Contents

List of Acronyms...... i

List of Tables and Figures...... iii

PART A - ’s National Reform Programme 2005-2008 Closure Report

Sustainability of Public Finances...... - 2 - Competitiveness...... - 7 - Employment ...... - 15 - Education and Training ...... - 19 - Environment...... - 23 -

PART B - Addressing Malta’s Specific Recommendations

Political Summary ...... - 28 - Strategic Direction 2008 - 2010...... - 30 - Addressing Malta Country Specific Recommendations ...... - 30 - Reinforcing the competition authority to strengthen competition ...... - 30 - To strengthen competition, notably in professional services...... - 31 - Reduce state aids and redirect them towards horizontal objectives, especially R&D...... - 32 - Step up efforts to attract more people into the labour market, particularly women and older workers ...... - 35 - Addressing Malta’s Points to Watch...... - 39 - Implementing and reinforcing delayed measures on health care reform ...... - 39 - Further improving the regulatory environment by continuing simplifying legislation by introducing systematic impact assessments and effective one stop shops for business start-ups...... - 41 - Diversifying energy sources, including enhancing energy efficiency and renewable energy and connecting Malta to Europe’s energy networks...... - 42 - Raising educational attainment and reducing early school leavers ...... - 44 -

Part C - Malta's National Reform Programme 2008-2010

Macroeconomic Policies ...... - 48 -

Recent Economic Developments ...... - 48 - Macroeconomic Policy ...... - 50 - Issues and Opportunities ...... - 50 - Vision and Objectives...... - 52 - Stable macro economic framework...... - 52 - Competition policy...... - 52 - Wage developments ...... - 53 - Diversification of the economy ...... - 53 - Human Resource Development ...... - 54 - Development of infrastructure...... - 54 - Encouraging investment...... - 54 -

Malta National Reform Programme 2008-2010 Contents

Flexibility of the economy...... - 55 - Fiscal Policy ...... - 56 - Issues and Opportunities ...... - 56 - Vision and Objectives...... - 57 -

Microeconomic Pillar...... - 58 -

Unlocking Business Potential...... - 58 - Better Regulation – From ‘Red Tape’ to ‘Red Carpet Treatment ...... - 58 - The Small Business Act ...... - 60 - Tourism ...... - 61 - Public Land Transport Reform ...... - 61 - Services Directive ...... - 61 - Intellectual Property Rights ...... - 62 - Investing in knowledge and innovation ...... - 62 - R&D...... - 62 - ICT ...... - 63 - Energy and Climate Change...... - 65 - Energy...... - 65 - Climate Change ...... - 66 -

Employment...... - 68 -

Health and Safety...... - 68 - An Overview of Recent Labour Market Trends ...... - 68 - Malta’s Flexicurity Pathway...... - 70 -

Education and Training ...... - 73 -

Curriculum Review ...... - 73 - Core Competencies Policy and Strategy ...... - 73 - Review of the Transition from Primary to Secondary Education...... - 73 - Promoting literacy skills in young people ...... - 74 - Increasing the number of graduates in Science and Technology ...... - 74 - Developments in further education ...... - 74 - Expansion of the Junior College ...... - 75 - Ongoing developments within the Institute for Tourism Studies ...... - 75 - Malta College for Arts, Science and Technology Master Plan 2008-2013...... - 75 - The University of Malta ...... - 76 - Skills shortages and new occupational needs ...... - 78 - Lifelong Learning...... - 79 - Paradigm shift to a Developmental Model of Education ...... - 79 - eLearning Strategy – training the education workforce...... - 79 -

Malta National Reform Programme 2008-2010 Contents

Conclusion...... - 81 -

Appendix 1 – List of Measures………………………………………………………………………………………………-82- Appendix 2 – Flexicurity Measures………………………………………………….………………………………………-90 -

Malta National Reform Programme 2008-2010 Contents

List of Acronyms

ALMP Active Labour Market Policies MEU Management Efficiency Unit Ministry of Finance, Economy and APR Annual Progress Report MFEI Investment APS Action Plan For Simplification MFSA Malta Financial Service Authority AYS Active Youth Scheme MGSS Malta Government Scholarship Scheme BEP Basic Employment Passport MIP Malta Industrial Parks Ltd BPA Business Promotion Act MQC Malta Qualifications Council BRU Better Regulation Unit MRF Material Recovery Facility CHP Combined Heat and Power MSW Municipal Solid Waste Plant CITAC Core ICT Advisory Committee MSOC Ministry for Social Policy EIF MTA Malta Tourism Authority ERA European Research Area MTP Material Treatment Plant European Regional NBSAP National Biodiversity Strategy & ERDF Development Fund Action Plan National Commission for Higher ESF European Social Fund NCHE Education Environmental Technologies NIFTE Night Institute for Further ETAP Action Plan Technical Education Employment & Training NQF National Qualifications Framework ETC Corporation EU European Union NRP National Reform Programme EUPA European Union Programmes NSO National Statistics Office Agency NSRF National Strategic Reference FDI Foreign Direct Investment Framework FFM Family Friendly Measures OFC Office of Fair Competition FHRD Foundation for Human PES Public Employment Service Resources Development Financial Management and PV Photo Voltaic FMMU Monitoring Unit FOI Federation of Industry PVC Programme Validation Committee GDP Gross Domestic Product R&D Research & Development GHG Green House Gas R&I Research & Innovation GSU Government Services Unit RIA Regulatory Impact Assessment Information & Communication RTO Regenerative Thermal Oxidiser ICT Technology IO Information obligation SAC Special Area of Conservation Industrial Projects and SAP Systems Applications & Products IPSL Services LTD

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IT Information Technology SCM Standard Cost Model SEA Strategic Environmental ITS Institute of Tourism Studies Assessment LN Legal Notice SMEs Small & Medium Enterprises SMPPMA Special Marketing Policy MAP Multi Annual Programme Programme for Maltese Agriculture Malta College for Arts, Science TEES Training & Employment Exposure MCAST & Technology Scheme Malta Council for Economic & MCESD VAT Value added tax Social Development Malta Council for Science & Vessel Traffic Management MCST VTMIS Technology Information Systems ME Malta Enterprise WSC Water Services Corporation Malta Environment & Planning MEPA Authority

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List of Tables and Figures

Table 1 - Use of road transport fuels in Malta during 2007 and the share of Biofuels ...... - 26 - Table 2 - Key State Aid Indicators 2006 ...... - 34 - Table 3- Total Day and Evening Student Population in Further and Higher Education Institutions in Malta (2004-2007)...... - 45 - Table 4 - Main Economic Indicators...... - 49 - Table 5 - Achievements registered in the ICT sector within the past 3 years ...... - 64 - Table 6 - Employment Rates, 2007……………………………………………………………………...….- 67 - Table 7 - Estimated number of students attending evening courses at MCAST...... - 76 -

Figure 1 - Total Day and Evening Student Population in Further and Higher (1994- 2007)...... - 44 -

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Introduction

The renewed aims ‘ to make Europe the most dynamic and competitive knowledge–based economy in the world ’. Malta’s first NRP 2005-2008 proposed 54 concrete measures designed to improve Malta’s economic growth rate and employment opportunities under 5 strategic thrusts, namely: • Sustainability of public finances; • Competitiveness; • Employment; • Education and training; and • Environment. During the first cycle of the NRP, Malta has managed to achieve a number of positive results in a number of sectors. Such achievements include: improved fiscal position, Euro adoption, reduction in unemployment, the introduction of incremental measures in pensions reform, taxation measures, ICT, tourism and FDI.

In the second cycle of the NRP, the Maltese Government will focus on the priorities highlighted by the in its country specific and general recommendations as well as on addressing the national issues which contribute towards Malta’s competitiveness.

The main thrusts which will be addressed within the next three year cycle include: • Unlocking business potential; • Investing in knowledge and innovation; • Energy and climate change; and • Investing in people and modernising labour markets. Addressing these thrusts will contribute towards improving Malta’s competitiveness. Competitiveness is a key driver for a better quality of life as it fosters increased employment, better levels of earnings. Malta’s NRP is not a document which belongs solely to Government – it is a document which is important to many stakeholders and even to each and every citizen. In fact, the Maltese Government has carried out a public consultation exercise with a view to seek the views and opinions of the widest audience possible with a view to encompassing all positive ideas whilst steering Malta towards more competitive levels. This methodology is in line with Government’s commitment towards intensive public dialogue on all its programmes and initiatives.

The NRP will guide Malta’s strategic development for growth and jobs for the period 2008- 2010. All the measures put forward within the NRP will be undertaken whilst ensuring that the sustainability of public finances. It is intended to build on what Malta has already achieved and to move further and farther.

This document is made up of three main sections, namely: • Part A - Malta’s National Reform Programme 2005-2008 Closure Report; • Part B - Addressing Malta’s Specific Recommendations; and • Part C - Malta’s National Reform Programme 2008-2010.

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Part A - Malta’s National Reform Programme 2005-2008 Closure Report

Malta’s NRP 2005-2008 Closure Report

In its National Reform Programme for the period 2005-2008 Malta had submitted 54 measures on which progress had to be reported for the same period. A status of these measures is being highlighted in this section. The measures follow the pre-established five pillars on which Malta’s NRP 2005-2008 hinged namely; Sustainability of Public Finances, Competitiveness, Employment, Education and Training and Environment.

Sustainability of Public Finances

In the first phase of its NRP, Malta has given a lot of importance to its macroeconomic situation. One of the main reasons for such importance is the run up to the adoption of the Euro on the 1 st January 2008. Prior to adopting the Euro, Malta had to comply with the Convergence Criteria and its admission to the Euro Area is an independent certification of this achievement. Another important issue that has been addressed is the sustainability of pensions by initiating the reform of the pension system as outlined in the White Paper “Pensions, Adequate and Sustainable”. Since this reform is a long term measure no clear indicators are as yet available that can provide a more accurate picture of the effectiveness of this measure The general Government debt 1 has decreased from 70.4% in 2005 to 62% in 2007. As mentioned above this was particularly important in the light of Malta’s adoption of the Euro in 1st January 2008. Moreover, the reduction of public expenditure allows the savings gained to be channelled in other areas that would be more beneficial to the country as a whole. Below is the state of play of the measures that fall under the pillar of Sustainability of Public Finances. Measure 1.1 Review the existing taxation framework in order for taxation policy to encourage work and productivity (within the framework of sustainable public finances) This measure has been implemented through the Budget Measures announced in the Budget Speech 2006 and 2007 and includes: • A reform of the income tax bands in order to provide a greater incentive to those who want to work harder. It is estimated that this measure will cost the Government approximately m12 million ( €28 million) in revenue; • A stipulated timeframe in which to pay tax refunds owed by the Inland Revenue Department; • A tax credit for women returning to employment, where women will benefit from a tax credit of Lm700 ( €1,631) subject to certain conditions; • An amendment to the Part time work rules to enable women and their husbands to benefit from married rates in the case of women in part time employment. • Recognition of both spouses working in family businesses thus being eligible for social benefits and pensions; • A change in the computation of part time employment where the social security contribution has been adjusted to a percentage of income earned as opposed to the previous system where a minimum had to be paid irrespective of the hours worked.

1 General government consolidated gross debt as a percentage of GDP

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Measure 1.2 Enhance price flexibility through the liberalisation of monopolies and actively considering liberalising entry into certain service sectors particularly in the distribution, transport and construction sectors, commencing with the liberalisation of the importation and distribution of fuel and the ports sector Government is firmly in favour of liberalisation, and has liberalised a number of sectors in which the government was the major provider of services. Among the liberalisation initiatives in the past three years one finds the port sector, fuel distribution as well as telecommunications; both cellular and fixed line. Moreover, the provision of postal services has also been passed on to the private sector, with the whole sector to be liberalised in due course following Malta’s choice to allow for the maximum term under the EU directive to elapse before fully liberalising the sector , by the 31st December 2012. Measure 1.3 Review spending aiming at setting agreed departmental targets for achieving efficiencies in the use of public resources. Efficiencies include savings in terms of public expenditure as well as the redeployment of human resources The Financial Management and Monitoring Unit (FMMU) has been set up as a permanent unit within MFEI. FMMU is to ensure that all entities necessarily administer Public Funds within stricter financial control, discipline and cost effectiveness and to aid the Government in reducing public spending and managing the country’s deficit, which aims are central to sustainable economic growth, convergence targets and Malta’s International Credit Rating The Benefit Fraud and Investigations Directorate within MSOC was set up in late 2005 to combat reports on alleged social benefit fraud. During the period 2006-2007 the Benefit Fraud and Investigation Directorate concluded investigations on 2,372 cases of alleged social benefit fraud and it is estimated that the combined operations of the Directorate resulted in an estimated Lm3,000,601 ( €6,991,400) in savings. Malta reduced its expenditure particularly in the run up to the adoption of the Euro prior to January 2008 to be in conformity with the Maastricht criteria. In fact, Malta reduced its deficit from 3% in 2005 to 1.8% of GDP in 2007. 2 For the same period General Government debt was reduced from 70.4% to 62.6% of GDP. Measure 1.4 Further review of the public sector workforce, identifying the core competencies and staff requirements in Government entities and the attachment of the surplus staff to a Surplus Employment Pool In November 2003, 902 employees were transferred to Industrial Projects and Services Ltd (IPSL). Out of these 418 opted to apply for one of the four voluntary resignation / early retirement schemes. The remaining 484 preferred to remain on the books of IPSL on the grounds that Government would guarantee their employment within various public entities and departments. Today only 433 employees remained from the original number transferred from Malta Shipyards Ltd due to retirement age. However, these were increased to 479 with the transfer of surplus employees from other entities/corporations. Recently, the company organised a skills assessment exercise; all employees were interviewed so as to enable the company to asses the skills and abilities of every employee. This exercise resulted in the transferring of 124 employees from one entity or department to another so as to be better utilised according to their trade or profession. In some cases IPSL staff had to be re-trained to be able to cater for office environment or in enforcement as was the case of the environment field inspectors at MEPA. Concurrently, the Management Efficiency Unit has also prepared a skills profiling manual in order to serve as a guideline in profiling skills across the Public Service.

2 NSO News release dated 18th April 2008 available online at http://www.nso.gov.mt/statdoc/document_file.aspx?id=2220 (last accessed on 29 th September 2008)

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Measure 1.5 Redeploy Government employees with other public sector organisations and Government departments through the Recruitment and Re-Deployment Advisory Group The Recruitment and Redeployment Advisory Group is supported by the Resourcing Department within MPO. Recruitment in non-essential categories in Government Departments and public sector entities is being restricted, whilst other human resources requirements are subject to validation and justification procedures. An amendment to the Employment and Training Services Act (Cap. 343) (Art 15A) was adopted to allow for redeployment of employees between public sector entities. As a result of these polices the people in employment with the Public Service decreased by 687 employees to 29,061 for the period December 2005 to August 2008. In the case of Independent Statutory Bodies there was a decrease of 377 persons for the period April 2005 to April 2008. In the case of Companies with Public Majority Shareholding the decrease was more evident with a decrease of 2,598 employees for the same period 3. Measure 1.6 Consolidation of Government entities to ensure that back office capacity is not fragmented and replicated. A Task Force is to be appointed in 2006 to produce regular reviews The Public Service has introduced a back office function operations in Gozo and is gradually migrating the Malta based base functions such as data inputting and salaries processing to Gozo under Service Level Agreements. Malta based resources are being retrained / redeployed as necessary to other functions or services. To date some 60 persons have been transferred thereby reducing social fragmentation in Gozo, and developing more knowledge based work on the island. It is positive to note that the private sector is following such an opportunity by following Government’s model. This can be clearly seen in the setting up of a call centre by a prominent bank in Gozo. Measure 1.7 Develop a more aggressive plan against benefit fraud supported by the necessary legislative framework, especially with regards to invalidity benefits and unemployment assistance This measure is ongoing since it also includes recent measures such as the reform in the invalidity pension criteria which is still to be assessed. The Benefit Fraud and Investigation Directorate is committed to investigate all reports of alleged abuse in social benefits and recommend actions to be enforced against defaulters. The total number of inspections carried out by all the relevant authorities including the Benefit Fraud and Investigations Directorate, ETC officials and other units, from October 2004 to January 2008 totalled 13,563. Out of these, 7,131 infringements have been observed. As a result 6,234 persons have been removed from the unemployment register during the same time period. The ETC has won 82% of the cases referred to the courts as a result of the appeals by the defaulters. Measure 1.8 Asses the role of means-testing instruments that determines eligibility for means-tested benefits A Working group under the chairmanship of the Permanent Secretary of MSOC was set up, to implement this measure. A sub group of technical experts was established in order to (a) extensively discuss means-tested benefits and services across Government; (b) identified and discussed the tool to be adopted with a view to introduce a single means-testing instrument. The Working Group is now working to define the capital / income bands to be tied to each bracket of the new means-testing instrument.

3 Data obtained from the Management and Personnel Office, Office of the Prime Minister.

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The sub group has forwarded its recommendations to the working group and the latter is to approve the final version in order to secure Ministerial approval. Measure 1.9 Commencement of incremental measures in pension’s reform The Social Security (Amendment) (No. 2) Act, 2006(Act XIX of 2006) was adopted on 7 December 2006. These amendments include: • Raising of the pension age depending on the year of birth with the pension age increasing gradually to 65;; • People reaching the age of 65 will still benefit from a pension if they remain in employment; • A reworking of the rates of the maximum pensionable income; • A guaranteed national minimum pension of 60% of the National Median Income as opposed to the current regime of four fifths of Minimum wage for a married couple and two thirds for any other person; • Credits of contribution for parents for child rearing where social security contributions will be awarded, under specific conditions, for the purpose of pensionable income; • A legal provision that places the responsibility on the Minister responsible for Social Security to report to Parliament on a regular periodic review of the Pension System. Measure 1.10 Introduce a new Health Services Act to separate the regulatory from the operational and service-delivery functions of the Health Division The draft Healthcare Act was at a very advanced stage of completion and a draft was being vetted by the Attorney General in early 2008. However, due to the general elections in Malta in March 2008, and the resulting change of Minister, this draft Act has been put on hold for to undergo revisions by the newly appointed Minister. However, the administrative structures envisaged in the Act for the Health Sector have been reformed despite the delay in the publishing of the Health Services Act; namely the separation of the regulator from the provider, that should improve the sustainability as well as the provision of Health Services in Malta. Measure 1.11 Help ensure a flexible and dynamic labour market The ETC is currently providing a number of training services that include basic skills, trade and non trade programs, ICT, Business and Management Development and other Labour Market oriented programs. In addition it also administers a number of training and employment schemes that include apprenticeship and traineeship. Selected schemes and initiatives include the Business Promotion Act (Cap. 325) schemes; Training Subsidy Scheme; Traineeships; Apprenticeships; Night Institute for Further Technical Education; Mainstream courses; Basic Employment Training; Trade Testing; ESF 18 – Literacy for those seeking employment; ESF 31 - Employment and Training Scheme; ESF 47 - Promoting the Woman – Entrepreneur Culture; ESF 52 - Training Programmes for Youths in Institutional Care; Employability Programme; ESF 73 - Addressing the demand and supply of e-skills through traineeships in ICT; ESF 24 - Increasing female participation; ESF 50 - National Campaign promoting the benefits of quality childcare.

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Measure 1.12 Promote public service change to encourage the: • Improvement of quality of public service delivery; • Development of greater focus on end results in public sector management; • Development of family-friendly measures. Government has been continuously seeking mechanisms to encourage public service change to improve its services. Quality service charters are in effect in a number of public service entities and the government is exploring the possibility of adopting the Common Assessment Framework methodology which has been adopted by a number of Member States. In order to facilitate employment opportunities for its staff, Government has extended family friendly measures to the wider public sector. A teleworking policy has been launched across the entire public sector in February 2008. The Public Administration Bill is currently undergoing its approval process in Parliament. This Bill aims to improve the service delivery of the Public Service, promote an appropriate and accountable governance model, instil a sound work ethic culture and mainly focus on efficiency, results and meritocracy.

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Competitiveness

Improving the national competitiveness is a priority for Malta given the specific needs of the country and its dependence on attracting foreign investment. In order to increase efficiency, government is increasingly changing its role to a regulatory function as opposed to being a provider. Liberalisation has featured high on the government’s agenda in the past three years with more and more functions such as gas, petroleum, ports and telephony being placed in the realm of the private sector. Moreover, Government has acknowledged that the traditional sectors in the Maltese economy have been affected by the international scenario and as a result of this other sectors have flourished. The increase in knowledge-based and value added sectors is readily visible and it is in sectors such as ICT, financial services and pharmaceuticals that foreign investment is on the increase. In this respect, the competitiveness measures for the 2005 – 2008 NRP were the following: Measure 2.1.1 Set up Working Group to identify competitive advantages of Malta An Industry Strategy for Malta 4 was launched during the Budget for 2007. This strategy was drawn up following extensive consultation meetings with various stakeholders, more prominently with the Federation of Industry. The Strategy clearly defines the need for incentives to promote research, development and innovation capacity in Malta. It also promotes the need for fiscal incentives to those industries that cluster with SMEs and higher education institutions. The strategy proposes the sectors and activities that Malta should target in order to increase its competitiveness in its industrial areas. These areas include:

• Education • Bio-technology

• Health Care • Bio-informatics

• Business Process Outsourcing • Pharmaceuticals

• Financial Management • ICT

• Professional Consultancy • High-Tech Manufacturing and Services

• Creative Services • Maritime and Maritime Maintenance

• Logistics and Warehousing • Aviation and Aviation Maintenance

Measure 2.1.2 Revise Business Promotion Act This measure was completed with the adoption of the Malta Enterprise Act (Cap. 463) that empowers ME to issue incentives to business under specific subsidiary legislation. The Act was approved by Parliament and came into force on 23 October 2007 through Commencement Notice LN 317/07. Under this new Act it is envisaged that incentives to Industry in line with the new EU State Aid Rules will be provided. These initiatives will amount to approximately €40 million per annum. In the past three years ME has provided approximately €38 million in assistance to SMEs in grants and fiscal assistance. Around 1,000 firms have benefited from these schemes.

4 Industrial Strategy for Malta- Available online from: http://www.doi.gov.mt/EN/archive/Budget2007/engl.pdf . [Accessed on 1st October 2008]

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Measure 2.1.3 Develop SME loan guarantee scheme The EIF Counter guarantee was available till December 2007. To this effect these schemes have now come to a close. A total of 17 small and medium-sized enterprises have been assisted under this scheme. (One of these has defaulted and 50% of the funds were recovered from the EIF). Building on the experience gained ME will be applying for a new loan counter guarantee under the Competitiveness and Innovation Programme in 2008. Measure 2.1.4 Formulate an action plan for Malta's industrial space Through a joint collaboration between MIP, ME and MEPA, an Action Plan for the Ħal Far Industrial Estate has been finalised, in view of the fact that this estate is seen as the only site where the projected growth of industry could be accommodated, in particular the pharmaceutical sector. This report was concluded in the first quarter of 2008 and should cover incoming demand for the next 3 to 5 years. Furthermore, again in consultation with ME and based on the project growth of industry and the change in their basic requirements over the next five years as prepared by the ME, MIP completed the development of design criteria for its new factory stock which takes into consideration the use of innovative materials (including energy efficiency), better space layout and land utilisation and acceptable costs. This was done through a design competition and finalised in the third quarter of 2007. Measure 2.1.5 Reengineer FDI procedures for business set ups in Malta Towards the end of the second quarter of 2007, Government set up the Government Services Unit (GSU) within the MITC. The GSU has been given the remit to provide an administrative one stop shop for the provision of services to business entities operating from Smart City@Malta. It is intended that the GSU focus its activities on: • the provision of a single point of reference from which Government Services may be sourced to start-up a new business within Smart City@Malta; • the identification, review, and adjustment of those operational structures and activities that are necessary for the provision of Government Services in a manner that meets client expectations and conforms to legislative and administrative requirements and generally leads to the delivery of more efficient and effective Government Services. This single point of reference is to be developed by synergising service delivery with client needs through a concurrent two dimensional process: • Inward - reviewing the needs of service owners; • Outward - assessing client needs. Currently, 26 main service areas have been identified. Basic information relevant to each service has been gathered, and service level agreement template has been developed and finalised. Negotiations with ten of the identified service owners have been concluded while another 10 have been initiated. It is envisaged that the service level agreements process with all identified service owners are finalised by the end of 2008. Moreover, operational guidelines are to be developed with a view to be finalised by the third quarter of 2009. Finally, the process for the development of electronic application management system with linkages to main service owners is to commence and should be finalised by end 2009. Furthermore, it is worth noting that another one stop shop specifically addressing the needs of small businesses will be set up over the second cycle of the NRP.

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Measure 2.2 Setting up of a Better Regulation Unit Following the setting up of a Better Regulation Unit (BRU) within the Management Efficiency Unit, Office of the Prime Minister reporting to the Principal Permanent Secretary as per NRP and Budget 2006, the current focus is on the implementation of the Action Plan for Simplification. The Plan includes recommendations on how existing regulations, procedures and structures are to be consolidated, rationalised, amended or removed in order to lighten the burdens, in particular the cost of administration, on the public and the business sector. Between February 2008 and August 2008 the BRU embarked on a Twinning Light Project with the Northern Ireland Public Sector Enterprises Limited (NI-CO, UK) under the heading of “Strengthening the Institutional Capacity for the Implementation of a Better Regulation Framework”. This project was financed by the EU 2005 Transition Facility Programme for Malta. The aim of this project was to build further the institutional capacity of the BRU and in fact, provided a platform for the sharing of the better regulation experience in the UK and Northern Ireland with Malta. As a result of this project the following were developed: • A procedures manual which provides a step by step guide to all users in three different areas of better regulation namely – the better regulation principles, the process of simplification and the design of new legislation. The procedures manual includes also an explanation on the use of the Standard Cost Model (SCM) the model chosen by the EU and Malta for the measurement of the reduction in administrative burden. This deliverable will promote more consistency and replicability in the implementation of better regulation in government. • A training manual which focuses on the same areas of the procedures manual and seeks to address the training needs of the Maltese public administration. This was followed by the actual delivery of the training to Ministry representatives whereby a 3- day course on the three areas was provided. Another 3-day course focusing on the soft-training skills was also provided, with the aim of equipping the attendees with the necessary skills so that they are able to cascade the training within their organisation – the concept of train the trainer. This is part of the project’s sustainability objective, apart from developing a basic set of skills within the departments and regulatory authorities. • A communications plan was also developed to assist the BRU in building better and more effective communication channels to engage stakeholders - both internal and external - in the better regulation initiatives undertaken by Government, together with the benefits, administrative burden reduction and cost savings resultant from such policies. This deliverable will continue to bring about cultural change. Measure 2.3 Introduce Quality Assurance Mechanisms across Government through the adoption of quality standards Malta has introduced various quality improvement mechanisms, mainly through the introduction of quality service charters for a number of government entities. These charters lay down a set of quality levels of service that an entity is question. In order to obtain this certification the entity is assessed by the Charter Support Unit in the OPM which then issues the certification. In web link of the Charter Support Unit one can find a list of chartered department as well as the charter for each organisation. 5 Moreover, the proposed Public Administration Act places emphasis on customer focus, public service delivery and increased public service efficiency. Malta has been expressing interest in adopting the Common Assessment Framework which has been adopted by a number of EU member states. Though a decision in principle has been taken to embark on such a project, Malta is still evaluating the best way forward to commence pilot projects to adopt such a mechanism across Government entities.

