Rachel Attard and Helena Grech

84% of executives surveyed in the annual EY attractiveness survey think that Malta is attractive for Foreign Direct Investment. FDI is an important source of job opportunities, market expansion as well as having a positive ripple effect on any local economy.

There has been a slump all over the world in 2014, however Europe has managed to beat the trend, with FDI rising by 36% over the same period.

According to the EY attractiveness survey, the main features attracting FDI to Malta include stability of social climate and stability and transparency of the political and legal and regulatory environment.  Areas that are hindering FDI mainly relate to transport and logistics infrastructure, research and development and innovation environment, and lastly the domestic and regional market.

EY Senior Manager and EU advisory project leader Simon Barbieri who conducted the survey said that "it gives us an opportunity to compare Malta with other countries," and that this year the focus was on "the perceived openness of businesses."

According to the survey, the number of companies that intend to be present in Malta in 10 years' time has risen from 59% in 2014 to 74% in 2015. This points towards a perceived positive outlook on Malta's future political, social and economic stability.

82% of the companies surveyed said that they are willing to invest in training to develop skills, at a time where global labour markets are demanding increasingly specialised personnel.  The companies willing to invest in training said that they would do this either through providing internships, vocational training or through financial help and sponsorship. According to results of the survey, the demand for skilled labour is outstripping supply, therefore training and development needs feature prominently in the needs of investors.

47% of companies surveyed said that they are able to find specialised skills in the local job market, however 53% reported that they must look outside Malta's shores for the specialised skills they require.

The number of companies who say that they are unable to employ specialised personnel locally is down by 10% from last year. The survey points towards the demand for specialised personnel outweighing the cost of labour; therefore finding personnel with the desired skill level is prioritised over the cost of labour.

According to the survey, in order for sectors to become leaders in innovation the top three areas that must improve are reducing bureaucracy, improving education and training in new technologies, and lastly developing a culture of innovation and creativity.

Innovation is key for a number of reasons for any industry; it contributes towards increasing a competitive edge, ensuring a strong market position as well as ensuring a stable and prosperous working environment.

In the light of Europe's economic turmoil and the ensuing persistently high unemployment investors have been reluctant to shift operations, but since 2014 this trend started to reverse. Reasons for this include geopolitical and economic uncertainty found in other regions such as Russia and China. This year the survey has found that investors' perception of Europe's attractiveness has continued to increase, an increase of 5 points since 2014 and 21 points since 2012.

60% believe that iGaming will be the leading business sector driving Malta's growth in the next five years. This was followed by 43% who believe it will be fund administration and 41% who believe it will be asset management sectors driving growth in the next 5 years.

EY Managing partner: Three key objectives

In his address to the conference, managing partner of EY Ronald Attard outlined three key objectives that would help in building on the attractiveness to investors. He mentioned fostering a high value knowledge based economy that would leave Malta less vulnerable to outside market forces, striving to be at the cutting edge of technological advancement as well as reducing bureaucracy to further increase attractiveness.  

He highlighted six concrete suggestions that would make Malta more open to business. He urged the country to take a lead in regulating online financial services, which can take the form of crowdfunding, peer-to-peer lending and similar platforms. He also suggested that Malta can be turned into a commodities trading hub by building on existing attractive features, citing Singapore as a leading example.

Mr Attard went on to mention that Malta can truly become a logistics hub if it ensures that it has the best legal infrastructure in Europe. He also suggested Malta becoming a hub for Asian e-commerce, making the country the key Mediterranean and European destination for goods sold online in Asia.

One of the most relevant points made in his concrete suggestions relates to the implementation of 'best-in-class, web-enabled' solutions in parking management, transport sharing and tracking. The new technologies available in current markets are counted as the main drivers of more efficient, comfortable and faster transport.

Mr Attard's final concrete suggestion related to taking a ground breaking step by surveying the skill level of irregular migrants. He said that this is one untapped source of labour that risks becoming a drain on public finances as well as social services when it could be contributing to further economic growth.

He continued by saying that "as a small country we should also quickly adapt educational programmes to current skill needs."

He concluded by highlighting the significant economic grounds that has been made, citing that between 2004 and 2014 the average household income increased by 13%, and that the size of the services sector spiked from 72% to close to 83%.

'Salesman? Guilty as charged', Prime Minister says

 

Prime Minister Joseph Muscat said that he is "guilty as charged" with reference to accusations made that he is a salesman.

Dr Muscat said that tough calls had to be made in order to turn Malta's economic direction around. He said that the government's instinctive reaction was to make the country as open for business as possible. He pleaded with his ministers and staff to act as salesmen like he has done, because Malta is a small island competing globally for business, investment and economic gains.

He said that "Malta is a good place to invest. It does not only offer its local and European market but it also bridges the continents around us. We have an open economy and a business community who are ready to take the plunge and open up even more. "

He said that currently Malta's economic growth stands at 5%, and although the statistics are positive one must look at the mood of the country in order to see if they are realistic and representative of current trends. He said that the mood of the country is positive, and that this has been confirmed by Eurostat which published a study that Maltese people are the most optimistic in Europe.

