ARCHIVES HISTORIQUES
DELACOMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (77)547
V ol.1977/0175

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COMMISSION OF THE EUROPEAN COMMUNITIES
COM(77)547 final
Brussels ,3November 1977
Draft
DECISION OF THE ASSOCIATION COUNCIL
defining the guidelines for cooperation between the
Community and Malta
(submitted totheCouncil bythe Commission )
COM(77)547final

COMMISSION COMMUNICATION TOTHE COUNCIL
Atthesecond meeting oftheEEC-Malta Association Council held on
24March 1977 »theCommunity stated itsreadiness toundertake ,with Malta 's
collaboration ,thepreparatory work fortheimplementation oftheoooperation
provided forintheProtocol laying down certain provisions relating to
theEEC-Malta Association Agreement * -
J
Attherequest oftheMaltese Government ,theCommunity also gave
itsagreement towork beginning ,inthecontext oftechnical a&dfinancial
cooperation ,ontheappraisal ofprojects sothat ,where appropriate ,
deoisions could betaken assoon asthe Protocol entered into force *'The
Community stated itsreadiness tohelp theMaltese Government toestablish
ateam ofindustrial specialists which would have thetask ofpreparing
anindustry-based eoonomio development strategy ,ofidentifying projeots and
encouraging initiatives from European entrepreneurs fortheir implementation *
Pursuant tothedecision oftheAssociation Council ttheCommission
isputting forward inthis communication proposals fortheposition tobe
adopted bytheCommunity *
Thepreparatory work tobeundertaken jointly bytheCommunity
andMalta with regard toeconomic ,technical andfinancial cooperation
will have tobecarried outonthebasis oftheguidelines adopted
bytheCommunity *Itwill then benecessary tohave those guidelines
approved bythetwoparties ataforthcoming meeting oftheAssociation
Council .
Theconclusions ofthereport prepared bytheteam ofindustrial
specialists referred toabove will make itpossible atalater stage toset
outinpractical tenns howtheCommunity aidisto-be used under the
guidelines adopted bytheAssociation Council * /

The Comnission has attached amemo ontho economic and finanoial ,.':
situation inMalta ,most ofthedata for which w*?recollected during the
fact-finding mission carried outinMarch byrepresentatives ofthe ComaiM ;?
andthe European Investment Bank *TheBank hasalso collaborated closely
indrawing upthe annexed proposals concerning the implementation of
technical andfinanoial cooperation *

Decision oftheAssociation Counoil defining theguidelines for
cooperation between the Community andMalta *
Having regard tothe Protocol laying down oertain provisions relating
tothe Agreement establishing anassociation between the European Economic
Community andMalta ,andinparticular Articles 18and 21(l)andArtiole 9(l)
ofthe Financial Protocol ,
Whereas Article 18provides fortheinstitution ofoooperation with
the aimofcontributing tothe development ofMalta byefforts compl eoentary
tothose made byMalta itself andofstrengthening existing economio
links onasbroad abasis aspossible forthe mutual benefit ofboth parties ;
Whereas ,inaccordance with Artiole 2l(l )oftheProtoool andArtiole
.9(l)oftheFinancial Protocol ,itisnecessary todefine thegeneral
guidelines forthis cooperation andthespeoifie objectives offinancial and
technical cooperation , ;V
HAS DECIDED AS FOLLOWS :
Artide 1
Thefollowing objectives shall betaken asgeneral guidelines
forthecooperation tobeestablished between the Community and Malta for
the mutual benefit ofboth parties : '
(i)Thedevelopment andmodernization ofMaltese industry inorder
tohelp create employment ,increase industrial productivity and
contribute tobalance ofpayments equilibrium !

(ii)Thedevelopment ofbasio infrastructure andofprojects forvocationa
training and research ,these being crucial for thoattainment of
the above objectives :
(iii)Tfcestrengthening ofoooperation between European andMaltese firms
intheindustrial field tofacilitate thetransfer oftechnology
ajidthe inflow ofcapital#
Artide 2
Technioal andfinancial cooperation will beputinto effeot in
accordance with the following principles :
(i)Aneffort will bemade touse Community aidtosupport the economic
cooperation schemes tobeimplemented under Article 20ofthe Protoool *
(ii)Special attention will bepaid tooperations Mhich would permit
the simultaneous use ofdifferent forms ofaid,inparticular to
operations likely toattraot technology ,capital andother benefits
resulting from the implementation ofthe above mentioned Artiole 20# -
(iii)Community aidmeasures will bedesigned toenoourage ,ifpossible ,
other suppliers offunds togive aid,inparticular inthe oontext
oftriangular cooperation#
Article 3
• ' /
Onthebasis oftheprinciples setoutinArtiole 1andinthelight
oftheobjectives ofMalta 'sdevelopment plan,theaidspeoified inArtiole 2
oftheFinancial Protocol will beused inaccordance with theprovisions of
that Protocol tofinance orpart-finance projects andmeasures whioh correspond
*
tothe following economio priorities :

-3-
I.TECHNICAL ASSISTANCE INTRAINING
(i)Technical assistance forthepreparation ofadevelopment
strategy andtoensure theeffectiveness oftheprocess of
selecting ,preparing ,executing andadministering projects }
(ii)Technical assistance forthedevelopment ofexport markets
(surveys ,trade relations ,trade networks ).
n.DEVELOPMENT OPPRODUCTION
Industry
(i)Establishment ofinfrastructure necessary forindustrial development
(such asindustrial estates orprojects fortheproduction of
certain primary products );
(ii)Development ofindustries which create stable employment ,in
particular those requiring ahighly skilled workforce j
(iii)Development ofindustries that canusetheproduction orrepair
equipment left onmilitary bases $
(iv)Projects which make useofMalta 'sgeographical position and
existing infrastructure (service andsupply bases ).
Agriculture
Development andmodernization ofagriculture anafisheries .
ni .TOURISM
Improvement ofthepotential fortourism anddiversification of
reception capacity ,inparticular tourism infrastructure projects .
IV.SCIENTIFIC COOPERATION
Cooperation activities inthescientific ,technological andenvironmental
protection fields ,particularly incertain areaa ofresearch onsolar
energy ,water andairpollution ,standards ,reference materials and
measurements ,anddata-processing services .

MAL TA
ECONOMIC AND FINANCIAL SITUATION ;
Provïsional oddrcss :200,ruedelaLoi,1040Brusscls -Téléphoné 350040-358040 -TefegfOpfciC oddress :«COMEUR Brussels »
Telex :.COMEURBRU 2)877.

TABLE OP CONTENTS
SUMMARY AND CONCLUSIONS
1..GENERAL INTRODUCTION
2.POPULATION AND EMPLOYMENT
3.ECONOMIC OBJECTIVES OPTHE PLAN
4.;RECENT TREND OPTHE ECONOMIC SITUATION
(a)Growth andorigin ofthenational product
("b)Consumption ,savings andinvestment
(c)Public finance
(d)Currency ,credit andthehanking system
(e)Prices and wages
(f)External trade andthe "balance ofpayments
(g)External debt
5.SITUATION INTHE MAIN SECTORS
(a)Agriculture andfisheries
(h)Manufacturing industry
(c)Shipyards
(d)Water andenergy
(e)Transport and communications
(f)Tourism
6.SHORT -AND MEDIUM-TEHM PROSPECTS

Lil
TABLES CONTAINED INTHE TEXT
:Average annual growth andsectoral 7
distribution ofGDP envisaged b,ythe
1973-80 Plan
tAnnual average growth ofGNP 8
:Structure ofGDPbysector oforigin • ' 9
SStructure ofresources andemployment 11
:Financing ofinvestment 12
lGeneral State Budget (1969-1976 ) • 14
Money supply andmain counterparts \ 16
Annual increase intheretail price index v17
Trend ofthebalance ofpayments (1970-76 ) 19
Public external debt (part paid )asa 20
percentage ofGDPfortheyear inquestion ;
:Debt servicing asapercentage ofexports 21
offoods and non-factor services
jBreakdown ofindustrial firms bynumbers 23
employed in1975
STATISTICAL ANNEXES
XSectoral breakdown ofworkers inemployment
:Sectoral breakdown ofgross fixed capital
formation
SBreakdown ofcifimports byproduct andmain
countries oforigin
SBreakdown ofexports byproduct andmain
countries ofdestination (fob)
:Gold andforeign currency reserves
tBreakdown ofthevalue ofagricultural
production
:Growth ofmanufacturing industry andbreakdown
ofitsadded value ($)

EXCHANGE HATES
1u.a. £3f1
ainMaltese pounds «*inUS/I »inu»a «
(£M)
End 1973 0.^7 2.59 2.15
End 197^ 0A7 2.66 v2.12
tnd1975 0.^7 2#lf8 2"15
End1976 0*W5 2.3^ 2*07