5 Information Available Online from: http://www.servicecharters.gov.mt/depts/index.html [last accessed on 2nd October 2008]

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Measure 2.4 Enhancement of existing tax incentives for R&D investment A Scheme was launched in 2005 by ME under the Deductions and Tax Credits (Research and Development) Rules (LN.330/05) focussing mainly on SMEs. Take up has been low due to the Business Promotion Act being the main source of tax credits for R&D. Following changes in the EU R&D state aid regime together with the entry into force of the Malta Enterprise Act, new subsidiary legislation incorporating all the principles of the new EU State Aid regime has been drafted. ME is awaiting approval from DG Competition to issue this subsidiary legislation and respective guidelines in 2008. Meanwhile, ME joined the Eureka network and the initiative was launched in June 2006. Currently 9 projects are being mentored for EUREKA submission. To date two projects have been submitted. This incentive will be part of the above mentioned R&D subsidiary legislation. Measure 2.5 Develop a Regional Innovation Strategy This Strategy has been finalised with a number of recommendations in line with research carried out throughout the project and best practices in other European Regions. This Strategy aims to address gaps in Malta’s Innovation System and recommendations on how these gaps should be fulfilled. The results developed from the pilot actions in this project will also be implemented as part of this strategy. The final reports were completed on 29 April 2008 and sent to the Commission for review. ME is awaiting the final approval from the Commission. Measure 2.6 Introduce a loan guarantee scheme to support innovative start-ups The EIF Counter guarantee was available till December 2007. To this effect these schemes have now come to a close. Five innovative start-ups have made use of this scheme. Building on the experience gained, Malta Enterprise will be applying for a new loan counter guarantee under the Competitiveness and Innovation Programme in 2008. Measure 2.7 Publish an eWork Framework with guidelines on incentives and awareness raising A set of guidelines has been drafted and was presented for approval by the Core ICT Advisory Committee (CITAC). Following CITAC approval, the guidelines were integrated with a policy document drafted by the MPO. Policy and Guidelines have been presented as one document to the Cabinet of Ministers by the MPO and subsequently have been officially disseminated for implementation in the Public Service and the wider Public Sector 6. Measure 2.8 Establish a National ICT Framework A National ICT framework is being established in order to encourage further the dissemination of ICT in Malta. This measure deals mainly with a framework that will facilitate the attracting of multinational ICT companies to set up a base in Malta, and in parallel to ensure that an adequate supply of resources, both infrastructural and human resource, is available for these companies.

6 Teleworking Policy in Public Administration, Relations Directorate Management and Personnel Office, Employee, Office of the Prime Minister, February 2008. This is available on the Intranet for reference purposes for all Government Employees.

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The main achievements under this measure is the commencement of the Smart City project 7, that is envisaged to generate 5600 new employment opportunities in the coming years, 3600 of which are directly ICT related. In order to ensure that these figures are achieved, Government has embarked on a number of different initiatives to entice further training in ICT related subjects. These include various sponsorship schemes such as the myPotential 8 are producing the intended results with more than 1100 people 9currently undergoing various forms of training in ICT. Moreover, the job placement schemes have enabled 280 students 10 to gain valuable work experience in the ICT related organisations. Furthermore, to increase the possibility of more facilities for further training, Government has facilitated the setting up Multinational academies like Microsoft, Cisco, Oracle and SAP in Malta. In addition a new ICT strategy for the period 2008 -2010 has been launched with the aim to provide for Malta a world-class external lCT environment which meets international best- practice standards. This strategy outlines Malta’s ambition to become one of the top 10 Information societies in the world by 2010. It sets to achieve this by using ICT to right social inequality, disadvantages and disabilities, while improving the quality of life of those who reside or visit Malta. According to the latest i2010 report rates public services online availability for citizens at 92% compared with the European average of 51%. 11 It is on such a positive standing that the Government of Malta intends to continue developing the levels of ICT in Malta. Measure 2.9 Review Malta's broadband connectivity Government has embarked on a project with the aim to decrease the cost of broadband connectivity and hence increase accessibility. A study on the current state of internet connectivity conditions is due to be commissioned to establish the current market conditions following which Government will analyse the options with the aim to find the best and most cost effective manner on how to decrease the price of internet connectivity. In this respect Government has launched the Blueskies initiative to increase broadband penetration in the short term. This initiative was taken up by 5,600 households. 12 Malta’s Broadband penetration rates have grown from 3.5% in 2004 to 13.9% in 2007. 13 Furthermore the level of internet access in 2007 stood at 54% which is at par with the levels of the EU-27. Measure 2.10 As part of the restructuring of the MTA present / implement strategy for mainstream / niche tourism The Malta Tourism Authority has been restructured in order to better respond to the approved strategy that promotes niche markets in addition to the mainstream tourism potential. This strategy seems to be producing satisfactory results since the income from tourism has increased in the past years. In this respect, Malta experienced an increase of 11.9% of inbound tourists between January to July 2008 when compared to the same period in 2007.

7 The Official website of the project is available online from: http://www.smartcity.ae/malta/ . [Accessed on 1 October 2008] 8 My Potential. Available online from : https://secure2.gov.mt/SmartIsland/Pages/Initiatives/Initiative.aspx?id=5 [Accessed on 1 st October 2008] 9 Data obtained from the Ministry of Investment, Technology and Communications. 10 Ibid 11 Speech by Minister for IT, DOI Press Release 22 nd September 2008, Available online from: http://doi.gov.mt/en/press_releases/2008/09/pr1320.asp [Accessed on 2 October 2008] 12 “5,600 DAR BIL-BROADBAND G ĦALL-EWWEL DARBA BL-ISKEMA BLUESKIES ” DOI Press Release, 24 th April 2008. Available online from: http://doi.gov.mt/en/press_releases/2008/04/pr0584.asp [Accessed on 1 st October 2008] 13 Structural Indicators.

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In July 2008 Malta experienced a 1.2% increase of tourist arrivals when compared to July 2007 14 . Measure 2.11 Improve accessibility, conservation and promotion of key heritage sites Work is currently in progress in the World heritage of Ħagar Qim and Mnajdra, Tarxien Temples and the Museum of Archaeology. The main thrusts of these works are to improve the accessibility of these sites by means of visitor centres that provide for a better experience of these sites. In the case of the Ħagar Qim and Mnajdra temples, the erection of protection structures is due to commence imminently in order to improve the conservation of these sites. The Visitor centre at these temples is due to be completed by end 2008. This project is estimated to cost around €4.2 million excluding taxes. Work on the other two sites (Tarxien Temples and Museum of Archaeology) has been slightly delayed due to permit approvals and other resourcing issues. Measure 2.12 Introduce tourism zone management tools to raise quality standards The monitoring and upgrading of standards in tourism zones and improvement of beaches is currently underway and is envisaged to be finalised by end 2008. Once this completed it is envisaged that a better overall product will be made available to tourists through better services and improved facilities in the main tourism zones. The introduction of Zone management enables the micro management of these areas instead of a national system of management and, it is, therefore, envisaged that a better response to localised and sectoral issues and problems will be achieved. Measure 2.13 Implement a branding exercise for tourism Branding Malta has been the focus of MTA in Malta in the past years. This exercise was undertaken to shift the marketing approach from a geographical market basis to a segment market basis. Various campaigns in overseas potential markets have been undertaken to portray Malta as a destination in the various segments identified in the new tourism strategy. In the local scenario, a nationwide campaign to entice every Maltese citizen to respond to the tourism industry by becoming more tourism friendly as well as more customer service orientated has been undertaken. The increase in tourism arrivals shown in measure 2.10 are a statement to the work involved in promoting Malta in the overseas market. Measure 2.14.1 Operate the Vessel Traffic Management System The Ports and Coastal Vessel Traffic Management Information Systems (VTMIS) commenced operation in Dec 2006 on a one-year trial basis. Following this trial period, the Malta Ports and Coastal Vessel Traffic Service became mandatory as of 1 December 2007 with Notice to Mariners No 80/2007. This system was officially launched on 5 March 2008 and is primarily aimed to monitor shipping and to provide vessel traffic management to shipping within the national waters and ports. The cost for this system is € 3.5 million. Measure 2.14.2 Complete economic, financial, feasibility and environmental impact study for expanding the Grand Harbour and Freeport infrastructures This measure involves two main projects, a feasibility study and impact assessment for port development projects in the Grand Harbour and Mgarr Harbour (Gozo); and surveys and geotechnical investigations of existing port structures in Malta. All reports including Geotechnical, Feasibility Studies and Environmental Impact Assessments have been completed. All reports including Geotechnical, Feasibility Studies and Environmental Impact Assessments have been completed.

14 Data provided by the Office of the Prime Minister – Parliamentary Secretariat for Tourism.

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All reports including Geotechnical, Feasibility Studies and Environmental Impact Assessments have been completed. Areas covered by the geotechnical reports inter alia cover Valletta, Marsaxlokk, Msida Marina, Sliema/Gzira Strand, Salina Bay, Anchor Bay Jetty, Marsascala and Gozo. Government has published its Vision for the Grand Harbour. 15 This vision entails various initiatives for the Grand Harbour which include: • A new Cruise line terminal in Isla • Extension of the Valletta Cruise Liner Terminal • A promenade from Ricasoli to Isla • A new Yacht Marina in Kalkara • An Excellent Hotel for the Grand Harbour • A new Tourism and Cultural Sector • A centre for the Audio-Visual Industry • The Restoration of Villa Bighi • Super yachts along the Isla Waterfront • Ceasing of the cleaning of Tanks • A commercial maritime park • Maritime Institute • Maritime Services • Closing down of the Marsa Power Station • Afforestaion of the Rinella Valley • Rinella Creek • New Maritime infrastructure in Kalkara • The Reorganisation of Xatt il Mollijiet • Extension of Quay Infrastructure • A Base for Towing Services A complication in the tendering process resulted in the second project being slightly delayed. Measure 2.14.3 Privatisation of all yacht marinas and identification of new marina sites to be developed by private sector Government has announced that all government run yacht marinas are to be privatised by the end of 2008. This move is envisaged to create a more competitive yacht marina sector with the participation of various market players and to upgrade the service level that boat owners receive through investment and modernisation of such yacht marina facilities. In addition, studies are being carried out to identify potential new sites for new marinas and destination ports. Currently, studies are being focused on the development of marinas in St Paul’s Bay and Marsascala. From the preliminary findings, it is clear that each location should be protected by a breakwater which makes the possibility of private intervention more difficult, thus, there is the possibility of Government funding this public infrastructure. This should then make private investment more feasible.

15 “A vision for Malta’s Grand Harbour”. Available Online from: https://secure2.gov.mt/mitc/MediaCenter/PDFs/1_16392-%20Grand%20Harbour%20insert%20ENG%20Small.pdf [lAccessed on 2 October 2008]

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Moreover, Government has set its vision for building breakwaters at the mouth of Marsamxett Harbour. According to studies already commissioned, such a construction would allow the creation of about 2,000 additional berths. Measure 2.15 Initiate divestiture of the entire gas function & supply chain from importation of fuel to distribution in petrol stations from Enemalta Corporation The Enemalta Corporation will be transferring the management and operations of its LPG activities to a private company following approval by Parliament. This bidder was chosen following a competitive tendering process. As part of the conditions the bidder will be building and operating a new state of the art and fully certified LPG bottling and storage facility at Beng ħajsa with an investment of over €25 million. The new storage and bottling plant will fully respect the EU stringent criteria as established in the Seveso II Directives, recently adopted by Malta. With regard to the fuel storage installation, this measure has been changed somewhat since the corporation is in the process of commercialisation. Thus, the relocation is to be executed by the preferred bidder after the signing of the concession. Hence, this measure is no longer in the hands of the Maltese Government but will now be the remit of the private sector.

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Employment

Increasing employment is one of the key thrusts of the Lisbon Agenda and also one of the top priorities in the current Maltese administration. Through the main thrusts in this area, Malta’s unemployment rate by gender has decreased in the past year to 6.4% which is below the EU 27 and 25, at 7.1% and 7.2% respectively. 16 Nevertheless, Malta has some challenges to face particularly in the areas of older workers and women. In this respect, one has also to keep in mind the socio-cultural characteristics of the Maltese scenario. The Maltese society places a great deal of emphasis on the concept of the family, thus it is a known fact that attracting females back to the labour market is particularly challenging. This is particularly the case with older women who due to the traditional and cultural forces around them, may have never been in actual formal employment. This situation is particularly evident when one notices that with younger people, the employment rates are particularly promising with 44.3% of the 15-24 age bracket and 68.2% of the 25-54 age bracket in employment as opposed to 28% for the 55-64 bracket. 17 Nevertheless, Government is committed to continue working to increase the employment opportunities, as well as facilitating the return to employment of these segments of society by providing a framework that facilitates the work life balance and family friendly measures. The state of play of the NRP 2005-2008 measures relating to employment are outlined below: Measure 3.1 Revise the Employment and Training corporation (ETC) youth strategy to address the needs of the youth group and to generate personalised employment paths for unemployed youths The first draft of the Youth Strategy 2008/2009 was approved and a consultation forum was organised in February 2008. Following this consultation process the strategy was officially launched on the 20th May 2008. 18 Its main aim is to encourage more youth to pursue continuous education and integrate in the world of work, with the necessary skills needed by the economy. More concretely this strategy aims to: • develop a strategy for its youth client group for a two year period; • Develop career paths for youth unemployed; • Youth website ; • Early School Leavers Training / Basic Employment Training; • Enhance Youth Guidance services / Introduction of new Employment Measures; • Youth Employment Measures; and • Developed personalised action plans for youth unemployed. For the period October 2007 till January 2008 the ETC has placed 2051 youths in full time employment and 433 in part time work. Measure 3.2 Train and engage mothers absent from the labour market Mothers are the primary educators of their children, thus it is believed that these can undertake occasional remunerated educational service work that will not disrupt their family routine and child rearing .

16 Eurostat Structural Indicator, Unemployment Rate by Gender, 2007. 17 NSO News Release 173/2008, 1 st October 2008 Labour Force Survey Q2 2008, 18 Youth Strategy 2008/2009. Available online from http://www.etc.gov.mt/docs/ETC%20report.pdf [Accessed on 1 October 2008]

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The first phase of this initiative is in progress and achieving promising results with a number of licensed child minders, parent leaders, and school helpers resulting from the various programmes. More specifically these programmes consist of: • The NindokraPlus Service where non-working mothers trained for occasional work as childminders with a cadre made up of 47 trained and licensed childminders. Of these 23 provide service according to the demand. Nine of these hail from Gozo; • A cadre of parents trained for educational leadership roles in schools and local communities. To date, cadre made up of 32 trained and licensed Parent Leaders. As from January 2008, Parent Leaders are paid for the service they are offering. A project intended to expand this area of operations has been submitted for ESF funding. Project approval and funding are still pending; • A cadre of parents trained to co-work with teachers on the design and delivery of skills- based courses for parents at community level. To date, parent helpers are providing this service on a voluntary basis as part of their induction training and practicum. Measure 3.3 Review tax and pensions system to encourage female participation in the workforce This measure has been completed in the Budget 2006 and 2007. Selected initiatives include the reviewing of income tax bands, replacement of the National insurance contribution to a pro rata basis, recognition of married women workers within a family business as well as a possible tax rebate on childcare expenditure. Moreover the amendments to the part time workers regulations to favour more the possibility of part time work are envisaged to promote the increase of female participation in the workforce. 19 Measure 3.4 Promote family-friendly measures The Employment and Training Corporation implemented a number of initiatives which included training, awareness raising campaigns, research and the implementation of various EU funded projects. Gender equality features high on the agenda of family friendly measures (FFM). The ETC published its third Gender Equality Action Plan for the years 2007 and 2008 20 . This plan outlines the projects and initiatives that are to be undertaken over the next two years. Moreover, an intensive campaign on family friendly measures was undertaken in collaboration with University students. This campaign highlighted the benefits that FFM such as telework and job sharing bring to both the organisations and employees. IN addition an ESF campaign (ESF 50) promoting the benefits of Quality Childcare was launched in order to raise awareness about quality childcare. This campaign made use of all forms of media and also a national conference on issues related to quality childcare. A information website 21 has also been launched and provides guidance on choosing quality childcare centres as well information on child care services available. Another ESF funded project (ESF24) was implemented in order to increase Female participation through Childcare services at the workplace. Eleven childcare courses have been funded through this project in order to ensure a supply of qualified child carers at workplaces.

19 This measure has also been addressed in Measure 01.1 in the Macroeconomic Section 20 Gender Equality Action Plan 2007-2008. Available online from: http://etc.gov.mt/docs/ETC%20Gender%20Equality%20Action%20Plan.pdf [Accessed on 1 st October 2008] 21 Available online: http://www.childcaremalta.org/etc/home.aspx [Accessed on 1st October 2008]

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It is also worth mentioning that family friendly measures in the public service have been extended to the wider public sector. This is particularly significant in the case of working mothers who can now enjoy the flexibility that these measures offer, thus facilitating the balance between employment and family life. These family friendly measures include but are not solely limited to: • Maternity leave • Parental leave • Paternity leave • Responsibility leave • Adoption leave • Leave to foster children • Work on a reduced timetable • Marriage leave In the new collective agreement for public servants, there is also the provision of exploring arrangements such as flexitime, teleworking and job sharing. Measure 3.5 Develop a programme obliging the unemployed beneficiary of subsidies to attend training and community services This programme is currently in force with all persons registering for unemployment benefits having to attend compulsory training courses as well as interviews for employment. If any registered unemployed does not attend these schemes he is automatically removed from the unemployment register. • The schemes available for these unemployed include • ETC training courses • Referral to job opportunities • Long term unemployed exercise • TEES – A scheme that consists of six months training followed by six months of work exposure with an employer. This scheme is targeted for persons over 40 years of age • An ESF funded literacy programme for those seeking employment In this regard the ETC has trained 20,646 persons in the period October 2004 to January 2008. For the same period 268,226 persons have been referred to attend job interviews. Measure 3.6 Review policy in the field of employment of third countries nationals The ETC has applied for funding under the EU Integration Fund in order to commission an assessment of the situation of foreigners employed in Malta. ETC is currently awaiting a reply on its application for the EU Integration Fund. Measure 3.7 Set up a Central Visa Unit to better manage visa and work arrangements for third-country persons required to address local labour shortage Visa consultations with Member States have been enhanced through the set-up of this Unit. Measure 3.8 Launch the Foster Entrepreneurial Skills scheme Another measure being promoted so as to increase the employment rate is the promotion of new business start ups.

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Between 2005 and 2006, 37 22 participants started the entrepreneurship scheme (INT scheme). New businesses which use the INT Scheme included diving schools, artworks and retailing, importation and sale of collectible and antique firearms, electrical handyperson services, and holiday letting. Small business and management development programmes were attended by 98 persons, 44 of whom were women. During 2007, Government also completed another measure aimed at fostering an entrepreneurial culture in Gozo which has led to the opening up of 14 23 new start ups in Gozo. These represent 5.4% 24 of the annual average new VAT registered self employed who have their business address in Gozo.

22 Employment and Training Corporation, Annual Report 2005 – 2006. Available online from: http://etc.gov.mt/docs/ETC%20ANNUAL%20REPORT%201-26.pdf . [Accessed on: 6 th September 2007]

23 Ministry for Gozo 24 ibid

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Education and Training

The objective of Government’s Vision 2015 is to make Malta a centre of excellence in various areas in order to entice foreign investment. Education is a key factor in the success of this vision, since the adequate supply of skilled labour is fundamental to achieve excellence in any area. Malta’s educational system is based on the fact that compulsory education is mandatory till the age of 16. Following this age it is up to the students to further their education in the various institutions that provide higher education. Government has increased its expenditure for 2008 by €21million 25 in the educational field in all areas of education to enable students to obtain a better level of education. In compulsory education, Government is implementing reforms to change the structure of state schools into colleges, thus aiming to achieve a better teaching delivery as well as increased use of IT. The rest of the schools are undergoing a process of upgrading and refurbishment. In terms of vocational and higher education government has also invested particularly in areas of science and technology in order to ensure a supply of skilled labour to the new enterprises currently being targeted for foreign direct investment. The state of play of the Education and Training pillar measures is outlined below: Measure 4.1 Implement the reforms of the compulsory education system in the strategy document entitled "For all Children to Succeed" The reforms in this initiative are in a very advanced stage of completion. The Colleges are now up and running with the College Principals employed and functioning. The reforms in the Education Division have been concluded. This structure was changed into two separate Directorates General - the Malta Educational Directorate and the Educational Services Directorate respectively. The Malta Educational Directorate will act as a central national policy maker and regulator for the Maltese educational system and will be responsible for the setting of standards and ensuring the delivery of quality education. On the other hand, the Educational Services Directorate is responsible for the co-ordination of the operation of educational services and schools, and fulfils the role of a support and services resource. Currently a number of schools are being refurbished and others being built in order to extend the current stock of schools. A new secondary school in Qormi has been completed whilst the Verdala school is close to completion and with all the timeframes being respected. The construction of the Pembroke School has commenced and construction is soon to start at a school in Mosta. Measure 4.2 Set up a higher education directorate This Directorate has been set up and currently close to its full complement. Since its permanent establishment, the NCHE has started addressing a number of critical matters including the following: • Governance of state higher end further education institutions in Malta • A quality assurance framework for institution and course accreditation • Student support schemes to further their studies at undergraduate, masters and doctoral levels • Support and advice on the development of a strategy for the use of structural funds in the further and higher sectors

25 Budget Speech 2008. Available online at http://finance.gov.mt/image.aspx?site=MFIN&ref=2008_speech_en [Accessed 2 nd October 2008]

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A consultation paper on the introduction of a new framework for licensing, accreditation and quality assurance of further and higher education institutions in Malta has been published. Measure 4.3 Initiate training in basic computer skills for those registering for employment and establish Community Technology Learning Centres A Community Technology Learning Centre has been established in Vittoriosa in 2006. This training centre is considered to be successful in view of the fact that until the end of June 2006 a significant number of persons have already successfully completed the courses. Moreover, another Centre in Valletta and a computer laboratory in Hal Far have also been set up. These centres provide training in basic IT skills and is provided to both jobseekers as well as employed people who want to enhance their employability. These centres have been attended by 933 persons in the period for October 2006 to September 2007. Figures for the period October 2007 to January 2008 show an attendance of 384 persons 26 . Measure 4.4 Intensify guidance services in order to enable the establishment of a comprehensive career pathway The ETC in collaboration with the Euro Guidance falling under the responsibility of the European Union Programmes Agency (EUPA) in conjunction with the Education Division’s Guidance Unit have carried out research on career paths. This data has been compiled and 100 career paths are now available online on the EURES website (www.eures.com.mt). Furthermore, in May 2007 a new EURES website was launched which includes details of local employers, local and foreign vacancies together with other information related to employment mobility. Works are also underway to launch a new ETC website which will include more on-line services for both job seekers and employers, such as an on- line matching service. The ETC also provided personalised career guidance services to registered unemployed, adults at risk of redundancy, women returners and persons from disadvantaged groups. On 22 February 2008, the Youth Employment Programme was launched. The project's target group will benefit through this project in the following ways: • Clarification of career choices and pathways to achieve them; • Improved skills in areas related to their career choice; • Improved skills in seeking and applying for work; • Greater awareness of one’s rights and obligations as a jobseeker and prospective employee; • Increased contact with employers, bettering their chances of finding work Moreover, a call for guidance officers for ex VF / Bortex employees has been issued on 24 February 2008. These officers will be requested to work with the clients to help them clarify their abilities, aptitudes and aspirations to develop suitable career paths. This call for occupational guidance services is being undertaken under the European Globalisation Adjustment Fund.

26 Figures provided by the Employment and Training Corporation

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Measure 4.5 Ensure that formal informal and non-formal qualifications and skills are certified The Malta Qualification Council (MQC) was set up in December 2005 and met for the first time in the third week of January 2006. During 2006 and the first quarter of 2007, MQC conducted a nation-wide consultation process to set up a National Qualifications Framework for Lifelong Learning. The start date for the mapping of informal and non-formal learning according to nationally agreed key competences was in September 2006. The process ended in April 2007 and the National Qualifications Framework for Lifelong Learning was launched in June 2007 27 . During the consultation process, MQC met public and private training providers (including MCAST, ETC, ITS) non-governmental organisations, students and parents’ organisations, trade unions, employers associations and other individuals with a direct or indirect interest in the recognition and accreditation of qualifications. The MQC has published four working documents on Malta’s qualifications framework, a system for vocational education and training linked to the NQF, a quality assurance policy as well as Level descriptors for Key Competences for Levels 1, 2 and 3 of the NQF. These documents aim at ensuring that formal, informal and non-formal qualifications and skills are certified. In June 2008, MQC published the last of the four policy documents (The Validation of Informal and non-Formal Learning) 28 . A national conference was organised on the 25 th of September 2008 in collaboration with FHRD (Foundation for Human Resources Development) ,inviting two international speakers from France and Finland, on the Validation of Informal and Non- Formal Learning. A report on the consultation on such policy was also published. The process for the mapping of formal, informal and non-formal qualifications and skills has commenced and should be finalised in the fourth quarter of 2008. Measure 4.6 Initiate teacher training for new competences linked to parent capacity building, prevention of social exclusion, the nurturing of active citizenship and the provision of community based lifelong learning opportunities This measure has been completed since according to the agreement between the Government and the teacher’s union, teachers are required to follow compulsory training in various competencies. Between April and July 2008, the following training sessions have taken place: • 4 in-school Professional development sessions reaching 82 teachers; • 2 in-house In-Service Training courses reaching 26 teachers; • on-the-job training for 236 primary school teachers from 40 different state primary schools in the use of a multi-sensory approach to the teaching of Maltese and English, including synthetic phonics; • on-the-job training for 55 primary school teachers from 18 different state primary schools in the use of writing process methodology; • 1 week writing process training course for 45 primary and secondary state school teachers. Malta’s application under a call for EU funding in order to further these programmes has been rejected. However, MEDC will still continue to offer more programmes to this effect.

