Bleaker outlook for exports

The forecasts of export-oriented firms for the first half of this year were less positive or more negative than the forecasts for the second half of last year, according to the latest Industry Trends Survey carried out by the Federation of Industry.

The main thrust of the survey results was that industry feared it was losing its competitive edge, said FOI president Joseph Zammit Tabona when announcing the results at a news conference at the FOI offices in Floriana yesterday.

According to the survey, business optimism, export order books, local order books, and capital expenditure on land and building were all more negative, while capital expenditure on plant and machinery, as well as production volume were less positive.

Costs are envisaged to increase at a faster pace than prices, and profitability is forecast to experience a sharp deterioration, the survey indicates.

Mr Zammit Tabona said the FOI had been lobbying the government to set up a National Competitiveness Council and had broached this concept with the prime minister and several government ministers.

The form and structure of the council is expected to be discussed during the next meeting of the Malta Council for Economic and Social Development.

The council would help set benchmarks that would assist industry and the government to steer away from uncompetitive practices in an ever more competitive world.

FOI director general Edwin Calleja said the council would be owned and run by the social partners and would follow the methodology indicated by overseas economic research institutes.

"It is important for the social partners to believe that the council will assist industry and the government to keep their fingers on the pulse of the economy`s competitive edge," he said.

Referring to the current debate between the unions and the government on the new bill on employment and industrial relations, Mr Zammit Tabona said that workers` rights should be safeguarded. However, unions should not demand wages for civil servants that were higher than those in the private sector.

He said the threats made by the GWU to mobilise workers to protest in the streets if its proposals were not incorporated in the bill made Malta less attractive for investors and he appealed for conciliation.

It was now important, more than ever, Mr Zammit Tabona said, for the social partners to make competitiveness the most important factor in all their actions.

While everyone paid lip service to competitiveness not everyone was prepared to act accordingly.

"Was competitiveness the government`s most important consideration when it decided to leave out of the bill on the employment and industrial relations most of the recommendations by the FOI and the other employer organisations which were meant to minimise costs?

"Was competitiveness the uppermost consideration of those trade unionists who ordered strike action during the last few months over issues that did not seem to warrant the ultimate industrial action?

"It is important for one and all to start putting words into deeds," Mr Zammit Tabona said.

Referring to the bill, Mr Calleja said the government did not allow enough time for unions and employers` organisations to discuss their proposals, particularly those dealing with the technical details.

"The government should rethink the need for further debate. Putting employers through a hurdle race unnecessarily was definitely not the right approach.

"Employers` organisations will, in the next few days, be handing copies of their proposals on the bill to MPs because some thought about the importance for industry to maintain its competitive edge should be taken into account.

"The new rights for workers would involve industry in additional costs and it is only fair that these costs will be mitigated by the reduction of costs to industry on other fronts."

Mr Zammit Tabona quoted from a recent EU report on macroeconomic and financial sector stability developments in candidate countries which pointed out with reference to Malta that:

"Maintaining external competitiveness will be crucial for the coming years to reduce potential risks. In this regard, it will be fundamental to maintain wage growth moderation and to continue with structural reforms to increase the competitiveness of the Maltese economy."

Continuing with the findings of the survey, the FOI said that for the mainly locally oriented firms, the situation could not be said to be good.

But in many cases, forecasts in this sector were less negative than those of the preceding six months. Business optimism, export order books, local order books, and capital expenditure on land and building were all less negative.

Production volumes were up, while capital expenditure on plant and machinery was down. As in the case of the mainly export oriented sector, firms were expecting a sharp increase in costs that would be only partly compensated by a small increase in prices.

However, profitability forecasts tended to point towards a slightly less negative situation than before. The manufacturing industry was still suffering from a depressed demand situation that had been a common characteristic in several of its main export markets.

Industry had been doing its utmost to increase productivity and reduce production costs. Firms were, however, operating in a difficult environment and only the more competitive would stand a chance of improving their performance while the uncompetitive ones would find great difficulties to survive.

"International competitiveness in products and services is the best indicator of the chances of survival or otherwise of our producers of goods and services, and, ultimately, of the Maltese economy in general," Mr Zammit Tabona said.