A recent news item that unfortunately went unnoticed was the announcement by the Malta Federation of Industry that it had formally asked the government to set up a national competitiveness council. The president of the FOI stated that the National Council for Economic and Social Development is to start discussing this proposal soon.
Presumably, this is the most appropriate channel that should be used to achieve consensus on the need to set up such a council and on its composition. However, I would like to state at the outset that the day this council is set up will always be a day too late.
The recent economic news and the stand being taken by the social partners on the new industrial relations legislation are proof of the urgent requirement that, as a country, we need to start a serious, open, honest, unbiased and rational debate on the competitiveness of our economy.
I am not one of those who believe that our economy has not lost its competitiveness over the years. Nor am I one of those who believe that our economy is uncompetitive. As usual, the truth lies somewhere between these two extremes, and no one has a monopoly of any kind on the truth.
The snag is that, for too many years, the various sectorial interests in the country have prevented this debate from taking place, with the result that either the government or the business sector has had to foot the bill in the short term, the employee has had to foot the bill in the medium term, and the taxpayer has had to foot the bill eventually in the long term.
However, we have not sought to create a cause-effect relationship between the short, medium and long terms, with the result that there is still an unclear understanding of what we mean by competitiveness, why we need to monitor it and how do we measure it.
When we speak of competitiveness we cannot speak of the economy as a whole because in any economy, and Malta is no exception, there shall always be some businesses that are competitive when compared to other businesses, even those in other countries, and others that have lost their competitive edge. Therefore, any reference to competitiveness has to be made in relation to individual businesses and not to the economy as a whole.
I would dare say that we cannot even speak of competitiveness of an economic sector since the issue of competitiveness is very much an issue that has to be tackled at the level of the individual firm.
Unfortunately, when the social partners speak or when they address a particular issue, they very often do so at a macroeconomic level. This implies that they would be bypassing totally the competitiveness of individual firms because there cannot be one single policy that would safeguard the competitiveness of all firms.
To achieve this, one would have to go for the lowest common denominator (that is adopting policies that would safeguard the competitiveness of each individual firm no matter what it costs), something which is likely to have extensive negative consequences.
In a recent commentary in The Sunday Times, there was the attempt to compare the progress that Singapore made with that of Malta since they both became independent states in the 1960s. One notes this type of comparison fairly regularly; in fact, what these learned gentlemen do not state is that Malta has made great strides forward on social and political issues, when compared to Singapore. Do these gentlemen suggest that we should give up this progress for the sake of maintaining the competitiveness of our businesses?
These gentlemen did not state that workers at the Singapore port had to take something like a 12 per cent cut in their wages in order to retain customers, that were otherwise being lured to nearby Malaysia. Is this something that we want to have in this country?
This is why competitiveness cannot be seen simply as an exercise in number crunching, but as an analysis of a whole series of issues that in their totality impact on doing business in and from Malta.
For example, are a low crime rate and a good health service contributing factors to making our firms more competitive like the level of wages is, albeit not to the same extent?
The issue is that one can quantify the impact of wages or the costs of utilities like water and electricity on a firm's competitiveness, but it is very difficult to quantify the impact of a low crime rate.
The same problem exists when one speaks of what is known to be an important and proven source of competitive advantage of Malta when we speak of foreign direct investment - the fact that English is widely spoken in our country. Although we all know how important this is, we cannot quantify what impact it has on a company's profit and loss account.
Yet, we know that businesses thrive and grow if they remain competitive. And the more open our economy becomes, the more critical is the issue of competitiveness. Therefore, this whole discussion on competitiveness that the FOI is seeking to promote should lead us to understand better what competitive advantage Malta offers today and is willing to continue offering in future to businesses, foreign and local, which operate on this island.
Understanding this issue would also help us to understand better the type of economic activity that is most likely to offer sustainability to our economy. This is why the national competitiveness council proposed by the FOI is needed urgently and cannot be simply a debating society but a council that provides clear direction to the rest of the economy, including government and public institutions, trade unions and organisations that represent the business sector.