27 Available online from: http://www.mqc.gov.mt/pdfs/mqc%203gateA4%20english.pdf [Accessed on: 3 October 2008] 28 The four working policy documents entitled Valuing All Learning 1-4, are available online from http://www.mqc.gov.mt/news.aspx?nid=1 [Accessed on 3 rd October 2008]

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Measure 4.7 Establish a forum between ETC, UOM, MCAST, ME, FOI, NSO and other stakeholders with the aim to monitor the matching of the demand and supply side of skills. This initiative is currently underway. A conference with all the stakeholders was held in September 2008. As a result of this conference, a report is to be drawn up by the end of 2008, the input of which will be used in the formulation of the Further and Higher Education strategy.

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Environment

Environment is an area that is featuring high on Government’s agenda in all areas of governance. The strive towards sustainability in all areas is characterised by a number of initiatives that entail protection of the environment that surrounds us. Moreover, taking into account the current global dependency on fossil fuels that is reflected by increasing oil prices, it is evident that it is imperative that alternative sources of energy are tapped into. Malta is exploring various means to lessen its dependency on fossil fuels. Waste Management is another area that Malta is addressing by means of promotion of recycling of waste, rehabilitation of dump sites as well as regulated and controlled sites where citizens can dispose of their waste in a better way. The state of play of Malta’s environmental measures in the NRP 2005 -2008 is outlined below: Measure 5.1 Develop a National Biodiversity Strategy Action Plan. The development of the National Biodiversity Action Plan (NBSAP) is still in progress due to some constraints in the allocated resources for this project. Meanwhile two public seminars and various public awareness activities have been held with satisfactory results. Several NBSAP sub-reports addressing the different drivers of biodiversity change and cross-cutting issues have been drafted. These are currently undergoing consultation within MEPA. The compilation of sub-reports now also includes the development of action plans proposing the way forward for mainstreaming biodiversity concerns into relevant sectors, apart from just presenting data/information available to date of the sub-report topic in relation to biodiversity. In addition, the NBSAP report template has been sent to the relevant government entities in order to provide the necessary information on how activities within their remit interact with biodiversity as part of the country study. Tailor-made questionnaires were also developed and sent to two target groups (1) NGOs (2) research and education entities.

Furthermore, nominated representatives from government entities are being received. These representatives will appear on the NBSAP coordinating committee at a later stage to discuss and agree on the actions recommended in the respective NBSAP sub-reports. These action plans once agreed by the NBSAP-CC will form the crux of the NBSAP document. Measure 5.2 Conduct marine-scientific surveys for Fifla as a Special Area of Conservation The aim of this project was to obtain accurate scientific data on the area around Filfla. This was necessary for the designation of the area around Filfla as a marine Special Area of Conservation (SAC). Data was compiled through field surveys, using various techniques, including diving and remote surveillance by submersibles. This data was then analysed and results were portrayed in comprehensive reports on the status of marine biodiversity and habitats in the area. In fact a compendium of information about the site, its habitats and species has been drafted. In addition, a public seminar and awareness raising campaign has been carried out following this report. Government has also installed a fixed telescope in the nearby mainland, with the aim of enabling tourists and visitors to get a closer view of the island’s habitats and species. Measure 5.3 Develop a Regional Project for Marine and Coastal Protected Areas This measure calls for the Development of a management plan on the basis of a management framework for the Marine Area from Rdum Majjiesa to Ras ir-Ra ħeb. After discussions held with the European Commission, it has been decided that Malta will follow the EU Rolling Plan. Such plan requires that Malta drafts a Strategy which outlines the process for selection and establishment of Specific Areas for Conservation and Marine Protected Areas (MPA).

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Within this context, an MPA Steering Committee has been set up with a view to oversee the management and enforcement issues of the sites to be chosen or already chosen and will be in operation legally by 2009. It is envisaged that the MPA strategy will be approved for consultation by the end of 2008. These developments have had an impact on the status of this measure which is slightly behind schedule. Notwithstanding, Government has: • Zoning plans; • Published educational material in relation to this MPA; • Carried out public consultation seminars; • Drafted the legal designation of the MPA. Measure 5.4 Strengthen the institutional capacity for the implementation of the Nature Protection Acquis The Malta Environment and Planning Authority (MEPA) has benefited from a Twinning project with Austria (in consortium with Italy) 29 . Through this measure, MEPA has carried out various information meetings, seminars, workshops and general awareness raised. Moreover, additional staff has been trained by means of 15 week traineeships in this area. Measure 5.5 Construction of three sewage treatment plants, all the sewage will be treated Over the 2005-2008 period the Maltese Government has initiated the construction of three sewage treatment plans; in Gozo, the northern part and southern part of Malta. The aim of these new plants is to ensure that all treated sewage conforms to the standards laid out in the Urban Wastewater Directive. The Gozo plant was the first of the three new Wastewater Sewage Treatment Plants which was inaugurated in January 2008. This new sewage treatment plant at Ras il-Ħobz, limits of Ghajnsielem which will eliminate the discharge of raw sewage into the sea. The North plant was completed in September 2008. The plant is expected to be fully operational in October 2008, when the biological treatment process is fully established. The contract for the construction of the South plant project has been signed in August 2008. This will be the largest plant of all with a capacity to treat about 80% of all sewage generated on the Maltese Islands. Furthermore, the plant will restore bathing water quality status to the lower North Easterly coast spanning between Rinella and Zonqor, which is of significant importance both for the inhabitants of the areas, as well as the tourism potential due to the Smart City Project in the area. Measure 5.6 Draft a national Environnent Technologies Action Plan. A departmental draft of the Plan has been finalised and will be adopted imminently. Some of the actions put forward within the draft ETAP have already been implemented. Such actions include environment related fiscal incentives and Green Public Procurement. Measure 5.7 and 5.9 Prepare and implement Green Procurement Plan (GPP) The Maltese Government has launched the Green Office Label certification scheme for government ministries, departments and agencies which run their offices according to environmental best practices. These best practices adopted in the public sector include environmental planning, waste reduction, energy conservation, water conservation, transport and green public procurement. The GPP has been submitted for Ministerial approval however this measure is behind schedule.

29 Information available online from: http://www.ppcd.gov.mt/twinning [Accessed on: 29 September 2008]

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Measure 5.8 Introduction of the Polluter Pays Principle, through economic instruments This measure has been completed through various instruments that imply that payment for a service or product is based on the consumption or the generated pollution. This latest reform using this principle is envisaged to be the Annual Vehicle Registration and Annual Circulation Tax which should be announced in the near future 30 . Measure 5.10 Capture of methane from waste disposal and treatment The project ‘Aerial Emissions Control for Mag ħtab, Qortin and Wied Fulija Landfills’ is being co-financed from the European Regional Development Fund (ERDF) 2004-2006. With an investment of €10,398,326 31 , the aim of this measure is to implement an aerial emissions control programme and initial rehabilitation of three landfill sites: Mag ħtab, Qortin and Wied Fulija. Mag ħtab The works at the Mag ħtab site included the installation of 41 wells, the laying of the gas mains and all interconnecting pipework, as well as the installation of the phase 1 gas treatment plant and compound. Between March and June 2007, all the equipment including the Thermal Oxidiser and all its ancillary equipment had to undergo a continuous period of trial testing in order to assess its performance on the field. To compliment this testing, gases collected from each well and manifold were monitored twice weekly. A further 27 wells of a depth of 6m were installed. Works on the pipe work connecting these wells to their respective manifolds was completed during October 2007.

In addition, all major enabling and earthmoving works are complete. Currently, the small gas compound is in operation. The big gas compound will soon start operating. Qortin After the shifting of some 70,000m 3 of material for stabilisation, surface gas tests were implemented. The results have led to the requirement of a more intense investigation to confirm needs of gas collection and treatment at this site. This has led to some technical considerations which are currently being implemented. Wied Fulija Surface gas emissions monitoring is ongoing. This project involves setting up systems to capture and treat those landfill gases which are currently released into the atmosphere, thereby reducing emissions by 50%. This project is currently ongoing. Measure 5.11 Replace uncontrolled landfills and improve treatment of Municipal Solid Waste (MSW) All uncontrolled landfills have been closed down and are to be rehabilitated. New plants for waste treatment which include energy recovery processes are being proposed. This project is still ongoing particularly due to the rehabilitation process in certain areas which is taking longer than expected.

30 Vide Measure on Annual Vehicle Registration and Annual Circulation tax in the Climate Change thematic in Section C – Page 62 31 Aerial Emissions Control for Maghtab, Qortin and Wied Fulija Landfills. Available online from: http://www.eu4u.gov.mt/aerial_emissions.asp . [Accessed on: 29 th September 2008]

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The main plant of Sant Antnin is being constructed to improve treatment of MSW. Upon the completion of the upgrade of the Sant’ Antnin Waste Treatment Plant, it is envisaged that the plant will annually process and treat 71,000 32 tonnes of waste mainly resulting from the MSW produced by residents in the vicinity. The fully enclosed upgraded plant will include the following facilities: a Material Recovery Facility (MRF) for the manual sorting of dry recyclable waste recovered by the separation at source, a Mechanical Treatment Plant (MTP) to mechanically separate the MSW, a Digestion and Stabilising (Composting) Plant, a Combined Heat and Power Plant (CHP), a Regenerative Thermal Oxidiser (RTO) and a Waste acceptance station for the collection of data and control waste deposit at this site. It is envisaged that this plant will be operational in the 1 st quarter of 2009. Measure 5.12 Promote use of bio-fuels through exemption from excise duties on importation; pilot collection scheme for the collection of used cooking oil Government has lowered tax on bio-fuels by 1% when compared to other fuels. During 2007, three companies were active in the Maltese bio-fuel market. Two companies produced biodiesel, one from recycled spent cooking oil and the other from imported raw material, whilst the third company recycled spent cooking oil for use as pure vegetable oil being marketed as a substitute for fossil fuel. All three companies retailed both to the transport and to the industry sector. One of the companies retailed pure biodiesel (B100) through petroleum filling stations in Malta. This proved very successful and in 2007 the number of stations retailing pure biodiesel continued to increase. Around 40% 33 of the total petroleum filling stations are now retailing biodiesel to consumers. Table 1 below shows the percentage of road transport fuels in Malta during 2007 and the share of biofuels. Table 1 - Use of road transport fuels in Malta during 2007 and the share of Biofuels Million Litres Type of fuel % of total Petrol and Diesel sales

Petrol 87.392 43.68

Diesel 98.471 56.32

Total Fossil Fuel sales 185.863 100

Pure Vegetable Oil 0.038 0.02

Biodiesel 2.022 1.06

Total Biofuel Sales 2.060 1.08

Measure 5.13 Measure to encourage the greater utilisation of non-conventional sources of water Government has been looking at various means of reducing the dependency on desalination plants as the main source of water in the islands. Desalination is the only option currently available however it is also substantially expensive both in financial and environmental terms. Studies are currently being conducted to establish the feasibility of capturing the storm water resulting in certain areas of the islands. The storm water infrastructure has been approved in order to alleviate the flooding problems; however the costs and feasibility to store this excess storm water and to promote its re-use for secondary usage still need to be established. This measure will continue within the next NRP cycle.

32 The 71,000 tonnes of waste treated is made up of 36,000 tonnes of dry recyclables and 35,000 tonnes of organic waste. Figures available online from: http://www.wasteservmalta.com/main.asp?ID=18&TAB=Tab5 33 Malta’s Annual Report for 2007 submitted to fulfil requirements of Article 4 of Directive 2003/30/EC on the promotion of biofuels and other renewable fuels for transport, Malta Resources Authority August 2008.

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Part B - Addressing Malta’s Specific Recommendations

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Political Summary

The re-launch of the Lisbon strategy in 2005 has enabled Member States to focus their efforts towards growth enhancing activities which in turn have created more and better jobs within the economy. Malta was no exception, and has actively participated in the Lisbon process through the active implementation of its first NRP.

Three years after launching of the first NRP, Malta has managed to register significant improvements. Real GDP growth rate has increase by over 2 percentage points in 2007 when compared to 2004. In addition, General Government Deficit has decreased to 1.8% which is significant when compared to 2004 figures whilst also permitting Malta to join the in January 2008. Malta’s drive towards the implementation of its NRP has contributed towards the achievement of a higher employment rate which increased by over 2 percentage points [1] and stood at 55.2% as at June 2008 and a complementary decrease of 1% in the unemployment rate when compared to 2004.

The NRP subscribes to Malta’s Vision 2015 of “a dynamic, high value-added economy founded on competence, skills and excellence and capable of sustaining a high standard of living for its entire people.” In terms of the strategy to attain this vision, the Government aimed at having a well-diversified and productive economy that uses all its available resources effectively to generate economic and social well-being for all. Special focus will be dedicated to the six sectors highlighted by Vision 2015, namely: the creative economy and especially ICT; the financial services sector; tourism; high value-added industry and services; international educational services; and health services. In order to get there, a number of key fundamental elements that would contribute towards increased national productivity and competitiveness were identified.

Over the last three years, the Maltese Government has committed itself to further stimulate the economy by shifting its role from operator to regulator. Within this context, Government has privatised a number of state-owned entities in various sectors including: ports, postal services and yacht marinas. This not only ensures a more focused role for Government but also stimulates the economy by offering additional business opportunities, strategic partnerships and an improved service to customers.

Concurrently, public and private investment in infrastructure and productive capacities has been encouraged, whilst keeping environmental considerations in mind. The support of enterprise and the creation of an entrepreneurial culture in order to create a more dynamic and flexible economy with an increased capacity to adapt to change has been pursued. Government is focusing more on creating the right environment for businesses to invest and grow. Competition and flexibility in our markets in order to improve our economy’s capacity to adapt to changing trends and developments and the delivery of public services has improved. Investment in research and innovation in order to sustain the creation of a high value-added, technology-intensive and knowledge-based economy has increased.

Tourism is one of the main pillars of the Maltese economy. Investing in the tourism sector is deemed as a major contributor towards Malta’s competitiveness. Government has continued to promote the cruise liner shipping industry whilst also moving towards the introduction of low cost carriers with a view to expand the tourism sector. The actions pursued within the first cycle of the NRP have contributed towards the improvement of the tourism package. In fact an increase of 7.41% has been registered in inbound tourism in 2007 when compared to 2004.

Malta’s most valued resource is its human capital. Hence, Government will continue increasing its investment the education and training fields. Efforts to reduce the number of early school leavers and increase the level of education especially at the tertiary level will continue to be sustained over the next cycle. It is envisaged that Malta’s educational infrastructure will continued to be transformed in such a way as to offer all citizens the opportunity to improve themselves and avoid anyone being left behind.

[1] Increase has been registered between Q2 2004 and Q2 2008.

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Investment in education and skills will contribute to ensure a highly prepared, versatile and flexible workforce and to fulfil the right conditions for people to make their own choices, to achieve their full potential and to excel.

In its Annual Progress Report, the Commission has made a series of recommendations which need to be addressed over the next three year cycle. Within this context, the Maltese Government will address the Country Specific Recommendations and Points to Watch which have been proposed by the Commission with a view to achieve the Lisbon targets. These recommendations include: the strengthening of the competition authority and opening up professional services, the reduction and redirection of state aid, step up efforts to attract more people in the labour market in particular women and older workers, continue implementing and reinforcing measures on health care reform; improve the regulatory environment, introduce effective one-stop-shops for business start-ups; diversifying energy sources and raise educational attainment and reduce early school leaving.

Whilst Malta will focus its efforts in achieving the above recommendations, Malta is cognisant of both its strengths and comparative advantages and external environment challenges. Experience and research on the country’s competitive position have established our competitive advantages as being: a stable macro-economic environment; a well-developed financial and taxation infrastructures; well-educated, highly-skilled and flexible workforce; a clear, transparent and stable administrative and regulatory regime; a robust and dynamic information and communications technology infrastructure; and, Malta’s membership of the European Union and of the Euro-zone. In this regard, Government intends to continue building on our national achievements thus far in order to take the country forward towards a higher level of sustainable development.

Country Specific Recommendations and Points to Watch are not the only challenges which need to be faced within the next three years. Global challenges that have prevailed during the current programming period are likely to continue to characterise the environment within which we operate. The recent crisis in the financial markets and the relatively high oil prices will no doubt spare any country from being impinged – to this Malta is no exception. Yet we are committed to work as hard as possible in order to overcome these market conditions. Malta is convinced that the Lisbon objectives for growth and jobs befit all EU Member States and that their implementation will translate into a better quality of life for all our citizens.

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Addressing Malta’s Specific Recommendations

Strategic Direction 2008 - 2010

The first cycle of the Lisbon Strategy has contributed towards improving Malta’s economic growth and the provision of more and better jobs. The strategies proposed within the first NRP have over the past three years yielded significant improvement in a number of areas including the tourism, employment, education and environment sectors. The improvements registered in these areas are encouraging, however, Malta is undertaking further actions and reforms with a view to achieve the Lisbon objectives.

The Annual Progress Report presented by the Commission in December 2007 has given a clear indication as to those areas which require immediate action by the Maltese Government. Malta’s second NRP builds upon the first NRP 2005 -2008 and the developments that ensued during this period also taking into consideration the Country Specific Recommendations and the Points to Watch as well as the Spring Conclusions in the four priority action areas.

Addressing Malta Country Specific Recommendations

In its 2007 Annual Progress Report, the Commission highlighted Malta’s need to address its weaknesses in relation to competition policy and persistent labour market problems. Within this context, the Commission recommended that Malta:

• “strengthens competition, notably by reducing state aids and redirecting them towards horizontal objectives as well as by reinforcing the competition authority and by further steps in opening up professional services;

• steps up efforts to attract more people into the labour market, particularly women and older workers; maintain efforts to tackle undeclared work and take further action on the benefit system to make declared work more attractive.”

Reinforcing the competition authority to strengthen competition The Government of Malta remains determined to strengthen the competition authority in order to improve Malta’s competitiveness. In 2007 a new Director General and a Director for Competition were appointed with a view to provide the necessary skills and expertise which were required within the Consumer and Competition Division within MFEI.

Furthermore, a capacity building exercise was conducted within the Office of Fair Competition (OFC) with a view to identify any human resource gaps in the various areas of operation of the OFC. Following this capacity building exercise, the Consumer and Competition Division issued a number of calls for the recruitment of qualified personnel in the Legal, Economic, Pharmaceutical and Cost Accounting areas. Further recruitment is envisaged in the economic and accounting sectors in the coming months. Over the next cycle of the NRP, it is envisaged that the OFC increases its technical staff by 20% with a special emphasis being made to address the following areas: school transport, transport coaches and motor hearses.

It is envisaged that through this exercise, the OFC will have the necessary capacity to extend its capability to monitor price movements, undertake market analysis, merger studies and take a more proactive approach in investigating allegations of market abuses. This strengthening process will also permit the OFC to develop appropriate leniency programmes and their proper implementation.

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Amendments to the Competition Act (Cap. 379)

The Maltese Government is in the final stages of completing the amendments to the current legal framework with a view to reflect modern trends and therefore key changes to the present enforcement system will include: • a shift from the present criminal fining system to one of administrative fines; this will empower the OFC to actually impose fines on infringing undertakings, whereas under the current enforcement system fines may only be imposed upon conviction by a court of criminal jurisdiction; • clarifying and improving the standard procedure for investigation of infringements of Competition law – which include increasing the investigative powers of the OFC and introducing certain standard procedures into the current decision-making process with the aim of increasing transparency (in particular, clarifying the OFC’s obligation to issue a detailed statement of objections and to allow access to the file to the investigated undertakings);and • simplifying the decision-making process by entrusting decision making powers to a single body – namely OFC, whereas currently there is a two tier structure, with the OFC empowered to conduct investigations of serious infringements of the local Act and infringements of Article 81 and Article 82 EC while decision-making powers are entrusted to the Commission for Fair Trading. The introduction of a leniency programme

The OFC will introduce a leniency programme with a view to counter cartels as these have a damaging effect on consumers and the economy. This will permit the OFC to carry out its work in this area more effectively.

In addition, it is to be noted that the current fining system provided for under the Competition Act (Cap. 379), whereby fines for the infringement of competition law may only be imposed upon conviction by a criminal court, does not allow for the adoption of any such leniency policy by the OFC. It must be pointed out that although the Competition Act does not concurrently contemplate a leniency policy. Nonetheless, it does provide for the possibility of extinction of criminal liability with regard to competition law infringements, upon signing of an agreement between the Director of the OFC and the offender. Thus, Article 26B of the Act provides that the Director of the OFC is to enter into an agreement in writing with the offender whereby the said offender pays or gives security to the satisfaction of the Director for the payment of a sum not less than fifty per centum of the minimum penalty applicable for the offence in question, and not more than seventy per centum of the maximum penalty applicable for the offence. Upon the signing of such agreement by the Director and the offender, all criminal liability of the offender under the Act with regard to the offence in relation to which agreement has been entered shall be extinguished.

To strengthen competition, notably in professional services The OFC has continued internal consultations with Ministries and professional bodies responsible for the regulation of the liberal professions, in order to identify existing restrictions imposed by State legislation or self-regulation by professional bodies which may potentially raise competition concerns.

The Competition Authority has finalised a first round of meetings with the pertinent authorities in order to identify possible problem areas. Meanwhile, the Office also conducted an independent assessment on the implications on each of the six professions. For each profession the said report deals with each category identified by the Commission as being of possible anti-competitive areas, that is: • Entry and Exclusive rights; • Fee Structure; • Advertising; and • Business Structure.

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Whereas it may be confidently ascertained that there do not seem to be insurmountable difficulties in the majority of the professions, such as engineers and pharmacists, some difficulties may arise in the legal professions, that is, lawyers and notaries. These difficulties will be better identified when a deeper analysis is conducted.

Prima facie , there seem to be no restrictions in place which potentially raise competition concerns. Existing entry restrictions relate exclusively to educational and training requirements, and as such are deemed to be directly related and proportionate to the ultimate goal of ensuring the proper practice of the professions concerned in the general public interest. In particular, it must be noted that there are no quantitative restrictions on entry into any of the professions concerned.

Furthermore, the imposition of fixed or recommended tariffs by these professions have been found to be present solely with regard to three of the six professions considered – namely lawyers, notaries and architects. In each case, fixed tariffs arise exclusively from national legislation – namely the Code of Organisation and Civil Procedure (Cap. 12). The remaining professions, on the other hand, enjoy complete freedom with regard to pricing of their services.

With respect to restrictions on advertising, the Codes of Conduct relating to the architectural, engineering and legal professions respectively prohibit the soliciting of work and the offering of professional services through commercial advertising media, whilst permitting certain other forms of advertising insofar as they ensure the dissemination of objective information regarding the services supplied by individual professionals or firms. In each case, such advertising restrictions are aimed at avoiding the making of incorrect, misleading or exaggerated statements by professionals which may potentially misinform the public with regard to the provision of services involving a substantial ‘asymmetry of information’ as between customers and service providers.

Reduce state aids and redirect them towards horizontal objectives, especially R&D The level of State aid granted in Malta during 2006 amounted to €115 million, thus reflecting a decline on the 2005 levels which stood at €146.6 million, and which represents 2.29% of GDP in 2006 compared to 3.16% in 2005. However, it should be noted that although Malta has one of the highest ratios of State aid to GDP, the share of the absolute amount of State aid granted by Malta represents only 0.15% of all the State aid granted by the EU-25 in 2006. Hence, the impact of possible distortion on competition in the total internal market is somewhat limited.

The level and composition of State aid in Malta is also reflective of the need for specific interventions in particular sectors also deemed to be necessary during EU accession negotiations. These include the restructuring plan for Malta Shipyards and operating aid granted under the Business Promotion Act (Cap. 356) earmarked to allow for the orderly integration of the small Maltese economy into the European market. In the agriculture sector, State aid under the Special Market Policy Programme for Maltese Agriculture (SMPPMA) is being granted with a view to allow operators to adjust to the common market and protect consumers against abrupt increases in prices.

Some State aid schemes consist of aid in the form of fiscal measures that are directly related to the future profitability of enterprises (most of which deal internationally). Moreover, some SMPPMA schemes are tied up to the international price of agriculture commodities (for example, cereals and sugar), thus making future projections of aid in this area is very difficult.. On this basis it can be noted that the trend in share of aid to GDP has been moving along a declining trend; down by some 0.72 percentage points for the period 2001-2006 in the case of total State aid granted by Malta and down by 1.21 percentage points if no account is taken of aid granted to the agriculture, fisheries and transport sectors. The reductions registered in the same ratios for the EU-25 are 0.05 and 0.07 respectively.

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Concerning horizontal aid one notes that over 70% of all aid granted in Malta goes to the manufacturing sector, primarily under existing aid schemes agreed with the EU during accession negotiations . As a result, the share of aid for horizontal objectives is comparatively low at 7.2% of total aid granted in 2006. This compares favourable with the level of 3.1% share registered in 2005. Moreover, the trend in the share of aid to horizontal objectives as a percentage of total aid is positive, and amount to 0.9 percentage points for the 2001-2006 period.

The specific realities faced by different Member States and regions should be appropriately taken into account. In this regard, small Island States like Malta face ad hoc geographical realities and disadvantages that cannot be sufficiently addressed only by horizontal measures.

Given the nature of some of the State aid currently being granted in Malta it is not realistic at this stage to establish annual projections of State aid to be granted in a particular year. As pre-2004 schemes reach their end duration date as established in the Accession Treaty, it would be possible for Malta to determine annual State aid projections with an appropriate degree of certainty. . Moreover, as the restructuring aid package for Malta Shipyards ends in December 2008, the level of State aid granted in Malta to the sensitive sectors will decline significantly in future years.

It is envisaged that State aid policy in Malta will in general continue to move towards less and better targeted aid. Particular attention will also be given to the promotion of horizontal State aid measures, which reflects the message given to Member States in the Stockholm European Council in 2001 to "demonstrate a downward trend in State aid in relation to GDP by 2003" and also to "redirect aid toward horizontal objectives".

Given Malta’s status as an Article 87(3)(a) , it is envisaged that development aid measures will continue to be implemented in the NRP period. The nature of such intervention would bolster the rhythm of socio-economic development in Malta, contribute towards the realisation of Malta’s Vision 2015, and also support the further integration of Malta into the European economy.

Moreover, Government will continue to remain vigilant for market imperfection situations that may arise in specific areas, especially in the wake of the specificities of the economy, as State aid may be an important policy instrument to mitigate such situations. In this way appropriate measures may be necessary to support the competitiveness of the economy, whilst honouring State aid principles.

