STATEMENT BY MINISTRY OF ECONOMIC SERVICES

In the 1970s, the ‘import substitution' versus ‘export led growth' debate was a central issue within the formulation of Malta's economic development policy. However, it had soon become evident that ‘import substitution' was leading Malta into a dead-end. As a consequence, there exists today a wide concensus that Malta's future lies in the successful participation of Maltese enterprise within the global market place. Liberalisation is not an option but the only way forward.

Not surprisingly, this view is not shared by the exponents of some of the industrial firms that have long sheltered under the cosy protection of import levies; which levies will be phased out by 2003. The press release by GHIMA is a case in point. It is legitimate for GHIMA to defend the perceived interests of its members. Unfortunately, however, their press release contained a number of partial or even inaccurate information and was largely based on blatant misconceptions.

Although the ‘Fast Track' assistance programme was only officially launched by IPSE on the 29 December 1999, discussions with most of the affected companies had started as early as July 1999, immediately upon the publication of the legal notice defining the phasing out of industrial levies.

Well before the publication of the above mentioned legal notice, it had been universal knowledge that levies would be eventually removed. There was no justification for companies not to have embarked on serious restructuring plans even before the publication of the legal notice.

The above mentioned legal notice covers the removal of levies on those industrial products that already enjoy a tariff free entry into the single European market. Not to have done so would have eventually carried the risk of retaliatory measures that would have prejudiced Malta's exports into the EU, with potentially devastating consequences on employment in the manufacturing sector. (To give just one example: there are only, at most, 60 employees producing shoes for the local market, that have lost their levy protection as on the 1st January 2000. On the other hand, there are about 600 employees producing shoe parts for export to the EU.)

Levies offer protection for higher cost production that leads to higher prices for local consumers. Levies can easily become cushions for less than efficient production with little incentive for quality improvement, product innovation and cost cutting.

Levies were always perceived as a temporary measure, and were introduced to provide Maltese industry with an additional breathing space within which to become more competitive so as to be able to stand on their own feet. Unfortunately, in due course, given the prolonged period within which the levies have been operative, they have themselves become the principal barrier to the desired and necessary restructuring exercise.

Now is the time for the relevant firms to break-out of the static frame-of-mind in which they have ingrained themselves. Lamentations are nothing but ‘old hat'. Now is the time to face up to the challenge that can no longer be postponed. The Ministry firmly believes that Maltese entrepreneurs have the necessary spirit, skills and guile to be successful.