SUMMARY AND CONCLUSIONS
IheRepublio ofMalta hasapopulation of320000onaland area
(2)of320km.1Itcomprises four islands# Approximately $($ >ofthepopulatim
lives ontheisland ofMalta ,where population density isinexcess of10G-
(2)inhab# /km#v'Theislands have anuneven relief butareoflowaltitude# The
strategic position ofthearchipelago ,atthecentre oftheMediterranean ,
itsclimate androle asaplace oftourism areMalta 'sonly natural advantages *
Theshortage ofwater restricts theagricultural possibilities andthe
industrial sector ishandicapped bythesmall size ofthelocal market# The
V
economic andsooial infrastructure iswell -developed ,andwith apercapita
GNPofUS 1700,Malta isinasimilar position toPortugal#
Despite theefforts atrestructuring undertaken t>ytheGovernment in
thepast ,theMaltese economy isstill largely dependent ontheBritish
military bases# Theagreement setting 1979 asthedate fortheir definitive
closure will therefore have considerable economic repercussions ;itis
obliging thecountry toertend itsrestructuring effort inorder tocounter­
balance theloss ofrevenue andemployment brought about bytheprogressive
withdrawal oftheBritish troops# This effort isatthebasis oftherevised
1973-80 Plan ,which envisages investments totalling £M240million during
theperiod 1977-79 inorder tocreate 237000newjobs^and reach aGDP
12)growth rate of7*5% P®?annum# v'
During thefirst four years ofthePlan ,economic growth exceeded
thesetobjectives# GDPincreased atanaverage annual rate ofl6fo,This
favourable trend isdueessentially tothedevelopment ofindustrial exports
(ready-made olothing ,foodstuffs )andoftourism# Manufacturihg industry
nowaccounts forathird ofGDPcompared with onlyaQuarter in1972 .
Itprovides jobsforapproximately 25$oftheworking population .Services
remain ,however ,themainstay oftheMaltese economy (52%ofGSP).
(1)Theinvestments cost pernewjobseems relatively low (approximately
21000u.a.)j however ,all,oratleast thevast majority ,oftheinvestment
operations necessary tocreate approximately 12000 jobs have already been
carried out.Lastly ,most ofthenewinvestment operations envisaged arein
light industry .
(2)Unless otherwise stated ,allgrowth rates express increases inrealterms .

After afairly sharp drop between I967 and1972 Aaueed byaproperty
crisis andbudgetaiy restrictions ,thelevel ofgross fixed capital '
formation picked uprapidly ,increasing from \}%ofGDPin1973 to27%in
1976 (compared with thetarget of25$laid down inthePlan ).This recov r:
wasprincipally duetopublic investment ,thevolume ofwhich increased
appreciably mainly asaresult ofdirect State participation inindustrial
projects .In1975 and1976 ,more than 50%ofthevolume ofinvestment
wasfinanced bydomestic savings ,compared with only 8%in1972 .Ifone
takes into account theincrease innetrevenue ,transfers from abroad
(transfers from emigrant workers ,therents forthebases ,subsidies
from theUnited Kingdom )andoftheloans obtained onfavourable terms ,the
resources available forfinancing are atpresent well inexcess ofthe
total investments .
Therents paid forthemilitary bases areofimmense importance to
public finances .Thanks tothese payments ,thecurrent netbudgetary
position covers approximately two-thirds ofpublic capital expenditure .
Forsome years now ,theState hasbeen playing anactive part insetting up
newindustrial activities ,inparticular bydeveloping industrial zones of
itself launohing newundertakings# This hassignificantly increased publio
capital expenditure andhasgiven rise toaconsiderable budget deficit
(1976 :£M12,5 million •15%ofbudget revenue and6%ofGDP).Most of
this deficit hasbeen financed bygrants andloan9 onfavourable terms
obtained mainly from theUnited Kingdom ,thePeople 'sRepublio ofChina
and anumber ofArab States#
Thescarcity ofnatural resources and -theemail area oftheoountry
oblige Malta toimport most ofwhat itneeds *lhetrade balance is
traditionally indefioit andeven thevery favourable trend ofexports ,
based essentially ontextiles ,wasunable after 1974 "toprevent aninore&s *
inthis deficit ,which in1976 reached ^200million *However ,despite the
large amounts obtained inrevenue from tourism andtransfers from emigrant
workers ,thetransfers conneoted with theactivities ofthemilitary bases
areneoessary tomaintain apositive balanoe ofcurrent payments .Thanks
tothenetinflow oflong-term capital ,thegoldandforeign exchange '
reserves have regularly increased andtotalled $620million attheend'
of1976(17months' imports ).

-3~
Most ofthe foreign aid received byMalta iainthe form ofgrants
orloans onfavourable terms .The publie external debt hastl.Jrefore
remained relatively low($40million »&foofGDP)anditsservicing
absorbs less than 1$oftheexports ofgoods andnon-faotor services#
The apparent improvement inthe eoonomio situation inrecent years
h
cannot ,however ,conceal the problems facing 'alta inthe medium term }
1.Since 1975i thetraditional emigratory movement ofMaltese worker *
has been reversed and over thelast two years ,the number of 1
workers returning has exceeded the number departing by2700#
This phenomenon andthearrival ofalarge number ofyoung people
onthe labour market ,the reduction inthe number ofworkers
employed onthemilitary bases and redundancies incertain industries
have ledtoaconsiderable inorease inthe numbers seeking employment *
Toavoid anincrease inthe unemployment rate ,the Government has
setupspecial corps ofworkers (Pioneer Corps )paid from theState
budget and generally employed onmajor infrastructure works ;it
has tiria been po33i"ole tokeep the level of "area?!072est iovc to
approximately 4>ofthe working population# Ifanincrease in
the number ofjobless istobeavoided ,the reabsorption ofthe
workers from the special corps ,the foreseeable increase inthe
working population andthe evacuation ofthemilitary bases will
require the creation of23700 new jobs between now and 1979 *
According tothe Maltese Government ,approximately half these jobs
arevirtually guaranteed byprojects inthe process ofimplementation
(tourism ,infrastructure ,shipyards ,industrial projects)# To
provide thetotal of23700 jobs ,afurther 12000will have to
becreated and anamount ofapproximately £M240million will
have tobeinvested between 1977 and 1979 *These twoobjectives
seem very ambitious when oneconsiders that their attainment would
involve the number ofjobs created increasing from thelevel of
1400per annum recorded over theperiod 1971-75 to5800per
annum over the period 1977-79 and would also involve the annual
volume ofinvestment being onaverage 44$greater than thevolume
recorded in1976# Such ajump would seem difficult tomake ,
especially astherestricted nature ofthedomestic market obliges
Malta todevelop industries geared almost entirely toexport markets#
'The implementation ofviable projects ofthis type may well take
longer than anticipated ,especially astheinternational economic
climate >isatpresent unfavourable# Itistherefore tobefeared
that the employment objectives will not beattained andthat the
level ofunemployment will inorease well beyond thepresent level#

2# Asfrom 1979 "therevenue derived from "^epresen eofthemilitary
tases ,which accounts forapproximately 14f0pfGi;?,20$ofbudget
revenue andbetween 25%and 30$offore _gnexchange revenue ,will
nolonger beforthcoming andthe economy will therefore need tobe
adapted tonewresources .Thepassage through this delicate
period will befacilitated ,however ,bytheusefor anumber of
years ofabundant foreign exchange reserves (US 620million a
17months *imports ).
Toestablish thebasis forabalanced eoonomic development nolonger de­
pendent ontheactivities ofthemilitary bases ,Malta doubtless has a
number ofadvantages ,notably skilled labour ,relatively low wages ,tourism .
However ,restructuring onthis scale seems tobebeyond thecountry *scapa­
cities and will beimpossible without external aid# This isrequired
essentially inthe form oftechnical assistance and economic cooperation#
Its main contribution could betowards :
1# The establishment ofanindustrial development strategy ,including
the identification and preparation ofspecific projects# Given
therestricted nature ofthelocal market andthe danger ofheavy
dependence onexport markets ,theselection ofthe branches whose
activities could bedeveloped isaparticularly delioate matter in
Malta *scase# Itwill require avery sound assessment ofpotential
outlets onthe export markets#
2# Thepromotion ofprojects tobecarried outwith thehelp of
foreign investors# .
3»Thepreparation ofmarkets ,theestablishment oftrade relations
and trade links .
Inmore general terms ,itisapparent that Malta 'seconomic future
isessentially dependent ontheextent towhich newindustries canbe
established byforeign entrepreneurs over thenext fewyears# Itisnot
certain ,however ,that thecomparative advantages enjoyed bythecountry
aresufficiently attractive inthemselves tobring about automatically the
creation ofindustrial activities onanadequate scale# Theeffectiveness
ofthe Community aidwill have tobeassessed ,inthefined analysis ,
interms ofitscontribution towards that objective®

