NATIONAL INTELLIGENCE SURVEY 25B; MALTA; THE ECONOMY

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r
0
Malta
CONTENTS
This thapter supersedes the ecnnomic
Merage in the General Surccy dated
A1ay 1.96; which should be destroyed.
A. Economic appraisal 1
B. Structure of the economy 2
I. Agriculture and fishing 3
a. Agriculture 3
b. Fishing 4
2. Fuels and power 5
a. Fuels 5
b. Electric power 5
3. Metals and minerals 6
4. Manufacturing and construction 6
a. Manufacturing 6
b. Construction 7
Coxru vrUL No FOREIGN DISSEM
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Page
5. Tourism "r
6. ]domestic trade 7
C. Economic policy and de velngment 8
1. Governmental economic policies 8
a. Fiscal policy and the budget 8
b. Monetary policy and the banking
system 9
Page
2. Economic development 16
a. Government plans 10
b. Incentive programs 11
3. Manpower 11
D. International economic relations 12
1. Foreign trade 12
2. Balance of payments 14
3. Foreign aid 14
FIGIZIES
ii
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Page
Fig. 1
Gross national product and gross
7
Budget revenues and expenditures
fixed investment chart)
1
Fig. 2
Land use map)
3
Fig. 3
Agricultural commodities 'table)
3
Fig. 4
Cropland (chart)
4
Fig. 5
Survey of manufacturing table)
7
Fig. 6
Domestic trade table)
8
ii
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Page
Fig.
7
Budget revenues and expenditures
(chart)
9
Fig.
8
Labor force table)
11
Fig.
9
Foreign trade (chart)
12
Fig.
10
Imports table)
'2
Fig.
11
Exports table)
13
Fig.
12
Direction of foreign trade (char.)
13
Fig.
13
Balance of payments table)
14
ii
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0
A. Economic apprai.al ICI
%I111111f0 161 Iltr 1lt plll +llfallt 4 4 .Il"I
'it" 111 II es� 11110-1 11104111 1`1141 l ill fr.1101ta1 h''- 1wlh,^
i.1il.1 Ira� lalrla/1wl its i�1at141 1.�1:1114611 ill 11
NI"lil1.traltrall .11"1 it+ +1t,1ia1 h lat14 prlrill 11111 IIN�
l nilrtl Kitlttll,pft iftl .1 r.111i1111 1.i -iutt 11. +r1 ,.1 litileC
Ill VI 1- %Ialla tow-. 11.1Ii,p1.11 1x'41114.1 1:%1'
a11V011h1r11 to 12.40 111illi,61r ill 1 .11hIll 111.111-11 1x1!1�..
ties 111�t laltil.l (AI' 11f Svill 'A.1+ aI1IF+t 11 111.11
111 .11 3111 lillw Iltal 1.111.1 111,',1114` 11141 lMtiNb'tlt
Ifloill Iititi +ll 11111� ill I'Mi1 -11C4h I
%Ilhna;11 I01es Ifa1.r tlr.lu IIN� 1,.r11th +aililltt 111 IIN�
dlhrinitt�!1 N1�I. INt 1.1111:1 5:*%1 0 IliCIN't 111.114 111
I'ntltlit.11 lac 1-1-!+,�11+ 111.11 ill '11116% .11141 It- litilll.
1:.1411111 111.111!1104 t�
!�:rnupni!� nlwlh an 1111/1 .111. �r i1es1/104'fNl1tN
awracillc it 1'. .1100111.1111 its fral x-�1111+ in 1
11111�%lltes�III ill f :Mlllll.11lrltitlL' .11141 I�1111�tle 1/N 1/i11. 71
tier 111.1ill Itt11N�111+ Igo drr,rllllx111 �tll 4106� Cln rftlles �111
1.nl,a1ra111.11 IIw trioulie nl i1N11r -111 IIIt1IrlCh 11"11011 1
HI!'ll .1� 1.1 wlui��ilgt� .11"1 1,16111. Ilrnifla"I 10-1 1
I:d 1..1f 111.111� .11111 161 111 1-0111.111 14.."611
.Id/1.ru -11111 in :1,ntbwn 1:11hgw� 1111. tt" n�a ��d atlil iI.
in 111aft111.11�1ofi11C ,11 "1 In11rolle. .11 -lilt aitle .1 �11.111
inllmm 141 Iirili -le ht 111$- 111..1.1111
!�1i111.111.. Ines 1.11e, 11141 a 1-114 1 +-1 �11 Ilt �1utl1wl
1,n +tr11!�tinn 10411-111 111.11 ImIIN�r I �t..l rtn111.1111N�a1
MA inl.nnl�.
