Malta Country Report. EUFORI Study. European Foundations for Research and Innovation. Richard Muscat. Research and innovation

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1 Malta Country Report EUFORI Study European Foundations for Research and Innovation Richard Muscat Research and innovation 1

2 EUROPEAN COMMISSION Directorate-General for Research and Innovation European Commission B-1049 Brussels

3 Malta Country Report EUFORI Study Richard Muscat University of Malta

4 Europe Direct is a service to help you find answers to your questions about the European Union. Freephone number (*): (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). LEGAL NOTICE This document has been prepared for the European Commission however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein. More information on the European Union is available on the Internet ( Luxembourg: Publications Office of the European Union, 2015 European Union, Directorate-General for Research and Innovation

5 Contents 1 Contextual Background Historical background The foundation landscape The legal and fiscal framework Research/innovation funding 7 2 Data Collection Identification of foundations supporting R&I The survey The interviews 9 3 Results Types of foundation Origins of funds Expenditure Focus of support Geographical dimensions of activities Foundations operations and practices 12 4 Innovative Examples 13 5 Conclusions Main conclusions Strengths and weaknesses of the R&I foundation sector Recommendations 14 5

6 1 Contextual Background 1.1 Historical background The islands of Malta and Gozo today host a population of some individuals, which is akin to a small city in Europe, and occupying a space of some 316Km². However, due to their geographical position in the centre of the Mediterranean Sea, the islands have been host to a number of outsiders for thousands of years, and thus have a rich history related to these occupiers over the years. Malta obtained independence from British rule 50 years ago this year, and 40 years ago it became a Republic. In addition, 2014 will also herald 10 years of Malta s accession to the EU. Malta s GDP is around EUR 7 billion and the GDP per capita is at around EUR (Eurostat (21 March 2013)). 1.2 The foundation landscape Foundations per se have been in existence for a number of years in Malta, and were in essence a result of what may be termed continental law. They have operated in Malta for sometime now foundations in terms of their recognition through doctrine and recorded case law dating back to the 1930s, in that they have been recognised as having the status of legal persons and have been mentioned in various legal provisions. However, foundations per se were only codified in the existent Laws Of Malta in the 2007 amendments, which became operational on 1 April The legal and fiscal framework The 2007 amendments to the Civil Code were based on principles of the Companies Act and in large take their essence from Italian and French civil code provisions. Thus, a second schedule to the Maltese Civil Code, the foundation provisions, were enacted as part of Cap 16 of the Laws of Malta. Moreover, as part of this exercise the Voluntary Organisation Act was also put in place to complement the amendments to the civil code. Organisations such as NGOs may now obtain legal status if they are voluntary, nonprofit making or fulfill a social purpose. A foundation, on the other hand, must be constituted by a public deed or a public or secret will and is subject to a minimal endowment. The deed also needs to be registered with the Registrar of Legal Persons within the Public Registry. The following must be provided for in the Deed of Foundation: Name of the foundation, registered name, purposes or objectives. Constitutive assets, composition of the Board of Administrators, legal representation and in the case of a private foundation, the names of the beneficiaries. In general, since 2008 foundations that have been registered are those that serve some purpose; social, charitable or philanthropic, and are therefore public foundations. It is of interest to note that in the case of public foundations registered as voluntary organisations, that MALTA - EUFORI Study Country Report

