The partnership option for industry explained

Dr John Attard Montalto – lawyer, politician, former Minister for Industry - is also religious, loves listening to classical music, wrote a book called ‘The nobles of Malta,’ which was awarded the Malta Literary Prize for 1981, has visited more than 100 countries and is a baron, although he prefers not to use the title. JULIAN MANDUCA caught up with him in his office in Valletta

When I mention the name John Attard Montalto, people immediately know who I’m talking about. The first image that springs to mind is of a tall, slim, young-looking lawyer who was minister for industry, but usually people will say: "is that not the one that lots of women fancy?"
Politicians in Malta lack sex appeal like Moroccan summers lack rain. Attard Montalto is one of the few that, with a few tips, could make the catwalk and he does not mind being thought of because of his sex appeal, in conjunction with his successes as a minister.
"I think it is a compliment. All men like to think that women find them attractive. I think that in one way or another we all have a certain amount of vanity and I must admit that I am a little bit vain. Of course I prefer it if men would think of me as the ex-minister for industry."
John Attard Montalto may be vain to a certain extent, but it is by far not the only thing on his mind. He obviously keeps very much up to date on what is happening in our industrial sector.
"The fact that Malta is, in my opinion, an industrialised country is extremely positive. Considering our size and lack of resources, with reference to raw materials, I think we have performed extremely well. Our performance is the result of over 50 years of investment in industry, especially in manufacturing. It did not come about on its own, it took a lot of imagination to attract foreign-owned companies to Malta.
"We have about 200 foreign-owned firms that export substantially to the western world in particular."
Several economists and commentators feel that while Malta’s industry did very well in the 70s and 80s, the 90s saw something of a slump. But Attard Montalto does not believe Malta has fared badly.
"Our expectations have been fulfilled, we have nearly a dozen top notch factories and we can no longer say that Malta’s industrial is developing. We have a mature industrial scene.
"One must distinguish between industry that is operating from Malta and that which is trying to be attracted.
"With regards to those that are present in Malta. We have seen that nearly all the flag bearers have made huge investments over the past years. ST, Methode, Brandstatter, Dowty O Rings, Carlo Gavazzi, Baxter and many others have decided not only to remain in Malta, but also to expand and invest.
"They all know that Malta is not a cheap location. There are many other countries that have cheaper labour, financial incentives that compare favourably or surpass what we offer and this means that these companies have decided to expand in Malta because it pays them to do so."
While it is often assumed that because of globalisation companies will always choose to move to cheaper destinations, but Attard Montalto points out that this is not always the case.
"The decision to stay in Malta is in line with general global trends as far as Foreign Direct Investment (FDI) is concerned. Contrary to perceptions, FDI is mainly directed towards industrialised and developed countries. In fact, the latest statistics show that 68 per cent of FDI has gone to these countries.
"This means that the perception of competitiveness has developed. Previously industrialists took a narrow view of investment as far as the location is concerned and used to consider three specific elements: low wages, fiscal attractions and political stability.
"Today investors consider many more elements such as an educated and technologically advanced labour force and induced costs such as transport and telecommunications. One is aware that the choice of location for new investment is much more complex than previously thought.
"As regards new investments, in the past years, apart from some exceptions, no completely new investment of a certain magnitude has taken place.
"Government points at HSBC as a new investment and takes it into consideration for statistical purposes. This gives a completely erroneous picture of foreign direct investment over the past four years."
"The reality is that new FDI has been extremely moderate. It has not stopped, but there was nothing of significance.
According to Attard Montalto, this has nothing to do with the world economic situation.
"I believe that one of the main causes is the lack of Malta’s profile as a place for FDI in the manufacturing sector. The blame lies squarely on the government agencies responsible for advertising Malta, in particular the Malta Development Corporation. The way in which Malta is advertised is very amateurish. We hear about targeting specific sectors, but what is actually happening is that old strategies are being directed towards particular manufacturing.
"I believe that when one talks of targeting one should identify not a sector, but a specific enterprise. One should be extremely forceful to try and persuade the decision-makers of that specific company to locate or extend their manufacturing to Malta.
"We should analyse what industry is here and target their suppliers, or cluster manufacturers in the same line of business."
The obvious question springs to mind: Did the former industry minister do that when Labour was in power?
