The Malta Independent 14 July 2024, Sunday
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Malta is thriving, but needs to up-skill

The Malta Business Weekly Thursday, 18 April 2019, 11:09 Last update: about 6 years ago

Nima Sanandaji

While much of Europe is facing gloomy times, Malta is prospering. But the nation needs to invest heavily in up-skilling students and adults alike. Otherwise, some of the people of Malta will fall behind the shift towards a knowledge economy. Up-skilling is also what is needed to strengthen industrial competitiveness. After all, the greatest obstacle for modern businesses today is the lack of necessary talent.

Between 2000 and 2018, Malta's economy has grown at an average rate of 3.8% per year. This is the fastest growth rate in Southern Europe. Cyprus, an island which much like Malta thrives on tourism and a business friendly climate, comes in second place with 2.3% per year. Spain and France have had half the growth rate of Malta. Italy and Greece, which share Malta's climate but not its modern business legislation, had 10 times lower growth rate.

With the growth rate that Malta currently has, it takes less than 19 years for the size of the economy to double. With a growth rate of 0.3% that Greece has had, it takes 231 years before the same happens. The reason is simply differences in economic policy. The Mediterranean nation which has a modern, business-friendly, policy regime thrives. The Mediterranean nation which has a byzantine government bureaucracy in the way of business stagnates.

Economic research tells us that governments should not pick winners. Governments need only foster good institutions, and business will thrive. Malta has already favourable regulations, with room for further improvement by streamlining. The country is also witnessing the build-up of knowledge-institutions such as the Malta Life Sciences Park.

While some businesses leave Malta, others flourish here. Malta has introduced regulation for a range of new markets, such as cryptocurrency, artificial intelligence and medical marijuana. Malta's economy is expected to grow by 5.2% in the coming year. This is the highest forecasted growth rate in all the European Union. The country is becoming something of a new Singapore of the Mediterranean.

So all seems to be good news. But there is one big problem: some in Malta are falling behind the knowledge economy. The Singapore school model produces top of the world results among its pupils. The knowledge-level of the average Maltese student is on the other hand closer to that of students in Greece.

The school results need to improve, particularly for students from socio-economically weak families. This can be achieved by the introduction of researched-based pedagogical models in schools. Essentially modern teacher-led educational methods. Another important policy is investments in early support education for at-risk children. This can work wonders for those who otherwise risk becoming future drop-outs.

Improving educational results might sound like an obvious thing. Of course we should want this. But let me emphasise the importance of this issue. At no time ever in human history has so much change happened in the world economy, and as fast, as today. Artificial intelligence, robots, a globalisation of the marketplace, and a rapid shift towards knowledge-intensive jobs are all happening at once. With this growth comes the problem of low-skilled people falling behind.

In many European economies, low-skilled people have difficulty finding a job. In Malta, this is not a major problem due to the simple jobs created by tourism. But low-skilled individuals in Malta still risk falling behind in prosperity. The simple reason is that the world economy is increasingly rewarding people with specialised skills. So what should government do? The only policy solution to this issue is encouraging up-skilling.

Up-skilling is not only about reforming the school system so that it becomes more productive. It is also about creating an environment where adults that have entered the work life continuously invest in adult education. Encouraging adult education, with funding from the individual, employer as well as the state, has been an important part of Sweden's positioning as a knowledge-economy. In this regard, Malta can learn from Sweden.

Encouraging up-skilling is the best way for Malta to prepare its citizens for the future jobs and also to strengthen an already impressive economic foundation. Because what businesses need to grow in is talent. An up-skilling policy focused on skills that are in demand would ensure that growing firms, whether they be in IT, manufacturing or biotech, have the talent needed to grow.


Dr Nima Sanandaji is president of ECEPR (European Centre for Entrepreneurship and Policy Reform) and the author of 25 books on entrepreneurship and policy. He has lived in Malta since early 2016.

The Malta Business Weekly, in collaboration with the office of Dr Miriam Dalli, member of the European Parliament, will be organising a business breakfast with the theme Industry of the future: challenges and opportunities. This event will be held on Thursday, 25 April at 8am at Spinola Suite, Hilton, Portomaso. Anyone interested in attending this event, can phone on 2134 5888.


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