7 they may benefit from local tax exemptions if they adhere to the conditions of the Voluntary Organisation Act, and in principle they are not for profit making. The income tax regulations of 2010 treat foundations as companies domiciled and resident in Malta, and hence as is the case with companies, a tax rate of 35,% is applicable. Beneficiaries, in addition, will also be subject to the same as is the case of shareholders of a company. Foundations may also apply for tax a regime that is synonymous to that of Trusts. 1.4 Research/innovation funding Research and innovation policies are the responsibility of the Ministry for Education and Employment. Within the framework of the Ministry, the Malta Council for Science and Technology (MCST) is the body responsible for developing, implementing and managing research and innovation policy and the national funding programme. Malta Enterprise, which answers to the Ministry of Economy, Investment and Small Business, is the national development agency responsible for supporting the private sector and operates a number of research and development (R&D) schemes. Malta s research landscape is relatively small with one public university, the University of Malta, which is the main research performer in the higher education sector, and one public research organisation, the Malta Aquaculture Research Centre. There are four public funding organisations in Malta: the Ministry for Finance, which allocates institutional funding to the University of Malta and government departments; the Planning and Priorities Coordination Division within the Ministry for European Affairs, which manages the allocation of EU structural funds, the MCST, which manages the national research and innovation programme and the Commercialisation Programme and Malta Enterprise, which manages a combination of national funds and EU structural funds. The National Research and Innovation (R&I) Strategy 2020, which was adopted in February 2014, outlines Malta s R&D priorities between 2014 and It identifies eight areas for smart specialisation and aims at promoting the ERA objectives. The National R&I Strategy will be complemented by an R&I Action Plan, which will identify specific measures and timelines up to 2020 for achieving the objectives outlined in the National R&I Strategy. The National R&I Strategy will also be implemented through the Technology Development Programme (formerly known as the National R&I Programme), which provides R&D grants. In terms of R&I funding, the Government Budget Appropriations or Outlays for Research and Development (GBAORD) in Malta represented EUR 49 per inhabitant in 2012 (EUR 179 in EU- 28). In 2013, GBAORD per inhabitant was EUR 46. In 2012, total GBAORD corresponded to 0.7 % of total government expenditures and 0.3 % of Gross Domestic Product (GDP)(Eurostat). The analysis of the evolution of GBAORD in the period during the economic crisis ( ) shows that in nominal terms, the growth rate of total GBAORD in Malta has been higher than the growth rate of the total EU GBAORD. GBAORD as a share of GDP has evolved positively in Malta even when it declined from the EU-28 level. ( 7

8 As can be ascertained from the above, it would appear that the only exception per se is the governmentfunded body known as the Malta Council for Science and Technology, which was enacted by a Deed of Foundation in The Council s primary responsibility is to advise the government on science policy, but over the past 10 years it has received some EUR 1.2 million per year from the government to fund its research and innovation projects. This project requires both university and local firms to form a consortium and submit a grant proposal that requires both research and innovation to be the central component. The proposals are reviewed by a panel made up of local and overseas experts, and on average six projects are selected each year. In 2012 the total expenditure on research and development amounted to EUR 62.4 million, and this accounts for 0.91,% of the GDP, which is an increase from 0.67 % in 2010 and 0.73 % in The main contribution is from the business enterprise sector, which accounts for 58 %, a decrease from 66 % in 2005, and also from 59 % in This is followed by the higher education sector at 33.4 %, and then government sectors at 8.6 %. What is of interest is that Malta falls into the category of modest innovators as far as the latest EU innovation score board is concerned, and ranks 22nd position out of the 28 EU countries. In truth, this is a result of a better performance in terms of the indicators that relate to output rather than firms activities, or for that matter enablers. Therefore, some understanding can be made of the above figure in relation to the largest contribution to R&D being from the business sector. However, this is mainly due to the fact that most of Malta's business R&D is carried out by a small cluster of foreign-owned companies; for example, 43 % of R&D is performed by US-owned companies. Thus: Most local funding comes from the business sector, which in 2012 financed 47% of total R&D with government providing most of the rest. Private non-profit funding for R&D is negligible. Cross-funding between sectors is very low, with businesses largely funding their own research and central government providing funding for public research and higher educational institutions. (Malta country report ERA watch. Country overview): eu/erawatch/opencms/information/country_pages/mt/country?tab=country&country=mt MALTA - EUFORI Study Country Report

