Malta’s dismal level of competitiveness was highlighted in the EU’s annual competitiveness report yesterday as one of the worst performing member states – while the entire bloc has for the first time since 2001, outstripped the US in productivity growth.
Malta ranked last amongst members states in GDP growth between 2000-2005, and lags behind new member states which registered double-digit growths since joining the EU in 2004.
The report is the EU’s official ranking of member states’ performance and the bloc’s standing with the US.
Between 2000-2005, Malta’s gross domestic product fell by 0.3% – a decrease in its GPD per capita – showing the country’s standard of living did not achieve any growth in the five-year period under review, while states like Latvia and Estonia registered growths of 8.9% and 8.6% respectively during the same period. Its growth for 2006 was 2.3%.
Worse still was Malta’s labour productivity. Between 2000 and 2005, real productivity from Maltese workers actually decreased by 0.5% – the only country to register a worsening rate of productivity. It means Malta’s labour was costlier than any of its EU cousins. Productivity is considered to be the key driver of competitiveness and welfare in the long term.
Also conspicuous is Malta’s employment rate – the worst in Europe – where only 54.5% of its population aged 15-64 is in employment, reflecting the low level of female participation in the labour market.
GDP per capita is a common indicator of the standards of living. In 2006, the growth rate of GDP per capita in the EU-27 was 2.6% – Malta registered a 2.3% growth last year. Malta’s GDP per capita is currently at 74.3% of the EU’s average.
Amongst its attractive points, Malta can boast of a high level of high-tech exports as a share of its total exports, the report shows. Still, its expenditure on research and development, and the investment by business on R&D is at a very low level. Science and technology graduates are few. The Commission criticised the fact that spending on research and development across the EU bloc was insufficient.
Malta’s competitiveness profile still contains unfavourable indicators, as the report clearly shows, in a hit list of favourable and unfavourable characteristics of the Maltese economy. The most glaring indicators were last taken from 2005, such as the enormous level of state aid and subsidies to entities such as the shipyards. Others included Malta’s high emissions of greenhouse gases in 2004, and the market share of Enemalta as the only generator of electrical energy on the island. The other ‘unfavourable’ aspect listed was the above-EU average of electricity prices for industrial users.
Competition through trade and openness is seen as a major driver of economic efficiency. The removal of the remaining internal market barriers could increase EU GDP by 2.2% and create 2.75 million additional jobs, according to Commission estimates.
The disappointing productivity performance of the EU over the recent past as well as the recent recovery was reported to be explained to a large extent by total factor  productivity developments.
This, Commissioner Gunther Verheugen said, underlined the importance of research  and innovation as well as training and education policies and of economic reforms that  enhance the general business envir onment and facilitate structural change and re-allocation of  resources. ÒCoordinated action in these areas produces, in most cases, superior benefits to acting alone. A major driver for increased economic efficiency is competition, either through trade openness, a reinforced Single Market, especially in services, continuous liberalisation of network industries or product market reform.