1. GENERAL INTRODUCTION
Situated between \-ibya andSicily ,the laltese Archipelago connande
the passage from the Western tothe Eastern Mediterranean .Because of
itsstrategio position ,Malta has been conquer !onnumerous occasions
and suffered severe damage during the Second World War# The country has
been independent since 1964 and,under anagreement concluded in1972 ,
themilitary bases occupied bytheBritish Admiralty and NATO will be
finally vacated asfrom 1979 *
2lhe Republio ofMalta covers barely 320 km .find oomprises four islands *
ofwhich only Malta and Gozo are inhabited# Theisland 'sonly natural wealth
isintheform ofquarry stone ,andthesearch foroilundertaken offthe
coast has sofar proved fruitless .The Mediterranean climate allows the
cultivation ofcereals ,vegetables and flowers ,plus alittle arborioulture ,
but the shortage ofwater resources restricts thepotential ofthe agri­
cultural sector .
The country has atransport infrastructure whioh isgenerally
considered adequate .The road network links all the inhabited areas .The
airport ,which isofcrucial importance forthe development oftourism ,is
situated atLuqa and the runway has recently been extended totake all
types oflong-range aircraft .Anational shipping oompany andanational
airline were established in1973 and 1974 respectively .
2.POPULATION AND EMPLOYMMT
Thepopulation ofMalta has remained constant around the 320000
mark for more than tenyears .Thepopulation density isextremely high
(l000inhab./km)and90$ofthepopulation lives onthemain island *
Thecapital ,Valletta ,has only 14000inhabitants#
Thetraditional trend ofemigration ,which reached apeak in1974
(netemigration of3700)was suddenly reversed in1975 andover
thelast twoyears the number ofpeople returning haB been 2700
greater than the number ofdepartures .This phenomenon and the
arrival oflarge numbers ofyound people onthelabour market have
contributed tothenet increase inthe labour supply *

which totalled 115 000in1976 compared with 100 000in1969 •
Thanks mainly tothe creation asfrom 1972 ofspecial corps of
workers (Pioneer Corps )raid from theState "budget andgenerally
employed onmajor infrasx .-ucture works (approxi lately 8COOpeople ),
the number ofpersons inemployment increased from 95000in1969
to110 000in1976 }this measure andtheraisir „ofthe school -
leaving age explain the apparently lowrate ofunemployment -3»3
ofthe working population in1976 .
Thebreakdown oxxneworking population bysector hasundergone a
profound change since 1969 (seeAnnex l)tmainly infavour ofmanu­
facturing industry (25$),inwhich the 10000 newjobs have partially
compensated forthe reduction inthe numbers employed ontheBritish
military bases (7800in1969 »3300in1976 )andfortheredundancies
inthebuilding sector following the boom inthelate sixties# Theposi­
tion ofprivate services remains fairly constant with approximately 30$
ofthe employed working population ,while the number employed directly
intourism isconstantly increasing (3800in1975f 3.4$ ofthe employed
working population ).
3.ECONOMIC OBJECTIVES OP THE PLAN
Uptotheendofthefifties ,theMaltese economy wasgeared entirely
totheneeds oftheBritish military bases.These accounted forapproximately
50f0oftheisland'sGNPandprovided jobsforalmost 2%oftheworking
population .TheGovernment hassince beenendeavouring torestructure
theMaltese economy inorder tomake upfortheloss ofrevenue and
employment brought about bytheprogressive withdrawal oftheBritish troops .
Alltheplans drawn upsince 1959 setouttodevelop highly labour -intensive
manufacturing industries ,toextend tourism andstrengthen agriculture .
Inthemost reoent plan covering theperiod 1973-80 ,theplanners *
objective wastocreate 20600newjobsinorder tocompensate forthe
effects oftheshutdown ofthemilitary bases in1979 *Thefaster thanantici­
pated increase intheworking population (115300in1976 compared withthe
111800forecast )andtheredundancies brought about (approximately 1,000 )
orenvisaged (particularly inthetextile factories )asaresult ofthe
crisis ininternational trade have obliged theState torevise itsobjectives
4
(1)onthebasis ofthenwber ofpersons oversi*te<m years ofage>*o
have ajoborareinsearch ofajob.

-7-
TABLE 1:A VERAGE ANNUAL GROWTH AND SECTORAL DISTRIBUTION OP'.'DP
ENVISAGED BYTHE1973-60 PLAN (original version )v.
(in onbaeia of1972 prices )
Antioipatea
aimua"'
avérée e
growthΓ"– ■ 11 ι-«_χ ι .3- ν..Α Α.. Iböotoral dietributioi
*972 1979
I .Agriculture andfisheries 4-° .Γ7 7.5 <-7
JIndustry (including shipyards )11.6 ■ 24.6 36.3
IPublio undertakings 5.5 4.9 4.9
.Construction andquarrying 0.0 4.9 3.4
JTourism andprivate services12.4 5.9 v 9.2
JProvision ofservices forthemilitary bases -31.4 6.3.°'3
!Public administrationI 3.2 16.1 13.7
Other services 3.2 .29.8 25.5
GDP atfactor cost 5.5 100,0 100.0
Source :Offioe ofthe Prime Minister :Outline ofdevelopment plan for Malta -
1973-1980 (August 1973 )
4

-8-
j ;:'C®5the1&tter yearsofth«Plan,withtheresult that/orthe
period 1977-79 atotal of23700newjobswill havetofeecreated toavoid
anincrease inthecurrent level ofunemployment .Toatiinthiaobjeotivr ,
Malta will havetoinvest £M240million overthisthree yearperiod t
approximately onehalf ofwhich will bepayable ,inforeign currenoy .This
additional effort should makeitpossible toincrease GDPby7,50 %per
annum ,most ofwhich will beaccounted forbymanufacturing industries
(added value ofthesectors +19-5$ perannum )geared towards exports
(total volume ofexports :+26$perannum )inorder alsotoachieve
equilibria *inthebalance ofcurrent pavaents a3TTGB .1990 «
4»HECENT TRSND OPTHE ECONOMIC SITUATION
(a)Growth andorigin ofthenational product \
In1976 Malta 'sGNPwastheequivalent off,530million# Per
capita GNPforthe same year wastherefore approximately $1700,a
figure comparable tothat recorded inPortugal ,for example#
Since theearly sixties ,theMaltese economy hagexperienced
alternating periods ofstagnation andrapid growths
Table 2:Annual average growth ofGNPfinreal terms )
1960-65 : 0.3%
1965-70 : 10.3%
1970-72 : 4.2%
1972-76:^ 15.5$
For 1976 ,onthebasis oftherate ofGDP growth
After asevere economic crisis provoked bythe' reduction intheBritish
military presence beginning in1959i "theintroduction ofinvestment subsidies
andoftax exemptions facilitated the development asfrom 1975 ofmanufacturing
industry (+16$per annum between 1965 and 1970),nhile theextension ofthf
tourist sector (revenue :+36$per annum )brought about asimilar expansion
inthebuilding andservices sectors .Thereduction inthe number oftourists
in1970 ,theoollapse ofproperty speculation andlastly theprovisional
abolition in1971 ofthetax advantages for newundertakings combined to
putabrake onthe growth ofeconomic activity upto1972#
For 1976 ,onthebasis oftherate ofGDP growth .

TABLE 3sSTRUCTURE OP GDP BY SECTOR OPORIGIN
(in%.onbasis ofcurrent prices )
1965 .• ! 1969 1972 1975 1976
Agriculture andfisheries1 1■!
7.5 I 7.4 7.5 6.0 5.4
Manui actunng industry 19»3 22.4 24.6 30.5 33.1
Construction and quarrying 5.5 6.8 4.9 6.0 5.8
Publio undertakings 3.9 4.6 4.5 3.9 3.4
Transport and communications 4.6 3.8 3.3 4.4 4.6
Public administration 13.3 13.8 16.1 14.6 14.4
Provision ofservices forthemilitary bases 11.8 7.7 6.2 4.2 3.2
Other services 34.1 33.5 32.9 30.4 30.1
GDP atfactor cost 100.0 100.0 100.0 100.0 100.0
Provi6ionai data
2_Inoluding shipyards
Sources Central Office ofStatistics

-10-
Thegrowth rate didnotstart recovering until 1973 (GDPJ+10$)
thanks toacceleration ofthe Sts'-e investment program® >andthedevelopment
ofexports ofgoods andservices (+29$in1973 ,.+20$onaverage between 1973
and1976 ),these exports consisting mainly ofprocessed agricultural products ,
ready-made clothing andtourism .Theobjectives ofthePlan for1973-60 have
therefore been exceeded comfortably forthefirst four years ,since the
annual average growth ofGDPhasbeen 16$compared with theInitial target
of5,5$ .Asshown inTable 3,this acceleration isdueessentially to
manufacturing industry ,which nowaccounts forathird ofGDPcompared with
only aquarter in1972 .Services remain ,however ,theprincipal seotor ofthe
Maltese economy (52$ofGDPin1976 )despite theprogressive reduction inthh
services provided forthemilitary bases (3$ofGDPin1976 compared with
12$in1965 ).
(b)Consumption ,savings andinvestment
After rising rapidly between 1965 and1970 ,private consumption
increased only modestly between 1971 and1973 (2.3$ perannum ),suffering
therepercussions ofthesiowing-down ofeconomic activity andthetemporary
freezing ofthelevel ofcivil servants *salaries decided bytheState in1972 .
Over thelast three years ,incontrast ,private consumption hasincreased
Lbyanaverage of8.7$ perannum ;this level remains well below that ofthe
extremely rapid growth innational income (seeTable 4)*Since publie
consumption hadfollowed approximately the Baroe trend ,domestio savings -
thevolume ofwhich continued todecline until 1972 (then representing
less than 2$ofGNP)-were re-established atamore satisfactory level
after 1974 andrepresented 17$ofGDPin1976.They covered approximately
43$oftheamount ofinvestments in1975 and59$in1976 compared with
only 8$in1972 .Allowing fortheincrease inthenetincome from
capital invested abroad ,fortransfers ^^andcapital inflows ,resources
available forfinancing were well inexoess oftheamount ofinvestment
expenditure (seeTable 5)*
After afairly sharp drop between 1969 and1972 (-*30$)caused bythe
property crisis andthebudget restrictions ,thelevel ofgross fixed
capital formation picked upagain rapidly ,increasing from 19$ofGDPin1973
to27$in1976 (compared with the25$target setbythePlan)*This
recovery ismainly duetopublio investment ,thevolume ofwhich increased appreciably
Transfers from emigrant workers ,rents forthemilitary tases andsubsidies
from theUnited Kingdom .

