Case against piling up of new costs to industry

Just four days before the presentation of the Budget for next year, the heads of three very important manufacturing firms stuck their neck out and made a strong case against the piling up of what they called unrealistic costs, lack of special focus on the manufacturing sector and the authorities’ inflexibility. These are strong accusations prompted, no doubt, by the firms’ own experiences in the business.

It is not without good reason that their views made a strong impact for each of the three firms has been running quite successfully in Malta, two of them for 40 years. It may be difficult to find fault with their arguments over rising costs. No firm, whether in manufacturing, retail or tourism, is likely to cheer whenever costs go up.

But what has perhaps struck a wrong cord was the charge that the government lacks a special focus on the manufacturing sector. They may well back up this charge by arguing that, had it focused on the sector’s role more directly, the government would have made it a point not to raise additional costs to industry.

Well, that may very well be so, but it is hardly likely that costs remain static here or, for that matter, anywhere else. If costs rise at a higher rate than those abroad, then it is true that industry becomes uncompetitive and there have been cases in past years where firms had had to relocate their operations as higher production costs made their business financially unfeasible. But, then, the government could hardly be accused of ignoring industry or that it is failing to focus on the sector. Its direct action at the time this mattered most, that is, at the time of the recession, proves otherwise.

The three firms argue that prohibitive rents for office space and shop floors, the proposed service charge and escalating utility rates are hitting Malta’s competitiveness. This is definitely no good news for Malta, more so at a time when the austerity measures other countries are taking to put their financial house in order are expected to unleash another recession.

What appears to be irking the firms most is the proposed service charge. One of the firms’ chiefs, Andy Gatesy, said: “Why do we have to talk about a service charge now? This has not been an issue for 40 years.”

He is right, the service charge should not be turned into an issue. It is the firms’ competitiveness that counts most and every effort ought to be made to ensure that no additional costs beyond what is absolutely necessary are introduced. In any case, the Finance Minister said in his Budget speech that, following consultation with industry’s representatives, the service charge has been cut to €3.50 per square metre. The funds will go to the tenants’ associations when these are set up.

The views expressed by the three manufacturers ought to be well considered by the government as even the fact that they have chosen to speak publicly suggests that the matter of competitiveness needs to be taken up with greater vigour. The last thing they would want is to be taken for granted. It is all very well to help small- and medium-sized enterprises, as the government is once again planning to do over the next financial year, but it would be a mistake not to give sufficient attention to the plight of firms that have been operating here successfully for so many years.