Economies are in essence a social construct whereby human interaction comes together to produce and exchange value within an institutional framework, which in turn are too human and social constructs.
Viewing economic development this way means that designing economic sectors should take an ‘ecological’ approach. This approach is also in line with the movement to take a greener approach to economic development especially to be more conscious of the limits to growth and to take of a more resource-sustainability approach.
An ecological approach to designing economic sectors is based on ecosystems. An ecosystem is defined as a dynamically stable network of interconnected firms and institutions within bounded geographical space.
By taking such a systems approach means that focus is given on both the individual components of the system as well as on the sum of the parts and this is in fact believed to yield maximum results when building economic sectors and visions.
This has been our experience too when building and designing a number of sectors which turned out to be highly successful. In Malta, when designing the remote and online gaming sector, care was given to creating a connected and dynamic ecosystem.
This has been a key factor in the sectors success which today accounts for close to 12% of Malta’s GDP and created more than 10,000 jobs. The sector is not based on regulatory innovation but also access to qualified staff, enhanced education and training, access to finance and also a hub of entrepreneurs that have created
The question that one will naturally ask is, what are the components for a successful ecosystem-based approach to economic design and planning? A good regulatory and legislative framework are central to any ecosystem together with the associated governance and institutional mechanisms.
In our experience, we have found that building proactive and innovative regulators is critical to the long-term success of the ecosystem. Regular regulatory reviews and legislative changes to cater for new developments and trends are fundamental for a sector to remain competitive and attractive. Also, regulatory capacity building needs to be regular.
In line with this, human talent is also a key pillar of any ecosystem. The power of the ecosystem to attract investment to it depends very much on the availability of skilled and required talent. This means that educational partners need to be fully onboard in the design of the ecosystem to ensure that the right qualifications are being offered and other training programmes.
A case-study in this regard is that when Malta was building its airplane maintenance, repair and overhaul sector together with industry giants Lufthansa Technik, a specific graduate course in aircraft repair engineering was designed with a local educational institution which has attracted over 4,000 students who today are employed within this cluster. In addition, residency schemes or visas can be a luring factor in a new start-up dominated and nomad environment.
Talent is nurtured by educational institutions which also need to collaborate with the private sector to develop research, development and innovation. Here, collaboration agreements between industry and academia are central to sustain future-proof growth. The creation of business parks close to universities can translate in important innovation cross-fertilisation and spill-over adding to the vibrancy and dynamism of the ecosystem itself.
Clusters also thrive on access to finance as it serves as the blood for the system to grow and develop. Here, innovative financing solutions and products can enhance a sector’s attractiveness and also its linkages to start-ups. The availability of seed financing, venture capital, private equity as well as capital markets together with a responsive banking sector will be critical for any ecosystem to thrive. Development banks are proving to be a critical source of risk-sharing and financing for projects.
Finally, the general business and market environment needs to be supportive of the ecosystem. Tax systems that are simple and attractive together with investment support schemes are fundamental building blocks. General infrastructure which is sector-supportive, such as telecommunications, data centres or air connectivity, will also be important. Access to international markets aided by double taxation agreements is seen as having an important role in developing a sustainable and attractive ecosystem.
Economic sectors require a systems-thinking approach. They depend on the sum of parts and on having all elements aligned and well-functioning. Designing economic sectors start with a vision or realisation that there is a gap in the local and more importantly regional space to attract a nascent or fast-growing sector. Maintaining it and making it attractive depends on the well-functioning of all elements.
JP Fabri is a founding partner of Seed, a research-driven consultancy firm.
jp@seedconsultancy.com
www.seedconsultancy.com
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