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Table 2 - Key State Aid Indicators 2006 Trend in the share Trend in the State aid as a % of GDP, 2006 of aid to GDP, Share of aid share of aid to 2001 - 2006 to horizontal in % points horizontal objectives as objectives Total state aid Total state aid a % less Total aid less as a % of Total aid less of total* aid, agriculture, less agriculture, total* aid, railways 2001 - 2006 fisheries and railways fisheries and 2006 transport transport in % points

EU-25 0.58 0.42 -0.05 -0.07 85.2 17.0 EU-15 0.56 0.41 -0.03 -0.04 85.7 12.4 EU-10 0.91 0.52 -0.45 -0.82 78.3 36.0 Belgium 0.39 0.28 -0.06 -0.05 97.8 -0.7 Czech Republic 0.66 0.51 -2.33 -2.50 99.6 78.2 Denmark 0.59 0.46 -0.21 -0.18 96.4 -2.4 Germany 0.87 0.69 -0.09 -0.17 85.3 20.4 Estonia 0.41 0.08 0.32 -0.01 100.0 5.5 Ireland 0.57 0.28 -0.32 -0.19 80.5 26.2 Greece 0.26 0.15 -0.12 -0.09 90.2 2.2 Spain 0.50 0.39 -0.17 -0.18 72.1 14.3 France 0.58 0.41 0.04 0.04 96.6 10.1 Italy 0.37 0.26 -0.08 -0.08 95.6 0.3 Cyprus 0.76 0.48 -1.56 -1.53 95.7 28.5 Latvia 1.80 0.15 1.10 -0.05 99.9 51.7 Lithuania 0.54 0.23 0.25 -0.12 100.0 73.6 Luxembourg 0.32 0.13 -0.08 -0.07 100.0 0.0 Hungary 1.57 0.93 0.48 -0.16 51.9 7.1 Malta 2.29 1.77 -0.72 -1.21 7.2 0.9 Netherlands 0.35 0.24 -0.06 0.03 97.4 1.5 Austria 0.90 0.60 0.12 0.16 50.5 -21.8 Poland 0.85 0.45 -0.30 -0.70 85.0 30.8 Portugal 0.93 0.91 -0.05 0.04 13.9 -3.2 Slovenia 0.83 0.48 0.21 -0.15 87.8 10.3 Slovakia 0.51 0.45 0.11 0.08 94.6 14.3 Finland 1.53 0.35 0.07 0.05 96.7 0.2 Sweden 1.15 0.94 0.64 0.64 99.4 -0.4 United Kingdom 0.22 0.16 0.00 0.02 89.8 5.3

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Step up efforts to attract more people into the labour market, particularly women and older workers Reaching the 40% female participation rate by 2010 will prove to be one of the major challenges to be reached by the Maltese Government. The primary challenge in achieving this target emanates from indications that the major hurdle is a cultural one. A major obstacle is to entice middle aged and older women to return to work, particularly since a number of these have either never participated within the labour market or else have been absent from the labour market for a considerable number of years. It is a known fact that many of these women have often remained at home in order to take care of the family. This fact is further reinforced when one notices that in the younger women (15-24 age bracket) the female employment rate registered a 5.5% increase to a total of 43.9%34 when compared to the same period in the previous year. In the 25 – 54 age bracket the rate currently stands at 41% whilst the older women bracket (55-64) stands at 14.7 % 35 .

Notwithstanding, Government is committed to increase the female participation rate and continues to intensify its efforts in this regard. In 2007, 1,712 women have been placed in employment, 2880 women have been trained, 36 and talks have been delivered to girls in schools in order to further encourage females to take up non – traditional female occupations. In addition, in its Budget Speech 2008, the Maltese Government launched various initiatives aimed to attract more women in the labour market. These include: • the establishment of a part-time employment register to cater for persons who are seeking part-time employment. This register was launched in early 2008, and allows women looking for part-time jobs to have the opportunity to be registered for such jobs enabling better matching between the demand and supply side of the labour market. Furthermore Government has enacted legislation to allow for the pro-rating of the National Insurance contributions and benefits for those working on a part-time basis; • as from 1 January 2008, paid maternity leave has been increased by another week amounting to a total of 14 weeks. Expenditure for the extra week will be borne by the Government by means of a credit in the social security contribution paid by the employer; • training of child carers to improve the provision of child care services. To this effect, Government has started an initiative whereby parents availing themselves from childcare facilities are now able to deduct €932 from the taxable amount to make good for part of the expenses incurred in licensed child care services. Furthermore, in those cases were employees receive payment from their employer for expenses related to childcare services, such payments are no longer considered as fringe benefits and will therefore no longer be taxable for the employee. At the same time expenditure related to childcare services is considered as business costs for the employer and therefore are deductible from taxable income. Through these measures Government has shown its commitment towards providing an encouraging framework and improved support services for mothers and women returning to work. It is worth noting that since these measures have only recently been launched their impact on the rate of women in employment cannot be established as yet. Moreover, the impact of such initiatives is difficult to measure since women returning to work can also be affected by other circumstances not necessarily linked to the above initiatives. Apart from offering the usual employment and training services, the ETC will continue with its efforts to empower young males and females to make the best possible career choices in line with their skills and inclinations and irrespective of gender stereotypes. In addition, in 2007 a Youth Strategy was launched with a view to further address youth unemployment.

34 Labour Force Survey, January – March 2008, National Statistics Office, Malta 35 Ibid 36 Internal data provided by the Employment and Training Corporation.

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Older workers Increasing the employment rate of older workers to 32% by 2010 is another major challenge for Malta. During 2007, employment amongst older workers registered a decrease of 2.9% when compared to 2004. In Malta, the employment rate of older workers stands at 28.3% 37 (compared to EU27 of 44.7%), although one must take into consideration the pensionable age of 61 applicable in Malta. The average exit age from the labour force stood at 58.5 38 in 2006, which although the lowest in the EU27, represents an increase of 0.9 years over 2001. According to administrative data for the years 2005 to 2007 inclusive, the reasons for terminating employment among those aged 55 plus include: • retirement on pension (51%); • resignation (12%); • health reasons (10%); • redundancy or dismissal (10%); • end of contract (9%); and • other reasons (8%). Statistical analysis of this administrative data suggests a strong correlation between the skill level and the rationale for terminating employment, with higher skilled persons more likely to resign and lower skilled persons more likely to withdraw for health reasons or following redundancy. Resignation of older workers is most likely in the hospitality and real estate/business sectors; redundancy is most likely in manufacturing and hospitality; health reasons for exiting the labour market are most prominent in construction and the transport and communications sectors. Malta has pursued various actions aimed at improving the employment rate of older workers during the past twelve months. These actions include: • a promotional campaign which was held between January and June 2008 with a view to promote the integration of older workers. Several adverts were issued on the local newspapers and over 20 interviews were held on local radio and television stations; • the ETC organised two motivational seminars. During these seminars various speakers were invited and workshops were organised. Participants had also the possibility to discuss the various problems which they are encountering in finding a job; • new registered unemployed (including older workers) clients were called in to attend a 6 hour job search seminar. During such seminars, participants are informed about the various services offered by the ETC and participants are also given job search techniques. These seminars are offered within the first 15 days of unemployment. After attending the job search seminar, each registered unemployed who is also an older worker, is assigned to an employment advisor. The employment advisor carries out an in-depth profiling interview with the job seeker before the first month of unemployment; and • a Personal Action Plan is drafted and reviewed on a monthly basis. In addition, during the Budget Speech 2008, Government introduced a new measure which will encourage older workers to remain active in the labour market. As of January 2008, persons who have retired are now able to keep on working and earn any amount of income without any reduction in the pension.

37 Employment Rate of Older Workers as at 2007 abstracted from EuroStat. Available online from: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=0&language=en&pcode=tsiem020 [Accessed on: 01 August 2008] 38 Average exit age from the labour force as at 2006 (EuroStat). Available online from: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=0&language=en&pcode=tsiem030 Accessed on: 01 August 2008]

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Intensify efforts to tackle undeclared work

A priority for the Maltese Government is to curb the amount of undeclared work. A Candidate Country Exhaustiveness Project was undertaken in 2002 by the National Statistics Office. This study established that the level of undeclared work in Malta then stood at 5.78% of GDP in 2002 (EuroStat 2002) which is within the EU average.

A number of measures have been undertaken with a view to facilitate employment registrations for both employees and employers. Further to facilitating the registration of employees the other alternative is to apply enforcement measures in order to contain illegal employment.

ETC has a Compliance Unit made up of a team of five inspectors who conduct on-site inspections and desk investigations on a daily basis to track undeclared employment. Legislation in Malta compels every employer employing a person to notify the ETC of such employment by sending an engagement form. This is a legal document and enables ETC to keep track of declared employment. Similarly, when an employer terminates employment of a person, a termination form is to be sent to ETC. A computerised database of persons who are in employment is thus maintained up to date. Persons not featuring in such database are not considered to be in legal employment. These notifications can be done by employers electronically in order to facilitate matters.

On-site inspections are carried out to identify any infringements and employers found acting illegally are brought to Court. In 2007, a total of 878 persons were found to be working illegally and criminal proceedings have been initiated against the employers.

Undeclared work is also fought through compulsory Active Labour Market Policies (ALMP) measures for the registered unemployed. Failure to participate in these ALMP’s will result in removal from the unemployment register. As a result of this, almost 2,400 persons were removed from the register in 2007. Moreover, an increased number of persons were removed from the unemployment register as they were found working and registering – they must work consecutively for 6 months to obtain the right to register for unemployment benefits again.

Undeclared work is also being addressed through: • closer collaboration with the Police in conducting inspections especially when illegal employment is expected to involve foreigners; • turning undeclared work into regular employment following on-site inspections by allowing employers to regularise the employment position of the persons found working illegally and paying a fine; • sharing of information with other government entities – Department of Social Security, Police, VAT Department, Tax Compliance Unit; • employers found breaching employment legislation are not having their application for work permits for foreigners approved; and • publicity measures to promote rights and responsibilities.

Government intends to intensify the response against undeclared work by intensifying its current efforts by increasing the resource capacity as well increasing collaboration between the various entities in order to curtail the defaulting workers. Moreover, it is also being proposed that legislation is amended or introduced whereby higher fines are imposed on these defaulters. In addition publicity and information campaigns with the aim of promoting the benefits of legal employment are also being planned.

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Implement changes to the tax and benefit system to make working more attractive.

During the NRP 2005 – 2008 programming period, the Government of Malta amended current income tax provisions with a view to make work more attractive. The main changes to taxation policy is summarised below: • Tax credit (Women Returning to Employment) Regulations, 2005 - where female returnees to the labour market will benefit from a tax credit set off against the tax in respect of gains of profit from the said employment; • Part-time Work (Amendment) Regulations, 2005 - these provisions have now been extended to married couples. This measure complements the introduction of the register for part time employees introduced in early 2008; • the revision of income tax bands in budget 2008 - tax bands have been revised with a view to provide a greater incentive to those who wish to work; • recognition of men/women working within a family business - men/women working in their family business will be allowed to be registered on the company’s books and thus have the opportunity to enjoy social benefits while also being entitled to a pension on payment on their social security contribution; • Tax deduction for use of childcare services. Government shall allow parents to deduct Lm400 (€931.75) from the taxable amount to make good for part of the expenses incurred in licensed childcare services. In those cases were employees receive payment from their employer for expenses related to childcare services, such payments shall no longer be considered as fringe benefits and will therefore no longer be taxable. In those cases where employers pay their employees for expenses related to childcare services, such expenses are considered as business costs and therefore are deductible from taxable income;; • change in computation system of social security contributions for part-time employment. In order to make part-time work more attractive, Government has adjusted the social security contribution paid by part-time employees for whom such employment is their main job and has also introduced benefits on a pro rata basis. In addition to the measures already introduced, Government also plans to introduce further reforms in the taxation framework in order to stimulate economic growth and increase the attractiveness of work. A primary measure which will be introduced in the coming years is the revision of the income tax rates. Government plans to further widen the tax bands as a continuation of the measure introduced in Budget 2008. The thresholds of when tax is paid at 15% and 25% will be raised. As a result the number of persons who do not pay income tax will increase as will those who pay 15% instead of 25%. The widening of the 15% tax threshold is a measure that is expected to impact around 75,000 taxpayers. Moreover the maximum tax rate of income tax will be reduced from 35% to 25% for those earning up to €60,000. Initial projections point out that there are around 21,300 taxpayers who would potentially benefit from this measure.

Another taxation measure which is aimed to contribute towards increasing productivity and growth is the removal of the €23 departure tax. This impacts all travellers but it is also an increased cost for business since all business travellers have to bear the burden of this tax. The number of departing business and professional persons in 2007 (NSO) amounted to 98,800. This measure is expected to cost Government €2,272,400.

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Addressing Malta’s Points to Watch

In December 2007, the Commission in its Annual Assessment Report has reconfirmed the four points to watch identified for Malta. The Points to Watch which need to be addressed in the Malta NRP 2008-2010 include: • “continue implementing and reinforcing measures on health care reform; • further improving the regulatory environment by continuing simplifying legislation by introducing systematic impact assessments and effective one-stop-shops for business start-ups; • diversifying energy sources, including enhancing energy efficiency and renewable energy and connecting Malta to Europe’s energy networks; and • continuing efforts to raise educational attainment and reduce early school leaving.”

Implementing and reinforcing delayed measures on health care reform Government has opted for an incremental approach towards health sector reform that is based on building the appropriate strategies and systems to modernise the public health sector.

Safeguarding financial sustainability has been identified as a core policy objective for health and long-term care systems by the EU. The challenges posed by the ageing population together with the availability of expensive medicines and technology coupled with the global scarcity of health care human resources come together to provide strong cost escalation levers. The issue of the long-term sustainability of the system is receiving increasing attention. This should be understood also in light of Government’s commitment to keep health care free at the point of delivery. There is a need to create awareness amongst service users of their responsibilities to utilise health care services responsibly. Some health services are not functioning efficiently because they are misused. Better financial control will be exerted by initiating a shift of all health care entities to a controlled decentralised accrual and responsibility accounting system 39 . This will be accompanied by an appropriate investment in the necessary human expertise and information management systems. A high level strategy that outlines the priorities for further developments in ICT in the coming years is being drawn up. In all ICT developments, emphasis will be made on maximising value.

Recognising that quality health services contribute to the high level of healthy life expectancy enjoyed by the Maltese population, Government is determined to continue to facilitate access to services notably by providing better information on the available services as well as by reducing lengthy waiting time to access services. Government will publish a plan on the way forward for primary and community care services by the end of 2008. Actions to implement the agreed strategy will start in 2009 and continue between 2010 and 2015. The key thrusts in relation to health care include: • containing public health care expenditure through enhanced efficiency; • improving access to services; and • creating an environment that supports foreign investment in health services.

39 Such a system has been in place at Mount Carmel Hospital and Zammit Clapp Hospital for a number of years with excellent results in terms of efficiency and cost-savings.

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Containing public health care expenditure through enhanced efficiency

Public health expenditure will be contained by means of:

• promoting responsible service utilisation through information campaigns, more utilisation of health centres; • setting up of operational and financial control systems to ensure better resource utilisation and allow management to have access to the necessary information to exercise appropriate financial planning and control; • enforcement of entitlement mechanisms; and • investment in ICT as an enabler for change and process re-engineering. Improving access to services

The Maltese Government will improve access to services by

• creating a framework for patients rights; • enhancing information on health services; • reducing waiting time for interventions; • providing better access for residents of Gozo; and • providing access to hospital patient data from the primary care setting. Creating an environment that supports foreign investment in health services

The Maltese Government intends to:

• promote Malta as a centre for health care education and training as part of Vision 2015; and • provide an effective yet supportive regulatory environment for the pharmaceutical sector. Pharmaceuticals create knowledge-based jobs using high technology employment and access to global markets. New Health Care Act

A new Health Care Act will replace the Department of Health (Constitution) Ordinance (Cap. 94). The Act aims at safeguarding and improving public health, promote a comprehensive, sustainable and better-value-for-money-spent health service anchored on the principles of social solidarity and equity.

The draft Act was cleared through the Cabinet`s Social Policy Subcommittee and a revised draft was submitted for vetting by the office of the Attorney General. The draft is currently being reviewed following changes in the legislature. It is still envisaged that the Act will be presented to Parliament later on next year. Despite this delay, an administrative decision had been taken to implement the top management structures envisaged in the Act, namely the separation of the regulatory function from the service provision function. As from September 2007, 4 Directorates General have been set up namely:

• Public Health Regulation Division i.e. the Regulator; • Health Care Services Division i.e. the Service Provider; • Strategy and Sustainability Division tasked with ensuring that financial sustainability is achieved through establishment of policies and strategies ; and • Resources and Support Division responsible for the financial element and HR functions.

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Improving Health Care Services in Gozo

The Maltese Government is in the process of procuring medical equipment for the Gozo General Hospital that will replace old environmentally damaging technologies with more energy efficient ones, as well as new equipment that will significantly reduce the need for the transportation of patients from the Gozo General Hospital to Mater Dei Hospital for diagnostic services which are not currently available in Gozo. This project will notably entail the upgrading of the operating theatre and the setting up of a radiology unit.

Further improving the regulatory environment by continuing simplifying legislation by introducing systematic impact assessments and effective one stop shops for business start-ups Government’s policy in relation to the drafting of subsidiary legislation states that each draft legislation has to be accompanied by a basic Impact Assessment referred to as a Legal Notice Checklist. The Legal Notice Checklist provides the financial and administrative impacts of regulatory measures on the private sector.

The Legal Notice Checklist covers general aspects, how the drafting exercise was carried out, its findings, and anticipated outcomes. It gathers information on whether stakeholders were consulted, the list of stakeholders that were consulted and their feedback. Consultation is a common practice for Ministries, government departments and public sector entities, who work in close collaboration with stakeholders when drafting legislation and policies. The checklist asks whether an impact assessment was carried out and requests the Ministries to list its main findings.

The Legal Notice Checklist takes into consideration the procedural or administrative impacts on SMEs resulting from the draft legislation. Ministries have also to specify whether there will be any envisaged new or increased burdens.

Although not a requisite, it is the norm for impact assessments to be carried out in the case of high impact proposed legislation; legislation or initiatives which are deemed to have a strategic impact on the general public’s quality of life, economical growth and jobs are supported by in-depth studies. Examples include the Social Impact Assessment of Pensions reforms, and the Socio-Economic Impact Assessment of Smart City at Malta, both of which are publicly available.

It is worth noting that the Better Regulation Unit was engaged in a Twinning Light project where a procedure manual on simplification and better policy-making has been produced.

Effective one stop shops for business start-ups

Government is committed to create a business-friendly environment and to remove unnecessary bureaucracy and burdens to business. The MFSA acts as the official one-stop- shop for setting up limited liability companies. Through the MFSA, individuals are able to set up limited liability companies in as little as one working day as long as the necessary documentation is available. Furthermore, the registering of a limited liability company may also be done online by obtaining an e-signature. A company may set up business within 24 hours if all documentation is available.

The Maltese Government has also set up the GSU with the remit of formalising the commitment of the various Government entities within tight and formally established time bound parameters such that the bureaucratic needs of individuals or entities seeking to set up and operate a business from Smart City can be addressed through a single point of reference and within the formally established time parameters. The work of the GSU is complemented by that of the Malta Enterprise who through a variety of schemes provides support and impetus to FDI firms seeking to set up and operate from within the Maltese Islands.

In the light of the fact that the majority of businesses in Malta are micro enterprises, the Government of Malta has decided that these businesses should also avail themselves from the services provided by the one-stop-shop.

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Within this context the existing Business Care Unit of the Commerce Division within MFEI will expand its remit with a view to act as the single contact point to businesses to assist them in the setting up of their enterprise. In the mean time, businesses may obtain a trading licence within ten days.

Diversifying energy sources, including enhancing energy efficiency and renewable energy and connecting Malta to Europe’s energy networks

Malta’s total dependency on fossil fuels for energy needs is having considerable impact both from an environmental and economic perspective. From an environmental perspective, the production of energy from fossil fuels is causing environmental pressure due to the combustion processes involved. In fact, 63% of Malta’s greenhouse gas emissions emanates from this sector. In addition, the volatility in oil prices is causing pressures on the Maltese socio-economic development efforts:

• from rising costs of imports ; and • costs of productions locally.

Within this context energy efficiency and diversifying Malta’s energy sources including renewable energy sources play a crucial role.

Diversifying energy resources and ensuring security of supply

The Maltese Government is committed towards increasing its share of renewable energy. In fact, Malta intends to generate 10% of the national energy needs through renewable energy sources by 2020. The potential sources for renewable energy for Malta are solar, wind and waste. In achieving the 10% target, Government has earmarked €33 million from the 2007 – 2013 structural funds.

Government has published “A Draft Renewable Energy Policy for Malta 2006”. Furthermore, a study on the best way to link Malta to the European Grid is underway and is being carried out by Lahmeyer International. The options for future expansion of on-island generation capacity together with natural gas via pipeline interconnection or liquefied natural gas as alternatives to the existing fuel oil/ gas oil mix are also under review.

Following the widespread success achieved with the rebate schemes on energy saving domestic appliances, the Government intends to extend such scheme to renewable energy sources equipment by increasing financial subsidies for solar water heaters, photovoltaic and micro-wind generators. In 2006 market response to solar thermal installations in Malta saw a significant improvement, as requests for financial subsidies increased by 434% when compared to the 360 subsidies awarded in 2005. Through these aid schemes the government intends to double such figure to 3000 units SWH sold per household in 2009, (in addition to the 220 PVs and micro-wind generators to be sold) thus providing a substantial contribution towards the 2020’s targets.

Energy Efficiency Energy efficiency can have a significant impact on the demand for energy and so, it can reduce the country’s fuel bill and the release of carbon into the environment. According to the latest available statistics, between 2000 and 2004, the Maltese economy has improved its energy efficiency by 6% 40 . Energy efficiency in households and transport has improved by 9% and 5% respectively whereas energy efficiency in the manufacturing has deteriorated. These results are encouraging. However, further action is required to implement Malta’s national policy towards more effective energy efficiency.

40 Pre-Budget Document 2009 – Together for a Sustainable Future. Available online from: www.mfei.gov.mt . [Accessed on 11 August 2008]

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The Maltese Government Policy towards energy efficiency is a multi-faceted one. In fact in its Pre Budget Document 2009, Government announced that a series of actions will be taken with a view to contribute towards one or more of the following objectives:

• motivate the public sector to become a role model in energy efficiency; • promote increased awareness and behavioural change by consumers on an individual level through communications campaigns; • adopt financing instruments and economic incentives targeting all sectors to stimulate further the take up of more efficient technologies and processes; • take advantage of international efforts, in particular at EU level, to ensure that more efficient energy using products become available to the consumer; • use legislation, such as the energy performance in buildings, to set standards for energy performance in buildings. These Regulations will be enforced by 1st January 2009 in accordance with the provisions of the Directive; and • conduct research in energy efficient technologies and practices suitable for adoption in Malta. Over the past three years, Government has introduced an Energy Saving Government Rebate scheme with a view to promote energy saving appliances. Within this context, over 27,000 persons 41 benefited from this scheme.

Energy Efficiency in Products

The majority of consumers in Malta are aware of the importance of choosing Class ‘A’ energy efficient appliances. This result has been achieved through the Government scheme which was available over the past years which promoted energy efficiency in appliances.

The Maltese Government acknowledges that there is a general lack of information and awareness about energy efficiency. Within this context, an information campaign focusing on specific energy consumption sectors will be re-launched during 2009. In addition, Government will launch schemes to promote energy efficiency in the non-domestic sector will also be launched.

Energy Efficiency in Buildings In order to further promote energy efficiency in building, the Maltese Government will revise the existing legal framework with a view to ensure energy efficient techniques in new buildings, renovated buildings and public buildings.

Within this context, Government has proposed a renewable energy project for the Gozo General Hospital. This project includes a solar thermal system, Photovoltaic and the replacement of the existing fossil fuel driven boiler by a gas fired one. This is expected to reduce the current carbon dioxide emission levels from the boiler by approximately 450 tonnes. Moreover, the project will also eliminate 1 tonne of SO 2 emitted annually. The solar panels proposed under this project will contribute to the energy savings target indicated in the National Energy Efficiency Action Plan 2007 by reducing the hospital’s traditional energy consumption by 300MWh per annum.

Connecting Malta to Europe’s energy networks

A study on the best way to link Malta to the European Grid is underway and being carried out by Lahmeyer International. The options for future expansion of on-island generation capacity together with natural gas via pipeline interconnection or liquefied natural gas as alternatives to the existing fuel oil/ gas oil mix are also under review. The possible synergy of this project with the production of ‘green energy’ from wind farms is also within the purview of this study.

41 Data provided by the Ministry for Resources and Rural Affairs

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Raising educational attainment and reducing early school leavers

Government is committed towards increasing attainment rates and decreasing the rate of early school leavers in the coming years. The Budget Speech 2007 and the Pre-Budget Document 2008 reinforce this objective and outline short and long-term measures which will contribute towards reaching this goal. The Maltese Government is currently undertaking an in depth review of transition from primary school education to post secondary education and the alternative transition to work. This study compliments the review of student transitions from primary to secondary education and gives an overarching view of the link and impact of education policy at a primary and secondary level on student choices and transitions into further education.

Student population trends in post-secondary and tertiary education

Since 1999, the total student population in further and higher education in Malta registered an increase of 61% in the last eight years as indicated in Figure 1 hereunder. The average age in the further education sector is typically 16-17 years for the general post secondary sector, and 16-19 years for the vocational post secondary sector. It is worth noting that the compulsory education in Malta is till the age of 16. At a tertiary level, the typical age bracket for courses ranging between 3-4 years is that of 18-22.

Figure 1 - Total Day and Evening Student Population in Further and Higher Education in Malta (1994-2007)

25,000

20,000

15,000

10,000 Student population

5,000

- 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Post secondary (General) 3,723 3,872 3,250 4,438 5,185 5,033 5,191 5,122 4,970 5,169 5,394 5,732 6,117 6,119 Post secondary (Vocational) 1,748 1,362 1,423 1,621 1,841 1,917 2,615 2,801 3,638 3,858 4,476 6,964 6,730 6,774 Tertiary (Day & Evening) 5,177 5,805 6,263 6,368 7,146 6,959 6,362 7,493 7,332 9,006 9,245 9,530 9,450 9,500 Total Further and Higher education 10,648 11,039 10,936 12,427 14,172 13,909 14,168 15,416 15,940 18,033 19,115 22,226 22,297 22,393 Years

Source: NSO Education Statistics (1994 – 2005) Provisional Institutional Data compiled by NCHE (2006 – 2007)

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The number of students outlined in the diagram above for 2004-2007 are further broken down by institution in Table 3 below, to demonstrate that all further and higher education institutions with the exception of private sixth forms have increased their total number of students every year.

