CLOSING ADDRESS BY THE HON. EDWIN VASSALLO PARLIAMENTARY SECRETARY IN THE MINISTRY FOR ECONOMIC SERVICES ON THE FIRST DAY OF THE SEMINAR ON EU-MALTA ENTERPRISE POLICY

Ladies and Gentlemen,

There could have hardly been a more appropriate moment to hold this seminar. From the European Union's part, the conclusions of the Feira Summit have bolstered the Member States' resolve to achieve an "Enterprise Europe". On its part, Government has embarked on an ambitious plan to update and consolidate our national enterprise policy by, as you have already heard this morning, launching an Industrial Policy White Paper at the end of last year. Furthermore, the coming weeks will see the launching of an Entrepreneurship Policy. Indeed, for the first time in our economic history, Malta will have a detailed strategic blueprint that will trace out the way ahead for enterprise.

Enterprise policy is drawing increasing attention and importance the world over. Malta is no exception. This is because Government wants to harness the benefits that business infers on society. Private enterprise is the main contributor to job creation, is a source of economic dynamism and improvement in the quality of life. Moreover, enterprises are generators of economic growth.

There is a critical role for Government, if our enterprises are to succeed and prosper. True, Government should fall short from being interventionist. However, it must be active nonetheless. An active Government is not one which tries to halt change, but one that understands that change itself needs to be managed so that its effects do not disrupt economic growth. This requires that we involve our people in the entire change process. In this manner, they become partners in change and not its by-standers or worse, its innocent victims.

Government's first task is to ensure macroeconomic stability. Business needs economic stability if it is to acquire the confidence to engage in long-term investment. That is why we took immediate and decisive action to maintain firm control of our public finances. This should help us reign in inflation and secure economic stability, both of which will lead to securing a steady growth.

Yet getting the economic conditions right is just the beginning. In the emerging economic order we will need to use and upgrade the capabilities of all our people. Indeed, human capital has become the principal source of value and competitive advantage in the modern economy. The lead that countries used to command when they controlled vast amounts of raw materials will now be replaced by human capital. This implies that we need to make our people more knowledgeable. New ways have to be devised to ensure that each individual is capable of achieving his and her full potential. To deny such an opportunity is to deny justice and fairness. Apart from being detrimental to the individual, it represents a waste of economic potential.

It is equally important, that we refrain from hindering change in industries, which need to restructure. Propping up old ways of work practices and inefficient processes will deliver only temporary economic activity with potentially problematic long-term consequences.

We must ensure that all public agencies that promote enterprise in Malta become themselves more entrepreneurial, innovative and accept risk. We must streamline processes and do away with unwarranted bureaucracy and red-tape that are a drag on enterprise. These are the attributes, which any organisation needs, to succeed in a rapidly evolving world.

Government is also currently introducing a regulatory framework for e-commerce, which will provide legal certainty to Maltese and foreign companies wishing to exploit the opportunities offered by the information society. It is also Government's objective to provide the largest possible number of services it offers and information through dedicated electronic portals.

All this is evidence of the observable shift we are currently experiencing from an industrial economy to one based on information, knowledge and technology. The "old" industrial order was built on raw materials, heavy industry, and an abundant supply of cheap unskilled labour. On top of that, many national governments adopted protectionist trade policies. Indeed, on all of these counts, Malta manifested a structural weakness. Deprived of natural resources, and with a limited population, the heavy industries that were the cornerstone of the industrial development in many countries were a non-starter for our economy. Today, all this is gradually making way for the emerging enterprises that depend less on raw materials and abundant low-skilled workers. Instead, the new enterprises are built on small economic units employing high-skilled workers. The main raw materials have become knowledge and entrepreneurial skills.

The main challenges facing enterprise growth in Malta can be grouped under three broad headings:

1. providing the necessary training and skills to ensure that those made redundant can find new, quality jobs, whilst ensuring that those joining the labour market have the skills that are relevant to today's needs;

2. stepping up our efforts in attracting new investment in growth industries; and

3. encouraging enterprise by supporting individuals who want to establish a business and new small firms with the potential to grow.

