Bank of Valletta plc has published the 31st edition of the Bank of Valletta Review, featuring four interesting papers.
The first paper, entitled: The propensity for dependence in small Caribbean and Pacific Islands, written by Jerome L. McElroy and Katherine Sanborn, focuses on the stalling of the postwar march to independence among small tropical islands and the dependent islands’ persistence in voting for the status quo. The primary explanation in the literature is the substantial economic benefits conferred by political affiliation: preferential metropolitan trade, investment and migration opportunities and subsidised infrastructure funding.
The study compares 16 dependent with 19 independent islands in the Caribbean and Pacific across 25 socio-economic and demographic indicators. The former significantly out-perform their larger sovereign rivals across most indices. The results suggest that the dependencies have more successfully restructured their colonial economies, have progressed further along the demographic transition, and constitute a new insular development case, ie the small service-driven dependent island economy.
The second paper is entitled: Successful Small Scale Manufacturing: A Comparative Assessment across Five European Island Regions by Godfrey Baldacchino. This paper attempts to explain the conditions behind the success of exceptional small firms in Europe, with reference to a project entitled Nissos. The project set a tough and stringent set of criteria for defining success and sought out firms which match those criteria.
A total of 144 firms in the five partner island territories which matched the criteria were identified. The project then delved into detail to understand the particular ensemble of characteristics of these firms. In excluding many thriving small firms from its remit in the process, only the truly exceptional were being scouted by Nissos. The paper invites readers to critically consider the quantity and quality of successful Malta-based firms, in the context of the Nissos data and research template.
Another article is written by Silvio John Camilleri with the title of: An Analysis of the Profitability, Risk and Growth indicators of Banks operating in Malta. The paper consolidates the summarised financial statements of the main banks operating in Malta during the year 2002, to form a Typical Large Bank and a Typical Small Bank. The profitability, risk and growth prospects of the two institutions are analysed through return on equity decomposition and the use of other financial ratios. Various differences between large and small institutions emerge.
In particular, larger institutions realised higher profitability and cost control; they were more capitalised in absolute terms and relied relatively less on interest income. Smaller institutions generated comparatively more revenue, were more capitalised in relative terms, were relatively more provisioned against loan losses and held a higher proportion of liquid assets.
The fourth paper, entitled: EMU: Implications for Social Partners and written by Saviour Rizzo, deals with the structural changes induced by the EMU framework for a deepening of economic integration which is seen as possibly interfering with the entrenched position often taken by the social partners. In countries like Malta, long used to government overspending and subsidy addiction, the conformity to fiscal rigour demanded by the Maastricht Treaty may be interpreted as a replacement of adjustment policy options to less attractive ones.
The change generally triggers a call for a more transparent political process because it tends to bring in its wake a rise of participatory moods and ideologies which lead people to exercise the repertoire of existing democratic rights more extensively. The dilemma which the social partners have to face is that of adapting their policies and strategies to the social and economic imperatives of this new socio-political scenario, while at the same time retaining the support of their hard core constituents who tend to hold to the traditional norms. The leaders will therefore have to find ways of injecting a new type of rationality in their constituents, at the same time maintaining the legitimacy of their leadership and of the organisation they represent.
As in previous issues, the current BOV Review provides a useful index of the articles and their respective authors. In addition, articles from Issue 25 onwards are available online on the BOV website www.bov.com
Further information, and hardback copies of the Review, are available by contacting Michelle Caruana at BOV Strategic Planning on telephone number 2321-3288 or by email to [email protected]