As Malta approaches its first year of EU membership it is already clear that becoming more competitive has become the country’s main strategic goal. Malta is seeking to become more competitive because there is no alternative to such a strategy if economic growth and prosperity are to be sustained in future. A simple look at Malta’s neighbourhood clearly demonstrates this fact.
As a member of the EU Malta finds itself in an exclusive group of 25 countries that are all seeking to improve and strengthen their economic track-record by implementing a systematic reform process, the so-called Lisbon Strategy that was launched in 2000. Interacting with our fellow EU members is already facilitating the difficult task of reform we are confronting as EU membership allows us to tap into technical and financial resources that the EU Commission is able to provide.
Given that Malta is geographically proximate to one of the world’s most dynamic zones of technological innovation, Europe, and is also at the centre of one of the world’s busiest sea routes, the Mediterranean, there is no reason why Malta should not be able to absorb technologies from abroad. This includes offering technology-based services in different sectors including tourism and financial services to state-of-the-art research and development facilities for multinational technology firms that are seeking to expand their business in the Euro-Mediterranean area.
Malta is a country which is already implementing policies to promote foreign direct and portfolio investment to supplement its broad based manufacturing and service industries. As a result, Malta has consistently registered higher growth, lower inflation and increased investment. Malta’s ongoing economic development plan is therefore an exemplary model that other countries in the Mediterranean area can follow. The improvement in efficiency we are achieving as a result of the reform process we are conducting is an experience that we will be able to export in the form of numerous services that our neighbours will require as they try to implement similar strategies in the decade ahead.
European Union membership has guaranteed Malta access to one of the world’s most prosperous economic blocks in the world. Implementation of the Lisbon Strategy is now crucial to ensure that Malta is able to maximise its competitive edge in a market of over four hundred million consumers. Malta is already carrying out reforms in the important areas of education, research and development to ensure that a more competitive climate is sustainable in future.
Like other developing states in the post-Cold War international system, Malta is continuously taking stock of its strengths and is seeking to optimise its comparative advantages. Malta possesses a number of assets – language, modern legal and administrative systems, qualified labour force, air and sea links, an ever growing neighbourhood of Arab markets. These advantages need to be fully-exploited and where necessary adapted to the new global economy of which Europe is an important region.
Malta’s future prosperity will more than ever depend on the dynamism of its business community. Free competition will be the watchword of the future. Being innovative, having a capacity to develop new products and new markets, and an ability to merge with other companies, to do research and even to invest overseas will be essential. Membership of the EU is already providing a more stable environment, more competition and more possibilities for co-operation across Europe.
This policy framework is probably one of the most outstanding advantages that Malta has achieved in its first year of EU membership. Improving our competitiveness in such a framework will determine Malta’s geo-political and geo-economic destiny for decades to come. In fact, the competitive strategy that the government of Malta is seeking to implement will ensure that Malta becomes a Euro-Mediterranean economic powerhouse in the next decade.
As a member of the EU, Malta has already started to raise awareness of the economic challenges that our southern neighbours are confronting. By becoming more competitive at home Malta will also be in a favourable position to attract the attention of the international business community towards the economic opportunities that exist in the Mediterranean.
At present Mediterranean countries continue to attract less than two per cent of international investment. A major hindrance to attracting larger amounts of investment is that the Mediterranean market is partitioned in a multitude of small markets. For example, the entire north African market only corresponds to the size of the internal Portuguese market. Moreover, internal transaction costs remain very high. With so many barriers it is not surprising that intra-regional Mediterranean trade remains stagnant. South-south cooperation is dormant with intra-regional trade in the North Africa representing five per cent of their total trade.
To the south our neighbours are all seeking to participate more comprehensively in the EU economic and financial sectors through already negotiated partnership agreements and emerging neighborhood action plans. Malta’s European and Mediterranean political and economic comparative advantages must be consistently developed so that we are able to play a direct role in such a strategy.
If the Mediterranean area is to become more competitive it must foster a process of sub-regionalisation. This exercise must result in the opening of sub-regional markets and the creation of sub-regional free trade areas. Trade liberalisation within the Euro-Mediterranean process has so far been taking place on a north-south basis. It is essential that the EU and its Mediterranean partners now focus their attention to opening transnational cooperation at a south-south level.
As a consistently active member of the Euro-Mediterranean Partnership and also the Five plus Five Western Mediterranean Forum, a sub regional grouping of five southern European states – Italy, Spain, France, Portugal and Malta, and five north African states, Morocco, Mauritania, Algeria, Tunisia, and Libya – with Malta currently holding the presidency, Malta is already seeking to enhance efforts aimed at intensifying south-south political and economic relations.
During last week’s EU Competitiveness Council I informed my European counterparts that Malta agrees with the Commission’s emphasis to shift the focus of the Lisbon Agenda to jobs and growth, rather than solely spreading emphasis equally on the three pillars of sustainable development (economic, social, environment)
With this in mind Malta supports the establishment of the European Research Council and the European Institute of Technology and other centralised community initiatives and measures which can spur research in key technology areas that contribute to EU in terms of global competitiveness. Particularly, we welcome the increased orientation of cohesion policy and all supporting frameworks towards growth of jobs in general.
The Commission is of the opinion that EU funding has a role to play in pursuing the Lisbon Agenda. In this context, Malta concurs with the view that the new financial perspective for 2007-13 should be consistent with the New Lisbon Strategy.
Malta’s geographical position on the periphery of the Union makes it more difficult for Malta, in collaboration with other Member States, to form part of a project that has very strong value added to the community. Malta’s economic operators are mostly micro enterprises and they too are at a disadvantage. Besides backing more investment in infrastructure and more emphasis on innovation and research and development, Malta reiterates the need for EU programmes in both areas to take into consideration needs of smaller Member States not allowing technical considerations and geo-physical specifics to unduly penalise them in funding opportunities.
We acknowledge that R&D and innovation are important drivers of productivity and hence economic growth. R&D together with innovation are key priority areas for investment in order to secure the aim of the EU becoming the most competitive and dynamic knowledge-based economy in the world.
Censu Galea is Competitiveness and Communications Minister