Market commentary: Malta's absolute and comparative advantages

It is common knowledge that this island of ours has a considerable lack of resources and it is because of this reason that it has to radically invest in its comparative advantages, as there is simply no way that Malta can in anyway match, let alone come close, towards the output capacity of larger countries with greater resources.

Keeping the previous statement in mind, Malta focuses on excelling in what it knows best, resulting in the comparative advantages that it has today.

From the heydays of the dry-docks, to the booming film and gaming industry, Malta has proven to be resourceful in what it trades, however with progress comes change, and with it, the island’s most important factor to be embraced, Technology; Malta’s largest comparative advantage that has placed it above and beyond other countries the world over. 

When compared to giant countries, that have far more resources, Malta, in terms of high technological exports/ performance, such as that of pharmaceuticals and microprocessors, are in a much better position thus indicating a strong comparative advantage.

Moreover, the Maltese economy has a number of skilled employees in specific areas of industry that the rest of the world simply does not have. With that in mind, having a more focused, well-crafted trade means that the price, in relation to the higher quality output, would be higher than what is being offered by other countries, giving us a classic case of quality over quantity. 

There exist many factors that may influence a country’s comparative advantage, be it to a positive or negative effect, however, the main factor of influence would be that of innovation, even more so with regards to high technology, as it is what drives Malta to maintain its competitive edge. The high level of exports in this sector indicate a high demand for Malta’s high tech products that supersedes that of other countries, which indicates that innovation and quality standards are being met.

This high level is in-turn beneficial to Malta, since if maintained, it would increase Malta’s chances of attaining stability in the high-tech market, which would in-turn most likely increase trade towards Malta.  One must also understand that such markets have not appeared out of thin air, but were developed over long periods, ergo a dip in recession between a number of years is not as big a problem as it may first appear to be; although it should be monitored.

This article was issued by Steve Diacono, Intern at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.