Hailing the Merits of National Productivity report

The medicine is bitter and enablers of the economy need strong nerves, good leadership and weaned on proper funding


Last week, I attended a well-attended business breakfast organised by MCESD concerning a report on national productivity. The presentations were jointly given by an economist from EY and ECubed Ltd.

They gave a very interesting and erudite presentation on a future economic path needed to ensure that productivity is properly measured and how it can be maintained based on various surveys conducted last year. Among other things, it stressed the need for more investment in applied research, suggesting the need for focused training of workers and finally the importance to link our diverse ecosystem.

At present, one observes that a number of players are pulling the rope in various directions. While conscious that our economy is achieving a modest surplus, yet we must be wary that the future beckons particularly due to the adverse impact of the global coronavirus which has decimated economic activity in nearby Italy.

Many are still not aware how the effect of quarantines by European citizens in a means to fight the virus will end up hitting our productivity in both exports and services particularly tourism. Can the cost of reduced trade and redundancies be shared by the state and if yes, who will qualify for such relief?

Typically, MHRA is requesting fiscal assistance for hoteliers (but not restaurants owners) to temporary remove a seven percent tax on accommodation. Ideally, the solution is to think outside the box and discover ways how to enhance national productivity beyond the crippling effect of the epidemic.

Ideally, we must search for enablers. These can be invoking technological research that can set us apart from our competitors and not rest on our laurels especially now that in the short-term demand for our exports will be slowing down. This reflects the sudden 30% drop in oil prices and the drastic fall in stock exchanges indexes ranging from Asia to USA.

The drive to recover our productivity levels is an uphill struggle and there is no room for palliatives. It has been a cliché that Europe constantly advises us about the importance of taking good care of nurseries and SME’s to ease the path to growth for start-ups. It is a positive sign noting the rebranding of GRTU to the Institute for SME’s as this better reflects their importance.

Yet, it is a pity that they continue to face an uphill climb to access funds from local banks and bureaucracy within certain state agencies makes their life difficult. We need to be vigilant and train our workforce to face the disruptive forces of the Covid-19 strain which may spread in Europe to pandemic proportions.

This is the stark reality that faces our young tourism minister seeing the daily cancellations of flights, blockage of cruise liners and non allowance of passengers on the Virtu ferries to Italy. Back to the national productivity event, where Dr Cordina explained economic theory how as an island state we have over the years built a thriving factors of production and competed on a global level to sell our products and services.

In truth, successive phases in our productivity history culminate in the fourth industrial revolution - since the steam engine to the present day which now embraces A.I, IOT, Blockchain and Augmented Reality. He emphasized the need for a well-oiled ecosystem which in his opinion is the vital mechanism that Malta lacks.

Be that as it may, we have been reminded by party apologists how as an island nation, we need not rock the boat but rather feel snug in our cocoon while the world is experiencing reduced growth in the short term due to the disruptive effects of Corona Virus.

Our industry cannot rely on outdated technology that simply meets yesterday’s manufacturing standards. There are new building blocks of disruptive systems where young businesses compete to provide cutting-edge services and products - having access to research and innovation facilities coupled with proficient management resources.

Just take a look at the vast amount US tech giants spend on R&D. Starting with Amazon, this leads the pack with a budget of $23 billion annually. Back home, our investment on technological research and development is a modest one-reaching a mere 0.6% of GDP. Finland spends 3%, of GDP whereas the EU expects a minimum of 2%. Yet, one cannot blame our political leaders to be frugal seeing that spending of millions in such a risky venture needs nerves of steel and foresight.

One may ask - can we afford not to invest €250 million in applied research? Beyond any doubt, one heeds comments out of the national productivity survey pointing to the imperative how to inculcate a new road map conscious of existing pitfalls. If not, there will be patching and piecemeal solutions particularly in our quest for innovation.

Surely, without risking capital, the future of our manufacturing and services industry face an upward struggle partly due to the double insularity handicap located at the periphery of Europe - not helped with ageing demographics, now aggravated by the deleterious effect of the epidemic.

Incidentally another drawback is our education system. This fails us as fewer students excel in maths, ICT and science faculties. Regardless of these drawbacks, this is a wake-up call. The National productivity report makes us conscious of the drive for more applied research and to train workforce which aided with adequate capital and transfer of technology can compete to match the successes of our competitors.

Ultimately remedying us of this temporary hiatus will be ideas and innovation - the likes of which drove the first industrial revolution in Europe some 200 years ago. This should be our target linked to ways how to continue improving our educational facilities, invest in top research and to link academia and industry to work together.

Readers may argue that this seems like pie in the sky saying Malta can never dream of being an innovation leader battling with giants. We cannot afford it. Without the necessary funds, how can our start-ups in incubators and business accelerators ever seek disruptive ideas and turn them into improved manufacturing and services outputs. On the contrary, rationality tells us reform is doable. It starts with creating a can-do attitude, fostering knowledge exchange. This acts as a catalyst for invention.

The medicine is bitter and enablers of the economy need strong nerves, good leadership and weaned on proper funding. The cure involves reinventing the way things are done, collaborating more widely with ecosystems of organisations, cutting dead wood in bloated bureaucracies.

In my opinion, we need to inculcate meritocracy by investing in people of calibre. As stated earlier, innovation starts with smart people, wherever they may be: R&D departments at start-ups, firms from small to large, business accelerators, universities and research institutes. In a word – innovators.

It is a fact that sustainable growth demands focus and input from a wide spectrum of connected parties. We envy the success enjoyed by tech giants. They bite the bullet - not shying away from problems but harnessing a team involving innovators, decision makers, visionaries and enablers.

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