"When I was minister, I directed the Board of MDC and its chief executive to change their strategies, because I felt that the performance judged by the results was inadequate."
"One example of how we put this into practice was that we started to target small to medium sized companies in Italy, explaining that Malta is an ideal location for extending their line of manufacturing business since we offered all the advantages that Italy offered, while at the same time we did not have what they call the social induced costs which, by law in Italy, was holding back expansion."
Attard Montalto is convinced that the partnership option being heralded by the Malta Labour Party will give Malta that added advantage.
"I do not believe the assertion that Malta within the EU will be able to attract increased FDI. We would have to curtail our incentives to come in line with EU regulations.
"This will mean potential investors will not have a different scenario to than that offered by other EU countries.
"If Malta is not a member of the EU, Malta is not constrained to pass legislation to come in line with EU directives.
"ST, which is our major exporter, will have to change its work practices because of specific EU regulations related, for example, to the shift system and overtime. This will lead to our competitiveness being further eroded.
"There is no difference between the two options as far as access to the EU market is concerned."
"A cornerstone of the partnership option is accessibility to the EU market. This is a sine qua non. One would still have to have the quality as requested by EU regulations.
"I believe certain important regulations regarding health and safety should be adhered to, immaterial of whether Malta joins the EU or not, but there are other regulations that would definitely affect Malta’s competitiveness, the choice of raw materials for our products in relation to the cost for instance.
"If you are a member of the EU you can import from where you like, but as a member Malta would have to take into consideration the regulations that affect the cost of the raw materials."
If Malta does not join the EU, however, it will not benefit from the Structural and Cohesion funds that the EU offers to help with the restructuring process. Attard Montalto believes Malta will still manage to get funding:
"Between 1996 and 1998, when Labour was in power, Malta had been allocated funding for pre-accession and, notwithstanding that, we froze our application. The EU accepted our proposal for the use of the said funds for the restructuring of our manufacturing base.
"If we stay out of the EU, the funds we get might not be called ‘Structural’ or ‘Cohesion,’ funds, but we are determined to negotiate a package that will enable us to develop our infrastructure and our industries.
"One must not forget that most European Union countries have a positive balance of payments as regards Malta, and the Labour Party in government was able to enter into a favourable protocol with Italy on this basis.
"One seems to analyse the situation as regards the EU as either we join and get funding, or we don’t join and get no funding. This is incorrect. There are several possibilities, one of which I have just referred to - protocols with particular countries in addition to a package as a result of our partnership option."
All well and good, but I ask Attard Montalto what would happen if Malta’s negotiations for the partnership option with the EU are not successful.
"That is a hypothetical question. Lawyers don’t consider hypothetical situations. When before the 1971 elections Mintoff was asked the same question with regards to the agreement with Britain, Mintoff answered, "We will come to an agreement with Britain."
But would this be one that would include funds made available to industry?
"The agreement which I envisage is inclusive of funds to restructure our industrial base where necessary and to invest in the industrial infrastructure to make Malta a more competitive location.
"The partnership option is not solely dependent on Malta’s relationship with the EU. That is part of our general political vision and includes agreements with other geographic zones such as the US, which today absorbs roughly 20 per cent of our exports.
"The partnership agreement will not allow for the curtailment or limitation of other aspects of our economy such as agriculture, fishing, financial services and maritime services."
In the parliamentary debate related to the referendum and EU accession, Prime Minister Eddie insinuated that John Attard Montalto’s speech indicated that he favoured EU accession.
"I was hurt because I never expected to be completely misquoted regarding my contribution on industry. Senior members of the NP know that nowhere in my speech did I link the problems that we found in industry on being elected with the freezing of EU accession. The way that my speech was completely inverted not only took me by surprise but as I stated it hurt me."
Attard Montalto is convinced that the partnership option will be best for Malta’s industry and is sure that Labour will be in government once again in the coming months. Time will allow us to judge whether he is right.
Attard Montalto, in the meantime, answers my final two questions:
"I expect the Labour Party to win the elections and as to whether I will be minister, that is the prerogative of Dr Alfred Sant.
"In the referendum I will vote ‘No’. The Labour Party has given the three options and I expect that these will surpass the ‘yes’ vote."