Business • January 18 2004

FOI calls for drastic measures to bolster eroding competitiveness

David Lindsay

Speaking this week about recent redundancies in industry and tourism, the Malta Federation of Industry has issued an appeal to all stakeholders to urgently tackle the country’s competitiveness problems without further delay, if the situation is not to deteriorate more than it has and if investment is to be saved and encouraged.
In a strongly worded statement, the FOI advises in no uncertain terms, "The country needs to take drastic and immediate measures. There must be serious commitment from Government and Trade Unions to find a way out of the present difficult situation. This must start right away because it is an urgent requirement on which depend future investment and jobs.
"Industry is prepared to give its contribution to tripartite talks and to reach a serious agreement as long as negotiations start without pre-conditions from any side."
The FOI’s two-cents’ worth comes following recent redundancies in the manufacturing and tourism industries – Malta’s two most important economic segments in terms of employment generation and foreign currency earnings.
Stating its concern over the state of affairs and expressing its sympathies to the workers who have been made redundant and lost their earning potential, the FOI cited the circumstances as symptomatic of the problems Malta is facing.
"It is an indicator that enterprises are suffering in the global market place, losing market share and perhaps even the will to invest in Malta. This is indeed serious."
The FOI recalls that it had been warning the government and unions that what appears at the time of undertaking as a strong investment, is no longer safe from external market pressures.
"Export-oriented industry in all sectors, except in the machinery and transport sector, is suffering from reductions in their export figures; and that includes tourism. Although each entrepreneur does his best to retain and expand his operations, it is also true that performance and profitability in manufacturing and tourism have been on a downward trend for a number of years. The cause is not EU membership but our increased exposure to market pressures, the level of efficiency measured in terms of productivity increases, as well as the comparable lower costs for industry in other countries."
In addition to these ailments, the FOI also warns that the state of the country’s public finances and the accompanying upward push in taxation is contributing to a diminishing disposable income in the hands of workers and entrepreneurs alike.
"It is becoming increasingly difficult for firms to increase their prices on the market whilst their profitability is being squeezed between increasing costs and resistance by the market to accept higher prices for goods and services.
"In the meantime, the Malta currency is becoming stronger and rendering exports more expensive to sell, whilst productivity increases are being surpassed by wage increases. In these circumstances no entrepreneur can be blamed if he shifts his operations away from Malta."