Malta ranks high in growth competitiveness

Malta has been ranked 19th out of 102 countries for growth competitiveness in the World Economic Forum's annual report, and 42nd in a separate ranking for business competitiveness.

This is the first time that Malta has been featured in the report, entitled the Global Competitiveness Report, released since 1979.

The scope of the report has grown considerably since last year, when only 80 countries were featured.

The WEF report is based on a combination of publicly available data and survey data capturing the perceptions and observations of business leaders operating in a given country.

The survey data for Malta are drawn from an executive opinion survey undertaken by local consultancy firm EMCS Ltd with the support of the Malta Council for Science and Technology.

Consultants spoke to 100 companies, a mix of foreign-owned, Maltese-owned with international or export connections, and others with a strong government involvement.

They were supported by the constituted bodies including the Chamber of Commerce, Federation of Industry, Union Haddiema Maghqudin, Bank of Valletta, Malta Employers' Association and the Central Bank of Malta.

In the future, a foundation to be launched next month, to be called Competitive Malta - Foundation for National Competitiveness, will handle the survey as the World Economic Forum's partner institute. The foundation will be backed and funded by 10 entities, including MCST, EMCS and eight companies.

The Global Competitiveness Report uses two complementary indices to assess a country's competitiveness: the Growth Competitiveness Index (GCI) and the Business Competitivess Index (BCI).

The GCI analyses the potential of a country to attain sustained economic growth over the medium and long term. The index is founded on three central components: the macroeconomic environment, the quality of public institutions, and technology.

The BCI identifies the factors that underpin high current productivity and, hence, current economic performance measured by the level of GDP per person. The factors range from company operations, to the national business environment, and from input factors and demand to support industries.

Malta was outperformed in the BCI by six EU acceding countries, although it fared much better in the GCI, achieving the highest ranking among Mediterranean countries.

In a section classifying the participant countries' business competitiveness, Malta was listed with the "overachievers", described as having a per capita income which was high relative to its microeconomic "competitiveness".

Speaking at a news conference to present the results, EMCS chairman John Grech said the indices should be seen as a form of benchmarking, not as a "breast beating exercise" when Malta performed badly, but as a way of analysing where the country could do better.

EMCS director Adrian Said highlighted the importance of the report, saying it was one of the main factors taken into consideration by potential investors.

It clearly showed the need for more investment in innovation and research and development, the MCST CEO Wilfred Kenely said. The European target - which is significantly met by many of the countries which ranked highly - is three per cent of GDP. Although national figures were not available, the business sector investment makes up a mere 0.12 per cent of GDP.

Finland ranked first in both the indices, with the US in second place, and Sweden in third.

The report accounts for 97.8 per cent of the world's GDP.

The results of the Global Competitiveness Report will be explained in further detail by Emma Loades, manager of the Global Competitiveness Programme, at an EMCS conference entitled: Is Malta Competitive? Building a viable strategy for business and the country, which will be held at the Corinthia San Gorg on November 18.

The World Economic Forum is an independent international organisation committed to improving the state of the world. The forum provides a collaborative framework for the world's leaders to address global issues, engaging particularly its corporate members in global citizenship.

Growth Competitiveness Index (GCI)

Malta ranks 19 out of 102 countries just after Korea (18), Austria (17), Canada (16) and the UK (15).

The country's notable competitive advantage in relation to the other participating countries is the result of the following (ranking in brackets):

FDI technology transfer (1st),
Government prioritisation of ICT (6th),
Interest rate spread in 2002 (6th),
Government success in ICT promotion (7th),
Recession expectations (16th),
Organised crime (16th),
Irregular payments in tax collection (16th),
Irregular payment in public utilities (18th),
Property rights (18th).

On the other hand the main competitive disadvantages in relation to the other participants among others include:

Government surplus/deficit (67th),
National savings rate 2002 (62nd),
University/industry research collaboration (62nd),
Company spending on research and development (55th),
Tertiary enrolment (58th),
Extent of distortive government subsidies (41st),
Technological sophistication (30th),
Inflation 2002 (32nd),
Country credit rating 2003 (28th),
Public trust of politicians (22nd)

This indicates that Malta's potential to attain sustained economic growth over the medium- and long-term ranks among those ranking in the top 20.

The main contributors to this are the fact that foreign direct investment in Malta has always contributed to a transfer of skills and technology to local enterprise.

Other factors that are given importance by WEF include strong property rights, low level of corruption and organised crime and the increased commitment by the government towards the promotion of ICT. The latter is of particular relevance especially when one considers that competitiveness in the medium- to long-term will be largely determined by ICT.

Business Competitiveness Index (BCI)

On the other hand, Malta ranks 42nd in the Business Competitiveness Index, which looks into the factors that underpin high current productivity and, hence, current economic performance measured by the level of GDP per person.

The outcome of this ranking is summarised as follows:

Sophistication of company operations and strategy is determined by production process sophistication (27th),
Nature of competitive advantage (30th),
Value chain presence (31st).

On the other hand, Malta scored low on:

Control of international distribution (75th),
Extent of incentive compensation (68th)
Reliance on professional management (64th)

The quality of the national business environment is determined by:

Local equity market access (12th),
Quality of the educational system (16th),
Judicial independence (20th).

On the other hand, Malta scored low on:

Stringency of environmental regulations (85th),
Prevalence of mergers and acquisitions (83rd),
Local availability of components and parts (81st).

It shows that the factors that underpin high current productivity and, hence, current economic performance, lag behind those of Malta's European counterparts.

This is clearly explained through the low level of sophistication of company operations and strategy and a general lack in the quality of the national business environment. Indeed, these could be explained by the relative lack of control in the marketing of exported products and services (including tourism).

This is also exacerbated by the extent to which companies generally tend to be run by non-professional managers together with the fact that employees are not usually offered compensation for developing new ideas for improved competitiveness in their company.

It is also evident that more emphasis needs to be put by Malta to improve the enforcement of environmental regulations and the need to create a new culture of entrepreneurial exchange through mergers and acquisitions. Malta also lacks clusters, thus increasing its reliability on competing countries to source components and parts. This, however, is understandable due to the small size of the country.