to tourism by the government and, in fact, the military image of the islands discouraged the tourists. There have been changes, however, in both of these asi:ects and the number of tourists who visited Malta in 1962, coming mainly from the United Kingdom, amounted to more than 23,000, as compared with 11,000 in 1957. -9-

34. As an English-speaking country with a familiar currency and similar institutions, Malta has a special attraction for British tourists. The islands have many other attractions, such as a sunny and healthy climate, a tourist season extending for 300 days, many still unspoiled places and monuments of great historical interest. Many of these features, however, are not unique in the area; there are serious limiting factors such as the scarcity of water, lack of trees, overcrowding on few sandy beaches, the distance from London and other large tourist centers. There are at present some 20 hotels with a capacity of about 1,200 guests, but few are of sufficiently high standard to compete with other Mediterranean resorts.

35. Along with new industries, development of tourism has been given high priority in the Governmentfs current Development Plan. A Government Tourist Board has been set up, similar to the Aids-to-Industry Board, to co- ordinate promotion efforts and to advise on attracting investors in tourist facilities. In addition to fiscal incentives similar to those for new industries, hotel builders receive land, rented at nominal fees, and grants up to 20% of their construction costs. The government provides roads, water, power and telephone connections, and has been conducting an advertising campaign abroad. Yet, the actual progress in adding to the islands' tourist facilities has so far been very limited. The Tourist Board has recently entered into agreements with private investors for the construction of three new hotels (to be completed by 1965) which will almost double the present capacity to accommodate tourists. In addition, five other hotels are planned, with a combined capacity of about 1,900 guests. The new hotels are to be self-contained units with private beaches or swimming pools, and other facilities, and would involve a capital expenditure of over L2 million. Considering Malta's limited capacity to accommodate tourists, the Tourist Board intends to try to attract mainly high- income tourists. Little efforts are made to cater for the growing number of middle-income tourists.

Agriculture and Fisheries (Table 13)

36. Agriculture's share in GDP declined from about 7% in 1955 to about 6% in 1961. Agricultural products contribute about one-third of domestic exports. Most of the terrain is rocky and lack of water limits the scope of agriculture. The cultivated area is about 40,000 acres, with only under 4% irrigation, and tends to diminish as agricultural lands are taken for buildings and as farmers find more remunerative non-agricultural Smallholdings occupations. are predominant: about 70% of the farmers cultivate holdings of less than five acres.

37. The main products are potatoes, tomatoes, oniens, cereals and grapes. Farmers keep also livestock (cows., sheep and goats), mainly for milk, Processing of agricultural products is limited to the production of tomato paste and wines and to some vegetable canning. The export of cut flowers, started recently, has had some success. Due to the small size of holdings and the farmers' resistance to change, few farms are mechanized, but light machinery, such as water pumps and rotary cultivators, is in usa The government has set up an experimental farm in Malta and a livestock center in Gozo; extension services are provided. Low-interest loans are available to farmers for purchase of machinery. -10-

38, FIsherips, although still insignificant as a contributor to GDP, are developing, mainly because of the introduction of trawlers, In 1960, 1,200 tons of fresh fish were caught by local fishermen, as against 800 tons in 1954. The government conducts a training and information program for fishermen and provides small grants and loans for the purchase of machinery. Prospects for growth of output are good: local demand is still far from being met. As indicated by the number of new applications for aid for purchase of trawlers, the local fishermen are showing interest in expanding their operations.

Mining

39. Malta has no proven mineral resources, other than quarries which provide good quality building stone. A geological survey is now being carried out with the assistance of the United Nations Special Fund. A test well for oil drilled in 1958 by BP, was dry and did not offer positive indications. The government hopes to interest other prospectors in further explorations.

Basic Services

40. Power and water services are supplied by the Government's Water and Electricity Department, The public power system has a generating capacity of 25 MW. The military services have a separate system with a capacity of about 20 MN, but most of the generating equipment is old and will soon be retired. Sales of electricity over the last five years have increased at an annual rate of 16.3%. A new rate structure, introduced in October 1960, has reduced power charges by about 25%. At present the supply to the dockyard company comes from the Admiralty system, but it will be supplied by the public power system in the near future. To provide for this additional load and to meet the growing domestic and industrial consumption, the government has plans for a new power station with an initial capacity of 25 MW. A statutory Electricity Authority will take over the old power station and will be responsible for the construction of the new plant. An application for a loan has been made to the Bank for the expansion program which is described in detail in a separate report (No. TO 320 ).

41. The water supplv system consists of a large number of springs and wells partly connected by galleries, pumping stations, reservoirs and pipe- lines. It can at present supply a maximum of 4,300 million callons per year. Present consumption, about 3,400 million gallons per year, is kept low by a highly progressive tariff. For the success of its industrial and tourist development programs, the government also has plans for constructing a sea water distillation plant with a cpacity of 1 million gallons per day. This constitutes a part of the power project which is under consideration the Bank. by

42. Malta has a road system (excluding defense roads) of about 680 miles of which 460 miles are first class roads,: Traffic is heavy and has been increasing. There are now about 25,000 notor vehicles, of which 15,o0o are private cars (22 persons per car). The roads are too narrow and require -11-

improvement at many points. A recently completed traffic census has shown that outside a radius of about 3 miles from Valletta traffic falls off very rapidly. The allocation for road works under the Government's Development Plan has now been revised accordingly.

43. Seaborne traffic has been on the decline since the pre-war period. Recently, however, there has been a revival in the tonnage of ships calling in Malta (3.9 million tons in 1962 as against 2,4 million in 1954). To provide necessary port facilities in Valletta for comnercial use, a new quay has now been completed and should enhance the importance of Valletta as a transhipment and bunkering port. It may also help the new industries by facilitating shipment of their imports and exports. There are daily air services with the continent and Britain.

44. Malta has a long mercantile tradition and experience. While the export trade is negligible, the import trade supports a large number of wholesalers retailers, agents, et al, Commerce contributes 22% of GODP and employs 12% of the labor force; these high shares, partly a result of the presence of the military, reflect also some excess capacity. Currency and Banking (Tables 14-15)

43, Malta has no central bank. The Naltese currency is issued by a Board of Commissicners of Currency under the sterling exchange system usual for British dependencies. Notes and coins, denominated in Maltese pounds, are at par with the pound sterling. The currency is backed 85% by sterling assets of the Currency Board and 15% (3.3 million) by its holdings of Maltese government bonds. The Currency Board nay invest up to 14 million in internal bond issues (including the 13,.6 million already invested),As of December 31, 1962 the currency in circulation was about 24.7 million. 46. There are two commercial banks, the Maltese-owned National Bank of Malta and Barclays Bank D.C.O. which is also the government's banker. Total bank deposits, including the Government Savings Bank, have increased from L42 million in 1955 to L56 million in 1962 (4h3% per annum), Deposits in commercial banks have increased at a faster rate (over 8% per year), at the expense of those in the Government Savings Bank, The ratio of advances to commercial bank deposits is very low (about 14%) and has been on the decline in 1955-613 deposits are thus invested mainly in sterling securities or held in cash in London. Advances to wholesale and retail traders account for about 45% of the total. Commercial bankst interest rates to borrowers are limited by usury laws to 8%; the rate on fixed deposits, which is established under a gentlemen's agreement with the government, is now

47. Deposits with the Government Savings Bank amounted to about million by September L12 1962, as against L17.1 million in 1955. The decrease was particularly rapid in 1959 and 1960, as a result of a no-confidence campaign organized by the Labour Party. To counter this, the authorities granted -relief from income tax on interest (up to :25) accruing on deposits with the Savings Bank. They also required the transferring bank to withhold the 25% tax on dividends from foreign investment; this measure has -12- been highly unpopular and may be removed by the new Government. The Savings Bank's investments are at present all in sterling securities, but it can invest up to a third of its balances in domestic bonds.

