A new economic model

Silvan Mifsud is director of Advisory at EMCS Tax & Advisory. Mr Mifsud is also a council member of The Malta Chamber

Last week, during the launch of the annual report of the National Productivity Board it was made emphatically clear that Malta needs a new economic model. Quoting from this same report, it states “Economic growth in Malta has traditionally depended on growth of the labour force, consumption and the level of investment in what we produce and provide by way of services and rising education levels. We need to rethink this model of economic growth if we are to boost productivity levels. Malta’s industrial policy over the years seems to have been driven by diversifying into new economic sectors that typically create strong productivity gains during their early stages, but then mature at a rather rapid rate. This seems to be best expressed in the very sharp increase in migrant labour over the past years, which in turn, reflects the very labour-intensive growth compared to the growth which was driven by RDI activities. Shifting the focus from corporate tax incentives aimed at attracting investment that creates employment, to one which potentially attracts firms whose explicit focus is on research and innovation would certainly be an important driver of change”. In essence, this means that we need to attract investment that generates more with less, more value added per person employed.

There are still many barriers that are hindering from making this happen, from a change in mindset of business owners to filling the financing needs gap for startups. However, one of the identified gaps is that we need to make sure that our workforce is equipped and skilled for this new economic model. There are two main gaps here, identified by the report. The first one is a much better collaboration between industry and educational institutions and policymakers. This to make sure that the skills being learnt are what the industry will need going forward. The second gap is the decline in STEM (Science, Technology, Engineering and Mathematics) graduates. The recommendation from the report is that STEM thinking is to be included in the primary and secondary school curriculum. So what is STEM thinking? STEM is an approach to learning and development that integrates the areas of science, technology, engineering and mathematics. Through STEM thinking, students develop key skills including problem-solving, creativity and critical analysis. The same important future proof core skills identified in the World Economic Forum report on the Future of Work, I wrote about in my article last week.

Now to be fair, we made huge strides in our educational levels in past years. The percentage of early school levers has gone down from 17% in 2013 to around 10% in 2022. On the other hand, the percentage of people aged 25-34 that obtained a tertiary education degree stood at 42% by 2021, in line with the overall EU average. However, the next step is one based on quality rather than quantity. Quality being a change in mindset, whereby a degree is not looked at as a safe passage to a job, but rather a tool to thinking critically, sorting issues and being innovative. When one looks at Malta’s National Strategic Action Plan for Further and Higher Education, published in December 2022, one sees that the proportion of 15-year-olds that were underachieving in Maths and Science stood at around one third. A much higher level than the EU average, which stood at one fifth. This is surely the much-needed quantum leap, whereby future generations need to approach problems and issues with a sense of curiosity, to find and research data and facts to then create innovative solutions.

If the pandemic has not taught us anything, it is that some people’s reactions during the pandemic underlined the spread of a widely negative attitude toward mathematics and science, with the proliferation of strange, unscientific and dangerous theories coupled with the refusal to approach facts that involve maths and science. It was a clear global case study where many people showed their own fear of maths and science and their rejection of mathematical and scientific arguments. It showed the lack of knowledge of the fundamental principles of STEM thinking.

The way forward is clear. If we have the courage and foresight to change, is another thing.