- Observatory: EMCC
- Published on: 02 March 2008
Disclaimer: This information is made available as a service to the public but has not been edited or approved by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.
Although, in recent years, a number of organisations mostly from the manufacturing sector relocated abroad, the government tended not to intervene to influence the companies’ decisions. The government also has a rather liberal policy towards the selling of domestic companies to foreign ones. While the threat of relocation appears to be increasing its weight on collective bargaining, unions usually do not publicise it. The cases of ST Microelectronics and Bortex Limited were two notable exceptions which made it to the press. There have been no recent cases where trade unions have resisted foreign acquisition of domestic companies explicitly on the basis of the nationality of the company concerned. Eurobarometer surveys indicate that most Maltese are in favour of globalisation and view it as a positive trend.
Institutional responses to globalisation
Government action to prevent or reduce the extent of off shoring/relocation
Are there any recent examples in your country (i.e. over the past 3-4 years) of the government intervening to prevent particular activities from being relocated abroad or to reduce the scale of this?
If so, please give summary details and indicate the activities concerned
During the last 3-4 years, many companies, mostly from the manufacturing sector and in particular from the clothing sector closed down their operations in Malta. Most of these export-oriented companies were foreign owned. They have relocated to various countries such as Tunisia, China, Bulgaria and Romania. The government seemed to be powerless to halt this trend and had to adopt a laissez-faire policy. The minister responsible for investments publicly stated that trying to compete in the low-end high volume market, which is shrinking due to the much cheaper labour costs elsewhere, is not a viable option. Thus, government’s policy to this outward relocation has been to find other niche markets for foreign direct investment in high value-added sectors such as pharmaceuticals and IT. Malta Enterprise, the government agency responsible for inward investments is focusing on areas such as information technology, healthcare services, manufacture of electronic components and back office support work.
However, an exception to Government’s laissez-faire occurred in the case of Denim Services, a manufacturer in the textile industry, which employed around 1200 employees. The government, faced with the threat of massive redundancies tried to find prospective buyers for the company. The government oversaw discussions that a prospective foreign buyer called Gama Textile Group was having with the directors of Denim Services. The outcome of negotiations with this foreign firm was not successful, and eventually, the company closed down.
Social partner attitudes towards off-shoring/relocation
Have there been cases over the past 3-4 years where the possibility – or threat – of relocation of production has featured as a factor in collective bargaining?
If so, please indicate the cases concerned, how the possibility has been used and whether its use has become a more frequent occurrence.
Although informally it is known that the possibility or threat of relocation features as a factor in collective bargaining, in general the unions choose not to highlight any specific cases in the media. Such threat seems to be becoming a more frequent occurrence in the private sector. According to a Union of United Workers (Union Haddiema Maghqudin, UHM) Official, most manufacturing firms report that they are not doing well; hence they either have to relocate or close down.
In recent years, there was a prominent case in which collective bargaining by the General Workers’ Union (GWU) was carried out under the threat of relocation. In 2006, ST Microelectronics, one of the largest semiconductor suppliers, was planning around 3,000 layoffs from its European organisations. At the time, in Malta, the GWU, the union representing the ST employees, was negotiating a new collective agreement, which was put to the side until this international issue was cleared. The union, through the European Works Council made pressure and through negotiations managed to get a guarantee from the mother company that there would be no layoffs from the Malta base. The union and the management agreed that in the new collective agreement that there would be no layoffs. However, the working shifts and wages would be altered. The employees approved the new agreement and around 400 jobs were saved.
Are there any cases over the past 3-4 years where trade unions have successfully resisted plans to relocate production abroad or have managed to reduce the extent of this?
According to the UHM, there have been no reported cases where trade unions have successfully resisted plans to relocate production abroad or have managed to reduce the extent of this. The union tries to prolong discussions in order to gain more time before the relocation takes place.
Usually, the advantages of relocation to the company are so big that resistance by unions is perceived to be futile. However, the GWU seems to have been successful at stopping the shedding of jobs due to relocation abroad in at least one company, Bortex Limited.
If so, please indicate the cases concerned and outline their main features Are there any cases where trade unions have accepted the need for the relocation of production – or part of it – abroad as a means of maintaining or improving the viability of companies and so of preserving some jobs and even ultimately expanding them?
