05 July 2006

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Business Today

A globalisation mêlée

We must be competitive and entrepreneurial and be able to weather the storms that beset a micro state like ours with no natural resources

There is still a lingering thought in our minds that the Commonwealth Business Forum which was hosted last year has left us lasting memories of the shadowy gains of globalisation.
The minister of foreign affairs, who had co-ordinated the prestigious conference had assured us that money-spinning opportunities would be harvested in this resplendent gathering of top brass and royalty in our midst. The outlay of over Lm2.6 million was cordially accepted by the business community as our duty to leave a lasting impression with Commonwealth diplomats and their entourage.
New roads were constructed and a general sprucing up was evident. The Business Forum was organised when some 500 Commonwealth heads of government and business leaders were hosted at the newly completed Radisson Hotel. The main topic on the agenda was globalisation in today’s world. Undoubtedly the Forum had covered the aspect of strengthening national economies by generating cross-border trade particularly among the less affluent Commonwealth countries. Without any doubt harnessing globalisation means the consolidation of markets on the economic side and a fortification of the relations between people of different cultures on the social side.
Even the small and medium sized companies that are so numerous yet so fragile could take their chance to tap new markets and reap tangible kudos. It is quite understandable that many companies, who are used to trade or produce their goods only in a delimited area are often frightened to do the first step to export but a concerted marketing effort is sine qua non .There is no avoiding the poisoned chalice of the demanding journey towards cross-border trade. It is noticeable in some commonwealth countries, particularly underdeveloped African states, that their trade policy is not supporting the general trend to open their domestic markets to embrace globalisation. This is not without a reason. Persistent uses of protectionist measures are destroying the flowering of a liberalised market.
Certainly, in its own stride globalisation has the potential to improve the lives of many people in the globe so how does this phenomenon affect Malta with its host of small and medium sized enterprises? It is no surprise that GRTU extol the merits of these small businesses; that they constitute the salt of the earth and are the supporting pillars of a growing economy. Ideally, if a culture of “think small first” can be nurtured they can have a flourishing effect on our sluggish economy.
It translates into a mindset that can fire the self-esteem of entrepreneurs and create new jobs. The point is that small or medium sized businesses strive within their limited resources to participate on the development of new markets by good design and innovation. Effectively they are building the new opportunities with their pioneering spirit even though they are not high in the pecking order of politicians who tend to prefer “cigar swinging” zenith industrialists and SmartCity outsized projects.
The million dollar question to ask is whether globalisation and fair competition can co-exist amongst the fragile and under –capitalised SME’s. The answer is not easy since globalisation tends to ram the frontiers of free trade to the limit and consequently only the fittest will survive. Beyond any reasonable doubt many agree that the ultimate solution is to empower entrepreneurs with tax incentives such as lower labour taxes and exemptions from punitive government induced costs. Particularly for Malta the mantra should be confidence building and fostering a tangible feel good factor.
Intermittently politicians wax lyrical announcing domestic projects that cater for local consumption .This is fine but to survive and pay back our Lm1.3 billion in accumulated debt we need exports to earn foreign currency and create added value. A sense of déjà vu lingers on when we remember the progress of the island state of Singapore bereft of natural resources and encircled by low paid albeit hard working immigrants. We all heard it before that Malta can be the epitome of a successful tiger economy in the southern periphery of Europe. Since industrialisation in the 60’s we managed to reach 62% of the EU GDP. The dilemma is whether our politicians are sharpening their pencils to embrace competition and the challenges of globalisation. Opposition spokesmen, lament that post accession, there is a feeling of disillusionment that Malta’s own competition policy has yet to pass from words to deeds. The minister responsible for competition is optimistic to become a prime mover in the identification and elimination of uncompetitive pricing structures such as the recent reform of the port handling monopoly. In our countries the incumbent is directly involved in instigating a programmed dismantling of national and/or private monopolies through privatisations together with a rigorous enforcement of fair trading practices. Malta can be no exception.
Like India, we must be competitive and entrepreneurial and be able to weather the storms that beset a micro state like ours with no natural resources. Memories run short when one recalls that liberalisation and dismantling of subsidies that in the past were severely criticised and demonised as dancing to the tune of laissez-faire. But surely competition and a prudent regulatory policy are vital for a healthy market economy. Consider success stories such as India they have started early reforms to liberalise restrictive work practices. They boast of a world class educational system that has been the envy of engineers, technicians and IT programmers all over the world. An army of over one million IT specialists in Bangalore work on an outsourcing scheme for multi-national firms. In essence Bangalore is today’s replica of a low-cost Silicon Valley in India .Other examples abound in China.
Politicians in India are functioning in tandem with the foreign consultants to offload loss-making public sector entities and embrace innovation. India is steadily working to achieve a world class economy even though it is hampered with a bulging population and ethnic problems at its borders. If India can do it one need not hesitate to ask why Malta touted as the tiniest state in the EU (devoid of any ethnic and religious divisions) cannot emulate them.
Back to Malta, without a shadow of a doubt many hoteliers have been rallying government to forge ahead with a more liberalised and competitive environment primarily to attract new arrivals through opening of discussions with low-cost carriers. Yes, globalisation in mass air travel can be a threat to tour operators and the national airline but it also provides us with ample opportunities to throw overboard our fossilised “one million” arrivals glass ceiling.
Yet not all is doom and gloom and recently a comprehensive document has just been commissioned from the auditors of Air Malta advising government on the pitfalls of flooding the island with arrivals from low-cost airlines. Similar reports abound on how to harness competitiveness and match the revised Lisbon criteria. We are not alone in this sea of change. Only last winter France saw tidal waves of globalisation battering its economy and it enraged the lower classes and sons of immigrants facing record unemployment to riot in the main streets of Paris.
To counterbalance its bleak growth France is exercising a policy of protectionism and is in denial to outside suppliers. There is no way that globalisation can enjoy a field day in France. It continues to defy EU rules of the open internal market policy by blocking entry to outsiders particularly in the heavily subsidised agriculture sector. In their opinion the process of importing agricultural goods from other countries causes a threat to their domestic market. The French government persists in paying generous subventions to support the local farmers under the remit of the CAP rules.
The European Commission is condemning the behaviour of the French government since turning back the clock to protectionism means that traders want to compete with the illusory protection of import tariffs. It goes without saying that the promoters of EU single market laboured hard to avoid such abuses. As has happened locally, in my opinion there is no going back to imposition of levies which in the past created distorted market conditions.
We have to admit that globalisation is the flavour of the month and will not pass away. Countries need to embrace it and in particular set up higher levels of competitiveness by eliminating archaic work practices and removing subsidies to loss making state enterprises.
While competitiveness still proves elusive for many emerging economies, we cannot hide our head in the sand while the globalisation storm rages on unimpeded .We all need to embrace it or the referee of the game will show us a red card.

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