State of the Union: Five key takeaways from Ursula Von der Leyen
17 September 2020
Key points from von der Leyen's state of the union speech [caption id="attachment_14822" align="alignnone" width="640"]...
Malta still has a lot of road to cover to achieve the standard of competitiveness that can really get us moving. We've moved forward substantively over the years given our limited resources but the recession, which is now beating heavily on our doors, shows most clearly that we have not taken this issue of competitiveness seriously enough.
The problem with us is our failure to prioritise. I am now the longest serving member of MCESD. Hardly a meeting is held without competitiveness cropping up on one item or another of the agenda. At one time we had an excellent working group with all the leaders of the top national organizations participating. I used to enjoy these meetings and used to contribute greatly. Economist Gordon Cordina drew an excellent report, following six months of weekly meetings. This report was then followed by a year of discussions that should have lead to Malta's first Social Contract among social partners.
This never materialised however. The General Workers Union invented one excuse after another not to sign. The Unions argued among themselves and the social contract was doomed. Since then MCESD, has been one big fat sleeping beauty. The enthusiasm has never been regained.
We pay today a high price for this failure. Workers never understand why they have to pay the high price of unemployment. As recession in our major markets bites, more workers will be laid off. Who can explain to these workers that their jobs might have been saved if their leaders sacrificed their pride a little more and accepted the Social Contract.
Competitiveness it's not something that employers, trade unions or Government can achieve on their own. It needs a collective commitment. Unfortunately the concept of representation in Malta remains archaic. Many of us strive to seek solutions and try to lead from up front. Many others are weak and they allow themselves to be backseat-driven by militants and people with silly partisan political motivation. Some are completely myopic in economic terms. I have heard so many silly economic arguments over the years I could write a best-seller: We would be years ahead and our restructuring in industry, in commerce, in tourism in Government would be much, much more advanced if our representative organizations left more of the serious economic planning and analytical work to the experts. But we're democratic aren't we? We prefer to push ahead the most popular and not the most capable and the most efficient.
The end result is that in the Global Competitiveness Index of the World Economic Forum Malta's economy ranks 52nd out of 134 countries. We should be facing the impact of the world recession blow from a strong position but our failure to move faster in restructuring holds us down in ranking. From 134 countries measured by the Competitiveness Index for Labour market efficiency Malta ranked 100th, 68th for macroeconomic stability and 56th for innovation and sophistication factors. We scored better in the area for goods market efficiency at the 43rd place, proving that the removal of trade restrictions since joining the EU has had a tremendous affect, this is however still not enough. We do very well in financial market sophistication at 18th and 27th in technological readiness.
Our performance continues to suffer due to our failure to take serious remedial action on the problems that keep burdening our competitiveness. The five most problematic areas identified by the World Economic Forum Competitiveness Index are inefficient government bureaucracy, access to finance, inadequate supply of infrastructure, the rates of taxation and the restrictive labour regulations. Other negative factors are inadequately educated workforce, the rate of inflation, tax regulations, poor work ethics in the national labour force and corruption.
It is the responsibility of all of us on MCESD to watch carefully what bodies like the World Economic Forum are saying about our economic performance. It is not so difficult to identify the areas that matter and that need remedial action. That is what we tried to do the last time round. We failed then because not all constituted bodies and trade union members of MCESD were convinced that economic recessions do occur and that in a recession only the best survive and only the efficient continue to expand.
The cause of all our economic problems is our competitiveness. Were the problems of competitiveness addressed earlier, as it was the intention of all of us who strived so hard to get the Social Contract signed and implemented, today we would have been facing our economic problems with a much better structure and with a sharper competitive edge. In the absence of the Social Contract we have now allowed the market forces to correct our competitiveness. This is the costliest way of revolting our economic problems, and who is paying the price? The market economy even though we have all been talking about a social market economy corrects uncompetitive structures and situations in the crudest of ways: job losses, unemployment, bankruptcies, closures and defaulters.
The way forward is to restructure and restructure in time. Restructuring is not a political slogan. It is an economic necessity. No trade union leader can truly wish the best for workers if trough his efforts he holds back the process of restructuring. The best form of restructuring is that which is achieved through national consensus. That is why they call us social partners: we are partners because we believe that together we achieve more.
The way forward is to drive home those policies that sustain competitiveness at all times and at all levels. Competitiveness may happen on its own but it takes times and remains subject to market forces on which we have no control. If we do it correctly, keeping an eye on what our competitors are doing and providing the right policies, then we can remain ahead of our competitors and cleverly shift more of our economic structures away from susceptibility of the cyclical economic forces.
The problem with our economy is that too much of our productive capacity is subject to what happens in the short term in the markets on which we depend. An intelligent economic strategy based on a forward looking Social Contract can effectively cause little Malta to move upwards in the competitiveness ranking. This is something we need to do with great urgency, if we do not do it by ourselves the market will force it upon us and many will suffer. Lets not fool around with the concept that Government can do it on its own. When Barack Obama says "Yes we can", it doesn't mean Government on its own can. This applies even more so to Malta as Government doesn't really have the financial or other resources to really do the intervention that is needed when competitiveness falls sharply and recession in our most important markets is hitting hard.
Fortunately thanks to all those who have striven to ensure Malta's membership of the European Union we are now an integral part of an Economic and Political Union that is helping us to invest and improve in many areas where in the past we were extremely deficient.
We have indeed moved forward. Let us all be positive about this. The European Union has not only been a great instrument of change but also a great financial source of support. It has successfully installed in us a better way of designing and implementing policies. But we need to do much, much more to ensure that we get the maximum support that the EU offers to uncompetitive regions and economic sectors.
Building a competitiveness consciousness is very important; we all need to strive to ensure that we Maltese workers, entrepreneurs, management and bureaucratic institutions of Government place competitiveness on the topmost notch of the agenda.
Surviving together to get agreements at national level on the way forward is a top priority. Let us not keep wasting more time arguing and doing nothing. The people who suffer the cause of our inaction will not forgive us as the economy fights its way out of a difficult period let us not forget that things could have been better if we did the things we needed to do in time.
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