Business bureau calls for more EU funds into private sector

A report presented today by the Malta Business Bureau (MBB) highlights that only 8% of EU Cohesion Policy funds were allocated to the private sector during the 2007-2013 programming period.

The report, entitled 'The Allocation of EU Structural Funds in Aid of Private Enterprise', was this morning presented by MBB President George Vella to the Parliamentary Secretary for EU Funds, Ian Borg.

The MBB study shows that during the 2007-2013 programming period only €70 million of the €855 million EU cohesion policy funds committed to Malta was directly made available to private enterprise. The extra investment boosted Malta's average income, in comparison to its decline as a percentage of the EU average before the 2007-2013 programming period began. This economic growth resulted in Malta losing out on 'Objective 1' and moving to a status of 'Regional Competitiveness and Employment'.

Although Malta's allocation of structural funds increased to €1.128 billion, the new 2014-2020 programming period saw Cohesion Policy funds being reduced from €855 million to €776 million. Cohesion Policy includes funds which may be directly invested into private enterprise. In the last programming period, this included ERDF and ESF.

"It is crucial that the amount of funds allocated to private enterprise is not cut to reflect this decrease," Vella said. "If anything, this should be increased to reflect the multiplier benefits of added investment into the private sector."

An increase in the allocation of structural funds to businesses would offset a downward trend in local private investment that was experienced in recent years. The MBB report makes reference to other studies proving that investment in the private sector yields higher rates of economic growth. Regions that have experienced the best performance in terms of economic growth are the ones that allocated funds more efficiently across productive factors.

"This confirms that the private sector is a better alternative than the public sector to bring higher returns from EU structural funds to meet the country's needs," Vella said. "Malta's economy necessitates economic growth that is mostly export-led. This can only be brought about through further investment in the private sector."

The shortage of funding to private enterprise was only too evident in the last programming period: the study revealed that schemes which targeted businesses were largely committed, with some even being oversubscribed.

The MBB study estimates that during the 2014-2020 period, €180-200 million of structural funds should be allocated for direct use by the private sector. This would reduce the need to having to turn down eligible project proposals of private enterprise while the 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. For this reason, the MBB recommended to government to entrust non-profit business intermediary bodies with the implementation of small-grant schemes for small and micro enterprises. These are referred to as 'global grants'.

"Global grants address actual SME needs and are flexible in decision-making and implementation," Vella said.

Vella said the MBB was committed to help the Government and the relevant authorities in bridging the gap between Maltese business and our European counterparts.