Efficiency key to maintaining economic competitiveness
The Malta Independent Online-News
Staff Reporter

A high level of efficiency at all times and across all sectors of the economy was instrumental in maintaining Malta's economic competitiveness.

Dr John C. Grech, president of the foundation for national competitiveness, made it very clear that although Malta was well positioned to make the most of the opportunities for growth, it was important that the country took a long hard look at the future and established where it wanted to go.

Dr Grech was addressing a business breakfast organised by The Malta Business Weekly and the Le Meridien Phoenicia Hotel last Thursday.

Throughout his presentation, Dr Grech emphasised on the need for change but more importantly consultation between all parties. He said the options chosen must be plausible and desirable, and the country?s strategy must be developed accordingly.

He added that incorporated Malta should not try to do what it could not do.

We cannot be any of the larger resorts in Spain. It is simply not possible. We have to work within our capabilities and structural limitations, Dr Grech said.

Turning to politics, Dr Grech said there should be space for everyone and the country deserved coordination between political parties so that one policy direction which no party could call its own, but which Malta could call its own, could be drawn up. EU membership had been essential for Malta but it was not the vision. Membership had been an essential means to an end.

The country now needed to have a vision, he said, adding that it had to think of the scenario in 10, 15, 20 years time and plan the infrastructure as a corporate body planned its strategic business competence.

There has to be competitive efficiency and competitive response. Were Malta to sharpen its response capability rather than adding on to the bureaucracy which was weighing the country down, things would start moving, Dr Grech said.

Dr Grech gave an in-depth analysis of the Global Competitiveness Report which was compiled by the World Economic Forum and EMCS Ltd.

The Global Competitiveness Report for 2003 put Malta in the 19th place worldwide as regards the Growth Competitiveness Index, but 42nd worldwide as regards the Business Competitiveness Index.

On the one hand, Malta is 19th as regards the growth competitiveness because Malta excels in the following fields:

· FDI technology transfer, where Malta is registered as first worldwide;
· Government prioritasation of ICT where Malta is sixth worldwide;
· Interest rate spread in 2002 (6th);
· Government success in ICT promotion (7th);
· Recession expectations (16th);
· Lack of organised crime (16th);
· Lack of irregular payments in tax collection (16th),
· Lack of irregular payments in public utilities (18th);
· Property rights (18th);

On the other hand, the areas where Malta, despite its high placing, ahead of countries such as Israel, Luxembourg, Spain or France, ranks lower than its competing countries include:

· Government surplus / deficit (67th);
· National Savings rate 2002 (62nd);
· University/industry research collaboration (62nd);
· Company spending on research and development (55th);
· Tertiary enrolment (58th);
· Extent of distortive government subsidies (41st);
· Technological sophistication (30th);
· Inflation 202 (32nd);
· Country credit rating 203(28th);
· Public trust of politicians (2nd).

With regards to the Business Competitiveness Index, where Malta, at 42nd, ranked quite low in the world table, the factors examined underpin high current productivity and hence current economic performance measured by the level of GDP per person as determined by:

· Sophistication of Company operations and strategy:
· Production process sophistication (27th);
· Nature of competitive advantage (30th);
· Value chain presence (31st);
· Control of international distribution (75th);
· Extent of incentive compensation (68th);
· Reliance on professional management (64th);
· Quality of national business environment
· Local equity and bonds market access (12th);
· Quality of local educational system (16th);
· Judicial independence (20th);
· Stringency of environmental regulations (85th);
· Prevalence of merger and acquisitions (83rd);
· Local availability of components and parts (81st).

Mr Grech explained the genesis and work of the Competitive Malta organisation which was created and is striving to get the whole of the country to focus on competitiveness. Competitiveness will become a crucial component once Malta joins the EU and starts to encounter the impact of worldwide globalisation, Mr Grech warned.

He also had his own list of what must be done on the national level in the coming period of time.

· We must start to think as one country.
· We must identify what it takes to link production to a product.
· We must think in terms of integrating and internalising the value chain.
· More importantly, we must have a vision for our future.

Mr Grech complained of bureaucracy: when MTA recently produced its plans for St George’s Bay, it needed to talk to 20 organisations. Malta, as a friend told him in Dubai, has old structures still there alongside with new structures. He said there were still very few links between business and university and the people at university seemed to expect these links to be one-way only. The university must not be a teaching university only, but also a university of research.

Malta must learn to deliver value, he said. “We cannot compete with competitors who have a bigger country and who can offer better economies of scale. Malta must offer itself as a value place.”

Again and again, Mr Grech mentioned Dubai as an example: 50 years ago Dubai was just a desert. Malta cannot compete with Costa Brava. Concluding, Mr Grech warned that unless Malta got it right, EU accession would bring all the pain and no gain.

“The pain will lead to unhappiness and gloom and doom, and this will be further encouraged for partisan reasons. The end result will be a mess all around.

“Malta must emulate Ireland and pull together, come to an agreement on a social pact and move forward to get the gains of EU accession and not just the pain.”

Taking questions, Mr Grech said the Maltese must stop looking at their own backyards and start looking outside: with EU accession we now had a market of 450 million in our backyard. “Politicians are important in our country, but they must realise there are other people on the island, people who can contribute validly to the national forum.

The Maltese are a competitive race, we learn and act fast, we are intelligent and have time and again proved we can move on ahead.”