23 February 2005

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A pro-active, competitive, enterprising outlook
Investment, Industry and Information Technology Minister Austin Gatt speaks at the second annual Management Studies Conference organised by the Institute of Business and Commerce of the Malta College of Arts, Science and Technology themed ‘Our outlook?
Pro-active, competitive, enterprising’

You have chosen a timely and topical question for your discussion. The European Union and its member states, not least our own country, is at the moment undertaking a Europe-wide exercise of just the questions you have posited. Five years ago, leaders of the old European Union set out a ten year agenda for Europe. Perhaps in the enthusiasm of the new century, the new currency and the upcoming enlargement –perhaps in the wisdom of ambition and aiming high – those leaders set a high target for the rest of us. By 2010, Europe would be the most competitive region in the world with the most dynamic, most informed and most prosperous economy of the entire globe.
We are half way through the Lisbon decade and it does not take much to realise that it will take not a little pushing and pulling to get anywhere near those targets by 2010. There is no reason to be despair of course. Europe is largely on the right track. It has a relatively vibrant economy which has picked up somewhat from the doldrums of the late 90s; it has managed to found the single currency that, as predicted, has become a global character in the monetary world; it has managed to harness technology and innovation in a scale unprecedented in previous decades; it has managed to enlarge Eastwards welcoming in its fold the sundered countries that not fifteen years earlier belonged to what was then called ‘the Second World’ … literally another world.
Malta is also largely on the right track. Our economy is driven by private enterprise and individual risk in an ever greater proportion compared to any prior period in our history. All indices of gross product growth and of individual wealth in all levels of our society over the past fifteen years can give us nothing but reasons to be optimistic. And we have succeeded in the most ambitious political target our country set out for itself since Independence: to become part of the Europe that is now thinking about its own – and therefore our own – future.
Europe is asking itself what it must do to become what it set out to be: the wealthiest, most vibrant, most competitive economy in the world: and so should, and so are we.
For starters, we need a better environment for our small and medium-sized businesses. The European Commission rightly recognised that there are just too many obstacles to becoming an entrepreneur or starting a business, and therefore, Europe is missing opportunities. The barriers of bureaucracy and restriction are familiar to any Maltese business. These are the hard barriers. But there are also soft barriers: particularly Maltese incentives, I would call them, to attract individuals away from entrepreneurship and private risk. The attractive prospect of investing money in property (a far safer prospect than any intangible investment, yet one with much smaller return and practically no value added to the rest of our economy). There is also the false security of public employment that numbs an over-sized portion of our productive labour force in the comfort of a job for life.
We would secondly need to start benefiting from EU membership beyond the narrow, colonial attitude of an arrangement between the Government and the European bureaucracy for the part-funding of public projects. The money we get from the EU is certainly an important benefit of membership, but it is negligible when compared with the real point of joining: opening up for our own enterprise the internal European market – the largest single market of the entire planet.
I do not mean to say that the Government does not have a crucial role in this as well. Maltese access to the internal market will not fall like rain from an unclouded sky. We have to continue to polish our regulatory systems to attune them better to the needs of a European rather than a narrowly Maltese market. We have to provide the right market conditions for doing business on a European scale. Our work in developing a comprehensive eGovernment environment for business between enterprise and public authorities to be conducted efficiently and with a much reduced risk of fraud and corruption ultimately has this same broad aim.
Malta also has much yet to do to free itself completely from the shackles of protection and to implement fully and entirely the European competition environment. Difficult as it may be to face up to the realities of looking away from our past, we must reduce and redirect the aid we squandered on failing industries and redirect those moneys instead to address market failures in sectors with a high growth potential as well as to stimulate innovation. The Government’s policy on reducing to nothing by 2009 operational subsidies to the Shipyards is neither partisan vindictiveness nor a Brussels dictum: it is a fundamental economic need of our country to risk its little money where value added can be genuinely expected.
It is also our duty to encourage more research and development. The simple fact of the matter is that unless its new, it will not sell. Innovation is crucial to competitiveness on the world stage. To encourage this, we will this year be introducing attractive tax incentives to make it cheaper and easier for the private sector to reinvest some of its profits from old ideas into coming up with new ones.
This leads me to the fifth point that I would like to make in which Malta is more than certainly on the right track but that having started on such a rapid rhythm must continue to work hard to sustain it until 2010 and beyond. The performance of Malta’s as well as any other economy is crucially dependent on strengthening investment and the use of new technologies, particularly ICTs, by both the private and public sectors.
We are going through our second ICT programme – the first one covering the period 2000 to 2003. The first eMalta programme was a ‘catching up’ programme aimed at introducing the first genuine digital divide initiatives to promote digital literacy among its ideal candidates and giving life to a then new eGovernment programme. The current ICT programme for Malta is more ambitious. Already in 2003, when the current strategy was being prepared, it was becoming clear that we cannot be any less ambitious than the authors of the Lisbon Strategy: by 2010 we are to enjoy a genuinely prosperous, competitive and vibrant economy and join the leaders in the leading region on a world scale.
To sum up therefore, the steps to 2010 will, in my view need to be: a better environment for small enterprise to start up, emerge and grow in a sustainable manner; a fuller, more successful access to the benefits of the European single market; a redirection of funds squandered in unjustified state aid into sectors of the economy that can return exponential added value to the rest of the economy; the promotion of research and development; and the widespread use of information and communications technologies throughout a Maltese information society and economy.
I do not mean to suggest it will be easy. Nor do I mean to suggest that this target will be reached without us working hard to achieve it. Yet if it is worth doing, it has to be hard to do.

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