Manufacturing sector is ‘Cinderella story’ of Covid-19

Marisa Xuereb, Deputy President of the Chamber of Commerce. Photo by Giuseppe Attard

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Covid-19 has highlighted the importance of Malta’s manufacturing sector and the need to remain competitive within the international sphere, said Marisa Xuereb, Deputy President of the Chamber of Commerce.

Xuereb is an economist and Managing Director of Raesch Quarz (Malta) Ltd, a German-owned manufacturing company that produces glass quartz components and has been operating from the Mosta Technopark for 24 years.

Agility and resilience were vital for manufacturing throughout the pandemic. Speaking to this newsroom, Xuereb noted that there were opportunities during the pandemic in the form of new customers who could not source products they usually bought from the Far East and placed orders with the company instead.

Businesses are now more sensitive to the importance of having a multiple-source supply chain, and hence these new customers continue to place orders for at least part of their requirement for a wider range of items. “The development of positive customer relationships is paramount to survival; this requires responding to changing customer requirements very quickly, particularly when they are facing extraordinary challenges such as the pandemic. As a company, our challenge was to remain nimble and agile enough to react to the demand. Our customers quickly realised that we are a reliable supplier, even in exceptional circumstances.”

A recent Eurostat report on production rates within the EU, comparing December 2020 to the same month in 2019, found the production of non-durable consumer goods fell by 3.1%, capital goods by 2.8% and energy by 2.5%, while production of durable consumer goods rose by 4.2% and intermediate goods by 4.4%. Among the member states for which data are available, the largest decreases in industrial production were registered in Belgium (-4.6%), Malta and Portugal (both -4.3%). The highest increases were observed in Slovakia (+6.8%), Poland (+6.1%) and Latvia (+4.7%).

Xuereb said that “this comes as no surprise. It reflects the gradual transfer of manufacturing activities from the West to the East of Europe. Many Western European companies are outsourcing to Eastern Europe, where the costs of living are lower. Yet Malta struggles to compete with Eastern Europe and hence is not benefitting from this movement. We have one of the highest industrial energy rates within the EU and are the only EU country where domestic energy rates are cheaper than industrial rates. Our salaries and rents are also higher than in East European countries”

 “Then we have significant logistical challenges,” she added. “It’s not an easy feat for a niche company to ship from Malta to the rest of the world, as logistical options are limited due to our size and geography. Drivers cannot just hop in a lorry, drive for a few hours and deliver to Germany or anywhere else in mainland Europe. For Raesch, since our products are bulky and we ship directly to a number of customers in different locations worldwide, we rely a lot on groupage road-sea transport. This means that if an order isn’t on time for our weekly shipment, it will be delayed by a full week until the next.”

Regarding the potential of emerging technology to disrupt the sector, Xuereb explained that “when it comes to production equipment and communication methods, yes, a lot is changing. However, there will always be a human component in manufacturing. One must be on the factory floor to know what’s going on. You have to see with your own eyes. You can hear if something isn’t right with a machine and use your senses and expertise to diagnose issues, along with the team. Remote working possibilities are limited.”

 “The challenge is offering as much flexibility as possible to the team, without losing corporate identity,” she added. “Over recent years, we have seen a change locally in that shift work isn’t appealing to Maltese workers. People no longer want to work on a two-shift basis or night shifts. We had to change our working hours to retain our workforce, most of whom have been with us for many years and are skilled. You need skilled workers to maintain and improve productivity to remain competitive. One of the pandemic dangers is that companies that have less work spread it over more hours to keep people occupied. This undermines efficiency and future productivity. Excess hours are better used for training or product development or taken as time off.”

Xuereb acknowledged the great variety of companies within the local manufacturing industry, each subsector with its own challenges and success stories.

“Being in Malta has its advantages and disadvantages. However, we must work alongside with government to ensure we remain a competitive destination for niche manufacturing industries. Compared to other sectors that have suffered tremendously during the pandemic, manufacturing is truly the Cinderella story of survival. If you look across the islands, we already have some global players here in various subsectors of manufacturing – whether that’s pharmaceuticals, plastics, electronics, industrial components, food and beverage, we must retain and support what we have and attract more manufacturing activity that can strength the sector and provide critical mass for better industrial infrastructure and support services.”

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