The performance of Malta's Small and Medium Sized Enterprises has slipped below the EU average in recent years, according to a new analytical report issued in Brussels.
According to the report, the number of SMEs in Malta grew by 12 per cent in the period 2002 to 2008, which is slightly lower compared with the EU average of 13 per cent.
However, while EU member states' SMEs contributed towards an increase in employment of 12 per cent on average, the number of SME employees in Malta decreased by two per cent.
The report also reveals that while value added for SMEs around the EU grew by 28 per cent during the seven-year period, in Malta it only went up by 19 per cent.
The results have prompted the European Commission's Director for the Promotion of Competitiveness of SMEs, former Nationalist candidate Joanna Drake, to call on the government to carry out the necessary reforms to boost the sector.
"This study does not depict a rosy picture of the business environment for SMEs in Malta," Dr Drake told The Sunday Times.
"There are several reasons why many Maltese small businesses rank behind the EU average. While there are certainly several market imperfections because of the size of the island, I also believe Malta is not yet supportive and responsive enough to the needs of SMEs," she said.
The Commission's report states that the SME sector in Malta has a relatively small-scale structure where the percentage of micro-enterprises is higher than the EU average. At the same time, the contribution of Maltese SMEs to the overall economy, compared with the EU average, is more important. In particular, the contribution of micro firms to employment in Malta is higher than the EU average.
Despite the evident importance of SMEs in the Maltese economy, Brussels is not convinced that the government is doing all it can to support this sector.
Member states had to implement 10 binding principles from the EU's Small Business Act (SBA) to increase the competitiveness of small enterprises. These include increasing training opportunities, access to finance, exposing small firms to internationalisation and providing bureaucracy-free one-stop-shop services.
However, the SBA principles are currently not being implemented well enough into policy actions to assist Maltese SMEs - even if Malta agreed to this act, the report says.
The report states that nearly 30 per cent of government payments owed to SMEs last year were paid more than two months late - a situation that unnecessarily weakens those operating in this sector - while the proportion of total state aid devoted to SMEs is just one per cent when the EU average is 10 per cent.
"Urgent and sustainable reforms are necessary so that Maltese SMEs are equipped with the right skills and competences for the future," Dr Drake said.
According to the Commission's report, in 2009 there were 34,088 SMEs in MAlta, with the majority, over 95 per cent, being micro enterprises. The total number of employees in SMEs last year stood at 88,499.