The Gama Group's decision to explore the possibility of setting up a manufacturing plant in Malta was good news indeed. It came at the proper time to boost the sinking morale of the unemployed and those who were on the verge of becoming redundant. In particular, it provided a sense of solace to the Denim factory workers who were still suffering from the traumatic effects that job losses and future uncertainties would undoubtedly cause.
A warm welcome was extended to the Austrian investors by all interested parties. They were assured that a concerted effort would be made to discard any hindrance which might jeopardise the whole process of establishing a feasible venture in Malta. Malta Enterprise and the Employment and Training Corporation made exception in bypassing the procedural red tape to ensure efficiency and expediency in the process. The management of the Denim factory pronounced their open book policy and extended their full support and cooperation to the prospective investors. Even the trade union representing the Denim workers publicly declared its willingness to establish sound industrial relations with the Austrian Group.
The government played its part as if it were a public sector achievement rather than a purely private sector opportunity. The Minister for Investments said that "The government is committed to assist the fast set up of Gama in Malta. The Gama officials were positively impressed by what Malta has to offer. They were already aware of the high-end quality production of two particular firms (both Maltese-owned) and are consequently very hopeful that they can retrain the ex-Denim employees to the higher standards required by them. They also stated that even in this field, the fact that employees understand English gives Malta an edge over other competitors".
What would have been a blessing in disguise has turned out to become smoke in the air! The due diligence report said it all. The Austrian Group was asking too much from our local bank. The deal was struck off and Gama left us empty-handed.
The aftermath of this unfortunate outcome was characterised with the blame-the-other syndrome. The government and public authorities kept a relatively low profile this time round. The trade union asked for the Prime Minister's intervention. The bank refused to comment in detail since its participation in the deal contained commercial sensitivity. The opposition indulged in the 20 question fact-finding inquiry. The prospective employees once again questioned their destiny. Their high hopes faded away more than ever before!
There were no winners in this game. The country, the government, the investors, the industry and the workers were defeated and all of them suffered from a hit-and-run investment misfortune. But was it an unfortunate experience?
Our domestic growth prospects appear so weak. It therefore falls upon us to try and attract foreign investors in order to promote economic development. We must devise a medium-to-long-term strategy based on fiscal incentives, efficient physical infrastructural facilities and human capital formation in order to improve the investment climate for foreign direct investment inflows and their export-orientation.
Designing efficient incentive programmes is not an easy task and the competition between governments trying to attract FDI is likely to complicate the task even further. But we need to set the rules of the game and formulate our own FDI incentive policy if we want to raise our technological level, create new employment and promote economic growth.
As a member state of the European Union we are obliged to adhere to the policy of investment incentives harmonisation and its specific guidelines but that shall not be considered as an insurmountable barrier to meet our national targets. It is a known fact that many countries will continue using FDI incentives as important policy tools.
The use of investment incentives focusing exclusively on foreign firms is not an efficient way to raise national welfare. It has been proven that spillovers of foreign technology and skill to local industry, the motive for financial subsidies to inward FDI, are not an automatic consequence of foreign investment.
Such benefits are realised only if local firms have the ability and motivation to invest in absorbing foreign technologies and skills. Hence, good governance in the area of FDI policy is to consider the investment incentive packages as part of the county's overall industrial policy and make any incentives available on equal terms to all investors, foreign and local. The incentives shall focus on those activities that create potential for spillovers, such as education, training, research and development.
Another fundamental for economic growth is the infrastructure availability. Whether it is transport, telecommunications, information or energy, these infrastructures contribute significantly to the relative attractiveness of our country when luring foreign investment by multinational firms. Unfortunately, although we have made considerable improvement in this respect, we tend to take things for granted and fail to conduct periodic reviews of the overall situation in order to ensure that our infrastructural set-up conforms to the modern trends and the demands of foreign and local investors. Infrastructure development should become an integral part of the strategy to attract FDI inflows in general and export-oriented production from multinationals in particular.
The type of human capital necessary to attract foreign direct investment obviously depends on the type of FDI we are targeting! To attract high-value added multinationals, we cannot rely on an adult population with basic schooling but we need to develop the tertiary education sector with close collaboration with the industry so as to formulate demand-driven programmes.
As far as I know, the right formula of synchronisation between the university and industry is still undiscovered. Our graduates are not finding jobs matching their academic specialisation and the thought of experiencing a brain drain in the not so distant future is not uncommon.
With all due respect to those who are reporting positive results in our economic growth, investment opportunities and job creation, it is imperative that we now turn to hard action and adopt a hands-on approach to regenerate the necessary climate which attracts new investment. So far, the rate of success has been relatively insignificant and if we persist in our ostensible progress without revisiting our modus operandi we would never make the grade.
We cannot spare time to play more Gama games!