The manufacturing industry has, since the late 1950s, changed and adapted to the global economic realities over the years. From the early days of low-cost mass production it has restructured and developed itself to higher value-added, high-end manufacturing, adopting more lean concepts and processes with a significant increase in research and development. Today the sector contributes over 13% to Malta’s GVA and to a fifth of the country’s GDP, making it one of the main pillars of our economy.
Ever since Malta attained its independence in 1964, it embarked on a series of campaigns to attract foreign direct investment. Initially the two main sectors targeted were tourism and manufacturing. Whilst tourism was the more obvious sector given its climate, historical and natural beauty, manufacturing was a more challenging objective since it lacked significant natural resources and communication was less efficient and costlier in the early days.
To overcome this Malta embarked on a campaign of building industrial zones with ready-to-move-in factories and improve communications at all levels. Furthermore Malta offered fiscal incentives, initially in the form of “tax free holiday periods” amongst others, to attract companies to set up their operations in Malta. However the most important element Malta offered was an efficient, skilled, English speaking and flexible workforce, giving the industry that cutting edge to competitiveness, which was fundamental for the success of manufacturing in Malta. From my experience in the manufacturing industry, this has always been one of the key attributes given by foreign investors, together with business leadership, and is evidenced by the sound investments and growth undertaken by most of them.
Initially manufacturing in Malta depended mainly on the low wage rates attracting, for the most part, the clothing industry. Along the years, with the ever-improving standard of living and consequential higher wages, the dependency on low wages decreased and couldn’t compete with countries like China, India and North Africa. The focus then shifted on attracting more higher value-added technologically based high-tech industries, including electronics, communication technologies, automotive components, precision engineering plastics, and medical devices amongst others. In parallel the local authorities, in conjunction with the educational entities, embarked on a strategic plan to ensure that highly skilled workers are available to meet the changing requisites of the industry. Added to this, the pharmaceutical industry in Malta, backed by a well-established Medicines Authority, Malta’s intellectual property landscape and a qualified and erudite workforce, has experienced substantial growth.
Ever since Malta started formal accession negotiations in 2000 ending with Malta joining the EU on 1st May 2004, several non-EU companies, including those within the manufacturing industry, saw the opportunity and benefits of setting up operations in Malta with free access to the large EU market. This created new opportunities and also challenges, with Malta having to change some of the fiscal incentives it offered to be in line with EU regulations. The transition was smooth with the new industry-specific fiscal incentives, including loan interest rate subsidies to support new investment projects and loan guarantees, still attracting FDI. Furthermore, access to EU funds have encouraged and helped several manufacturing companies in their investment to grow or diversify, especially with regards to R&D. When Malta joined the Euro zone on 1st January 2008, it gave more stability to companies trading in Euro with regards to cost analysis, forecasts and budgets. Undoubtedly the sector is moving forward as new and established companies are preparing to invest millions of euro in facilities on the island.
The strong emergence of the fiduciary and iGaming industries in Malta has made the labour market more competitive and has affected the availability of people working in manufacturing. This has been partially solved by the number of foreigners relocating to work in Malta, a phenomena that has been steadily increasing in recent years. The population in Malta was estimated at 435,000 at the end of 2015, of which about 31,000 were non-Maltese.
Manufacturing was and still is a vital and important sector acting as one of the main sources of employment across all levels of competencies, and in spite of the challenging times, it has continued to survive through diversification and remains a principal provider of economic stability.
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