An extract from the latest IMF report on Malta talks of the challenges that lie ahead but also the considerable opportunities. While the closer integration of the world economy magnified the impact of the current crisis, countries that reform their structures stand a better chance of speeding the recovery, as demand from the countries that first return to growth will take exports, and thus production, from their trading partners. In its annual report the IMF issued a clear warning to those who harp on about how well the island did in the wake of the global recession, and quaintly declared that the economy is “enjoying a cyclical upswing, but the momentum is expected to fade”.

The report continues to reassure us that, as a small and very open economy, Malta is adjusting well to the challenges posed by globalisation. Progress is being made in diversifying the economy through higher value-added activities, including aircraft maintenance, pharmaceuticals, financial and accounting services, ICT and more.

It tells us never to give up our drive to upgrade and promote synergies between the various economic clusters. Any hesitancy in this task would augment the risks stemming from potentially unfavourable changes in the frail international recovery. At this juncture, it is pertinent to recall that the Governor of the Central Bank of Malta cautioned us to monitor wage increases, making sure that these reflect productivity developments. Competitiveness is also suffering from low participation of a vast pool of tertiary level women and one hopes that a partial remedy will be more family friendly measures for part-time work and flexible working practices.

So while politicians tell us to be jubilant about our successes we cannot rest on our laurels. Malta definitely needs to sharpen its tools to become more competitive as its latest ranking was 55th place in the world index. Economists tell us that a robust competitiveness policy must encourage dynamism and transition into an open marketplace in the global context.

Thus if our national policy is not formulated in this way, it could hinder and undermine the motivation that is needed for exporting firms to succeed in both the EU and the world market place. Nonetheless, the EU is offering its members generous help to put their economy back on track and one of the programmes is the European Regional Development Fund (ERDF).

This funding scheme is aimed at strengthening economic and social cohesion in the European Union by correcting imbalances between its regions and focusing its intervention on diversifying economic structures, creating sustainable jobs, fostering innovation and competition and increasing economic and social cross-border activities. In this manner the EU is helping Malta to speed up the process of penetrating new markets and providing ad hoc networking opportunities to improve levels of competitiveness and innovation. This may seem too utopian to be true and yet very few are making use of this facility to help them penetrate overseas niches, which to some extent is not so easy now due to distressed markets.

Still, the EDRF programme does attempt to build a deeper understanding of the fundamentals of global leadership and competitiveness using various tools and case studies and aid packages.

PKF Malta is proud to announce that its associated company GMM Business Solutions was granted financial assistance in a competitiveness scheme. This ERDF International Competitiveness Grant co-funded a project involving the creation of a drive linked to innovative marketing tools, which, apart from one to one meetings, trade conferences and so on, features a new highly interactive website (www.tunemalta.com). The latter was designed by ICON and is aimed at enhancing collaboration with other service providers to put forward a complete package of services targeting a diverse spread of industries. tuneMalta.com is in its initial stages with a micro-site currently in place and a formal launch is scheduled in the next few weeks. It is an innovative idea on how to promote Malta and covers a wide spectrum of services provided by a multitude of local trades and professions.

GMM Business Solutions looks forward to promoting competitiveness through a web of contacts across the commercial spectrum. In essence, this will be a pivotal approach to amass sufficient gravitas by way of contacts who wish to subscribe (free of charge) to the pool by simply joining a ‘Preferred Partners’ section. This section is aimed at proactively enhancing business growth. To lend a hand in encouraging new contacts GMM Business Solutions are assisted by a team of researchers. This resource has put GMM Business Solutions in the forefront of outsourcing both locally and internationally.

Naturally, it is a long journey to be tackled astutely, fully aware of the formidable task of co-ordinating the various aspects of the complex relationship between service providers in varied industries. We shall be using this information to help companies seek ways to improve their performance by minimizing costs, reducing risk, fostering collaboration, increasing transparency and even sharpening their focus to improve their competitive position, no matter what industry they are in. To conclude, one can say that the key to success is to locate a pool of service providers of high quality with a dependable reputation backed by years of experience.

Leveraging the opportunities from such cross-border opportunities will lead to a higher level of competitiveness. Thus, the competitiveness of a firm depends not only on its own strength, but also on the support it receives from the external environment in which it operates.

Clearly, this support varies markedly from industry to industry and from country to country. It goes without saying that a national competitiveness policy must be in force to encourage dynamism and transition into an open, yet distressed market place within the global context. If a robust policy is not formulated, it could hinder and undermine the motivation that is needed for our nascent manufacturing sector to survive the storm. That is why in order to benefit fully from commercial advantages and trade opportunities we must be fully competitive. In this context one has to keep in mind an important factor that contributes towards accomplishing trade facilitation. Such trade facilitation is driven by Malta Enterprise, Finance Malta co-ordinated via all overseas consulates and embassies.

Trade facilitation measures fall into four categories: port efficiency; Customs procedures and Freeport requirements; improved regulatory environment; reduced bureaucracy and wider e-business use. On its own, trade facilitation is no panacea but it is desirable. On a practical level one can define it as a host of measures to make the flow of internal commerce faster, cheaper. This can be further assisted by a reform in streamlining the administration of ports and Customs clearance with the scope to reduce trade transaction costs significantly. It is true that taking into consideration the turbulence suffered by other Euro zone countries, Malta has so far weathered the global recession relatively well. Output has dropped less than the euro area average and unemployment rose only modestly, also reflecting government support targeting specific industries. At the same time, borrowing continued to rise and this on its own help maintain a mild stimulus.

In fact, the IMF report mentioned earlier states that our economy is currently enjoying a cyclical upswing and growth is projected at around three per cent this year but will be lower next year. On its own this is commendable – as this matches the stellar growth registered by Germany. But the IMF reports warns us that to achieve a strong and sustainable growth over the medium term, policy makers need to adopt a strategic approach that includes growth coupled with ambitious fiscal consolidation and continued progress in establishing high value added export activities. In our open economy, it is no secret that more effort is needed next year to protect financial stability in the banking sector and safeguard against systemic and fiscal risks. As can be expected, following trends in changing technology, the need to move to a human resource-efficient economy and the continuing rapid development of the ICT based entities will better equip us to penetrate niches in the global markets. All this is a do or die scenario. Consequently, during such turbulent times it is a relief that the EU is offering valuable assistance to encourage innovative business ideas. If Malta rides the tide and moves swiftly to adapt itself to emerging trends, it will be in a position to capitalise on first-mover advantages. Naturally, we need to ensure our growing firms have easy access to finance, world-class innovation, science and research through the university graduates coupled with a superior digital infrastructure. It is a sad fact that banks are becoming more risk averse even though their liquidity ratios continue to increase but, as noted in the IMF report, their exposure on the real estate lending to mega developments is creating some attention. To conclude, one must be vigilant and face 2011 with renewed vigour and a stronger determination to surmount future challenges. Certainly the initiative to participate in the TuneMalta project is an exciting prospect for growing firms.

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The writer is a partner in PKFMALTA, an audit and business advisory firm

For more information on how to become a Preferred Partner contact +356 2748 4375 or e-mail Audrey Ann Casingena at [email protected].