Developing a competitive knowledge-based
Finance and Economic Affairs Minister John Dalli addresses
Fridays Federation of Industrys conference: Europe
Most Competitive economy by 2010? How will Malta benefit from
this process? In his wide-ranging speech, Dalli extols the advantages
of a knowledge based economy, he urges that we need to be committed
to work together to introduce the necessary changes in order to secure
a better future, and addresses a wide range of issues including the
tremendous costs associated with using Maltas ports
First of all I would like to commend the Malta Federation
of Industry for having delved into a detailed study of Maltas
competitive position with regard to EU member states. It is indeed very
encouraging that some of our social partners are getting beyond superficial
grumbling but are drawing up recommendations which are based on a tangible
effort to move forward.
A knowledge based economy is one in which the production, distribution
and use of knowledge is the main driver of growth, wealth creation and
employment across industries. In a globalised world were product value
chains are scattered around the globe in order to maximise production
efficiency a company can only gain a competitive advantage over competitors
through innovation either of the product itself or of the production,
distribution and marketing process. Thus knowledge must be continuously
developed in order to bring about these innovations.
Increased standards of living have to be sustained with increased productivity
or wealth generating processes and thus a countrys wealth need
to be sustained by continuously working to attain the development of
innovations locally as well as the production of innovative products
in the local market. However the attraction of such products and processes
necessarily entails that Government has to weave a competitive backing
environment which is capable of dealing with the demands of a knowledge
The country has reached a stage in its development were we need to reassess
present practices in order to ensure that the advantages and challenges
of a knowledge driven economy, EU membership and globalisation are fully
exploited. We cannot remain locked each in our little blockaded little
corner, jealous of all advantages that we perceive we have accumulated
over the years.
We need to be committed to work together to introduce the necessary
changes in order to secure a better future. Because to reach the goals
we are talking about, we have to shift resources from their present
transfer flow to a flow of investment.
The Federation of Industry calls in its study for the need to halt growth
in unit labour and non-wage costs through the determination of a National
Incomes policy in consultation with other social partners. I am all
for the establishment of a negotiated Incomes Policy. We had put up
a milestone some ten years ago. We should have built on this but unfortunately
this attempt was derailed through union pressure and soft negotiators
in the private sector.
The point of departure is that wage increases should not outpace productivity
I reiterate that the time is ripe for an assessment of the experience
with the current incomes policy regime with a view to ensure that it
reflects modern realities following appropriate consultations with all
We are also committed towards unleashing our companies from the burden
of exchange rate uncertainty and transaction costs with our major trading
partners through the adoption of the Euro. Submissions under the Pre-accession
Economic Programme indicate the path towards moving closer to the Maastricht
criteria of inflation, Government deficit and debt to GDP. We believe
that these are achievable goals that we shall attain, however, moving
at a pace which does not sacrifice the overall well-being of the domestic
The reaping of the true value of all resources must be secured. A case
in point is land which is one of Maltas scarcest resources. A
greater focus is needed on the monitoring and administration of public
industrial land use in order to achieve greater value for the use of
It is interesting that the study compiled by the Federation of Industry
indicates electricity prices which compare well to the EU average. The
main complaint by industry still mainly concerns power cuts. We are
committed to minimise as much as possible power cuts through further
investing in generation and distribution equipment.
Malta has invested heavily over the years to develop excellent air and
sea links and a modern telecommunication infrastructure. The liberalisation
of the telecommunications sector has already brought with it tangible
benefits to users of mobile telephony. Regulation in this sector will
hopefully bring about also more competitive prices in mobile fixed and
Various initiatives have been taken and are being taken to decrease
the burden caused by excess workers in the public service and public
corporations caused by ill-advised political decisions, inertia in public
sector management and unwarranted union interference in management prerogatives.
We believe that we cannot afford any longer to have persons earning
a living but not giving their fair share of work. Thus we need to make
a genuine effort to encourage these workers to embark on alternative
productive employment and embrace a new work ethic.
We are also committed towards decreasing the burden of bureaucracy on
the local businesses and are aiming at creating a public service which
is more business friendly. The investment in e-Government was an important
step towards developing more efficient Government services and also
for the regulation and proliferation of electronic commerce.
The establishment of Malta Enterprise is another step to improve the
efficiency of the public sector in dealing with businesses needs.
Malta Enterprise will be a lean organisation that provides a one stop
shop for all business requirements whether to improve the innovative
capability, to find overseas markets or to expand their productive activities.
ME will be following modern business support practices.
Maltas incentive structure for businesses is such that it aims
to target high value added activities to be located in Malta. Industry
is encouraged to take full advantage of the competitive incentives package
we have negotiated with the EU. In this context one must note that special
incentives are laid down under the Business Promotion Act for businesses
engaged in research. In addition business benefits from income tax exemption
on profits which are reinvested in the company.
We have also tried to help the finance of innovative businesses through
the setting up of the Kordin Business Incubation Centre. The Kordin
Business Incubation Centre provides physical space and technology infrastructure
in a convenient, yet low cost location. It is encouraging to note that
up to now there are 18 clients at the Kordin Business Incubation Centre
who are taking advantage of this opportunity to embark on an innovative
business. Initiatives by the Malta Council of Science and Technology
continue to support the trust towards innovation in Malta. We will continue
to invest public funds in this area as it is viewed to be critical for
the future of this country.
The FOI study indicates the low proportion of science and technology
graduates and persons with tertiary education. We cannot truly reap
the advantages of a knowledge based economy unless our labour force
is adequately prepared to take full advantage of the opportunities that
this presents. We are unfortunately still suffering from wrong past
policy decisions. It is only since 1987 that University and other post-secondary
institutions have opened up to a larger number of students. However
the rapid increase in University students from a few hundreds in the
late eighties to almost 9,000 students is an encouraging sign that the
situation is improving. We will continue to work to further increase
the uptake of further training by all our labour force.
The access to EU programmes will further enhance the research and educational
opportunities available to our companies. The set up of Malta Enterprise
should also facilitate in further enhancing the synergy between industry
and our educational institutions. Up to the setting up of Malta Enterprise,
the collaboration between industry and the academic world was very piecemeal
and uncoordinated. The partnership between businesses and educational
institutions through Malta Enterprise should result in mutual benefit.
Another factor which is impinging seriously on Maltas competitivity
is the situation of the local ports. It is of concern that it costs
in Malta about three times what it costs in Antwerp to handle goods
from ship to port gate. Maltas dependence on trade means that
the majority of the goods that we purchase or sell abroad are negatively
affected by such charges. A solution on this issue, with the full commitment
of partners must be achieved for the benefit of our economy.
Over the past years by working together we have managed to achieve important
results. Looking into the future there are real opportunities for businesses
to reap within a European context. Indeed we do not intend to sit on
our laurels and know that there is still much to be done to continue
to improve Maltas competitivity through further training of our
labour force, increased encouragement of innovation and the further
mitigation of our inefficiencies in our business environment.