23 March 2005

The Web

Malta’s Lisbon challenge

The fact that the score board published by the Centre for Economic Reform, a London based think tank, has found that Malta is lagging seriously behind in meeting the goals of the Lisbon Agenda is of concern and carries serious repercussions to the long time living standards in our country.
The hallmark of this European strategy for the creation of jobs is competitiveness. All countries, including our own, are being encouraged to build competitive economies in order to be able to create wealth and jobs. This latest report gives us low marks, and in fact places us at the bottom of the rankings, in a number of areas. These include the enterprise section, the lack of sufficient female participation in the economy, the lack of skills and of a secondary education for many 20 to 24 year olds, the lack of sustainable development, the lack of electricity generated from renewable sources and the great amount of waste dumping. Our country also comes in for direct criticism for the lack of sufficient and immediate supply of data for many of the key Lisbon measures.
Regrettably, as a result of entrenched shortcomings in our economy the process of competitivity enhancement in Malta is taking far too long. The reasons behind this delay are various but two particular reasons warrant mentioning. Malta has strong unions dead bent on preserving the present extremely generous social system. Second is the many trade restrictive practices still in existence that are hindering free trade in the country. The accumulation of these two factors working in an atmosphere where all Maltese governments have traditionally pandered to the wishes of the trade unions has created the protected economy, which is Malta.
With our admission into the European Union, all of this has to change. The rules of the game are changing and indeed it is a whole new ball game now. Unfortunately not all have noticed, or noticed sufficiently quickly, that the rules of the game are changing. The arbiter of the game is no longer exclusively our government, but indeed the European Commission, which regularly issues regulations and directives that have a direct effect on our local economy.
The hallmark of a European economy is cross frontier European trade, liberalised services throughout the European Union, freedom of trade services residences and money flows. All of this is a culture shock to the traditional way of running the Maltese economy. The rule is freedom, yet the traditional way of operating locally is protectionism. These past practices must be thrown to the wind and, in all fairness, this is precisely what the government is trying to do. And it is meeting no small amount of resistance from the unions.
The objectives of the Lisbon strategy cannot be reached without the joint effort of all the social partners. This requires the commitment of all the protagonists who take a joint ownership of the project to make Malta competitive. This cannot happen if, as in the case of the removal of a compensatory day of leave for holidays falling on the weekend, one wastes two to three solid months arguing endlessly and failing to reach agreement.
Malta can only become competitive if we produce more with the same unit cost. The blue print for competitivity is crystal clear. Reduce the public service work force, reduce government induced costs, reduce public holidays, cut bureaucracy, remove restricted practices thereby reducing costs of transportation both air and sea linking Malta. Remove all monopolies that for years have simply drained the consumer with superficially high charges.
Indeed, all these measures may not be enough unless they are supplemented with a culture change. Malta is lucky to have an entrepreneurial spirit naturally ingrained in its workforce. No one works harder than the local work force when working for himself or when benefiting from incentives.
The secret is to creatively draw up incentives that will inevitably increase productivity. There is certainly no magic formula for making the country competitive. However, there are certainly a number of hurdles preventing this from materialising that could be removed in order to increase the possibility of competitivity materialising.
Unless these hurdles are removed achieving the Lisbon Agenda goals will remain a pipe dream.

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Editor: Saviour Balzan
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