Malta Chamber hits back: State policy, not business, drove foreign labour reliance

The Malta Chamber has pushed back against Finance Minister Clyde Caruana's suggestion that businesses favour cheap foreign labour over investment. The Chamber insists the country's reliance on foreign workers stems from a decade of state-backed economic policy, not a corporate reluctance to modernise.

While agreeing that population growth is creating "unnecessary and unsustainable pressure", the Chamber said the minister's characterisation misdiagnoses the root causes of Malta's economic bottlenecks. "The Finance Minister is well aware of how the current labour market framework was built," it said, pointing to policies adopted under successive Labour administrations that promoted growth through workforce expansion.

Businesses now operate within a regulatory and administrative framework designed for volume-driven growth, the Chamber argued, despite repeated calls for a shift towards quality and higher-value activity. "It is neither fair nor accurate to place the full burden on employers now that physical and infrastructural limits are being reached," it said.

The Chamber also rejected the notion that employing third-country nationals is a cheap or straightforward option, citing the significant human resources administration and time involved in recruitment.

Data cited by the Chamber shows how deeply labour-driven the economy has become. Gross Value Added grew by 81.9%, with 68.9% of that growth coming from an expansion of the labour force. Shifts towards higher-value sectors contributed just 9.9%, while actual productivity gains measured as output per worker accounted for a mere 3.1%.

The Chamber said the model was encouraged by state policy, making it unrealistic to expect businesses to reverse a decade of workforce expansion on their own. It noted that Malta Vision 2050 itself recognises the need to move away from labour-driven growth towards a productivity-based economy, but warned that its key performance indicators must be rigorously monitored and delivered rather than left as "aspirational talking points".

A genuine shift towards productivity-led growth would require significantly greater public investment, the Chamber argued. Had government pursued a different economic direction, there would have been decisive investment in preventing electricity disruptions, tackling traffic congestion, addressing abusive planning and construction, accelerating digitalisation, and supporting reskilling.

Instead, initiatives have repeatedly been delayed from one budget to another, undermining companies' ability to plan their investments. The Chamber called for all fiscal incentives and grant support measures to be available from the start of each budget year, with clear timelines for disbursement.

It also argued that existing fiscal and financial frameworks can discourage productive investment. Until state policy de-risks productive capital investment compared with flexible labour and speculative assets, businesses cannot realistically be expected to alter their behaviour in the quantum needed to bring real effective change, the Chamber said. A future budget should therefore realign incentives, funding mechanisms, and tax structures to reward automation, digitalisation, and upskilling.

The Chamber highlighted the stark contrast between Malta's economic growth and its productivity performance. Real GDP increased by 22.9% between 2021 and 2025, making Malta the fastest-growing EU economy. Yet real GDP per hour worked fell by 0.2%, placing Malta 21st among the 27 EU member states for productivity growth.

Population figures add to the urgency. Malta's population reached 588,254 at the end of 2025, with foreign residents accounting for about 31%. Projections put the population near 636,000 by 2030, intensifying pressure on one of the world's most densely populated countries.

The Chamber also rejected the idea that businesses continue to seek foreign workers simply because they are unwilling to modernise. Companies that have invested in automation, lean processes, and digital tools are achieving efficiency gains, but these gains are frequently eroded by bottlenecks elsewhere in the economy.

Delays in public administration, inconsistencies between government departments, and the absence of "once-only" systems mean businesses and citizens repeatedly provide the same information. The Chamber also argued that continued public-sector recruitment is contributing to demand for workers, particularly during pre-election hiring surges.

It called for an independent audit of all government departments and entities to identify structural redundancies and streamline bureaucratic layers. The objective should be to improve efficiency rather than expand headcount, with a transition programme to facilitate the secondment or redeployment of surplus public-sector personnel into private-sector roles.

The Malta Chamber said it remains ready to work with both the government and the Opposition on an evidence-based plan for Malta's economic future. Such a plan should combine infrastructure investment, simpler administration, and well-designed incentives to ensure growth is increasingly driven by productivity rather than population growth.

The Chamber's position is clear: businesses cannot be expected to deliver that transition alone. Government policy must make productive investment in automation, digitalisation, skills, and capital more attractive than continued reliance on additional labour. Only then can Malta move from an economic model based on increasing headcount towards one built on higher productivity and greater value-added growth.