All independent States aspire for a place in the sun. They seek to earn their keep by their diligent industriousness. If they are lucky, and if they have natural resources, the challenge is less burdensome. Even so, they have to keep an eye on the competition, and, in the process, they have, in turn, to keep an eye on technological advancement.
The more advanced economies have secure places in the sun, having built solid economic foundations. They compete to enhance or solidify their respective niches.
Smaller and less endowed States have a harder time to survive, and to edge forward towards prosperity.
Malta is in the latter category. Its struggle for survival is bedevilled by its small size and lack of natural resources.
The people of these islands became masters of their own home as recently as 1964. From the outset, Malta had to take up positions in the international family of nations, build up from scratch a diplomatic service, and assume responsibility for its own defence in a troubled Mediterranean environment.
Even more tellingly, it faced an economic imperative; namely that of laying the groundwork for a switch from a fortress to a market economy.
No bed of roses
It was no bed of roses. An industrialisation programme was launched in tandem with the development of the services sector. Tourism and transhipment were among the first targets. The development of maritime services, (ship registration and ship repair work consumed a significant part of the initial energy) and the establishment of a financial sector followed.
There were ups and downs but, in the process, Malta edged forward to establish itself as a Mediterranean hub, well placed to trade with all countries on the Mediterranean rim, Four years ago, Malta joined the European Union. In a few weeks’ time, it will join the Eurozone.
Making the grade meant that Malta had matched certain demanding criteria, considering its structural deficit and indebtedness. It is now faced with the added challenge of a smooth changeover to the euro, which is getting stronger and stronger in the world’s money markets.
Pros and cons to savour
Considering that Malta has the smallest and most open economy among the EU member States, there are pros and cons to savour. With Malta’s average import and export-to-GDP ratios of over 80 per cent, membership of the Eurozone will provide a cushion against external shocks and volatility. Malta is now bound by euro discipline and is expected to consolidate budgets, implement structural reforms and improve adjustment capacities, which may come with a cost.
It is to be hoped that Malta’s new status will allow Malta to take advantage of the openings arising from ongoing globalisation.
All of this was, understandably, portrayed in glorious Technicolor in the prevailing pre-electoral environment. There is the other side of the coin.
Malta has a tough time to compete and to earn its keep.
In the latest Global Competitiveness Index, published by the World Economic Forum, Malta lost five places in the pecking order. It is ranked in 56th place out of 131 countries in the 2007-2008 edition.
Among the 27 EU member States, Malta ranks in the 24th place.
Malta scored 103rd in terms of efficiency in the labour market, 56th for macroeconomic stability, 62nd in innovation and 60th for the sophistication of its business practices.
Inadequacies
Maltese business leaders complain about the inefficiency of the bureaucracy, tax rates, inadequate infrastructure, restrictive labour regulations, inadequately educated workforce and difficult access to financing.
All of these bear on Malta’s ability to compete. The fact that Malta has surrendered ground in the WEF Global Competitiveness Index in this last year means that passing the Eurozone test did not shield us from the consequences of inefficiency.
There is plainly much left to be done—and the initiative, as well as the drive - has to originate from Malta, and not from Brussels or Frankfurt.
The initiative has to come from government as well as from private enterprise.
At the same time, just as politicians cannot escape taking on collective responsibility for peace, neither can they escape taking on collective responsibility for economic growth.
In this context, it is worth recalling John F. Kennedy’s dictum to the effect that economic growth without social progress lets the great majority of the people remain in poverty, while a privileged few reap the benefits of rising abundance.
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