Vince Farrugia | Sunday, 08 March 2009

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The things we need to do

Malta still has a lot of road to cover to achieve the standard of competitiveness that can really get us moving. We’ve moved forward substantively over the years, but the recession, which is now beating heavily on our doors, shows most clearly that we have not taken this issue of competitiveness seriously enough.
The problem with us is our failure to prioritise. I am now the longest serving member of MCESD. Hardly a meeting is held without competitiveness cropping up on one item or another of the agenda. I used to enjoy these meetings and used to contribute greatly. Economist Gordon Cordina drew up an excellent report, following six months of weekly meetings. This report was then followed by a year of discussions that should have led to Malta’s first “Social Contract” among social partners.
This never materialised. The General Workers’ Union invented one excuse after another not to sign. The Unions argued among themselves and the social contract was doomed. Since then, MCESD has been one big fat sleeping beauty. The enthusiasm has never been regained.
We pay today a high price for this failure. Workers never understand why they have to pay the high price of unemployment. As recession bites into in our major markets, more workers will be laid off. Who can explain to these workers that their jobs might have been saved, if their leaders sacrificed their pride a little more and accepted the Social Contract?
Competitiveness is not something that employers, trade unions or government can achieve on their own. It needs a collective commitment. Unfortunately the concept of representation in Malta remains archaic. Many of us strive to seek solutions and try to lead from up front. Many others are weak and they allow themselves to be backseat-driven by militants and people with silly partisan political motivation. Some are completely myopic in economic terms. I have heard so many silly economic arguments over the years I could write a bestseller. We would be years ahead and our restructuring in industry, in commerce, and tourism would be much, much more advanced if our representative organizations left more of the serious economic planning and analytical work to the experts.
But we’re democratic aren’t we? We prefer to push ahead the most popular and not the most capable and the most efficient.
The end result is that in the Global Competitiveness Index of the World Economic Forum Malta’s economy ranks 52nd out of 134 countries. We should be facing the impact of the world recession blow from a strong position, but our failure to move faster in restructuring holds us down in ranking. From 134 countries measured by the Competitiveness Index for Labour market efficiency Malta ranked 100th, 68th for macroeconomic stability and 56th for innovation and sophistication factors. We scored better in the area for goods market efficiency at the 43rd place, proving that the removal of trade restrictions since joining the EU has had a tremendous effect. This is however still not enough. We do very well in financial market sophistication, at 18th and 27th in technological readiness.
Our performance continues to suffer due to our failure to take serious remedial action on the problems that keep burdening our competitiveness. The five most problematic areas identified by the World Economic Forum Competitiveness Index are inefficient government bureaucracy, access to finance, inadequate supply of infrastructure, the rates of taxation and the restrictive labour regulations.
Other negative factors are inadequately educated workforce, the rate of inflation, tax regulations, poor work ethics in the national labour force and corruption.
It is not so difficult to identify the areas that matter and that need remedial action. That is what MCESD tried to do the last time round. We failed then because not all members were convinced that economic recessions occur, and that in a recession only the best survive and only the efficient continue to expand.
The cause of all our economic problems is our competitiveness. Were the problems of competitiveness addressed earlier, as was the intention of all of us who strived so hard to get the Social Contract signed and implemented, today we would have been facing our economic problems with a much better structure and with a sharper competitive edge. In the absence of the Social Contract we have now allowed the market forces to correct our competitiveness.
The way forward is to restructure, and restructure in time. Restructuring is not a political slogan. It is an economic necessity. No trade union leader can truly wish the best for workers if through his efforts he holds back the process of restructuring. The best form of restructuring is that which is achieved through national consensus. That is why they call us social partners: we are partners because we believe that together we achieve more.
The problem with our economy is that too much of our productive capacity is subject to what happens in the short term in the markets on which we depend. An intelligent economic strategy based on a forward-looking Social Contract can effectively cause little Malta to move upwards in the competitiveness ranking. This is something we need to do with great urgency, if we do not do it by ourselves the market will force it upon us and many will suffer.
Fortunately thanks to all those who have striven to ensure Malta’s membership of the European Union we are now an integral part of an Economic and Political Union that is helping us to invest and improve in many areas where in the past we were extremely deficient.
We have indeed moved forward. Let us all be positive about this. The European Union has not only been a great instrument of change but also a great financial source of support. It has successfully installed in us a better way of designing and implementing policies.
But we need to do much, much more to ensure that we get the maximum support that the EU offers to uncompetitive regions and economic sectors.
Surviving together to get agreements at national level on the way forward is a top priority. Let us not keep wasting more time arguing and doing nothing. The people who suffer the cause of our inaction will not forgive us as the economy fights its way out of a difficult period let us not forget that things could have been better if we did the things we needed to do in time.

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