Issue link: https://maltatoday.uberflip.com/i/1287818
14 maltatoday | SUNDAY • 13 SEPTEMBER 2020 COMMERCIAL Economic sustainability, productivity, and the digital economy Philip von Brockdorff Head, Department of Economics University of Malta THE structure of the Maltese economy is changing fast… Take factor inputs: there is an increasing shift in emphasis away from physical capital to human capital. The COVID-19 experience will only ac- celerate this process with the demand for labour for skilled and qualified personnel in the digital economy and other techni- cal services likely to increase as the transi- tion towards a more resilient and sustain- able economy relying less than on sectors such tourism which has been hit like no other sector by the pandemic. This change would reflect changes in the content of jobs themselves and pos- sibly changes in the sectoral allocation of employment. For example, one could envisage a situation where the con- struction industry would invest heavi- ly in digitalisation to bring it up to the best international standards. Whilst digital technology is trans- forming everything from hospitality and banking, to healthcare and e-com- merce, Malta's construction industry has been slow to adopt this change. Technology, however, could be the en- abling factor for the up-skilling of con- struction workers. Often culture is a significant barrier to embracing this necessary change but this is where all stakeholders including Government have a crucial role to play. True, there needs to be a willingness on the part of all to embrace the digital future in this industry. However, ex- perience abroad has shown that digital transformation plays a key role within the construction industry to make it more sustainable and environmental- ly-friendly. Besides Artificial Intelli- gence, the construction industry could look at a range of technologies that could help them in the future, with vir- tual reality, cloud computing, software defined networking, block chain and Internet of Things: all possible for the future development a sector that has been resilient to COVID-19 economic shocks. Whereas the construction sector will remain vital for the economic prosper- ity of this nation, we need to continue developing our services sectors. Job cre- ation in fast-growing, knowledge-inten- sive sectors is the future of our labour market with individual productivity growth more likely to occur if jobs are more secure and workers having better opportunities to progress in their work and achieve higher earnings. In time this will improve workers' qualifica- tions and enhance their employability in a changing environment. For businesses, boosting their produc- tivity is crucial for them to remain com- petitive. In today's world, productivity cannot realistically rely only investment in machinery and equipment. Produc- tivity growth means that costs rise more slowly; price competitiveness and pay- roll capacity improve; jobs are more se- cure (and hence more desirable); work tasks and organisation change; more added value is achieved for customers with fewer resources; profitability im- proves, growth and survival in the mar- ket become possible; and the ground is laid for investment and the develop- ment of activities. In a fast changing environment this can only be achieved if business em- brace new technologies and operate in a digital economy. Digitalisation can help achieve a more sustainable, more resil- ient and more productive Maltese econ- omy: key objectives of Government's economic policies as laid out in the Ministry of Finance's Pre-Budget Doc- ument. Government's role in achieving all this is critical but it cannot do all this alone. Contributions from the private sector are critical. Private sector investment in digital in- frastructure is not new. Infrastructure investments have been private-sector led in most parts of the world for more than a generation. However, the scale of the investment required means that Government has to attract investment also from overseas in order to accel- erate investment in our digital econo- my. Foreign direct investment already accounts for a sizeable proportion of investment in our economy but invest- ment in the digital infrastructure needs to increase further and consistently in the coming months and years. The digital economy offers huge ad- vantages in terms of enhanced efficien- cy, resilience and ubiquity of access for all citizens but this will not happen au- tomatically. The Parliamentary Secretariat for Digital Economy and Financial Services is already doing its part to support local digital applications, help develop con- tent services and promote digital skills across the population as a whole but it needs to do more. Hence, the forth- coming budget is an opportunity for Government to propose measures and create the optimal conditions to attract a sustainable flow of private investment in the digital economy. No doubt, that would help boost the transition towards a more sustainable, more resilient and more productive economy. "The digital economy offers huge advantages in terms of enhanced efficiency, resilience and ubiquity of access for all citizens but this will not happen automatically"