Statistics show a declining share of manufacturing in the country’s economy. Photo: Chris Sant Fournier

Malta is enjoying times of relatively high economic growth compared to other Eurozone countries, with government understandably portraying a generally optimistic outlook.

From a sectoral perspective, this expansion has been mainly driven by services. Conversely, the reality of the 20,000 employed in the manufacturing industry is hardly on the same plane. Statistics show a declining share of manufacturing in the country’s economy.

The causes of this trend need to be analysed closely with a view to taking effective remedial action.

From an expenditure viewpoint, the recent economic success is mainly attributed to domestic demand which, of course, cannot be relied upon for long-term sustainability. For growth to be sustainable, it must be driven by export-led activity which in turn requires the country to be internationally competitive.

Good economic performance does not automatically render a country competitive, in fact, while Malta certainly scores well on the former, the same cannot be said on the latter.

Generally, times of relative economic well-being are the best times to look ahead and take the necessary decisions to safeguard long-term sustainability and competitiveness.

As the newly elected chairman of the Manufacturing Economic Group within the Chamber, I feel compelled to shine a light on the recurring downward trend in industrial production as highlighted by official data.

The Chamber has been addressingthis important matter in various ways with a view to ensuring that industrial competitiveness remains high on the national agenda.

The Chamber’s Manufacturing Economic Group, comprising diverse representation of Malta’s industrial firms, both locally and foreign-owned, large and small, has provided national stakeholders with a blueprint for the local manufacturing sector to rediscover its competitive advantage.

The blueprint, titled ‘An Industrial Policy for Malta’, was unanimously acclaimed as a clear and focused depiction of Malta’s inherent challenges and the policy fundamentals required to immediately overcome these challenges.

The Industrial Policy for Malta identifies policy fundamentals that include an adequate skilled labour force at competitive wages; better interlinkages between education, skills development and training with industry;

Stable energy at rates closer to European average rates; investment support with immediate tangible effects; efficient and competitive transport links; internationalisation support; more adequate access to finance;

Lower manageable bureaucracy by enhancing the application of the better regulation principle and regulatory impact assessment methodologies; more reasonable rental rates and adequatefactory availability together with superior upkeep and support within all industrial zones by Malta Industrial Parks, as the responsible public entity, along with the relevant tenant associations and entities.

The manufacturing industry is a key pillar which can continue to provide long-term employment opportunities, stability and investment in technology, research and development

Our group firmly believes that by following 64 concrete recommendations it listed in the document, the country would foster improved framework conditions that promote long-term productivity and enhanced working conditions.

Discussions intending to identify and tackle areas of support are currently underway with Malta Enterprise and within the Malta Council for Economic and Social Development.

The social partners and key stakeholders are aware of the need to find long-term solutions to the granting of investment aid given Malta has now lost its EU classification as an Objective 1 country (with all the limiting consequences on our enabling legislation, namely the Malta Enterprise Act).

As a result of this, Malta Enterprise has been compelled to redimension the level of support permissible to manufacturing industry and to this end, last July it issued Incentive Guidelines for Investment Aid Tax Credits (2014-2020) which, nevertheless, are considered both limited in scope and reach.

Therefore, until more effective and lasting solutions on this matter are found and negotiated, we must all work harder on neutralising the impact of this change, ensuring Malta’s attractiveness to manufacturing investment through other competitiveness enhancing measures.

With our present status of 10.6 per cent of GDP for industry we are far away from the European Commission’s aim to reindustrialise Europe by reaching a target of 20 per cent of GDP for industry by 2020.

A recent European Commission communication called for strong commitment at national levels to prioritise the implementation of a strategy that cultivates a strong and diversified industrial base that is competitive on a global scale.

On a national level, some measures intending to safeguard industrial competitiveness have been implemented, such as the reduction of energy cost by 25 per cent and the setting up of Trade Malta to support the internationalisation of Malta-based firms and export growth in general.

However, a lot more needs to be done in order to live up to reach the intended target. The country cannot afford to downplay the early warning signals given by statistics and the continuous calls of the Malta Chamber to ensure that the fundamentals to support indus-try through its present challenges arein place.

Malta was relatively sheltered from the full brunt of the global economic crisis. However, other less fortunate Member States were forced to take bold steps to reform.

These countries are now reaping the benefits of the actions they took, to the detriment of their more complacent European counterparts.

A case in point is Spain where reform has brought about amongst the fastest export-led growth in the Eurozone.

Also, Ireland, one of the worst-hit member states by the recession, has recently registered an industrial production increase of 16.3 per cent between January and February 2015. This percentage contrasts starkly with Malta’s decrease of 1.3 per cent.

Therefore, the signs are there for us all to see. Through our industrial policy document we have provided a clear, focused and well-structured blueprint for a solid, productive and innovative manufacturing sector by 2020.

The manufacturing industry is a key pillar which, if supported correctly, can continue to provide long-term employment opportunities, stability and investment in technology, research and development, as it has done in the past.

The Manufacturing Economic Group within the Chamber will continue to champion Malta’s industrial competitiveness and work towards the implementation of an effective industrial policy. We all need to be more assertive to ensure a more competitive manufacturing sector.

Norman Aquilina is chairman of the manufacturers and other industries economic group of the Malta Chamber of Commerce, Enterprise and Industry.