TABLE 4J STBtJCTURE OP RESOURCES AND 0JPLOYMOTT
Consumption
-private
-publie
Gross fixed »ortjv;ion
mprivate
-public
Variation inbivoks
Gross domestic expenditure
Exports ofgoods andnon-factor services
Imports ofboods andnon-factor services
Resources deficit (-)
Gross domestic product
Erternal revenue offactors
Eictemal expenditure offactorsCM f000atourrent prices
1965
48283
(39217)
(9066)
11784
(7687)
(4097)
1683
617501969
77650
(63986)
(13664)
25456
(18356)
(7100)
1>48
104 454
28377
37392
-9015
52735
4261
Gross national produot 5699646584
69042
-22458
81996
9949
-3423
885221972
100 193
(60407)
(19786)
22533
(16255)
(6278)
2967
1*5 693
53460
76948
-23488
102 205
12448
-4H9
110 5341975
149 183 169 000
(118 660) (135 200)
(30523) (33800)
37 82 54800
(19500);I n*a «
(17982) n.a.'
1475 3900
188 140
137 327
159 710
-22383
165 757
23880
-5623
184 0141976Struoturo in
1965
227 700
171 700
195 800
-24100
203 600
19200
222 80091.6
(74.4 )
(17.2 )
22.3
(14.6)
(7.7)
3.2
117.1
53.8
-70.9
-17.1
100.0
8.1
108.11972
(7*.7)
(W.4)
:V»0
0%9 )
(6.1)1976
83.0
(68.4 )
(16.6 )
26.9
Λ9 1.9
\:i.o 111.8
•>-o3 84.3
-,'i>.3 -96a
-M.o
I-11.8
\vV .0 100.0
'-.2
-4.0 *|9.4
UN5.2 109.4
Provisional estimates
Sources !-Central Office ofStatistics ,Malta :Annual abstract ofStatistics .1975
-Data for 1976 supplied bythe Maltese administration

TABLE 5 SFINANCING OP INVESTMENT
Γ In M•OOO atcurrent;prices Structure in %
1965 1969 1972 1975 1963 1965 1972 i1976
I L_ Estimate rJ
I(-)Investment 13467 26804 25000 38957 58700 100.0 100,0 100.0
ofwhich :
I–Gross cap*.'i-dl .Tcnnation 11784 25456 22533 37482 54800 87.5 88.4 93.4
-private (7687 (18356) (16255)(19500) (25200)(57.1 ) (63.7 ) (42.9 )
–public (4097) (7100) (6278) (17982) (29600)(30.4 ) (24o6 ) (50.4 )
–variati ;..*in 1683 1348 2967 1475 3900 12.5 11.6 6.6
(+) National savings : 8719 10872 10341 34831 54800 64.7 40.6 91.6
ofwhich :
Domestic savings 4452 4346 2012 16374 34600 33.1 7.9 58.9
I -private (2371) (1817) (14622) n.a . (7.1)
I-public n.a . (1975) (195) 1952) n.a . (0.8)
Net revenue from abroad 4261 I 6526 8329 18257 19200 31.6 32.7 32.7
Resources deficit (-)orsurplus (+1 -4754 -15932 -15159 -4126 -4900 -35.3 -59.5 -8.3
External Financing
(1)Net transfers v' 6303 10268 24787 29178 31900 46.8 97.8 54.3
ofwhich ,transfers from emigrant
11
Maltese workers (913) (5433) (5244) (6275) (10400) (6.8 (21.1 ) (17.7 )
Net capital inflow 716 -2341 19612 14401 n.a . 5.3 76.9
Variation inexternal assetsI
I
(increase s-:decrease s+) -2265 . ♦8005 -29240 -39453 I n.a . -16.8 -114.7L_iJ
(1)Including rent forthemilitary bases after 1972.
(2)Including balance ofpayments errors and omissionsSources :–Central Office ofStatistics ,Malta t
Annual abstract ofStatistics ,1975 .
–Data supplied bytheMaltese administration .

-13-
mainly asaresult ofdirect State participation .inindur>rial
projects *Private sector investment ,however ,declined by12$inreal
value terms between 1973 and 1975 asaresult o;theinternational economio
climate anddespite theintroduction offavourable taxmeasures f6rfirms
intheindustrial andtourist sectors .This trend seems tohave been
reversed in1976 (+29$atourrent prices )tojudge bytheconsiderable volume
ofcapital goods imported tostart upnewfactories# Is1976 ,however ,private
I investment accounted foronly 46$ofgross fixed capital formation compared
with 72$in1969 and 1972.
_. . V(o)Public finance (seeTable 6)
) •
Since 1969 »Government revenue hasincreased much more rapidly than
thenational income (33$ofONPin1969,49$in1975 )t t*"-8more thaa
proportional increase isdueessentially tothepayment oftherent forthe
British military bases andtotheaccompanying grants from other NATO countries
(10#ofONP).
Asregards other items ofrevenue ,there has been amarked
reduction intheproportion represented bycustoms duties (47$in
1969 ,21$in1975 )»nodoubt connected with thetariff reductions
granted tothe EEC countries since 1971 *The recent increase in
theprofits earned bythe Central Bank onitsfinancial investments
abroad (6$ofcurrent revenue in1969 »10$in1975 )roay,however ,be
considered atemporary phenomenon insofar asitislinked tothe
accumulation ofsurpluses ,particularly inforeign currency ,derived
from the rent for the bases .
The current expenditure entered intheState budget has
increaeed onaverage atthe same rate as CfNP since 1969# The increase
inthe price ofrawmaterials ontheinternational market caused the
Government totriple theamount ofthesubsidies onessential products^
between 1973 and 1975 *These subsidies (9$ofcurrent expenditure )are
tobeprogressively abolised .
(l)Foodoils,condensed milk,flour ,pasta andbread *sugar .

TABLE 6tGENERAL STATE BUDGET -(1969-76 )
Period from 1April to31MarchIn M'000 As %ofrevenue
budgets implemented budget voted 1969/70 1975/76 1976/77
proposed
budget 1969/70 1972/73 1975/76 1876/77
IRevenue 24.0 47.8 81.6 83.9 100.0 100.0 [100.0 1
[ofwhich :
jRentforthemilitary foa6ee j (-) (13.5 ). (13.5 ) (13.5 ) (-) (16.5 ) (16.1)I
Profits oftheCentral Bank | (1.5) 2.4) (15.1 ) (15.0 ) (6.3) (18.5 ) (17.9).!
Tax onincomes and estate duty (3.3) (8.5 (14.4 ) (15.4 ) (13.8 ) (17.7 ) .(13.4 )I
ICustoms duties (11.4 ) (12.8 ) (17.1 ) (17.2 ). (47.5 ) (21.0 ) (20.5 )1
ICurrent expenditure 23.7 33.4 57.6 63.3 98.8 70.6 75.5
Iofwhich :
ISubsidies onessential foodstuffs (1.4) 1.6 (7.1) (6.6 (5.8) (8.7) (7.9)
Balance 0.3 14.4 24oO 20.6 1.2 29.4 24.5
I(Balance ,excluding therentfor
Ithebases ) (0.3) (0.9) (10.5 ) (7.1) 1.2 (12.9 ) (8.5)
Capital expenditure 9.8 8.8 36.5 32.8 40.8 44.7 39.1
ofwhich :
IRepayment ofdebt (0.3) (0.5) (0.3) (0.3) 1.3 (0.4) . (0.3)
IInvestment (9.5) (8.3) (36.2 ) (32.5 ) (39.5 ) (44.3 ) (38.7 )
IOverall balance H -9.5 5.6 -12.5 –12o2 -39.6 -15.3 -14.6
Local borrowing
External grants and loans9.5
2.1 6.7 5.739.6
8.2 6.8
Variation inTreasury assets +7.7 -5.8 -6.5 -7.1 -7.8
Source xMinistry ofFinance 1The Malta Financial Report
Data supplied bythe Maltese authorities

-15-
Most oftheState "3capital expenditure takes theform offixed
investments ;according tothe1975-76 "budget ,almost 60$ofthetotal
aidtotheacquisition ofholdings inproducti'3 investments (shipyards ,
industry ,tourism )and25$isforinfrastructure works# TheState takes
anactive part ingetting newindustrial activities under way ,inparti­
cular "byestablishing industrial zones equipped with thenecessary infra­
structure ,andsometimes even with factory buildings jor "byitself
launching newundertakings (inthetextile industry forexample ).This
approach iscontinued inthe1976-77 "budget ,which will probably devote
M.5million toshipbuilding and M10million toindustrial projects .
\
Therent paid foruseofthemilitary bases provides acurrent
netbudgetary position which covers approximately two-thirds ofcapital
expenditure ,buttherapid increase inthelatter (M14million in
1974/75andthen M30million inthefollowing twoyears )hasgiven
rise toaconsiderable overall deficit (%ofGNPin1976)# The
grants andloans obtained byMalta onvery favourable terms have
notbeen sufficient tofinance this deficit ,with theresult that
theState hashadtodraw onthereserves accumulated previously
with the Central Bank#
(d)Currency ,credit andthebanking system
Thecharacteristic feature ofthetrend ofMalta 'scurrency
situation isasteady increase innetforeign assets ,which isthe
main cause oftheexpanision inthemoney supply (seeTable 7).
Approximately 37$ofthis isheld intheform ofnotes andcoin and
morethan50$isheld intheform ofdeposit andsavings accounts at
3$or5$perannum .Theinflow ofbudget revenue from therent for
themilitary bases explains thelowlevel ofclaims ontheTreasury ,
Theamount ofcredit totheprivate sector ,which quadrupled between
1966 and1972 mainly asaresult oftheconstruction boom ,hassince
stabilized .Upto1967 theexternal assets were held mainly bythe
commerical Jbanks ,which have since been obliged bytheGovernment to
repatriate their financial assets ,with theresult that theCentral
Bank nowholds 85$ofthem .

