A healthy economy requires a balanced economy. In such an economy, manufacturing still has a valid and important contribution to make. Studies have shown that the positive effects of a strong manufacturing base have ripple effects across a range of other sectors. It has direct links with various other sectors, such as construction, warehousing, transportation, the wholesale and retail trade of the finished products, creating benefits, jobs and opportunities for investment.
An economy without a strong manufacturing presence is not a complete economy- Matthias Fauser
Employing over 22,000 people, the contribution of manufacturing to our economy may actually be larger than we think, as statistics tend to exclude those service sectors which derive their business from manufacturing companies.
The situation is not a rosy one. According to the National Statistics Office, in July 2011, industrial production decreased by 4.8 per cent compared to July 2010. The manufacture of computer, electronic and optical products, which account for 18.5 per cent of the total industry, dropped to 12.6 per cent. Other reductions were registered in the manufacture of food products, beverages, wearing apparel, chemicals and chemical products and the manufacture of basic pharmaceutical products and preparations.
On the other hand, the NSO reports that the manufacture of textiles, printing and reproduction of media, manufacture of rubber and plastic products, motor vehicles, trailers and semi-trailers all registered increases when compared to the corresponding month last year.
As reflected in the September 2011 European business and consumer confidence surveys, business confidence was recovering well for the first half of the year, but indications post-June showed a sharp dive across a number of sectors, including manufacturing. Although industry remains above its long-term average, its performance has worsened, on the basis of a drop in production expectations and managers’ appraisal of the level of order books.
This difficult economic scenario further puts in evidence the crucial role that the manufacturing sector has to play in the economy. Indeed, locally the manufacturing sector is fairly diversified, with operators in electronics, plastics, pharmaceutical, communication technologies and automotive components, among others.
Over the years, the sector has, to a large extent, restructured itself and is now adopting more lean approaches. It also shows promise of developing into higher value-added activities through R&D activities and product and process (re-) design. In terms of development, the role of indigenous start-ups needs to be considered more seriously.
What is most significant is that the existing manufacturing base has survived in spite of the international crisis. This can only be a testimony to the capability and adaptability of our local manufacturing workforce, business leadership and sound investments.
The Manufacturing and Other Industries Economic Group (MEG) of the Malta Chamber is concerned that this year’s Pre-Budget document was devoid of any significant recommendations in relation to industry. It is seen that industry requires serious and effective plans to curb rising trend in operating costs; improvements in the general education levels of the manufacturing workforce; the addressing of skill mismatches especially vis-à-vis more specialised and technical workers; and an industrial policy which complements the development of existing enterprises as well as to map out the country’s strategic vision for the sector.
Indeed, a clear long-term industrial strategy for Malta needs to be drafted in consultation with the Malta Chamber and other stakeholders, with a focus on the long term sustainability and competitiveness of this sector. Such a strategy should place innovation and R&D, coupled with internationalisation efforts, human resources, the efficient use of resources and the environment at centre stage. Productivity and cost reduction have to be the driving force, with the aim to at least, safeguard current investments.
Furthermore, the sector demands sound public policies and good regulation in order to minimise economic shocks and induced costs to enterprises. This requires proper management and development of the public infrastructure that is needed for the sector to operate in. The MEG firmly believes that this infrastructure must not only be seen as a commercial venture, but rather as an economic development instrument. For instance, the leasing of government factory premises must reflect Malta’s insular realities. The authorities must be more sensitive to the consequences of increasing rent rates and other associated charges on the competitiveness of the manufacturing sector. It is imperative that new policies are only introduced after a thorough cost impact assessment is undertaken to assess the ability of enterprises to absorb any resulting cost increases.
In the management of industrial parks, the MEG also stresses the important role of tenants’ associations, as a means to assist in the definition of expected standards related to the upkeep of industrial estates and any set service charge to support such standards. It must be noted that there are already two existing tenants associations, those of Bulebel and Mosta Technopark that have proved very successful and enjoy the support of the tenants of these two industrial estates.
Manufacturing is still a vital and important sector and in spite of the challenging times, it has continued to survive through diversification. It also continues to be one of the main sources of employment across all levels of competencies, as well as a principal provider of economic stability. Manufacturing must be given the importance it deserves, starting with a political culture that embraces the vision that industry is essential to our economy and therefore is committed to creating an environment within which the sector can be nurtured and further developed.
An economy without a strong manufacturing presence is not a complete economy. The UK and US economies can be seen as proof of this, with their respective governments turning to manufacturing once again. Meanwhile, German economy’s manufacturing sector has gone from strength to strength.
The MEG strongly urges the competent authorities to prioritise the manufacturing sector and to ensure that in such sensitive international economic scenarios, decisions need to be taken with caution. While this has to be achieved with the involvement of all, manufacturing enterprises are committed to drive this agenda forward.
The author is the chairman of the Manufacturers and Other Industries Economic Group of The Malta Chamber of Commerce, Enterprise and Industry.