“I can tell you that a major player in Malta is looking at a major expansion of its operation in Malta creating hundreds of new jobs for Maltese employees”. Noel Grima interviews AUSTIN GATT

In the very last press conference for 2007, you, together with the Prime Minister, announced the new ICT strategy that is being labelled as The Smart Island. Over the past few years, we witnessed the departure of various low-end manufacturing firms and the increase of new industries. Can the term SMART also be applied to our economy and the way it has evolved?

‘The Smart Island’ is not a geographical expression. It is, for want of a better word, an anthropological description. It describes the people of Malta and their willingness and capacity to adapt to changing circumstances. Innate characteristics of a nation do not emerge spontaneously, nor are they the products of even the most insightful strategic documents. The smartness of the Maltese people is what helped them to prosper in spite of their geographical isolation and of living on the edge of the periphery.

But our smartness becomes our smugness at our peril. That is the role of leadership: to harness the natural advantages and resources available to us as a country and make the most of them. That is what we have done over the past few years. Making the right choices was by no means inevitable.

When we were staring globalisation in the face some of us blinked. You will not have forgotten how some warned employees of firms they named that their jobs were threatened by globalisation. Their advice to them was to vote for protectionism and an isolationist economic policy, essentially an attempt to stop time and live in a cloud of nostalgia. Hardly a smart approach.

The alternative the people of Malta chose was rather to open up to globalisation, sharpen our competitive edge and shift the structures of our economy away from sectors in which we could no longer compete and towards new economic activities that add value. ICT is but, albeit a very important, one of these activities. Pharmaceuticals, electronics, engineering, call centres and the media industries are others. This direction has borne fruit and, since that fateful decision in 2003, we have attracted new FDI projects that are expected to generate 4,000 new jobs.

The people of Malta then made the smart choice, as it were.

What are the tangible effects of such a change?

Two hundred million euros invested from foreign resources in four years in manufacturing and industrial projects is a tangible effect. That’s out of a total of e2.7 billion invested in Malta from overseas sources since 2003. Four thousand new jobs is a tangible change. From the point of view of the families of those 4,000, their improved pay packets are a tangible change.

Now, of course no change is painless. Employees of traditional factories lost their jobs during this time. They went through tough times of insecurity until they got back on their feet in new jobs. Because they did. By way of example, since the year 2000, VF has reduced employment by over 700 people, including a mass redundancy of over 500 last summer. Of these, 424 are now in productive employment. Over the same period, Denim Services made around 650 employees redundant and to-date over 450 of them are back in productive employment.

Not all ‘traditional’ factories shut down. Some of them were ready for the challenge of globalisation. There can be no more ‘traditional’ name for a factory than Nylon Knitting. With a name like that you’d have expected it to close down some time in the early 2000s. Instead it changed its business and I am informed they are looking at expanding the business.

In balance, the changes in our economy brought about higher incomes and improved living standards for our families. Our country is right to be proud.

It’s only a few days since the adoption of the euro, and maybe too early to quantify how this will impact FDI in Malta, however we’ve been in the EU for four years. Was EU membership crucial to retain high-end investments or was it a catalyst for the losses in the low-end industry?

EU membership proved to be for Malta exactly what it promised to be before it happened: a new spring. Malta’s economy has undergone a veritable growth spurt in the past four years. The significance of the recent adoption of the euro should not be underestimated either. To get this far our country needed to pass a series of objective tests proving the resilience of its economy, price stability, managed public debt and careful budgeting. All these are measures of credibility any investor looks out for before committing any of his money.

Your question speaks of ‘retaining’ high-end investments, so let us put aside for a while the opening of new projects since our accession in the EU. Let us focus instead on the expansion of operations that were already here before 2004. The best example must be Lufthansa Technik. On 1 May 2004 nine other countries joined the EU, many offering cheaper land, reasonably skilled resources and, in most of the cases, lower salaries than Malta. Could we have competed with those destinations had we also locked ourselves out of the European single market and the stability of a single currency?

The expansions of HSBC, Actavis, Thomas De La Rue, and others, are due to several factors but none of those factors would have counted for much had the one crucial factor of EU membership not been resolved the way it was five years ago.

It seems incredible to me now that those who railed against EU membership so vociferously a rabbit’s lifetime ago now claim to have answers to all of industry’s woes. There would have been no industry to support now if those jeremiahs had had their way in 2003.

Without any doubt, SmartCity remains the biggest ever FDI investment in the Maltese economy. When you visited the work being carried out on site, you referred to the event as a landmark in Malta’s economic transformation. Why is that?

SmartCity is at the heart of the Smart Island project. It is its inspiration, its model and its monument.

In the simple symbolic fact that we are erecting a modern city in place of a derelict industrial estate, SmartCity becomes a physical landmark that reminds us and those who visit to do business with us, of the changes in our economy and what we expect from it.

The crude economic fact that it is financed to the tune of e230 million by the creators, and the Dubai Internet City idea employing several thousand people in newly created jobs, SmartCity becomes a commercial landmark that single-handedly boosts our economy in a perceptible way.

While I would hate to do so, it is very hard to exaggerate the significance of this development. It shows how along with financial services, tourism and manufacturing we have managed to make out of ICTs a new pillar to support the prosperity of the Maltese.

When 5,600 people are earning their bread and butter from SmartCity, we should then ask them if they think it is a landmark of Malta’s economic transformation. They will wonder at the hyperbole but they will surely confirm that SmartCity is a landmark in their own lives. I would be more than satisfied with that.

At the beginning of a year, one tends to look back to take stock and also forecasts and make wish lists for 2008. How was 2007 and what are we to expect, in terms of FDI, in the coming 12 months?

In 2007 we paid out to industry more in terms of support and grants than ever before. This year we paid out more than 10 times what we paid in 2004. This is not merely an indicator of generosity. It is an indicator of the take up of our attractive incentives and of the ever-growing confidence we enjoy with investors overseas. Late last year, Parliament approved the new Malta Enterprise Act that will now allow Malta Enterprise to offer more and better incentives, including substantial cash grants funded fully by the European Union.

In 2004, on the day of our membership, we looked forward to a period of rapid growth. Since then we have experienced it but we are nowhere near the crest of that wave. These are happening and exciting times. There is an electrifying sensation that Malta is up for big changes in the future.

I don’t want to peer too far into the future. Crystal ball gazing is not my business. But what we are expecting from the next few weeks shows that the rate of growth in our investment records can and will continue to rise exponentially.

I can tell you that a major player in Malta is looking at a major expansion of its operation in Malta creating hundreds of new jobs for Maltese employees.

There are other positive indicators coming our way and when deals are concluded they will of course be announced. But at the current rate there is no doubt that we can hope for continued growth in our economy.

What is the biggest challenge you foresee in our economy? How can we meet it/them?

The greatest challenge ahead of us is quite simply realising the promise of our successes. I spoke to you of the reasons to hope for continued growth.

I should warn that none of this is guaranteed. Simply acquiescing to EU membership or euro accession, as the Opposition now expects us to believe it is doing, is not enough.

As in 2003, the Maltese electorate is faced by a clear and present choice: economic prosperity or an isolated, desolate economy, a choice between new jobs or depression and unemployment.

Once again, as in 2003, 2008 is a crossroads for the people of Malta. I have no doubt in my mind that they will again make the smart choice.