Wanted – a paradigm shift in R&D | PKF Malta

The sustainability of manufacturing, aviation, financial services and other components in exports is trailing while tourism and Igaming sectors come in as a welcome boost

Alas, the objective of having an innovation and business accelerator centre of calibre can prove to be a true catalyst to anchor existing manufacturing community and attract new ones in Blockchain
Alas, the objective of having an innovation and business accelerator centre of calibre can prove to be a true catalyst to anchor existing manufacturing community and attract new ones in Blockchain

PKF Malta is pleased to have had the privilege to visit the CIC Thought Leadership centre in Rotterdam, the Netherlands. The centre is the home for about 550 innovative companies and is built to synergise with CIC’s international community of entrepreneurs, investors, and established businesses.

CIC is based in Boston, US, and has recently expanded to Rotterdam. This city is in a very central location just a one-hour flight south of Amsterdam, a “footstep” away from the Belgium border and really close to other European hubs.  

Like Malta, the Dutch population are fluent in English and prides itself to be a melting pot of different cultures. The visit to Rotterdam was a sequel to an event “Blueprint for Innovation” held two years ago, supported by Finance Malta at the Microsoft Innovation Centre, Skyparks Gudja.

This saw an expert lineup of speakers which included (among others), Gor Sargsyan, MD, Qbiticlogic International Atlanta USA, Stas Gayshan MD, CIC Boston, Joe Woods MD, Creolabs, Kenneth Farrugia, President FinanceMalta, Ing Joe Sammut CEO LifeSciences Park, speakers from MCAST and University while Parliamentary Secretary Silvio Schembri, responsible for innovation, gave the opening speech.

Comments at the event were positive and all agreed that the island needs to do more to boost its contribution to R&D which based as a percentage of GDP is one of the lowest in the EU and in this context, one may recall that the government in its 2019 budget is pledging to open the taps for more investment.

The good news is that both political parties promised in their election manifesto to increase investment in innovation and consequently PKF thinks that its efforts to attract a world class organisation in this field does not come a moment too soon.

With hindsight, two years later and little progress has been registered to achieve this goal. Alas, the objective of having an innovation and business accelerator centre of calibre can prove to be a true catalyst to anchor existing manufacturing community and attract new ones in Blockchain. This roadmap is an ambitious one, noting how European governments are in competition to attract international companies and start-ups particularly in the wake of Brexit.

Which brings us as to why PKF Malta is keen to put its shoulder to the wheel and attract investment in this regard.  

Three years ago, it pioneered a familiarisation trip to Massachusetts Institute of Technology (MIT) in Boston, US. This visit was to explore links to promote Malta as a potential business accelerator and/or Life Sciences hub for innovators, inventors and entrepreneurs. It is interesting to note that the Massachusetts Institute of Technology (MIT) is a private research university in Cambridge, Massachusetts founded in 1861 - built in response to the increasing industrialization of the United States.

Needless to say, that with its supportive campus environment it houses an incredible number of talented students and as part of its diversity and its intensely creative atmosphere, both the arts and science flourish in all their forms. It is no stranger to accolades - rated as the world’s best university in chemistry; economics; linguistics; materials sciences; nanotechnology and astronomy.  

Another interesting landmark is the Boston-based Cambridge Innovation Center (CIC).  This houses more than 1,000 companies in an impressive building sporting 50,000 square metres of premium office and co-working space across eight facilities. Other six centres are located in St. Louis, Missouri, Miami, The Netherlands, Poland and Australia.

A number of high-profile companies know their origins at CIC - including HubSpot, which now employs over 1,100 people, and raised $125 million through its IPO last year, and Greatpoint Energy, which several years ago announced a $1.25 billion deal to build reactors in China.  

CIC also has a non-profit sister, the Venture Cafe Foundation (this provides a Forum for venture capitalists to scout and help fund new talent).   Having toured CIC in Boston US, the PKF delegation were guests at the Venture Cafe - an organisation which funds promising talent.

Back to Malta, and upon reflection one concludes that the country is not in a political mindset to favour research and development.  The mantra at Castille is supporting multi-million construction projects and by granting public land on preferential rates to a handful of hoteliers. It argues, that it is the only way to fight the pangs of low-priced accommodation currently paid by mass tourism.  Hence, the slogan of building six-star hotels.  

This contrasts sharply with the pittance paid on R&D.  It comes as no surprise, that the combined expenditure on MCST, University and other agencies falls short of the 2.0% of GDP which is the norm for progressive Western countries.  By paying peanuts, you do not succeed to become the birthplace of a nexus of superior minds in the Med.

Party apologists say that the island is too small to be a leader in innovation. Its education system is fragmented albeit a costly venture which serves to churn graduates yet few PhD excel in science, maths and ICT subjects. It is true that the economy is racing ahead fuelled not by a rally in exports but by a sustained push in domestic demand. Thus the sustainability of manufacturing, aviation, financial services and other components in exports is trailing while tourism and iGaming sectors (which are both volatile) come in as a welcome boost.

The latter are ratcheting demand for foreign workers. Government originally promised that capital reaped from selling the ITS land to a bidder will be channelled in building a new campus costing €80 million in Smart City.

Many assumed this can be an ideal venue to host an innovation centre.  So far, such plans to construct the centre have not materialised so the policy to attract mega business in Blockchain, Fintech and A.I can only be a mirage. Needless to say, without top-end R&D facilities it remains a pie in the sky. Granted, it is not easy to jump on proverbial unicorns that roam successfully in Silicon Valley.

We observe many countries including Saudi Arabia, which try to emulate the commercial success of Boston, New York and Silicon Valley.  In conclusion, it was three years ago, that PKF Malta on behalf of bona fide clients applied for a subvention from the S&D fund - hosting millions accumulated from IIP proceeds.  

This was not conceded. Since its inception, the Social and Development Fund has paid no heed to support R&D and only invested in buying shares in local banks, Istrina donations, and lately a contribution towards social housing.  

Can our country, albeit small and lacking indigenous raw materials rise to the occasion and surf gloriously over the tide to seize this R&D opportunity? We can still do it.

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