The 30th edition of the Bank of Valletta Review, which has just been published, features four interesting papers.

The first paper, entitled Competition Constraints in Small Jurisdictions, written by Professor Lino Briguglio and Dr Eugene Buttigieg, discusses the constraints that small jurisdictions face in matters associated with competition law and policy in view of their small domestic market. Special reference is made to Malta, where competition legislation is modelled on EU law.

The thrust of the argument is that certain aspects of competition law may not be desirable to implement or may be more difficult to put into operation in a small state. It concluded that exceptions, based on considerations such as improved efficiency, distribution, and overall consumer benefit, are likely to be of major relevance to small jurisdictions. The arguments are various, and may have legal as well as policy implications.

Another article is The Stability and Growth Pact in rainy days: An Alterative View, written by Antimo Verde. According to many economists, the crisis which occurred vis-à-vis the Stability and Growth Pact has its roots in the incorrect behaviour of member states. These are believed to dissipate resources during economic upswings, thus foregoing an improvement in the budgetary balance to cushion the effects of an eventual downturn.

This paper discusses an alternative view which attributes the crisis to the persistently low growth in the European Union. The author proposes a reform of the pact based on the idea that if the GDP growth of a Member state is very low, high-quality growth-inducing government expenditure on infrastructure, research and technological innovation should not be considered for the purposes of computing its fiscal deficit. The objectives of this proposal are to make the escape clause of the pact useable in practice and to avoid forcing member states to give up high-quality spending which is important for growth and for long-term fiscal sustainability, merely to meet the constraints of the pact.

Another article, written by Philip M. Beattie and entitled Malta’s Industrial Policy as a vehicle towards securing enhanced competitiveness, focuses on the link between industrial policy and competitiveness. Authors, including Professor Michael Porter, reject industrial policy as a means of achieving competitiveness, arguing that this policy distorts competition in favour of a particular location, as opposed to the diamond theory, which seeks to remove constraints to productivity growth.

This paper argues that despite Malta’s size, resource limitations and insularity, enhanced competitiveness resulting from a pro-active industrial policy is possible, provided that the definition and scope of industrial policy is aligned as much as possible to the Porterian diamond concept.

This is particularly so if one wants to witness the local economy’s transformation from its largely current factor-driven state, to a mainly investment-driven stage. Malta’s current industrial policy is assessed through Porterian lenses, with the feasibility of business clustering still requiring comprehensive evaluation.

This, coupled with recent initiatives to seriously tackle the competitiveness issue, leaves a number of unanswered questions, particularly regarding the extent to which the local authorities accept the “diamond” underlying national competitive advantage, as well as the manner in which coordination of all aspects of industrial policy should be achieved.

The fourth article is A case for a Maltese offshore wind farm: challenges and opportunities, by Joe Meilak. This paper focuses on the economic aspects of building, operating and eventually de-commissioning an offshore wind farm. It is based on research currently available on this potentially lucrative economic resource and addresses the concept from a holistic independent point of view. It considers possible operational economic models for the funding, operation and continued operation of the project.

It is proposed that by applying simple free market economics, coupled to “green” fiscal incentives, the net effect on the government’s pocket, as the ultimate owner of Enemalta, may be neutralised. Better still, the green premium may be passed onto polluters required to purchase green vouchers from the project owners. A phased increase in electricity prices is also necessary to ensure funding of alternative electricity-generating power. Provided that free market rules are applied properly, the case for wind energy by means of an offshore wind farm would be strengthened.

As in previous issues, the current BOV Review provides a useful index of the articles and their authors. Articles from Issue 24 onwards are available online on the BOV website www.bov.com.

Those requiring further information or a hard copy of the BOV Review, may contact Strategic Planning at Bank of Valletta on telephone number 2321-3288 or by email to [email protected]