The European Commission has highlighted Malta’s weakness in monitoring the implementation of reforms that improve its competitiveness, citing SmartCity as an example.
Ambitious plans are not always backed by clear and reliable implementation strategies
“Originally conceived as an IT cluster – similar to the planned Life Science centre (being implemented by Malta Enterprise) – it is criticised to have turned into a real estate venture at the expense of the envisaged IT focus,” according to the latest competiveness report. The Commission is advising Malta to make sure it rigorously monitors the implementation of various measures to improve the island’s competitiveness as this seems to be lacking.
While recognising that Malta has in the last years introduced various reforms to achieve this goal, Brussels remains critical of their overall implementation, mentioning SmartCity as an example.
When compared to the rest of the EU, Malta is still considered to be far below the EU average, particularly in research and development (R&D) and labour productivity.
Referring particularly to the National Research and Innovation Strategy 2011-2020, which according to the report is still being drawn up, the Commission says: “The design and announcement of sophisticated strategies is not necessarily a guarantee that they will be fully implemented in the way they were intended to... The SmartCity project is a case in point.”
Brussels also reiterated that Malta should improve the overall qualifications of its workforce if further progress was to be achieved.
The competitiveness report analyses the progress achieved by member states during the past years to improve their overall competitiveness, particularly in the manufacturing industry.
Malta has been ranked in the third of four distinctive groups – described as “catching up in terms of GDP per capita, and whose trade specialisation is in high-innovation intensity sectors and technology-driven industries”.
According to the Commission, Malta, together with the Czech Republic, Hungary, Poland, Slovakia and Slovenia, has achieved a structural change from labour intensive industries towards technology-driven industries on both production and trade.
The report commended the various initiatives being taken by the government to address shortcomings in the economy’s competitiveness, particularly the “significant reduction of state aid” and its channelling to more productive areas; the increase in R&D funding including incentives to industry; enlarging the pool of Maltese researchers and massive investments in hi-tech education. However, Brussels said better monitoring to ensure these measures were implemented was crucial.
“The government continues to pursue the reform agenda. However, the often prevailing impetus and ambitious plans are not always backed up by clear and reliable implementation strategies,” the Commission said.
To fully realise the results of the announced measures, a reinforced emphasis on implementation, follow-up and tools or processes that helped regularly measure the implementation progress of announced policies in a transparent way “does seem advisable”, Brussels said.
On a general level, the EU’s report shows manufacturing in Malta accounts for 13.3 per cent of total value added and although Malta’s R&D intensity – considering its industrial structure – was far below the EU average, “its position on the quality ladder is much better”.
The Commission’s report also states Malta has experienced an appreciation of the real effective exchange rate by 16 per cent over the last decade, which is below the EU average (21 per cent), indicating a loss in cost and price competitiveness.
Nominal unit labour costs have increased by 29 per cent between 2000 and 2010, compared to an increase of 14 per cent in the EU and 20 per cent in the eurozone. Meanwhile, estimated labour productivity per hour worked is about 18 percentage points below the EU average and about 32 percentage points below the eurozone average.