Speaking during a workshop on Maximising the competitiveness potential of small states, organised by the Commonwealth Secretariat and the University of Malta, Mr Galea said the OECD 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.

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, Mr Galea said. “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 results 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 to ensure that new businesses are well managed and therefore successful,” Mr Galea said.

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. 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, he said.

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 the government, the business community and the trade unions in taking consistent steps towards the promotion of competitiveness, Mr Galea said.

It does not make much sense to have the government moving in one direction and the other social partners moving in another direction. In addition, given the diverse interests of the social partners, consensus building is needed in the drawing up of such a strategy.

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 the government but all the other social partners including the trade unions, the service providers, various employees, ship agents, haulage operators and local industry.

The Malta Maritime Authority, together with the Competitiveness and Communications Ministry, 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, Mr Galea said.