A year since Budget 2005, and the Lm900,000 venture capital fund promised in the last budget for small enterprises and industry has not been set up yet.
With no mention of the fund in this year’s budget speech, the Federation of Industry has lamented the absence of “good instruments” to increase research and development, such as the venture capital fund.
But the chairman of Malta Enterprise Corporation, Joseph Zammit Tabona, says the fund is “certainly something we want to set up as fast as possible” and is expected to be created “within the next months.”
A ministry spokesperson said government was hoping “the bureaucratic hurdles are overcome at the soonest such that the fund can be operational by the end of the year.”
According to the ME chairman, the process is being held up in the drafting of the legislation and getting though the state aid monitoring board.
EU competition regulations ensure enterprises in the EU market compete on a level-playing field. Excessive subsidies paid by governments are in fact prohibited. Since 2000, the state aid monitoring board oversees the compatibility of all state aid measures. The board has to be notified of all state aid in advance.
“The government has committed to invest Lm300,000 for next year, totalling one million liri over three years. Basically there is a problem to adjust the appropriate legislation, but we are stuck at passing it through the state aid monitoring board because we have to be compatible with EU law.”
Prime Minister Lawrence Gonzi had said last year the fund would help investors obtain tax credit on capital invested and partial exemptions on capital gains tax.
Six months ago, the Investments Ministry had said it was still thinking about setting up a company to manage the venture capital fund independently of Malta Enterprise.
“A complete overhaul of venture capital is being carried out by the ministry that is being provided advice by the MFSA. A fund is being set up which may involve setting up of a company to manage these funds independently of Malta Enterprise. This is in line with what was announced in the 2005 budget. This involves changes in various regulations which are currently in drafting stage,” a ministry spokesperson had said.
Gonzi had announced in Budget 2005 last year that he wanted to open access to risk capital “to those who have good ideas”, and that Malta’s economy would not grow as long as entrepreneurs will be bound with guaranteeing their bank loans with property.
He also said that government would be pushing this initiative aggressively because he believed it was “crucial to have a new source of financing for our enterprises”.
Recently, Investments, Industry and IT Minister Austin Gatt unveiled new tax credits for companies investing in Malta. Gatt said the government would be allocating Lm2.3 million 2006, Lm450,000 more than this year.
For 2006, the minister said the government was allocating Lm4 million in tax credits for R&D incentives. Tax credits were also being offered on employees studying for doctorates related to science subjects, ebusinesses, companies offering back office operations such as call centres, and for film facilities.