The Federation of Industry recently held a national seminar on this very issue and I am sure that these indicators and targets will continue to attract the necessary attention, not least within the Malta Council for Economic and Social Development (MCESD). Allow me, however, to make a few observations about how Malta is performing in this regard. I shall do so by comparison with the international best practice benchmarks upon which most of the Lisbon Agenda criteria were built. So how does Malta fare, especially when compared to the peer group of the new EU member States? Based on data relating mainly to 2002, Malta’s GDP grew by 1.5% compared to 2.5% in the other new member States. And this is not simply because less advanced economies than Malta’s need to grow faster in order to catch up. Indeed, the two acceding countries which are richer than Malta, namely Cyprus and Slovenia, grew by 2.0% and 2.9%, respectively. Turning now to possible reasons for Malta’s slower growth rate, a first observation is that our unit labour costs are relatively high. On average, other new member States have labour productivity and price levels which hover around 50% of the current EU average. In Malta labour productivity is relatively higher, at 70% of the EU average, but the price level is higher still at almost 90%. This suggests that Malta needs to increase its productivity to match its price level. A second measure relates to public finances.
This requires us to produce more, and more intelligently, and to devote a larger share of the nation’s resources to fund the investments which are vital for its continued economic development. Policy Dimensions I have often stressed that the solution to such problems lies in the implementation of a coherent reform strategy that enjoys as wide a measure of support as possible. Today I would like to dwell on two considerations arising directly out of EU membership, which should in themselves help to promote progress in this direction. These are Malta’s expected contribution to the realisation of the Lisbon Agenda and its participation in the Economic and Monetary Union (EMU). Malta and the Lisbon Agenda The central objective of the Lisbon Agenda is to address supply-side impediments to growth. The Agenda states: “The Union has today set itself a new strategic goal for the next decade: to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion” As from May next year, Malta will automatically be part of a process which presents opportunities for improving supply capabilities through focused policies and for which specific funding is available. It, however, also involves a greater degree of competition, and thus constitutes a driving force for countries to move ahead rapidly with the required structural reforms. The Lisbon Agenda establishes numerous competitiveness indicators, as well as a set of targets to be achieved by 2010. I do not intend to dwell on these here.