Surviving the change: competing successfully in a liberalised environment

Economic and Management Consultancy Services (EMCS) Ltd, in collaboration with The Malta Business Weekly, is organising a conference entitled "Surviving the Change: Competing Successfully in a Liberalised Environment". The conference will be held at the Corinthia San Gorg on Friday 24 March. The Malta Business Weekly interviewed six of the speakers on their expectations for this conference. The conference will also be addressed by Dr John C. Grech, managing director, EMCS Ltd; Prof. Peter McKiernan, Visiting Professor of Strategic Management at Warwick Business School; Joe Borg, managing director, FX Borg Furniture Ltd; and Peter Borg, director, Bortex Clothing Industry Co. Ltd.

What are your views on the state of Maltese industry to date?

John Magro, managing director, Magro Bros. (Foods) Ltd, said that Maltese industry can be classified into two sectors: one which is based on local investment and the other which is based on foreign investment. The former sector is mainly directed towards production for the local market, whereas the latter sector is mainly export oriented.

Mr Magro said that to date Maltese industry is characterised by uncertainty regarding EU membership and liberalisation which is affecting the two sectors differently. Whereas the sector oriented towards exports is not marginally affected, that sector which produces for the local market is being hit badly by the uncertainty surrounding the industry. Therefore one can conclude that the major problems of the Maltese industry are being faced by companies which are domestically oriented. In fact large companies which are export oriented have recently been experiencing an increase in investments.

Meanwhile Dott. Federico Provinciali, a partner in Cast Consulting Srl, which teamed up with EMCS Ltd in the sectoral study of the Maltese furniture industry, commented only on the furniture industry. In his opinion the Maltese furniture industry is currently suffering a "splendid isolation" that negatively affects its competitiveness when compared with foreign competitors. Dott. Provinciali thinks that this will prove an obstacle when Maltese companies try to compete in a larger and more dynamic environment.

Joe Vella Bonnici, chief executive of IPSE Ltd, thinks that the Maltese economy needs to reposition itself in the international business sphere if it is to be competitive above the low-cost, low-wages segment. Mr Vella Bonnici commented that Maltese companies must learn how to compete by "creating value"; they need to focus and specialise by enhancing strategic thinking and planning techniques and developing a marketing culture where customers' needs always come first. In his opinion, the Maltese industry has a bright future if these challenges are met, otherwise "it will become a thing of the past".

Stefano Mallia, who is a consultant at EMCS Ltd and who has recently been involved in the sectoral impact analysis of the furniture industry, thinks that the Maltese industry to date is characterised by contrasting situations. On the one hand, some firms within certain industries (for example the electronics industry) have evolved into extremely sophisticated industries using the latest technologies and are thus very competitive not only locally but also abroad. On the other hand, other firms in other industries (the furniture industry is a case in point) have unfortunately just taken advantage of the protection provided by the levies system and subsequently have remained very much at an embryonic stage.

Mr Mallia commented that there are a good number of firms which need serious restructuring if they are to survive the coming liberalisation, while those that have already taken action are ready to take advantage of the opportunities afforded by liberalisation as well as EU membership.

What are your views about

Malta's prospects within a liberalised environment?

Federico Provinciali has no doubt about the necessity to open up to a more liberalised environment. He thinks that this will certainly translate into some hard work, some pain, and in some cases, to casualties - yet it will pay off in terms of opportunities. Mr Provinciali thinks that the gradual removal of levies is an excellent opportunity to get equipped for the open market, because it will allow everybody to prepare for it.

Prof. Bill Donaldson, director of marketing at the University of Strathclyde Graduate School of Business, said that Malta's prospects in sectors such as IT, tourism and filming are excellent. Malta is in a position to leap-frog its competitors but it is also difficult due to the learning curve with new and developing businesses. Prof. Donaldson thinks that the most important thing is that core competencies and resources are maximised to their potential.

According to Joe Vella Bonnici, liberalisation is not an option but a reality that one has to learn to live. He thinks that "the fundamental issue is the speed at which our society is prepared to adapt to this change process". This change process, commented Mr Vella Bonnici, requires a commitment and the leadership of government, with the active participation of all social partners.

John Magro said that in Malta we are facing liberalisation and EU membership simultaneously, which is not a common scenario in many other countries. Moreover he thinks that the application of the common external tariff on raw materials which are sourced from outside the EU may have a negative impact on the industry.