TABLE 7:MONEY SUPPLY AND MAIN COUNTERPARTS
(1969-1976 )
I In Mmillion !IAs%oftotal money ]
BUT )ply J
(endofperiod )i
i η
1969 1972 1974 . II 1975 1976 1969 1976 I
IMoney 56.4 76.5 93.1 117.1 144.5 41.7 45.0 |
Iofwhich notes andcoin (40.9 ) (62.4 ) (79.5 ) (98.8 ) (119.6 ) (30.2 ) (37.3 )
|Quasi-money76.8 114.9 127.2 148.0 176.4 58.3 55.0
Total money "nppl ; 135.2 197.4 220.5 265.1 320.9 100.0 100.0 |
IExternal assets (net) 100.3 132.9 174.5 228.6 286.6 74.2 89.3
Iofwhich :held bytheCentral Bank (58.5 ) (103.4 ) (130.7 ) (183.4 ) (237.8 ) (43.3 ) (74.1) !
IClaims ontheTreasury (net) 6.8 14.6 12.9 12.9 22.1 5.0 6.9
IClaims ontheprivate sector 38.2 54.7 55.9 53.1 56.5 28.3 17.6
jOther items (net)-10.1 -10.8 -23.0 -29.5 I-44.2 -7.5 -13.8
Total counterparts 135.2 191.4 220.3 265.1 320.9 100.0 100.0
Source :Central Bank ofMalta :Quarterly Review ,March 1977

-17-
Ontheother hand ,the commercial "banks hold considerable
liquid assets given thelowlevel ofdemand frrcredit •nMalta ,with
theresult that their average liquidity ratio isaround 50%to55#
even though thelegal minimum isonly 25
Tie Central .~-gr>«?Vv is. \::.-.3 r-;l5 as "car>
T:itT«î.sr.T =âTiiîrjîrr.iïé trs
ofthe other banks ;itisthe Government 'sfinancial agent# The
tanking system also comprises three commercial "banks ,two savings banks ,
three long-term financing institutions ^andlastly two "bodies to
manage the funds offoreign residents .
V
(e)Prices and wages
The only index recording price variations isforretail prices ;
itshows arelatively modest increase inprices since I960 with the
exception ofthe period 1973-75 »when there were sharp increases inthe
prices ofimported products .However ,this index isoflittle signi­
ficance given that the State was maintaining asystem ofsubsidies for
essential products .Their progressive abolition will probably bring
about anincrease inthecost ofliving ofatleast 3$.
TABLE 8tAMTJAL INCREASE INTHE RETAIL PRICE ?INDEX
(in$,base I960 until 1974 »base 1974
thereafter )
1969 1970 1971 1972 1973 1974 1975 1976
2.4 3.7 2.5 3.2 7.8 7.3 8.8 0.6
Between 1969 and 1976 the minimum wage inthepublic sector
more than doubled .Since April 1976 ithas been the equivalent of
approximately 145u.a.Intheprivate sector ,wag© increases follow
more orless those obtained inthecivil service .The minimum wage
is125u.a «Permonth .Thelegal minimum wages seem tohave increased
more rapidly than the average wage .
See page 24.

-18-
(f)External trade andth""balance ofpayments
Thescarcity ofnatural resources antthesize ofthecountry -
oblige Malta toimport most ofwhatitneeds .Even asproduction
increases ,theproportion ofimports tends torise andimports ofgoods
andservices ,which accounted foronly 6l$ofgross domestic expenditure
in1970,accounted for85$ofthat expenditure in1975.
Thetrade balance istraditionally indeficit .This deficit 1
began tonarrow asfrom 1970.Whereas throughout thesixties exports
covered only about one-quarter ofimports ,this .ratio increased to
29$in1971 »47$in1972 and51$in1973 *Theincrease intheprice
ofraw materials and above all the recession beginning in1974 onthe
main export markets brought about anincrease inthat year of60$in
thetrade deficit (atcurrent prices )}this deficit increased further
in1976 toreach theequivalent ofUS$200million *
Thestructure ofimports (see Annex 3)broken down byproducts
has changed appreciably infavour ofsemi-finished products ,textile
fibres inparticular ,relecting the growing importance inthe economy
ofexport -oriented processing industries# Semi-finished products thus
accounted for 31$ofimports compared with 21$in1967 *
Thestructure ofexports (seeAnnex 4)still reflects thepre­
dominance oftextile products (20$ofexports in1962 and62$in1975 )»
butwithin that category ,yam andwoven fabrics nowrepresent only 7$
ofexports compared with 55$formade-up articles .Other exports consist
ofMalta 'smain items ofagricultural production and goods from the newly
established industries (plastic articles ,toys ,electronic components ,
rubber goods ,pasta).Exports offinished products nowaccount for76$
ofthetotal compared with only 33$in1967#
The breakdown oftrade bycountry oforigin anddestination' shows
thepreponderance ofthecountries oftheEuropean Community (65$of
imports and68$ofexports ).Theloosening ofthelinks with theUhited
Kingdom isreflected inareduction inthat country 'sshare ofMalta 's
overall external trade (seeAnnexes 3and4)«

TABLE 9-TREND OFTHE BALANCE OFPAYMENTS (1970-76 )
(inM«000 )
1970 1971 1972 1973 1974 1975 Jan.-Sept .I
-Expo.'.s(fob) 17103 , 19089 28414 40275 59723 69199 79900
-Imports (fob) 59931 58252 59852 78886 121 937 129 521 112600 I
.rade Balance J-42828 -39163 -31438 -38611 -62214 -60322 -3270Ô 1
-Travel ,tourism (net) 7769 8308 5874 13139 18853 . 23491 17500 I
-Transport -4957 -5253 -6036 -7203 -7606 -2042 |••1.600|
•Investment ir .3 7278 7498 8329 7507 12465 18257 16300
-Government revenue 13190 12751 8990 11656 14146 18859 10200 I
-Other services -1592 -1841 878 -1691 - 1202 -2369 I-3000 I
•Private transfers 11526 10446 8569 10332 10282 11534 8500 I
-Public transfers 7314 9661 16218 18128 I20341 17644 13600 ]
Balance oninvisibles 40528 41570 41066 51868 67280 85374 61500
Jalance ofpayments oncurrent
account-2300 2407 9628 13257 5066 25052 28800
•Net capital inflow 6373 1204 18905 -1306 6648 14401Ππ
•SDR allocation 700 713 707 < 7000
•Errors and omissions 2868 j
I3494 - 1067 2610 4531 4352ij:
letvariation onreserves
(increase : decrease :+)-7641 -7818 -28173 -14561 -16245 -43805 -35800
Including shipbuilding andship repair work andre-exports (fuel forships ,oilexploration equipment stored onatemporary basis )*
Rent forthemilitary bases ,sales ofgoods andservices tothebases andtothose serving onthem ,wages ofMaltese working on
the bases .
^Mainly transfers from emigrant Maltese workers .
Mainly subsidies from the United Kingdom forthe creation ofnew firms#
Estimates . . - .
•urce :Central Office ofStatistics ,Malta :Annual Abstract ofStatistics (1975 )anddata supplied bytheMaltese authorities .

-20-
Thescale ofthetransfers andthedevelopment oftourism have
madeitpossible tomaintain apositive balance cfpayments oncurrent
account since 1971. :he(net)revenue fron tourism issufficient in
sufficient mitself tocover approximately one-thin ,ofthe trade
deficit (M12.6 million in1976),this re\nuehavi -:trebled
between 1970 and 197% The main source ofinvisible ,urnings is
still thedirect revenue (rent ofapproximately M1/jmillion since
1972 )resulting from theBritish military presence ,%?.which canbe
added the wages ofthe workers employed onthe bases and the services
supplied tothe Admiralty .This source ofrevenue iddue todisappear
completely in1979 1which explains the Maltese authorities' priority
concern todevelop other sources offoreign currency earnings .
V
Net private investment has followed anirregular trend since
1970 ,amounting to M5*8million inthat year and M13.7 million in
1975 .The other capital transactions consist ofState borrowing ,
generally onvery favourable terms ,and ofshort –ormedium-term loans
made abroad bythe commercial banks ,the two items approximately can­
celling each other out.
The positive balance ofpayments oncurrent amount and the net
inflow oflong-term capital has brought about aregular increase since
1970 inMalta 'sgold andcurrency reserves ,which stood at^500million
atthe endof1975 and$620million inDecember 1976.These reserves
should facilitate thetransition period following theloss in1979 of
the revenue from the bases andwill make itpossible tocope for anumber
ofyears with thebalance ofpayments deficit oncurrent account which
will result .
(g)External debt
Malta 'sexternal public debt has remained relatively low since
independence .InMarch 1976ittotalled USft40million .
TABLE 10:PUBLIC EXTERNAL DEBT (PART PAID )ASAPERCENTAGE
OFt:s GDP1fortheyear inq.^tton (asat31
KARCH OFEACH YEAR ):
1970 1971 1972 1973 1214 1221
11.4 13.3 6.9 7.7 7.1 δ·3
1Atmarket prices .1221
8.1

-21-
The de"bt tothe People 'sRepublic ofJhina aocounts forapproxi­
mately aqurter ofthetotal .The other main creditors arethe United
Kingdom (15%),Saudi Arabia (13f°)tItaly (10$),Germany (1%)andLibya
(7%).
Malta generally obtains very favourable terms from itscreditors#
The concessional element ofthe loans and grants obtained between 1971
and1974 averaged 94 Attheendof1974 »45%ofthetotal vdebt had
maturity dates more than ten years off# Malta hae thus been able to
keep the cost ofservicing its external debt atanextremely low level#
TABLE 11:DEBT SERVICING AS APERCENTAGE OFEXPORTS OF GOODS
AND NON-FACTOR SERVICES
1967 1968 1969 1970 1971 1972 1973 1974 1975
# 1.3 1.4 1.7 2.0 12.4 10,7 0.5 0.8 0.72
Duetoanearly repayment .
^Estimate .

