The manufacturing industry in Malta contributes about 10 per cent of the country’s output while providing over 20,000 jobs. This directly represents 18 per cent of the total private sector jobs and many others indirectly through the supply chain.

Manufacturing remains one of the major contributors to the Maltese economy but, much to our regret, its contribution is often overlooked, more so with its share in the total economy having been in gradual decline for a number of years.

For this reason, the manufacturing economic group within the Malta Chamber of Commerce, Enterprise and Industry shares the common European objective of an industrial renaissance. This was the central principle on which our economic group based our industrial policy for Malta, a document published to widespread acclaim last year.

The common approach of this document centred on the identification of a set of policy fundamentals that represent the priorities for securing a sustainable present and future for the manufacturing industry. The priorities ranged from the availability of a skilled labour force at competitive wages to the availability of efficient and reliable transport links at competitive rates.

Over the past few years, competitiveness and growth in local manufacturing have been hampered by the fact that the rate of increase in operating costs has exceeded the rate of growth in productivity. Moreover, at such a crucial time for local industry to respond by investing in new technologies, we have been hit by two major developments that render investment in local manufacturing less attractive.

The first of these developments is a purely statistical one since Malta’s per capita GDP exceeded 75 per cent of the EU average. The country is now classified as a more developed assisted area in terms of the European Commission’s regional aid regulations (‘C’ region status).

The second development was the coming into force, on July 1, 2014, of a revised set of regulations as a result of which the Maltese authorities are no longer allowed to grant investment aid incentives that used to reach a maximum of 30 per cent in the case of large undertakings. This percentage has been reduced to zero unless the investment relates to the manufacture of products that fall under a different NACE code to existing products manufactured by a company.

It is worth noting that it is too early to capture the effects of these developments on investment figures. On the contrary, data will show an upward spike in manufacturing investment due to a ‘front-loading’ effect of projects that were submitted in 2014 to benefit from a two-year extension of the previous regime.

It has become increasingly difficult to operate competitively from as mall, ‘single island region’

The manufacturing economic group had been proactively focusing on this matter since 2012 – two years before the regulations came into effect. From then on, we continue to devote time and resources on this matter by raising it high on the national agenda with the local pertinent authorities.

The group is now increasingly feeling the need for a more in-depth analysis of the role of investment incentives in mitigating competitiveness pressures arising from unique characteristics of peripheral regions and states of the European Union. These characteristics and onward challenges are recognised by the Lisbon Treaty itself. Article 349, in fact, refers to the permanent geographical disadvantages typified by remoteness, insularity, small size, typical difficult topography and climate and economic dependence on a small number of economic sectors/activities.

We are making it a point to investigate the matter with a wider scope than Malta because we are certain that Europe’s 2020 target of 20 per cent for manufacturing contributions to GDP is equally ambitious for other countries and regions as it is for us.

It has become increasingly difficult to operate competitively from a small, ‘single island region’. These difficulties remain despite constant efforts on our part to enhance our competitiveness. However, it must be made amply clear that we are not asking for protection or preferential treatment.

Eight of our largest manufacturing companies have between them invested about €330 million between 2007 and 2013. We are truly doing our best to remain competitive by ongoing reform in our operating processes and reviewing work practices. We want to ensure, however, that we are placed on an equal playing field with our European counterparts through fair equal and indiscriminate treatment.

Yet, after the outcome of our competitive enhancing measures we remain disadvantaged versus manufacturing operations within mainland Europe purely because we operate from an island State that has physical operating disadvantages which currently it cannot be legally compensated for.

Besides the obvious physical disadvantages, we must also put up with certain inconsistencies that exist in European regulations and in the application of a one-size-fits-all approach to particular regulation. All this is resulting in increasingly uncompetitive and unsustainable conditions for industrial operators in the affected locations.

Norman Aquilina is chairman of the manufacturing economic group within the Chamber of Commerce, Enterprise and Industry.