48. The Maltese have accumulated substantial investments in London. At the end of 1961, private holdings of British securities were estimated at about LLO million, as against L22 million in 1955. A large part of this increase occurred in 1959 and l9bO, as an aftermath of political tensions and uncertainty. In addition, commercial bankst investments in London amount to E32.4 million. Official holdings consist of ;20.8 million of the Currency Board, 59.5 million of the Savings Bank and 12.3 million of the National Insurance Fund. Thus, official and commercial banks, sterling reserves totalled, at the end of 1961, about T65 million, or more than twice as much as total imports in 1961.

49. Malta has no senarate institution to provide medium- and long- term capital for the Drivate sector; commercial banks have been providing funds for some new industrial ventures in the form of mortgage credit., Recent efforts by some business leaders to set up a finance corporation have not been fruitful as the public has been accustomed for a long time to investing their savings abroad. The Government may come forward with a new proposal on this matter,

IV. GOVERNMENT FINANCE

Current Revenue and Expenditure (Tables 16-18)

5c. Between 1950/51 and 1961/62, current government revenue increased at an annual rate of 7,6%; since 1954/55 it has been increasing at a rate of 9%, faster than the growth in national income. Customs duties, with an average incidence of about 16%, are the major source of revenue (42% in 1961/62). The present tariffs provide preference for Commonwealth sup- pliers and protection for local industries; they will soon be revised to further industrialization. As a result of better administration and, to a lesser extent, of the introduction in 1959 of a surtax on personal incomes, revenue from income taxes has increased in both absolute and relative terms: it now amounts to some 15% of total tax revenue as against 11% in 1954/55. Income tax rates are fairly low; company tax is levied at a rate of 25%.

51- The economy is still burdened by controls, subsidies and other forms of government intervention, which distort the free operation of the price mechanism. Subsidies, a residue of the war period, are given to consumers of wheat, flour, sugar and kerosene. The government's Milk Marketing Under- taking - the exclusive purchasing and selling agency for milk products - operates at a substantial loss which is covered from the budget. Between 1954/55 and 1960/61, subsidies averaged about 9% of current expenditure. A Price Control Board fixes general margins of profits for many essential commodities such as bread, coal, petrol, tomato paste, etc. -13-

52. From 1950 to 1962, current expenditure increased by 8% per annum or more ranidly than revenue. A growing deficit was made good by the United Kingdom's grants. The budget deficit was particularly high in 1960/61 (more than U million) as a result of increases in wages, but it was considerably reduced in 1961/62. The Government intends to balance its accounts by 1964, mainly through a reorganization of some departments and cuts in expenditure. However, following the recent announcement of discharges by the military establishments, the Government has decided to postpone a cut in its payrolls. There should be scope for increased taxation, but political circumstances have prevented an increase in the rates. Fixed financial commitments in recent years averaged 5% of current expenditure. The standards in the public administration, almost entirely staffed by Maltese, are high.

Development ExDenditure (Tables 16, 19-20)

53. In five years, from 1954/55 to 1958/59, about 13.7 million was spent on development, financed entirely by the United Kingdom in the form ,f grants-in-aid (80%o) and C.D. & W. and other grants (20%). This does not take account of expenditure on war damage reconstruction, totalling 18 million, which was also financed entirely by United Kingdom grants. During this period, the annual rate of the government's capital expenditure was about E4.4 million, including war damage reconstruction. Emphasis was mainly on infrastructure, which absorbed 48% of the total expenditure; social services absorbed 35% and economic services 12%. Large provisions were made for education, water supply, roads and agriculture.

54. In 1959, with some assistance by a Bank staff member, a 5-year Development Plan covering the period 1959/60-1!963/64 was prepared, The Plan was not aimed at an increase in per capita real income, but it was designed to maintain full employment, by attracting new industries and tourism, which would balance the decline in employment by the services, the governrent and the Dockyard. It was assumed, for purposes of the Plan, that the amount of public expenditure and the number of new jobs in new industries and new tourism facilities would be matched by an equal amount of private investment and would generate approximately a similar number of jobs in tertiary activities.

55. The total proposed development expenditure, excluding the loan to Bailey (Malta) Ltd. for the dockyard conversion and the cost of war damage reconstruction, amounted to about T25 million, of which economic services were to absorb 18%, including 12% for industrial development, infrastructure 30% and social services 20%. A reserve of about L4 million was provided, of which about b2 million was earmarked for industrial development. The bulk of the necessary finance was to be provided by the United Kingdom's C.D. & W. and other grants (68%) and Exchequer Loans (20%); Malta was to contribute out of her own resources about L3 million (12%) through government bond issues.

56 During the first three years of the Plan (1959/60 - 1961/62), ex-, penditure totalled about L12.7 million, 23% less than the original forecast. Expenditure lagged behind mainly in the economic services, and, in particular, -14-

in industrial development. The experience gained during the last three years shows that the forecasts for new employment have been over-optimistic, especially those regarding tertiary activities. On the basis of this experience, the Plan was revised in 1961 and again in 1962. The loan from the United Kingdom to the dockyard company has been increased to k7.25 million, with a resultant cut in the amount of the C.D. & W. funds allocated for the remainder of the plan; Malta's contribution from internal loans has been raised to L4 million. The following table shows the main changes in the sector allocations:

Development Plan 1959/60-1963/64 (L million)

1961 1962 Original revised revised allocation % allocation % allocatimn %

Economic Services 4.h 18 7.4 28 6.4 25 (Industry) (3.0) (12) (5.2) (20) (4.2) (17) (Tourism) (0.6) (3) (1.4) (5) (1.) (5) Infrastructure 9.5 38 11.7 45 11.2 44 (Power) (1.5) (6) (3.2) (12) (2.0) (8) Social services 5.9 24 5.6 22 6.0 24 Reserve 4.2 17 0.5 2 0.8 3 Miscellaneous 0.8 3 0.7 3 1.0 4 Total 2.7 l0 25.9 100 25. 100

Dockyard 6.0 7.2 7.2 War damage 1.4 14 1.L Grand Total 32 2 3Z.5 3'd

The changes in 1961 were made mainly to allocate the reserve funds for industrial development and power supply, the latter to meet part of the costs of a new thermal power and sea water distillation station. The changes which were made in 1962 are of a greater economic significance: the allocation for industrial development has been reduced because the targets set earlier proved unrealistically high and the Government, to offset partly the forthcoming discharges by the military establishments, has decided to provide additional jobs by way of increased road construction and other public works. The Government plans that, if further sums are needed for industrial development, cuts could be made from other allocations. The reduction in the allocation for power is merely due to a rephasing of the construction for the new power and water distillation station. In view of the recent deterioration in the employment prospects, the revised Plan now aims at maintaining, to the extent possible, the present level of employment.

