In last week’s contribution, I argued that our country needs a new economic model that is based less on low-cost labour, which is mainly being provided through a significant influx of non-EU workers. I have often stated that we need to move up the value chain, that is develop activities which are of a higher added value, across all economic sectors, from tourism to manufacturing, to information and communication technology, to financial services.
This week, my intention is to get to the next stage of my argument. I believe that the three principles on which we need to base a new economic model for Malta are innovation, excellence and sustainability. These three words may sound like fads or clichés. In effect, they are not like the morning dew that disappears with the first rays of the sun, because we have proven time and time again that it is possible to grow our economy through innovation, excellence and sustainability.
Just 60 years ago, our economy was still based on basic economic activities, in addition to ship repair and the UK military base. From then on, we developed manufacturing, tourism and service activities, continually moving up the value chain. Even then, as now, we sought to be innovative, to excel and to have sustainability.
Sustainability has a number of aspects. Our infrastructure needs to be continually improved, be it roads, be it electricity generation and distribution, be it water production, be it waste management, be it the connectivity of our island. Sustainability also means the protection of the environment. We are gradually but steadily eating away at our countryside and our shoreline, and as these are put to commercial use, we are not recognising that the damage being done is irreparable.
We may think climate change will not affect us. Maybe we need to do an analysis of how Malta would be affected as a result of an increase in average temperature of 1.5⁰C or as a result of the sea level rising by one inch.
Another aspect of sustainability is social sustainability. We need an economic model that can sustain our society and which our society can sustain.
Excellence may sound like an empty word. It is not. A look around our manufacturing landscape shows that our large manufacturing firms are world leaders in their respective product area. The heavy reliance of our economy on the export of goods and services in an international business environment which has become more competitive is a testament to our excellence. However, we may not be realising that we are losing our competitive edge because in certain areas, we are losing our ability to excel.
We need an economic model that can sustain our society and which our society can sustain
Our education system plays a key role in enabling excellence. In fact, over the last six decades, our education system evolved in response to the requirements of the economy and our society in general. If we do not aim for excellence in education (that is provide an excellent education to all, such that everyone achieves one’s aspirations and potential), we can hardly talk of excellence as a basis for our economy.
The third word is innovation. Our economy needs to continually seek opportunities for innovation. There are a number of companies operating in Malta which innovate their processes, innovate their products and services, innovate their structures. To use an analogy taken from agriculture, our ability to generate wealth in the future depends on our ability to plant new trees which will give us new fruit, while looking after the trees we have.
Our ability to use technology in a strategic manner is essential. With an ageing, and possibly declining, Maltese population, technology is the key to moving up the value chain. We should not view technology just as a tool for automation, but we should view technology as a tool to enhance our knowledge and expertise.
We may postpone facing the issue of having a new economic model for Malta, but the longer we postpone it, the harder the choices we have to make, will become. The government cannot do this alone because it cannot enforce the change. The government needs to enable the change with the support of all the social partners, of individual businesses and of society in general.