Fabian Demicoli

EU competitiveness report on Malta leaves us feeling uneasy


On the 25th of September the European
Commission published the 2013 Edition of the report called Member States'
Competitiveness Performance and Implementation of EU Industrial Policy –
Industrial Performance Scoreboard. The purpose of this annual report is to
review and compare the industrial performance and policies of the EU as a whole
and of individual Member States. This report therefore gives a fairly detailed
account of how each Member State is fairing in its approach to the private
sector.                                                               

The foreword to this report by
Commission Vice-President Tajani states ‘Growth and employment can only be
achieved through competitive enterprises. The task of policy-makers is to
create an environment where entrepreneurs can fulfil their ambitions and
contribute to a sustainable and balanced growth of our economies.'

The report outlines how badly
Malta is fairing in this. The report is indeed very stark and outlines sharply
how poor the environment of doing business in Malta is. This leads us to think,
have the initiatives that looked so good on paper such as the Business First
and reducing administrative burdens really worked as successfully as policy
makers say? On the other hand GRTU is skeptical to rely 100% on the results of
this report as we believe that the comparable data available might not have
been the best to represent what is really going on in Malta. This however sheds
light on another problem. The authorities need to give importance to the way
their efforts are measured and ranked as the results we end up with are truly
unnerving. We do however feel that to a large extend the findings of the report
represent the sentiment of GRTU and its members. We do feel that Malta is not
attractive to do business and that local SMEs have a hard time dealing with the
bureaucracy and the high operation costs in Malta.

The report placed Malta in the
‘Moderate Cluster' of EU states, where Malta was grouped with Cyprus, Greece,
Italy, Portugal and Slovenia.  This
group, according to the report, "performs well in some competitiveness areas
but face difficulties and deterioration in others". It also outlines that
‘productivity growth has lagged behind the euro-area average over the past
decade and has been notably weaker than in the other ‘new' Member States. These
are very negative results for Malta but let's go into a bit more into detail
into the negative and the lesser frequent positives:

Malta has
already exceeded its Europe 2020 targets on research and development, however
here one should point out that Malta's target was set very low , one can even
call it unambitious. Malta however also lags behind in R&D performed by
businesses. In terms of innovation, Malta was placed in the six-worst position and
had fared better than only Lithuania, Poland, Latvia, Romania and
Bulgaria. Along the lines of people with
high qualifications being employed in manufacturing, Malta had improved
slightly between 2006 and 2011 but its level of roughly eight per cent was far
below the EU 20 per cent average.

Malta lags
severely behind the EU average on Labour productivity per hour worked and
person employed, the same stands for the percentage of employees in
manufacturing with high educational attainment and the number of graduates in
mathematics, science and technology.

On a positive
note, Malta is the leading Member State in share of high-tech exports of total
exports, however at the same time it is the State at the far end on exports of
environmental goods as a percentage of all exports of goods.

Malta fairs
very badly in the time required to start a business with the EU average being
around 14 days and in Malta averaging around 40 days. The same goes for the
business environment in Malta. In fact Malta was ranked in the EU's last place
in terms of the country's business environment.
The EU as a whole had slightly improved upon its business environment
and the rankings were led by the UK, Ireland, Denmark, Sweden and Finland.
Malta is the second Member State with the highest cost of electricity for the
private sector, surpassed just by Italy.

We are doing
very well in the percentage of broadband lines with speed above 10 MBps Malta
is also doing very well in burden of government regulation and even
e-government usage by enterprises is somewhat positive Access to bank lending
for SMEs is also seen as positive but this is something we are a bit sceptical
about.

In its conclusion the report stated
that Malta continues to withstand the impact of the international crisis
relatively well. Given the large size of its financial sector and the high
exposure of domestic banks to the real estate sector, maintaining financial
stability remains crucial.

In terms of structural reforms,
medium and long-term sustainable growth will depend on the successful move to a
more knowledge-based economy, further improving skills and the utilisation of
human capital, and adopting more ambitious R&D targets.

Investment plans for improving the
energy supply are encouraging as they promise to reduce dependency, improve
cost competitiveness and boost efficiency. Policy measures to address the
challenges involved in meeting climate and renewable energy targets need to be
maintained and stepped up. Efforts to implement the Small Business Act with the
support of the business community, a large majority of which are SMEs, should
be maintained.

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