17 JULY 2002

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Comic this week: Butterfly, butterfly

Grey clouds hit world stock markets

Accounting horrors have added more dead weight to the future of the world’s markets. The ailments of the US markets are taking their toll on world markets, as the accounting scandals sweeping through the world’s strongest economy are seriously undermining investor confidence.

A cursory look at the Maltese market reveals new lows, some of which are as depressed as in the 11 September terrorist fallout.

But Maltese investors have not yet realised how dependent we all are on the mood swings of the US stock market.

The frail markets have left many investors in a state of despair and unable to find their footing.

Those, as many in the US, who put all their savings into the stock market are left with little or no room to breathe.

Malta is not an island in this respect, and many funds have continued to drop as investor confidence hits a new low.

Market watchers feared that even calming words from central US bank, the Federal Reserve, chief Alan Greenspan would not be enough to prevent further falls in US share prices. And that is quite true.

Mr Greenspan offered some reassurance about the state of the US economy when he addressed the US Senate banking committee yesterday.

But he did not go as far as some had hoped.

Traders are trying to assess whether the markets will eventually find an even keel, or whether there are more falls yet to come.

As the world markets enter a second week of turmoil, there is concern about the effect of falling markets on the world’s economies.

Falling stock prices generally lead consumers to cut spending, which could push economies back into recession.

Reality bites

Job losses are nothing to rejoice over - it creates anguish for the afflicted families and increases the financial burden on the State in the form of unemployment benefits.

The layoffs announced last week by two companies operating in the manufacturing sector brought home a number of truths that both employers and employees should learn.

The manufacturing sector in Malta is on the wane to the benefit of an ever- growing service economy. This is normal in advanced economies, as low skill manufacturing tends to shift to countries with cheaper labour costs. With its high employment and social aspirations, Malta can never hope to compete with countries such as Tunisia and Morocco in the manufacturing field.

If manufacturing made sense 30 years ago, today’s Malta requires a value-added inspired economy focussed on services and knowledge creation.

And investors entering the manufacturing field have to act fast to adapt to market changes. Competing with cheap labour is out of the question and this should be substituted by innovation.

The time when a factory could produce the same pair of trousers for time immemorial is over. Change is a characteristic of today’s world economy - driven by an influx of media and communication influences. Acting fast has to be a prerogative of any industrialist.

As for employees, the job-for-life work ethic is long dead and buried. Workers are expected to be flexible and multi-skilled, thus able to change jobs with ease. This is not easy to learn for those who have been in the same job for almost their whole life, but for the younger generations flexibility and the will to learn are a must if they are to survive the new economy.

Copyright © Network Publications Malta.
Editor: Saviour Balzan
The Business Times, Network House, Vjal ir-Rihan San Gwann SGN 07, Malta
Tel: (356) 21382741-3, 21382745-6 | Fax: (356) 21385075 | e-mail: editorial@networkpublications.com.mt