Working hard to be proud Europeans

In view of the fact that there is more than a good chance that, in a few days, we will have a Labour government, it is important for the intelligent citizen to have a clear idea of what today's opposition really says that it intends to do when it takes over the ship of state. It is then up to each and every one of us to reflect soberly and make our own choices.

Take job creation and economic growth.

The Labour Party promises annual real GDP growth rates of four to six per cent. This statement cannot be read in a vacuum. It must be understood in the context of Malta's economic reality. Joseph Falzon has recently demonstrated that official statistics overestimate Malta's real GDP growth. He found that, between third quarter 2006 and third quarter 2007, real GDP at constant prices rose by 1.94 per cent and not at 4.14 per cent as claimed by the National Statistics Office.

Although the NSO has stood by its way of calculating GDP, insisting that is identical to that used throughout the EU, there are persistent doubts as to whether we are indeed being told the truth. Eurostat's somewhat rapid revision, a few weeks ago, of Malta's 2007 third quarter seasonally adjusted GDP growth rate from 0.11 per cent to 4.35 per cent has not added to the credibility of official statistics, wherever they come from.

In any case, we cannot afford to aim any lower than four to six per cent real growth consistently over the next five years if we want to at least retain standards of quality of life that our people are accustomed to and justly deserve. That's the target we need to aim at if we are not to fall further behind in the European Union. Having joined the EU - and let there be no doubt that we are in the EU to stay - is not enough. Now we need to work hard to keep to the best European standards and to be proud Europeans.

The Nationalist Party insists that the MLP aims to create only 6,000 jobs within four years. This is simply not true. The MLP never said that it aims at a total of 6,000 new jobs. What it has clearly and repeatedly stated is that it is aiming at no fewer than 6,000 jobs in manufacturing alone, of which 2,000 in existing establishments and 4,000 in green-field projects over the next four years.

Other jobs need be created in other productive sectors of the economy. There are insufficiently tapped opportunities in tourism, information technology-driven business, financial services, commercial health care, marine services and large scale regional projects such as the ambitious regional plan for the Grand Harbour and its environs.

Manufacturing contributes about a quarter of GDP. So, if we want to create more jobs evenly throughout all sectors of economic activity, we need to aim at about 24,000 jobs gross over the next four years. Between 2009 and 2012 about 20,500 persons will have reached the minimum school leaving age and about 23,400 will have reached pensionable age, 2,900 more than those old enough to seek employment.

Assuming that jobs left by pensioners become available for others and ignoring the net retardant effect of those that decide to stay on within the educational system after 16, you are left with about 17,600 new entrants into the labour market.

Add a further 5,000 jobs to bring down the unemployment inherited by the new Administration to socially acceptable levels and that brings us to around 22,600 jobs.

The rough target of 24,000 jobs in four years should, therefore, suffice to cover this as well as any temporary unemployment resulting from market-induced restructuring.

We need mainly jobs in sectors that produce goods and services for export. As a country that must just about import everything it needs, we need to at least balance the cost of our imports with what we earn from our exports.

Growth of domestic business - buying and selling goods and services between residents - is, of course, important but it ultimately depends on our ability to pay for imports with exports.

Moreover, the MLP's social programme will need to be financed. If we want an inclusive society that cares and wants only the best for its children, for its elderly, for its persons with special needs, that needs to compensate for market imperfections and the hardship caused by external economic, political, technological and climate changes over which it has little or no influence...we have to be able to afford it. We will have to pay for this principally from wealth generated by the export of goods and services.

All this will depend on our ability or otherwise to be internationally competitive. Unless we are sufficiently competitive - and competitiveness is not only or even mainly a question of labour costs - in a number of sectors or, at least, niches thereof, our exports of goods and services, tourism and industrial exports in the first place will continue to suffer and fall behind, followed by disinvestment.

This brings us to the need to attract new direct investment, local and foreign. My work at Napier University Business School - an institution that works closely with Scottish Enterprise - and for the Swiss outward investment promotion agency SOFI, as well as my close cooperation with the World Association of Investment Promotion Agencies WAIPA in Geneva, has impressed upon me the extraordinary intensity of global competition for foreign direct investment today. The Mediterranean region is an especially hot battle field for foreign investment and, putting it kindly, we are by far not the smartest at this game.

I have been deeply involved in the coming to Malta of some of the most important pharmaceutical investment over the past few years. Nobody makes a major investment in another country unless that country offers reasonable prospects of enabling the investor to become more competitive on the world market.

You may, however, be competitive today and uncompetitive tomorrow. You may be highly competitive but if another location becomes more competitive than yours, then your location is uncompetitive. In the case of pharmaceuticals, we are, quite frankly, playing dice with fortune. It is not enough to have seduced a few important pharmaceutical with promises of heaven of earth. We must maintain those promises.

Dr Vella teaches political economy and sociology of development at the University of Malta and is international programme coordinator of the Master of Science in Investment Promotion & Economic Development (MSc IPED) at Napier University, Edinburgh, where he is visiting professor.

m.vella@napier.ac.uk