Stefano Mallia believes that liberalisation is going to bring about a lot of changes within local industry and certainly the biggest challenges are to effect the necessary changes in time and to recognise the opportunities that will become available. Mr Mallia said that it must be clear that effecting the required changes is going to be difficult but not impossible. He thinks that "our economy needs to move on and this cannot happen within a protected environment". Therefore, liberalisation cannot be looked upon only as the result of a political decision to go for EU membership but rather as a natural progression of our economy.

Do you think that Maltese enterprises can compete internationally? Why?

According to John Magro, Maltese enterprises can compete internationally, but "a lot of support is needed from politicians, economic operators, port workers, people in the telecommunications industry, utility providers and unions.

Joe Vella Bonnici also thinks that Maltese companies can compete and says that some of them are already competing on the international market. However he commented that we must not take competitiveness for granted.

Enterprises must build greater competitiveness through higher value-added activities, between the enterprises themselves through networking as well as at the macroeconomic level so as to ensure that the enterprises operate in the right environment. Mr Vella Bonnici continues by saying that the entrepreneurs must see their

businesses not just as stand-alone operations, but as part of a broad value-creating chain.

Commenting on the furniture industry, Federico Provinciali said that some furniture companies are already competing well on foreign markets. However he thinks that the majority of the industry still needs to fill the gap that has been created after a number of years operating in a protected environment. There are a number of actions that companies can take in order to prepare for the removal of levies and if these are carried out Dott. Provinciali thinks that the industry will be ready for the international market.

On a very optimistic note, Stefano Mallia's answer was "certainly!". In fact he points out that companies in a number of industries already compete internationally and are in fact doing very well. These firms either already operate within a liberalised environment or else are totally dedicated to export. Mr Mallia thinks that becoming competitive is a must for each and every firm. However he said that we must not live with the dogma "export or die". In his opinion "this is absolutely not the case". A good number of firms are getting and will continue to be able to get a good return by operating solely on the local market or alternatively by providing products and services for export oriented firms.

Do you think that the conference is timely?

Joe Vella Bonnici thinks that it is timely since, given the timeframe for the removal of levies, no entrepreneur can afford not to consider the impact of liberalisation on his/her business.

John Magro is of the same idea. He thinks that all enterprises must be knowledgeable about the issues of EU membership and liberalisation and how these will effect their businesses.

Federico Provinciali is of the

opinion that the timing is perfect to stimulate companies and institutions to start an improvement programme that can generate results by the time Malta will have to compete in an open market.

Stefano Mallia thinks that the conference is timely since we are entering a crucial phase where any further delays in restructuring will be fatal. The good thing about having a deadline by when the changes must take place is that people are forced to act. The levies issue is a perfect example. Now they are being forced to act and this conference could not be more timely in providing some in-sights as to what actions are required.

How do you think participants can benefit from this conference?

By attending the conference, the participants will be able to get ideas about how to proceed in the near future to prepare in the best way possible to a liberalised environment. Dott. Provinciali also added that the participants must turn these ideas into practical action.

Joe Vella Bonnici thinks the conference will be most useful in shifting the debate about restructuring from the macro level to the micro level. In so doing participants can understand the meaning of restructuring at an enterprise level. Mr Vella Bonnici thinks that participants will be able to set an agenda for themselves and their organisations of what needs to be done in terms of restructuring.

According to John Magro the participants will be in a position to become more knowledgeable about liberalisation and there are many industrialists who are facing similar difficulties. On a more positive note he concludes that industrialists can survive the change if they are properly supported.

On considering the calibre of the participating speakers, Stefano Mallia commented: "I feel certain that the participants will find that a number of thoughts and issues raised by the speakers will be extremely relevant to their particular situations". Furthermore, EMCS conferences have always been characterised by an open discussion which "is essential if anything useful is to be gained from such events".

He concludes by saying that "together with the opportunity to network with other business associates this conference should be a worthwhile experience for the participants".

Those interested in participating are to contact: Dorothy Camilleri or Mariella Cini EMCS Ltd, Airways House, 4th Floor, High Street, Sliema, SLM15. Tel: 341848/9, Fax: 318677

Email:info@emcs.com.mt

Website: http://www.emcs.com.mt