The Malta Chamber of Commerce, Enterprise and Industry said today it disagreed with Finance Minister Edward Scicluna that the reason for a drop in exports was external demand. The Chamber said the problem is a decline in competitiveness.
Reacting to a televised debate on the subject of manufacturing, the Chamber said it was by the Minister's declaration that all efforts need to be directed at improving the country's competitiveness, by such measures as treating COLA responsibly, reducing energy tariffs and clamping down on excessive bureaucracy.
Nevertheless, the Malta Chamber is dismayed by the fact that the Minister appears to be downplaying the signals given by independent statistics and the continuous calls of the Malta Chamber towards ensuring that the necessary fundamentals are in place to support industry through its present challenges and realities.
The Chamber does not agree with the Minister's explanation that the reason for declining exports is a drop in external demand. Rather, the Chamber attributes the situation to declining competitiveness levels mainly due to increased operating costs and improved competitiveness in certain overseas countries where the need to defend competitiveness has surpassed all other priorities.
The statistics which the Minister doubted were released by Eurostat and show that Malta's combined exports to EU and Extra-EU states declined by 27% in the 12 months to August 2014. But even the export figures released by the National Statistics Office (NSO) show a decline, albeit by a significantly lower magnitude. In fact, NSO reports a 3.6% decline in exports between 2012 and 2013 (full year) and again by 1.0% between 2013 and 2014 (quarters 1 and 2).
The Pre-Budget Document published by the Ministry of Finance shows that Gross Value Added (GVA) in manufacturing declined by 4.1% during the first half of this year when compared to the same period last year.
The same document states that Real Labour Productivity per person Employed between 2008-2012 experienced a 3.3% drop compared to an increase in the Eurozone (1.0%) and the EU27 (1.1%).
These warning statistics are corroborated by NSO News Release no 210/2014 which shows that the Index of Industrial Production has been in constant decline since February 2013 with a slight exception for September 2013. In its latest reading for September 2014, the Index stood -7.1 per cent.
It is therefore the duty of our political leaders and all stakeholders to make a concerted effort to halt this process of deteriorating conditions in the manufacturing sector. Consequently, the Chamber reiterates its call for all stakeholders to engage in an active and exhaustive discussion about Malta's competitiveness.
Domestic demand alone cannot be the engine of long-term sustainable economic growth. Lasting economic growth needs to be driven by export-led activity and this requires the country to be competitive. Competitiveness must be at the centre of policy-making if we want to really improve the business environment and build a strong and innovative industrial base, with positive spill-over effects in all economic sectors.