Traditionally, viable export manufacturing ventures in Malta depended on shipping where the import of the required raw materials and the export of finished products made manufacturing feasible only for high value-added products.
Digital technology has circumvented this geographical disadvantage.
Unlike major industrial projects, digital tech requires less space and in Malta, office space is currently abundant and relatively still cheap.
Additionally, advances in digital technology require human creativity, computers, cabling and memory banks – hardware that is generally available at reasonable prices and pollution levels are very low. And once hardware is imported it lasts for several years; the export of digital products takes place on the internet, via cables or satellites
When it comes to human brains, the situation is admittedly worrisome but not insurmountable. Students are not reaching the educational standards one expects, and reports indicate that Malta ranks lower in academic achievement compared to other EU countries, despite higher per capita educational spending.
Recently, MCAST, private colleges, and the Malta Development Bank’s Further Studies Made Affordable Schemes helped a lot in spreading technical education but much more needs to be done.
Students need stronger motivation to study science, technology, engineering, and mathematics at the secondary level when they begin selecting their career paths (which I believe happens too early). These incentives should become more compelling as their studies advance.
STEM subjects are the bedrock of research and development in digital tech. And it is R&D in digital tech which creates the stupendous value added we hear and read about. And this value added in digital tech is one of today’s main sources of wealth, both for countries and individuals.
Digitisation vs Digitalisation
Normally, we discuss two levels of digital transformation. First, digitisation, converting analogue data into digital data so that it can be read by computers. Second, there’s digitalisation which involves using digital technology to change a company’s business processes and operations – and often its business model itself – to create higher value-added, by increasing revenues and/or decreasing costs.
A paradigm of digital transformation would be a chauffeur service company using digitisation and digitalisation to change into a car-hailing digital enterprise.
There are then what I call third-level digital tech projects. These are companies which are born digital, think digital, operate digitally, and which would not have existed had we not been living in a digital world.
Examples would be a company producing mobile phone apps or a company producing chatbots and scheduling software using AI.
One advantage of Malta’s small size in product development is the ease of setting in-person meetings. When virtual meetings are insufficient, multiple face-to-face sessions can be organised in a single day with different groups at various locations across the island. Many creative meetings benefit from physical presence—perhaps due to clearer body language, friendlier interruptions, or easier brainstorming. (There is still significant potential for improvement in virtual meeting software.)
But creativity in digital tech needs various components in place manly STEM expertise; finance (seed, venture, credit); creative entrepreneurs (ambitious, bold, astute risktakers); an open economy; the ability to partner with locals and foreigners; the courage and the will for wealthy businesses to move away from traditional businesses (tourism, construction, importation, retail); reliable and modern infrastructure; IP valuation experts; government co-ordination towards national priorities.
Digitalisation has been rightly described across many fora as a game changer and digital tech and digitalisation is what the MDB aims to foster through its products.
Maltese businesses struggling with basics.
A recent survey by the Malta Communications Authority found that barely half of Maltese firms (47%), engage with their customers online. A separate NSO study found that just over 32% of firms conduct sales through e-commerce.
The MDB has strategically positioned itself as a key catalyst and facilitator for the digital transition in the Maltese financial ecosystem and to date, there have already been notable Maltese success stories.
For instance, the MDB facilitated €12 million in favourable financing to two transformative digital projects in the ride-hailing and artificial intelligence space.
More needs to be done to ensure that digital innovators access necessary financing because the MDB can only finance bankable projects. Riskier finance, such as seed and venture capital, is still difficult to find in Malta.
The MDB’s willingness to support investment in digitalisation comes through two major schemes, the Guaranteed Co-Lending Scheme, a risk-sharing facility involving co-lending with commercial banks for loans up to €10 million with the MDB guaranteeing 60% of the loan, and the SME Guarantee Scheme which provides the commercial bank with a guarantee of 80% on loans up to €750,000.
These two financial instruments are being intermediated by three leading banks in Malta – APS, BOV and HSBC.
At the MDB, we are keen to support entrepreneurs and commercial banks in expanding the possibilities for successful digital tech projects. We believe that digital tech projects offer great opportunities, while avoiding major handicaps for Malta’s economic development.
Full details of MDB’s schemes can be found at www.mdb.org.mt
Independent journalism costs money. Support Times of Malta for the price of a coffee.
