Small economies strive to promote diversification to make them less vulnerable to a downturn in one particular sector. Over the past few decades, Malta’s economy has seen a decline in traditional manufacturing activities and an impressive growth in a few service industries, including tourism and financial services.
Globalisation has meant a steady transfer of basic manufacturing activities from Europe to Asia as the old continent had outpriced itself. But it will be wrong to conclude that industrial development in Europe is a thing of the past. Select manufacturing and industrial services that depend on substantial investment in technology and a skilled workforce still prosper in Western economies that encourage such development.
It is, therefore, good news that Malta’s industrial community is looking towards expansion. Economy Minister Silvio Schembri announced various initiatives of development in Malta’s industrial sector that confirms that entrepreneurs still believe the country has what it takes to produce and compete with industrial products and services that the market demands. It is just as encouraging that this expansion is spread over various economic activities including manufacturing of toys, high-quality cosmetics packaging, sealing solutions and servicing of aircraft that depend on advanced technology and a highly skilled workforce.
The creation of 800 new jobs as a result of this new investment should help in the diversification of the country’s economic activities. To optimise the added value from this investment, it is critically important that local workers take as many of these new jobs as possible.
This objective could be challenging as a career in industry may not be as fashionable as it once was. With many young people wanting to pursue a career in financial services or internet gaming, one hopes that there will still be sufficient engineering graduates and vocational college students who see a future in the higher end of industry.
The country’s dependence on imported labour for economic growth has some negative effects. It has created pressures on the country’s housing infrastructure that now needs massive investment to be resolved. This dependence can be reduced by ensuring that Malta’s educational achievement levels improve to be amongst the best in the EU. Vocational education, as well as academic education in sciences like information and communications technology and engineering, should attract more resources to help students excel in their training.
It is not desirable to have an economy growing on steroids but dependent on a few high-risk economic activities like the selling passports. Steady but sustainable growth in both new and old economic activities give the country protection from sudden shocks that often afflict rapid-growth activities. The new investment in the high-end industrial sector can produce excellent results in the long term if it is based on the skills of young people who complete their studies successfully in relevant academic and vocational education.
Malta’s reputational risks that have increased in the last few years have mainly hit the services sector, especially financial services that rely so much on investors’ trust in the quality of governance in the jurisdictions where they invest.
While the reputational-damage repair exercise is underway to reverse negative developments in the services sector, it is encouraging that long-established local industrial operators have confirmed their commitment to Malta by committing themselves to invest €200 million in the economy.
A diversified economy is indeed a stronger economy.