E%t v -111 Inc 111111-11 .d 1-..111111. rl.l_. Al %I all�.. 1��.+.t 1.t +1.r.
16hn1[11 1111. 11141'1.1 (M-1.1..n1. 1.�1
11 4114� ,1.l %11.1 vole; 11w f.11. r +11141.1 -1 -1 111 11.-r1..1r1
VC tlw 1). I-rtan II, -M ang sh 1,.1. Ile.* *veto slow -.r.
Irrtin>;161rettutl.+t 6 wrrn flu! .,1 d1.11ert 1-111 111 1.10" w
1.r( L11fa� 11LIPol i� Abort p t Irvat. Irlw114r1 1 b-i p+,�fj.l
1...n�.
L%11-4 1: 1 n.m 1447 1611 �t6 W'1 I lw 1 .1.
,r( ��16.111tr %l1. 141
11"Iff+mal 1.11.11111,1 Mall., In I.y.lna
i1+ 1.Al"If1+ 1.1411 +i11!`f.11If Isarli1.111.rr11 �.111'� Vol
ft1.11r1d.1l- Iatt'sI 0 -111� 1.11 1.Al041ft !llfirlr .N,t01lflh�41
lost I V, Vol IAP ill Resit .1111 +111111!,1 In .1104,111 11', nl
IA1' In If1'1 11001M Ar�t �inl, 1l,lesnrni1. Qf,1llll 11.1+
llrlN twl+wl Ise.101t rill itfllu11t141 !�.1110.11 8104,11� and
f1 -itrq ies ti11�01w 11.1.. itw- 11..1.111 1111� 411.111.11111 111r
Inter
We
N cC
us VOssian
fewrem F4e11 G.ofs
Fired
Its
110
10
car
GNP
w. GNP w
owpi NO Cowdeve of-le 040
MN Ib K M N 70 71
FIGM 1. Orr nc 11 product o d Spots fixed
Y11rss11m 1964 71 lu;'CUl
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con >.utuer goods that are not produced locally. Malta's
trade account remains in ehrnic deficit; the deficit
was $121 million in 1971.
The United Kingdom has played a dominant and
pervasive role in Malta's ecouonic life. ;111hougll
Malta was given independence in 196.1, the United
Kingdom signed aid and defense agreements and
continued to maintain it sizahle presence on the island
through the stationing of military troops and their
dependents. LI.K. econrnnicaid substantially financed
the Maltese Government's investment expenditures
and provided foreign exchange to support Malta's
hign level of import.,. British military expendit :;c�.
accounted for 9S' of CNN in 196.1 -69, and
expenditures of dependents bolstered domestic trade
and services. Furthermore, for several years British
companies operated the drydocks, and Barclays Bank
was the bank of the Maltese Government, which even
today turns to British experts for counseling. British
influence is still apparent in tlc British -run airport and
in Malta Airlines, run by British European Airlines. In
the business community, English is spoken as often as,
if not more frequently than, Maltese, and retail stores
in downtown Valletta arc branches of London
companies.
In 1969, the special relationshili between the United
Kingdom and Malta began to deteriorate. The U.K.
Government hisisted that the terms of the aid
extended to Malta be changed, claiming that Malta's
economic prosperity justified more stringent terms.
The Maltese Government refused to accept aid under
those conditions. The United Kingdom yielded in late
1970, in anticipation of the Maltese elections and the
possibility of it Maltese Labor Party (M LP) victory.
