Today, EY are organising their annual attractiveness conference, now a stable fixture in Malta’s economic discussions. With the main theme being “Thinking without the box: Disruption, Technology and FDI,” attendees and guest speakers will engage in what promises to be a most interesting discussion, yet against a unique challenging backdrop.

The event is anchored around the premise of Malta’s path towards becoming an innovation-driven economy. Indeed, we are. In today’s globalised and highly disruptive world, an innovation-driven economy is central to long-run growth, attractiveness and competitiveness. To this effect, any analysis of any economy needs to look at four main areas: the enabling environment, human capital, market efficiency, and the innovation ecosystem. Although the current economic focus is on the innovation ecosystem we must not lose focus or sight of the key building blocks as otherwise we will be risking our long-term achievements.

The enabling environment is something that many take for granted. It looks at the institutions, the infrastructure and the macro-economic context. Yet again, we must not let the current positive economic context distract us from the other two components. That infrastructure presents challenges is a known fact and effort is being made to address it. However, our challenges lie in the institutions. The events that happened over the past two weeks have highlighted several cracks in our institutional set-up. Institutions are prerequisites for growth and a key source in a country’s investment attractiveness and competitiveness.

Our reputation depends on how we care for our institutions and failing to take corrective action can be extremely damaging to our future health as a democracy. It is evident that democracy still has to deepen in Malta and that institutional capacity needs to be strengthened as also highlighted by the European Commission in its Country Specific Recommendations. Institutions that focus on anti-money laundering and on regulating the financial services need to be strengthened but even more so Malta’s governance system. Governance is a multi-layered concept and needs care and regular maintenance. Failure to do so will have grave consequences. It is therefore the right time to start talking about Constitutional Reform in order to enhance our governance credentials and start repairing our institutional system.

Human capital remains a key pressing challenge. Yet again, education is not about statistics of early school leavers, percentage of students pursuing tertiary education and the rest. Although they are important indicators, we need to holistically look at the quality of students and the quality of education at a national level. Are we investing in the skills tomorrow’s industries require? Are we imbuing our students with the right soft skills such as critical analysis? We need to ensure that we are investing properly in our human resources as this will determine our future growth. Importing talent is a short-term measure that has helped Malta but this has the risk of eroding a competitive advantage.

Market efficiency is also central and usually looks at product markets, labour markets and the financial market. In the case of the latter, Maltese SMEs had realised that the market had failed in this regard; however, through schemes such as Jeremie and Prospects, SMEs have found new channels. The discussion on crowdfunding and the establishment of the Malta Development Bank should open up new funding avenues.

Finally, the innovation ecosystem is being groomed well and there is a growing element of business dynamism. Our capacity to innovate and adopt technology is helping us make good strides. I am confident that today’s discussion will also add value to this dimension.

Forward-looking events as today’s are good and necessary. However, not at the risk of not focusing on the present and pressing challenges. Our level of economic debate needs to be broader than the current one. We need to look at the role of institutions and governance and their effect on the economy. We need to look at quality growth and not quantity growth as measured only by GDP. We need to look at the structural health of our economy and not only at key headline figures. Yes, we are an attractive location but attractiveness is not guaranteed. It is nurtured and it is our collective responsibility to ensure that it is being taken care of.

JP Fabri is an economist and a visiting assistant lecturer at the University of Malta