FOI industry trends survey - EU-phoria
is over, business optimism is down
By Matthew Vella
The Federation of Industrys 42nd edition of its half-yearly industry
trends survey (ITS) have revealed findings "not as upbeat"
as those in the preceding edition. Respondents to the survey, 85 in
all, employing a total of 12,960 workers, have registered claims of
insufficient demand, especially amongst locally-oriented business firms.
FOI President Anton Borg said Maltas competitiveness was being
eroded at a regular pace. He lamented that while the manufacturing sectors
contribution to the GDP had decreased, employment income was on the
increase, urging a review of the costs which firms are incurring due
to labour, and also freight costs.
Clearly over the euphoria that characterised the thirty days following
the EU referendum-elections, Maltese manufacturing firms today have
registered drops in business optimism as the FOIs ITS has revealed.
Both locally-oriented firms and the larger exporters have seen a general
drop in business optimism that was more negative than the preceding
survey. The smaller export-oriented firms business optimism remains
positive, although less than six months ago.
All manufacturing firms have expressed uncertainty over political
issues as having decreased in importance, with both referendum
and elections having determined the agenda from April thereon.
The forecasts of the larger, mainly export-oriented respondents are
all more negative or less positive than six months earlier, as shown
in figures relating to export order books, business optimism, profitability,
production volumes and capital expenditure on land and building. Likewise,
the smaller locally-oriented firms have registered negative trends in
terms of local order books, business optimism, profitability, production
volumes and general capital expenditure
A total of 85 firms participated in the FOIs survey, of which
70 were manufacturing firms whilst the other 15 were non-manufacturing.
Manufacturing employment comprises 37% of the total full-time employment
of Maltas manufacturing workforce (28,605 in April 2003). The
total workforce covered in the survey, including both manufacturing
and non-manufacturing, was 12,960. Of the 70 manufacturing firms covered
in the survey, 61 firms which disclosed turnover figures accounted for
67% of total national turnover by manufacturing firms.
In the first half of 2002, whilst the smaller export-oriented firms
had forecasted a plunge in export orders, the larger export-oriented
firms were more optimistic. 2003 has shown a reversed situation: the
large export-oriented firms have seen their export orders turn negative,
whilst those of the smaller firms have picked up noticeably. Over 90
per cent of respondents attributed this situation to lower demand, but
36% now say that this is also due to uncompetitiveness, an increase
of 13% from the previous survey.
In the past six months, full time employment amongst survey respondents
registered an overall increase, most of it attributable to the export-oriented
sector. The main increase in employment took place in the foodstuffs,
beverages and tobacco sector and the electronics, electrical and mechanical
In the second half of 2003, there are more firms forecasting an increase
in employment then those forecasting a decrease. The main decreases
are expected to take place in the Chemicals, plastics, rubber and non-metallic
minerals sector and the F&B/tobacco sector.
In terms of profitability, the balance of replies for the local-oriented
and larger export-oriented sectors is more negative than six months
ago, whilst that of the smaller export-oriented sector are slightly
less negative. Costs are expected to increase at a slower rate than
they did in the first half of 2003.
The ITS also focused on the level of utilisation of the services provided
by the Malta Export Credit Insurance Co Ltd (MECI) to identify the reasons
brought forward by those who do not use these services. Only 6% of the
export-oriented firms and 20% of the locally-oriented firms have ever
used the services offered by MECI. Most of the firms who do not use
the service just do not need it, although a few do not do so because
the find the service too expensive or because MECI does not extend a
cover to those countries where they export, such as North Africa and
In addition to the manufacturing section of the ITS, the findings for
the non-manufacturing sector reported a stable outlook for local order
books, whilst export order books remain negative in outlook, similarly
to the first half of the year.
Survey respondents reported an increase in the number of full-time employees
during the first half of 2003 and they are forecasting a decrease of
equal magnitude in such type fo employment in the second half of 2003.
Just as in the case of manufacturing, this development is expected to
take place in spite of the fact that there are more firms forecasting
an increase in employment than those forecasting a decrease.
Costs are expected to increase at a slower rate for this part of 2003.
Many respondents indicated that they had decreased their prices in the
first half of 20002 and they forecast that they would continue to do
so in the second half of 2003. Generally, profitability experienced
a reduction in the first half of 2003. It is expected to be less negative
in the second half of 2003.
FOI to present budget recommendations
At its presentation on the Industry Trends Survey, FOI President Anton
Borg yesterday said the federation would seen be presenting its budgetary
recommendations to Finance Minister John Dalli.
Borg said competitiveness and the structural deficit had to be put into
the spotlight as these were two related factors in Maltas economic
development. "If Malta does not become more competitive, and attract
more foreign direct investment, our deficit can only continue to increase
if higher taxes are resorted to
we must remember that many of
our larger manufacturing firms in Malta have factories in other countries
with cheaper labour costs such as North Africa. We dont wish to
see Malta becoming a cheap, labour cost base however these factories
need the right incentives to remain on the island."
Other recommendations will include: the reduction of the public workforce;
the removal of public holiday compensation leave; the control of the
public sector wages; intensifying the war against the black economy;
the removal of abuses in the social services and health sectors; an
increase in VAT on luxury goods and concurrently a decrease in direct
taxation; and encouraging the public to take up private education and