R & D: Trick or treat?

I refer to a news item entitled PM Urges More Research And Development (November 3).

The Chamber of Engineers has for some time now been lobbying the government to raise the importance of research and development within our national agenda purely and simply because we will be creating the basis upon which we can build ourselves a thriving high value added economy for tomorrow. It is indeed very unfortunate that a country our size is not able to lead by example and position R&D quite high on our national agenda and undertake with real determination the quest to transform the local industry into one that embraces an R&D culture as an integral part of a successful business strategy.

It is interesting to note that a number of successful locally based "foreign owned" manufacturing companies that invest in their own R&D are today organisations that thrive and compete with success in the international arena. This success does not come easy or quick, as significant amounts of investment, both in quality human resource and capital, are expended over time.

There is no doubt that Malta does have the intellectual brain power to start a focused R&D effort within local industry but the limiting factor for small to medium sized companies (SMEs) in many cases is related to the significant investment required and the medium to long term within which to reap attractive returns.

This is where the government should step in with no further delay. The government should play a major role in supporting and initiating this effort, not necessarily by distributing money to industry in the form of R&D subsidies or research grants but by introducing various fiscal incentives attractive enough to make local industry respond and react.

There already exists a fiscal incentive allowing companies to deduct approved R&D costs incurred, at a 150 per cent charge, within one's tax computation, thus reducing a company's potential tax charge for the period. But this is not enough, especially for SMEs. In fact, it is more than likely that, in initial years, SMEs would incur losses due to the substantial R&D investment incurred without realistically being in a position to reap tangible returns.

So what is required is the introduction of short term fiscal incentives that can directly assist SMEs reduce their R&D human resource cost, which would be their largest operating expense. Naturally, incentives launched would be pegged against clearly defined aims and timeframes within which the government can benchmark the R&D process over time.

Please let us not have a repeat of having excellent initiatives being launched which then fall by the way side, such as the Lm1 million Technology Venture Fund announced in September 2002 and the more recent Lm300,000 National Research Technological Development and Innovation (RTDI) programme for this year. It is very demotivating for those who have, in the past and are still willing in the future, to continue to dedicate tremendous effort, time and even sacrifice career prospects to make an R&D initiative truly succeed. In fact, both the initiatives mentioned earlier managed to attract interest and raise industry awareness in R&D but then there was a loss of credibility as both initiatives got lost either because of lack of ownership, lengthy processing procedures or because of a sudden pull back of funds.

The government must not let any more time pass without championing R&D as a truly national initiative with committed funds, established timeframes and efficient mechanisms to monitor progress. We cannot afford any more delays in kick-starting this effort within our local industry, especially now that we continue to face an ever growing and highly competitive and challenging market out there, in which knowledge, innovation, creativity and R&D are slowly but surely forming the basis upon which other countries are succeeding to secure their future economic growth and competitive advantage.

Ing. Tranter is president of the Chamber of Engineers.