I have already dealt with the first heading - that of providing the necessary skills and training – earlier on, and I understand that the subject has been extensively dealt with this morning.

The second heading, that of increased efforts to attract foreign direct investments within our shores, will be dealt with in the second session of this seminar. I am confident that a most interesting debate on the subject will be developed tomorrow.

I would like to dwell more on the third heading – that of encouraging enterprise by supporting individuals who want to establish a business and new small firms with the potential to grow.

As I mentioned in my introduction, in the coming weeks Government will be launching a policy document dealing with its vision on the future of entrepreneurship in Malta. The objective behind this document will be to upgrade the quality of entrepreneurship amongst the Maltese population. The word "population" is used here deliberately since it is the Government's belief that entrepreneurship should not be restricted only to those who are already in commercial activity. In its aim to achieve a more widespread diffusion of entrepreneurship, the document tackles particular needs of a number of under-represented sectors of the Maltese society. By this document we are aiming to introduce a new entrepreneurial society, which will include government departments and entities, which are the main service providers for the commercial sector.

The document also treats the cultural aspect of entrepreneurship and spells out the ways Government is planning to foster a greater entrepreneurial spirit.

The thrust of the document also reflects, to a large extent, the European Small Firms' Charter as agreed at the Feira Summit in Portugal.

It is important that we all become aware that these changes are not happening in a vacuum but rather within an international context. I believe that Malta's bid to become an EU member has to be part of the process by which Malta is facing the challenges of a market driven economy, which is eliminating individual markets and leading all business activity into one commercial system. The manner, in which the market driven economy is developing, leaves us no choice in deciding whether to be part of the globalisation process or not.

Increasingly, as we do a way with the distortive policies of protectionism and open up our economy, every product and almost every service will be exposed to global competition in one form or another. This raises important issues about the nature and consequences of globalisation and the appropriate policies we must adopt that will put us in a position to harness the benefits arising from the emerging economic order.

In the new global setting, neither Malta nor any other country can live under the illusion of isolation. We all pertain to, and are finally the result of, circumstances occurring around us.

No matter how powerful a trade union might be or how concerned a Government is, there can no longer be a guarantee that anyone can hold a particular job for life in today's dynamic and changing global economy. Notwithstanding this, it is understandable that such an environment is disturbing for many, especially when coupled with the change occurring on a scale and at a speed unprecedented in the post war period.

I must emphasise, once again, that we cannot try and stop change. The emerging economic order represents the future. It offers new opportunities and prosperity to the entire economy.

As to Malta's aspiration to join the European Union, the whole process will surely bring new challenges to our enterprises. Yet, in our opinion, it will create more opportunities for new business and those with a growth potential. Already, nearly 60% of our trade is with the European Union - worth Lm1 billion last year. Exports going to EU countries account for almost half the country's exports. Clearly, Europe matters both politically and economically.

Many of our current jobs and investment increasingly depend on Europe. It is our key market. Small local companies are also dependent on this inward investment. Membership in the European Union will open up more opportunities to the local business community and the country at large. While the domestic market constrains business from growing, it has become increasingly felt that the current Agreement we have with Europe has passed its expiry date. We need to move on. We need a new arrangement; we are confident that being a full member is the best option Malta can choose.

The challenge for Government is how to prepare our enterprises to participate in a world in which information, knowledge and technology have an overriding importance. We must ensure that as a country we are capable of exploiting the new opportunities around us. Only those economies that adapt to rapid change will succeed in the new international order. A key to this is to expand the winners' circle. In a modern economy it is vital that we do so otherwise talent will be wasted and opportunities restrained, with the adverse consequence of being relegated to the league of backward economies.

Government is committed to create the right environment for a flourishing enterprising economy. To achieve this we must help people through the process of change and not to resist change and deny opportunities. We must build capabilities and refrain from offering subsidies. We must support individuals who may be affected by economic change - not simply the security of benefits but the opportunity of retraining. I look at all this as an investment scheme, an investment in Malta's primary resources: its people.