The Maltese wine industry in the light of EU membership : the economic aspect

Abstract

This dissertation is an economic survey of the Maltese Wine Industry (MWI) in the light of European Union (EU) membership. The Maltese people have grown vines and produced wine for well over 4000 years. Traditional viticulture was one of the most abundant agricultural practices, and our grandparents often narrate how large areas as Fiddien, Burmarrad, Mġarr valley, Rabat, Siġġiewi and other areas in Malta and Gozo were covered by vines. Unfortunately mass viticultural practices were abandoned in the 70's and 80's and the land under vine was considerably reduced. Malta has a long-standing wine industry and is considered to be of favorable climatic conditions for the growing of grapes. There are 14 wineries, which are registered to be engaged for the production of wine for resale within Malta and Gozo (by the end of the year 2000). These range from small wineries producing a few thousand bottles annually to larger ones producing a few million. This thesis focuses on the three major wineries: Marsovin, Delicata and Meridiana; each of which has utilized different ways to 'cope with scarcity'. One should note that 70% of the wine produced in Malta derives from grapes imported from the rest EU (mainly from Italy). Before the levies were removed on May 1st, Malta-produced wine overwhelmingly dominated the Maltese wine market (about 90%). Until 1999 the total land under vine was of 300 hectares, mostly planted with the Maltese indigenous varieties Ghirgentina and Gellewza. Shallow soils and prevalent dry conditions are a dominant feature of the Maltese viticutural landscape. Malta's EU membership has meant that the MWI has to adapt to the EU's common market organization for wine, established by Council Regulation (EC) 1493/1999, plus the other regulations, which complement it. Moreover, the growing of grapes falls under the EU' s Common Agricultural Policy (CAP). This posed different challenges to an industry, which until May 1st, has been protected by a levy of LMI .50c per bottle and which now is exposed to EU harsh competition. Competition puts pressure on producers to utilize their scarce resources in the best way possible in order to achieve better quality at the lowest possible price. Throughout the history of wine, politics has repeatedly interfered in the economics of wine, affecting it both positively and negatively according to the situation. In this case one has the EU regulations reforming the way in which the MWI has been operating during the last couple of decades. The Maltese government has therefore sought to reinforce the industry by obtaining several transitional periods and offering financial assistance to restructure. Such financial schemes include aid under the Special Market Policy Programme for Maltese Agriculture (SMPPMA), for farmers (the SMPPMA is 20% financed by the EU); planting aid, aimed to increase the land under vine from 300 hectares to 1000 hectares (which would be enough to meet the local demand as until 2003); and so on. In fact there has already been positive response as by March 2004, land under vine had increased to 700 hectares (involving international grape varieties). Malta's EU membership has therefore contributed to increase Malta's viticutural landscape. This would have never been possible without the subsidies offered by the Maltese government in the light of EU membership. Money would therefore go to the Maltese farmers instead of going to Italian farmers. Moreover, the Maltese Government is aiming to develop out of the viticultural landscape, an agritourist attraction in itself, which, combined to other resources such as wine tasting in Malta's several wine cellars and dining at the numerous fine restaurants, should further boost the MWI. Such initiatives combined with product innovation, high quality, reasonable pricing and so on should enable the MWI to emerge successfully and grow.