Issue link: https://maltatoday.uberflip.com/i/1135882
27.06.19 12 OPINION George Mangion George M. Mangion is a senior partner of PKF Malta, an audit and consultancy firm | gmm@pkfmalta.com A recent breakfast meeting which I found very informative was addressed by Professor Jonathan Borg from the department of Industrial & Manufacturing Engineering at the Uni- versity of Malta. He explained in detail how successive waves led to the fourth industrial revo- lution – from the steam engine to the present day, which now embraces AI, IOT, Blockchain and augmented reality. Jonathan emphasised the need for a well-oiled ecosystem which in his opin- ion 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. ey tell us that we are lucky to enjoy stellar GDP growth and there is no need for disruptive ideas while we can feel snug in our cocoon in an island bless- ed with clear blue seas and sky. is ignores reality. e world is experienc- ing astronomical growth in areas such as Artificial Intelligence, Big Data, ma- chine learning, bio-technics and Fin- tech in the financial services - among others. e truth is that living the status quo is akin to obstructing change. To start with, one cannot deny the fact that in- dustry cannot rely on outdated tech- nology that simply meets yesterday's manufacturing standards. Again, Borg reminded us of new building blocks of disruptive systems where young busi- nesses 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 tech giants spend on R&D. Amazon leads the pack with a budget of $23 billion annually. Google is currently spending $16 billion on research, Intel $13 billion while Microsoft devotes $12 billion and Apple $11 billion. In all that is upwards of $75 billion annually. is arsenal of funds is being spent researching artificial intelligence, ro- botics, drones, green energy, driverless cars, smart homes and the Internet of ings. e Economist informs us how since a few years ago, Chinese innova- tion meant copycats and counterfeits. All this has changed and their driving force is now an audacious, talented and globally minded generation of entrepre- neurs. Back home, our investment on tech- nological 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 politi- cal leaders for being frugal seeing that spending millions in such a risky ven- ture needs nerves of steel and foresight. Can Malta afford to invest €250 mil- lion in applied research? is roughly equates the annual interest we pay to service national debt. Surely, the answer is that the state has other priorities. is means that over the years, there will be patching and piecemeal solutions in our quest for innovation. Surely, without risking capital, the fu- ture of our manufacturing and services industry face an upward struggle part- ly due to the double insular handicap located at the periphery of Europe not helped with ageing demographics and fewer students excelling in the maths, ICT and science faculties. Regardless of these drawbacks, we are cautioned that the solution is a fundamental reform in our educational setup. ese evange- lists wax lyrical about the utopian way to upgrade our educational facilities, invest in top research and to link aca- demia and industry to work together. Readers may argue that this seems like pie in the sky claiming that Malta can never be an innovation leader. We sim- ply cannot afford it. Without the nec- essary funds, how can we seek disrup- tive ideas and turn them into improved manufacturing and servicing outputs. On the contrary, rationality tells us re- form is doable. It starts with creating a can-do attitude, fostering knowledge exchange. is acts as a catalyst for invention. Moving on, we heard it many times in budget speeches that the government of the day will provide clear leadership to lead us out of the woods and while we made good progress - there is still a long way to go to be able to surmount future tech challenges. e medicine is bitter and enablers of the economy need strong nerves, good leadership and weaned on proper funding. e cure involves reinventing the way things are done, collaborating more widely with ecosystems of organisa- tions, cutting dead wood in bloated bureaucracies. In my opinion, we need to inculcate meritocracy by investing in people of calibre. Purging cronyism in political appointments leads to a better and more equitable cohort of able-bod- ied persons running the top echelons of government. A country which leads the pack in active innovation is Israel. Its admin- istration, has been successful to attract IT giants such as Microsoft for new sources of innovation. Traditionally, large companies engage in internal or external research and development, whether by having their own in-house R&D teams or acquiring companies for their human or knowledge capabilities. Israel is proud to claim over 300 mul- tinationals have tapped into Israeli in- novation niche by setting up R&D labs in the country, usually to work on their most cutting-edge products. Can Malta take a leaf from Tel Aviv's book and seriously start to attract busi- ness accelerators which are adequately funded by venture capital? is looks utopian to many young en- trepreneurs who battle against all odds to create opportunities for their ideas. Most end up migrating. e concept of mentors has been a clarion call by Malta Enterprise for a number of years. So far, we have not managed to adopt a working pattern to help start-ups and mentor entrepreneurs. ere are too many strings attached to start-up aid. Quoting Maya Gross- man, head of communications for Mi- crosoft's accelerator program, she de- scribes, "Innovation is not easy. If you want to stay close to innovation, you need to stay close to start-ups". Last week, during a press conference, Min- ister for the Economy, Investment and Small Businesses Chris Cardona (see picture) launched the Start-Up Malta Foundation (SUM) to establish a better and more efficient support system for young and maturing start-ups. In his words, Dr Cardona invited all business leaders in a position to con- tribute to the ecosystem development, to take a more active role in the start- up community, by listening and engag- ing with local start-ups and supporting them through guidance, vital introduc- tions and networking. "We know that entrepreneurs must lead the start-up community". e dawn of the SUM Foundation as a public organisation can possibly be the answer to our prayers. It is a foundation run by a board of administrators, where the government will be represented. I sincerely augur Minister Cardona on this initiative. His approach is palpable. If it works, this is sweet music to start- up firms struggling to make headway up the slippery slopes. A new champion for start-ups Economy minister Chris Cardona