57. Despite its limitations, the present development plan represents a major departure from the traditional economic policy in Malta. The channel- ling of development efforts through a plan, a greatly increased rate of capital expenditure and a contribution from Malta's own resources are its -15- novel features. The order of priorities seems correct; however, greater emohasis on tourism would have probably been justifiable. Malta's own contribution towards the Plan remains low in relation to the amount of the Maltese savings accumulated abroad: the local bond issues were taken up mainly (88%) by the Currency Board, and no attempt to tap savings accruing during the planning period has been made. This has been partly due to a scarcity of opportunities for Maltese private investors and partly to the particular political atmosphere of the country. In view of the relative uncertainty of Malta's political future, some Maltese consider investment at home unsafe. This attitude was encouraged by some statements by the Malta Labour Party that the Colonial Administration should not be trusted by the Maltese people. In the circumstances, the Administration was reluctant to make an all-out effort to convince the Maltese to repatriate their savings. So far5the newly-elected Government has not come into grips with this problem. Cultivation of confidence is a difficult task, particularly in a country depending for its prosperity on foreign military expenditure, loans and grants. It will certainly take time.

V. PROSPECTS FOR ECONOMIC DEVELOPMENT

58. The prospects of the economy of Malta during the next few years are closely related to the rate of decline in the United Kingdom's military exnenditure, the performance of the Dockyard as a commercial undertaking, and the success of the government efforts in attracting new industries, expanding tourism and in widening the outlets for emigration. With certain assumptions on these factors, a tentative forecast of Malta's gross domestic product and foreign exchange earnings by 1964 has been prepared and is given in Annex B. If any of the basic assumptions are altered, which is not an unlikely prospect, considerable changes in the forecasts will be necessary. The following paragraphs give some tentative conclusions.

39. As already mentioned, by 1967, employment in the military services will decrease by 5,000. On the basis of the present level of wages and salaries, the decline in military employment may result by 1964 in a reduction of about 15% in the contribution of this sector to GDP. NATO infrastructure works have already been completed and the NATO contracts would probably decrease to the 1958 level. Furthermore, the United King- dom garrison is being reduced, and this should affect the demand for goods and services in the islands. As a consequence, foreign exchange earnings from the military services may decrease.

60. Assuming that the recent change in the Dockyard's administration would not seriously delay its conversion to commercial use, the Dockyard would have,after completion of the conversion program, to compete with other Mediterranean yards in Spain, Greece or Italy. Its competitive position vis-a-vis other Mediterranean yards will be of great importance. At present, mainly because of Malta's higher wages and, to a lesser extent, higher power and water rates, the Dockyard's prices are generally above those charged by other shipyards in the area. On the positive side, however, the Dockyard benefits from Malta's more convenient location and excellent harbor; its workers' skill may, in some cases, be higher than elsewhere, -16- and they may succeed in adopting modern techniques better than some of their competitors in the area. Work for the British Navy is expected to continue for some time, at least until the present transition period is over. Of the 5,000 workers employed in 1961 by the dockyard company, not more than 4,500 will probably remain on the payroll after the conversion is completed. Such a reduction, however, should not decrease its contribution to Malta's GDP and its foreign exchange earnings which, by 1964, should be not less than the 1961 level (during the progress of the conversion works, the Dockyard's foreign exchange earnings may be temporarily reduced).

61. By 1964, agricultural output may slightly decline, but fisheries should expand, leaving these sectors' overall contribution to GDP and exports at about the 1961 level. Similarly, the government's direct contribution in 1964 to GDP would probably be the same as in 1961.

62. The main contribution to Malta's GDP during the next few years, to make up for the loss of earnings from military services, would have to come largely from new industries and tourism. It was assumed under the original Development Plan that, by 1964, about 3,900 new jobs would be created in the manufacturing sector. Due to the lag of industrialization, this goal is not likely to be achieved. New industries now employ about 600 workers; after the completion of the plants for which applications for aid have been approved by the government by the end of September 1962, it is expected that the employment figure may reach 1,400, with an eventual target of 2,300. On the basis of these estimates, which may still be optimistic, the gross output of the manufacturing sector might increase from L5.7 million in 1961 to about 7 million in 1964. So far, about half of the sales of new industries have been for exports; if the same ratio is maintained, manufacturing exports may, by the end of 1964, amount to L1.7 million as compared with LO.6 million in 1961.

63. As a result of the proposed new investment in hotels, it is expected that tourism's contribution to GDP and foreign exchange earnings will double by 1964. It is uncertain, however, whether the high-income tourists, to whom the new hotels will address themselves, will be attracted to Malta in adequate numbers. The government's plans may be too optimistic in this respect.

64. Other sectors of the economy should follow the general progress of the directly productive sectors, but the reductions in military expenditure will affect the contribution to GDP of commerce and domestic services, with resultant lower incomes in these activities.

65. On the basis of these assumptions, Malta's GDP may remain stationary between 1961 and 1964. Assuming that the natural increase in population remains at 1.6% per annum and the annual rate of emigration at about 3,200 persons, there would during this period be a slight decline in the per capita incomes. At present, the Government is making efforts to find new or larger outlets for emigration, The possibilities for sending contract labour to central European countries are also being explored. -17-

66. In general line with the foregoing developments in the internal economy, foreign exchange earnings might decline by about 3% during the 1961- 1964 period. Imports of capital oods should increase as a result of industrialization. Income per capita should slightly decline, the amount of goods purchased through Malta should diminish and some import substitution might well result from the new industries; hence, imports of consumer goods should decrease. A very large part of investment capital during the period would come from abroad, mainly in the form of official grants and loans. Local savings would continue to be largely invested abroad; commercial banks' deposits in London and private Maltese holdings of British securities may, therefore, increase throughout 1968. It can be expected that the current account of the balance of payments will run at a small deficit, comparable to the 1959-1961 average deficit.

67. Employment prospects have clearly deteriorated since the preparation of the Development Plan. Reduced employment by the military services and by the Dockyard, is likely to lead to unemployment also in tertiary activities. Even after taking into account the Government's efforts to reduce unemploynent through expenditure in public works, unless emigration is substantially increased, there may be major political difficulties ahead. Furthermore, in the face of rising unemployment, trade unions may press for higher wages, thereby undermining the competitive position of Malta in attracting foreign investors.

68. Before the breakdowm of the negotiations between the European Economiz Community and the United Kingdom, Malta was actively considering plans for joining the Common Market. Malta can now associate itself with EEC only when it becomes independent. Assuming that the United Kingdom would also eventual- ly join in, an EEC membership should not require major readjustments in Malta's economy. Agricultural exports might be affected adversely, but their contribution to the economy is expected to become less important in the futur3. Association with the EEC might benefit Malta because it might attract the interest of continental European investors, provide new outlets for Maltese emii- grants and contract workers and create new markets for some of her exports.

69. It is more difficult to assess the prospects of the economy after 1964. The process of transformation from dependence on military expenditure to economically viable industries and tourism will continue long after this date. The Government intends to implement a second development plan to ac- celerate industrialization and the growth of tourism. A United Nations Technical Assistance Board expert has recently visited Malta for a survey of the economy and advise on a new development plan. There is, however, little information regarding the amount and sources of external assistance after 1900,

70. If the Government succeeds in restoring confidence, a substantial amount of local capital should be available for investment in Malta. It is doubtful, however, whether the type of new industries so far established can, on the longer run, assure to Malta an efficient industrial structure, caoable of exporting in competitive markets. The local market is too shallow and will not expand to satisfy the requirements of the new industries; the new industries will have to plan mainly on exports. In the United Kingdom market, where most of the present exports of the new industries are shipped, Malta will have to compete with other countries some of which grant similar incentives to new industries (Northern Ireland, for -18- instance). The eventual success of Malta's industrialization depends largely on. Malta's natural assets - a convenient location, good harbor, fairly skilled labor and suitable climate - and the degree of political stability it can offer to a potential investor. It may be advisable for the Government to re-examine its present incentive legislation (see paragraph 32) in the light of the experience gained during the first three years of the Development Plan. Large foreign enterprises with assured export outlets seem to be reluctant to invest in Malta partly because of the uncertainties regarding Malta's future political prospects. The shape of future constitutional developments will be of crucial importance and, unfortunately, does not lend itself to easy forecast.

