The rapid expansion of the financial services sector is a measure of Malta’s economic prowess, and the availability of a host of financial instruments is enhancing the process of wealth creation, said Prime Minister Lawrence Gonzi

yesterday.

Opening a KPMG conference, Dr Gonzi said that innovation, integrity, effective risk-management and adaptation were critical to industry leadership, and as the world economy regained momentum, the international financial services sector was reinventing itself.

“Intense competition is fuelling this reinvention and the key to staying ahead lies in leveraging all available mechanisms in order to ensure that customers get what they need when they need it,” he said.

Dr Gonzi pointed out that the Malta International Business Authority Act of 1988 provided a legal framework that permitted Malta to venture into the international business and financial sphere. By the end of 1996, 2,500 offshore companies and four offshore banks were registered in Malta.

“As important economic reforms started taking root during the early 1990s, it was decided that the special off-shore framework should be integrated into Malta’s economic mainstream. A major legislative reform was undertaken and in 1994, the Malta Financial Services Centre (MFSC) was set up to consolidate the regulatory framework and spearhead the development of an integrated financial services sector able to service both domestic and international economic activity,” he said.

Dr Gonzi added that Malta’s regulatory structure was further consolidated in 2002 with the establishment of the Malta Financial Services Authority (MFSA) as the single licensing and supervisory authority for all financial services activity.

The agenda for Maltese financial services in Europe, launched in January 2004, provided the blueprint for the repositioning of Maltese companies within the context of accession to the European Union, he said, adding: “This document defines how we should attract the right foreign direct investment, improve the level and quality of our services, build a strong brand, raise the level of professional competence and continue to develop a suitable legal and regulator environment.”

He continued: “The improvement and upgrading of Malta’s legislative and regulatory framework for financial services has since become a continuous process, reflecting the dynamism of the sector and this government’s commitment to provide a comprehensive functional environment within which the industry can continue to grow.”

Dr Gonzi said that Malta was today internationally known not just in its traditional areas of competence but also for the quality and high standard of its financial services. “It is therefore important to the economy as a whole that this brand continues to develop and grow in strength and prestige to become a national resource in its own right,” he said. Dr Gonzi said the next important milestone for Malta was the adoption of the euro.

“Malta has been able to meet the required criteria and it is time to passport our currency into the eurozone, an area that has turned in some of its best economic results since its inception: 1.5 per cent growth in employment, 2.7 per cent GDP growth and two per cent inflation,” he said.

The Prime Minister said the National Strategic Reference Framework, drawn up to position Malta in the context of EU cohesion policy for the period 2007-2013, provided the basic strategic framework for sustaining economic competitiveness through innovation and entrepreneurship and for facilitating a knowledge-based economy through investment in the necessary physical and social infrastructural capabilities, education and social inclusion.

He said that on another level, the MFSA’s strategic plan 2007-2009 focused on the development of a more resilient, competitive and dynamic regulatory system that contributed positively to the growth of the economy.

“This is why MFSA is embarking on four main objectives: networking with other organisations to maximise its effectiveness as an organisation, implementing new, risk-based regulatory strategies that will enable it to deal with this growing industry, continuously upgrading its technology to cater for the increased sophistication in the business environment and sustaining organisational excellence through continuous staff training,” he said.

The morning session was also addressed by MFSA chairman Joseph Bannister and global head advisory services KPMG Germany Joerg Hashagen.