EXANTE recently attended a conference where the government published a strategy policy document “Programming of European Funds for Malta 2014-2020”, which outlines the country’s objectives for the use of EU funds in the next seven years. Consequently, a public consultation process was initiated to listen to stakeholders’ views on how to make best use of the €1.128 billion that were allocated to Malta. Parliamentary Secretary Dr Ian Borg himself stated that our aspirations must become the aspirations of the government.
The Malta Business Bureau (MBB) in fact has high aspirations with respect to the upcoming programming period of EU funding, and is pleased to have contributed to this public consultation by presenting a report to the government, which presents a case on the importance of allocating a larger share of EU funds to private enterprise when compared to what would have been invested by the end of 2013. The report sheds light on the fact that eight per cent of EU Cohesion Policy Funds was made available to private enterprise in the last programming period. This amounts to only €70 million of a possible €855 million which was accessible to business.
While the contribution boosted Malta’s economy considerably, it makes economic sense for the contribution allocated to private enterprise to be increased further. This is due to the multiplier benefits that added investment injected into the private sector brings about – yielding higher rates of economic growth. It must also be considered that with Malta losing out on ‘Objective 1’ status, in real terms Cohesion Policy funds, which may be directly invested into private enterprise, have been reduced from €855 million to €776 million. It is therefore more important that the amount of funds allocated to private enterprise is not cut to reflect this decrease.
If anything, it should be increased due to the proven stimulus that such investment will provide to the local economy, while also offsetting a downward trend in local private investment that was experienced in recent years. The private sector is most certainly a better alternative than the public sector to bring higher returns from EU structural funds to meet the country’s needs. Our report shows that regions that have experienced the best performance in terms of economic growth are the ones that allocated funds more efficiently across productive sectors. Efficient allocation of structural funds across productive sectors should also be sufficient enough to meet the private sector’s investment needs. During the last programming period, the shortage of funding to private enterprise was only too evident. The study revealed that schemes which targeted businesses were largely committed, with some even being oversubscribed. The report suggests that during the 2014-2020 programming period, €180-200 million of structural funds should be allocated for direct use by the private sector. This would reduce the need of having to turn down eligible project proposals of private enterprise. Also, this estimated amount would be able to meet the demand for both grants and financial engineering instruments. Funds and schemes allocated to private enterprise should also be managed in an efficient way to meet their needs. We believe that a portion of structural funds allocated for the private sector should be disbursed by non-profit intermediary bodies, through the implementation of small grant schemes for micro and small enterprises. These are also referred to as ‘global grants’. Global grants address actual SME needs and are flexible in decision-making and implementation. With Malta’s transition from Objective 1 status, we will have a more restrictive set of rules to deal with when incentivising industry to invest in growth. This shows how important it is for the government to allocate a greater portion of EU funds for the private sector. After all, it is the private sector that has the largest multiplier and contributes the most to the local economy. The MBB is willing to offer its full support to the government and local stakeholders in implementing the government’s strategy, particularly with regard to the private sector. George Vella is president of the Malta Business Bureau and heads the Advisory Services at Grant Thornton. The MBB is the EU-business advisory and support office for the Malta Chamber of Commerce, Enterprise & Industry, and the Malta Hotels and Restaurants Association. The report ‘Allocation of EU Funds in Aid of Private Enterprise’ can be downloaded from www.mbb.org.mt