share and competitive pressures. in addition, a disproportionately high percentage of these businesses reported higher costs in 2009. in this regard, the automatic adjustment of wages to inflation through the cola mechanism, irrespective of the level of productivity, is one of the factors that has been contributing adversely to the cost structure of these enterprises, and consequently to their competitive position. here i must reiterate that a currency union member country like malta, whose only sustainable source of long - term growth are its exports, cannot afford to allow nominal wages to grow faster than productivity, which is what has happened during the past decade. the competitive position of these enterprises is also constrained by their ability to introduce more efficient production processes. the proportion of enterprises that did not undertake some form of restructuring last year was one of the highest in europe. this is probably one reason why malta has lagged behind its european peers in pursuing the targets set by the lisbon innovation scoreboard, in particular in the areas of entrepreneurship and human resources. 6 another frequently mentioned cost factor are administrative burdens. this is an endemic problem in malta, confirmed by a recent survey in which a reduction in such burdens featured as the priority recommendation by executives of foreign - owned companies operating in malta as a means of enhancing the attractiveness of the island to foreign investors. 7 finally, with regard to the constraint represented by the small size of the domestic market, maltese entrepreneurs have no option other than to attempt to break into foreign markets. this is not an easy task. during the past decade, malta has registered one of the slowest european innovation scoreboard 2009. link available at : < > http : / / www. proinno - europe. eu / sites / default / files / page / 10 / 03 / i981 - dg % 20entr - report % 20eis. pdf ernst & young ’ s 2009 malta attractiveness survey. average annual export growth rates in volume terms in the eu. survey information from micro and small enterprises reveals that the most frequently cited obstacles to exporting relate to taxation issues in foreign markets, inadequate market intelligence and insufficient capital. 8 recent initiatives and the way forward this suggests the need for a comprehensive strategy to help these small enterprises exploit the opportunities offered by the eu single market, building on the existing public and private initiatives. the budget for 2010, for example, included measures aimed specifically at easing some of the constraints i have just referred to. chief among these is a

. the annual growth rate of loans to all nfcs – large, medium and small – fell from a peak of almost 15 % in april 2008 to – 2. 5 % in february. with regard to credit flows to smes, a recently published ecb survey, which however does not include the five smallest countries in the euro area, including malta, shows that smes were generally less successful than large companies in obtaining bank loans in 2009, even if the majority received part or all of what they had applied for. in the second half of 2009, 75 % of all smes reported successful approaches, slightly less than in the first half of the year. the main reasons given by the banks were the general economic and the firm - specific outlook, together with a reduced willingness to extend credit. it would appear, therefore, that both demand and supply factors explain recent credit developments in the euro area. this conclusion is corroborated by the evidence from the bank lending survey, which points to factors associated with the weak macroeconomic conditions, such as a lower demand for credit due to less fixed investment, combined with supply side factors such as the tightening of credit standards. the restricted flow of credit in the euro area does not, however, appear to have been replicated in malta, whose banking sector emerged from the financial turmoil with high capital and liquidity ratios. domestic credit to the private sector continued to expand at steady, though slower, rates in 2009. the annual rate of increase in bank loans to the private sector declined from around 10 % in 2008 to 8. 3 % last year, and the latest figures for february suggest that total credit is still expanding by over 6 %. lending to nfcs, meanwhile, is growing at an annual rate of 3. 9 %. with regard to the recent experience of domestic small enterprises, our estimates suggest that bank lending to them expanded by around 6. 6 % per annum between 2005 and 2009. this impression of a sustained credit flow is confirmed by a joint survey carried out by the european commission ( ec ) and the ecb during 2009. 5 the results for malta are based on a sample of 100 enterprises, of which 94 % were categorized as micro enterprises in the services sector with an average annual turnover of less than eur 2 million in 2008. one of the most significant results was that small enterprises in malta did not consider access to finance a main concern. only 8 % of respondents cited it as their most pressing problem, compared to 16 % in