Manufacturing in Malta : opportunities, challenges and policy implications

Abstract

The study, which hails from Malta, seeks to gain a better understanding of the opportunities and challenges of manufacturing firms when investing in Malta, in an attempt to produce feasible recommendations aimed at better guiding local policy makers in creating an environment within which the manufacturing sector can be nurtured and further developed.

The manufacturing sector in Malta accounted for 31,471 full-time jobs in 1992 (25.0 % of total employment) and 29,031jobs in 2000 (21.26 % of total employment). This has further declined to 20,600 jobs in May 2010 (14.2 % of total employment). Hence, in 18 years, the manufacturing sector has lost 10,871 jobs or a 34.5 % decline. This happened when total employment increased from 125,825 in 1992 to 144,871 in May 2010- a mere 15.14 % increase or a 0.84 % increase in each of the 18 years (Falzon, 2011). The decline in manufacturing has put a significant drag on the growth in total employment in the local economy.

Over these years, the manufacturing sector has been the largest sector in the economy. However, in May 2010, the wholesale and retail sector overtook manufacturing and became the largest sector employing over 22,000 full-time persons. Hence, the manufacturing sector, which traditionally has been open to exports, potentially providing high levels of growth to the economy, had lost its top place to wholesale and retail, which is a domestic sector depending on imports for growth.

This study targeted manufacturing firms that form part of the manufacturing economic group of the Malta Chamber of Commerce, Enterprise and Industry. A survey was conducted in an attempt to better understand: (i) the primary reasons why these manufacturing firms invested in Malta, (ii) the factors that are currently reinforcing their competitive advantage, (iii) the measures that they are taking to increase the level of skills of the workers, (iv) the importance of specific incentives that the firms currently enjoy under the Malta Enterprise Act and Business Promotion Act, (v) the challenges that they are currently facing, (vi) the reasons why (or why not) they would set up in Malta again, (vii) whether or not they expect to grow and expand in the next five to ten years, and (viii) the measures they would like to see implemented by local policy makers to help them survive and prosper in the future. In the light of the findings that emerge, the chapter provides a series of recommendations to Maltese policy makers as well as interesting avenues for future research on manufacturing.