The world will not wait for Malta to catch up

Finance Minister Clyde Caruana has made it amply clear that unless Malta adopts a new economic model, its population would have to reach 800,000 in a few years to maintain the same level of growth as today.

If the architect of the economic growth model Malta has embraced since 2013 is now calling for its overhaul, then surely something must be wrong with it going forward.

To make matters more complicated, Economy Minister Silvio Schembri politely dismissed Caruana’s analysis and insisted the economy only needed ‘tweaking’. Prime Minister Robert Abela on Sunday tried to calm the waters, and injected a dose of realism by advocating for ‘change without shock’.

Writing in The Sunday Times of Malta, Abela spoke of how the country must now shift its focus “to the next phase” of economic development. He then said the country must continue to “transition into a more knowledge-based economy” that creates higher value-added sectors, which will “enhance our sustainability”.

Abela did not go into specifics, but reiterated the five pillars government had outlined when launching its economic vision in 2020: quality of life, education, better infrastructure, climate neutrality and governance.

A glimpse of what the future could hold was provided last week by Malta Enterprise, although the government did not hype it up.

The government agency proposed a public aid package for STMicroelectronics to the European Commission as part of an EU-wide initiative to boost microchip production in the bloc. The Malta proposal, in conjunction with Italy and France, was approved along with several others put forward by other member states.

No details have yet emerged as to the size of the aid package ME will provide; what level of investment STMicroelectronics is expected to put up; and how many new jobs will be created as a result of the company upgrading its production lines.

Obviously, this means that the State will be forking out millions of euros; but this is a strategic investment in the knowledge-based industry, of the kind referred to by the Prime Minister. And this type of State subsidy is likely to be more economically fruitful in terms of job creation and sustainability, than the hundreds of millions in subsidies being spent now on fuels.

Malta needs more companies like STMicroelectronics that are at the cutting edge of innovation and development. Not all have to be big as STM; indeed, Malta’s space limitations make attracting large companies a problem.

But there is scope to attract medium-sized enterprises and start-ups that service the larger companies.

The Prime Minister wrote: “In our road toward the next phase of economic evolution, investing in our workforce’s upskilling and reskilling is non-negotiable. This will equip our future economy with the talent required to drive prosperity. By embracing innovation, prioritising education and leveraging our resilience, we can confidently progress towards the next phase of Malta’s economic prosperity.”

The key word in this statement is education. Malta must ask itself whether its education system is preparing the next generation of knowledge workers.

During the state of the nation conference organised by President George Vella a fortnight ago, AI entrepreneur Gege Gatt said that estimates show that up to 45% of existing jobs could be replaced by Artificial Intelligence over the coming years.

The world is at the cusp of an economic revolution that will see AI make many jobs obsolete but will also create a need for new workers in the fields of engineering, information technology, software programming, game development and the industries that service these sectors.

Malta must take stock of where it is and where it wants to go and chart out the changes that have to be made across every sector. This is much more than just tweaking but is a necessity if Malta wants to prosper without the need to go for unbridled population growth.

So, change without shock by all means, but government also needs to have a sense of urgency. The world will not wait for Malta to catch up.