The pre-budget document has attracted the attention of the media and the non-governmental organisations and has as such created an element of debate in spite of the summer holidays. One of the issues that this document addresses is the sustainability of the industrial sector. This sector, together with the tourism sector, has long been one of the engine drivers of this country's economy and must always be taken into account when speaking of economic policies.
The manufacturing industry is an important foreign exchange earner and provides jobs to thousands of people, even if its share of the total number of persons in employment is decreasing. Moreover, the multiplier effect that it creates in our economy is not insignificant.
The emphasis on industry in the pre-budget document should also lays to rest the notion that Malta can do without the manufacturing industry. It cannot. However, I have always felt that the debate as to whether we can have a sustainable manufacturing sector has always been one based on gratuitous assumptions, made to score political brownie points rather than to challenge any specific policy.
Malta can have a sustainable manufacturing sector. However, it needs to reinvent itself continually to achieve this, just like other countries have done such as Singapore. Malta's manufacturing sector of tomorrow will look nothing like Malta's manufacturing sector of yesteryear.
The investments that we have had in the last years by all major manufacturing firms operating in Malta are a proof of the comparative advantage of this sector and a proof of the trust placed by these firms in a government that has always had one objective in mind - that of ensuring that Malta continues to have an important presence in the international economy and not to close itself within our centuries old bastions. These investments are also a proof of the intelligence, versatility and capacity for hard work of the Maltese labour force, coupled with the responsiveness to changing circumstances and requirements shown by some (unfortunately not all) public sector structures.
And this is the way it has to be in future given the ease with which capital, goods and services can move freely around the globe. There is always another firm in another country that is ready to produce a product cheaper and/or better, and hence the need to ensure the sustainability of industry.
What is striking in the current Maltese manufacturing sector is that we no longer have zombies; companies that keep operating thanks to loans that could never be repaid, subsidies or import barriers.
This ensures that productivity remains high (even if not as much as employers would like it to be, but high enough by international standards), investment in new equipment and new techniques (that is technology and innovation) keeps flowing and the labour market is not congested.
The manufacturing sector may be employing a lower percentage of the labour force but it is much stronger than in the past and is therefore making a more significant contribution to the economy.
The elimination of these manufacturing zombies (admittedly a very tough term, which certainly does not include firms that have had to discontinue their operations because of international competition and that have served the Maltese economy well in the past) has been one way of making industry more sustainable. It may have been the easier part of the job.
We now come to the tougher part. The pre-budget document does list a number of actions that need to be taken to make industry more sustainable.
They range from the strengthening of the entrepreneurial culture in this sector (one cannot claim that the Maltese are not entrepreneurs, but we have not seen enough local entrepreneurship in industry), to the strengthening of Malta's human resource skills base, to achieving higher productivity growth through ICT, to incentivising research and innovation, to enabling access to finance, to the fostering of the appropriate macro-economic and infrastructural environment to secure competitiveness. However, proposed actions need to be transformed into action plans with clear accountabilities.
One of the success stories of this country has been the inflow of foreign direct investment in the last five years in the manufacturing of pharmaceuticals. We have managed to attract some big names. Actavis has led the way and others quickly followed.
This success story has been based on an active targeting strategy adopted by the Malta Development Corporation first, and then by its successor, Malta Enterprise. If we do learn from such success stories (one cannot learn only from one's mistakes), then we can strengthen the sustainability of the manufacturing industry in this country.