We have started a new year and expectations for a good 2018 are generally high. However, life teaches us that there may always be surprises round the corner.

I recently came across an interesting contribution in a publication of the Chamber of Commerce and Industry, written by Marie-Claire Grima, on the factors that will have an impact on Malta’s economy in 2018. I found it to be a very objective assessment of the challenges facing our economy.

The author mentioned six such challenges: business confidence, human resources, governance, regulatory changes, tourism and the infrastructure. My contribution this week will focus on these six points.

I would start with the HR issue. Attracting and retaining suitable staff – both in terms of qualifications as well as in terms of skills and qualities – has become as important as winning new customers and retaining existing ones. The shortage of suitable staff is pushing wages close to the levels beyond which the sustainability of several business organisations is jeopardised.

One of the answers to this shortage seems to be importing foreign labour. However, one needs to examine whether even this solution is sustainable. Malta is too small to have a permanent population that is edging towards half a million. Moreover, one also needs to examine the extent to which such foreign workers have added to the skills base of the population. We need to ride the economic wave, but we need to make sure that we are not creating new problems in the process.

The second point is the infrastructure, which is recognised as being an ageing one. Investment is required in all areas and focusing just on roads would be very short-sighted.

Issues including water generation, drainage, waste management, and electricity distribution infrastructure all need to be seen to.

The current infrastructure is not good enough to sustain our current economic and population growth and poses a threat to our economy. The extensive road development of the last decade or so may seem like a drop in the ocean when one considers what is actually needed to modernise our infrastructure.

We cannot write off the manufacturing sector. It has always been an important pillar of our economy

In terms of business confidence, we need to make a distinction among the various sectors of the economy. In general business sentiment is very positive. However, it would be wrong to assume that all sectors are doing well. Those that face strong competition, both internal and external, know that, in spite of the opportunities that may exist, they may not be able to exploit them. An analysis of the data on the gross domestic product evidences the fact that some sectors are not growing as fast as the rest of the economy. We have always prided ourselves with Malta’s resilient and diversified economy.

We need to maintain such resilience and diversification, to support in concrete terms the positive business sentiment there is.

Tourism is certainly an area that presents a challenge in its own right. The latest figures released by Malta International Airport plc regarding the number of passengers that passed through MIA indicate a thriving tourism sector, certainly also thanks to work of the Malta Tourism Authority and the investment undertaken by the private sector. However, one needs to examine how sustainable these numbers are.

We also need to assess other variables and not just arrivals. For example the length of stay has gone down again, and whereas the total number of nights spent in Malta increased by 10 per cent, the total number of nights spent in collective accommodation (such as hotels) increased by only five per cent.

With the present number of tourist arrivals, we have certainly reached the stage where quality needs to be given more consideration.

The other two issues may be taken together: governance and regulatory requirements. One of the requirements that we have as a country to make a quantum leap forward is to address governance issues with a sense of urgency. Governance does not relate only to law and order and a fair and transparent public administration, but also to aspects such as tax evasion. As I have written in previous contributions, our economy should be business-friendly but not businessman-friendly.

Malta has developed its economy over the last decades by seeking to be at the forefront in adopting regulatory changes that have consequently contributed to generating a very positive reputation internationally. That reputation needs to be safeguarded while continuing to exploit the opportunities that come along, like we have done and continue to do with the iGaming sector.

I would add a seventh issue which needs to be tackled with some urgency and that is the sustainability of the manufacturing sector. We cannot write off this sector. It has always been an important pillar of our economy and needs to remain so.

I agree that we should look at 2018 with a sense of optimism. The economic indicators are still very positive. However, adding a dose of realism into that optimism has never done anyone any harm.