VI. CREDITWORTHINESS 1 71. At the end of June 1963, Malta's public long-term debt (Tables and lb) was equivalent to about $15.2 million. Service payrents on this will absorb in 1963/64 about 3% of the Governent's current revenue (1961/62). At the same date, external public debt outstanding totalled $3.4 million equivalent. Under the Development Plan and to provide a part of the cost of the new power/sea water distillation station, the Government plans to raise an additional $18.1 million equivalent in external loans (Exchequer Loans of 1,3.8 million from the United Kingdom and $7.5 million from the Bank) (Table la). The annual service payments on the present and prospective external public debt would average, from 1963/64 to 1972/73, about $1.9 million or some 2% of foreign exchange earnings and 35% of domestic exports in 1961 (by 1964, the latter ratio may come down to about 20%).

72. Because of the forthcoming reduction in the United Kingdom's expenditure, which has been largely responsible for Malta's achieving a fairly high standard of living, the economy faces a major problem of reorientation and diversification. With substantial financial support by the United Kingdom, a large 5-year program has been launched to achieve these ends. The Maltese people have a long tradition of industry and skill in industrial work, but the security of employment and income which over the years has been provided by the military services may have sapped their initiative. Eventual success in making the necessary economic readjustment cannot be taken for granted.

73. The efforts to attract domestic savings for investment in government bonds have not been successful and there has been little participation by Maltese capital in industrialization. Developing confidence in government bonds and in local enterprises will require time and concerted efforts, on ex- particularly in a country which has depended for a very long time ternal assistance. As Malta now has an elected government, greater effort should be made to attract Maltese savings for investment at home. For the time being, the scope for the government's resorting to the Currency Board's and Savings Bank's resources in financing its development plans will necessarily be limited in view of political sensitivity on this matter.

74. Lending by the Bank could assist in filling the gap in the Govern- ment's present Development Plan. It would also help Malta in developing sound -olicies of project execution. -19-

75. Malta's per capita income is higher than that of Portugal, Greece, high Spain and Turkey, and close to that of Jamaica and Yugoslavia. This per capita income stems in large part from British expenditures in Malta, For the without which the economy would be radically reduced in size. time being, however, considering its high per capita income, small external debt and large investment by Maltese abroad, Malta can hardly be regarded as a high priority country for IDA credits. that 76. There are clearly major political and economic uncertainties Malta make any forecasts as to Malta's long-term prospects highly suspect. still depends heavily on British military expenditure which is to diminish in the near future. On the other hand, the substantial aid so far given by the United Kingdom in grants and loans for both the government's current and capital expenditure demonstrates the interest and responsibility felt by the United Kingdom for Malta's future. In view of the magnitude of the adjustments faced by the Maltese and Malta's financial dependence on the United Kingdom, the Bank in lending to Malta would be relying on a United Kingdom guarantee. Annex A

MANUFACTURING AND CONSTRUCTI ON

Productivity and Prcfit ability in Large Establishmental/ (, per man employed)' Average annual % rate of increase 1956 % 1960 %o 1956-1960

Value of output 978 100O0 1.599 100.0 14 Less: Cost of materials & fuels 521 53.2 865 54.1 14 Value added 457 h6.8 734 45.9 15 Less: Wages and salaries 22 22.7 31J 9.7 9 Gross margins & other costs 235 24.1 418 26.1 21 of which: fixed investment & increase in stocks 81 8.3 59 3.7 5 distributed profits & other costs 154 15.8 359 22.4 29

Number of establishments 185 226 Number employed 6,794 8,320 Consumer nrice index (1955=100) 101 107

1/ Employing more than 10 workers.

Source: Statistical Abstract of the Maltese Islands, 1960, and Government Statistician, ANNEC B

On the basis of the assumptions explained under III below, the following forecasts of gross domestic product and foreign exchange earnings have been prepared by the Mission to indicate the orders of magnitude:

I. Gross Domestic Product ( million)

Actual Forecast 1961 19641Z

Agriculture and fisheries 3.4 3.4 Manufacturing (established firms2/ 57 5.7 (new firms 1.1 Service departments 7,6 65 Government 5.8 5.8 Tourism o.4 0.8 Public utilities 1.2 1.2 Banking, transport, rents 5.2 5.2 Distribution, commerce and other services 11.8 10.5 Construction & quarrying 4.0 5.1 Gross domestic product 45.1 __.3 Population 329;8C7 335,737 GDP per capita' (E) 137 135

1/ At 1961 prices. 7/ Including the Dockyard.

II. Foreign Exchange Earnings (Tmilion

Actual Forecast 1961 196217

Merchandise exports, f.o.b. 5.1 6.2 (established firms7 (.1) (J.l) (new firms) (- (1.1) Dockyard 2.02/ 2.0 Service departments 19.0 1.1 (purchases by non-Maltese) 771) T.7) (materials, contracts, etc.) (4.9) (3.8) (wages and salaries) (7.0) (6.1) Transportation 0.8 0.8 Tourism 0.7 -1 Investment income Z7. 77. Cther transactions 7.7 77 Total receipts 377 f3,7

1/ At 1961 prices. 7/ Estimated. -ii-

III. Assumntions

A) - Gross domestic product

Agriculture & fisheries: no general change.

Manufacturing: a) established firms - no change; the Dockyard is included and it is assumed that the amount of wages and salaries paid in 1961 would equal the amount of wages, salaries and profits in 1964. b) new firms - value added per man is assumed to equal the average of large establishment as per the 1960 industrial census (1730), and is then applied to the expected number of new jobs (1,500; cf. Annex C).

Service denartments: to decrease in proportion to the reduction in employment.

Government: to change in proportion to the change in emoloyment.

Tourism: value added is assumed to be 50% of tourist receiDts.

Public Utilities: to increase as preceding sectors.

Banking, transport, rents: to remain constant; these sectors have large margins of unused capacity.

Distribution & commerce & other services: to decrease in proportion to the reduction in employment by the Service departments and then to increase at the rate of population growth (1.l9% between 1961 and 1964).

Construction & quarrying: to increase in proportion to the Government's development expenditure.

B) - Foreign exchange earnings

Merchandise exports: a) established firms - no change. b) new firms: output per man employed is assumed to be twice as large as the value added; on the basis of past exnerience, it is then assamed that 50% of total output will be exTorted.

Dockyard: in 1961, the value of exports almost equalled the value added; the same relationship is assumed for 1964.

Service departments: a) purchases by non-Maltese; to decrease in proportion to the reduction in employment; b) materials, contracts, etc.: to remain at the 1958 level; c) wages and salaries: to decrease in proportion to the reduction in employment.

Tourism: to increase at the rate of growth in hotel capacity.

Transportation: to increase as preceding sectors.

Investment income: to change in proportion to the change of GDP.

