A year on 9/11 effects still felt

By Marika Azzopardi and Ray Abdilla

The Maltese economy was by no means spared the effect of the startling events that took place one year ago today and the after effects of the ensuing economic downturn are still being felt – particularly in the industrial and tourism sectors.

One year since the earth shattering events, The Malta Financial and Business Times speaks to protagonists from the sectors hardest hit and finds that the effects of last 11 September are still very much being felt.

Federation of Industry Director General Edwin Calleja told this newspaper yesterday, "Maltese industry was definitely not hit well and today it is still affected as its exports depend greatly on international stability. Recession was already being felt in March/April 2001, so the events of 11 September were obviously the coup de grace. For one thing it hit the US economy in a big way and resulted in a general loss of faith in future investment.

"58 billion dollars were withdrawn by Europeans from the US stock market. Not only as a result of the disaster, but also due to the threats of war, which create uncertain circumstances. These factors all equal less export possibilities for Malta.”

Mr Calleja explains that exports as a whole have suffered, while the electronics industry was the worst hit. However, he explains that companies specialised in electronic surveillance apparatus, for example, have actually improved their sales.

When asked about future prospects for industry in the wake of the last year’s downturn, Calleja says it’s difficult to gauge. He explains, "When you depend on the market, you are generally addressing its demand. Once the people’s faith and spending power are lost, a comeback can be slow. For instance in the States, stocks that provided workers with individual returns, as well as stock options offered to employees, were all lost – that equals lost capital.

"In 2000 Malta had exported USD697 million to the US and imported USD388 million. In 2001 we exported USD338.5 million and imported USD285 million. As you can see the difference is enormous. This year between January and July we exported Lm15 million less we had over the same period in 2001.

"The American economy does not appear to be improving and of course the European economy is also linked in the chain. This means the EU, which is important for Maltese trade, could also face further decline."

But regarding the prospects for 2002, Calleja says that Malta is holding its ground.

He elaborates, "Hopefully by the end of the year things will not turn out as bad as last year, but unstable prospects also mean that foreign investment in Malta could slacken. Industrialists may very well be eager to invest, or expand, but then again the whole of Europe is awaiting the results of the forthcoming German election, since Germany is the biggest gauge for the European market."

Meanwhile, Labour Party tourism spokesman and former Tourism Minister Karmenu Vella was adamant yesterday that tourism was hard hit by the events a year ago today, but the blow was only one out of several.

He explains, "The 11 September tragedy was significant not only for the Maltese tourism industry but for global tourism as well, both of which, as expected, were dealt a large blow. Unfortunately Malta’s tourism took longer to revive than many other countries like, for example, Turkey.”

Mr Vella explained that Malta’s tourism sector was doing badly prior to the events of 11 September and was already down two per cent, but the New York tragedy made matters far worse.

He explains, "Now a year has gone by and we should start thinking positively. But to do that we need to continue working on improving the Malta product because our competitors are in the process of improving theirs.

"What is worrying is that we need to diversify Malta's economy. We depend very much on tourism, which constitutes some 33 per cent of our economy. What would happen if another 11 September incident occurs or if there is another slide in global tourism?" he asks.

To this effect, the former Tourism Minister was adamant we should invest more in our national heritage and other places of interest that Malta is renowned for. He suggests that the country should also diversify into sectors that have yet to be capitalised upon on a national basis, family tourism.

However, Vella emphasises that we should not speak of the 11 September incident ad nauseam to cover our deficiencies, adding that our policies have to be long term, a mind set not present at the moment.

On the future of the local industry, one year on after the 11 September disaster Mr Vella says we have to look forward now, we have to see what we need to upgrade in our service and in our country.

"We need to spread the word that Malta is viable for a holiday destination but we must keep our promises. We must give the tourist value for money or we will continue to lose and if that happens the economy would certainly begin to collapse."

Representing the retail sector, GRTU Director General Vince Farrugia comments, "The impact on Malta of the 11 September attack has accentuated the economic problems Malta suffers from: too rigid cost structures, too large a part of the economy remaining inward-looking and non-responsible to global competitive pressures and the overall un-competitiveness of our manufacturing and tourism sectors. Malta is one of the most open economies in the world, so anything effecting the performance of the global economy effects us in two ways: the impact on the price of imported raw materials, energy supplies and food and general consumption items; the impact on our foreign exchange earnings through industry and tourism.

"The impact on both these sides of the economic equation was visible over the last 12 months. The increased costs and our inability to react efficiently, due to the many rigidities that exist in our system, and the fall in earnings on aviation, tourism and exports, has further dampened the purchasing power of local and visiting consumers. The resulting dampening of total demand has turned the previously growing, though slowing, Maltese economy in reverse.

"Last year the Maltese economy stopped growing and went in reverse partly due to the impact of 11 September, but essentially due to our inability to respond quickly and maintain our competitiveness in the face of a general cutting of prices, particularly by competing as a tourist destination. Hopefully a lesson has been learnt - we cannot imagine that what is good in one year can remain good forever.

"We cannot continue to sustain the many automatic price and income increase mechanisms that exist in our economy, especially in all that that has to do with the public sector. We must be leaner and more flexible so that we can adopt our systems to maintain competitiveness irrespective of the energies blowing over the international market. Malta’s economy is too small and too open for any of us to expect that the status quo can be sustained irrespective of what happens elsewhere."