If so, please briefly describe the cases concerned
Bortex is a leading clothing manufacturer that employs about 300 workers. Between 2003 and 2005, it transferred parts of its production to Tunisia, Bulgaria, and China in order to cut costs and remain competitive. The GWU was in continuous consultation with the company throughout the relocation process. During the same time, the union accepted a wage freeze by postponing the renewal of the company collective agreement in order not to burden the firm with extra costs. Relocation did not result in any redundancies in the Maltese factory.
Government policy on foreign-owned firms controlling significant sections of the economy
Does the Government in your country have an explicit policy on restricting the acquisition of domestic companies in certain sectors by foreign-owned firms?
If so, please give summary details and indicate which sectors this applies to as well as whether any distinction is made between companies according to their nationality (e.g. whether non-European companies are treated differently from European ones)
No, the government does not have an explicit policy on restricting the acquisition of domestic companies by foreign-owned firms. The privatisation or attempted privatisation of some public companies, such as Maltacom, Seamalta, and Malta International Airport have prompted discussions about the strategic value of such assets and what would be the impact on the Maltese economy if they are bought by foreign firms. The present Maltese government tends to be liberal in its policies. It has proceeded with privatisation processes, often involving foreign potential buyers, after obtaining assurances about the continuation of public service obligations. For example, lately, Maltacom, the largest telephone operator in Malta was sold to the Dubai-Based Tecom Investments Limited. This particular case also shows that no particular distinction is made between companies according to whether they are European or not.
Governments’ declared policy in its privatisation has been to attract foreign companies to Malta which are able, through expansion of their activities or services, to provide added value to the Maltese economy. On the other hand, the Malta Labour Party (MLP), the party in opposition, seems to be more hesitant about the selling of strategic Maltese enterprises to foreign owners. In a document entitled “Plan for Economic and Social Regeneration” (2005), MLP stated that entities with a strategic value for Malta should not be privatised.
Are there any restrictions on foreign-owned companies setting up branches or subsidiaries in your country either generally or in specific sectors?
Please indicate the sectors concerned and the stated reasons for the restrictions. Please also indicate whether the restriction apply to companies from other parts of the EU as well as from outside
No restrictions exist on foreign owned companies to set-up branches or subsidiaries in Malta. The converse is rather true, as they are encouraged to do so. HSBC, which took over the state-owned Mid-Med Bank in 2002, has lately opened a call centre. The initiative was highly praised by the government. Tecom Investments Limited, the main shareholder of Maltacom, has signed an agreement with the government to set up an IT venture called Smart City, which has the potential of providing over 5,000 jobs.
Are there any sectors of the economy in which the acquisition of a domestic company has not been allowed over the past 3-4 years?
If so, please indicate the sectors concerned and the nationality of the foreign companies involved as well as the reasons given for the decision
Social partner responses to the take-over of domestic firms by foreign-owned ones
Have there been any recent cases (i.e. over the past 3-4 years) where trade unions have resisted foreign acquisition of domestic companies explicitly because of the nationality of the company concerned?
If so, please give summary details, indicating whether there is any evidence of different attitudes being shown towards European firms as opposed to companies from outside Europe
There have been no reported cases where trade unions have resisted foreign acquisition of domestic companies explicitly because of the nationality of the company concerned. The occurrence of domestic companies being acquired by foreign firms is uncommon as the large majority of companies in Malta are very small ones and are very unlikely to attract the interest of foreigners. The cases of foreign acquisition concerned public sector companies that the government decided to privatise as part of its new liberal policy. In these cases, trade unions were primarily concerned about the potential loss of employment and secondly about the curbing of the existing working conditions.
Lately news was reported in the press about a bid from a Canadian company to take over a firm producing foreign beer under the auspices of a local company. The union made a call to management to provide the relevant information to the employees.
Have there been any recent cases (i.e. over the past 3-4 years) where domestic companies have resisted acquisition by a foreign-owned firm on the grounds of its nationality?
If so, please give summary details, indicating the nationality of the company concerned and whether there is any evidence of European and non-European companies being regarded differently in this regard.
There have been no reported cases where domestic companies have resisted acquisition by a foreign owned firm on the ground of its nationality. This view was corroborated by UHM official.
Attitudes to globalisation
Have employers’ associations in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?