9 2 Data Collection 2.1 Identification of foundations supporting R&I In light of the enactment of the Voluntary Organisation Act in 2007, and due to the fact that those public foundations as per the foundation regulations of 2008 which allows them to register as such, an approach was made to the Commissioner for the Voluntary Organisations. The Office of the Commissioner provided the database of all the registered voluntary, organisations which included a number of public foundations. The list consisted of some 800 voluntary organisations and a number of foundations. We then approached the Registrar of Legal Persons Office in the office of the Public Registry, and a list of 150 foundations was provided. In addition, for cross reference purpose both lists were compared. The list of 150 foundations was in turn forwarded to EUFORI for the purpose of the short online survey. The short questionnaire and a letter introducing the survey were sent to all 150 foundations via the addresses provided. A second letter was also sent to those that had not answered the first call. Due to the fact that the initial starting point was some 800 or so voluntary organisations, which was shortened to a list of 150 registered foundations and then cross-checked with the former, it became clear from the survey that 10 foundations are actually involved in funding research and innovation. 2.2 The survey As stated above, 150 foundations which are registered with the Public Registry received the short version of the questionnaire by with an accompanying letter from EUFORI. The total number of foundations answering was 37, out of which nine indicated their support for research and innovation. The final numbers were attained following further reminders from EUFORI. Moreover, of the nine foundations that said they supported R&I, only two completed more than the first section of the questionnaire. Thus, the overall results reported here are somewhat limited, but suggest that this kind of activity is still a novelty for Malta. 2.3 The interviews Following the survey, an informal interview was conducted with the CEO of the Research, Innovation and Development Trust (RIDT) cited at the University of Malta, and which will be further outlined in Section 4 below. 9

10 3 Results 3.1 Types of foundation Of the nine foundations that responded in the affirmative to their support for research and innovation, most are of operational nature in that they fund projects to achieve their foundation s goals. Therefore, these types of foundation are both private and public, and one in particular is an offshoot of one the largest private locally-owned companies, Farsons, which implements projects in accordance with its corporate social responsibilities. 3.2 Origins of funds As stated above, one of the foundations, Farsons, obtains its funds through its for-profit corporation, whereas the others obtain their funds through nonprofit organisations and government funds. All the foundations, as required by law, are governed by a Board of either elected members or appointed members. Only two of the nine foundations, namely the Malta Business Bureau and the Farsons Foundation, which responded to the question about R&I involvement, provided financial figures totalling EUR One foundation, the Malta Business Bureau, claimed R&I to account for the bulk of the income, namely 95 %. The total assets of both these foundations giving these responses to such are around EUR , which are in the form of cash representing 100 % of their assets. 3.3 Expenditure The total expenditure of the foundations that did respond are around EUR , of which 50 % is spent on research in the form of grants or sponsorships. This reflects overall a major increase from the previous year, but in the following year it would appear that there will be a slight decrease, but still significantly up on previous years. 3.4 Focus of support Most support is provided for the social and behavioural sciences in the form of science communication and education, the humanities and history. An example of a larger foundation is the Malta Business Bureau, which is the executive arm of the Malta Business Foundation, as outlined below The Malta Business Bureau (MBB 1996) is a non-profit organisation acting as the EU-business advisory office for the Malta Chamber of Commerce, Enterprise and Industry, and the Malta Hotels and Restaurants Association (MHRA). The MBB is run by the Malta Business Foundation (MBF) which is made up of six senior officials representing Malta Chamber and MHRA. This year, Mr. Mario Spiteri - an entrepreneur MALTA - EUFORI Study Country Report

11 - was nominated President of the Bureau. The organisation is based in two countries, the Head-office in Malta and a Representation-office in Brussels. The MBF provides strategic direction to the MBB. Over the past fifteen years of service, the results have been remarkable, taking into account the requirements of Maltese businesses and the need for a direct channel linking them to the various EU institutions that are responsible to initiate proposals for a number of wide-ranging policies. The MBB liaises directly with its counterparts both locally and abroad, including the European Commission, the European Parliament, the Maltese Permanent Representation in Brussels and other international business organisations such as BUSINESSEUROPE, EUROCHAMBRES and HOTREC on all policy and funding issues affecting Maltese business interests. MBB sign a business-academia collaboration agreement: The MBB and the Institute for European Studies within the University of Malta concluded an agreement that will make it possible for students to obtain credits through traineeship programmes with the MBB. The collaboration between the MBB and the Institute for European Studies has been successfully evolving over the past two years resulting into a mutually-beneficial relationship now culminating into a formal agreement signed by MBB CEO Mr Tanti and Institute for European Studies Chairperson Prof. Roderick Pace. This partnership will provide invaluable opportunities for European Studies undergraduate students to gain a practical and professional experience. Second-year students of the Institute will have the possibility to choose the traineeship as an elective study unit during their second semester. The MBB executive team will mentor students on an individual basis and assist them in developing and enhancing practical knowledge in the area of European affairs. At the end of the traineeship, an assessment of each individual will be determined by a board of examiners on the basis of a logbook held by each student constituting of all the work done during the traineeship programme, in addition to a report drafted by their mentor (MBB Annual Report, 2012). A further example provided here is that of the second foundation which provided information on expenditure, namely the Farsons Foundation, whose priorities are listed below; The Farsons Foundation was established in 1995 with the main objectives of promoting, diffusing and safeguarding of Maltese culture, heritage and social solidarity. The aims of the Foundation are to: Promote and assist the development and public manifestation of Maltese culture especially in the fields of art, music, literature and drama. Contribute research projects and assist in the publication of studies undertaken by any 11