Table 3 - Total Day and Evening Student Population in Further and Higher Education Institutions in Malta (2004-2007) Institution 2004 2005 2006 2007 Institute for Tourism Studies ( ITS) 710 771 598 615 Junior College 2958 3057 3225 3269 MCAST 3766 6193 6132 6159 Post Secondary (Government) - G. Curmi and M. Refalo 1646 1908 2140 2156 School Post Secondary (Private) 790 767 752 694 University of Malta 9245 9530 9450 9500 Grand Total 19115 22226 22297 22393 Source: NSO Education Statistics (2004 – 2005) Provisional Institutional Data compiled by NCHE (2006 – 2007) ITS Data excludes evening part-time students (159 in 2007, 145 in 2008) Structural indicators show that in 2006 the educational attainment level in Malta was 50.8% for the 20-24 age bracket. In 2007 42 the same indicators show that Malta has now increased its educational attainment rate to 54.7%. This also implies a corresponding drop in early school leavers from 41.7% in 2006 to 37.6% in 2007. Government’s policy is to undertake the necessary educational reforms with a view to retain 85% of school leavers aged 16-18 in post-secondary level education by 2015. Measures to increase attainment rates and reduce early school leavers are being undertaken in various sectors and across different levels of the education system simultaneously. Measures related to post-secondary and tertiary level student participation rates include:

• the continuation of student support schemes such as the Student Maintenance Grants and the Malta Government Scholarships Schemes (MGSS) for the undergraduates and postgraduates following programmes in private/non-state institutions, both in Malta or abroad, EU programmes to promote mobility, and financial support to parents of children attending private schools; and • further investment in the capacity of post-secondary vocational institutions such as MCAST and ITS which shall witness the largest share of marginal growth in school leavers who opt to continue their studies beyond compulsory levels of education. The target of reducing early school leavers from 30% in 2007 to 34% by 2010 holds. The Maltese Government aims to continue making longer-term restructuring to achieve its 85% participation rate targets by 2015. In achieving this target Malta will also make use of Structural Funds with a view to reduce the rate of early school leavers and hence raise educational attainment levels. Actions undertaken include a new MCAST campus, investment in human capital including scholarships and targeted programmes, guidance services, internal and external quality assurance expertise, administration and governance, and subject related education and professional development including ICT, entrepreneurship, science and technology amongst others

Other complimentary long-term measures related to primary and secondary education which have a strong influence on long-term student school leaving choices are also being undertaken. The strategy for compulsory education includes a number of measures which on the one hand assess and improve the quality of education services by revising existing policies and practices and introducing new concepts and frameworks. The strategic thrust in schools shall consist of a portfolio of measures including:

42 “Progress towards the Lisbon Objectives in Education and Training - Indicators and Benchmarks 2008”, COMMISSION STAFF WORKING DOCUMENT, EU Commission, 2008.

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• a number of policy reviews which include a review of the National Minimum Curriculum, a strategy to ensure core competency outcomes at a primary level, and a review of selectivity and transitions are all currently underway; • measures related to the education system and programmes including the continued implementation and strengthening of the college system, a review of the examination system at the end of the primary education, promotion of Mathematics, Science and Technology subjects in schools for increased take up, refurbishment of Science Laboratories and the provision of an ‘after school’ programme of sports, literacy, art, drama, dance and creativity for children in schools; and • the continuation of the refurbishment and building programme for State-run schools; and • scholarships for training teachers and educators in an array of specialised areas are being offered. In addition to the actions pursued above, the Maltese Government is also proposing a series of actions aimed specifically at addressing the regional aspect of the island of Gozo. The Government is committed to continue to invest in its human resources by offering a number of vocational education courses aimed at early school leavers in the areas of language training and hospitality in Gozo. It will also be providing lifelong learning opportunities for Gozitans by offering higher education courses at the University of Malta Gozo Centre. These courses will be offered in the areas of IT, Finance and Tourism. Participants to these courses will either achieve a Diploma or a Degree in any one of these areas. The choice of areas in which training will be offered has been dictated by labour market trends as well as by developments in these sectors.

The Maltese Government is committed towards addressing its Country Specific Recommendations and Points to Watch notwithstanding certain specific challenges that impact these concerns. It is important to consider the socio-cultural context in which these recommendations are being implemented and hence a long term implementation approach is required to address these challenges.

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Part C - Malta’s National Reform Programme 2008 -2010

Macroeconomic Policies

Recent Economic Developments

The Maltese economy sustained upbeat economic growth during 2007 for the third year in a row. In fact, during 2007, GDP grew by 6.3% in nominal terms and by 3.7% in real terms. Moreover, GDP growth remained relatively strong during the first two quarters of 2008 reaching 3.3%, only marginally below the 3.5% growth rate registered during the same period in the previous year. Economic growth during 2007 as well as during the first two quarters of 2008 was mainly sustained by domestic demand.

The recent international economic developments pose downside risks to the outlook for the Maltese economy. In particular, the financial turmoil and the slowdown in major economies around the world pose a significant challenge. Furthermore, the relatively high international prices of oil and food commodities also pose additional risks. Table 04 shows the development of the main economic indicators over recent years.

The level of Malta’s GDP per capita in purchasing power standards has remained fairly stable around the 77.5% mark during the past four years thus continuing to be appreciably below the EU27 average. This highlights that real convergence of living standards in Malta with the EU27 average remains an important issue for the national economic policy agenda.

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Table 4 - Main Economic Indicators Main Economic Indicators 2003 2004 2005 2006 2007 2007 2008

Nominal GDP (€ 4388.3 4508.8 4799.8 5095.4 5415.0 Jan-Jun 2588.6 2745.8 millions) Real GDP (€ 3999.3 4044.3 4185.4 4317.1 4477.0 Jan-Jun 2142.4 2213.0 millions) Real GDP growth -0.3 1.1 3.5 3.1 3.7 Jan-Jun 3.5 3.3 (%)

GDP per capita in PPS (compared to 78.6 77.4 77.9 77.2 77.3 EU27 100 benchmark)

Expenditure Components of GDP at constant 2000 prices (% change) Private final consumption 3.9 2.5 1.8 0.7 1.6 Jan-Jun 2.9 4.1 expenditure *1 General government final consumption 3.3 0.5 -0.5 5.9 -0.1 Jan-Jun -0.9 12.3 expenditure Gross fixed capital 23.1 -2.8 8.6 4.2 4.1 Jan-Jun -3.0 -6.3 formation Exports of goods -0.6 -0.9 1.2 17.1 -4.1 Jan-Jun -3.3 -10.2 and services Imports of goods 5.9 0.8 3.6 14.7 -3.8 Jan-Jun -7.4 -4.7 and services

Current Account -3.1 -5.8 -8.7 -8.2 -5.5 Jan-Mar -3.0 -2.5 Balance (% of GDP)

HICP Inflation (%) 1.9 2.7 2.5 2.6 0.7 August 0.5 3.7 Unemployment (%) 7.6 7.2 7.2 7.3 6.5 Jan-Mar 7.3 6.0 *2 Employment (%) 54.2 54.0 53.9 54.8 55.7 Jan-Mar 53.9 54.7 Unit Labour Cost 5.0 0.5 -0.2 1.4 0.7 Jan-Jun 2.9 -0.1 growth

General Government Deficit 9.8 4.6 2.9 2.5 1.8 (% of GDP) General Government Debt 69.3 72.1 69.9 63.8 62.2 (% of GDP) Sources: National Statistics Office, Eurostat *1 Includes NPISH final consumption expenditure *2 Based on LFS data The external sector plays an important role in the context of the small and open economy of the Maltese islands and in fact, Malta has recently been subject to a number of negative supply side shocks. Particularly, a number of important challenges have materialised in the form of major fluctuations in oil and food prices, as well as volatility in market conditions of a major export category. Moreover, local industries are increasingly facing increased competitive pressures from around the world. During 2007, the current account deficit contracted to 5.5% of GDP, an improvement of 2.7 percentage points when compared to the previous year. Moreover, the current account situation continued to improve over the course of this year. In fact, during the first quarter of 2008, the current account deficit as a percent of GDP reached 2.5%, marking an improvement of 0.5 percentage points when compared to the same quarter in the previous year.

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The improvement in the current account during the first quarter of 2008 is mainly attributable to the current transfers received as well as lower profits of foreign-owned companies repatriated abroad which compensated for the deterioration in the trade and services balances. In fact, the goods account was negatively affected by a fall in merchandise receipts as well as an increase in expenditure on merchandise imports. Increased receipts from tourists travelling to Malta contributed positively to the services account, however, such an effect was more than offset by increased expenditure of Maltese travellers going abroad.

HICP inflation reached a low of 0.7% during 2007 marking a substantial decline from a level of 2.6% registered during the previous year. The rate of HICP inflation has, however, started to increase, partly reflecting the effect of international price pressures. In fact, the HICP inflation rate during the month of August in 2008 stood at 3.7%.

The positive economic growth registered in recent years was reflected in a tightening of labour market conditions. The employment rate increased by 0.9 percentage points from 54.8% in 2006 to 55.7 per cent during 2007. The employment rate stood at 54.7% in the first quarter of 2008. There has been an increase in full time employment, while part-time employment has also continued to increase. While the employment rate has improved it remains significantly below the EU27 average which stood at 65.4% in 2007 and 65.5% for the first quarter of 2008. The unemployment rate declined by 0.8 percentage points reaching 6.5% in 2007. The rate of unemployment in Malta continued to decrease in the second quarter of 2008 reaching 6.0% thus continuing to remain below the EU27 average.

With respect to international competitiveness, growth in nominal unit labour costs has been relatively contained since 2003, reaching levels close to zero during 2004 and 2005 before somewhat increasing again in 2006. The growth in nominal unit labour cost has, however, decreased again in 2007 and data for the first two quarters of 2008 shows a negative growth rate of 0.1%. Since 2003, the real unit labour cost growth rate for both Malta and the EU27 was negative, with a relatively stronger average annual decline for Malta (-2.0%) compared to the EU27 (-0.9%)Such trends contribute positively towards the competitiveness of the domestic economy.

The budgetary consolidation that commenced in 2004 has continued in 2007 with the general Government deficit declining further to 1.8% of GDP. The general Government debt-to-GDP ratio has also followed a downward trend, decreasing by 1.6 percentage points from 63.8% in 2006 to 62.2 per cent in 2007.

Macroeconomic Policy

Issues and Opportunities

Ensuring a stable and sound macroeconomic framework, which is conducive to price stability, is a necessary precondition to achieve sustainable economic growth and employment creation. In the run up to the adoption of the Euro, Malta’s macroeconomic environment has been strengthened. In particular, inflation has been relatively low whilst significant progress has been made in the consolidation of public finances. Participation in the Euro Area is conducive to further strengthen the macroeconomic framework. In particular, adoption of the euro has removed the exchange rate risk associated with the . Furthermore, it is widely acknowledged that the framework governing the euro makes it a stable currency with low inflation and low interest rates, and encourages sound public finances. Moreover, the adoption of a single currency increases price transparency, eliminates currency exchange costs, facilitates international trade and improves the integration of financial markets.

The current international economic scenario presents downside risks to the growth outlook for the Maltese economy. These primarily relate to the financial turmoil, the slowing down of world economic growth, particularly in Malta’s main trading partners, inflationary pressures stemming from the relatively high international oil and commodity prices, as well as the appreciation of the Euro against the US dollar and the Pound sterling.

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These developments are expected to result in a fall in aggregate demand, both as a result of lower demand for exports as well as a slowdown in private consumption growth due to higher domestic inflation.

Government’s main macroeconomic policy objectives are to achieve sustainable economic growth and ensure real convergence with EU average income levels; and to generate a high level of employment and secure a relatively low unemployment rate. Malta’s per capita GDP stood at around 77 per cent of the EU27 average in 2007. Convergence to the average EU per capita income within a reasonable timeframe requires that Malta’s economic growth rate increases above the recent levels and remain at such elevated growth rates for a sustained period of time. It is estimated that an average annual real growth rate of approximately 4.2% is required in order to reach the EU average per capita income by 2020. This level of growth appears to be in excess of most conventional estimates of Malta’s potential growth suggesting the need to address supply-side issues in order to achieve real convergence with EU average income levels within a reasonable time frame. This implies consistent increases in the employed population as well as enhanced labour productivity over a prolonged period of time. Thus Government will continue to implement supply-side policies earmarked to improve participation in the labour force, improve the functioning of the market, encourage investment, including foreign direct investment, and support the transformation of the economy to high value added activities.

Demographic developments, specifically the ageing of the Maltese population, are expected to have a notable impact on the labour supply in the coming years and consequently also on the rate of potential economic growth. In this context, Government will be considering the role of policies earmarked to increase participation in the labour market as well as measures aimed to improve the fertility rate and migration policies. Government is particularly focusing on measures targeting female and older workers, whilst also implementing measures aimed to improve the incentive to work. Imported labour can provide an important contribution to meet the growing demand in certain sectors and to ensure that any labour shortages do not lead to undue wage pressures. Experiences in other countries in the EU show that migration can provide a significant means to support the growth process, particularly in the context of constraints on the growth of the labour supply due to demographic developments. Globalisation and the inherent increasing international competition, especially from low-cost countries, which it brings about is posing significant challenges to specific sectors of the Maltese economy, particularly in traditional manufacturing activities. The tourism industry also faces intense international competitive pressures from competing destinations, not only in the Mediterranean region but also from cheaper long-haul tourist locations. In this context, Government attaches high priority to policies which aim to enhance competitiveness so as to ensure sustainable economic growth. Furthermore, Government will continue to promote the development of high value added growth sectors, so as to ensure that wages can improve and converge to average EU levels. Such diversification of the economy would also reduce the country’s vulnerability to external shocks and reduce the volatility of the growth path.

As a Euro Area Member State, Malta can no longer make independent use of monetary or exchange rate policies. Economic theory suggests that in such a scenario, negative external shocks need to be absorbed by an increase in productivity and / or a decrease in prices and wages, or the migration of labour across industries (if shock is sector specific) or across countries (if shock is country specific). In the absence of such flexibility in the labour and product market, a persistent rise in the unemployment level is the likely outcome. Flexibility in the economy is thus crucial to facilitate national adjustment capacity when faced with economic shocks. Such flexibility is important in order to respond to changes in cyclical economic conditions, as well as longer term trends, including globalisation and technological changes. Thus, Government will continue to implement structural reforms aimed to instil further flexibility in the labour and product markets.

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Vision and Objectives

Stable macro economic framework

Government’s economic policy is based on growth and stability oriented macroeconomic policies. Sound macroeconomic policies are essential to create an environment which is conducive to employment creation and growth. Thus continuing to implement a prudent fiscal policy so as to secure a sustainable budgetary position remains a key priority in Government’s economic policy agenda. Reaching the medium term objective (MTO), of a balanced budget in structural terms (i.e. cyclically-adjusted balance net of one-off and other temporary measures) by 2010, in line with the Stability Programme 2007-2010 of December 2007, would be an important step to ensure fiscal sustainability.

Government will also continue to aim to maintain a low and stable level of inflation is another key aspect of a stable macroeconomic framework. This is especially important to ensure the competitiveness of local enterprises in view of the high degree of openness of the domestic economy. It is also a precondition to attract foreign direct investment.

It is recognised that the relatively high international prices of oil as well as other commodity prices, particularly agricultural items, have a bearing on the domestic inflation rate. Since Malta is wholly dependent on oil for energy generation and in view also of the use of oil for water desalination purposes, the impact of the increase in oil has hit significantly the Maltese economy. On the other hand, the appreciation of the Euro against the US dollar has partly mitigated the impact of high international oil prices. At the same time, the increase in food prices is also affecting the local economy, directly through its impact on consumers as well as an input to industry.

Government of Malta’s economic policy is based on the principle that wherever possible domestic market developments should reflect the imperatives of supply and demand. This has been applied also in the case of energy prices, where Government has established mechanisms that align closer domestic fuel and energy prices to the developments in the international market. As the relatively high oil prices involve a structural change in the international energy market, and not a temporary increase as originally envisaged, Government is proposing to remove the current fuel surcharge on water and electricity whilst revising the current tariffs, whilst also taking into account social and economic considerations.

Competition policy

An effective competition policy is a key priority for Malta, where the small size of the economy tends to result in market imperfections. Government is committed to remain vigilant on inflationary developments. Thus, the monitoring of market functioning by competition authorities is being intensified so as to ensure that any domestic price increases are not out of line with international price developments. Competition policy is thus a main instrument for ensuring price stability.

By encouraging the liberalisation of a number of markets, improving the functioning of the market and reducing remaining rigidities, an effective competition policy would contribute to lower the costs of production and improve Malta’s external competitiveness. Moreover, enhancing competition in the domestic economy is a prerequisite for a more efficient allocation of resources, enhanced investment and productive capacity, as well as improved market flexibility necessary to withstand negative external shocks in the economy. Government is considering liberalising entry in the transport sector. Furthermore, Government will be reviewing the subsidies in place to ensure that these do not lead to undue distortion of competitive pressures, thus resulting in suboptimal allocation of resources, whilst taking into account social considerations. Government is also committed to continue with its policy of reducing its direct involvement in economic activity.

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Wage developments

At this juncture, it is also important to ensure that the temporary increase in the inflation rate does not lead to an unsustainable trend in wage growth in excess of productivity gains. Thus, Government will ensure that any wage increases to compensate for the increases in inflation registered in recent months do not endanger Malta’s competitive position. Government will contribute to ensure that the social partners work together so that wage increases do not exceed gains in productivity.

Relatively high inflation rates have been registered in recent months. In such a scenario, wage indexation mechanisms can contribute to greater inflation persistence and thus create greater risks of second round effects from inflationary shocks. Thus, at this juncture, Government is monitoring closely the impact of the COLA mechanism on wage developments, to ensure that it does not lead to competitive losses. This is particularly important given that Malta’s inflation rate has been exceeding the average for the Euro Area and also in view of the fact that other Member States in the single currency area may not have in place similar wage indexation mechanisms.

Although wage moderation is essential in order to safeguard competitiveness particularly in a small open economy which operates in a highly competitive environment, the catching up process to reach EU levels of development requires wage increases in excess of those observed in the EU. Thus, Government recognises that the capacity of the economy to increase productivity, in excess of wage growth is a necessary condition for sustainable growth. Thus, besides contributing to wage moderation, Governent will continue to implement productivity enhancing reforms so as to ensure favourable developments in unit labour costs, whilst achieving convergence with EU average income levels. Furthermore, in order to safeguard competitiveness, Government will monitor the trend in domestic unit labour costs in the context of developments in competitor countries. Government also recognises the importance that wage developments reflect local labour conditions and take into account differences across skills.

Diversification of the economy

Promoting competitiveness is essential in order to withstand adverse developments due to globalisation and in particular the intense competition from low cost countries and to contain external imbalances. In order to address the challenges presented by globalisation, Government will continue to promote further development of high value added sectors. It is in this manner that Malta can compete in international markets and achieve a rise in its average income level. Government’s strategy is to have a well-diversified, competitive and productive economy. In this context, as outlined in Government’s Vision 2015, Government’s goal is to make Malta a centre of excellence in information, communication technologies, financial services, tourism service, high value-added industry and services, international educational services and health services.

In particular, Government attaches a high degree of potential for knowledge-based activities across a wide variety of sectors, ranging from ICT and pharmaceuticals to financial services. With regards to ICT, SmartCity is an example of the Government’s belief in the importance of this sector. Moreover, Government’s plan to extend the ‘smart’ concept to the whole of the country making it SmartMalta will surely attract even greater investment from ICT businesses. The Maltese government is also working to strengthen Malta’s position as an important financial services centre in the Euro-Mediterranean region. Government is also promoting the development of high-value-added activities which offer higher pay for greater skills, in sectors that include pharmaceuticals, biotechnology and sophisticated technology. Sustaining the tourism industry is another key priority, in particular, given the multiplier effects of this industry on other sectors of the Maltese economy.

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The generally widespread trend in Europe of services overtaking manufacturing as a share value added generated also appears to be taking place in Malta. Nevertheless, Government considers that the contribution of the manufacturing industry remains important. Government will continue to promote the diversification and restructuring process which is also taking place in the manufacturing industry. New sectors like pharmaceuticals are overtaking traditional sectors like textiles which are relocating to low cost centres. A constant stream of well qualified and skilled labour is required in order to make the leap to high value added manufacturing. Government will thus continue to invest in education and training and to promote investment, research and innovation, which are also necessary for this sector to remain competitive and increase value added. It is also Government’s priority that new growth industries in manufacturing are targeted with schemes which encourage manufacturing industries to undertake the necessary investment and upgrade their production capabilities and minimize costs. Human Resource Development

Human resource development is crucial to ensure that the local labour force has the necessary skills levels to meet the demands of these growth sectors. Education and training policies are a key aspect of Government’s policy agenda will help to ensure that emerging economic activities do not face labour shortages. Apart from the constraints imposed on potential output in the economy, labour shortages can lead to wage pressures in excess of productivity gains which can undermine competitiveness. Government will thus continue to invest in education and training so as to ensure a flexible labour force which is capable of adapting to the changing realised of a globalised world economy. This will contribute to enhance labour productivity which in a country like Malta appears to be the main source of labour adjustment to negative external shocks.

An improvement in the labour force participation is another key priority in Government’s policy agenda. This is especially important in the context of an ageing population, in order to avoid negative effects on potential output growth. Although the level of GDP per capita is around 77% of the EU average, output produced per worker is around 89 per cent of the EU average. Moreover, although the Maltese workforce is more productive than that of competitor economies such as Slovenia (86.2% of EU average), Cyprus (85.8% of EU average) and the Czech Republic (85.8% of EU average), Malta’s GDP per capita lags behind that registered by these economies. This indicates that the value added generated by the Maltese economy is being distributed among a higher proportion of the population which is inactive. Moreover, Malta has yet to reach the EU average. Thus Government will continue to implement measures which aim to increase labour force participation as this is a necessary condition for economic convergence with the EU. Specific focus will be made on measures which encourage higher employment rates of females and older workers, where Malta lags significantly behind the EU average.

Development of infrastructure

The country’s infrastructure should support and facilitate the transformation of the economy. Malta’s geographical characteristics – being a small island state at the periphery of the European mainland – highlight the importance of having effective and efficient connections. This includes sea and air links, telecommunications, ports as well as roads. Energy links is another key aspect which has gained in importance given the recent developments in international oil markets. Government intends to continue to invest to strengthen and improve the infrastructure, including through the use of EU funds.

Encouraging investment

Government will continue to encourage investment in the new growth areas of the economy. Export oriented investment will be encouraged, since for a small and open economy like Malta, sustainable economic growth requires that it is export-led. Thus Government will continue to undertake efforts to attract further foreign direct investment in emerging sectors, whilst also supporting domestic production towards exports.

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More competitive domestically produced goods to compete with imports for the supply of the local market would also contribute to an improvement in trade balance. Government will take measures to improve the business environment so as to ensure that it is conducive for private enterprise to grow. Moreover, Government’s goal of improving market structures and increase competition domestically will encourage domestic firms (which up to this point may have been shielded from competition and thus discouraged to upgrade their production techniques) to invest more in order to remain competitive. Government will ensure that there are the right incentives in place to channel investment away from speculative investment in property towards more productive investment in the real sector of the economy. Furthermore, Government will monitor the issue of the availability of appropriate commercial property and the cost of land in Malta relative to competitor countries as this constitutes an issue which can severely hamper investment, including FDI. The domestic property market is characterised by market rigidities. When periods of excess demand and supply tend to persist, there is a higher risk that asset price bubbles are created. Government will consider measures, such as prudential standards, market supervision and a good regulatory framework, which would not only help this market work more efficiently, but are also important in view of the sensitivity of the domestic financial sector to the conditions of the real estate sector.

Flexibility of the economy

As a Euro Area Member State, it is important to have the capacity to ensure smooth adjustment to asymmetric shocks which may hit the Maltese economy. Government will thus continue to implement structural reforms which aim to improve the functioning of the labour market and of product markets, and in particular to enhance wage and price flexibility. Such structural reforms would also improve competitiveness and ensure the full realisation of growth potential. Government will also continue to implement labour market policies which address the ability of the labour force to increase productivity in the presence of exogenous shocks , as this is also an important element of labour market flexibility in Malta. Government initiatives in the education sector constitute a crucial element of the labour market policies in Malta.

The small size of the domestic market tends to limit the scope for competition in a number of markets. In the presence of imperfect market structures, Government will be adopting more aggressive regulation and supervision of market players. In this context, Government attaches high priority to strengthening competition policy and competition authorities. Government will also consider further liberalisation of economic sectors which can contribute to enhance the degree of competition in domestic markets. Liberalisation is more likely to be effective in resulting in more competitive prices, with positive effects on costs of production and competitiveness, when market imperfections are limited. Liberalisation will thus be coupled with effective market regulation and monitoring when there are imperfect market structures and high market concentration ratios. Government will assess the role of external competition, and specifically trade policy with a view to improve the degree of competition in product and service markets. In particular, Government considers that international trade policy might present an opportunity to improve market access in certain service activities.

A flexible labour market is another important requirement to ensure successful participation in the Economic and Monetary Union. Flexibility in the labour market involves the responsiveness of wages to changes in inflation as well as wages which adequately reflect sectoral and skills conditions. When faced with industry specific shocks, the labour market should ensure rapid adjustment of relative wages and improved labour mobility, to allow the necessary reallocation of labour resources across sectors and occupations. Other adjustments in the labour market, particularly productivity changes, will also be beneficial. In the case of a small and open economy, like Malta, avoidance of wage inflationary pressure is desirable in order to avoid a loss of structural competitiveness. Government thus recognises the importance that changes in real wages must thus be in line with productivity developments at sectoral level. In Malta, wage bargaining largely takes place at enterprise level.

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This high degree of decentralisation is conducive to relative wage flexibility, as wages adapt more readily to the prevailing conditions in a particular industry. Government will ensure that its wage policy in the public sector contributes to wage moderation in the economy. Furthermore, Government will continue to aim to reduce the share of public sector employment, through further privatisation efforts, as well as the implementation of a strict recruitment policy. This will also help to instil further flexibility in the labour market. Malta’s flexicurity strategy will also contribute towards this objective by seeking to attract more people in the labour market, principally women and older workers, tackle undeclared work and make declared work more attractive, raise educational attainment and ensuring that labour market legislation is consistent with a flexible and dynamic labour market.

