Electronics manufacturing – finding an even keel

This month’s Economic Update magazine, found within today’s issue, focuses on the electronics manufacturing sub sector – a sector hard hit by the events of 11 September, which had, in part, catalysed a drastic drop in international consumer demand.

We say that the tragic events were partially responsible, as many observers have continuously pointed out that a drop in consumer demand had been felt even prior to last September.

The local electronics manufacturing industry is formidable and accounts for some 65 per cent of Malta’s manufactured exports, largely due to the attraction Malta holds as an investment opportunity for foreign companies.

The industry, which is spearheaded by the presence of the world-leading STMicroelectronics, was held largely accountable for last year’s contraction of the economy, which was primarily due to a decrease in the sub-sector’s output.

In fact, performance in the sector last year miserably failed to reflect its performance over 2000, a period in which the sector had reached new heights.

In fact, reflecting the reduction in foreign demand, which hit the global sector following 11 September, the sector plunged and its performance was a far cry from that of 2000, during which it had peaked.

However, despite the reduced demand levels registered over last year’s fourth quarter, which was felt the world over, the government remains upbeat about this year’s prospects, adamantly expecting the sector, which accounted for a substantial reduction in exports over 2001, to recover by midyear.

The sentiment is echoed by STMicroelectronics, which is expecting that the market will grow between 1-4 per cent in relation to 2001. In fact, the semi-conducter giant recently told this newspaper that the first quarter of this year represents the bottom of the downward cycle and that the company is expecting double digit growth over the second quarter.

Keeping our feet on the ground

However strong this newspaper’s belief in the positive effect EU membership will have on the long term prospects of this country, we still contend that it is up to us Maltese to make things work.

The EU offers no magical solutions to this country’s problems. The EU can only provide the right context within which local industry can prosper if it rises up to the occasion.

This sentiment is echoed by Edwin Calleja of the Federation of Industry. In an interview with the Economic Update he says that EU membership will not in itself bring about an increase in business activity. The challenge, he contends, is to keep an ongoing transfer of new technology that will have a positive effect on the efficiency, the volumes the industry will be able to export and the value-added.

At the end of the day it is the entrepreunerial spirit that will keep the Island’s economy ticking. Emerging from the protective cocoon that has shielded local industry from the full impact of international economics is a must if this country is to become competitive.

In this scenario the education system has an important role to play. It must prepare students for the challenges of life and not least the work place. School leavers must have the skill to adapt their line of study to the changing trends in industry. We cannot continue competing with other countries on the premise of cheap labour, Tunisia and Libya will always be cheaper than us.

In this respect our asset lies in the availability of a highly skilled work force, which is totally dependent on us, and the unhindered access to wider more prosperous markets that can open up to us on membership of the EU.

Saviour Balzan