Strengthening Europe’s manufacturing industry through policy and implementation
Recently, industry policy has gained substantial attention as EU and national policymakers have turned their focus on the manufacturing industry due to the perceived failures within the banking and financial services industries. Addressing this issue is of extreme importance since this industry plays a pivotal role in driving economic growth in some of the most important EU economies.
In 2010, the European Commission unveiled an industrial policy within the framework of the Europe 2020 Strategy. Just two years down the line, a re-orientation of the strategy needs to be undertaken to renew the implementation momentum. A mid-term review of the EU industrial policy has been carried out to reinstall the ‘real’ economy; not only to underpin economic recovery and job creation but also to reverse the declining role of industry in the European continent.
The shrinking economic contribution of the manufacturing industry in the EU is no news. To counter this worrying trend, the mid-term review of the EU industrial policy, specifically sets a quantifiable objective of improving industry’s contribution to EU GDP from the current 16% to 20% by 2020.
Identifying the needs, taking the necessary action
To this end, the European Commission highlights a series of investment priorities to reignite manufacturing production in the EU. These include technological upgrading of plant capital, strengthening the skills of human resources employed in manufacturing as well as the enhancement of market openings for industrial products and related services both within the EU internal market as well as on third markets.
The priority emphasis placed on such critical aspects like innovation, better access to markets, easing of credit lines and capital investments are issues that certainly tally with the immediate development needs of Maltese industry. The mid-term review of the EU’s industrial policy is very relevant to Malta, as it is also widely felt that the manufacturing sector is not given enough policy attention despite the clear added value that the industry brings to the country’s socio-economic wellbeing.
These concerns have been aptly picked up by the Manufacturing Economic Group within the Malta Chamber which, in a detailed position paper, communicated to government authorities its viewpoints on how to preserve and reinforce Malta’s immediate industrial competitiveness whilst also safeguarding the manufacturing industry’s long-term sustainability.
Preserving industrial competitiveness is certainly critical for the sustainability of the entire Maltese economy. It is worth recalling some figures to better illustrate the significant economic contribution of the manufacturing industry on the Maltese islands. As at 2011, industry contributed around 13% of Malta’s Gross Value Added – a relatively high contribution when compared to other sectors, with industry also providing invaluable employment posts, numbering in thousands, for a wide and varied cross-section of the Maltese labour force.
Different scale, same needs
The mid-term review of the EU’s industrial policy offers an interesting comparative perspective and draws a contrast between Malta’s investment-related challenges in the manufacturing sector and the EU’s more policy-oriented strategic objectives for the industry. The challenges confronting the manufacturing industry in Malta are in reality not so different from the issues articulated in the European Commission’s industrial policy. What differs is the sense of urgency to address certain short-term challenges within the immediate outlook and the disparate focus on what are considered to be promising ‘growth’ sectors.
In part, this disparity stems from structural differences. Maltese industry operates within different structural dynamics when compared to the manufacturing sector in continental Europe. The lack of economies of scale poses significant problems with regard to market exploitation, leaving no other option for local industry than to depend almost entirely on foreign exports and therefore finding itself more exposed to international pricing fluctuations of raw materials. Transport accessibility and the frequency of commercial cargo routes linking Malta to the trading hubs of continental Europe are also perennial matters of concern for the sustainability of local manufacturing business.
Given these structural constraints, the retention and most importantly, the enhancement of competitiveness should therefore lie at the core of Maltese industrial policy. Conversely, EU industrial policy is more oriented towards strengthening the industrial base by opening up new possibilities through the deployment of new technologies. In this regard, the review of EU industrial policy is highly dependent on the development of innovation-based markets within six distinct fields: advanced manufacturing technologies for clean production, key-enabling technologies, bio-based product markets, sustainable construction and raw material extraction, clean vehicles and smart grids.
From a local perspective, the immediate outlook on the manufacturing industry is perhaps less rosy unless certain fundamental deficiencies are either addressed or rapidly implemented. According to the Malta Chamber’s Manufacturing Economic Group, there are eight fundamental imperatives that require immediate targeted action. These are the availability of a skilled labour force at competitive wages, the provision of adequate factory space at competitive occupancy rates, stable provision of energy at competitive rates, better terms and provision of finance, efficient internal and external transport links, incentives for investment, a business-friendly public administration and finally, internationalisation support to help businesses access the European Single Market and beyond.
Whilst at first glance there might appear to be dissimilar and irreconcilable aspects between the EU’s industrial policy and local policy needs, it is certainly the case that in Malta, the urgency to deliver on industrial policy support is of paramount and absolute concern. Implementation of EU industrial policy is certainly also key and the success or otherwise of such a policy can only be ascertained by testing the results on the ground and noting their effectiveness in practice.