30 August 2006

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Business Today

Rushing to catch up

Research and innovation are key to every country’s ambition to secure competitiveness. However, Malta has insofar dragged its feet to read the sign of the times. Government now is alerted on the state-of-play, as is revealed in the recently published National Strategic Plan for R&I 2007-2010. BusinessToday speaks to David Spiteri Gingell, Chairman and CEO at MITTS. He also heads the Malta Council for Science and Technology, the agency entrusted by government to implement the strategy.

We are in 2006 and this country is still proposing a strategy on research and innovation. Just two years ago, government had announced its first initiatives to this regard. Now we have a strategic plan for 2007-2010. Where are we today?
Personally, I think that subsequent governments looked at R&I as a cost, rather than an investment. This I believe must be remedied. The economy needs R&I very badly for it to grow. If one takes a look at what made a number of countries successful was their foresight in investing in R&I. They made themselves competitive, and most of all they kept their economies in steady growth.

So if R&I is key to economic growth, why is it that we did not heed the sign of the times?
Like it or not, we live in a world that is so competitive. All economies evolve around innovation, creativity and all that comes of generating new ideas to make things better, and most of all more efficient and productive.
Here in Malta we have had mixed signals about R&I since 1987. Think about the setting up of The Malta Council for Science and Technology in 1989. Undoubtedly, there was foresight, a meaningful intervention towards something that was about to open doors to promoting innovation in this country.

Then what happened?
Well, it seems that government preferred to focus on other priorities. We have had finance ministers that looked more at balancing accounts rather than long-term economic investment.

So do you see it as a strategic miscalculation by government?
Yes, this is for sure. Rationalisation on investment in research and development, and sometimes ignoring advice on the need to address the issue, was a serious miscalculation. We could have come a long way today if only we recognised the importance years ago. Today, we struggle to rush and catch up where other countries have moved on.

Then what was MCST’s role in all these years?
I don’t want to minimise the work done by MCST; far from it. I say it was instrumental if not a catalyst for the creation of a national strategy in ICT.
At its inception, the MCST managed to turn IT into a vibrant sector for the country. MCST was instrumental in the drawing up of the ‘Vision 2000’ document, which had initially paved the way to make Malta a hub in IT. It was also instrumental in the setting up of the National Laboratory, and also a managed to make headway in securing EU funding in the FP5 and FP6 schemes.
MCST had the energy to resist certain attitudes. It fought on with brains and in 2005 managed to secure the issue of Legal Notice 330 on R&I and harmonise fiscal incentives with the Inland Revenue Act.
This country has had sporadic bursts of implementation in favour of R&I, and this did no good. There was a lack in continuity, it harmed the economy but we should not give up hope. Never say never.

But should government alone shoulder the responsibility for this R&I deficit? What about the private sector, what is its role and what has it done so far?
Here we have a chicken and egg situation. The private sector has a very important role in R&I. Here we are talking about foreign direct investment issues mostly, but also local companies.
We still lack the pre-requisites to be considered as a centre for excellence and make ourselves attractive for companies to invest here bringing their know-how and scientific skills for development.
We could make ourselves a centre for excellence in research on solar energy, given that we are an economy based mostly on importation of fossil oils to generate energy.
Another sector is the film industry. We have a minefield to create a niche for creative technology that could attract so many film directors to use our resources in computer graphic enhancement to movies.
Our SMEs have a major role to play. Just like in the rest of the EU, they are indeed the backbone of our economy. Unfortunately, SMEs here are kept far from venturing into innovation and this is due to the fact that nobody ever noticed the importance of paving the way for these businesses to grow and strengthen themselves and the country’s economy by looking further and researching and developing innovative products.
The main problem SMEs face is that the commercial banks are only retail oriented, and therefore don’t dare take risks by granting funds for R&I.
I understand it’s a risk they run because R&I is risky business, and sometimes the research can fail. However, all SMEs should be given a chance to think about the bigger picture, to improve on what they already offer.
We need to start understanding that R&I cannot be linked to collateral for loans. What businessman would risk taking a loan when the bank would want his property as collateral should the R&I project not materialise?
Government through METCO has moved a little through venture-capital initiatives but it’s not enough. We need immediate action, we need courageous decisions.

But we are today a member within the European Union so we are obliged to follow the Lisbon Agenda strategies for competitiveness and R&I. This is a priority that is being imposed on all member states…
The EU insists that each member state dedicate one per cent of GDP to R&I, while the private sector must contribute two per cent.
If you look at the strategic plan that government has published together with the pre-budget document, it is being said that the country will seek to increase investment in the setting up of the enabling R&I framework to a level of 0.75 per cent by 2010.
The private sector must also invest and reach goals by contributing an investment of two per cent to GDP.

What about the financing?
While throughout these last years we have had sporadic bursts of initiatives, there was a certain amount of financing, it is now high time to direct these funds in a better manner.
The strategic plan actually proposes methods of financing to institutions, such as the university, students and sectors of the economy, in a bid to push the R&I initiative further.
The intention is to avoid throwing money away, and prepare all sectors with the capacity to absorb the funds and increase efficiency.

How does this fit in with a national plan to strengthen the educational sector?
This is a matter that must generate enthusiasm within our youth to bring out their best, to study, to excel and most of all be prepared to continue their studies in the science and technology sector.
The whole concept of schooling must be geared for change, to prepare our children from an early stage to face the realities of a world that is constantly changing.
Obviously, there is a curriculum issue that has to be addressed, however I am confident that things have finally started to move in the right direction.

What are the immediate targets, or sectors to be addressed?
Well, the publicly-funded research and innovation system is in an emergency state, with the university and government laboratories operating under severe financial constraints, undermining and expending previous substantial investments in these laboratories and institutes.
On the other hand, government is being pressurised by the EU to increase its investments in R&I, both in terms of national spend and structural funds allocation for 2001-2013.

What is our commitment?
Our commitment is to invest in R&I. It’s growing in the private sector, and there is an urgent need to tangibly support the demand for research and development services by strengthening the system.
The EU has opened up extensive opportunities for us, and we must grab them, particularly in capacity-building.

So notwithstanding the time lost, are you confident that things will finally move on?
Yes, now that we have a serious and ambitious plan, we must work hard to start implementing it. We are now members of the European Union therefore we are obliged to work towards the set goals to secure future competitiveness.
I am not saying that we must satisfy all the criteria at once to reach all the R&I goals, but at least we have a benchmark to look at.
It’s in our interest to move towards the R&I targets, to work towards creating the right environment and attract industries that actually bring over their know-how and hire local brains to elaborate on their projects.
We are an entrepreneurial people, and it is us, through our entrepreneurship that have built this nation. We can still do it, as long as we concentrate on what is really needed to secure ourselves a future that befits us.

What is your vision from today onwards?
Well, I would say that we must all be aware that we must be determined to strengthen our ability to generate wealth by improving the existent technologies, increase our rate of innovation, and increase the number of incubation initiatives and establishment of new enterprises.
It’s a steep hill, but we can do it. All we need is the drive to believe in the changes that are needed to spearhead our economy.
With this we could secure an increase in employment opportunities, and attract the right investment to Malta.

David Spiteri Gingell was interviewed by Karl Stagno-Navarra

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