A look at manufacturing in Gozo

 One feature that is often ignored when discussing Gozo and its economy is its relative economic diversification especially when viewed against its very small size. 

Apart from activities associated with the public administration and tourism, manufacturing has been a constant across the last fifty years. Although relatively small, it played an important part in Gozo’s social and economic development.

The importance of manufacturing in Gozo has certainly decline over time. Compared to twenty years ago, manufacturing now provides a smaller contribution to the island’s output. While in 2000, manufacturing was the third largest contributor to Gozo’s gross value added (GVA); today, it ranks seventh. In terms of employment, in 2000 around 13 per cent worked in manufacturing compared to around 8 per cent in 2022. Although shrinking as a share, in level terms it remained stable at around 1,200. This happened as the services sector expanded rapidly, outpacing the growth in manufacturing.

There are several reasons why this happened. Insularity effects the territorial performance and attractiveness of manufacturing activities. For Gozo, accessibility in the movement of goods is compounded. Physical isolation from the core markets translates in high set-up and running costs for companies in terms of time, financial and operating expenses.

A recent discussion paper published by the GRDA on manufacturing in Gozo highlighted a factor that is often overlooked. Labour market dynamics seem to have played an important factor in the declining importance of manufacturing on the Island. For example, although Gozo’s labour participation rate has risen to 71 per cent between 2014 and 2022, it still falls short of the national average of 78 per cent. Female participation rate is also relatively lower.  

The paper also identified the quality of human resources as another critical factor. The proportion of mid-skilled workers in Gozo is comparable to the mainland. However, there seems to be a gap in the share of high-skilled and low-skilled workers. This might be because high skilled necessitate a level of specialization which in more available on the mainland, while low-skilled workers are more attracted towards public employment. 

More limited opportunities for post-secondary education plays a part, restricting opportunities for reskilling and upskilling. In fact, only one in ten of Gozo’s 25-64 age group participated in adult learning in 2021.

Gozo’s production basket seems to be missing skills-intensive and high-value added operations, with manufacturing being locked at the lower-end of the productivity spectrum. The island must shift away from low-cost activities focusing instead on quality and niche markets. However, leapfrogging into quality manufacturing activities necessitates addressing skills gaps and skills shortages through strong investment in the supply of high-skilled human resources.

So important questions need to be posed and answered. Some are supply side issues such as leveraging regional policy to address labour market and education and training deficiencies. Others are more on the demand side. For example, the sectors and products that employers focus on will determine which skills are required. If enterprises operating in manufacturing move into higher value-added markets, the level of skills they require will increase. 

Gozo can reposition its industrial base. Repositioning it towards activities which are far less intrusive in terms of infrastructure. Such strategic shift will help ensuring Gozo continuous economic prosperity. 

The EU newly re-found interest in support of manufacturing and the Maltese Government announcement in 2024 budget speech of its intention in supporting manufacturing and the identification of additive manufacturing as a target sector in Malta’s smart specialisation present an important opportunity for manufacturing in Gozo.