Malta ‘dead in the water’ without united front that can influence costly EU laws

Malta needs to bolster its lobbying efforts at European level if it wants to influence so-called one-size-fits-all EU laws that are negatively affecting the island’s small-scale industries.

A stellar panel from Malta’s business community addressed a Chamber of Commerce event, together with interventions from European Parliament office head Mario Sammut, MEPs Cyrus Engerer and Josianne Cutajar, PN spokesperson Peter Agius and Nationalist MP Jason Azzopardi.

The problems of supply chain disruption from COVID, as well as the costs of energy prices from the Ukraine conflict and the EU’s Green New Deal levies on carbon emissions, were chief complaints all throughout.

Maltese businesses were facing higher container costs due to the COVID pandemic, with containers from China previously costing €3,000 to transport, now growing to €13,000. “We are competing with foreign operators in Malta whose purchasing power is far greather than ours... they are buying for major countries in Europe, so it is difficult to compete on pricing,” said Malcolm Camilleri, deputy CEO of PG Group.

But it was PwC partner Neville Gatt who made an impassioned plea to all panellists that Malta had to present a united front across many levels to influence EU legislation before it is even planned.

“We have a tendency to think EU law is a Bible... but if we believe it must change, then we must work together to change it. Are we really making our case in Europe, in a united manner?

“We are split across the board, not only in terms of partisan politics, but even in local practices, which must change and not remain cast in stone.”

Gatt said once Brussles issues its communications on proposed laws, it is already too late to influence their direction.

“It means Germany and France are already on it. So we must take action on what is actually brewing... and indeed we are already late in the day to complain about certain issues such as the Energy Taxation Directive.”

Gatt also warned Malta will be dead in the water by complaining about ‘one-size-fits-all’ rules in Europe. “One-size-fits-all is Europe. But it is up to us, MEPs, the permanent representation, to come together... because once something is harmonised, you then need 27 individual states to change it.”

This sentiment was echoed by PN candidate for Europe Peter Agius, who said Malta had to influence legislation in Europe well before, starting from impact assessments issued by the EC before a law is drafted.

Labour MEP Josianne Cutajar said Malta must petition for a more relaxed set of rules for state aid to apply to the aviation and the maritime players in order to preserve the competitiveness of transport infrastructure and key sectors such as tourism. “Such flexibility would be extremely important to promptly act should the implementation of environmental measures cause any unintended negative effects on our country’s economy.”

EP head of delegation in Malta, Mario Sammut, called on Chamber members to flag issues to MEPs that were impacting their business and the livelihood of their employees. “Peter Agius had pointed out the problems which resulted from the impact which legislation on cabotage had on Maltese businesses, and which were unfortunately caught up when it was only too late. Dialogue between you and our representatives at the European Parliament is therefore crucial.”

Chamber of Commerce president Marisa Xuereb said the Ukraine war had now resulted Europe being de facto at war with its main energy supplier, at a time when economic recovery depends greatly on the ability of businesses to bounce back. “The implications on international energy prices are menacing for business, and especially for the manufacturing industry. There are clear threats for the competitiveness of European manufacturers.”

Malta, a market of 500,000, remains hampered by the absence of freight trains, limited airfreight options, and no door-to-door truck delivery option possible. Additionally, the frequency of scheduled freight services is constrained by the small volumes – typically a weekly service.

“Importers and exports have to contend with high freight costs and disproportionate local charges, which are at least partially dictated by the small volumes,” Xuereb said.

Even with its freeport, less than 5% of the cargo on ships passing through Malta are loaded or unloaded in Malta. “This makes it expedient for ships to skip their scheduled stop in Malta when running late on a route – something that we have seen happening multiple times over the past months. We have seen factories run out of materials because their incoming cargo was diverted to the next stop, as far away as Casablanca in Morocco, when it was only a couple of hours away from our ports.”

Xuereb said Maltese manufacturing, accounting for 8% of GDP and around 11% of employment, has seen its share of the economy decline despite its continued survival and continued presence of international industry leaders apart from robust homegrown companies. “They have invested heavily in their operations, and have serious growth ambitions that are often constrained by logistical limitations and disproportionate transport costs,” she said.

Under Article 7 of the EU’s General Block Exemption Regulations, Malta is acknowledged as a remote region. Yet this has not been translated into tangible support for importers and exporters to mitigate the disadvantages arising from Malta’s peripheral geographical position coupled with its small and insular market.

“Getting to the centre of Europe requires travelling all the way up the Italian boot by truck or alongside it by ship to Genova. If all goes well, you will get there on the third day with a weekly scheduled service. Then the truck journey to your mainland destination starts. But the weekly schedule plus the 3-day sail to Genova before you start the truck journey on the mainland means that you cannot reliably promise delivery times shorter than two weeks in the age of next day delivery,” Xuereb said.

“A level playing field with competing European operators and equal access to the Single Market necessitate serious consideration of the logistical challenges of Maltese businesses. This requires sensitisation to the realities faced.”