British economic aid at the old terms flowed into
Malta to bolster the chances of the incumbent
Nationalist government. The M I.P, however, was
victorious, anc' Don; Mintoff, the new Prime Minister,
quickly abrogated the defense and aid agreements and
demanded rental payments for the British bases on the
island. The controversy, which lasted 9 months,
resulted in the evacuation A British dependents and
most of the troops. Ultimately, Mintoff successfully
negotiated an agreement for cash payments from the
United Kingdom and its NATO allies, but the break
had a pronounced negative effect on the economy that
ultimately affected not only Maltese Government
operations but tourism and trade as well.
In 1971 the growth rate cif the Maltese economy fell
to 2.3% (the rate was 11.9% in 1970), and fixed
investment actually declined. The unemployment rate
rose from 4.7% at the end of 1970 to 7.4% by the end
of 1971. The controversy with the United Kingdom
2
was ille major element ill file slup. hill Ihem wrr
of her problems as well. 'i'he MIT gm erunienl
canceled government proiects planned by the
Nationalists, frightened preospectki investors with
price and profit controls, and canceled the imeslnenl
incentive program. Tourism, which depends prinaril}
coo British visitors, fell off' sharpl\. Imports and
domestic conunerc�e were adversely affected by rising
levels of uuernploynent and the deparlum of British
dependents. The foreign trade deficit fell for the first
lino� in years, and many snall store (inners
experienced financial losses. The construction sector.
affected by the falling demand in other sectors. was
marked by considerable unemployment.
The controversy with the United Kingdom was
settled in March 1972, and \Malta was guaranteed
substantial annual aid p:!yntents tit finance ecouonic
development for 7 years. The 1 Minister stated
that these fonds, along with othe aid already agreed
to, would be used to develop the econony so that i,
would no longer be dependent on ni',itary bases after
the 7 -year period of the� agreement. In the 9 months
following the agreement, however, litty- was clone to
increase the level of economic activity. The
ernncut has operated under it dcflationary btdget.
with un absolute decrease in capital spending.
Unemployment, however, has been reduced by
recruiting idle workers into an emergency labor corps
for public works projects. Prospects for renewed rapid
growth depend heavily of the use eventually made of
foreign aid inflows to stimulate investment and
employment. k ne\y 7 -year development plan is
scheduled to he released in 1973, at which time the
government's policies for achieving the airs of
economic: independence are to he revealed.
Prelirninary indications are that the role of the
government in economic ;clivities will increase
significantly.
B. Structure of the economy
In some respects, Malta's economy differs markedly
from those of other countries at a generally similar
level of development. Agriculture is relatively much
less important, and services are much more important
than in Greece or Portugal, for example. The unusual
prominence of scrviecs stems from the traditional use
of the public payroll to absorb some of the
unemployed, as well as front activities directly and
indirectly related to the British military presence.
Public administration and military services in Malta
together employ one quarter of the labor force and
produce some 30% of the gross domestic product
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r:
(f 11)1'). vomllmu -11 1111 11�.. 111 4111 111 ill 1: 111 .11 o ff
I'oti llit:ll. t' ()t
1)rlriug IM IA TI i 11N�'hatr of pullic a d "l i11i�lrllilal
Mid milila .1 nicr. ill Ille (;I)ll "�111411114.11 In �atli
vowl,1111. 11111 life .114111�. of li�tlahl olln�t .l�111r1r
rha figed 09111fic41nf1%, 40% 411111111 in lIW flrlllrailnl
Iallnllatilm (in ltrtcrnt of CI)1'I:
19" fro i
A.ttitollittr. (on�.Ite-. (tsllina
:.A
IMPORTS
Minim, atuatt)itl)t, a1N1 rmanlatiam
Wheat
1.700
Ntanufattllring
i ti.1/
/.1
Electric 114mer. U walct
21.1011
Public admiai.ltati.nl and mililatp
U
20.700
11
Potatoes.
32.200
1'hola�. ;da� 11111 14.1:411 trade�
.l
IA.
'I'r.amp tot and tonnlill"k lull.
4.;
3.
Ila.Ikilaat. 111MI nN,�. ;uad rill
1.700
to
Other acr %i4 a�. 0114:111(ina 11WIN -Wap
Other vegetables......
