Malta’s small and medium-sized enterprises may be in “good shape”, as a European Commission report has put it, but the sector is lagging behind that in other countries, such as Cyprus and Luxembourg, in terms of growth. Last year, Malta had about 35,000 SMEs, employing almost 88,000 workers.

Talk of economic development generally centres on the need to attract more foreign direct investment to help generate new growth. It is, of course, essential to attract new foreign investment, something that is becoming increasingly difficult in the turbulent economic climate that has been developing over the past two years. However, the role of the small and medium-sized enterprises in the economy should not be overlooked.

The sector was generally greatly neglected for years but the situation is now changing for the better with the government clearly well committed to help those already in operation and, also, to encourage greater entrepreneurship. Two new reports, one by the European Commission and the other by Eurostat, its statistical agency, have brought up interesting aspects about the sector. However, the report by the Commission appears to be somewhat confusing in that, while in one part it says that Malta performs above average in entrepreneurship in another it remarks that the island shows a general lack of entrepreneurial spirit among its population.

According to the Commission, relatively few Maltese consider it feasible for them to become an entrepreneur; 19 per cent as opposed to 28 per cent of the EU adult population. Fewer than 36 per cent of Maltese adults really want to be self-employed as against 45 per cent in the EU. The gap may well be attributed to a number of reasons, foremost among which is the bureaucracy that small and medium-sized enterprises usually come up against in their work. This has, at least, been the perception for years. Is it still the case? Has the situation improved since the enactment of the Small Business Act?

The Commission has described as an “example of best practice” the micro-investment scheme launched by Malta Enterprise to boost the SME sector. Indeed, it was reported some time ago that in just five weeks the government had received requests worth €10 million. Not bad for such a short time. What is the response up to now? More importantly, has it been made easier for small businesses to operate? This is surely one of the most important keys to the success or failure of the small business sector.

All the schemes the government and Malta Enterprise can come up with to help the sector could well be useful for the start or expansion of businesses but, as it has been said so often over the years, it is excessive bureaucracy that kills much of their initiative. A plan to have new laws SME-tested before coming into force is a friendly measure that could, naturally, help ease difficulties considerably if it is adhered to rigorously.

But to go back to the Commission’s report, while it has found the SME sector in good shape, it also points out that employment has been static since 2003. Eight years is a long stretch. Is the Commission’s statement correct? If it is, it suggests stagnation rather than “good shape”. By contrast, Cyprus and Luxembourg have both registered impressive growth rates of about 20 per cent between 2003 and 2010. In Luxembourg, for example, SMEs generated about 25,000 jobs and, in Cyprus, 35,000. So, why is Malta lagging so much behind?