Malta ranks low in EU innovation and competitiveness index

Malta needs to invest much more in research and development if it wants to better its competitiveness vis-a-vis EU partners, according to a report issued by the European Commission.

While admitting that Malta’s economy, based more on services, has its constraints in the innovation field, Brussels notes that investment in R&D on the island dropped in the past decade, in contrast to what is happening in the EU.

Although the Commission criticises all member states, as it deems not enough is being done to invest more in innovation, keeping the EU as a whole much less dynamic than its rival economies in the US, Japan and China, Malta was singled out, together with a group of eight other member states, as being among the less active in R&D investments among the 27 member states. This category also includes large economies such as the UK and France although in these countries innovation is much more intense than in Malta.

“In the last decade, R&D intensity in Malta reached a peak of 0.61 per cent of GDP in 2006 and declined to 0.55 per cent in 2009.

As part of the general EU 2020 targets – aimed at putting the EU on the forefront of the global economy – Malta set a R&D target of 0.67 per cent to be achieved by 2020, already much lower than the three per cent of GDP average targeted by the EU.

According to Brussels, in order to keep to its commitment, Malta needs “to specialise its R&D investments in particular niche fields where the system can achieve sufficient critical mass to support the local economy”.

Malta has identified health and biotechnology, energy and environmental technologies, ICT and value added manufacturing and services as potential areas to focus on and is registering some progress.

The island has in the past years managed to attract some large pharmaceutical companies and aviation engineering business like Lufthansa Technik and SR Techniques, boosting the island’s R&D investment and potential. Brussels says that, although in dynamic terms Malta has been progressing in terms of R&D investments, as reflected in its scientific and technological outputs, in absolute terms, they still remain relatively modest.

“The recognised need to specialise in particular promising fields where Malta can build on its strengths and create a competitive position can provide optimal results for the future scientific, technological and economic development of the country,” the report states.

On a general level, the report warns that the EU’s innovation performance needs major improvements in many areas if the is to deliver smart sustainable growth. “Europe needs to accelerate investment in research and innovation,” the report concludes.

The EU is slowly advancing towards its three per cent of GDP target (2.01 per cent in 2009) but the gap with leading competitors is widening notably due to weaker business R&D investment.

In 2008, 24 per cent of the total world R&D expenditure was registered in the EU (29 per cent in 1995). Relative to GDP, business invests twice as much in Japan or in South Korea as in Europe.