26,400
of dwellings)
100
II A
Llanufaclllring. g etirralh n�eogni/rd as the key 111 file
dt-velopillelit of Malta's l�com)Inv. inc�n� :1410 in
relative inlltortanev. New mau1161clorhip 11:11111.
nutny of them situated in industrial JUAN oillside
Valletta. and new tourist facilities Provided the
stimulus for most of the rise in the shades of (.I)I'
shown tender mining, quarrying, and construction and
under banking, insuratice. and real v%late. (1
1. Agriculture and fishing (U /OU)
a. Agriculture
Malta produces only one -fifth of the food required
by its densely populated urban areas. Less than half
the land area is classified as agricultural, and the
available cropland area (Figure 2) is wholly
CunnralW a.1-� iq.�n 0�a0es. rr
.gM.Ws,
nu-A uv area
C"h land
sport grounds. aaeda
Yls.relanC
.r
r
Go,o o Kemmuna
Matta
G `1 1-1,1 Hotta
fi4e
501771 573
FIGURE 2. Land use (U /OU)
lllalllml foil IV- ifIHM nlinit tly dlllruf 10111.4%v
Ilrt�iah� (lair- 1.111111111 all�te) I+" inhallilanl. \11"notrt.
�1 4 1111111 ardle atltt! a do lluir Ihal 1. i11�.1a I##
alt" 4111111n� %Metr 1111111 ImsdI1114i iv A %hlr sartk4%
I rf t"f1r1N, i1N�hh fi'r ft 411.. h Kh1gn. 11111 141111 11101 111N".
411141 lalilal% ate IMIIIItin"I In 111 {411rH1i'+. 1 11.1 1oml e lot
nln Ilrnllr.lh� tMnlattul &IMI 10tonkir %iralllle %eogoIow
111r rilertt 4 11111111411 pith' Ithrl 1111111 11follw%lit
Ittilltr. i. 1wo r 1 01hrtll�rl Higi �1 1 1i1m�llu ltna11ll�lh
11110f4it� life dothm aaltlarl al"I Ill.�% rrrtlllfall�
lonl ollse x111 im..11rttaltll "ruffle off r r afflinliy.
%eilfl% all of life IN�"fell gt411111. I1HINr11rt. 1111M I re
in1111tltll. A 11111n1011 %etrialIr� Mill Itllil. 4ltr
ltnrlllit."I. inilllotl. 41010011 all'i of life 4reen
vl�grlalrh�.. h3ti of 16 cdlm.. 11111 411 ld life 111111.1
Ituih tlau11nlyd. 111 414h lilioll, IAt4r 411111111111-t of lural
411111 d41irr 11folI1N`11% Me i nlliofttrl to 4111j;l1rillei 1111 -jel
pr dlitlion.
Almost .15"i of 111 4lgficult11tall erral 1. 1441111111 ill
grain. Mind fodder cm;?% l F lean� -1). The 11111% 4 r41111% of
irnlorhulce an- wh ei lt and 11:111.11 ghlNll primaril> loot
11.1� as feed for 1111 ^H�rc k. The ptincilkil Ioddrr chat%
includr su!la. gr1.1.11 Itatley. vrtc�h. alfalla. r1licklx�a..
hhrad 111�ans. and 1111.114 loeilm. S1111a. a l
irldigrnons 141 Ihr Mellilrrranr :m 41ra. i�
grown rNirl�ivel the acrrag1- 11.1,1 (ot .1111 :1 i� aillr11t
the s4111le as 111.11 for corral groins. 11�aler tril11irrnrrnl.
for sadlu an- low. :1ntl it% rst1-n.ivr nN1 .a1�tn hells to
prevent crosion.
The stain veget.11114. c�nl" an� iootalw%. 4111ion.. 411141
tomataN�s. Potato yields are generdl% I1�lovl those of
other Vledit1-rrancan counlrir. IN�c:ulN� of I "1- d o
climate, soil d1-fici nc�ir,. and inadcquale 1tM� of
fertilizer. Potatoes ree1-rt111-h�ss. have I1.1�u f :lltu's
Most important ag riculhlra) eslort for mane rein.
Onions are also an important ex111rrt crop. Sind� 1960.
FIGURE 3. Selected agricultural commodities: production,
imports, and exports, 1969 (U /OU)
(Metric tons)
3
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PROMIClION
IMPORTS
F.\huNTs
Wheat
1.700
*57.300
Barley
1.700
21.1011
Corn
U
20.700
11
Potatoes.
