In the space of two weeks, Malta was handed an invaluable chance to see how well its economy is doing thanks to two important reports: the 36th World Economic Forum ranking of global competitiveness, which came out last week, and the EY Attractiveness Survey which came out yesterday.
To derive maximum impact from these reports, they need to be analysed both as a benchmark against our competitors as well as a sign of our own performance.
Indeed, even if a number of indicators improve, we will still drop down the rankings if our competitors improve more than we have.
This is particularly relevant when you look at the trend over time. Take the WEF report for 2015, which captures 114 indicators grouped into 12 pillars, themselves grouped into basic requirements, efficiency enhancers and innovation and sophistication factors.
In 2004, Malta ranked 32nd with a score of 4.54. We have since fallen to 48th place – and our score has fallen to just 4.4.
Our score is always to an extent dragged down by our market size, which puts us in 123rd position. And some rankings – like female participation – seem to be lagging real developments as this is one area where we have seen considerable improvement.
But there is no excuse for some others. It takes 11 procedures and 34.5 days to start a business, ranking 123rd and 121st respectively. Compare this with the top ranked country for the past four years, Switzerland, where it takes six procedures and 10 days.
There are common elements in many countries, and we can draw cold comfort from the fact that in Switzerland, as in Malta, the most problematic factor for doing business is inefficient government bureaucracy, albeit with a lower percentage of responses. Over the past five years, Malta’s score on this point has improved: it was around 21 and has since dropped to 18.5. But that is still a long way from Switzerland’s 15.8.
Indeed, there are a number of our worst scores that fall under government control – like road infrastructure, electricity supply and tax rates. Others can be nudged by the government – such as the female participation rate and airline connectivity.
These are not new issues and while some have been tackled with impressive improvements, others have not.
The private sector has also got to do some soul-searching. Corporate boards’ efficacy ranked a poor 82nd, and Malta’s worst score is in innovation, where we score just 3.9, compared to Switzerland’s score of 5.8.
The picture painted by the EY Malta Attractiveness Survey released yesterday was only slightly more optimistic. Of the foreign direct investors surveyed, 84 per cent said Malta was attractive for FDI, up five points over 2014. But that is still seven percentage points down from 2011.
And the future does not look bad: 55 per cent of them have expansion plans… But this was 72 per cent in 2009.
The survey highlighted the red flags – transport and logistics infrastructure, the domestic market and the R&D and innovation environment – and more alarmingly there has been no progress since 2014.
And looking at what we need to remain competitive, 64 per cent and 52 per cent of respondents respectively cited education and skills, and incentives for FDI investors, while investing in major infrastructure and supporting high-tech industries and innovation were also ranked highly.
The reports simultaneously acknowledge where we are doing well and sound alarms about festering problems. What we choose to focus on will determine the future slope of those graphs.