More R & D – a recipe for success

By Luca Sacco

Malta’s main shortcomings in research and development are mainly due to our market size being restricted as well as to our ability to innovate. In fact, as discussed in a public meeting organised by the MCST, Malta should only try to focus on a small number of projects which are of huge potential and include as many people as possible, rather than trying to delve into a wider spectrum of projects.

Shortages are also experienced when it comes to the supply side in relation to human capital and R&D investments. Due to these, the EU Innovation Scoreboard classified Malta 22nd out of the 27 EU member states.

However, surprisingly, Malta is considered to be among the top five European countries which have registered a significant increase in innovation performance between 2008 and 2012. So, as one may notice, Research and Development in Malta still lags far behind, but is surely moving in the right direction.

Experience has shown that countries with consistently high investments in research and innovation (R&I) tend to manage better with economic difficulties and are normally more able to sustain a high standard of living. Undoubtedly, Research and development initiatives are crucial to the Maltese economy from which Malta attracts precise activities that have the prospective to create high value added activities and employment.

In the past, the Maltese economy was somewhat dependent only on a limited number of industries, mainly the manufacturing and tourism industries. However, over the past years, the Maltese economy has been experiencing radical changes. In fact, it has opened itself to more specialised and value added sectors which are now the main contributors to the country’s GDP. Some of these include aircraft maintenance, financial services, on-line gaming as well as pharmaceuticals.

As stated in the National Research and Innovation Strategy 2020 report, an increase of 45% over the period 2000-2011 was recorded in the Maltese gross value added. Such increase is due to the contribution of different sectors to this overall growth, with an increasing contribution from the service sector and decreasing contribution from the industry, wholesale and retail trade, transport, accommodation and food services.

Gross R&D expenditure as a percentage of the GDP remained fairly stable between 2004-2009, with an average of 0.55% until 2010. In 2010 and 2011, the R&D contribution to the gross value added (GVA) increased to 0.66% and 0.72% respectively, mainly due to capital and recurrent expenditure increases in the higher education sector. Once more, an increase of 0.19% over 2011 was recorded for 2012. In fact, the government has set a target that by 2020, this figure will increase to 2%.

If we were to consider the number of doctorate graduates, up till 2012, 0.47% of the active population were doctorates. Again, between 2006 and 2009, this figure was quite stable, but started to increase from 2010. The target set here is of 0.6% up till 2020.

Using the figures published by the National Statistics Office, when it comes to the total expenditure on R&D activities during 2012, the amount accounted for €62.4 million, an increase of €14.2 million or 29.4% when considering 2011. Such an increase was due to the higher capital expenditure of €9.7 million, primarily in investments in R&D facilities, including the Life Sciences Centre, classified within the government sector.

The Business enterprise sector R&D expenditure accounts for roughly three fifths (60%) of the total R&D expenditure, whereas the Higher Education and Government sectors contribute 33.4% and 8.6% respectively. Labour costs represented 51.8% of total R&D expenditure, while other recurrent expenditure and capital projects shared 26.8% and 21.4 % respectively. 

Focusing on the 2012 figures, the highest rate of R&D activity, which accounts for 29.1%, was recorded in Engineering and Technology followed by Medical Sciences (27.6 per cent) and Natural Sciences (21.0 per cent). When comparing year-on-year figures from 2010 till 2012, figures shows that all fields of sciences registered higher R&D expenditure, the major increases being recorded in Medical and Natural Sciences by €6.7 million and €2.8 million respectively.

If one were to analyse each sector separately, it becomes evident that most of the R&D activity in Engineering and Technology, Medical Sciences and Natural Sciences was carried out by the business enterprises, (93% of the total Business R&D expenditure in 2012), whereas research in relation to Social Sciences and Humanities was mainly carried out by the Higher Education sector (42% of the total Higher Education R&D expenditure in 2012).

With regard to the classification of funds allocated to R&D, mostly each sector funds its own research. Foreign funds for R&D reached €13.3 million in 2012, of which €6 million were funded by the EU Commission.