32.200
:1.400
1:3.900
Tomatoes............
0,1100
0
Onior.................
1.700
0
2.1110
Other vegetables......
26,400
11,300
Grapes
4.300
0
+100.01N1
hl. of
wine!
Citrus
600
�1.000
0
Other fruits...........
3,300
7,900
0
*Wheat and wheat flour in wheat equivalent.
"Less than 100 tons.
3
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TOTAL O
Gros
I
411111.1..
I
Grrllor 1M1/
btNr trop
FILM 4. Wolblrtion *1 crw okwocl, 1969 (U OU
the i+ruitr 11hIllk�li1ll off 11101010 II:0 IO r li 110 1 61 1 111.111
in live HtL10%. '111ritr aild 4#1111110 %:t% sill�h It"111
%rat H/ %rat. In 1114. 1161.1 timadr. Ihrtr Ili 111.1�11 little
rhallar in artratr .Ind tllltpovt of Nrhl gnIn
lo"nalo", shids arr �hl nminh I4# atsiortic t lilt
%wMl%rnholl itQos Iu.1.4r lost ihslnr sir 011.11n11Ii1n
Un 11trtllk iotil ill Illm aflrr� 1111f'rrl- w I%
11r;11R %116 liAml h+ llw� q/nrnntorto1..41141 1.111.1 h.4-
allem111rtl fir rylat"I 111r1111k'ti1N1 411"1 IM4e11 an
r %tu ttkltkrt fist tllnl.11t"
live 10tith i1R11 Inlil l�nq. :ltr 11141111111-11 list
ntakinit foo tk�.. r%1Ntt� of sldull :err %ignifiraill. (11114.0
I ndI% arr tr imn. Not Ills� artragr 4l1�+1 11 I IN �nl ho-.
dMined cvulinlNnt�l% .iiKr IlLi:i
%ally 4hom foo lowsloorr m11911th li +r.11K�k :11 Il.tln
11r114111e1. t1 .111101% it- 111911 /1��110 tyrh.11t111111o1i
tre ltdrritw ool�. t-.on-* rtal/lr :InN011 111� of /IN al .ultl SN9e
of Ivor milk t.m.11noml a il� i111110stleil %lilmoIK11 tlw
:1%1 41111111.11 rile of gnrslh 1 11 flor /911111111 Ili
rh./vtt�tl little ill file JM IIIYaIr. Illrr .1.1r1��n :1 �Ivill
in floe t� 111n1N 1004111 411.1111111.111//ldint�..n i11411t :I411 in
lilt- follosing I:1Fulitiln vin 111411MA1141 lormll.
Milk oullim Ili, hirtra%ml mootMMIIal. itltl dwn� h
ptiruler vrw� of tim m ilk. a4#, 1gtloor,"I to Jim: elf .f is"s
avid
Ptuhn 41141 Ili% fum illy. tin� live newt i- ilNlrtaot
livmlf 4-k indu%trir. in Inns� 401 r%1N1rt 1N11rtrlial.
Poulin rii.int ha. %f141wn +114.11 rillitl gn0;1I11 that
-1
%L11111 stilt 10111% ha. IN"11111 r �II �nllirirtll in 110rt1
tine ;Il. at11 rgq� 10111 fa v% Ihr 1r ill di.fN.itlk of
�I11111im
1gri. I111nral fhNlur�li%it% in %1:11141 grnrr :111 i. lo%.
The tit% rlilolair. iln� hillill�II %trill of ittigak.40V IN000r
�dl�- 411141 IIN� lya41.1fu:llr n .4-r (rtiilirrr. +Intl
111�.141 i4e�.
its- 4 f:t�!ol%. %loon� it11110tlailt.
I11sr%11. sin� the .111.111 air:� Vol agriraltund holding%
:11111 1111� I4- :Igttu�nlaliol of 1r1o1. Llrlitr. %%hit It Iitull�r
1114� liw ill 111.11 Nnr1% Mill make (.111 i%alion lalrrrion.
:rtld little +.rn�nulinq. In P0101. felt r%amfle. 1111
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