Waking from a dream that visualised a rich ecosystem
With hindsight, 2017 was a year with so many important milestones. It started with the sixmonth rotating EU presidency mired by a controversy about the Prime Minister’s family accused of secretly owning a Panama offshore company Egrant where illgotten gai
This was vehemently rebutted by Joseph Muscat who requested a magisterial inquiry to investigate the accusations. He considered the matter so serious that he challenged his detractors in a snap election – one year ahead of end of mandate. This led to eight weeks of fierce debate and tons of mudslinging among party stalwarts with a general election held on 3rd June. Muscat won his gamble with a larger share of the vote and the Opposition has since started a marathon spree to replace its caretaker leader. Today, one will be chosen and as my crystal ball is not functioning, I cannot predict the winner but I bet that the chosen one will have a tough task unifying the party and its various factions. Be that as it may, there is still a lot of work that needs to be done for tiny Malta to establish its future both on the domestic and international scene.
Next week we will have the result of the German election where the favourite is that eloquent lady from Eastern Germany. If Merkel is reappointed as Chancellor then the Macron/Merkel axis will most probably solidify their grip on EU policy post Brexit. Observers predict that the Macron/Merkel team will introduce, inter alia, stiff tax harmonization measures that four years ago gave birth to the ugly twins – BEPS and ADIT. This nascent harmonization regime may intensify the drive to impose Common Corporate consolidation tax rules which if fully implemented may sound the death knell for our unique tax structure. It may be the quiet before the storm and one shudders to think that Malta being the smallest member in the club is weak having lost the support of the UK (its biggest ally resisting harmonization). Alone, it needs to fight tooth and nail to retain its fiscal advantages.
Readers may question if my gloomy predictions are the cause of too much sun and the debilitating effect of the hottest summer in years. Indeed, I do sound like a prophet of doom. Rating agencies tell us our ranking is high and NSO calculates our GDP growth is reaching a cool figure – three times higher than the EU average. Labour statistics are so good we are about to match President Trump’s success in the US without the catchphrase “Make Malta great again”. However, in the midst of the 2018 budget consultations, one is tempted to ask whether the trickle-down effect is working. This is a com- plex question and government asserts that workers are experiencing a growing affluence and higher standard of living. Although wages are improving, the expectation gap is growing. This means that the share of wealth may not be distributed as smoothly as water runs from the hills down to reach the valleys.
This goes to the root of my article brandishing an ideology to carry out a root and branch overhaul of our garden where a number of trees contributing to this otherwise rich harvest may be threatened by latent deceases. Our erstwhile finance minister needs to plant a stronger variety of fruit bearing trees. Uprooting old and decaying trees is a regular task and as new plants take time to take root, one needs to act fast. A case in point is the announcement by the Prime Minister that our fragile infrastructure is the island's Achilles heel.
Another fly in the ointment is burgeoning traffic congestion and dubious air quality. Muscat hints that diesel/petrol cars will be replaced by electric ones in less than 20 years. He said the government is working on a national blockchain strategy as “the digital market is a big part of the EU's future". It begs the question: how can we succeed in this ambitious task if regulators are still in the dot-com era. In my opinion, this links perfectly with my prediction that if and when our financial services/iGaming sectors face a blitzkrieg from the ominous Macron/Merkel duo, we will need a plan B to save our bacon.
This plan looks us straight in the eye. Simply put, we need to invest money where our mouth is. This means enriching our research and development ecosystem. It is understood that this is no mean task. Planting new trees calls for a heavier investment in research and development and patching up as we have been doing since Independence is no solution. It is an open secret that local technology lacks research facilities such that our largest single exporter of microchip does not carry out its main R&D locally. Again, most of the pharmaceutical production units do not harness the important IP on the island. Innovation is the buzzword and on this topic, it is pertinent to mention that PKF had invited two leaders from the USA to speak at an event called “Blueprint for Innovation”. No sponsors graced PKF brochure yet in a spirit of true corporate social responsibility, it turned out to be a successful event and an invitation was made to the Prime Minister to address the audience. This was accepted and Silvio Schembri, parliamentary secretary at the OPM, addressed the delegates.
One of the keynote speakers, Gor Sargsyan is the president of Qbitlogic International, Atlanta (USA). His company specialises in building multi-purpose approaches and tools that synergize the power of artificial intelligence and quantum computing to help humans build and protect software systems across various industries. Gor is currently based in Palo Alto California which is the forerunner of Silicon Valley innovation stunts. One cannot ignore the immense contribution that researchers based in Silicon Valley have made to cutting-edge technology. Other speakers included Stas Gayshan MD, CIC Boston, Joe Woods MD, Creolabs, Dr Jeffrey Pullicino Orlando Executive Chairman MCST, Dr Leonard Bonello Senior Associate Ganado Advocates, Mr Matthew Caruana, Manager ZAAR Crowdfunding, Ing Joe Sammut CEO LifeSciences Park, speakers from MCAST and University were also invited.
The good news is that both political parties promised in their manifesto to substantially increase investment in R&D, and consequently PKF thinks that its efforts to attract a world class organization in this field does not come a moment too soon. Another interesting landmark is the Boston-based Cambridge Innovation Center (CIC). It was here that Android co-founder Rich Miner built his unique Google Android software. What is so special about CIC? The answer is that as an innovation hub it succeeded in attracting excellent start-ups which proved very beneficial for the US economy through the generation of premium jobs and its high value-added inventions.