Other transactions (remittances, government, miscellaneous): no change., LIST OF TABLES Number

1, lb Public Debt ...... la,

Proposed E&ternal Public Debt 1962-1966...... 2

Population and Population Growth...... 3

National Income...... 4

Industrial Origin of Gross Domestic Product...... 5

Gross Fixed Canital Formation...... 6

Balance of Payments...... 7

Total Imports, c.i.f...... 8

Domestic Exports, f.o.b...... 9

Direction of Trade...... * 10

Manufacturing: Value of Output, Investment and Enployment...... 11

Semi-annual Sales of New Industries: 1961...... 12

Acreage and Yields of Major Crops...... 13

Money Supply and Bank Oerations...... 1

Sterling Assets of the Government, Its Agencies and Commercial Banks ...... *. . . .e...... 15

Financing of Total Government EKpenditure...... 16

Current Government Revenue...... 17

Current Government EKpenditure...... 18

Government Capital Expenditure...... 19

Development Plan...... 20 Table 1

External Public Debt Outstanding as of June 30, 1963 and Estimated Contractual Service Payments (1i1U.S. $ 1000 equivalent)

A) External Debt

Debt outstanding as of June 30, 19631/

3,367

Loans from U.K. Government 3L367 U.K. Exchequer loan 3,300 Other 7

B) Service Payments/

Debt out- Payments during year Years ending standing Amorti- In March 31 (March 31) zation terest Total

1963 3, 360/ - - - 1964 3,360 62 197 259 1965 3,298 66 194 260 1966 3,232 70 190 260 1967 3,162 74 186 260 1968 3,088 78 181 259 1969 3,010 83 177 260 1970 2,927 88 172 260 1971 2,839 93 167 260 1972 2,746 98 161 259 1973 2,648 104 156 260 1974 2,5bh 110 149 259 1975 2,434 117 143 260 1976 2,317 124 136 260 1977 2,193 131 129 260

1/ All disbursed. T/ Includes service on all external public debt, except a loan of z2,323 from the United Kingdom Government, on which annual service payments are less than the equivalent of $500. 3/ Debt outstanding as of June 30, 1963.

Source: IBRD Statistics Division. Table la

Proposed External Public Debt 1963-1965 and Estimated Coitractual Service Paynents

A) Proposed External Debt (in :000)

In &, In U.S. dollar sterling eouivalents

Total Proposed Debt 6 j78 18,140

Proposed IBRD loan of $7,500,000 5i%, 1966-1983 2,67 00

Total proposed U.K. Exchequer/loans 3,800 l0 64o L 1,202,000 5-7/8%, 1963-614-/ 1,202 3,366 L 2,598,000 5-7/8%, 1963-6L1/ 2,598 7,27L

B) Service Payrments2/ (in U.S., $ '000 ecuivalent)

Debt out- Payments during year Years ending standing Amorti- In- March 31 (March 31) zation terest Total

Total proposed debt

196 10,640 511 625 1,136 1965 17,629 :)1 595 1,136 1966 17,088 572 563 1,135 1967 16,516 871 939 1,810 1968 15,6b5 922 888 1,810 1969 1h,723 975 834 1,809 1970 13,78 1,030 779 1,809 1971 12,718 1,087 719 1,806 1972 11,631 1,151 656 1,807 1973 10,480 1,219 539 1,808 1974 9,261 1,289 519 1,808 1975 7,972 1,362 445 1,807 1976 6,610 1,bU 366 1,810 1977 5,166 1,526 282 1,808 1978 3,640 480 194 674

1/ The terms of borrowing are estimated for purposes of calculation of service payments. 2/ Excluding service payments on existing external debt (Table 1)

Source: IBRD Statistics Division. Table lb

Estimated _nternal Public Debt Outstanding as of March 31, 1963 and :Estimated Contractual Service Pa 7ments

A) Internal Public Debt (in '000)

Debt outstanding March31 19631 Item In L Sterling In U.S. $ eauivalent

Total internal public debt h,242 11877

L,1,300,000 6%, 1974-1979 Stock 1,294 3,622

L 1,200,000 6%, 1973-1980 Stock 1,200 3,360

& 1,670,000 6%, 1974-1981 Stock 1,670 1,676

T 102,533.14.3 "Massa Frumentaria" 78 219

B) Service payments (in U.S. 000 equivalent)

Debt out- Payments during year Yearsending standing Amorti- In- March 31 (March 31) zation terest Total 1964 11,877 53 705 758 1965 11,823 93 705 798 1966 11,726 117 705 822 1967 11,599 117 705 822 1968 11,465 117 705 822 1969 11,322 117 705 322 1970 11,171 117 705 822 1971 11,010 117 705 822 1972 10,839 117 705 822 1973 10,658 117 705 822 1974 10,466 117 705 822 1975 10,264 117 705 322 1976 10,049 117 705 822 1977 9,821 117 705 822

1/ Net of accumulated sinking fund.

Source: IBRD Statistics Division. Table 2

Proposed External Public Debt 1962-1966 and Estimated Contractual Service Payments

A) Proposed debt (in '000)

In , In U.S. dollar sterling equivalents

Total 7;678 21,500

Total proposed U.K. exchequer loans 5,000 14,000

;2,400,000 610, 1962/63 2,402 6,726 12,598,0o0 61%, 1963/64 2,598 7,274

Proposed IBRD loan 12,678,500 1966/83 2,678 7,500

B) Service payments (in U.S. $'000 equivalent)

Net debt Payments during year outstanding Amorti- In- March 31 zation terest Total

1963 6,726 114 437 551 1964 13,886 246 901 1,147 1965 13,640 262 885 1,147 1966 20,878 278 869 1,147 1967 20,600 561 1,260 1,821 1968 20,039 595 1,226 1,821 1969 19,444 631 1,189 1,820 1970 18,813 667 1,152 1,819 1971 18,146 706 1,111 1,817 1972 17,440 750 1,069 1,819 1973 16,690 797 1,022 1,819 1974 15,893 845 974 1,819 1975 15,048 895 923 1,818 1976 14,153 952 868 1,820 1977 13,201 1,011 810 1,821

Source: IBRD Statistics Division. Table 3

Population and Population Growth

Total Net Net Annual Net Population Natural Increase Emigration Increase '000 '000 000 December 31 1945 285.3 7.0 2.5 -0.6 2.7

1950 312.5 7.1 2.3 7.3 -0.1

1951 312.6 6.0 19 5.8 0.1

1952 316.8 5.9 1.9 1.7 1.3

1953 320.6 6.2 1.9 2.3 1.2

1954 316.0 5.9 29 10.6 -W

1955 314.0 5.9 1.9 7.9 -0.6

1956 316.2 5.5 1.7 3.2 0.7

1957 320.0 5.8 1.8 2.1 L1

1958 323.7 5.9 1.8 22 1.1

1959 327,2 5.7 1.7 2.1 1.1

1960 328.9 5.7 1.7 4.o 0.5

1961 329.6 4,8 1.5 W.1 0,2

1962 329.3 4.7 1.4 5.0 -01

Source: Central Office of Statistics, Demographic Review for the year 1959 , Statistical Abstract of the Maltese Islands, 1960, and Quarterly Digest of Statistics, December 1962. Table 4

National Income

195l 195 1958 1959 1960 1961

Personal consumption 25.3 25.3 31.3 33.3 34.5 35 9 3.2 8.3 Government consumption . 5.2 6.5 6.3 10.2 9, Gross domestic caoital formation 5.3 6.0 10.7 9.3 0.3 1.1 1L2 in stocks .. 0.1 0.7 Increase 29.0 Exports of goods & serviceJ 20.6 20.9 24.6 25.5 28.3 less: Imports of goods & services!}/ -22.0 -23.3 -31.0 -30.4 -33.8 -32.4 Gross domestic -roduct rrices) 33.7 34.2 42.8 h.3 48.5 51,5 (at market 2.9 Net factor income from abroad 2.3 Gross national roduct 51.9 $-.u (at market prices) 36.0 36.7 7.2 58. Less: Taxes on expenditure -1.5 t -7: .9 . . -7.7 1.1 1.3 Tgidies 1.0 1 0 1.1 1.2 Gross national product 46,6 ) (at factor cost) 32&2 32,9 42.1 43.4 Less: Capital consumption -1.5 5 -1T77 TS 2.1 - National income 30.7 31.4 0.7 41.6 4h.5 LK9 National income (at constant - 39.2 b,1l6 prices27F nea. 31.6 39.5

Average annual rate of growth / _5.0 _/

7); 1/ The definitions are different from those of the balance of Dayments (Table some current items, such as remittances, are here excluded.