22
5.SITUATION INTHEMAIN SECTORS
(a)Agriculture ardfisheries
Agriculture employs only just over6$oftheworking population ,4
more than half ofthefarmers being over 50years old.Thesmall area
available ,thearid nature ofthesoil andshortage ofrainfall explain
thelimited role ofthis sector inthenational economy .Domestic agri­
cultural production accounts foronly around 5$ofGDPandsupplies only
about aquarter ofthecountry 'sfood requirements#
Arable land covers two-thirds ofthecountry ,butthearea under
cultivation isconstantly declining (-15%between 1968 and1975),mainly
asaresult oftheextension ofurban areas .Thearea under Cultivation
covers 12000haoralittle less than 40$ofthecountry 'stotal area .
Only 600haareirrigated .Thefarms aretooemail ,90$ofthem consisting
ofless than 3ha;thenational average is1.1ha,afigure that isstill
tending todecline .More than two-thirds ofthefarms aretenant farm6 ,
theState andtheChurch each owning approximately aquarter ofthearable
land .
Since independence ,themain objective oftheState 'sagricultural
policy hasbeen tolimit thenumber offarmers leaving theland soasnot
toaccentuate theproblem ofemployment atnational level .TheState has
tried toextend thearea that canbecultivated bymeans ofdams andwater
distribution schemes .InApril 1976 amajor project waslaunched torecover
abandoned arable land andestablish model farms .Theprice ofseed ,fertil­
izers ,pesticides andfodder ,aswell astheoperating costs oftheirri­
gation installations ,aresubsidized .Alarge amount ofaidandinterest
rate subsidies aregranted fortheirrigation work andtheagricultural
equipment .
Asaresult ofthis encouragement ,theadded value ofthesector
hasincreased byanaverage of11$perannum atcurrent prices (compared
with 13$forGDPasawhole over thelast tenyears ).This overall growth
hasbeen accompanied byamarked increase inagricultural productivity as
aresult ofthedevelopment ofcrops requiring agreater degree ofexpertise .
Despite this restructuring work ,theagricultural trade balance remains
heavily indeficit andexports cover only 32$ofimports .TheGovernment
controls external agricultural trade andistrying outnumerous promotional
activites .It,adsoregulates purchasing operations ,particularly of
cereals and fodder .

Thefisheries sector isstill onavery small scale ;there
are approximately 500 fishermen ontheisland providing approximately
three-<ruarters offish supplies .The annual latch doer not exceed
1500t.
(b)Manufacturing industry (notincluding shipya :is)
Maltese industry isheavily dependent onsell??g onforeign
markets .In1976 ,58$oftotal production wasexported ,and 80$of
textiles and made-up clothing# Manufacturing industry has grown very
rapidly over thelast tenyears ,ataround 9*5$ per annum inreal
terms •In1976 this sector accounted for 29$ofGDP compared with
18$in1964 »Manufacturing industry employs 28000people ,i.e. ,25$of
the employed working population compared with 17$in1964 *Theestab­
lishment ofnew firms ,generally financed byforeign capital ,islargely
responsible forthis rapid development .
The most important branches are those which provide proportionally
thegreatest added value and use alot oflabour .Theindustries producing
foodstuffs ,textiles andespecially made-up garments (mainly jeans and
babies *clothes )employ more than half ofthepopulation working in
industry andaccount for56$ofindustrial added value .Themetal con­
struction industry (cranes ,drydocks )andtheother metal processing
andassembly activities also provide more than 20$ofindustrial added
value .
The size offirms isstill generally modest »The tenlargest
firms employ anaverage ofsix hundred people btrt almost three-quarters
ofthe firms have five orfewer workers .
Table 12:Breakdown ofindustrial firms bynumbers employed
■in1975 2 '
between 1between 50between 100 More than T0TAL
Number ofpaid workers :and 49 and 99 and 299 300 –mmm
Number offirms : .2499 54 47 10 2606
■'■Based onthe production indices -see Annex 7*
2~ .'Source :communicated bythe Maltese authorities .

-24-
Foreign firms areattracted toMalta bynumerous taxincentives
introduced asearly as1959*«Foreign firms enjoy accelerated amorti­
zation arrangements ,taxexemptions onre-invested profits andlow-rent
industrial promises .Therelatively lowleve 1ofwagee -probably lower
than those inSpain oreven inGreece -agood level oxskills acquired
onthemilitary bases andasocial consenus based onanagreement between
the Government and the General Workers 1Union are further incentives for
thedecentralization ofEuropean units ofproduction# J
TheMalta Development Corportion (MDC),which wasestablished in
1967 tisresponsible forimplementing theGovernment 'sindustrial policy#
TheKDC ,which has acapital of V.iaillion ,iswhollv ovnei cvihe
V
State# Itassesses theapplications from new firms anddecides onthe
taxbenefits they aretoenjoy ,itprovides them with technical assistance
andwith theauxilliary services they require .Itcanalso runthefirms
controlled bytheState (theState hasa100$ capital holding intenorso
companies andamajority shareholding insome twenty others )orcanacquire
holdings directly (theMDChasamajority holding intenjoint ventures
andaminority holding intenorsoothers)#
Three other bodies setupmore recently arealso responsible for
assisting theestablishment ofnewindustrial firms# These are :
(a)theInvestment Finance Bank ,setupbytheState in1976 with
theparticipation ofLibyan andItalian capital ,which grants
loans atinterest rates notexceeding 8%perannum ;
(b)theSmall Scale Industries Development Centre ,thetask ofwhich
istoassist firms with astaff ofless than fifty ;
(c)TheLibyan Arab-Maltese Holding Company Ltd# ,which ,with a
capital ofM3million provided bytheMaltese andLibyan
Governments ,isintended topromote theindustrialization of
thetwocountries ,andofMalta inparticular#
There areatpresent about onehundred foreign firms#
215$taxonprofits instead of32.5$

-25-
»
In1974 and 1975 therate ofestablishment ofnew firms seems
tohave slowed down ,anumber oflarge factories reduced their staff
and others avoided this thanks only totheaid supplied bytheState
inexchange forthepreservation ofjobs.The export markets picked
upagain in1976 andthus ,ledtoarecovery inindustrial activity .
However ,the number ofjobs created isstill insufficient ,particularly
inview ofthe newdata ontheworking population (seepage 5)*Accord­
ingly ,theState amended theinitial forecasts ofthePlan andestablised
theobjectives ofcreating 12000additional jobs^inindustry during the
period 1977 "to1979# Itwill bedifficult toachieve this extremely
ambitious objective ,since the number ofjobs created Since 1971 bynew
industries has averaged 1400 per annum . v
(c)Shipyards
Grouped together intheMalta Drydocks Corporation ,the shipyards
employ 5200people ^that is5$ofthelabour force inemployment ,their
added value accounts for4%ofGDPandthey provide approximately 20$of
total exports .
The shipyards were nationalized in1959 bytheBritish Government
and were thereafter gradually converted fornon-military use.The Maltese
Government took control ofthis industry after 1970 butitisnowself-
managing .
Although work fortheBritish Admiralty still accounted for44$
ofturnover in19M »this work practically dried upafter 1970.The ship­
yards also suffered greatly from the repercussions ofthe closing ofthe
Suez Canal (non-military sales :down 30$in1968 compared with 1967),and
their operations remained indeficit until 1974 *With theaid ofthe
People 'sRepublic ofChina and Saudi Arabia ,-the Government has undertaken
2the construction oftwo new docks However ,theserious crisis currently
affecting shipyards ,particularly inEurope ,seems torestrict the
possibilities for extending the Malta Drydocks Corporation .
Not including those resulting from the entry into service offactories
already under construction .
2One fortherepair ofships ofupto300 000tandthe other forthe
construction ofships ofupto120 000t.