When it comes to employment figures, up till 2011, 40.8% of total employment resulted to be employment in knowledge-intensive activities. What one must highlight here is the fact that this has been steadily increasing. In fact, the aim is that such a figure should end up at 55% for the year 2020.

Even more specific, if we were to consider only R&D employment figures, up till 2012, 2,353 employees were engaged in R&D work, of whom 1,422 dedicated part of their time to R&D. The highest R&D employment rate was registered in the Business Enterprise sector, with 1,192 employees, followed by the Higher Education sector, with 1,075 employees.

Malta’s efforts in increasing investments in the R&D activities have been promising throughout the previous years. In fact Malta has reached its 2020 R&D intensity target of 0.67 per cent, with €42 million worth of investment in this area during 2010.

When compared to foreign countries, Malta’s research and development activity is still developing and experiencing continuous changes. Having said this, in a report published for 2013-2014, the World Economic Forum for Global Competitiveness considered Malta to be one of the 37 countries which are said to be in the innovation-driven stage of economic development.

Also, when it comes to the Global Competitiveness index, whilst in 2012-2013 Malta was ranked in 47th place from a total of 148 countries, in 2013-2014 Malta performed even better as it went up to the 41st place.

With regard to the innovation score, Malta is classified at the 42nd place worldwide, and at the 18th place when compared to the EU states. Even more specific, if we compare Malta’s performance with that of the countries bordering the Mediterranean sea, Malta would rank in sixth place.

With regard to EU funding, up till now Malta has received over €17 million from the EU’s Framework Programme for Research and Technological Development. Such a figure is considered to be significant if we were to compare with the funds available on a national basis, but at the same time one of the lowest of EU member states. With such funds, the government has been encouraged to invest in major projects in the R&D industry.

At the moment, Malta’s main highlight in such an area is the Life Sciences Centre being built in San Ġwann, which is considered to be a catalyst and a vital step in developing a national research infrastructure.

With the aid of this new Life Sciences park, which is to consist of 28 enterprises on site, interaction between university students, researchers, lecturers, hospital professional staff and the industry will be facilitated to develop new technology as well as research-based firms.

Companies will experience growth by the specialisation in value added activities and networking with companies from similar sectors as well as laboratories aimed specifically at setting up all relevant operations.

A substantial increase in R&D expenditure for current SMEs as well as new start-up companies will be experienced by the setting up of new advanced laboratory and testing equipment. Two laboratories will be built specifically to provide a service to the industry. Also, housing, maintenance and calibration of larger field equipment will be carried out inside the park. The research laboratories inside the Bio campus will deal with hazardous chemicals and genetically modified organisms.

Such a project, with an investment of around €38 million, is being coordinated by Malta Enterprise together with the University of Malta and Mater Dei Hospital.

When it comes to the aviation industry, an important project which has been developed recently is the Safi Aviation Park, with an investment of €17 million and consisting of 200,000 square metres with direct access to the airport’s runways.

Malta’s ICT industry is also another key point in Research and Development. Undoubtedly, the Smart City project, consisting of an approximate investment of €300 million has certainly put Malta on the map within the global ICT arena.

In conclusion, to improve the level of competitiveness industry, the country must make sure of providing training to a wider number of researchers and highly-skilled people but most importantly ensure that these are given adequate job opportunities as otherwise they will certainly emigrate.

To this extent, measures should be taken to make the research careers more engaging. Also, businesses must keep in mind that in order to maintain the competitive edge, they should keep exploring and investing in new ideas, new products and new services.

Luca Sacco is a trainee statistician.

More in Business Comment
BMW losses almost EUR 666 million | Calamatta Cuschieri
Business Comment
Calamatta Cuschieri
Apple’s 5th stock split in history | Calamatta Cuschieri
Business Comment
Calamatta Cuschieri
Global markets retreat whilst Tech firms stand out | Calamatta Cuschieri
Remington files for bankruptcy again
Business Comment
Calamatta Cuschieri