Issue link: https://maltatoday.uberflip.com/i/1220547
12.03.2020 12 OPINION George Mangion Hailing the Merits of National Productivity report George Mangion is a senior partner of an audit and consultancy firm, and has over 25 years experience in accounting, taxation, financial and consultancy services. His efforts have seen PKF being instrumental in establishing many companies in Malta and ensured PKF become one of the foremost professional financial service providers on the Island L ast week, I attended a well-attend- ed business breakfast organised by MCESD concerning a report on national productivity. e presentations were jointly given by an economist from EY and ECubed Ltd. ey gave a very interesting and eru- dite presentation on a future economic path needed to ensure that productivi- ty is properly measured and how it can be maintained based on various sur- veys conducted last year. Among oth- er things, it stressed the need for more investment in applied research, sug- gesting the need for focused training of workers and finally the importance to link our diverse ecosystem. At present, one observes that a num- ber of players are pulling the rope in various directions. While conscious that our economy is achieving a mod- est surplus, yet we must be wary that the future beckons particularly due to the adverse impact of the global coro- navirus 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 redun- dancies be shared by the state and if yes, who will qualify for such relief? Typically, MHRA is requesting fiscal assistance for hoteliers (but not restau- rants owners) to temporary remove a seven percent tax on accommodation. Ideally, the solution is to think outside the box and discover ways how to en- hance national productivity beyond the crippling effect of the epidemic. Ideally, we must search for enablers. ese 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 slow- ing down. is reflects the sudden 30% drop in oil prices and the drastic fall in stock exchanges indexes ranging from Asia to USA. e drive to recover our productivi- ty 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 vigi- lant and train our workforce to face the disruptive forces of the Covid-19 strain which may spread in Europe to pan- demic proportions. is 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 re- minded 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 re- duced growth in the short term due to the disruptive effects of Corona Virus. Our industry cannot rely on outdated technology that simply meets yester- day's manufacturing standards. ere are new building blocks of disruptive systems where young businesses com- pete to provide cutting-edge services and products - having access to re- search and innovation facilities cou- pled with proficient management re- sources. 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. Fin- land 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 in- vest €250 million in applied research? Beyond any doubt, one heeds com- ments 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 par- ticularly in our quest for innovation. Surely, without risking capital, the fu- ture 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. is fails us as few- er students excel in maths, ICT and science faculties. Regardless of these drawbacks, this is a wake-up call. e National productivity report makes us conscious of the drive for more applied research and to train workforce which aided with adequate capital and trans- fer of technology can compete to match the successes of our competitors. Ultimately remedying us of this tem- porary hiatus will be ideas and innova- tion - the likes of which drove the first industrial revolution in Europe some 200 years ago. is should be our target linked to ways how to continue improv- ing 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 nev- er 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 disrup- tive ideas and turn them into improved manufacturing and services 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 in- vention. 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 organ- isations, 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 ac- celerators, universities and research in- stitutes. 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. ey bite the bullet - not shying away from problems but harnessing a team involving innovators, decision makers, visionaries and enablers.