2/ Consumer price index.

Source: Central Office of Statistics, National Accounts of the Maltese Islands,

____-. 195h6-1961. Table 5 Industrial Origin of Gross Domestic Product (1 million)

195 1958 1959 1960 1961

Gross domestic product (at factor cost) 30.4 38.0 39.3 13.2 45.1

Percent

Agriculture & fishing 8.6 7.0 7.4 7.4 7.5 Construction & quarrying 8.6 9.7 9.1 9 5 8.9 Manufacturing 8.2 8.7 13.01/ 12:71/ 12.61/ Transport & storage 3.6 4.5 4.3 4.0 4.6 Public utilities 2.0 1.9 18 2.3 2.7 Distribution & commerce 20.4 21.8 21.9 22.7 22.2 Banking, insurance, etc. 1.6 1.3 2.0 2.1 2 4 Military services 25.0 22.6 18.12/ 17.8-1 16:92/ Rent of dwellings 4.3 5.5 4.8 4.6 4.4 Other services 6.9 6.1 5.9 5.6 4.9 Government 10.8 10.0 11.7 11.3 12.9

Total 100.0 100.0 100.0 100.0 100.0

1/ Includes the dockyard. 7/ Eccludes the dockyard.

Source: See Table 4. Table 6

Gross Domestic Fixed Canital Formation (I million) 1954 1955 1958 1959 1960 1961 A) By type of assets

Construction 3.5 4.1 6.3 5.9 6.9 6.1 Dwellings 1.2 T.3 1. 2.7 2.2 2.3 Non-residential buildings) 2.3 2.8 1.7 1.9 1.6 2.4 Other ) ) 3.0 1.8 3.1 1.4

Retained imports 1.5 1.6 4.o 3.1 2.9 3.0 Transport equipment 0.5 T7T 1. T. 1.1 Machinery, except electric o.4 o. 2.0 1.2 1.3 1.2 Electric machinery 0.5 0.3 0.5 0.3 0.3 0.2 Other 0.1 0.1 0.3 0.6 0.3 0.5

Domestic production 0.3 0.3 o.4 0.3 o.4 o.4

Total 5.3 6.0 10.7 9.3 10.2 9.5

B) By type of purchaser

Private enterprise 3.3 3.3 6.1 6.1 5.9 6.1 Public enterprise - 0.8 2.2 0.9 0.7 0.8 General government 2.0 1.9 2.4 2.3 3.6 2.6

Total 5.3 6.0 10.7 9.3 10.2 9.5

Source: See Table 4. Table 7

Balance of Payments

1954 1955 1958 1959 1960 1961 A) CURRENT ACCOUNT

1. Total receipts 25.1 25.5 31.5 31.3 33'8 34.7 Merchandise exports, f.o.b. 2.2 2.1 3.2 39 Th0 2 5.1 Transport & touri 1.5 1.5 1.3 1.4 1.3 1.6 Military servicesa- 16.6 171 19.5 19.5 21.5 21.0 (Purchases by non-Maltese) %6.4) (7.) (7-4) (7.6) /(7.2) (71) (Contracts, materials, etc.) (3.1 1() * ) (Wages & salaries) (7-1) /(7:,)!//(82 (6.6)Y (7 01 Government transactions o.4 o. 0.7 0.7 0.8 0.8 Investment income 2.6 2.7 4.7 4.3 4.2 4.6 Remittances 1i 1.0 1.4 1.1 1.3 1.1 Miscellaneous 0.7 0.7 0.7 0.5 o.5 0.5 2. Total paymrents 23.0 24.1 31.8 310 35.O 3'.5 Merchandise imports, c.i.f. 9 20.7 7 27 2b.9 Transport & tourism 16 1.5 1.6 1.6 1.8 1.6 Government transactions 0.3 0.5 1'.0 1.4 1.8 0.5 Investment income 03 0.2 0.3 0.2 0.8 1.7 Remittances 0.5 0.4 o.4 0.4 o.4 o.4 Miscellaneous 02 0.6 0.7 0.8 1.3 1.4 3. Current account balance (1-2) +2,1 +1.h -0.3 -0.3 -1.2 +0.2

B) CAPITAL ACCOUNT

4. Long-term capital inflow +2.1 +.o +5.3 +6.6 +7.9 +57 Direct investment - 0.1 0.2 3.9 3.0 T. Official grants 2.4 3.9 5.1 4.1 4 9 4~.2 5. Long-term ca-pital outflow -0.5 -0.7 -2,6 -6.5 -7 L4 -3., 6. CEhange in assets3/ -7. 0 -77 --2-. --01 40.7 7. Banks: long-tern, -0.1 Z.7 - -1 +T1 +U3 Banks: short-term -2.5 -0.3 -2.1 -2.0 -160 -2.1 Govt.: long-term -0.6 -1.0 -097 +.6 -1.5 +1.2 Govt.: short-term +0.3 -. 6 +0.2 -3 -00.1 -0.8 Other & er2rors & omissions -1.3 -2A4 +0.6 -2.3 +.0 -1,5 7. Capital account balance 0-2.1 -0.2 +0.3 -0.3 +1.2 -0.2

ud s the Dockyar1. 70Inc D/Bccludes the Dockyard. (-) indicates increase in assets held abroad.

Source: Government Statistician. Table 8

Total Imports, c.if, (1, 1000) Percent 1955 1958 1959 1960 1961 1962 1955 19(,

Food 8,479 9,900 9,785 10,387 10,003 9,744 40.0 34.1

Beverages and tobacco 637 859 815 784 712 717 3.0 2.5

Crude materials 1,334 59 h6 651 511 782 1.6 2,?

Fuels, lubricants, etc. 2,075 2,730 2,328 2,286 2,200 1,858 9.8 6.5 0,2 Animal and vegetable oils 304 296 329 279 339 245 1.L'

Chemicals 999 1,378 1,533 1,606 1,789 1,695 b.7 S

Mlanufactured goods 3,1 85 ,)494 5,063 5,753 5,321 5,272 16.5 185

Machinery and transport equipment 1,930 4,226 3,392 3,945 4,454 4,174 9.1 1.6 3,269 11.6 11.4 Miscellaneous manufactures 2, 448 3,246 3,215 3,481 3,601 2.Q Other 496 1,333 968 647 503 825 2.3 6 Total 21,187 2 821 272875 29L 19 29 )33 28 81 100.0 10090

Source: Government Statistician. Table 9

Domestic HYports, f.o.b.

