Malta`s industrial policy as a vehicle towards securing enhanced competitiveness

Abstract

The nexus that exists between industrial policy and competitiveness appears questionable. Authors including Professor Michael Porter reject industrial policy as a means to achieve competitiveness, arguing that this policy distorts competition in favour of a particular location, as opposed to his diamond theory, the latter seeking to remove constraints to productivity growth. This paper argues that despite Malta’s size, resource limitations and insularity, enhanced competitiveness resulting from a pro-active industrial policy is possible, provided that the definition and scope of industrial policy is aligned as much as possible to the Porterian diamond concept. This is particularly so if one wishes to see the local economy transformed from its largely current factor-driven state, to a mainly investment-driven stage. Malta’s current industrial policy is assessed through Porterian lenses, and it is submitted that the feasibility of business clustering has yet to be comprehensively evaluated. This together with recent initiatives to seriously tackle the competitiveness issue—several of which are praiseworthy—leave a number of unanswered questions, particularly regarding the extent to which the local authorities accept the “diamond” underlying national competitive advantage, as well as the manner in which co-ordination of all aspects of industrial policy should be achieved.