It is highly anachronistic that while Malta has made considerable advances in the area of e-government as well as in the IT sector in general, it has failed so dismally in the competitiveness, innovation and R & D sectors.

One would have expected a natural linkage to emerge between these various sectors and sub-sectors given their interdependency.

This is an argument well above the normal level of partisan politics.

It has emerged very clearly in the various sessions we have organised so far on competitiveness and innovation in the House’s Social Affairs Committee.

I found it very hard to fathom why Malta did not even provide the highly reputable Centre for European Reform with the relative statistics and economic indicators when they recently drew up their benchmarking scoreboard linked to the Lisbon Agenda amongst EU member states – old and new.

If it is worrying that Malta has slid 16 places on competitiveness from 19th to 35th place, it was even more worrying to learn that according to EU Commission sources Malta is expected to lag behind other EU member states for another fifty years before it can really catch up with the accepted and expected norms and standards.

To be surpassed by both Bulgaria and Romania who are still knocking at the EU’s door for entry as new members is worrying indeed.

While our unemployment figures remain dismally high, our inflation is well off target and our economic growth figures remain highly disputed by both the opposition and unofficial sources close to the Central Bank of Malta.

The recent CBM Annual Report for 2005 showed the red light in various areas.

While it complained that price levels appeared not to have benefited sufficiently from the liberalised trading environment following EU membership, particularly in the case of some essential commodities it remarked that as a result, the HICP Index tended to exceed the Maastricht reference value during the year.

For this reason, the Bank argued that in these circumstances, containing local costs should be a priority policy objective.

The bank made it very clear that even if we do achieve a growth rate of 2 per cent per annum this will not be sufficient to enable the economy to meet simultaneously the challenges of demographic change and faster convergence to the EU average income levels.

It is very obvious that the economy must expand at a faster rate per capita to enable us to achieve a satisfactory level of results.

Much more remains to be done to render product and labour markets more price sensitive and flexible. In particular, the Bank claims that priority should be given to productivity-enhancing measures.

In line with my concerns about our comparative lagging behind in competitiveness and R & D and innovation, the Bank states that enhanced efforts must also be made to strengthen the country’s scientific and technological base and to further develop and diversify the skills of the labour force.

While perhaps it might be difficult to draw comparison with the Chinese economy because of its Asian work ethics and geographic and demographic characteristics I was stunned when a telecoms firm we visited in Shanghai informed us that out of their 6,000 labour force some 2,000 employees were engaged on R & D work. The 1:3 was something that I found simply impressive!

If we want to catch up in the R & D sector both government and the commercial banks need to take a second look at the importance of the provision of venture capital. Most innovative start-ups in the US depend heavily on venture capital provided by the banks.

It should be of little consolation that certain core EU member states are lagging behind the new entrants into the EU in these important areas of innovation and R & D.

Although Europe right now has seen a certain slowdown in the pace of reform, particularly in the eurozone area, compounded with an emerging new streak of protectionism, most countries have made some progress in particular areas. The ‘villians’ of the piece happen to be mainly Med destinations such as Italy, Cyprus and Portugal.

Given our small domestic market and lack of economies of scale it is even more important that we should nurture a strong competitive edge if we want to survive in the 21st century.

We need more specialisation in various areas. Steps taken in the pharmaceutical sector to develop particular niches are definite pluses.

As things stand the US continues to outflank the EU in terms of productive growth. For this reason we must contribute our little bit too towards redressing this imbalance that is simply unacceptable.

Prodi’s challenges ahead

Although some have been already predicting that the Prodi government will be lucky to last more than a few months, Prodi is resolute to carry out his whole term.

What still needs to be seen is whether he can survive the various pseudo votes of confidence in the Senate which he will face when trying to introduce radical reforms, given his slender majority.

On his part Berlusconi should not complain about the vagaries of the electoral system and the way the electoral process was carried out. These were reforms that he had piloted and introduced himself in order to try and weaken the left’s prospects, although things seem to have misfired badly for him.

Although not a Buttiglione fan, I cannot but admire the way he put the national interest ahead of partisan politics when he recently augured that Italy would resolve its crisis quickly in order not to effect the markets negatively or else to scare away potential investment from the country.

I join him in saying so, since I have deep admiration and respect for Italy – whoever may be governing it at the time.

During the campaign both sides were so busy trading insults that very little was said about the radical measures needed to lift Italy out of its present economic difficulties.

For this reason it is even more important that the country gets down to business without further undue delay. Italy simply cannot afford to miss any further opportunities.

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Leo Brincat is the Shadow Minister for Foreign Affairs and IT