Fiscal Policy

Issues and Opportunities

• Whilst the Maltese economy has sustained a positive growth momentum since 2005, the significant downside risk levels surrounding the global macroeconomic outlook pose a degree of uncertainty to the short-term growth prospects. These risks relate primarily to the expected slowdown in world economic growth, including in Malta’s main trading partners, as a result of the recent financial turmoil in credit markets. Other downside risks include the inflationary pressures stemming from international prices of oil, commodities and food products, as well as the appreciation of the Euro against the US dollar and the Pound sterling. Such cyclical developments pose an additional challenge to the implementation of Government’s fiscal consolidation programme. • As in other nations, demographic changes in Malta are expected to represent a significant challenge in the coming years. In particular, the combination of lower birth rate, longer life expectancy and the entry into retirement of the ‘baby-boom’ generation is expected to lead to a significant rise in the outlays on pensions paid by Government over the next twenty years. Demographic developments are also expected to result in increasing pressures on other age- related public expenditure, namely health care and long-term care outlays. The availability of expensive medicines and technology coupled with the global scarcity of health care human resources provide additional pressures to the financial viability of health care systems. • Fiscal governance is an important element to ensure that budgetary targets are met. Furthermore, the effective and efficient functioning of public administration can play an important role in achieving a growth supportive environment. Over the recent years, significant improvements have been achieved in the provision of public services. Achieving modern, high quality and customer-focused public services remains a key Government priority. Given the scarce resources available, such objective must be achieved whilst ensuring that the available financial resources are spent, and the human resources are deployed, in an efficient and effective manner. • Adopting the euro entailed that Malta can no longer make independent use of monetary and exchange rate policies. Fiscal policy, together with product and labour market structural reforms, can constitute an important instrument of macroeconomic management. In particular, fiscal policy, specifically automatic stabilisers, can enhance the economic adjustment process when faced with certain types of short-run shocks. The smoothing capacity of automatic stabilisers may be limited for small, open economies, such as Malta, due to leakage effects. Moreover, it is necessary to ensure that the use of fiscal policy does not undermine long-term sustainability. In this context, enhancing the flexibility and efficiency of public spending becomes even more important, in order to increase the adjustment capacity of the Maltese economy within the Euro Area.

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• The public sector can contribute towards growth and employment through tax and expenditure systems that promote an efficient allocation of resources. On the expenditure side, this involves redirecting expenditure towards growth enhancing categories. Containment of recurrent expenditure and an increase of its efficiency would make room for increased expenditure on growth-enhancing categories. More efficient tax systems can also provide an important support to growth and employment.

Vision and Objectives

Securing a sustainable fiscal position is essential in order to ensure a stable and sound macroeconomic framework. This would generate the necessary confidence by economic operators and potential investors. It would also allow Government to use automatic stabilisers in economic downturns so as to stabilise demand without undermining the 3 per cent deficit reference value and the long-term sustainability of public finances.

Whilst recognising that the current international environment poses an additional challenge to the achievement of the fiscal targets, Government remains committed to continue to strengthen the public finance situation. The main fiscal policy objective is to reach the medium term objective (MTO), of a balanced budget in structural terms (i.e. cyclically-adjusted balance net of one-off and other temporary measures) by 2010, in line with the Stability Programme 2007-2010 of December 2007. Achieving the MTO is part of Government’s strategy to secure long-term fiscal sustainability in view of demographic changes and their negative implications on public finances in the long term. Government’s Vision 2015 as well as the Pre-Budget Document 2009 highlight that achieving a budget surplus by 2010 constitutes a key objective to which Government is committed. Such a fiscal target should enable the achievement of the MTO. Such improvement in the fiscal position will contribute to further reductions in the debt-to-GDP ratio.

Securing a sustainable fiscal position in the long-term also remains a priority in Government’s policy agenda. The stated aim of the pension reform was to enhance the adequacy aspects whilst consolidating fiscal sustainability. Developments in retirement pensions will be reviewed, in line with the legislative commitments resulting from the pensions reform (which provides for a review every five years, with the first review scheduled for 2010), with a view to achieving further adequacy, sustainability and social solidarity.

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Microeconomic Pillar

The turbulent economic conditions being faced globally are posing a series of challenges to Malta’s competitive environment. The Maltese Government is embarking on a number of measures and reforms with a view to mitigate the impact of these challenges whilst at the same time ensuring that Malta improves its attractiveness to foreign investors.

Within this context, Malta’s microeconomic pillar proposes actions which address unlocking business potential, investment in knowledge and innovation, energy and climate change. Further action is anticipated on:

• integrating a strategic approach to better regulation initiatives; • strengthening competition; • further aid schemes for new and existing businesses; • facilitating business start-up as much as possible; • refining the tourism product; • investing in R&D infrastructures and initiatives; • implementing the National ICT Strategy; and • liberalisation of land public transportation.

In addition, Malta intends to continue focusing its efforts towards improving the environment dimension of the country. Within this context, Government is embarking on a number of initiatives which promote the generation of energy from renewable sources. Furthermore, the Government also aims to diversify from its dependency on fossil fuels for the generation of its power towards more sustainable and cleaner sources.

Unlocking Business Potential

Fostering the right environment in which businesses can operate is of fundamental importance in pursuing the Lisbon objectives. The Maltese Government is committed towards ensuring a competitive business environment and has embarked on a number of initiatives to ensure that this objective is achieved.

In addition to the actions undertaken in addressing the Country Specific Recommendations and Points to Watch namely, strengthening of the competition authority and the introduction of a one stop shop, the new NRP is also focusing on new initiatives relating to:

• Better Regulation; • the Small Business Act; • Tourism; • Public Land Transport Reform; • Intellectual Property; and • Services Directive.

Better Regulation – From ‘Red Tape’ to ‘Red Carpet Treatment

The Maltese Government believes that Better Regulation is a crucial element in improving Malta’s competitiveness. Government’s vision aims to eliminate “red tape” whilst transforming services to business and citizens into “red carpet” treatment.

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Better regulation aims at supporting and encouraging the business community; reducing customer detriment; and, further developing an efficient, effective and improving public sector.

Malta’s better regulation strategy is now focusing on business and customer “pain points” so that the strategy is prioritised. The strategy will be aligned further with Government's Vision 2015 so that Malta's strategic sectors offer the necessary minimum required regulation to facilitate as much as possible economic development. The setting up of the Better Regulation Unit (BRU) within OPM in 2006 is considered to be a step in the right direction to promote Better Regulation. The BRU is currently in the process of implementing its first Action Plan for Simplification (APS). In drawing up the first APS, the BRU has taken an intentionally inward-looking ‘top-down’ and ‘bottom-up’ approach. Government believes that the next step is to take simplification to another level and consult with the various business sectors to obtain ‘on the ground’ feedback. Furthermore, the BRU intends to review the customer care systems within the public administration and the enforcement regimes currently utilised with a view to further promote and protect the interests of the businesses, citizens and consumers. In achieving Government’s vision, that is, “fostering a culture of ‘red carpet treatment’ for businesses”, the Government of Malta has committed itself to further strengthen the BRU. The strengthening of the BRU will also permit the completion of the current APS and the launch of an updated version through an intensive, sectoral based consultation to target the key ‘pain points’ felt by businesses. Furthermore, the BRU will embark on other Better Regulation initiatives including the review of current customer care systems and enforcement regimes within the public administration and the formalisation of consultation guidelines within the public administration in line with Government’s established system of securing intensive dialogue between interested stakeholders in the decision-making process amongst others.

Reduction of Administrative Burden

In January 2008, the Maltese Government kick-started a public consultation process with a view to establish what is the perception of administrative burdens and how these can be reduced.

The Maltese Government, in collaboration with the European Commission, organised a conference in February 2008 with a view to raise awareness on the Administrative Burden Reduction Programme. Furthermore, this conference also acted as a follow up to the consultation process. On the basis of this consultation process, the Maltese Government has identified the following four priority areas: • Company law; • Financial services; • Food safety; and • VAT. Similar to several other European countries, Malta has chosen to adopt the Standard Cost Model (SCM) as the tool that will be used to calculate the administrative cost of burdensome information obligations.

To this end, the Government has concluded a mapping exercise on the legislation in the mentioned priority areas. The exercise consisted in reviewing the legislation of each of the four areas and identifying the information obligations that originate from national legislation. In all, 49 such information obligations were identified. The Information Obligations (IOs) consist of the following: • 6 IOs concerning VAT; • 26 IOs concerning Company Law;

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• 5 IOs concerning Financial Services; and • 12 IOs concerning Food Safety. Upon close examination of the results of the mapping exercise, it is evident that the large majority of the Information Obligations identified were either necessary (thus not fulfilling the condition that IOs have to be considered unnecessary in order to be proposed for reduction); or one-time obligations that would not only be difficult to quantify, but their reduction would have little or no real tangible effect on businesses.

Government is proud to note that this exercise has shown that in the four areas under examination information obligations have been kept to a bare minimum. Notwithstanding this, Government still holds that there are areas that should be explored in search of unnecessary burdens. Therefore, the scope of the mapping exercise is being broadened and areas will also be looked into: • Pharmaceutical legislation; • Working environment / employment relations; • Fisheries; • Public procurement; and • Environment.

These areas were chosen in an attempt to determine whether there is more scope for simplification in these areas with a view to setting a realistic reduction target and to achieve tangible benefits for businesses.

The mapping of the new areas was completed in August 2008 and a preliminary analysis of the mapping results shows similar trends to those obtained for the four priority areas adopted initially. Notwithstanding, Malta is still fully committed to ambitious and systematic simplification to reduce administrative burdens on businesses. Therefore, after taking into account the above mapping results, Malta has set a target to reduce administrative burdens on businesses by 15% by 2012. However, Malta is leaving open the possibility of adjusting this target after completing the measurements.

The mapping exercise will be followed by a pilot measurement project and a measurement exercise in the four priority areas adopted initially. To this end, SMEs will be extensively involved in the measurement exercise in order to ensure that the simplification measures identified would translate into actual reduction of administrative burdens to their benefit.

The Small Business Act

The Maltese Government has strongly supported the Commission’s Small Business Act. The Small Business Act builds on a set of principles and measures which lead into concrete action for a long term, predictable, transparent and simple regulatory framework for small and medium-sized enterprises. The Commission will be implementing a number of measures to reach such objective, while the Member States too, have the responsibility to adapt the measures according to their specific circumstances, thus retaining an element of flexibility and yet strive towards the same identified goals.

The Maltese Government intends to carry out an exercise, involving major government stakeholders as well as constituted bodies to identify those measures which are best suited to provide its SMEs with the enhanced environment which is critical for their survival and growth. The exercise will also discuss the applicability of certain initiatives which are being proposed by the Commission, such as the Common Commencement Date, the only once principle and the use of the ‘SME toolkit’ before enacting legislation concerning SMEs. The exercise will also examine how the overall policy approach towards SMEs can be improved and rooted in the ‘Think Small First’ principle.

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It will also look at refining and adjusting current initiatives to better reflect the changing scenario in which these enterprises operate. These measures will then be developed into a Small Business Act for Malta to be given the standing of a law where considered necessary.

Tourism

The tourism industry is one of the main pillars supporting the Maltese economy. The Maltese Government will continue to invest in the tourism sector with a view to improve its tourism product. Such investments have already contributed towards registering positive results with an increase of 1.2% 43 and 22.8% 44 in inbound tourists and cruise liner passenger traffic respectively, in July 2008 when compared to July 2007. Within the next three year cycle, it is the intention of the Government to continue investing within the tourism sector. In fact, Government has embarked on a number of tourism projects including the upgrading of tourism zones and beaches. Furthermore a capacity building exercise will be undertaken with a view to ameliorate the local tourism product.

Public Land Transport Reform

The Public Land Transport reform has been identified as one of Government’s priorities for Malta in the coming years. In the past years, Malta has been driven by the liberalisation principle. This policy has been applied successfully in various industry sectors.

Notwithstanding this policy, a number of public land transport sectors have traditionally operated in closed markets. These sectors ‘inter alia’ include the taxi service as well as the unscheduled transport sector. Within these sectors new entrants to the market are effectively closed due to the current restrictions. This also inhibits the creation of new employment opportunities in this sector.

It is the intention of Government to liberalise these sectors. The liberalisation of taxis, mini buses and coaches operating within the unscheduled market will render these sectors more efficient and competitive thus contributing towards increased demand and expansion. In turn, the increased economic expansion in this area will lead to the creation of employment opportunities. It is expected that visible results from this measure will be seen by the end of 2010.

With regard to the Public Scheduled Transport, the Government intends to embark on this reform in order to increase the efficiency of this transport structure, which apart from offering a better service to users and increase employment, will also promote a modal shift from private to public transportation, thus reducing the number of vehicles in use concurrently on private roads. Moreover with liberalisation, this sector will be fully exposed to the competition forces, thus allowing market players to enter the market.

It is expected that due to the complications arising from this reform as well as any changes envisaged in the public transport vehicles, this measure will extend beyond 2010.

Services Directive

The Government of Malta is fully aware of the importance of a correct and timely transposition of the Services Directive in order to ensure the free movement of services in the internal market and as another significant tool for the reduction of administrative burdens.

43 News Release: Departing Tourists: July 2008 (154/2008), National Statistics Office. Available online from: http://www.nso.gov.mt/statdoc/document_file.aspx?id=2312 [Accessed on: 18 th September 2008] 44 News Release: Cruise passengers: July 2008(147/2008) National Statistics Office. Available online from: http://www.nso.gov.mt/statdoc/document_file.aspx?id=2304 [Accessed on: 18th September 2008]

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The ongoing screening process has identified a number of authorisation procedures, administered by a smaller number of Competent Authorities. These authorisation and licensing schemes are being further evaluated to identify actions required to ensure compliance with the directive. Work on the identification of the best way to implement the other provisions of the Directive is also progressing with the focus currently being on the Point of Single Contact and the eMeans. The preferred option is for a physical point of single contact that will also provide back office support for the electronic system. Government is also considering the feasibility of incorporating this function into a wider business support centre to act as a one-stop-shop for all services provided to businesses in order to provide a leaner and quicker response for the needs of enterprise.

The transposition process will be concluded by the established date of the coming into force of the Directive.

Intellectual Property Rights

In fostering a culture of innovation amongst SMEs, the protection of intellectual property is a fundamental aspect. To date, the number of domestic registration of trademarks and patents by Maltese nationals has always been very low when compared with the number of businesses which actually set up in Malta. Furthermore, over the past few years the number of trademarks and patents registered by local applicants has been decreasing.

Within this context, Government believes that there is a need to increase awareness about the importance and benefits of trademark registration and patents at a national level. Hence, Government will initiate an information campaign in relation to the importance of trademarks and patents. Furthermore, other actions will be pursued with a view to facilitate the registration and other processes related to intellectual property.

Investing in knowledge and innovation

The Maltese Government is committed towards further investment in the area of knowledge and innovation. Specific emphasis is being made in the area of research and development and ICT. Significant results have been registered in the area of ICT however further action is being undertaken in terms of reaching Malta’s target in relation to R&D expenditure.

R&D

In its first National Reform Programme, the Maltese Government committed itself to achieve the target of 0.75% expenditure of GDP on R&D by 2010 both from the private and public sector. According to the latest statistics, the total expenditure by the general Government in 2007 amounted to €11.3 million which is an increase of €0.7 million 45 over the previous year.

Malta is committed to the implementation of the vision of European Research Area (ERA) and to supporting innovation in all its forms. The National Research and Innovation Strategy acts as a driver towards the implementation or the ERA. Malta’s objectives in relation to R&D are aimed at: 1. Achieving the target of 0.75% expenditure of GDP on R&D by 2010; 2. Supporting innovation through public procurement; 3. Participation in joint programming activities; 4. Science popularisation; and 5. Targeted research strategies for identified priority areas.

45 Source: National Statistics Office, Press Release 111/2008 – Expenditure on Research and Development in the General Government Sector: 2005 -2007. Available online from: http://www.nso.gov.mt/statdoc/document_file.aspx?id=2266 . [ Accessed on: 16 September 2008]

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Achieving the target of 0.75% expenditure of GDP on R&D by 2010

Achieving the 0.75% target by 2010 is proving to be a major challenge to be achieved by Malta. Government intends to embark on the implementation of a series of measures with a view to accomplish this target. Measures which will contribute toward this target include: • strengthening the research infrastructure at the University of Malta; • establishing bursaries for PhD research students; • increase the funds available for Malta’s National R&I funding programme as a means of increasing national investment in R&D • the implementation of three research projects are planned. These projects will involve industry-academia consortia working on common issues of relevance. Two thirds of the funds earmarked for these projects are envisaged to be utilized by end 2010. Supporting innovation through public procurement

Malta will compile an action plan for procurement with the engagement of relevant experts, facilitation of discussions and collaboration between government entities and involvement of stakeholders including SMEs are foreseen. It is envisaged that one pilot tender will be launched by 2010.

Participation in joint programming activities

On the objective of promoting increased internationalisation of research through joint programming, Malta plans to participate in a joint call in one of the identified national priority research areas where there is an indication of significant take-up at national level. Science popularisation measures

A project promoting science and technology among students and the general public as well as the strengthening guidance and counselling services to encourage uptake of these subjects will be undertaken. The ultimate aim is to increase the availability of skilled employees in the areas of science, technology and engineering. Targeted research strategies for identified priority areas

For the period covered by this NRP, it is foreseen that targeted research strategies for two of the four priority areas will be formulated, and partly implemented. The two areas and related activities are as follows: • Increased efforts towards more and better research in the manufacturing sector: during the timeframe of the NRP a project to introduce the local industry to the benefits of research and innovation, as well as strengthening liaison and collaboration between industry and academia will be implemented. The project includes a number of activities in this regard, such as the establishment of a manufacturing platform to serve as a steering committee for the initiative, the formulation of a manufacturing research strategy, the realisation of three research projects through industry-academia consortia as well as dissemination and training. • Formulation of a health research strategy and action plan: Malta is embarking on the development of a Health Research Strategy and Action Plan in order to chart the way forward for local research activity in this sector. This document will include as its main deliverables a manageable number of recommended actions to be taken over the next four years and the identification of concrete opportunities for local health research which will have a clear return on investment in the short to medium term. ICT

The Maltese Government has been heavily investing in the ICT sector with a view to establish Malta as a centre of excellence in the area of ICT.

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The results of this investment have been already acknowledged by the European Commission in its report “ Preparing Europe’s digital future i2010 Mid-Term Review ”. The European Commission has recognised Malta’s high ranking and has described it as “well advanced in information society”. Significant progress has been registered in the area of basic public services available online. Table 3 below shows the positive trends being registered in the area of ICT as a result of Government’s investment.

Table 5 - Achievements registered in the ICT sector within the past 3 years 2005 2006 2007 Level of Internet Households 46 41% 53% 54%

Broadband penetration 10.4 12.8 13.9 rate 47

E-government usage by 68% 67% 77% enterprises - Percentage of enterprises which use the Internet for interaction with public authorities 48

E-government usage by 19% 17% 25% individuals by gender - Percentage of individuals aged 16 to 74 using the Internet for interaction with public authorities 49

E-government on-line 40% 75% 95% availability - Percentage of online availability of 20 basic public services

The above results are encouraging and Government is committed to continue to sustain its efforts with a view to continue to improve the Maltese ICT sector. In fact, Government has launched a new faculty in 2007 within the University of Malta and a new building in the University of Malta will be specifically built for the provision of training within the ICT sector.

Government also launched the Smart Island National ICT strategy 2008-2010, which seeks to address pro-actively the major challenges which Malta’s development in this sector shall inevitably face. Primary amongst these shall be the need for the identification and address of the ‘new’ digital divides which will emerge in the coming years, the successful application of technologies in the enhancement of the quality of life of citizens and the constantly moving target of becoming (and remaining) a leading ICT industry in the region.

The Smart Island Strategy aims, to set a vision for Malta to become one of the top 10 information societies in the world. The main objectives set within the Strategy include: • preparing Malta for the next generation of technology by laying the foundations for a world class infrastructure;

46 Percentage of households who have internet access at home. Figures abstracted from: http://epp.eurostat.ec.europa.eu/portal/page?_pageid=1996,45323734&_dad=portal&_schema=PORTAL&screen=we lcomeref&open=/&product=REF_SI_IR&depth=2 [Abstracted on: 19 August 2008] 47 Number of broadband access lines per 100 inhabitants Figures abstracted from: http://epp.eurostat.ec.europa.eu/portal/page?_pageid=1996,45323734&_dad=portal&_schema=PORTAL&screen=we lcomeref&open=/&product=REF_SI_IR&depth=2 [Abstracted on: 19 August 2008] 48 Figures abstracted from: http://epp.eurostat.ec.europa.eu/portal/page?_pageid=1996,45323734&_dad=portal&_schema=PORTAL&screen=we lcomeref&open=/&product=REF_SI_IR&depth=2 [Abstracted on: 19 August 2008] 49 Figures abstracted from: http://epp.eurostat.ec.europa.eu/portal/page?_pageid=1996,45323734&_dad=portal&_schema=PORTAL&screen=we lcomeref&open=/&product=REF_SI_IR&depth=2 [Abstracted on: 19 August 2008] 49

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• overcoming the last miles of the digital divide, whilst bringing people together irrespective of their social status, using ICT to give new opportunities; • developing an even smarter workforce by continuously investing in people and nurturing their skills and potential; • using information systems and technology to improve the quality of life of Maltese citizens; • re-inventing the Government of Malta by transforming the public service in terms of its service delivery and governance; • enhancing the productivity of Malta’s private sector and its competitiveness through the adoption of e-business; and • promoting Malta as a world-leading ICT hub for foreign direct investment whilst using ICT as a pillar to the economic growth of the nation.

In addition to the aforementioned strategy. Government has also launched a series of initiatives aimed at promoting ICT. These initiatives included:

• Blues Skies Scheme: the provision of Internet within households which do not have an internet connection at a cheaper rate of €3 per month. 5,600 households have benefited from this scheme;

• Smart Start: this schemes aims to minimise digital divide and making ICT affordable to all. The SmartStart has given the opportunity to approximately 1,200 persons benefiting from social or unemployment assistance benefits, persons with a disability registered with the National Commission of Persons with Disabilities, and Not-For-Profit Organisations to purchase a PC in a good working condition at a very affordable price;

• StarOffice: through a partnership with the private sector, Government has provided office software for students and persons with a disability at €2 per pack. This scheme was taken up by 600 persons.

• Smart Women: is aimed at increasing the employability of women through the offering of a number of Information and Communication Technology (ICT) certification programmes. The take up of this scheme is encouraging with 2,000 women having already benefited from this scheme;

• Computers for €0.99 per day scheme in partnership with the banks and the private sector to make brand-new PCs available to the public at the affordable rate of €0.99 per day;

• ICT awareness campaign aimed to attract students to take up ICT courses at the various institutions.

Energy and Climate Change

The sustainability of natural resources has been featuring high in the European agenda. Malta is cognisant of the need to safeguard the sustainability of natural resources in ensuring the country’s well being. Within the new NRP, Malta intends to focus its efforts towards ensuring energy efficiency, mitigating the impacts of climate change and water conservation. Energy

The production of energy from fossil fuels is the most obvious source of environmental pressure due to the combustion processes involved. Indeed, this sector contributes to about 63% of Malta’s GHG emissions.

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In this respect, energy efficiency can have a significant impact on the demand for energy and so, it can reduce the country’s fuel bill and the release of carbon into the environment. Within this context, Malta will embark on a set of initiatives that will contribute towards a 10% reduction in CO 2 emissions by 2020. In fact, Government has already set up a committee of national experts with a view to assess the possibility of tapping into sources of alternative energy as well as to address Malta's national obligations in relation to carbon dioxide emissions.

The Maltese Government needs to increase reliance on RES with the aim to diversify the fuel mix, reduce air pollution, reduce local dependence on polluting and costly fuel sources and ease economic burdens on domestic households and commercial enterprises. Within this context, Government will heavily invest in renewable energy sources through the assistance of structural funds. It is envisaged that a number of financial subsidies will be distributed locally to target the domestic and commercial sector in conjunction with a national information campaign.

Following the widespread success achieved with the rebate schemes on energy saving domestic appliances, the Government intends to extend such scheme to RES equipment by increasing financial subsidies for solar water heaters, photovoltaic and micro-wind generators. In 2006 market response to solar thermal installations in Malta saw a significant improvement, as requests for financial subsidies increased to 1,564 when compared to the 360 subsidies awarded in 2005. Through these aid schemes Malta intends to double such figure to 3,000 units solar water heaters sold per household in 2009, (in addition to the 220 photovoltaic units and micro-wind generators to be sold ) thus providing a substantial contribution towards the targets of 2020.

It is estimated that a total amount of 3,145 Mwh/annum (3,000 Mwh/annum domestic + 145 Mwh/annum Commercial) in energy will be saved each year. This means that a total of 903,500 Kg of CO 2 (865,800 Kg Domestic + 37,700 Kg Commercial) will not be released into the atmosphere.

The Maltese Government is also planning to embark on a wide educational campaign, partly co-financed by the 2007-2013 EU structural funding, that will educate the general public on the needs of being ‘energy saving’ conscious and on the need of adopting energy friendly measures as well RES equipment. The Government will disseminate such good practices through seminars, conferences, newspapers, TV and radio spots, websites and schools.

Climate Change

Climate change is a cross-cutting global issue which is affecting the foundations of socio- economic life globally. Malta, being a small island state, is highly susceptible to the negative impacts of climate change. These impacts include rise in sea levels, increase in draught, higher temperatures, etc. These impacts have an effect on key economic sectors including tourism, manufacturing and agriculture.

In 2008, Malta has managed to successfully complete its Greenhouse Gas (GHG) Inventory for the period 1990-2006 and submit the National Inventory Report for 2008. The national GHG inventory is also streamlined with the national emissions inventory. It is envisaged that data from the GHG inventory will assist in the development of national policies towards emission reduction.

In addition, Government appointed the Climate Change Group of Experts in June 2008. The Group of Experts is working on an action plan to reduce GHG emissions, over a 20 week period, with the scope of addressing Malta’s commitments within the negotiation process of the Climate Change and Energy Package. Furthermore, a National Strategy for Climate Change will be adopted with a view to better address the challenges posed by climate change.

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Reform in the Vehicle Registration Tax Regime Malta is amongst the top five EU Member States with the highest proportion of private car ownership – two cars for every household. The average vehicle age of private road vehicles is relatively high with over half registered vehicles between five and twelve years old. The continuing growth in private car ownership and use is causing increased traffic congestion, whilst older vehicles impact more negatively on the environment.

Declining patronage figures show that the use of Public Transport by private citiziens is not very widespread. Over the ten year period 1995 – 2005, annual patronage has decreased from 36 to 29 million commuters 50 . One of the principal reasons underlying the consumer’s preference to use private transport instead of the public bus service is because the current public transport routes have been established with Valetta as the central hub for all connections to the various towns and villages. Today it is acknowledged that an improved system is required in order to increase the use of Public Transport by the Maltese community. The scheduled public bus service is one of the pillars of the Transport Reform initiative which principally seeks to achieve a favourable modal shift towards public transport, thereby mitigating the negative environmental impact.

