The Malta Chamber of Commerce, Enterprise and Industry, through the Manufacturers Economic Group, has been at the forefront in highlighting the difficulties the manufacturing sector faces in overcoming the geographical and structural obstacles inherent in an island State on the periphery of the European market, which is its main export destination. The group was therefore encouraged to note the recently-published European Parliament document on the European Commission’s annual competition report for 2014. This report highlights the disadvantages inherent in peripheral, remote and island regions of the EU and argues for permanent remedial action.
The Chamber deems local manufacturing as an intrinsically strong and dynamic industry with a bright future. Nevertheless, in line with the contents of the above-mentioned report, this future can only be ascertained if permanent compensatory measures can be ensured to neutralise the permanent cost disadvantages that result from operating from a peripheral island base.
The Manufacturers Economic Group has on numerous occasions spoken up and taken initiatives aimed at raising awareness in Malta and in the European fora on the permanent disadvantages faced by Malta-based manufacturing industry. It has consistently reaffirmed that the European Commissions’ distinct interpretation and treatment of island regions versus island states is fundamentally flawed, if not outright incorrect.
It may require some form of support to compensate for the additional operating costs resulting from the island’s location
Furthermore, the group has always argued that without permanent compensatory measures to neutralise the equally permanent disadvantages, Malta’s manufacturing sector was losing competitiveness and, consequently, its share in the gross domestic product as well as its ability to attract new investment in the sector.
This European Parliament’s competition report lays emphasis on the need for more leeway in the application of State aid rules to the peripheral or isolated regions and islands of the EU since the current policy is contributing to increase the structural disparities that already exist between the centre and the periphery. State aid rules within the European Union were being applied to these regions, including Malta and Gozo, as if they belonged to the mainstream and better-endowed centres of the EU.
The report makes a series of references to the importance that, when applying competition rules, the Commission should take special consideration of the social and economic impacts on peripheral and insular regions of the EU. It further stresses that State aid is sometimes necessary to guarantee the delivery of services of general economic interest, including energy and transport. It underlines that State intervention is often the most effective policy tool for guaranteeing the provision of services that are vital to safeguard economic and social conditions in isolated and remote regions and islands in the EU.
One important aspect of the report, which the Manufacturers Economic Group is keen to see implemented, is the request for a separate study by the Commission that assesses whether EU State aid provisions are inhibiting the consolidation and strengthening of competition among European firms vis-à-vis their global competitors.
The group strongly believes that for the manufacturing sector in Malta to contribute to the industrial renaissance and to reach the European 2020 target of having a 20 per cent direct contribution to the GDP, it may require some form of support to compensate for the additional operating costs resulting from the island’s location. This will contribute towards a fairer and level competitive playing field on the international market in terms of operating costs.
The group also supports the European Parliament resolution voted upon on February 4 in which the Commission is urged to address the unique and vulnerable situation of EU islands and, most importantly, to consider other statistical indicators, besides GDP, which shed light on the economic and social vulnerability of these regions and to launch an in-depth analysis in the extra costs incurred as a result of being an island.
The Manufacturers Economic Group will continue to seek the necessary solutions to the predicament of Malta’s competitiveness position resulting from the stringent application of the EU competition regulations. It will be reaching out to all relevant stakeholders, both in Malta and the EU, to ensure that manufacturing can continue to generate jobs and remain an intrinsic contributor to the European industrial renaissance.
There is need for a national concerted and collective effort from both the government and the Opposition, along with our MEPs together and all private business representative organisations, to push this case forward. The Manufacturers Economic Group has already taken the initiative to invite the pertinent MEPs and other key stakeholders to discuss this matter.
We need to place island states on the EU agenda.
Norman Aquilina is chairman of the Manufacturers Economic Group within the Malta Chamber of Commerce, Enterprise and Industry.