-26-
(d)Water and energy
Malta 'swater supply possibilities arelimited endurgan and
industrial development aremaking itnecessary todraw increasingly
ontheunderground water reserves which supply almost 90%ofthewater
consumed .Furthermore ,the degree ofsalinity ofthat water is
increasing "beyond the normal "beyond the normal level ,atleast asfar
asthe main island isconcerned .There isaseawater desalination plant
oneach ofthe twoinhabited islands .These provide 40% ofthewater
consumed .The requirements dictated bytheobjectives ofindustrial
growth reduce thepossibilities fordeveloping irrigation andagriculture
ingeneral and make itnecessary tostrengthen the measures tolimit
domestic consumtion . \
Malta has nosource ofenergy .Oil exploration has been under­
taken offthe coast but has not yet been successful .Imports ofoil and
coal cost approximately M14«2 million in1976 ,that isapproximately 0$
ofthetotal import bill or6%ofGNP.Libya grants areduction onoil
products ofapproximately aquarter oftheir value .Itisproposed to
make use ofsolar energy .
Theelectricity produced bythe thermal power station ofthe Malta
Electricity Board amounts to350million kWh orapproximately 1150 kWh
perinhabitant *.Industrial consumtion didnotincrease between 1972 and
1975 andaccounts forapproximately 34$oftotal consumtion . ,
(e)Transport and communications
The road network totals approximately 1200 km,ofwhich is
surfaced ;the network links all theinhabited parts oftheisland and
appears tobeadequately developed .Buses provide asatisfactory service
between town .
Theairport atLuqa isbeing extend totake large-capacity air­
craft .The number ofincoming passengers in1975 was 376000,that is95$
ofthearrivals ontheisland .Air Malta ,which wasset upin1974 by "the
Government andforeign shareholders ,carried 230000passengers in1976.
Compared with apercapita figure of3850 kVfhinthe EECin1974 *

-27-
Port traffic ,mainly through Valetta ,isfairly intense ;in
1975 iimports totalled almost 5million t.Sea Malta ,established in
1973 »hasfive cargo ships ,andcarried 130 000 ofgood ",in1976# It
links a,number ofEuropean ports andistrying tospecialize inthe
transhipment ofgoods intended forother particularly congested Mediter­
ranean ports .The transport infrastructure projects envisaged bythe
Government include the construction ofasecond major international port
inthesouth of1theisland# This port would specialize tosome extent in
the transhipment ofcontainers .
Since .1975 telecommunications have been run bythe Telemalta Cor­
poration ,which iscurrently beginning avast extension programme whose
total cost isestimated at M13million over three years . v
(f)Tourism
This sector employs almost 4000 people directly .Although it
contributes between 1%and 8$ofGDP,gross foreign currency earnings in
1976 were M28.6 million ortheequivalent of36%ofmerchandise exports .
The number oftourists visiting Malta was 340 000in1976 compared with
only 16000in1966.
Since 1959 the State has offered hoteliers numerous advantages .
For the construction ofhotels ofatleast eighty beds theState supplies
capital inthe form ofsubsidies representing onaverage 28$ofthe con­
struction costs and offers tax exemption onthe income for ten years .As
aresult ofthese measures ,hotel capacity increased from 1900 beds in
1959 to6300in1968 and 9800in1976 .
The State istrying toencourage diversification ofthetourist
clientele and extend thetourist season .Ithas encouraged cruise tourism
and the organization ofinternational conferences# The hotel occupanoy "
rates areconsidered satisfactory .However ,40$ofthevisitors still stay
inMalta during thethree summer months ,apercentage that hasnot changed
inten years .

-28-
6.SHORT -AMI MEDIUM-TERM PROSPECTS
Thedirectives ofthe Plan ,asrevised atthe beginring of1977
(see page 6),setastheir priority objective the creation of23700 new
"■Γ:"*"Ρ **··-ν*ρ»♦*»·ο ■•".Λ"»*-* -^7– _·*«·-· « β*«·■«»'*«τ-Λ-ν*4**Α*»^ Β Α^-4»Α· *·–^ Μ–Β«» Α^^ I «»■»Μ «*νβ ^Μ. I ^^^I §Τ,γΛ ^
intherate ofraerr .ployment vatpresent approximately 4/£oftheworking
population ).
According tothe Government ,half these jobs arevirtually guaran­
teed :
(a)thegrowth intourism will create theneed forapproximately 700
new jobs ;
(b)the newinfrastructure projects will employ 2500workers (probably :
programme toextend theland under agriculture ,construction ofa
newport ,etc.);
(c)thetwo newdrydocks oftheMalta Drydocks Corporation should provide
employment for 1500 workers ;
(d)theincrease intheproduction ofindustrial firms that have notyet
reached full output will create 3000 jobs ,while thefactories
currently being fitted outwill employed 2400 workers .
Toreach thefigure of23700 jobs ,afurther 12000will have tobe
created between now and 1979 1probably entirely intheindustrial sector#
Generally speaking ,these objectives appear very optimistic ;firstly ,
because the extended shipyards will encounter an'extremely unfavourable
international market situation ,and secondly ,because the present
international trade situation ishardly conclusive tothedecentralization
ofindustrial capacity from Europe orNorth America with theintention of
exporting goods back tothose same regions ,andlastly because investment
decisions andtheir practical implementation generally take too long for
there tobeany chance of12000 new jobs being created inthree years

-29-
("between 1971 and1975 "the jamber ofnewjobs created inindustry averaged
1400 per annum ,whereas tha Government projects asawhole ippear topre­
suppose thecreation of5800 jobs per annum inth-3industrial sector "be­
tween 1977 and 1979 )*Thus theemployment objectives will probably notbe
achieved andtherate ofunemployment will doubtless rise above the present
level ;itcould beashigh aslQffotolj/ooftheworking population in1980.
Asfar asgross fixed capital formation isconcerned ,theState
estimates the volume ofinvestment needed at M240million between 1977
and 1979 »given the number ofjobs itishoped tocreate *Asanannual
average ,this is44$higher than thefigure achieved in1976.Since this
ismainly industrial investment ,itisnotcertain that Malta has the neces­
sary design and organization capacity toimplement rapidly asufficient
number ofviable new projects .Onthe other hand ,the amount offoreign
currency needed topurchase capital goods should notraise any problems
since ,upto1979 »"theState will have the exception revenue from therent
for themilitary bases and the connected revenue derive therefrom .
After 1980 Malta will befaced simultaneously with two''problems :
firstly ,arate ofunemployment probably far higher than that atpresent
anticipated ,and secondly ,alarge budget and balance ofcurrent payments
deficit ,since investment will have tobecontinued well beyond thedate
when Malta ceases tohave the revenue from themilitary bases .The pass­
age through this difficult transitional period should ,however ,befacili­
tated by'the possibility ofdrawing for anumber ofyears onthe abundant
foreign currency reserves :US 620million atthe endof1976 ,that is
the equivalent ofseventeen months' imports .Furthermore ,Malta has a
number ofadvantages tohelp itconstruct the basis for abalanced economic
development nolonger dependent onmilitary bases .These include :
Theinvestment cost per newjobseems relatively low (approximately
21000u0a.){however ,all,oratleast thevast majority ,ofthe
investment operations necessary tocreate approximately 12000 jobs
have already been carried out.Lastly ,most ofthe new investment
operations envisaged areinlight industry .

1*alabour force that isskilled (particularly inmechanical
engineering )andrelatively cheaps
ii»afavourable geographical location onthe route from Gibraltar
tothe Suez Canal ;
iii «aclimate that isfavourable forthe development oftourism .
The sucoess ofthis changeover will also depend toavery large extent
onthere-establishment ofamore favourable international economic climate .
Itwill also depend onthe extent towhich Malta can obtain effective assist
ance inimplementing itsindustrial strategy ,particularly for:
i.the selection ofexport-based inudstries and theidentification and
preparation ofprojects ;
ii«the promotion ofprojects selected with potential foreign investors ;
iii.the establishment oftrade relations and trade links .

ν
STATISTICAL ANNEXES

-il-
ANNEX 1:SECTORIAL BREAKDOWN OF WORKEPI IN EMPLf ,'MENT
« ■ 9
Number %
1969 1976 1969 1976
Agriculture and Fisheries 6.280 7.210 6.3 6.5
Manufacturing Industry 17.590 27.960 17.5 25.3
Shipyards 5.200 5.400 5.2 A.9
Buildings ,construction and
quarrying 12.370 4.700 12.3 4.3
Wholesale and retail trade 12.530 11.880 12.5 10.8
Other private sector services 18.360 20.450 18.3 18.5
Gas,electricity 920 660 0.9 0.6
Central administration 19.430 20.940 •19.3 19.0
British military bases 7.780 3.330 7.7 3.0
Pioneer Corps -Izza uRabbi ,etc.. (1) 7.880 7.1
100.460 110.410 100.0 100.0
(1)Thefirst special groups set uptoprovide work for unemployed were established in1v72
Source :-Central Office ofStatistics ,Annual Abstract ofStatistics
v -Office ofthe Pirme Minister -Economic Survey (1976 )

