Author: George Mangion - Senior Partner PKF Malta
Published on Business Today: 27th January 2022

Critics note that history is littered with examples of supposedly world-changing technologies that challenged entrepreneurs, only to fail to live up to the promise. Locally, we remember how millions were spent to advertise Malta as the blockchain island only to realise that such companies never landed here.

Can we blame COVID-19 for this misfortune? Not really but once COVID-19 is defeated or subdued, companies’ enthusiasm for new technologies may blossom again. Malta Enterprise may wake up to the notion that we missed the opportunity to automate - as most believe that its main purpose during the pandemic was

Critics note that history is littered with examples of supposedly world-changing technologies that challenged entrepreneurs, only to fail to live up to the promise. Locally, we remember how millions were spent to advertise Malta as the blockchain island only to realise that such companies never landed here.

Can we blame COVID-19 for this misfortune? Not really but once COVID-19 is defeated or subdued, companies’ enthusiasm for new technologies may blossom again. Malta Enterprise may wake up to the notion that we missed the opportunity to automate - as most believe that its main purpose during the pandemic was to undertake payment of wage supplements to furlough workers - an honourable activity which could have been handled by JobsPlus - thus allowing Malta Enterprise to focus on attracting new business.

Reading the business press, nobody can escape noticing how smart technology is being transferred inwards following efforts by other EU countries to diversify their industry. In the past, our country debt ratio may have hindered us from trying harder to innovate. We may overlook the six-year dip following the 2007-2013 economic crisis which saw us being chased by the Commission to reign in an excessive deficit position in our annual budgets and yet barring a few years when balance of payments was in surplus, we again exceed the Maastricht rule.

This means our debt is exceeding the 60% mark of GDP.  Party apologists console us that our unemployment rate is low and we are experiencing worker shortages so having increased our debt limits is a fair price to pay as most of it can be attributed to helping the economy recover from the pandemic.

Still, as the new year shows signs of an abating pandemic, can we take courage and work overselves away from the heavy yoke of grey listing so as to start a revival of economic growth? Our young firms need a good deal of support, which is free from bureaucracy and within reach of entrepreneurs. We have been promised since the days of the Blockchain era that Business Accelerators are coming - yet there has not been an Epiphany.

Four years ago, PKF had introduced a top-notch USA Accelerator to start talks with Malta Enterprise but the flame died and no progress was made. Such business enablers have revolutionalised countries like Israel to achieve cutting edge technological progress.  In Israel, young entrepreneurs can shape their ideas and meet advisers and investors.

Examples are plenty just to mention, for example, UpWest Labs, which intends to bring five to 10 Israeli start-ups to Silicon Valley for their programme of introduction to seed money.  The difficult bit is turning small firms into bigger ones. Another, is that venture-capital firms in Israel, just as in other countries, have had a few lean years. That could be changing: investment is climbing back towards its pre-crisis peak as the pandemic starts to wane.

According to the Israel Venture Capital Research Centre, Israeli funds now account for only a quarter of the amount raised by the country’s high-tech companies, down from two-fifths a few years ago. Whether the brand is Israeli or foreign, says Adam Fisher of Bessemer Venture Partners, an international group, the money comes from abroad.

A typical example how Malta can benefit from such technological wonders is in agriculture. Israel is growing a new type of agriculture ventures called vertical farms. These grow plants on trays stacked in a closed, controlled environment.  Efficient LED lighting has increased the rate of growth, though energy costs remain a burden. Water use is minimised and bugs are kept out, so little or no pesticides are needed.

Another growth area is in high tech.  Malta can try to improve its chances of joining the fast bandwagon of high tech. This year many are predicting the fusion of video games, social networking and entertainment to create new, immersive experiences, like swimming inside your favourite song at an online concert.

Facebook (now renamed Meta) is keen to launch Metaverse to capitalise on the opportunity. The list of opportunities featuring high tech is growing by the hour and Malta should be looking to join in the opportunities that such a revolution affords. It is encouraging to observe that after four years in the making, we now have an active Development Bank which is expected to support expansion in industry.

What can the result of this turnaround be? Many in the past discounted the importance of high tech manufacturing due to the gradual rise in wages and the relative lack of research and development hosted locally. Perhaps the efforts of the government to recognise the importance of getting MCAST and the university to work closely with industry is slowly yielding results. MCAST has reached a high standard in teaching technical subjects and proudly reported close to one thousand graduated in one of its many diplomas and degrees. It has revived apprentice schemes in various technical areas and is also making steady progress in vocational courses as a catch-all for early school leavers.

Still, we clamour for a higher cohort of trained workers with skills involving science, engineering and maths (STEM) as facts show that we have not yet achieved our targets in higher technical education.  Now at the doorstep of a general election, Castille share with us their sacred creeds to turn the island into a Utopia where they promise us to build a platform for collaboration between government, industries and individuals to train workers in cutting-edge technology.

It is true that we invest millions in education from kindergarten to tertiary levels yet we still have some way to go to solve the skill mismatch in particular sectors (such as Fintech, Igaming and Life Sciences). It goes without saying that our geographical mass limits us where large-scale manufacturing is concerned yet with the future use of robots and specialised machinery in factories are coming smaller in size yet being more capital intensive. Government mutely plans to help this revival in manufacturing as it will prove a safe alternative to financial services which is currently under siege from Brussels.

Can we in Malta rest on our laurels that the manufacturing sector is slowly turning the corner? Certainly not - we require a quiet revolution in learning new skills through a different mindset - one focused towards innovation, research and development.

These are the building blocks of present and future technology where young businesses compete to provide cutting-edge services and products - having access to an innovation philosophy leading to proficiency in high tech manufacturing.

Author: George Mangion - Senior Partner PKF Malta
Published on Business Today: 27th January 2022
Get in touch: info@pkfmalta.com