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“How can you reconstruct when you have reached full production?”(Peter Axisa, Association of Farmers)
In the vernacular the equivalent of ‘restructuring’ is not always that easy to pronounce. Almost a tongue-twister in fact. A colleague of mine, with a faint lisp and fully self-conscious to avoid uttering a malapropism, has resigned himself to calling it ‘reconstruction,’ a word he finds less difficult to pronounce.
And yet, in the context of Maltese society, he is not wrong at all. ‘Reconstruction’ probably suits the prevailing phenomenon better, although no politico has ever used it when describing the Herculean task ahead, facing the government and the nation now that we have assumed full obligations of EU membership. Indeed, the Opposition has gone one step further (or is it astride?) and started exhorting everyone to talk of regeneration if we want to survive global competition and maintain our current living standard.
Whereas restructuring leaves an edifice standing and just changes most of the structures supporting it, reconstruction presumes a prior piecemeal sectoral demolition whilst concurrently rebuilding another sector.
Regeneration presumes a complete renewal, reform or transformation, not a simple overhaul. In a way it almost implies a suffocation of what now exists - gradually and equally piecemeal, of course. It is more radical than restructuring, though some may argue that it merely means putting a new life in the economy without the choking bit.
Semantics? Probably. So why indulge in it? Because people tend to get confused in trying to understand the real true meaning, and particularly the implications couched therein, sometimes even concealed and hardly ever explained properly to the masses. On those occasions when an explanation is proffered, either deliberately to deceive or from sheer ignorance, more often than not, the speaker turns out eventually to have been wrong. By that time the issue will have taken a new dimension and the mistake becomes impossible to rectify. People feel cheated.
As the farmers appear to be at this juncture. Are they right or are they wrong? Give your judgment after you have finished reading this opinion column.
Undoubtedly, the sector in the economy that has so far been mostly affected by the ongoing restructuring process is the bulk of the productive one: manufacturing, tourism and agriculture. Other sectors, equally targeted, have to date remained unscathed, perhaps only minimally hit, eg the public sector and government finances.
Some have even profited from the sacrifices of others, eg banking and communications. The construction sector stands poised to develop erstwhile manufacturing properties no longer in activity as the local market is lost to imports.
Fifteen years have now passed since the government started preaching the imperative to restructure the whole economy through its various components. By 1989 nearly all physical import controls (except agricultural products) were dismantled. These had afforded unprecedented protection to those who had regarded the Maltese market as sufficiently ample to justify investment in machinery and know-how. There was to be no competition from corresponding imports to those who opted to add any degree of manufacturing value in Malta, employing Maltese workers. In cases where the size of the market warranted it, internal competition was fostered in order to safeguard against overpricing.
Before 1989 import substitution had been government’s policy plank for roughly the same length of time since. At times enforced without hardly any consideration for the consumer on quality. An extreme case which jumps to my mind concerned floor-cloths - the employment of a single operator cutting rolls of cloth in pieces was enough to justify stopping imports, no matter how inferior in quality it could be.
It was hoped that, by providing a modest market base, some manufacturers would take exporting seriously enough and eventually establish themselves firmly without the need for continued protection. A few did, but very few. Characteristically, the local entrepreneur always wants it the easy way to induce him to invest.
The 1989 restructuring exercise took off in a spirit of magnanimity on the part of the new administration. In place of physical controls a levy regime was introduced which effectively was intended initially to provide almost the same level of protection by heavily penalising consumers who capriciously preferred the imported product at all costs. A target date was set for a five-year duration, but was later extended, with reductions and some removals, from time to time in line with negotiations on EU membership: a tactical move to strengthen the negotiators’ stance.
Such was the overall level of protectionism that not even the Federation of Industry could fault it. It was the Chamber of Commerce which persistently clamoured for reductions and removals. In many cases it was right. A specialist Board, specifically appointed to look into the workings and effectiveness of each levy, monitored the situation and periodically advised the government accordingly. Gradually a dismantling programme was initiated such that by 2000 almost the whole gamut of levies on manufacturing could have disappeared completely if it wasn’t for the EU negotiations about to start.
During the discussions with local manufacturers, who understandably argued for levy retention for as long as possible, it was continually emphasised that, besides ensuring good quality for their products, they needed to search for improvement in production methods so that they would also compete on price when liberalisation eventually displaced protectionism. Those who saw this as impossible to achieve were told bluntly that there was no place for them any longer in our industrial estates. They had been given more than adequate time to recoup their capital investments.
In manufacturing the strongest economic case for retaining levies for the whole stretch was in furniture and food processing. Even these, however, accepted the inevitability and the former saw sense in asking for an earlier liberalisation than indicated.
The problem was, and still is, agriculture. For many years, besides levies, farmers also enjoyed seasonal physical measures against imports. Sometimes even illogical, like insisting on stopping imports of apples and bananas in order to make the consumer buy their peaches and pears when in season. Such was the potency of their lobby, supported to the hilt by the agriculture ministry, that the levies Board was totally ignored and decisions were taken above its head, mostly against their advice. Quotas were, however, sporadically given which pretentiously afforded the consumer a modicum of choice, but at a price which only the privileged well-to-do could afford. The farmer was happy; the housewife in tears.
Restructure? What exactly does it mean? According to the farming lobby, it is to continue producing the same crops as before because the government promised to subsidise the difference in prices between their erstwhile and their afterwards on import liberalisation. Not enough. If the worst came to the worst, the government would resort to the ‘safeguard clause’ they had won during their EU negotiations and should re-impose levies and/or even physical controls afresh. The Maltese market would be guaranteed ‘in advance’ and so also will the farmers’ income.
Is this restructuring? Where is the changeover to crops which do not need protecting? Instead of the housewife paying the high price directly, she would be paying it via taxes.
Since the old principle of ensuring ‘essential supplies’ no longer holds, why couldn’t farmers reduce or stop producing the volume of non-competing crops and concentrate on those which they can even export on price and quality? The answer is in the quotation on top. To farmers restructuring seems to imply expansion and increase in overall production, not a change in crops for the benefit of the whole economy. Full production cannot possibly be added to, hence restructuring is impossible. Tell that to manufacturing firms.
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