ANNEX 2:SECTORIAL BREAKDOWN OF GROSS FIXED CAPITAL FORMATION
y IntMOOO atcurrent prices Structure inX
1970 1971 1972 1973 1974 1975 1970 1975
Agriculture andfisheries 292 270 255 529 480 468 1.1 1.3
9
Manufacturing industr " A.918 3.907 3.601 4.402 4.517 7.664 17.7 20.5
Construction andquarrying 1.182 946 822 1.108 1.701 1.472 4.3 3.9
Transport and communications 3.617 .3.369 2.226 2.459 3.062 3.545 13.0 9.5
Houzing 4.578 6.335 7.431 5.280 4.096 3.305 16.5 8.8
Hotel trade 1.282 861 544 621 923 947 4.6 2.5
Other services 1.870 976 1.376 2.264 2.623 2.099 6.7 5.6
Total private sector 17.737 16.664 16.254 16.663 17.401 19.500 63.8 52.0
1Total public sector 10.076 8.857 6.279 5.590/'13.795 17.982 36.2 48.0
Grand total 27.813 25.521 22.533 22.251 31.196 37.482 '«
100.0 100.0
1The sectoral breakdown ofpublic investment isnot known
Source :Central Office ofStatistics ,Malta :National accounts oftheMaltese Islands 1966-1975

ANNEX 3:BREAKDOWN OFCIF IMPORTS BY PRODUCT AND MAIN COUNTRIES OFORIGIN
inH 000,atcurrent prices
 
1967
I|
!
i
i i1974 19759months
19759months
1976Average
|annual
incolase
1967-1975
%Structure in A
1967 1975
Foodstuffs 12.709 18.513 35.720 37.332 25.068 28.265 .14.4 31.4 25.8
Cereals
live animals anil m^at
fruit and veget.iM ^
dairy produce ,coos
sugar
Raw materials atnl energy2.878
2.44 4
1.680
1.350
736
4.7523.834
3.408
2.219
2.409
1.424
7.42210.564
4.050
3.176
3.199
4.709
20.75711.487
4.715
3.645
3.371
3.228
17.432n.a.
II
II
M
(I
13.074n.a .
ti
it
ii
ii
14.547118.9 j
8.6
10.2
12.1 j
20.3
17.67.1
6.0
4.2
3.3
1.8
11.78.0
3.3
2.5
2.3
2.2
12.1
oil and derivatives
veget ableand an(»idloils2.442
3314.996
51615.558
1.54213.643
1.06910.369
74411.442
72324.0
15.86.0
0.89.4
0.7
Semi finished products 8.455 19.041 41.172 44.050 31.240 40.922 22.9 20.9 30.5
texti les
chemi cals2.958
2.6839.397
4.89020.487
9.12120.755
8.474n.a .
6.352n.a .
8.26427.6
15.57.3
6.614.4
5.9
Other finished products 11.436 16.517 30.523 35.745 24.130 36.144 15.3 28.2 24.7
machines
transport équipant
made upgarments andfootwear4.727
2.241
1.5147.264
2.846
2.16914.857
5.372
3.36218.165
5.943
3.36415,791
n.a.26.026
n.a .18.3
13.0
10.511.7
5.5
3.712.6
4.1
2.3
Other 475 827 1.675 1.425 1.187 905 14.6 1.2 1.0
total 40.510 67.210 I38.969 144.448 100.992 129.049 17.2 100.0 100.0
Main countries oforigin
United Kingdom
Germany
iItaly
Bene lux
France
EEC ofnine15.803
1.524
6.411
8.223
1.288
27.72021.231
4.090
12.556
n.a .
3.144
n.a .34.148
11.592
23.940
13.798
6.298
91.04638.386
13.213
26.100
11.802
6.606
97.42327.811
8.007
18.486
8.744
4.855
67.74932.046
13.522
22.564
9.162
6.933
85.50211.7
31.0
19.2
4.6
22.7
17.039.0
3.8
15.8
20.3
3.2
68.426.6
9.2
18.1
8.2
4.6
67.5
Unrtea States ^
. I1.293|3.8188.143 11.540 n.a . n.a . 31.5_±u8.0
Sources :Central Office ofStatistics /Malta :Annual abstract ofStatistics 1975
vttnnHpH hvthp MaItp^p Antfcftri ttipq

m
ANNEX 4:BREAKDOWN OFEXPORTS BYPRODUCT AND MAIN COUNTRIES OFDESTINATION (FOB)
IN-tMOOO atcurrent prices
1967 1972 1974 19759months
19759months
1976Average
annual
incolase
1967-1975
%Structure in %
 
î1967 1975
Foodstuffs
potatoes
flowers ,seed
tobacco
processed -.jm'ctural products1.519
376
303
200
1621.784
475
229
54
5324.453
365
223
1.045
2.4094.928
547
226
1.930
1.9573.686
180
1.3906.311
»
249
1.68015.8
4.8
-3.6
32.8
36.521.2
5.3
4.2
2.8
2.39.8
1.1
0.5
3.8
3.9
Raw materials
serag329
283435
430926
781528
464561
338781
4526.1
5.44.6
4.01.1
0.9
Semi finished products
textiles (yarns andfabrics )
rubber products2.973
2.390
5425.140
2.735
1.9138.224
4.506
3.1366.444
3.585
2.1804.774
2.579
1.7046.117
1.460
1.46010.1
5.2
19.041.6
33.4
7.612.8
7.1
4.3
Finished products
made upfoods
sanitary equipment
plastic foods
toys
electronic2.333 14.209 28.950 38.435 27.395 44.088 41.9 32.6 76.3
1.474
120
857.968
1.439
641
281
43519.256
2.245
1.419
2.886
41927.688
1.939
1.331
3.560
63520.031
977
49829.063
1.199
1.61344.3
35.1
59.520.6
1.7
1.266.0
3.9
2.6
7.1
1.3
Total 7.159 21.568 42.633 50.336 36.123 57.302 27.5 I100.0 I100.0
JîX.-Ç.Q.unt_rx _o_fde
United Kingdom
Germany
Bénélux
EEC
!^1a.. .. ■(2)Other Arab countries2.739
131
386
600
958.236
3.670
2.525
815
34713.777
4.901
5.429
31.466
2.533
1.45113.400
12.294
6.495
36.954
3.987
2.2649.880
9.069
4.222
27.007
3.13311.452
16.112
5.927
39.615
6.47722.0
76.4
39.4
26.738.3
1.8
5.4
8.4
1.326.6
24.4
10.9
73.4
7.9
4.5
I I I I
Sources :Central Office ofstatistics ,Malta :Annual Abstract ofStatistics 1975
Data supplied bytheMaltese authorities
(1)excluding agrair work
(2)estimates

-Sfr-
ANNEX 5:GOLD AND FOREIGN CURRENCY RESERVES
(end ofperiod ) ..
Innumber ofmonth 's
year inUS2million imports fortheyear
inquestion
1969 139.2 v11.3
1970 157.9 11.8
1971 198.1 14.8
1972 275.1 18.8
1973 325.2 16.3
1974 401.9 13.4
1975 500.3 15.9
1976 622.2 '17.3
Source :IMF/International Financial Statistics .February 1977

ANNEX 6:BREAKDOWN OFTHE VALUE OFAGRICULTURAL PRODUCTION
I 1 Production
in-tM000 as %ofthetotal (in'000 t)
Averaqe Average Averaqe iIAverage Average
1968-1971 1972-1975 1975 1968-1971 1972-1975 1972-1975 1975
Cereals ,foader etc.. 642 976 1.381 21.5 22.2 25.A 26.2
wheat 73 174 .327 2.4 4.0 2.1 2.3
varley 48 95 137 1.6 2.1 1.8 2.0
fodder 392 564 752 13.1 12.8 19.2 19.9
Vegetables 1.782 2.785 3.911 69.7 63.4 60.4 60.6
potatoes 691 893 1.225 23.1 20.3 20.1 18.3
onions 126 149 171 4.2 3.4 4.3 4.5
tomatoes 298 760 1.162 10.0 17.3 14.3 15.6
melons 62 106 145 2.1 2.4 1.4 1.1
Fruit (1) 298 353 419 10.0 8.0 4.1 4.3
citrus fruit 61 68 81 2.0 1.5 0.6 0.8
strawberries 30 44 0.7
Flowers nad seed 263 279 280 8.8 6.4
total (1)excluding stockfatmmg 2.985 4.393 5.991 100.0 100.0 89.9 91.1
Bovine animals ('000 head ) 10.5 11.2
Sheep ('000 head ) 7.3 8.0
(1)excluding grape production
Source :Central Office ofstatistics ,Malta :Annual abstract ofStatistics 1975

ANNEXE 7:GROWTH OFMANUFACTURING INDUSTRY AND BREAKDOWN OFITS ADDED V ALUE (%)
I Average annual growth onthe IStructure ofadded value^i ^ I
basis ofproduction indices thebasis ofcurrent prices N
1964-19.69 1969 -1974 1969 1975
Foodstuffs 4.7 4.8 9.6 8.6
Beverage ana *obacco 7.7 11.6 14.9 11.8
Textiles ,made uparticles ,hides ,leather
and footwear 19.1 12.3 24.2 37.9
Wood and furnishings 12.8 1.8 5.6 6.3
.Printing 16.7 5.4 6.0 5.5
Chemicals andplastics (2) 14.3 12.1 6.2 3.8
Non metallic mineral products 19.4 -1.6 4.7 2.9
Machinery 12.6 16.4 4.3 7.0
Transport vehicles 6.4 7.9 16.1 7.4
Other metal processing 16.9 13.5 4.2 6.1
Other manufacturing industry 12.3 -1.3 4.2 2.7
Manufacturing industry asswhole (3) 10.1 9.0 100.0 100.0
(1)atfactor cost
(2)rubber products aregrouped together with chemicals tocalculate theproduction indices andwith transport vehiclestocalculate the added value
(3)excluding the shipyards