When The Business Observer asked stakeholders whether they thought there was a long-term future for manufacturing in Malta, the answer was sharp and clear: yes, there is, but Malta must remain competitive. Two other questions were a bit more difficult to answer.

Was it realistic for Malta to aim for manufacturing to reach 20 per cent of gross domestic product again given the global and national realities? What would help the island get there?

The target is set in the European Commission’s policy for industrial renaissance, a comprehensive blueprint meant to support the competitiveness of European industry. The background leading to its adoption is quite disheartening.

Europe lost no fewer than 3.5 million jobs since 2008, with the share of manufacturing to gross domestic product falling from 15.4 per cent to 15.1 per cent (five countries, including Germany and the Netherlands, had actually raised their share of manufacturing in GDP).

Brussels believes that a strong industrial base will be a key to Europe’s economic recovery and competitiveness and has submitted growth-enhancement recommendations to member states in the hope of managing to reverse the downward trend and hit the 20 per cent target.

Malta, whose industrial background is similar to that experienced by other countries that had to change the face of their economy, was somewhat slow in going up the scale in development but steady efforts to attract a greater inflow of foreign direct investment had brought about significant changes in manufacturing and the economy.

Other sectors grew fast, providing new and exciting areas for employment. In the process, the island today has a more balanced mix of economic activity. In the light of the rapid expansion of the services sector, manufacturing might have receded somewhat into the background, with some talking more about its diminishing role rather than about what can be done to revitalise it.

Yet, those regularly taking the pulse of the economy, or who are directly involved, firmly believe that even in Malta manufacturing still has a role to play in the overall advancement of the economy. To Economy Minister Chris Cardona, for instance, manufacturing had, has and will clearly have an important central role in Malta’s long-term economic future. He believes that, for manufacturing to survive and gain in long-term competitiveness, it must remain dynamic to keep up with the fast developments taking place today.

While industry has long been warning about the gradual erosion of competitiveness due to various factors, including the rise in labour unit costs, the minister says the government is committed to keep abreast of the island’s level of competitiveness through a systematic analysis of the business environment and to take timely action to address any issues. But what particular issues have been successfully tackled? Toly Group’s chief, Andy Gatesy, expresses industry’s feeling in a categorical manner: the real issue when it comes to the long-term success of manufacturing in Malta is competitiveness.

A bone of contention is the annual award, across the board, of the cost of living wage adjustment, with both the government and the trade unions insisting this has had a beneficial effect as the country has avoided much industrial trouble. This may very well be the case, but care has to be taken to ensure that the cost of such a policy will not be too high.

Solutions to this and other problems are needed to help industry become more competitive.

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