Percent 1950 1955 1958 1959 1960 1961 1955 1L

Agricultural products 30 306 469 39r 512 542 36.0 28.1 ?reserved fruits - 97 "7 76 59 -7 - Potatoes 291 186 353 271 371 384 Onions 11 13 28 24 19 14 Bulbs, flowers, seeds 2 10 29 55 63 87

Manufactures 131 205 250 275 377 561 24.1 29.0 Tobacco products - 6i 7 2 7 T29 Beverages 11 84 85 41 89 121 Vegetable oils - - 47 100 89 127 Nylon stockings - 10 - 17 30 38 Gloves & mittens 49 82 95 94 107 128 Buttons 4o 11 5 2 1 - Smoking pines 31 12 11 19 24 19

Crude materials 343 253 226 465 399 626 29.7 32A4 HideT' ski ns 79 73 21 0 7 -- Scrap metal 285 215 205 375 350 566

Other 41 87 50 48 86 203 10.2 10.5

Total domestic exports 819 851 995 1,184 1,374 1,932 100.0 10,0

Source: Government Statistician. Table 10

Direction of Trade

Percent 1950 1955 1958 1959 1960 1961 190 1961

Laports T -a2r area 2,268 2,022 2,234 1,472 1,813 1,888 13.6 6.4

Europe and other non-sterling 5,753 9,249 12,375 13,351 13,725 13,732 34.3 116.7

United Kingdom 7,058 8,377 12,324 11,306 12,038 12,101 42.1 41.1

Other sterling area (including Libya) 1,681 1,539 1,888 1,745 2,043 1,712 1010 5.8

Total 16,760 21,187 28,821 27,874 29,619 29,433 100.0 100.0

Ex- or t s Dollar area 1 3 28 34 33 61 0.1 1.3

Eurone and other non-sterlinz 409 h75 h8 854 953 1,608 24.6 34.6

United Kingdom 1,032 1,953 2,655 2,365 2,438 2,336 62.1 50.3

Other sterling area (including Libya) 219 240 46 782 b01 641 13.2 13.8

Total 1,661 2,671 3,595 4,035 3,825 4,646 100.0 100.0

Source: Government Statistician. Table 11

Manufacturing: Value of Outnut, Investment (in ;0,000) and n-ployment in Large Establishments-/

1956 1960 Value of Invest- Enplcy- Value of Invest- Emplov- output ment!7 ment output ment.2/ ment

Quarrying 161 2 461 113 11 230 Food 1,080 64 77b 2,339 36 830 Beverages 1,433 177 890 1,831 60 996 Tobacco 1,149 -22 295 1,491 91 328 Textiles 141 -14 289 175 26 276 Wearing apparel, etc. 278 -6 702 397 20 633 Furniture 153 23 352 201 -2 379 Printing 207 4 08 320 25 485 Leather 46 5 70 43 4 65 Chemicals 496 57 135 546 15 158 i1on-metallic minerals./ 76 2 126 2.6 2 320 Metals 77 11 84 260 14 122 Machinery 366 87 h06 167 -1 259 Transport equipment 83 -2 295 98 192D Construction 833 162 1,322 4,933 179 2,787 Miscellaneous 70 3 185 136 6 260 Total 6,649 553 6,794 13,306 490 8,320

1/ Dncloying more than 10 persons. / Fixed investment plus (or minus) change in stocks and work in progress. '/ 1956 data uartly included under Construction. "T/ Excludes Bailey (Malta) Ltd.

Source: 1956: Statistical Abstract of the Maltese Islands; 1960: Government Statistician. Table 12

Semi-Annual Sales of New Industries: 1961

Export Sales Local Sales Total Sales Ist 2nd 1st 2nd 1st 2nd half half Total half half Total half half Total

Knitwear 0.6 1.2 1.8 5.1 15.9 21.0 5.7 17.1 22.8

Marine naints - 6.7 6.7 0.8 192 1.4 0.2 7.9 8.1

Mattresses 0.7 1.3 2.0 15.9 28-3 44.2 16.6 29.6 46.2

Mattresses - 0.3 0.3 10.9 17.2 28.1 10.9 17.5 28.4

Textiles 6.8 3.9 10.7 4.7 9.2 13.9 11.5 13.1 24.6

Automobiles 18.9 49.1 68.0 - 0.9 0.9 18.9 50.0 68.9

Flower cuttings 12.0 12.5 24 5 - - - 12.0 12.5 24.5

Metal products - 15.5 15.5 - 5.4 5.4 - 20.9 20.9

Plastics 0.5 2.0 2.5 5.5 8.0 13.5 6.0 10.0 16.3

Plastics - 1.3 1.3 - .. .. - 1.3 1.3

Rubber - 4.0 4.0 - - - - 4.0 4.0

Jewelry - 1.0 1.0 - - - - 1.0 1.0

Total 39.5 98.8 138.3 42.3 86.1 128.4 81c.8 18469 266.7

Source: Malta, Department of Trade and Industry. Table 13

Acrea,e & Yields of Major Crons

1950/51 1954/55 1955/56 1958/59 1959/60 1960/61

A) Acreage (?000)

Cereals 23.9 25.3 24.o 22.9 23.2 22.2 Fruits 3.5 4.5 4.7 5.1 4.6 4.6 Vegetables 17.7 15.8 16.3 17.0 15.7 16.9 Total 45.1 45.6 65.0 45.o 43 5 43 7

B) Production (1000 tons)

Cereals 32.1 32.5 43.0 35.9 36.4 3h.7 Fruits 11.9 8.2 9. 10.8 8.9 11.2 Vegetables 50.4 56.4 62.L 55.3 53.2 51.4 Total 94.4 97.3 114.9 102.0 98.5 97.3

C) Estimated value ('000) Cereals 430.8 682.8 680.5 776.6 780.6 771.4 Fruits 278.9 250.4 297.3 308.0 277.8 468.9 Vegetables 798.1 931.8 1,184.9 971.9 1,171.8 1,450.9 Total 1,507.8 1,865.0 2,162.7 2,056.5 2,230.2 2,691.2

Sources: Central Office of Statistics, Statistical Abstract of the Maltese Islands, 1960. Table 14

Money Sunnly and Eank D'erations

Money Supnly Bank Operations Governmen,tG Savings Currency in Demand Commercial Banks Bank circulation denosits Total Deoosits Advances denosits

December 31

1955 17.22! 5.0 22.2.2/ 21.7 3.9 17 1

1956 18.71/ L.9 23.62! 27.7 4.5 15.9 1957 19.Li/ 5.0 248.$ 31.4 4.5 15.8

19j8 20.5 6.2 26.7 36,0 4.3 15.9 1959 21.0 6.3 27.3 28.3 4.6 13.1 1960 22.6 6.3 28.9 38.3 5.3 11.8

1961 23.7 6.7 30.4 ho.5 5.6 11.5 1962 24.7 6.7 31.4 56.41 6.4 n.a.

1/ At the end of March. 2, Aoroximate. 3/ Includes Government Savings Bank deposits.

Source: Quarterly Digest of Statistics, September 1961 and Office of the Financial Secretary. Table 15

Sterling Assets of the Government, Its Agencies and Commercial Banks (V '000, valued at market prices, December 31)

1955 1958 1959 1960 1961

Government 384 1,071 1,h9 1,745 2,307 National Insurance Fund - 97 . 327 Tl -1,631 Cash in Joint Colonial Fund 384 95 122 140 676

Note Security Fund 17,194 20,269 19,820 21,0 0 20,795

Government Savings Bank 14,857 11,947 9,848 9,624 9,460

Commercial Banks 19,889 28,554 31,514 300200 32,07 Gilt-edged securities ?;* 1,) 0 Commonwealth securities 999 2,419 2,765) Cash on deoosit or at call 13,376 20,167 22,134 21,116 23,207

Total 52,324 61,841 62,631 60,609 64,969

Estimate of private holdings (I million) 22.1 3 2.4 32.7 36.7 39.91/

1/ Provisional.

