Editorial | Construction and economic diversification

The construction industry on its own is not a major economic driver when compared to the value added delivered by other sectors.

However, it helps drive other aspects of the economy such as real estate, quarrying and a multitude of services required to complete buildings.

In this sense, it is an important cog within the value chain, also because the money it generates gets distributed among a wide range of workers and self-employed individuals.

Statistics from the National Statistics Office show that last year, construction was one of a few sectors that contributed a higher value added to the economy despite the impact of the pandemic.

This resilience was aided and abetted by government schemes to stimulate the buyers’ market but the truth remains that the sector cannot be given the cold shoulder.

Over the years, successive governments have always pandered to the wishes of the construction sector, not least because of the feel-good factor it helps generate. The current administration is no exception.

Since 2013, the industry has boomed with new developments and ambitious projects that have seen towers go up in Paceville, Mrieħel and Gżira.

But now there seems to be a rethink within government. Finance Minister Clyde Caruana was the first to voice the view that the country needs to wean itself off the construction industry and diversify its portfolio.

Caruana said the rampant development of recent years had its flipside in the form of inconvenience caused to neighbourhoods and pressure on the environment.

Prime Minister Robert Abela was quick to cushion that statement by saying the industry is still an important one. But yesterday, during a meeting with the Malta Developers Association, the Prime Minister qualified government’s thinking: “The building industry is a key driver but it must not be the only one.”

This leader cannot foresee a situation where the government takes some form of radical action to curb construction and speculative development – a tax on vacant dwellings would be one way of shocking the system.

But it is good that the government talks of diversification. It has already committed to invest €400 million in upgrading industrial zones and creating modern high-rise spaces for the manufacturing and research and development industries.

This plan must get underway in a bid to attract new industries that specialise in technology, pharmaceuticals, artificial intelligence, drone development, medical equipment and other areas, which the country can capitalise on.

Diversification must also look at creating a research and development industry in the renewable energy sector. With Malta declaring an exclusive economic zone earlier this summer it has vast sea areas which can be utilised to study floating solar panels and floating wind turbines.

Within this drive to attract foreign direct investment, government must not lose sight of indigenous industries and service providers. They must be encouraged to grow, reinvent themselves, diversify and explore expansions beyond the confines of this country.

Red tape must be slashed but this has to be accompanied by serious oversight to avoid the bad apples slipping through.

Crucial to all this is strengthening Malta’s international reputation once again by ensuring the institutions tasked to serve as watchdogs against financial crime are first class.

A bustling economy that provides a multitude of job and growth opportunities can be achieved. It does not mean construction will come to a halt but it will not be the easy option out to stimulate economic growth.