Good governance of ESF funds - statements and comments on Malta

Abstract

Malta is currently experiencing a slow growing economy, largely due to a lowered level of competitiveness. In the past years, the country saw less foreign direct investment and considerable relocation of manufacturing firms abroad. The attractions which Malta used to offer to foreign investment over the past decades were primarily its low labour costs, its proximity to Europe and Africa and a relatively educated and skilled workforce with a high level of fluency in English. These comparative advantages are being lost due to the new developments in countries on the North African coast which more or less have the same geographical position of Malta, the EU accession of the Eastern European countries with their low labour cost and high education and skill levels, and the industrialisation process of large Asian countries. At about 70% of the EU average, Malta’s income per capita is higher than that of most other new member states. Malta relies heavily on imports for both its consumption and investment requirements, and its exports are of crucial importance to generate foreign currency to foot its import bill. The insufficient diversification of products and the fact that the few existing competitive firms are highly susceptible to changes in the global trade have made the Maltese economy vulnerable. Job security has decreased in the last years, and workers are losing strength in collective bargaining, with unions experiencing reductions in membership levels. Government is currently striving to curtail the country’s fiscal imbalance in order to adopt the EURO in 2008. The public sector is being restructured and downsized, and several public companies have been or are being privatised. While the manufacturing sector, especially the textile industry, is shedding jobs, the services sector, including the tourism industry, is increasing its importance in the creation of jobs. The Employment and Training Corporation, Malta’s public employment service, is adopting active labour market policies and measures which are restraining unemployment, in particular among the inactive unskilled individuals. Malta’s male full-time employment rate of 72% compares favourably with the EU average of 69.1%1. According to Eurostat data, Malta’s unemployment rate in 2005 was 7.9%, lower than the 8.7% average of the EU 25.2 However, the female activity rate leaves a lot to be desired as it stands at a mere 37%3, the lowest among EU countries. Gender equality is viewed as a means of increasing female participation in the labour market. In recent years, women have achieved more rights at the workplace through various legislative measures. It is interesting to note that Malta has a substantially smaller average gender wage gap than EU average. However, Government’s efforts have not yet managed to significantly increase the female employment rate in Malta. Despite its small geographical size, regional economic disparities are still felt in this country. The island of Gozo, the second largest island in the archipelago, is inhabited by about 8% of the Maltese population. Gozo suffers from a number of disadvantages related to double insularity. GDP at factor cost for Gozo in 2003 was estimated to be around 69% that for Malta.4 The island suffers from a higher inactivity rate and lower wages than Malta.