As businesses and policymakers internalise the aftertaste of the pandemic, there is a deep-rooted feeling that there is a need to rewire and future-proof our economies.

Economist Stephanie Fabri, chairperson of the Intelligent Planning Consultative Forum and a lecturer at the University of Malta, believes it would be a missed opportunity for us not to take stock of our strengths and weaknesses and to address them by forging a future-proof and resilient economy which places well-being at its core.

In a publication bringing together thought leaders who share their insight on the upcoming year through the perspective of their respective industries, she writes about the changes needed for Malta to prepare for future realities.

"There is no doubt that the global economy, including Malta’s economy, has been hard-hit,"she says. "Although Malta has managed to diversify its economic base, the country is still heavily dependent on tourism, especially when considering a number of closely related sectors including wholesale and retail."

From the experience of the past twelve months, Dr Fabri believes that a number of key lessons can be distilled.

These include the need to further diversify the economy in order to spread risk exposure onto different sectors, as well the need for a continuing focus on having public finances on sound footing, ensuring the Government has room to manoeuvre.

Dr Fabri believes that the Government needs to continue playing a central economic role. “Government needs to always be ready to continue investing into the country through capital and infrastructural projects, to not only improve the general environment but to also act as important stimulus measures when the need arises.”

At the same time, the importance of well-functioning institutional and governance structures has also been highlighted. Dr Fabri therefore believes that Malta’s preparedness needs to continuously be assessed.

“There is no doubt that the coming twelve months will remain challenging,” she says. “The external environment is still exhibiting heightened risk as the pandemic has not yet been controlled or reigned in.”

“Despite this, our efforts to shore up public and business confidence need to remain whilst intervening to kickstarting the economic momentum. The Government has already announced the extension of several support mechanisms and has tweaked them to make them more relevant and tailored to the type of aid needed at this point,” she says, pointing to the extension of the moratoria and the wage supplement scheme as cases in point.

Dr Fabri believes that, going forward, productivity enhancing issues must be a focus of any recovery programme. These include a focus of training, reskilling, upskilling as well as investments in technology and innovation.

“The Government’s decision to have a ministry focused on research and innovation is laudable, however the key is implementing measures that will enhance Malta’s performance,” she says.

Another key point for a strong recovery is the further internationalisation of the Maltese economy, she says, noting that Malta’s economy is inherently open, with its vocation as an international trading hub goes back to time immemorial.

“It is for this reason that Malta needs to continue focusing on niche markets for its goods and services.”

She says that the use of direct EU funds to internationalise markets is “strongly recommended”, together with building the capacity to tap into new emerging markets.

Exportation relies on a well-functioning ecosystem including an inclusive banking sector, so a key policy focus is needed to ensure that banks are able to process and open corporate accounts in an efficient manner, with enough correspondent banking facilities to give comfort to investors.

Dr Fabri added that “the establishment of an export credit agency should be considered to address a market failure that Maltese firms have faced.”

Turning to the workforce, Dr Fabri says that, notwithstanding the advances Malta made in the educational sector, much more needs to be done.

“A closer link between acquisition and utilisation of skills in industry needs to be achieved, however focus must be made on the basics too. The early school leaving rate remains high when compared to European averages and Government needs to drive this through a broad-ranging reform in the educational sector.”

“In addition, building on the success of past schemes, Government needs to further incentivise training and skill acquisition. New skills will be required and our attractiveness and competitiveness will depend on our ability to offer a skilled workforce prepared for the future.”

Dr Fabri then addresses the make up of the economy, saying that “although as a country we should always look out for new niche sectors, it is even more important to further diversify the present sectors by increasing the value-added as well as intra and inter-sectoral linkages.”

“The objective of transformation is to keep industries competitive and generate growth by building capabilities at the industry level. Following the pandemic, Government should set out clear principles and requirements in terms of business continuity and contingency planning.”

She says that special schemes should be launched to support such incentives, pointing to the business reengineering scheme by Malta Enterprise and The Malta Chamber of Commerce and Industry as a good example that embodies this thinking.

“Each sectoral transformation should be based on four pillars: Productivity, Jobs and skills, Innovation, technology and digital transformation, and Trade & internationalisation. The idea is to use a cluster approach between industries in order to maximise and exploit synergies.”

Noting that the current environment is highly volatile and complex, Dr Fabri says that the next twelve months will be the same as businesses continue to adapt to the new normal.

“Each business will be going through its own journey with a focus on surviving and stabilisation and there is no doubt that we will see consolidation across a number of sectors as exposed players will face mounting pressures,” she says.

Concluding, Dr Fabri opines that, on a national scale, “it is imperative to truly internalise the lessons learnt, face the challenges the economy is facing and chart a way forward.”

“In a new normal, there are numerous opportunities for Malta to reap.”