It is the intention of the Maltese Government to amend the motor vehicle registration tax and Annual Road Circulation tax to one based on the Polluter Pays Principle. In effect this change in tax will be based on a CO 2 and size based Registration Tax. Moreover, the Annual Circulation Tax will be based on the emissions and age of the vehicle in question. This should induce new vehicle owners to purchase smaller and less polluting vehicles since the cost of maintaining a vehicle that emits less and which is smaller in size will be more advantageous. Water Conservation

The conservation of water is a very important element especially in Malta where there is a shortage of water supplies which are usually mitigated through reverse osmosis systems. Utilising reverse osmosis systems to meet the local water demand implies that Malta is also utilising its energy resources for the production of water resources. This is having a direct impact on the levels of energy consumption in Malta. In addressing this issue, Government needs to adopt a strategy whereby conservation of water is promoted.

Densely populated areas where urbanisation has taken place along watercourses have in the past few decades become increasingly prone to flash flooding. Presently all water runoff from these areas culminates and passes through the lower areas, such as Msida, Gzira, Marsascala, Marsa and Qormi, and poses greatest risks to life and property, before going to the sea. The situation is untenable and with climate change the vulnerability of these areas is likely to increase.

50 Figures obtained from the Ministry of Investment, Transport and Communications.

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Employment Increasing the overall employment rate is a matter of priority in Malta. A multi-faceted approach is being undertaken with a view to address different segments of the population including youths, women and older workers. This approach has led to a decrease in the unemployment rate which amounted to 6.4% which is less than EU 27. In addition, Government has now also embarked on its first pathway for flexicurity which will be implemented over the next cycle of the new NRP.

Regional employment in the island of Gozo is also being given high priority. The employment strategy being pursued aims to exploit the human resource potential to achieve a flexible labour market and to increase employment opportunities in Gozo. Furthermore, the employment strategy is intended to facilitate the transition from traditional sectors to the growth sectors and thus aiming to increase employment opportunities in Gozo.

In addition to the actions undertaken by Government addressing the country specific recommendations and points to watch, Government has also committed to introduce measures which promote the importance of health and safety at the place of work with a view to further contribute towards the overall employment rate.

Health and Safety

A contributor towards the retention of employees within the labour market is occupational health and safety. The Maltese workplace should be an environment where health and safety issues are not considered as afterthoughts but are integrated throughout all work systems and processes. This aim requires the cooperation of all stakeholders.

Appropriate preventative measures should be in place in all workplaces in Malta to minimise the possibility and severity of occupational incidents and illness. The ultimate goal should be zero preventable incidents that can affect occupational health and safety.

Employers, employees and self employed persons will be aware of the importance of preventative health and safety measures, and will have the knowledge, expertise and commitment to apply these measures to their workplace.

Within this context, the Maltese Government is further consolidating its efforts towards improving health and safety at the place of work. During the next three years, Government through the Occupational Health and Safety Authority shall develop an effective legislative framework and enforcement procedures with a view to ensure compliance with health and safety regulations.

An Overview of Recent Labour Market Trends

The labour market in Malta has been buoyant in 2007 and 2008, registering the eighth highest levels of employment growth in the European Union. Productivity has risen each year since 2004, standing at a growth of 2% in 2007 over 2006. The tax wedge on the cost of labour in respect of low wage earners is the second lowest in the EU27. Government has already taken a number of actions in respect of Malta’s country-specific recommendations, seeking to increase the labour supply, to reduce undeclared work and to make work pay. This momentum will be sustained in 2009 and 2010 with a view to reaching Malta’s employment targets for 2010. The Labour Market in 2008 Since 2004, there have been increases on various employment indicators. The overall employment rate in 2007 stood at 55.7%, a rise of 2.3% over 2004. The rate for men has decreased over this period by 0.8 per cent to stand at 74.2%, which is identical to EU15 and higher than the EU27.

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The rate for women is – at 36.9% - still twenty percentage points lower than the European average though it has risen by 5.3 per cent since 2004. However, the rates differ markedly by age group as illustrated in the table below.

Table 6 - Employment Rates, 2007 Age Male Female Total 15 – 24 48.0 44.0 46.0 25 – 54 90.1 40.6 65.7 55 – 59 68.9 (20.20) 44.0 60 – 64 (21.5) -- (11.8) 15 – 64 74.2 36.9 55.7 N.B. Rates in brackets not reliable due to small sample size

The gender gap in employment remains; at 37.3% it is two and a half times greater than the EU27 average. However, the gap is much lower when it comes to persons with high educational attainment (9.9% vs. 6.7% in EU27). Furthermore, the gender gap between young women and young men is, at 4%, lower than that in the EU27 of 6%. The level of gender segregation in both occupations and sectors is also lower in Malta than the EU27.

The employment rate of young people aged between 15 and 24 has risen 0.8% since 2004 to stand at 46%. However, that of older workers has decreased by 2.9%. The employment rate of people aged between 55 and 59 is, at 44%, 13.5 percentage points lower than the EU27 rate. One must take into account the historical gender dimension; in fact, the male rate in this age group is similar to that of the EU27 (67.2%). Another important indicator is the average exit age from the labour force. In 2006, this stood at age 58.5, an increase of 0.9 over 2001 but still low.

Unemployment has continued to decrease in 2008, to stand at 6.5%, the lowest rate since 2000 (when the first Labour Force Survey found unemployment to stand at 6.3%). The drop is visible both among men (from 6.5% to 5.9%) and women (from 8.9% to 7.7%). Among young people, the unemployment rate is 13.3%, and the unemployment ratio 51 is 7.1%. The drop in the unemployment ratio has been particularly marked for young women (from 8.8% to 5.5%) but is also visible among young men (from 9.5% to 8.6%). Long-term unemployment 52 has also decreased, from 3.4% in 2004 to 2.6% in 2007; this is true among both men and women.

Working arrangements in Malta tend to be less diverse than in the EU27, though a slight increase is evident in this respect. In 2007, 26.2% of employees worked in ‘diverse’ arrangements 53 compared to 39.1% in EU27. In Malta, the number of those working on a part-time basis only, has risen every year (in 2007, 9.2% compared to 14.4% EU27). This is particularly true of women. Those working on fixed-term contracts has risen slightly but is still very low (3.1% compared to 10.7% EU27). Self-employment in Malta is closer to the European average (13.8% compared to 15.1% EU27). The share of female employment in part-time and fixed-term work is higher than the share of male employment in these categories; the opposite is true of self-employment.

In 2007, Maltese employees worked an average of 40.4 hours per week (40.5 EU27). Men worked 41.1 hours, while women worked 38.8 hours on average. 18.2% of Maltese employees have access to flexible working time (EU27 31.3%); the rates for men and women are similar (18.4% and 17.8%).

In respect of workforce skills, there has been a rise in the proportion of adults in lifelong learning, from 4.5% in 2000 to 6.0% in 2007 (EU27 9.7). Men are more likely to participate in such activities, presumably through work, than are women (6.4% and 5.7% respectively). Among those with higher or medium educational attainment, the lifelong learning rates are higher in Malta than in the EU27 (higher: 19.3%, EU27 18.6%; medium 11.2%, EU27 8.9%).

51 i.e. the total number of unemployed youth as a share of all those in the same age group. 52 Those unemployed for 12 months or more as a proportion of total active population 53 Includes part-time, fixed-term and self-employment

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The opposite is true for those with low educational attainment (2.8% compared to 3.9% EU27). According to CVTS statistics and Eurostat, in 2005 the investment 54 in adult training by enterprises in Malta was 1.8, compared to 1.6 in the EU27. The share of employees participating in continuous vocational training in 2005 was 32%, compared to 34% in EU25. The share of male employees participating in CVT was 30% (34% EU25), and higher among female employees 36% (32% EU25).

Malta’s Flexicurity Pathway

In 2008, a Working Group was set up to analyse the Maltese labour market from the perspective of flexicurity and to draw up a pathway, and a set of concrete and feasible recommendations for the period 2008 to 2010. The Working Group comprised a number of senior officials from relevant public sector entities as well as representatives of the social partners. The Group analysed the labour market as well as current policies and programmes according to each of the four flexicurity pillars. Subsequently, Malta’s necessary pathway was determined to be a hybrid of Flexicurity Pathways 3 and 4, that is, ‘ to improve the supply of skilled labour across the skills spectrum’ . This pathway has four principal objectives for the years 2008-2010:

• to anticipate and provide for an adequate supply of skills in emerging high-skill sectors of the economy, and simultaneously • to ensure that those at the lower end of the skills spectrum are sufficiently skilled and motivated to take up work in the formal economy and to progress within it, • to improve work-life balance, and • to improve awareness and enforcement of the rights and obligations of employers, jobseekers and employees.

The Flexicurity Pathway is accompanied by thirty five concrete measures intended to reach these objectives, which are reproduced in Appendix 02. The Public Employment Service The Employment and Training Corporation (ETC) is a key institution in the formulation and implementation of employment policy in Malta. Its annual throughput – of clients receiving a service as a jobseeker or trainee – amounts to one sixth of the total labour supply. At ETC, jobseekers register for work once a week and engage in an individualised Personal Action Plan process together with an Employment Advisor. ETC offers an Early Intervention Unit in cases of collective redundancies; this involves a one-stop service for persons to be made redundant which includes profiling, advice and re-training. ETC also administers apprenticeships and traineeships; operates the EURES office in Malta and the work permit system; and carries out law compliance activities towards reducing undeclared work.

In line with both the European Employment Strategy and national priorities, ETC works, each year, towards fourteen business targets. The majority of these targets have been met and exceeded since their establishment in 2005 and will be maintained as targets during the Corporation’s Business Planning period 2008 – 2010. Thus ETC will aim to increase, by at least one per cent each year, its outputs in respect of the following:

1. ETC’s capture of private sector vacancies 2. ETC’s placement of jobseekers in private sector employment 3. The number of low-skilled jobseekers who undergo training in basic skills necessary for employability 4. The drawing up of a personal action plan with every new young jobseeker by the fourth month of unemployment

54 Direct costs and labour costs of participants divided by total labour costs

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5. The drawing up of a personal action plan with every new adult jobseeker by the sixth month of unemployment 6. The placement of each registered unemployed on an active measure within nine months of registration for work 7. The number of registered disadvantaged job seekers who are put on active measures every year 8. The proportion of registered long-term unemployed on active measures 9. The number of non-registrants who are trained 10. The number of persons who make use of training grants each year 11. The number of infringements identified 12. The percentage of strike-offs upheld by the National Employment Authority 13. Women’s share of ETC short courses 14. Women’s share of apprenticeships and traineeships In addition to its core business services referred to above, ETC will be assisted to reach and exceed these targets due to a range of specific programmes aimed to meet the needs of the Maltese labour market, many of which programmes are to be co-financed by the European Social Fund. The principal programmes include the following.

ETC will be operating a Training Aid Framework , from late 2008 until the end of 2013, part- financed by the European Social Fund. This programme should make a significant impact upon rates of lifelong learning in Malta. It provides training grants to the self-employed and to private sector employers who provide their staff with on- and off-the-job training. The amount reimbursed will depend on the size of the undertaking and the type of training provided. This programme is expected to provide for the training of the equivalent of 2.5 per cent of the labour supply and will cost a total of € 9 million.

While the Training Aid Framework is intended to maintain and enhance the skill levels of those already in work, the Employability Programme will provide for a wide range of training initiatives aimed primarily (though not exclusively) at jobseekers and the inactive. The initiatives under this programme will consist of training and re-training in a variety of key competences, trade and non-trade skills; dual-system traineeships and a strengthened skills assessment system. The implementation of this Programme will greatly increase ETC’s training outputs, which range over 65 different courses. To date, ETC’s annual training output has been equivalent to five per cent of the labour supply; this Programme is expected to raise this figure to eight per cent. This increase in training output is being further supported by Phase 1 and Phase 2 of the extensions to ETC’s training facilities made possible by the European Regional Development Fund.

Another major initiative due to be launched in late 2008 is the Employment Aid Programme, also co-funded by the European Social Fund. This programme is intended to further promote the integration of persons from disadvantaged groups into work. A subsidy of half the wage cost and half the employer’s social security contribution will be made available to employers who recruit persons from a defined list of groups and who retain them in employment for at least twelve months. Regular monitoring will take place to ensure that this subsidised employment is a positive experience for both parties. Among other groups, the Employment Aid Programme will cater for Malta’s employment priorities including persons aged 50 and over, inactive women, low skilled young people, and persons with disability. It is expected to encourage the recruitment of the equivalent of one per cent of the labour supply over the five years of the project period, and to amount to € 10 million.

In addition to the wage subsidy available in respect of low-skilled young people, ETC will also be implementing a Youth Employment Programme , which is a streamlined and improved set of services for young people as reflected in the Youth Strategy 2008/2009. It is aimed particularly at early school leavers (who do not pursue post-secondary education) but also at those in precarious work who would benefit from further training and support.

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The project will help young people to clarify their career choices and the pathways towards them; to improve their skills in their chosen area as well as in jobsearch; to increase their knowledge of their rights and responsibilities as jobseekers and prospective employees; and to provide a holistic programme of information and skills which would help these young persons to further develop their skills and competencies.

A Gender Equality Programme is also being developed by ETC to be launched in 2009. This programme aims to raise awareness about various aspects of gender equality relating to work and family life. The main themes will include flexibility at work, overcoming gender stereotypes and the sharing of family responsibilities. The main target audiences are inactive women, lone parents, registered unemployed women, women and men with family responsibilities and employers. ETC will also be launching its fourth biennial Gender Equality Action Plan 2009-2010.

In order to further promote the integration of persons from disadvantaged groups while respecting the principle of and the expertise of numerous professionally run NGO’s in Malta, ETC will be operating its Social Inclusion Partnership Programme from 2009. This will be a strengthened and rationalised version of the various cooperation agreements that ETC has managed with a number of NGOs in recent years. Through the Programme, expert NGO’s will provide prevocational and on-the-job training to clients in their field of expertise, will help them find work and will monitor and support them during the first months of their work placement. Persons to be assisted under this programme include those with intellectual and physical disabilities, with mental health difficulties, ex-convicts and ex- substance abusers.

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Education and Training The Maltese compulsory education system is currently being reformed in order to make it more flexible to respond to the individual needs of the student who is placed at the centre of the system. The former Education Division, as a central government department, was responsible both for the administration and management of State schools and for the monitoring and the quality assurance of all schools, State and non-State, providing an educational service from kindergarten through primary and secondary education up to the compulsory education age of 16.

The Education Act, amended in 2006, provides for two directorates with distinct roles and functions, though complementary to each other: 1. the Directorate for Quality and Standards in Education which is responsible for quality assurance of all schools providing an educational service from kindergarten through primary and secondary education up to the compulsory education age of 16, and 2. the Directorate for Educational Services which provides for the central overall management of the State education system up to the end of compulsory education.

Curriculum Review

In January 2008, Government announced the initiation of a consultation process to draw up a National Curriculum Framework for early childhood, primary and secondary education, as stipulated in the amended Education Act of 2006, to replace the current National Minimum Curriculum. The process, which started in April 2008, will produce a national curriculum framework with updated aims and objectives, among other features, for the different educational phases. This will provide a clear vision for all sectors especially in the College network recently set up within the state school sector, in making curriculum related decisions. It is envisaged that this document will be completed in 2009 and will be followed by a public consultation process. The final document will be then published by 2010.

Core Competencies Policy and Strategy

In March 2008, the Maltese Government launched a process to draw up a policy and strategic plan which addresses the acquisition of core competencies. The focus is on numeric and digital literacy for all pupils in the primary cycle. This measure ensures the early identification of pupils who are facing challenges in acquiring these skills and subsequent early intervention to ensure the acquisition of such competencies by the end of the primary cycle. The policy and the strategic plan will be available to Colleges in 2008/2009. This document will then be refined taking into consideration the feedback received during the first year of implementation. This measure will ensure that all pupils are literate in these basic competencies at primary level and therefore have full access to curricular opportunities at secondary and post-secondary levels.

Review of the Transition from Primary to Secondary Education

At the end of the primary cycle within the State sector pupils sit for a national examination which determines which type of secondary school they attend (either Junior Lyceum or Secondary school). Around 60% of pupils make it to the Junior Lyceum which is the more academic of the two types. Entry into several boys’ Church secondary schools involves a different selective examination. The recently set-up College system, whereby pupils from a number of primary schools in the same region feed into one boys’ and one girls’ secondary school the infrastructure, allows for a more inclusive system. The results of a review that address selectivity, and the transition process, are being discussed at Ministerial level. A public consultation process is planned for the third quarter 2008 and decisions will be taken by the end of 2008. A number of interim measures are planned for 2009 and 2010.

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This process aims to facilitate the transition process and provide an inclusive educational experience for all pupils, thereby developing their confidence and self-esteem. This measure addresses the reduction of early school leavers by increasing retention rates.

Promoting literacy skills in young people

While Malta has developed its systems of data collection and is analysing the level of reading skills in primary and secondary schools on a national level, Malta’s participation in the collection of international comparative data is essential. In this respect Malta is seeking funds to be able to participate in international surveys such as PIRLS and PISA which will provide valid indicators.

Within the new College set-up students at secondary level, lacking basic skills including literacy, are being provided with customised programmes to address their needs. Such programmes supplement existing measures at both primary and secondary levels. This will ensure that all young people leave compulsory education functionally literate. In addition, a policy is being introduced in 2008/09 to ensure early identification of pupils who are facing difficulties in acquiring literacy skills in primary schools and a strategy aimed at subsequent early intervention is accompanying it thus ensuring the acquisition of literacy competencies by the end of the primary cycle.

An employment strategy to increase capacity building in the student services sector is also underway so as to offer support to those students facing educational challenges or are at some form of educational disadvantage.

Increasing the number of graduates in Science and Technology

At compulsory education level, measures are being undertaken with a view to encourage more students to take up courses in Mathematics, Science and Technology at tertiary level. These measures include: • the refurbishment of Science Laboratories : nurture a positive attitude to science and technology and develop inquiry-based learning and scientific skills among secondary school students by refurbishing and upgrading science and technology laboratories By 2010, all science laboratories and a number of technology laboratories in all state schools will be upgraded. This measure will contribute towards increasing the number of students opting for and obtaining certification in the sciences. • strengthening science teaching at primary and secondary level: the current curriculum review is also looking into the teaching and learning of science at both primary and secondary levels with a view to strengthen science within compulsory education. It is envisaged that concrete measures will be undertaken from 2009 following the outcome of this review. In addition, these actions will be complemented with significant investments at MCAST, the Junior College and the University of Malta to upgrade teaching laboratories. In particular, the University of Malta is now in a position to equip a number of specialist laboratories, ranging from biology, chemistry, biotechnology, physics, earth sciences, pharmacology, electronics, and ICT amongst others to support teaching and research at undergraduate, postgraduate, and postdoctoral levels.

Developments in further education

Further education in Malta includes all post secondary institutes and colleges which provide general academic teaching or vocational education and training leading to National Qualifications Framework (NQF) level 5.

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This sector is witnessing ongoing changes in response to changes both in the underlying school system and national curriculum as well as the evolving shape of higher education and the respective entry requirements to a growing range of programmes. This section outlines some of the key developments within this sector.

Expansion of the Junior College

The University of Malta has just been granted funding to extend the facilities of the Junior College 55 to address the acute space problems experienced in the past few years in the wake of the growing number of students. Moreover, it is envisaged that within the next two years the Junior College will upgrade of ICT facilities for staff and students as well as refurbish and upgrade laboratories and sports facilities.

Ongoing developments within the Institute for Tourism Studies

The Institute of Tourism Studies (ITS) recognises the fact that human resources are the most important factor in addressing the new challenges within the tourism sector in Malta. The current and future workforce in the sector require further training to use the newest electronic technologies and must be increasingly motivated to deal with new markets and multicultural backgrounds.

In this respect ITS has invested heavily in its eLearning capacity and adoption of IT in its pedagogies. Additionally, ITS is constantly seeking opportunities to collaborate and participate actively in various EU or international projects which invariably enrich the development of the ITS in all aspects of its mission.

In recent years ITS has been working on offering programmes which lead to degrees from foreign Universities, including programmes leading towards a Bachelor of Arts in Hospitality Management and a Bachelor of Science in Culinary Arts. Both programmes contain an element of work-based practice and consequently are a good fit with the current portfolio of programmes offered at ITS.

Malta College for Arts, Science and Technology Master Plan 2008-2013

During the last seven years, MCAST has been the primary further education and training institution contributing to a substantial increase in the overall number of students continuing with their studies beyond compulsory education age. MCAST is open to both young students who intend to continue with their studies beyond compulsory education age as well as adults, whether already working or considering joining the labour market.

MCAST has raised the status and attractiveness of vocational and professional education and training. It is an inclusive education and training institution open to young people and adults with varying educational attainment and certification. It currently offers four main levels of programmes. It is envisaged that within the next two years MCAST will start offering the first degree level programmes. Moreover, MCAST provides different entry and exit points, depending on the individual’s aspirations and potential. Over 120 courses are currently being offered, and these satisfy most of the existing demands by young people, adults as well as industry. According to current estimates the number of full-time students will rise from 4,537 in 2007/08 to 5,000 in 2008/09, to 5,500 in 2009/10.

Government will continue to sustain higher rates of educational attainment. Within this context, MCAST will be investing in a staff Continuous Development Programme through top- up degrees offered in collaboration with reputable Universities to develop academic and administrative staff for the improvement of courses offered and for the launch of new ones.

55 Junior College is a college specifically designed to prepare students for University.

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In addition, MCAST is embarking on the implementation of a master plan for the physical restructuring of the Corradino main campus in order to incorporate the nine Institutes currently spreading in five different locations. The master plan will turn the current physical infrastructure into a state-of-the-art campus that will satisfy the estimated growth of the number of full-time and part-time, day and evening, students as well as adult returnees for upgrading and re-skilling within the national lifelong learning process. The aim is to bring together all the Institutes to pool and share resources, facilities, expertise, spaces and services and to provide more opportunities for students to mix and exchange ideas and experiences. At the same time more Institutes will be working together in delivering joint programmes and making it possible for students to follow modules in different institutes.

Evening Courses

MCAST already offers a very wide range of short and longer courses, generally in the evening, but also during the day, to adults who wish to upgrade and update their knowledge, competences and skills or undergo retraining or re-skilling. Evening training programmes will be offered in various fields of study. The following represent the overall estimated intake over the period 2008 -2010:

Table 7 - Estimated number of students attending evening courses at MCAST.

Sector Number of learners

CPD MCAST Staff 425

Electrical and Electronics 640

Mechanical Engineering 500

Community Services 427

Building and Construction 362

Art and Design 1,195

ICT 987

Business and Commerce 227

Agribusiness 265

Maritime 2,632

Total 7,660

The University of Malta

Having extended the portfolio of the undergraduate and postgraduate teaching programmes in the past decade, and having established its credentials and ability to participate as a peer in EU RTDI programmes, the University of Malta is now in the process of consolidating past achievements whilst building its infrastructure to achieve future goals.

In the past two years, the University has been strengthening its administrative infrastructure and will shortly start the implementation of an Integrated University Information System which will see the streamlined management of student records, finance, human resources, research projects, and facilities management amongst others.

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The training and process reengineering to adopt this System that will ensue across the University in the coming two to three years, will help the University to operate more efficiently and will enable the University to maximize the utility of its resources.

In 2007, the University of Malta set up a Programme Validation Committee (PVC) to provide internal support and advice to the various Faculties, Institutes, and Centres with the formulation of new certificate, diploma, and degree programmes. It is intended that the PVC supported by the Academic Programmes Quality and Resources Unit (APQRU) extend their work to start appraising the curricula and course descriptions of all degree programmes ensuring that processes are in place to update course content from time to time to reflect developments in the respective fields or in response to the needs of industry and civil society. APQRU will also be instrumental in providing the necessary data for the University to determine and justify the resource requirements to maintain high-quality standards in the delivery of the respective teaching programmes.

Moreover, during this year the University has launched an on-line student appraisal scheme on a pilot basis in order to receive feedback from students on the quality of delivery of the various study-units comprising their degree programme. It is intended that in the academic year 2008-09 this scheme will be extended to all programmes of the University to ensure that in three-year cycles, the University starts to get a comprehensive snapshot of its quality of delivery as seen through student eyes. These initiatives together with the existing appraisal of external examiners are intended to monitor and strengthen the teaching quality of the University.

In a bid to increase international cooperation, to strengthen its teaching and research programmes, and to increase the number of foreign students, the University has also started to develop a portfolio of International Masters Programmes in joint venture with foreign counterparts of prestige. The first two international programmes are expected to be launched in September of 2009, with a further two launched in 2010. By 2015, the University plans to have launched 12 International Masters Programmes in a range of disciplines that address contemporary topics ranging: sustainable environmental resources management, integrated marketing communication, conflict resolution, Mediterranean security, criminology and criminal justice, global governance and digital media amongst others. These Masters programmes will be housed at the Old University Building in Valletta as this is being appropriately refurbished and equipped. Given the growing demand for education and training in Medicine and Health Care, the University is currently designing a graduate-entry medical programme to complement its existing one which is aimed at school-leavers. Moreover, both the Medical School as well as the Institute of Health Care are in the process of forging strategic alliances with international schools of prestige with an eye to increasing their capacity and to project their brand better on the international scene. Such alliances are also seen as a way of ensuring that Malta continues to retain and attract doctors of the highest standards particularly in the wake of the continuous expansion in medical knowledge. In 2007, the University of Malta has set up a Faculty of Information and Communication Technology (ICT). The setting up of this new faculty necessitated the restructuring and expansion of the Faculty of Engineering. The teaching programmes of the Faculty of ICT as well as those of the Faculty of Engineering were recast and are still being refined to cater for the emerging and growing needs of industry. As stated earlier the growth of the ICT industry, particularly in view of SmartCity, requires a significant increase in the number of graduates in ICT. Within this context, the University of Malta has embarked on a project which will build a state-of-the-art facility not only to cater for a larger number of undergraduates, but equally important, to support a growing number of postgraduates and researchers in various areas of ICT.

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Apart from the Faculty of ICT, the University will also build an IT Services Centre which will provide ICT facilities to all students at the University irrespective of discipline. This centre will also allow the University to strengthen Malta’s node in the GÉANT network - a multi-gigabit pan-European data communications network, reserved specifically for research and education use. The University of Malta IT Services Centre is also creating the infrastructure for distance education platforms and has started to provide support for the development of on-line teaching programmes. As mentioned earlier, in the fourth quarter of 2008, the University will be setting up and upgrading a number of teaching and research laboratories. This includes the equipment for the setting up or upgrade of Materials and Testing laboratory; Chemistry and Biology laboratories; Analytical Chemistry laboratory; an Electromagnetic laboratory; a Biomedical Engineering laboratory: Biotechnology for Health Laboratories; Super Computer Cluster; Control Systems Laboratory; Climate Monitoring Equipment; Energy Conservation Laboratory; Mechanical Engineering Modelling Laboratory; and a Signal Processing Laboratory. In 2008, the University has started a pilot project to upgrade the facilities in the Library and to extend the library opening hours. The University will gradually refurbish its library with modern-day learning spaces and facilities, and it will be introducing new systems for more efficient library management. This exercise will also entail the provision of training to library staff with a view to ensure that library staff will take a more proactive role in supporting student’s learning. Research within the University of Malta In 2007, the University introduced a new system of appraisal and support for research projects particularly those which are funded by or involve third parties. This new system helps academics at the University with the financial, legal, and logistical support needed to ensure that the University is in a position to deliver the commitments required by the projects in question. The University intends to support staff and students for the registration of patents and the protection and exploitation of intellectual property. A newly established Research Support Unit is intended to develop the institutional research and innovation framework of the University and to monitor the quality of the research output being produced, with an eye to technology transfer to industry and commercial exploitation.

