It is hard to look past the Single Market as the most significant achievement brought about by the European Union. The abolition of barriers in the economic bloc in 1992 brought about a change in the way business is conducted in Europe.

Protectionist barriers to market entry were replaced with cross-border business opportunities.

The Single Market has transformed the way Europeans live, work, travel and do business. It has opened up opportunities for businesses to expand and learn how to become successful globally.

Indeed, it is precisely because of the Single Market that the EU has developed into the largest economic bloc in the world, incorporating a population of 500 million, with 230 million employees.

The Single Market is one of the main reasons why Maltese business was so strongly in favour of EU accession.

In the EU’s calendar year, October marks the anniversary of the foundation of the European Single Market.

It is known throughout Europe as Single Market Month and serves as an opportunity to reflect upon the success and failures of the Single Market. Such reflection helps us to turn these into opportunities for improvement.

Opportunities will come from the considerable and, as yet, untapped potential the Single Market can offer to local businesses.

Recently, the Malta Business Bureau conducted a study to help identify the local business perspectives on the Single Market.

The replies were varied, with unanimous conclusions that, in the long term, the Single Market proved hugely beneficial.

However, there are still creases to be ironed out.

One of the biggest failures of the Single Market from the perspective of Maltese businesses is the fact that it does not address the biggest problem faced locally: transportation costs in light of Malta’s geographical insularity.

This is a factor that limits our business operations within the Single Market due to the fact that Maltese businesses must consider costs of importing materials and exporting manufactured products by air or sea. This results in added double costs of transportation.

Due to Malta’s isolation, air/sea transportation remains the only option available to businesses to be able to penetrate the Single Market.

Both means are expensive and sea transportation involves ports of call that still maintain country-specific regulations with different surveillance procedures and revenue collection practices.

The harmonisation of such fragmented procedures would be a considerable boost to alleviate burdens that Maltese businesses face when transporting goods.

This would also serve to incentivise private operators through the introduction of new and more frequent maritime routes to Malta.

In this respect, business welcomes the European Commission’s initiative of the proposed Blue Belt.

The Single Market is in a critical stage and is facing numerous challenges

This initiative seeks to harmonise port regulations with regard to the reduction of administrative bottlenecks in the shipment of goods.

Another serious bottleneck that Maltese businesses are facing is insufficient market surveillance.

It is commendable that the European Commission has included this in its Single Market Act, which comprises guidelines for Customs control in the area of product safety. However, the Commission’s initiative must be backed by concrete action in member states.

Steps must be taken to ensure national compliance in market surveillance through an EU-wide monitoring system.

This is due to the fact that local market surveillance is relatively weak with coordinated enforcement of VAT, eco-tax and food safety legislation conspicuously missing at point of entry.

It is not unknown for some businesses to take advantage of these shortcomings, creating an environment of unfair competition for those who conduct their operations according to the law.

In this regard, it is better to introduce stricter penalties for deliberate infringements, as opposed to general burdens for all market participants.

Another common concern raised in the MBB study was the fundamental definition of what constitutes a small and medium enterprise.

The current SME definition puts local businesses in categories that do not allow them to compete sustainably with EU counterparts.

The definition in place is too restrictive because it does not necessarily put companies on an equal footing.

For example, a company employing 300 people and generating €40 million in turnover would be classified as large while a company employing 50 people but also generating €40 million is considered as a medium-sized enterprise.

The reality is that Maltese businesses who employ over 250 employees (and are therefore considered to be large enterprises) cannot achieve the volume of sales and turnover to compete against medium and large foreign enterprises.

The definition should take into account sales and turnover rather than the number of employees, in order to better categorise competitors within the same grouping.

The Single Market is in a critical stage and is facing numerous challenges, particularly the achievement of a liberal market for services across the EU.

Achieving a deeper and more efficient Single Market is one of the most important factors in determining overall macroeconomic performance in the EU.

This will, undoubtedly, bring about the promised economic benefits of relaunching the Single Market.

ceo@mbb.org.mt

Joe Tanti is chief executive officer of the Malta Business Bureau.