Source: Office of the Financial Secretary. Table 16

Financing of Total Government Excenditurl/ (- '000) 1950/51 1954/55 1958/59 1959/60 1960/61 1961/62

1. Government deficit on current & capital account

Current revenue 5,643 6,942 9,355 9,952 11,OOx4 2,636 Current exnenditure 5,185 7,583 9:7,?3 10,673'12,36l2/12,92L6. Surlus (+) or deficit (-) +458 -641 -388 -721 -1,357 -288 Capital excenditure 617 792 3,727 4,707 1,337 3,672 War damage reconstruction 2,337 1,773 1,181 267 172 173

Total deficit -2,h96 -3,206 -5,296 -5,695 -5,866 -4,133

2. Financing of the deficit

Internal sources Internal loans - - - 1,11h 1,300 1,h95

External sources C.D. & W. grants 77 376 87 2,568 2,413 1,679 Imcerial grants - 268 292 61 601 239 Emigration grants - 566 - - - - Grants-in-aid - - 3,102 - 3U8 250 Colonial Services Vote - - - 894 733 515 War damage grants 2,1439 1,768 1,082 259 172 169 Total 2,516 2,968 4,563 5,296 5,567 L,3347

Change in Treasury balances (- increase) -20 +238 +733 +399 +299 -214

1/ Financial years: April 1 - March 31. 2/ Includes capital expenditure for civil aviation.

Source: Office of the Financial Secretary. Table 17

Current Governient -Revenve

1950/51 195h/55 1958/59 1959/60 1960/61 1961/62

Customs duties 2,353 3,036 4,096 4,312 4,648 5,312 Excise duty 389 308 320 334 546 867 Income tax 463 495 774 866 1,001 1,243 Succession and donation duties 221 157 260 249 282 283 Other taxes 312 479 593 675 663 772

Total tax revenue 3,738 4,475 6,o3 6,043 7,140 8,477

Fines, fees, etc. 333 462 582 663 768 979 Water & electricity 544 717 871 1,054 1,131) Port & telephones 178 350 368 432 460) 1,670 Other pronerty & enterorises 75 69 317 162 166) Lotteries 389 511 541 562 560 514 income from investments 180 151 34 37 64 54 Note Security Fund 206 207 599 608 715 942

Tctal revenue 5,643 6,942 9,355 9,952 11,004 12,636

Source: Office of the Financial Secretary. Table 18

Current GovernrIent Expenditure

1950/51 1954/55 1958/59 1959/60 1960/61 1961/62 Adm.-,in.stration 738 1,404 1.t 6 3 1,888 2,797 2,346 Gener al. 171 390 783 Financial 171 227 306 3114 446 592 Law & order 396 503 767 786 801 1,171

Economic services 1,126 1,698 2,373 2,594 2,899 3,092 Agriculture & fisheries 116 2I34 -- 27 -2 Trade & industry - 10 46 45 19 58 Water & electricity 446 677 796 833 923 908 Communications 176 274 396 418 411 ) Transrort, Tnublic works ) 1,78221 and housing 388 584 855 970.2 1,184/) Tourism - 32 84 85 82

Social services 3,064 3,968 5,360 5,345 5,633 6,464 Health 9!3 T76B6 7$7S1,71160 1,673 Education 571 751 1,300 1,332 1,648 1,925 Emigration & social welfare 615 1,360 1,567 1,524 1,503 1,56 Subsidies 925 604 841 753 772 1,160 Financial commitments 257 351 459 1494 699 ) Interest on nublic debt 2 2 33 7 170 1,C22 Property charges, etc. 17 31 35 33 30 ) Pension & gratuities 238 318 391 415 519 )

Other - 162 88 352 333 )

Total 5,185 7,583 9,743 10,6731/ 12,3611/ 12,9241

1/ Includes capital expenditure on civil aviation.

Source: Office of the Financial Secretary. Table 19

Governmient Ca.itai Exnenditure (& 1000)

1950/51 1954/55 1955/56 1956/57 1957/5, 1J5 /59

Economic services - - 171 486 60A 367 Agriculture - - 130 345 382 206 Fisheries - - 18 118 166 58 Industrial development - - 23 1 31 52 Tourism - - - 22 25 52

Infrastructure 298 917 .. 14 1,701 2,51 Water 114 144 234 562 832 744 Power 53 20 66 126 217 450 Gas - - - - 20 22 Telecomriunications 16 12 7 15 32 66 Ports & harbors - - 71 100 109 251 Roads & bridges 115 217 366 497 325 256 Civil aviation - 4 67 114 166 12

Social services 241 340 560 1 176 1,406 1,186 Sewerage 110 142 168 192 204 226 Health 102 70 102 106 157 80 Education- general )29 128 442 755 483 355 Education- technical) 2 320 234 Housing - - 48 123 242 291

Miscellaneous 78 55 25 13 98 123

',votal u7 792 0 3.259 ' 80 3 77

d 0 r^construction 2,337 1,773 1754 820 , 1,1

Grand Total 2,94 2,565 891 5 5 108

Source: Office of the Financial Secretarv. Talle 20

bevelonment Plan { A '000)

Original AIlucation Accoal Revised Estimate Total Total 1959-1966 % 1959/60 1960/61 1961/b2 1962/63 1963/66 1959-1966 % A)EV LMNT EMP"1ITURE 21,701 367 A) ElP N 4(r1L22,6 10 u',701 6,337 3,7 L629 6,5 2,6 1001

Sconomic Services 6 385 16 612 799 1,026 2,203 1,959 6,397 25 Agriculture 4- _17b T12 165 173 Fisheries 105 .. 1L 13 6 66 l 135 Industri develoorentY 2,960 12 131 511 822 1,691 1,253 6,208 17 TourisA2/ 637 3 122 127 76 503 593 1,619 5 Infrastructure 9,682 38 2,872 2,039 1,579 2,620 2,260 12,170 L4 Power 77r T 7752oT 1T173 7T 2/ - Water 2,213 9 552 615 20 336 185 1,768 7 Gas 61 .. 56 7 11 31 31 136 Telecommunications 786 3 2L7 115 l65 315 50 912 6 Ports and harbors 2,L81 10 1,26 716 512 373 20 2,7a5 11 Roads 1,365 6 266 JA8 295 635 526 2,090 8 Education (technical) 1,037 6 167 168 123 666 660 1,562 6 Social Services 5 683 26 1,299 1,398 989 1,386 900 5,970 26 Sewers _T M -T7- II 7T7 T ;07 -T Health 1,106 5 31 63 72 221 170 537 2 2 Education (general) 1,567 6 365 370 381 5 u 311 1,931 0 Housing 2,28B 9 670 8o6 392 363 182 2,h13 10 scellaneous 20 110 101 78 27? 1,238 1,505 7 Public builZings TIn0T TR !7 _T1 1,001 I Reserve 6,237 17 - - - - 8o 606/ 3

Financed from CD & W. Frants 13,250 2,630 2,35b 1,677 2,976 2,363 12,000 Colonial Grants vote 3,596 895 733 516 730 722 3,596 UNESCO grants - - - - 60 60 100 Exchequer loans 5,000 - - - 2,602 2,b98 5,000 LBRD loan - - - - 38 668b10 Local loans 3,000 1,176 1,250 1,651 93 - L,000

B) SPECIAL E(PEDITIRE 7,606 b,656 Dockyard conversion f= ...... 42M var damage reconstruction 1,606 267 172 173 36 630 1,606 GRAND TOTAL (A * B) 32,20 33,976

1/ Includes grants & loans for tourist develonnent. 7/ Includes antiquities. 3/ Includes exenditure on sea water distillation, but reuresents only %artof the cost of the nower/water rroject. T/ Consists of the following items: 375,000, the Government's share in the financing of the rower/sea water distillation nroject (196L/65) ik629,000 for electricity services for new industries and hotels 'afzar 1963/64.

Source: Office of the Financial Secretary.