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SMEs riding economic storm successfully

As in most other European countries, small and medium sized enterprises in Malta seem to be riding the economic storm that still rages in the EU. The latest evidence of this comes from a European Commission report published during an SME week organised across the EU.

According to the report, “Malta leads the EU average in terms of the value added created by SMEs in the services industries. So far, Malta’s SME sector has been much less affected by the crisis engulfing the eurozone”. The report goes further and “places the performance of Malta’s SMEs at par with those of Austria and Germany”.

While these findings are flattering, one must be cautious in interpreting their significance. The EU report qualifies its comments on Malta’s SMEs by “complaining for the second year in a row about lack of data concerning Maltese SMEs which form the backbone of the island’s economy”. Why is it that we are often criticised by EU statisticians for presenting late or insufficient economic information about our businesses?

The 30,000 Maltese SMEs, unlike those in some other EU countries such as Germany, mostly cater for the domestic market and, as such, are less exposed to the fortunes of the international economy.

One can, therefore, conclude that the fact that consumption has been quite buoyant in Malta in the last few years gave small businesses the opportunity to continue to operate successfully.

On a more positive note it seems that the Government is at last getting a good grip on issues that affect small business negatively. One such issue is, of course, unnecessary bureaucracy. The setting up of Business First – a one stop shop developed by Malta Enterprise – and other initiatives aimed to promote the access of credit to SMEs seem to be giving positive results.

The effort to reduce the impact of bureaucracy on small businesses is also evident in the Government’s decision to eliminate the need to apply for a licence with the Trade Department for those wanting to set up a new business that is not health and food related. The war against unnecessary bureaucracy may not be won by a big bang strategy but by implementing effective surgical tactics that identify and eliminate the worst stumbling blocks in the growth path of small businesses.

During a seminar organised by the Malta Business Bureau and the European Commission Representation in Malta, speakers highlighted that “despite Malta’s accession to the EU more than eight years ago, parochialism and inward-looking attitude and insularity were major stumbling blocks to making inroads into the market of 500 million consumers”. This sobering reality presents a formidable challenge both to the Government and also to business leaders for the coming decade.

This country’s SMEs will have a more promising future if they start looking beyond our shores to boost their business. An MBB survey confirmed that “location and insularity were factors limiting Maltese business operations within the Single Market”.

The report also notes that “the Single Market has intensified foreign companies’ competition in the Maltese market but local operators wishing to conduct cross-border business in Europe were finding it harder to compete in the Single Market due to limited capacity and resources”. This is indeed an eye opener for all those who are involved in managing small businesses.

A clinical analysis of the challenges facing SMEs will help us to ensure that they promote economic growth despite the difficult international economic climate we are facing.

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