One of the priorities set by the Finance Minister when presenting next year’s budget is the diversification in the economic sectors and the diversification of the target countries with which Malta undertakes economic activity. It is a tall order as it means understanding in greater depth the current structure of each economic sector, understanding the source of the competitive advantage which companies operating in Malta have in such sectors, understanding the opportunities that exist within each sector and being innovative in identifying new sectors.

It is very much like developing what marketing students term as a product-market matrix, and seeking to identify any gaps that could provide new opportunities for our economy. When one takes a long-term view of 50 years, one does note a strong element of diversification in our economy, as some sectors have died a natural death, others have transformed themselves dramatically and others still have been developed. Moreover, we have also had a significant diversification in our tourism and investment source markets, as well as in our export markets. The issue of diversification is critical as it very often cited as one of the reasons why Malta has proved itself to be resilient to international economic crises.

I believe this call for continued diversification is appropriate in its timing as it means we can start sowing the seeds and then let them grow into trees, while still reaping the benefits from those sectors that make up the structure of our economy today

At the time Malta achieved its independence in 1964, it was still very much reliant on the public sector, the dockyard and the British military base. Tourism was still in its infancy, while manufacturing for export was making its first steps.

In order to reduce unemployment, government had adopted a conscious policy of encouraging the Maltese to emigrate to Canada, Australia, the United Kingdom and other places. Yet we should not denigrate those first steps as soon afterwards, Malta started to attract a number of foreign firms to set up operations here. They were also supported by a banking sector that was steadily evolving.

Those steps taken in the 1960s, and even before, laid the foundations to create a diversified economy that had hitherto relied too much on its strategic position in the centre of the Mediterranean. By the end of the 1960s it had become evident that Malta needed to form part of a much stronger economic bloc to continue strengthening its economy. Thus it concluded the first ever Association Agreement that the then European Economic Community had with a non-member state. This gave further impetus to the manufacturing sector.

During the 1970s, the government set up a number of corporations to bring into public ownership the production of certain services, such as energy, ship repair and telecommunications. It also set up Air Malta to support tourism development.

At that time, we went through two elements of diversification in the tourism sector. The first was a geographical diversification: we made an effort to attract significant numbers of tourists from continental Europe. The second element was product diversification as we sought to create a tourism product that did not depend solely on sun and sea.

Manufacturing also started a process of diversification as we attracted a number of German companies. However, throughout the 1970s, manufacturing remained reliant on the clothing sector, thereby necessitating a transformation during the 1980s with the attraction of a number of light engineering firms. The services sector really took off at the end of the 1980s with the development of Malta Freeport, the liberalisation process in the area of importation, the starting from scratch of the ICT sector, and the attraction of a number of companies operating in the financial services sector. Other changes took place in manufacturing and tourism, while membership of the EU brought its own diversification as well.

This brings us to the present day, where we speak of the need to go through another process of diversification. In such a process we need to keep in mind a number of things which I will put in the form of a series of questions. What about strengthening commercial relations with the BRICS – Brazil, Russia, India, China and South Africa? What shape will the manufacturing sector take in the coming years? How can we exploit new technology like 3D printing?

How can we stimulate further creativity and innovation? What changes do we need to make to our tourism product? How can we exploit the movement of tourists from the Far East towards Malta?

Can we keep the i-gaming sector forever? Are there any niches in the financial services sector that we can penetrate? Is the development of the green economy a threat or an opportunity? Can we turn our budding entrepreneurs into strong competitors on the world stage?

One may ask further questions which would all require a great deal of thought. I believe this call for continued diversification is appropriate in its timing as it means we can start sowing the seeds and then let them grow into trees, while still reaping the benefits from those sectors that make up the structure of our economy today.