Malta’s competitiveness slips

Malta’s slippage in the World Economic Forum’s Global Competitiveness Index by one place to 51st in the world is not good news at all.  In the last couple of years, our competitiveness, which is so crucial to our economy and ability to export goods and services, has not improved one iota.  We still rank 14th amongst the Eurozone members whilst six of the twelve member states who joined the EU with us outrank us.

It is to be expected that the clockwork Swiss take the top spot, but it rankles that countries such as fellow EU states Estonia, the Czech Republic, Poland, Lithuania and Cyprus and non-EU states such as Qatar, Barbados and Oman score better in the competitiveness index.

Looking at the sub-indices that underly the GCI, one finds that we rank 40th in basic requirements, 47th in efficiency enhancers,  and 49th in innovation and sophistication factors.  In terms of basic requirements, what seems to be setting us particularly back are the macroeconomic environment, where we rank 51st, and infrastructure, where we rank 47th.  Looking at efficiency enhancers, the penalizing pillars are market size, where naturally we rank 127th, and labour market efficiency, where we rank 103rd.  Finally, in innovation and sophistication, we rank 51st in innovation. 

Several reforms in the Civil Service  trumpeted over the years by the Nationalist Government have failed to deliver.  This is amply evident from the fact that an inefficient government bureaucracy was mentioned in 19.1 percent of all responses in the opinion surveys and ranked 106th in the world.  The Prime Minister recently accused the late Dom Mintoff of starving the Maltese economy of investment in infrastructure.  Yet, decades and several Nationalist Governments later, an inadequate supply of infrastructure was mentioned in 11.7 percent of all responses as a problematic factor in doing business in Malta (the quality of our roads ranked 105th in the world, and our labour supply 90th).

Other factors which came up frequently as obstacles to the business community included access to financing, inflation, an inadequately educated workforce (remember how the PM ridiculed recent Labour emphasis on this), restrictive labour regulations, corruption (which according to the PM is merely a perception), and political instability (it doesn’t exist, according to Premier Gonzi).

The WEF Report also looks at the sustainability of the competitiveness drivers.  The drivers are susceptible to various vulnerabilities, such as weak institutions, poor infrastructure, and systemic risks amongst others.  Here, at least, we rank 40th and were deemed to have slightly improved our ability to deal with vulnerabilities.

One interesting comparison amongst the 142 countries ranked in the GCI is the value added contribution by sector.  Top-ranked Switzerland has a healthy balance between manufacturing, with a value added contribution of 44 percent to GDP, and services, with a 43 percent contribution.  Malta, on the other hand, is dangerously reliant on services, with a value-added contribution of 66 percent to GDP, and a mere 19 percent contribution by manufacturing.  We are in the same boat as Cyprus.