12 duly qualified person or persons, regarding Maltese disciplines relating to art, music and drama. Provide assistance to talented Maltese to enable them to obtain higher professional standard than those that can be obtained locally in disciplines relating to art, music and drama Contribute by means of financial assistance towards the work of any private, voluntary and non-profit organisation or religious body engaged principally in fostering social solidarity. A recent project carried out by this foundation was to sponsor a conference on Malta s Industrial Heritage held at the University of Malta, and the publishing of the proceedings of ther conference with the title, Approaches to Industrial Heritage: What works? in February of this year (2014). 3.5 Geographical dimensions of activities These are mostly local initiatives as highlighted above by the two examples provided. 3.6 Foundations operations and practices The management of foundations is conducted by the Board of Governors, and the day-to-day to management is apparently done by employed staff. Most of the functions of the foundations are complementary, and thus support ongoing activities. MALTA - EUFORI Study Country Report

13 4 Innovative Examples As can be gleaned from the responses to the survey, whereby nine foundations are involved with R&I, it is apparent that the funding of research via this mechanism is a relatively new activity in Malta. In addition, it would also appear that these organisations complement ongoing activities and are mainly responsible for raising funds. Hence, in order to facilitate the development of this field, in April 2011 the University of Malta launched a trust fund called the Research, Innovation and Development Trust (RIDT), for which the government provided EUR 0.5 million seed capital. The role of the trust is to attract funds from both private and corporate bodies to further research efforts here in the 14 faculties, and also to foster the commercial exploitation of this research. Thus, the Trust provides an avenue for foundations that raise funds and want to conduct research in a specified field, but do not have the resources for what they want to achieve. It is worth noting that in 2013 four foundations approached the RIDT with a request to conduct research in the medical field and for the required funds to do so. Two of these were the Life Cycle Foundation, which has been donating funds to the renal unit based in the only State-run hospital in Malta, and the Breast Cancer Foundation. Both of these have been able raise funds through activities related to sponsored bike rides that take place over a number of weeks around the world. So this year for the very first time two grants of EUR and EUR were forwarded to the RIDT for the University to conduct research in the renal and cancer fields this in effect is the first time that funds have been directed to research. Again, it must be emphasised that these are as yet are early days, but it would appear that the Trust seems to be working in the way it was intended, and is providing a mechanism through which the emergent foundations may fulfill their obligations to funding R&I. 13

14 5 Conclusions 5.1 Main conclusions The overriding emerging factor from the first-ever survey to be conducted here in Malta on the role of foundations in research and innovation is the fact that this is a new activity. In general, voluntary organisations and foundations have been the means through which funds have been raised to conduct social responsibilities, such as assisting those less able in society, as well as activities related to the arts and the humanities. In effect these relate to more tangible outcomes that can be seen by everyone, and which can be attained in the short term for the benefit of society as a whole. It is a very different matter to provide funds for conducting research that may result in long-term benefits. It is akin to the difficulties in raising venture capital and also in raising capital from what is known as the business angel network. 5.2 Strengths and weaknesses of the R&I foundation sector In reality the R&I foundation sector here in Malta is in it infancy when it specifically comes to R&I funding for science. To some extent this gap for the time being is being filled by the so-called government foundation known as the Malta Council for Science and Technology. 5.3 Recommendations The RIDT has been a brand-new initiative, through which foundations can provide funds for areas of R&I within their scope. As these are very early days, some success stories may provide the impetus through which they will indeed succeed. It should be pointed out, however, that research in any field is a long process, and both public and corporate organisations will need to understand and embrace the nature of this reality. MALTA - EUFORI Study Country Report