Points from the Address by the Minister for Competitiveness and Communications, the Hon. Censu Galea at the Workshop organised by the Commonwealth Secretariat and the University of Malta entitled ‘Maximising the Competitiveness Potential for Small States’ held in Gozo on the 14th July 2004

The term ‘Competitiveness’
Malta has recently joined the European Union which has placed competitiveness at the top of its political agenda for this decade. It is no wonder therefore that competitiveness has become a very commonly used term although it is also true that it is very often misused.

Competitiveness does not only refer to the price of goods or services but also means being able to produce good quality, desirable and well-priced products at the right time. The Organisation for Economic Cooperation and Development defines competitiveness as “the degree to which a country can, under free and fair market conditions, produce goods and services which meet the test of international markets, while simultaneously maintaining and expanding the real incomes of its people over the long term”. This definition requires businesses to be successful in the long run without relying on protectionist measures, government subsidies or low labour costs. It thus highlights the roles of knowledge and productive efficiency as the crucial factors that are likely to contribute to the attainment of all of these objectives simultaneously.

A level playing field
The term “fair” in this definition refers to the need for a level playing field, that is, dependence on unjust practices, such as protectionist measures, environmental degradation, child labour or exploitation of workers is not an acceptable option for achieving competitiveness. In the case of Malta , it has long been this Government’s policy to open up the markets, privatise public companies that tend to be cumbersome and under productive, and lately to remove protective levies on imported goods. We have had to do this in the face of severe criticism and very often having to face the accusation that we are dismantling the local production and service sectors. Invariably this policy has resulted in an economy becoming more lean and competitive if not in the short term, certainly in the medium and long term.

The Ministry is also working on a plan to implement a one stop shop for new business start-ups. We believe that the facilitation of such procedures will encourage entrepreneurship in the local economy and entice businessmen to delve into new ventures. We are, however, also committed to offer valuable advice to prospective entrepreneurs so as to ensure that new businesses are well managed and are therefore successful.

Our national issue
In the wider sense competitiveness becomes a national issue as much as an enterprise concern. Evidently enterprises, which are the main engines of national income creation, are at the front-line as the main drivers of the economy. On the other hand, the efficiency of resource allocation and the availability of the skills, knowledge and innovative practices necessary to sustain the competitiveness of enterprises are national concerns.

The need to be competitive is for small states a vital economic imperative. Their small size and likely lack of natural resources translate into a high degree of openness. They depend heavily on imports for their consumption and investment needs, and equally critically on exports to generate the foreign exchange required to service their import bill and to overcome the constraints posed by the small domestic market. This openness can result in a high degree of vulnerability to external shocks if the economy is only competitive in a few niches, such as tourism and financial services that are susceptible to sudden changes in market conditions.

On the other hand, such openness can become a source of economic resilience if it is backed by a strong competitive position that provides resistance against external shocks and allows successful participation in markets that are spread over different geographical regions and over a varied range of products and services. The degree of competitiveness is thus the key factor that can determine whether Malta’s inherent openness translates into a weakness or a strength.

A common strategy
The need for the drawing up of a competitiveness strategy for small states is obvious, given the high degree of openness of such states. Competitiveness is a nation-wide issue affecting the standard of living of the entire population. The stakeholders of a competitiveness strategy are thus all the social partners taking part in economic activity, including Government, the business sector as represented by constituted bodies, workers as represented by trade unions, as well as consumers and special interest groups such as pensioners.

All economic activities are inextricably linked to other dimensions of human behaviour. It is thus expected that environmental and social concerns would also play a role in the formulation of a national competitiveness strategy.
Given that competitiveness is such a complex issue, there is a need for an inclusive set of coherent directions - in other words a strategy - to guide Government, the business community and the trade unions in taking consistent steps towards the promotion of competitiveness. It does not make much sense to have Government moving in one direction and the other social partners moving in another direction. In addition, given the diverse interests of the social partners there is the need for consensus-building in the drawing up of such a strategy. As a case in point for Malta is the question of port reform which everyone has been extolling for a long time but which will require a sustained effort not only on the part of Government but all the other social partners including the trade unions, the service providers, various employees, ship agents, haulage operators, and the local industry.

The Malta Maritime Authority, together with the Ministry for Competitiveness and Communications, is already conducting an exercise to identify the port costs as related to the various entities that are involved in cargo handling activities within our ports.

As Briguglio and Cordina argue in their book on competitiveness a competitiveness strategy is not likely to be effective unless certain pre-conditions are met. These include that the strategy should serve to develop capacity and itself generate an enabling environment towards competitiveness; there should be a strong political backing for and commitment to the strategy; It should be supported and owned by the major stakeholders, notably the representatives of the business community and the unions; It must be coherent and anchored in sound economic and technical analysis; It should be accompanied by monitoring and assessment procedures and that it be supported by advocacy arrangements for its promotion and support.

These requisites are essential for the successful implementation of a competitiveness strategy and for the fostering of ownership of the strategy by the stakeholders. The role of advocacy is stressed because this complements legal provisions and promotes public education and support.