If so, please give summary details, indicating whether or not the position varies across sectors of the economy
No, there has not been any strong position on these issues. The specific aspects of globalisation such as outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign ones are not usually highlighted by employers’ associations. Thus, there is more talk on the need for Maltese enterprises to be competitive rather than on the potential consequences if this does not occur. Having said that, there does not seem to be resentment against the mentioned aspects of globalisation. While employers’ associations highlight the need for Malta to attract more foreign direct investment, they tend to be unconcerned about the issue of whether domestic companies might be acquired by foreign owned ones. Besides, the Malta Federation of Industry has in the past openly defended the decision of Maltese entrepreneurs who, due to difficult circumstances in Malta, transfer their operations abroad.
Have trade unions in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?
If so, please give summary details, indicating whether or not the position varies across sectors of the economy
Yes, trade unions in Malta did adopt a position as regards the main aspects of globalisation. The unions’ main goal is always to safeguard the interests of the employees who are their constituents. Therefore, if a company is thinking about relocating abroad with the consequence of having a number of employees being laid off, unions naturally oppose such a decision. The General Workers’ Union (GWU) believes that state corporations, parastatal and public companies, which are vital for the well being of the country’s economy, should not have been privatised. The GWU firmly believes that these public utilities should continue to be owned by the state, or otherwise, privatisation of such utilities should only be partial. It believes that the citizens, through the government should remain the majority stakeholders in such organisations. GWU secretary general commented that concepts such as globalization and flexibility should not be used as a threat against employees. The union understands that the labour market should become more flexible, but such flexibility should result in offering employees better conditions and security at the workplace rather than making their career paths more risky.
Both unions and employers’ associations are recognizing and intensifying their international links. The GWU is making use of EWCs, where the representative tends to be a union member, to get hold of information and express its views.
*A Eurobarometer survey on globalisation was carried out in 2003 in the EU-15 Member States. This might serve as a useful point of reference for the countries concerned, to see, for example, whether or not national attitudes expressed in the survey are in line with similar surveys which have been conducted nationally. The survey findings are available at:
Have there been any surveys of public opinion in your country over the past 3-4 years on attitudes towards globalisation or on the various dimensions of this (as listed above)?
If so, please summarise the main findings of these. Please give a breakdown, where possible, in terms of the characteristics of respondents (e.g. by sex, age, socio-economic group, education level, occupation, sector of employment or region).
The Eurobarometer Survey for Autumn 2006, shows that more Maltese respondents are in favour of globalisation (47%) when compared to those who adopt a more cautionary approach (26%). Similarly, the majority of Maltese respondents tend to think that globalisation represents a good opportunity for companies, and tend to fear less the loss of employment and closure of companies. On the other hand, 39% of the respondents believe that globalisation has a negative effect on employment in Malta, while only 32% think otherwise.
The Eurobarometer Survey for Spring 2005 found that 43% of the Maltese respondents view the term globalisation as a positive one when compared to 20% who are negative about it. However, 28% of the respondents also believe that globalisation increases competition for Maltese companies, while 23% linked it to a transfer of some companies to countries with cheaper labour. On the other hand, 14% link globalisation to greater opportunities for Maltese companies to open outlets abroad while 13% link the concept to foreign investments in Malta.
Have these surveys made a distinction between the different dimensions of globalisation (as listed above) or have separate surveys been carried out on these dimensions?
If so, please summarise the main findings of these as regards:
off-shoring(or the relocation of production abroad;
the take-over of domestic companies by foreign-owned ones and/or the growing extent of control by foreign companies of parts of the domestic economy
the establishment of new plants and offices by foreign-owned companies
Where possible, please give a breakdown in each case in terms of the characteristics of respondents (e.g. by sex, age, socio-economic group, education level, occupation, sector of employment or region)
No, the above mentioned surveys make no distinction between the different dimensions of globalisation.
Have these surveys made an explicit distinction between globalisation and the process of European integration, by, for example, distinguishing between relocation of production to other EU Member States and relocation to countries outside the EU or between the take-over of domestic companies by EU-owned firms and take-over by a non-EU companies?
If so, please give summary details of the differences in response to EU integration as opposed to globalisation.
No, these surveys do not make such distinctions.
Manwel Debon and Christine Farrugia, Centre for Labour Studies