The University has also started discussions with the Ministry for Gozo and is taking an active role in the formulation of the eco-Island strategy for Gozo. The feasibility of transforming the Government farm in Gozo into state-of-the-art research laboratories to support the development of suitable modern agricultural technologies, the preservation and enhancing of indigenous livestock and biodiversity, and the improvement of the quality and range of local produce, is currently being studied.

Skills shortages and new occupational needs

In the NRP of 2005-2008, one of the key objectives was to respond to new occupational needs, key competences and future skills requirements. Malta has managed to achieve significant progress within this area through the implementation of various measures which have been undertaken during the past years. Government is committed towards sustaining its efforts. Within this context Government has continued the implementation of the measures proposed within the NRP 2005-2008 and in addition has also embarked in a series of new measures which will be implemented during the second cycle of Malta’s NRP. These measures include: • the setting up of the National Qualifications Framework; • developing a Quality Assurance Framework for further and higher education; • increase investment in the educational sector with a view to make education more responsive to new areas of education;

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• Malta Government Scholarship Schemes 56 ; • Specific actions are being undertaken with a view to respond to skills required for the future. Examples of areas being addressed include ICT skills, research and innovation and health amongst others.

Lifelong Learning

Malta has registered marginal progress in lifelong learning. The rate of adults engaged in lifelong learning increased from 4.5% in 2000 to 6% in 2007 57 . This result is encouraging however Government needs to further invest and promote lifelong learning. Government’s strategy is to promote the importance of private investment and private consumption of education and training within the mainstream adult population. In addition, Government will also assist and provide training and retraining opportunities in priority areas in particular those related to the needs of the unemployed. Within this context, the University of Malta and MCAST provide a range of formal and informal training programmes on a part-time basis after regular hours, in a bid to extend access to higher education to those who are in employment. In addition, Government also intends to open schools after school hours with a view to transform these into community learning centres as stipulated by the amendments to the Education Act in 2006.

Paradigm shift to a Developmental Model of Education

Currently, the Maltese educational system is focusing at end of cycle examinations at primary, secondary and post-secondary levels. Several initiatives are taking place to ensure a paradigm shift to a developmental model whereby students’ needs, skills and potential are developed to the fullest. Such initiatives include: the transition from primary to secondary education, the curriculum review and the review of the local examination system at ages 16 and 18. These initiatives are targeted to develop an inclusive system of education, to widen the education experiences of school age children and to certify a range of skills and levels wider than what is currently available. The current reforms will be implementing these changes gradually. eLearning Strategy – training the education workforce

In December 2007, Government launched ”A Smart Learning Strategy”. The strategy focuses on three strands, namely: infrastructure in schools, teachers’ and students’ skills and resources. Within this context a number of actions will be pursued. These include: • the provision of laptops to all teachers in state schools by 2008; • raising the learner/computer ratio to 4:1 in all educational setups within the compulsory state school sector by 2009; • introduce high speed internet connectivity in all state schools by 2010; • the procurement of an eLearning platform;

56 Since 2006 the Malta Government Scholarship Schemes (MGSS) sponsored 29 scholars to follow studies at a doctoral level and 55 at a Masters level. [Source (Policy Development and Policy Implementation Directorate Statistics, MEYE) 57 Life-long learning by gender - Percentage of the adult population aged 25 to 64 participating in education and training – EuroStat. Available online from: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=0&language=en&pcode=tsiem080 . [Abstracted on: 19 September 2008]

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• the Implementation of an on-going training in IT pedagogy programme for all teachers which has been initiated in 2008; • the provision of a range of additional ICT courses all teachers during the scholastic year and during the summer holidays. • an on-going evaluation of web-based teaching and learning resources will be initiated in 2009 , in order to make available appropriate resources for primary and secondary schools. This strategy is aimed at improving pedagogies in schools; develop ICT and lifelong learning skills and widening access to educational experiences. In addition to the above, the University of Malta has been encouraging lecturing staff to transpose their teaching materials onto an open source eLearning platform and is currently working on a number of case-studies to accrue the necessary in-house experience. In 2007 a unit was set up within the IT Services Centre which is earmarked to grow to provide support and training to academics who wish to develop on-line courseware and distance learning teaching programmes. The IT Services Centre also provides the necessary video- conferencing infrastructure to support interactive classes between the University of Malta and its Gozo Centre, and through the GÉANT network. It supports collaboration between the University of Malta and international counterparts . Furthermore, the Institute of Tourism Studies has also invested heavily in the use and dissemination of adult education through e-learning, and is entrenching an e-learning culture within its students. ITS provides e-learning within an ICT environment for most of its post- secondary courses and a number of opportunities of collaborating with international partners in a number of EU projects. ICT has also been upgraded as one of the Institute’s entry requirements and the Diploma courses are designed within an e-learning framework.

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Conclusion In conclusion it must be said that Malta faces a number of challenges whilst also seeking to maintain and build on the progress it has achieved in a number of areas. The challenges that the world is facing in terms of the threats to competitiveness as a result of turbulent economic conditions has its repercussions on the Maltese Islands. Whilst fostering local manufacturing industry and moving towards an increased range of service provision, one cannot ignore the pressures that are being exerted on such sectors cannot be ignored. We need to respond and to do so in such a way that maintains, and improves, Malta’s attractiveness for foreign investors.

Our competitiveness is inherently linked to local skills and abilities which in turn characterise the employability of individuals. Malta will ensure that it becomes a centre of excellence in the educational sector through wholesome investments at all levels – early years, the primary, secondary, further and higher education sectors. This is not enough however. Malta will foster lifelong learning with a view to strengthening the opportunities of those who may have fallen behind and to enable them to improve their re-integration prospects into the labour market. At the same time, there is strong commitment towards constant re-skilling and retraining with a view towards ensuring that the Maltese workforce will remain in synch with the developments of the labour market and economic opportunities that present themselves.

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Appendix: 01 - List of Measures

1.0 Investing in Sustainable Healthcare

1.1 A new health care Act which will provide institutional reform, a modern legal basis as well as a framework for patient’s rights: - During the 2005 -2008 the Malta NRP highlighted the adoption of a new Health Care Act to replace the Department of Health Constitution Ordinance enabling legislative and institutional reform. The draft Act had been previously cleared through Cabinet’s Social Policy Subcommittee and a revised draft was submitted for vetting by the office of the Attorney General. The draft is currently being reviewed following changes introduced after the start of the new legislature in May 2008. 1.2 Measures to strengthen primary and community care: Provide a series of measures to render services more accessible and responsive to patients’ needs by strengthening primary and community care services. 1.3 Strategy and services to improve cancer care: Invest in modern infrastructure and equipment to enable an overall improvement in the quality of services provided for cancer prevention and treatment. Plans for the development of new cancer treatment facilities and for the procurement of new machines are underway. A strategy for cancer prevention, treatment and palliation is being finalised. 1.4 Incremental measures to introduce an effective financial strategy accompanied by the implementation of appropriate operational and IT systems: This strategy intends to build appropriate structures and systems within the health care provider units. Information systems will be upgraded where necessary and rolled out where still not available in order to provide robust and reliable information for management. Such information will be collated in such a way as to comply with the data structure approved for health systems in the EU, namely the “System of Health Accounts".

2.0 Create the right environment for growth and jobs

2.1 Reduction in income tax through the further widening of the tax bands: Reduce income tax bands with a view to make work more attractive. 2.2 Reduction of maximum rate of income tax from 35% to 25%: Reduce maximum income tax rate with a view to make work more attractive. 2.3 Removal of airport departure tax: Remove the €23 departure tax which impacts all those who travel on business will be removed.

3.0 Invest in research and innovation

3.0 Strengthening research infrastructure at the University of Malta: Modernising the research infrastructure within the University of Malta with a view to contribute towards R&D. 3.1 Bursaries for PhD students: Promote research and technology fields through the provision of bursaries for PhD research students. 3.2 Increase investment in R&I through the implementation of Malta’s R&I programme: Significantly increase Government investment in Malta’s national R&I funding programme . 3.3 Introduce schemes which focus on the promotion of R&D, Innovation and Growth : The schemes under the ME Act are focused on increasing private R&D expenditure, encouraging Innovation among enterprises and stimulating growth through the tapping of new markets. This will be undertaken through a number of incentives such as the EUREKA initiative together with the R&D grant schemes. Encouraging Innovation will take place through the implementation of a grant scheme which promotes product and process innovation together with eco–innovations.

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3.4 Manufacturing research projects: Three research projects are planned in relation to manufacturing research. These projects will involve industry-academia consortia working on common issues of relevance. 3.5 State of the art ICT facility: Build a state-of-the-art facility to cater for a larger number of undergraduates, and to support a growing number of postgraduates and researchers in various areas of ICT. 3.6 MGSS Postgraduate Scheme: to professionalise and build critical capacity in research and advanced education. 3.7 Launch University of Malta Trust Fund.

4.0 Pursue the fight against climate change

4.1 Enhancing Malta’s capacity to mitigate and adapt to climate change: introduce a comprehensive national framework for climate change policy action in Malta, built on the results of scientific studies and assessment of international obligations and vulnerability of the country. As a result, a National Climate Change Strategy for Malta, disseminated nationwide and integrated in all major national policies, programmes and measures will be achieved. 4.2 Promotion of Renewable Energy Sources in the Domestic & Commercial Sector : increase reliance on RES with the aim to diversify the fuel mix, reduce air pollution, reduce local dependence on polluting and costly fuel sources and ease economic burdens on domestic households and commercial enterprises. 4.3 The introduction of tax incentives with a view to promote newer and cleaner commercial vehicles: businesses that make use of cleaner, newer and smaller vehicles will be taxed less than those which utilize older and less environmental friendly vehicles. Businesses thatopt to buy newer vehicles and vehicles that have cleaner technology will be charged less registration tax than older vehicles. Furthermore, the annual registration tax will vary according to the age of the vehicle, that is as the vehicle gets older, the annual circulation tax will increase. This is in line with the polluter pays principle. 4.4 Reform in the Vehicle Registration Tax Regime: amend the motor vehicle registration tax and Annual Road Circulation tax to one based on the Polluter Pays Principle

5.0 Better Regulation

5.0 Strengthen the Better Regulation Unit: strengthen the Better Regulation Unit with a view to eliminate “red tape” whilst transforming services to business and citizens into “red carpet” treatment. 5.1 Complete the current Action Plan for Simplification: Continue the implementation of the measures within the Action Plan for Simplification 5.2 Carry out an intensive, sectoral based consultation to target the key pain points felt by businesses: Government believes that the next step is to take simplification to another level and consult with the various business sectors to obtain ‘on the ground’ feedback. A consultation plan has already been prepared by the BRU on this matter, which dissects the business community in a number of business sectors to facilitate the meetings. 5.3 Put in place consultation guidelines and better practice for use within the public administration: build further on the consultation achievements to date by putting in place consultation guidelines and better practice for use within the public administration. 5.4 Review the customer care systems within the public administration: implementation of a standardised customer care system in the wider public sector will possibly identify existing burdens on businesses and citizens. In particular recurring customer complaints can act as a source of further simplification.

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5.5 Carry out a review of the enforcement regime(s) : which will contribute to identify options to streamline enforcement, ensure synergies and better value-for-money, introduce more risk-based approaches and make certain that appropriate guidance is given to citizens and businesses.

6.0 Intellectual Property

6.1 Carry out pre-diagnostic visits to local firms: To increase IP awareness amongst the business community in order to SMEs are aware of any IP that they own with a view to protecting this if not already registered. Also to assist SMEs to use IP that may benefit their business such as by licensing rights or utlising patent information. 6.2 Carry out training events and workshops and an information campaign in relation to Intellectual Property: with a view to increase knowledge of IP not only to SMEs but also to students, researchers and the public in general. 6.3 Embark on a project for the digitisation of all national patent records thus offering a complete database of all national patents: Ensure that all national records are entered into a database so that searching on patent records is made easier and more accessible to interested parties. Through cooperation with the EPO, this database will also form part of a larger database of patents consisting of patent records from all over the world. 6.4 On-line filing for patents as part of eGov services to the local citizens: Improve the accessibility of IP services accessible to any member of the Maltese public who wishes to apply for the registration of an IP right. 6.5 Customise and implement other patent software tools such as the on-line filing (eOLF) module and the e-Phoenix module through continued technical assistance with the EPO. Provide further enhancements to services in the patent area, through the implementation of certain software tools in cooperation with the EPO. 6.6 On-line filing for trademarks as part of eGov services to the local citizens. Improve the accessibility of IP services accessible to any member of the Maltese public who wishes to apply for the registration of an IP right. 6.7 Implement a new trademark system which will facilitate processing of trademark applications and searching on national trademarks by interested parties. Improve the efficiency of the trademark by offering a better service to clients, not only with regards to the duration of a trademark registration but also with regards to the information and functionalities that will be available as a result of the new system. 6.8 Accession of Malta to the Madrid Protocol for the International Registration of Trademarks which will facilitate application and registration of local trademarks in other countries even those outside of the EU. This measure will offer Maltese citizens the opportunity to apply for the registration of their trademark via one application, and using one procedure, in a number of countries even outside the EU.

7.0 Services Directive

7.1 Implementation of the Services Directive by 2009.

8.0 Employment Rate

8.1 Preventive & Active Labour Market Policies: Provide a series of active and preventive labour market measures such as training courses, traineeships, work exposure schemes, employment advice, guidance, etc, with a view to decrease unemployment.

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9.0 Addressing Groups at Risk

9.1 Employment Aid Programme: The Employment Aid Programme contributes towards the integration of disadvantaged persons in the labour market. It facilitates access to employment through financial assistance and upgrades the skills of those furthest away from the labour market through work experience. 9.2 Youth Employment Programme: The Youth Employment Programme is intended to increase the employability and labour market integration of young people, particularly early school-leavers (i.e. young people who do not pursue post-secondary education) but also those young people in precarious work who would benefit from further training as well as greater knowledge of their rights and responsibilities at work. 9.3 Social Inclusion Partnership Programme: Provide training and employment opportunities to a number of target groups, namely socially excluded persons or persons with special needs. The scheme will enhance the participants’ capabilities in order to help them to integrate in the labour market.

10.0 Gender Equality

10.1 Gender Equality Programme: Devise actions which will encourage more women to remain in employment or return to the labour market. Hence, the general aim of this project is to inform and educate women and men with family responsibilities about gender equality and work and alternative job opportunities.

11.0 Promote a culture of health and safety at work

11.1 Increase educational programmes to instil a culture of health and safety at work for both employers and employees: Instil a culture of health and safety at work for both employers and employees by promoting self regulation and the implementation of occupational health and safety management systems at enterprise level. 11.2 Improve the enforcement capabilities of the Occupational Health and Safety Authority: Launch of an administrative fines system and introduce a legislative review, so as to refocus scope and applicability of OHS Act and increase deterrent effect while facilitating self regulation.

12.0 Entrepreneurship

12.1 Set up a one-stop-shop for the licensing/registration of commercial activities: The one- stop-shop will act as a single contact point to persons who want to set up business. 12.2 The Employability Programme: will consist of a number of training initiatives aimed to assist jobseekers, the inactive, employees interested in upgrading their knowledge and skills and persons interested in starting a business. The initiatives will consist of basic skills, work orientation, re-training programmes, traineeships, a training subsidy scheme and a skills assessment system.

13.0 Flexicurity

13.1 Implement Malta's Flexicurity Roadmap.

14.0 ICT

14.1 Develop a robust ICT environment and Next Generation Infrastructure: Invest in the required ICT infrastructure through the provision of fiscal incentives for international sub marine cables and upgrade the networks to high speed broadband.

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14.2 Invest in a connected society : Invest in Malta's connectivity through the provision of : internet subsidy schemes, refurbished computer equipment for disadvantaged groups, fiscal measures to help buy computers, digital divide response team, the introduction of ICT related TV programmes, the setting up of the First Steps calls centre and Broadband/Wifi centres. 14.3 Develop a smart work force with the necessary ICT skills: provide the necessary ICT skills to the local workforce through the necessary education and training. 14.4 Enhance the quality of life of citizens through ICT: improve the quality of life of citizens through the introduction of a series of ICT measures which improve the quality of life of citizens. These measures include the promotion of digital libraries, the introduction of digital TV applications, a portal for Gozo, access to health information and a portable clinical record amongst others. 14.5 Re-inventing government transformation and open government: Reinvent Government transformation through: the utilisation of e-government to trusted third parties, improve road safety, security and traffic congestion, introduce ICT in the streets, the introduction of GIS and mapping services, transport and travel portalisation, energy conservation IT programmes, promotion of ICT application in Gozo, the introduction of e-Courts system, anti-fraud programme amongst others. 14.6 Taking care of e-businessthrough the development of an e-mall, set up a national e- commerce infrastructure, and a series of electronic market places. 14.7 Developing Malta as a world leader in ICT: Embark into a series of measures with a view to develop Malta as a world leader in ICT. These measures include: the creation of ICT jobs, the establishment of a business park in Gozo, the creation of new blue chip VSA. 14.8 University of Malta IT Services Centre.

15.0 Invest in Malta’s Tourism Sector

15.1 Upgrade Tourism Zones in St Paul’s Bay, Qawra, Pembroke: Provide a landscaped urban space, with seating and open sea views in three tourism zones. Additional facilities being provided are an aquarium, a marine archaeology museum, a diving institute and a Greek theatre in the Qawra project and a cycle track and Garigue heritage park in the Pembroke project. 15.2 Developing Leaders for Change and Innovation in Tourism: Business Development and CPD for Tourism Senior Management: Developing Leaders for Change and Innovation in tourism is designed to up-skill and certify persons employed as or seeking employment in top, middle or supervisory management positions in sectors contributing directly or indirectly for tourism. The programmes are practical and result-focused and include mentoring as well as the possibility of an international field visit and benchmarking exercise in a best-in-class establishment overseas. Two studies to forecast employment levels and training needs are also included 15.3 Improvements to the coastal areas, in Qawra and Sliema: Improvements to two coastal areas together with the formation of a sandy beach in the Qawra area. This will comprise improved and safe access to the area and into the sea, repair of deteriorated man-made sun bathing platforms, upgrading of other infrastructure including general landscaping and facilities for beach management. 15.4 Master Plan for Cittadella Gozo: Develop a Master Plan for the Cittadella which will provide the guidelines to effectively and sustainably harness this valueable tourist attraction. In so doing, the historical aspect of the Cittadella will be safeguarded whilst promoting and developing its cultural and economic life. The Master Plan also aims to better present, protect and sustainably exploit this asset.

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15.5 Upgrading of Zewwieqa Waterfront: aims at rehabilitating the area known as Taz- Zewwieqa transforming it into a waterfront area by creating pedestrian zones, landscaped plazas including seating area with open sea views, an area hosting the restored Dghajsa tal-Latini and an informal stage structure. The project would upgrade another tourism zone in Gozo.

16.0 Reforming the Transport Sector

16.1 Reform Public Land Transport: The liberalisation of taxis, mini buses and coaches operating within the unscheduled market will render these sectors more efficient and competitive thus contributing towards increased demand and expansion.

17.0 Invest in the Maltese educational system

17.1 Promoting staff development: in education sector and postgraduate studies in science and technology

18.0 Life Long Learning

18.1 Training Aid Programme: The Training Aid Framework is intended to promote the concept of lifelong learning amongst employers (undertakings) by providing assistance through training grants which will be reimbursed on successful completion of training. This aid will be available to all non-public entities for both on the job and off the job training. 18.2 MCAST scholarships: for staff continuous development programmes.

19.0 Increase educational attainment and reduce early school leavers

19.1 Valuing all skills for the labour market. 19.2 Addressing skills mismatches in the aviation industry. 19.3 Parents and teachers fusion ICT training programme. 19.4 Launch 2 new evening programmes for adults addressing skills gaps in emerging growth sectors at MCAST. 19.5 Launch 2 new evening programmes for adults addressing skills gaps in emerging growth sectors at UoM. 19.6 Open, distance and e-learning strategies, tools and programmes by MCAST, ITS, and the University of Malta: Launch e-Learning strategy and schools implementation. 19.7 Reform Education Act Cap 327 and publish regulations for the development of new licensing and quality assurance framework. 19.8 Launch Quality Assurance Agency. 19.9 Sustain Student Maintenance Grants. 19.10 Malta Government Scholarships Schemes (MGSS) Undergraduate Scheme.

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20.0 Addressing growth and jobs in Gozo

20.1 Employment Aid Programme. 20.2 Upgrading of Operating Theatre & Setting Up of Radiology Unit. 20.3 Solar Systems & Support Services Installations at Gozo General Hospital. 20.4 Higher Education Courses to Address Skill Mismatches in Gozo. 20.5 Training Courses to Enhance the Employability and Adaptability of the Workforce. 20.6 The provision of hospitality courses. 20.7 Training Aid Framework. 20.8 Employability Programme

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Appendix: 02 – Flexicurity Measures

Objective No. Output

September 2008 – December 2008

1.1 Hold a national stakeholder conference on future skills needs

1.4 Expand workplace learning through supporting employers to train their employees in both generic and specific skills through a revised Training Aid Framework open to all firms irrespective of size and sector

2.10 Launch of an Employment Aid programme to provide a wage subsidy for a limited number of weeks to employers recruiting persons from certain disadvantaged groups

4.11 Review the current employment-related enforcement structures with a view to a better-targeted, coordinated and effective framework

Jan – June 2009

4.4 Draw up an information brochure on the implications of holding multiple part-time jobs, and to distribute through the public employment service to those holding two or more part-time jobs

4.5 Draw up an information brochure on one’s rights and obligations as a fixed- term employee

2.8 Study the feasibility of extending the current legal provision allowing jobseekers to enter work experience schemes for up to twelve weeks without loss of benefits, to 26 weeks

4.6 Consider introducing an incremental increase in the period that persons found working while registering, have to spend in declared employment before being able to register once more – from six months in the first instance, to twelve months for a second time, to eighteen months for a third, and so on

4.7 Increase the penalty period for persons who fail to participate in an activation measure, without just cause for three or more times, from six months on Part 2 of the Register to twelve months on Part 2 of the Register

2.3 Provide training courses targeted at women returners to the workplace, in personal and occupational skills and in areas of labour market shortage

2.4 Launch occupational standards of competence and define the basis for their accreditation with a view to validating all forms of learning including non- formal and informal learning

2.5 Strengthen the public employment service’s capacity to provide training in

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key competencies to adult learners which result in recognized certification

2.13 Revise and extend training and support for jobseekers wishing to take up self-employment

1.8 Define the conditions of entry of highly skilled third country labour and encourage the transfer of skills to Maltese understudies

2.7 Launch a twelve-week Work Trial Scheme, to enable jobseekers and inactive persons to gain work experience and ease their transition into work

4.9 Develop a proposal to increase the frequency of registration as a jobseeker’s duration of unemployment increases

July 2009 – December 2009

1.2 Report on the skills required in the seven priority areas of economic development and the implications for education and training 3.1 Conduct a study of the take-up and impact of current family-friendly provisions, on both the employee and employer, including recommendations as to how current provisions may be amended or supplemented, following a study of good practices in other countries with similar economic and industrial profiles to Malta 4.2 Design and launch an inter-departmental campaign on the benefits of declared work 3.3 As part of a broader Palliative Care Strategy, to study the feasibility of a Palliative Care allowance, similar to the Carer’s Allowance, for employees granted unpaid leave by their employer to care for a terminally ill patient at home 4.1 Produce a Quality Service Charter advising beneficiaries of their rights and obligations, and providing service targets whereby unemployed persons who start to work may be guaranteed a fast resumption of benefits in case of job loss 4.10 Propose, in respect of a wider potential use of hand-held IT facilities by doctors, that only real-time medical certificates presented by jobseekers failing to attend an activation measure, are recognised 1.7 Strengthen the potential of EURES Malta to attract more highly skilled EU nationals to Malta in areas of labour market shortage 2.6 Launch a Youth Programme that provides jobsearch support, relevant training and labour market information and advice, to ease the school to work transition especially of lower-skilled youth. Particular effort will be made to reach youth who are neither in education nor in employment 2.9 Conduct a feasibility study of a Job Rotation system whereby unemployed persons could be deployed to replace employees in training or on a family- friendly measure, with guaranteed resumption of priority on the register and of a rapid return to benefits when the placement ends 3.5 Explore the potential of utilizing school structures for after-school childcare

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January 2010 – June 2010 4.8 Study the feasibility of more frequent means-testing of recipients of social assistance who register for work 2.14 Explore the possibility of creating an ad hoc scheme for the self-employed in certain occupations where income is limited and irregular, but which occupations are socially necessary, thereby bringing such persons out of informal work and into the remit of social protection. Such occupations could include household workers such as cleaners and carers 3.2 Study the feasibility of deducting childcare costs (up to a capped amount equivalent to the amount permitted for tax rebate purposes) from the reckonable income used to calculate entitlement to Children’s Allowance 2.12 Design a Rehabilitation Pathway for those persons found ineligible for Invalidity Benefits but who still claim to be unable to work for health reasons July – Dec 2010 4.3 Review the situation regarding bona fide self-employment and dependent self-employment 3.4 Complete the preparation of a framework clearly outlining the obligations of both employer and employee in respect of telework in the private sector 2.11 Conduct a comprehensive review of the ways in which various benefits combine, for various household combinations, in relation to work incentives regarding the minimum and the average wages. Bearing in mind the related objectives of poverty prevention and a balanced budget, this study would result in appropriate recommendations and regulatory proposals 1.3 Conduct a skills audit of the working age population in Malta and Gozo, to identify the type and level of skills and qualifications available and how these skills are being utilised 1.5 Support employees in micro-enterprises where workplace training is generally low, through a training grant available to the individual rather than to the firm 1.6 Encourage the inclusion of lifelong learning opportunities in collective agreements 2.1 Continue to strengthen the safety nets in both primary and secondary school to ensure that all young people leave school with key competencies 2.2 Provide remedial training for young persons who leave school without qualifications

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