Editorial | Adapting to survive

Bouncing back from the economic slump caused by COVID-19 will require the country to adapt to changed realities.

The tourism markets of yesteryear may not be amenable to tap into in a post-COVID world; changed human behaviour may require new business responses.

Emphasis on greener technology, greater electrification and with it a higher demand for clean electricity, will require new and different responses.

Within this context, the words of economist Gordon Cordina, Bank of Valletta chair, require serious consideration.

“Not the strongest and the smartest will survive, but the most adaptable ones,” he tells BusinessToday.

Malta’s small economy has proven that it can adjust to circumstances, he says. The adjustments required to get over the COVID pandemic may be the biggest ones in decades.

We are already seeing this mentality with government’s tourism recovery plan that seeks to target the ‘free, independent traveller’ with incentives. The understanding is that the tried and tested markets of yesteryear may not be as responsive to travel in the immediate aftermath of a post-COVD world. Waiting for those markets to recover could see Malta miss out on the bus.

On a local level, businesses will also have to adapt. Models introduced over the past year to try and survive the forced closures and mitigation measures, may have to be adapted further into long-term business propositions.

Shops may use better hygiene methods as a competitive advantage, while restaurants and retail outlets may have to step up their delivery services.

Cordina argues that BOV and the banking sector as a whole must focus on niches, on digitalisation and going green, which will help the economy transform. Banks must be catalysts of change.

But government must also be a driving force for transformation by introducing incentives and support measures to enable companies to evolve and grow.

The going will be slow and tough. Cordina expects strong economic recovery in 2023.

This means that the next 18 months will be crucial to get the cogs of the economy working.

But before that it remains pertinent to retain the robust coronavirus vaccination programme so that the pandemic can be brought under control.

Added to this delicate situation is the reform programme that Malta has to maintain in the financial services sector as part of its international commitments. The outcome of the Moneyval test later this year is an important appointment for the country.

Finding the will to combat financial crime and beefing up the regulatory authorities has led to stronger vigilance, which may have caused a culture shock.

However, having regulatory authorities of repute that offer peace of mind will be important for the survival of the financial services sector that has taken a reputational battering over the past few years. The sector cannot afford a lax attitude.

For many years, growth in Malta’s financial services sector outpaced the authorities tasked to regulate it, a situation that ended up creating serious problems. The bad apples took advantage of this to the detriment of the country.

Getting tough on financial crime will help weed out the cowboys and serves to protect companies and practitioners who operate in an upright manner.

But passing the Moneyval test is not an end in itself. After Moneyval the country must retain a sense of vigilance while ensuring that the financial services sector adapts to new digital realities and risks.

Navigating these waters will be tough and not without its problems. However, survival will depend on being nimble enough to change and take advantage of the opportunities that will arise. Malta has done this in the past and there is no reason why it cannot do so again now.