We are living and working in the Transformative Age. It is an exciting era bursting with new ideas, millennial mindsets, smart cities, AI, automation, health care innovation, big data, the gig economy and so much more. Business is anything but usual.
With all this invention and reinvention, the Maltese economy is going through an unprecedented period of sustained economic growth, low unemployment, controlled inflation and fiscal surplus. In such an envious economic position, one might be reluctant to rock the boat, with change sometimes thought of as a threat.
In fact, there might never be a better time to be forward-looking, as the economy can prepare itself to adapt and continue attracting foreign direct investment and sustain local consumption.
So how does one prepare for this epochal transformation? Natural evolution, whereby small changes constantly occur without us even noticing, has always taken place. However, the significance of the Transformative Age is more far-reaching, with radical shifts affecting the way we think and do things.
Some bold changes in our mindset are needed to challenge the status quo.
New niches such as artificial intelligence, robotics, smart cities, and green buildings are all disrupting our set formula of how we usually operate. By creating the right regulatory and infrastructural foundations for such sectors, the economy can prepare itself to welcome such novelties and be positioned to reap the full benefits of such innovation. Globalisation and the internet are obviously creating an ever more connected planet. Having the right infrastructure thus means adequate internet connections, financial channels which allow for money transfers as well as the right logistics infrastructure.
Global economies are steadily moving towards a cashless society. Contactless cards, online transfers and mobile as well as app payments are becoming the order of the day. Malta lags behind, with nearly 92 per cent of all transactions still being carried out in cash.
Millennials are new players in the economy, seeking to accumulate experiences rather than assets as they are self-driven and strive for a work life-balance. The economy must cater to their expectations, creating the right opportunities for young talent and entrepreneurship to flourish. Along with the rise of millennials, the increased participation of women in the investment sphere is also leading to further changes, such as a bigger propensity to reward sustainable and socially impacting investments.
Steered by the 17 Sustainable Development Goals (SDGs), global economies are being given a direction with relation to which sectors businesses should operate in. By highlighting the ‘real’ global problems, the SDGs give true purpose and trajectory to businesses in the new world economy.
Economic processes are also changing in structure. Traditionally, our economic systems were built on linear principles focusing on throughput, optimisation and cost-benefit efficiency. We exploit, create value, and then waste. For this Fourth Industrial Revolution to be successful, we need to move towards a much more circular economic process.
Pricing is another economic element which is bound to change. Up till now economies seemed unable to internalise the real ‘earth’ costs. Yet as non-renewable resources become more scarce and as pollution and environmental degradation keep impinging negatively on our quality of life, we need to find new valuation models which allow us to reflect on the ‘real price’ of a commodity. Valuations must also be further sharpened and improved so that the long-term risk and benefits are reflected in the decisions made.
We should no longer look at GDP as the only statistical measure of success. Many other indicators and elements such as social justice, equality, environmental degradation, and technological advancement should also come into play.
In line with this, we often believe that solving problems related to externalities can only be achieved by first creating enough economic wealth followed by redistribution. However, countries can immediately look at sustainable ways of growing and therefore tackling the above-mentioned issues in parallel with economic growth.
Whereas in the past, stable conditions and the free market economy were enough to spur on entrepreneurship, ensure efficiency and generate wealth, this might no longer be the case. For the economy of the Transformative Age to be inclusive and deliver sustainable development goals, this revolution needs to be reined in within social and environmental boundaries. This is not a way of halting economic development at all – it is actually a way of spurring deeper innovation and step-changes to a healthy, thriving economy.
These realities will be discussed during this year’s edition of EY Malta’s Annual Attractiveness event, on October 24 at the Inter-Continental Arena Conference Centre.
To book your place visit www.ey.com/mt/attractiveness.
Chris Meilak and Maria Giulia Pace are economists within EY Malta’s Valuation, Modelling and Economics team.