The government continues to highlight the fact that our industrial base includes a strong pharmaceutical sub-sector, which has continued to grow despite fears some years back that it had a rather limited life-span. This positive factor should not dull awareness of the fact that there is output that will be sourced from centres where overall costs are much more competitive than in Malta.

North Africa and China are among other competing locations, despite an increasingly tense situation in the former and spiralling wages in the latter. There are many more competing centres. Currently, Tunisia is in the grip of a vortex of uncertainty. China, which goes on growing at remarkable rates, is worried by the onset of inflation.

Various countries, among them Vietnam and Afghanistan, are fast becoming alternatives to China. The Ukraine and other economies in transition are that already, in some regards. Cost structures shift and orders go where they are lowest, provided that key considerations are met. These include quality, according to one’s market segment and pitch, delivery dates, often influenced by the just-in-time concept, and response capability. Change leaves little choice. It forces adaptation.

That should provide for adaptation in the public bureaucracy. Responsible and accountable for them is the government of the day. In stressing the inevitable phenomenon of orders following costs, the public bureaucracy should always keep a mirror close at hand. To look into it regularly to remind itself that, whichever type of private investment can be aimed for in the context of this phenomenon the cost of government must be kept as low as possible, for competitive reasons, and not just to reduce the structural deficit in accordance with the strictures of the European Union and consequential Budget targets.

That cost is not measured in direct fees of office. Inefficiencies in the public administration also translate into costs for economic operators. This is another obvious factor, but public authorities do not always see it clearly enough. They tend to stress that charters have been drawn up for the public sector, performance packages introduced for the top hats, and information technology put in common place, plus the setting of restraining targets in the Budget for this year.

That has not really reduced bureaucratic costs, which manifest themselves in areas not adequately prioritised by the political administrators. It deserves much more critical attention even if it is true that it could be more fruitful to look for new investment that is not decided by, or mainly, labour costs. No investor is ever happy to waste time, to pay above the odds for public services, to carry the burden of the inefficiency of those whose job it is to smooth the running of the wheels, and not jam them up.

Regarding the pharmaceutical industry it has consolidated into a very important area, measured both by job opportunities and exports. That is good going. Those involved in promoting inward foreign direct investment surely have high in their priorities, fuller exploitation of the potential inherent in Malta’s situation.

They will be heartened by moves into generics by Swiss pharmaceutical giants, which initially were not quick enough to understand the threat to them in the form of generics. Generics are not a passing trend. They are the comparatively inexpensive alternative to branded products. Pharmaceutical experts say there was a time when quality was an issue, but today there are several good and reliable generics manufacturers. It has become easy to recognise them.

The main customers buy only from manufacturers who are based in countries with strict standards, and whose products have been allowed on the domestic market.

This does rule out unauthorised manufacturers of patent-protected products but experts hold, that is no loss. It’s a good rule of thumb that companies who produce unauthorised copies of patent-protected products are fly-by-nighters out for a quick buck. Malta’s objective has been and remains to establish itself as a location for producers of generics who recognise the value of strict standards to themselves. We need investment and jobs, but not from fly-by-nighters.

There are locally-produced generics on the market, at a lower price than established patented alternatives, though most users will continue to be guided by the advice of their doctor. I am not aware whether or to what extent the government is sourcing public requirement from local producers. Subject to production standards and use-effectiveness, comparative prices would be a basic consideration, especially at a time when private consumers are being encouraged to enquire about generic alternatives to patented medicines.

The starting point in pharmaceuticals is that the manufacturers’ asking price is the highest they think they can get away with. Big markets (like the USA, Japan, Germany, France and the UK) have the muscle to negotiate. Small to microscopic markets like Malta can only monitor prices internationally and insist on parity with the lowest. (In this regard comparisons with average prices in the EU may not be the best guide to a good deal.) Some institutional buyers construct and keep updated a basket of low-price countries, and refuse to accept anything higher.

Malta can consider doing this when sourcing for the public sector, which has much more bargaining power than individual importers.