Dr Muscat highlighted the priorities for the type of players that government wants to attract to Malta by saying that "the top world business players are global citizens with no particular country they call home. That is a sector we are particularly interested to attract even more. Our citizenship programme has helped Malta to become more visible on the world map. It is precisely because we had the courage to reach out to this new reality that we have become one of Europe's most open and welcoming economies. Global companies setting up shop in Malta are looking to attract the best persons to fill their top management and CEO posts. We are in that sort of competition. And yes, we are open for that kind of business. "

He highlighted the success in managing to turn around key economic niches that up to three years ago were considered Malta's "Achilles heel," such as in the energy and health sectors. He followed by saying that investors are looking to turn Malta into a hub for attracting leaders in the services industry. He said that the government is "far from done," and that he believes that the country has many untapped sources.

Turning to Malta's current main challenges, Dr Muscat spoke about technology and the impact of globalization on the labour market. He said that Malta's education system was not quick enough to adapt to "supersonic" changes in global markets.

He also mentioned the challenge of improving the general upkeep, cleanliness and the environment of the country.

He said that "as we are trying to attract world class businesses and top high net worth individuals ready to invest in Malta, we need to make sure that they do not only find high-end properties and hotels as well as first-class service, but they will also find in Malta a six-star environment to complement the experience. I am disappointed with the general level of upkeep of the country. It is time for all of us, political leaders, businesses and stakeholders to team up to give our share to clean the country. I want our people to live in a clean environment as well as six-star investments getting six-star surroundings."

The final challenge that he spoke of related to infrastructure, stating that Malta's roads are built to cater for less than half a million people, however in the summer months the country's population well exceeds this figure. There are 40 new cars per day on the road, and traffic impacts the economy and has a direct effect on peoples' lives and business.

He concluded by saying that there are no short term solutions for such a long term problem, and that the country must team up in order to come up with sustainable solutions.

 

Growth must be sustainable, wealth should be distributed fairly - Simon Busuttil

Rachel Attard

"We want growth to be sustainable and we want the wealth that we create to be fairly distributed in our society because we believe that the economy should work for the people and not the other way round," Nationalist Party leader Simon Busuttil said.

Dr Busuttil said he strongly believed that the past 11 years have transformed Malta's economy beyond recognition - a true root-and-branch-overhaul - and "we are now reaping the fruit of a clear vision but also the fruit of a tough endurance test that we had to pass both in the run-up to our eurozone membership as well as during the international financial and economic recession."

The Opposition Leader also welcomed the fact that the current administration has kept the economy moving in the same direction as the previous one and this should serve us a lesson.

When speaking about the results of EY attractiveness survey, Dr Busuttil said that the results showed that in the past few years, especially in 2011 and 2012, Malta was very attractive for foreign direct investment and for business. These very good results came, after the international economic and financial crisis. He added that results this year have caught up with the levels of 2011 and 2012. He said that foreign direct investment is not a one-man race and we must overcome very harsh competition.

Malta has passed mid-term in its electoral cycle. "The Opposition is changing gear and we want to become an Alternative Government. It is with this in mind that last week, for the first time ever for any Opposition in Malta, we published a pre-budget document." He added that he believes in an open government and he is leading an open Opposition

He said that there is no doubt that the economy is continuing to register steady growth, "that's good and I welcome that but I want growth to be sustainable and not fuelled by practices that are unsustainable, because this could become a major headache when the going gets tough."

Dr Busuttil gave as an example Malta's GDP growth which is being fuelled by a higher than normal government expenditure. "I would prefer the government to unleash the potential of the private sector to the full rather than play itself such an active role in the economy through greater public expenditure."

He said that whereas unemployment is going down the 25-year-long trend of decreasing the head-count in the public has been reversed. He emphasized that since 2013, Government has increased its own workforce by more than the manufacturing, transportation, wholesale, retail, financial services, construction, accommodation and food services put together. "This decision comes at a significant cost to taxpayers who have to foot an additional bill of no less than €100million on public service salaries alone."

Dr Busuttil said that Malta has painstakingly built a solid reputation over a quarter of a century. We cannot lose this because of poor governance. We need to stamp out corruption because this is not just bad for business but also for our country's reputation. He said that, "this is why, before this year is out, I will announce a major set of proposals  so you will all know clearly where I stand on good governance.

Speaking about funds he said that Malta has had a good run with EU funds. "We used them for our infrastructure, our competitiveness and our human resources. And they are also proving handy to help us reduce our public deficit - without EU funds our public finances would look far less healthy. We must prepare from now for the day, in 2020, when this bonanza will come to an end and we will become net contributors to the EU budget."

When speaking about tax harmonization he said that it is not state secret that many countries have been gunning at our tax system. "I am all for an every closer union in Europe because we stand to benefit greatly from that, but not even the United States of America has tax harmonisation; why should we in the EU?

"So I pledge my full support to the government at EU level to defend our turf even as we do so, we cannot live in denial and we must therefore have a Plan B, for the longer term."

 

Lord Peter Mandelson

Helena Grech and Rachel Attard

 A foreign guest speaker that addressed the audience during the conference was Lord Peter Mandelson, who is a former EU Commissioner and an adviser of former UK Prim Minister Tony Blair. Lord Mandelson who was analyzing what Malta did so far to become open for business and what it can do more to be open for business.

Mandelson said that technology and software service are for the European Commission very important. Malta in these two areas can play an important role with its high-value entrepreneurship skills and proficient in the English language.

The former EU Commissioner said that foreign competition can give a voice to Malta since the financial services have an important function in Europe.

Speaking about the EU strategy for the Energy Sector, he said that “as the Paris summit on climate change nears, I am sure Brussels will continue to support Malta’s decision to switch from heavy fuel oil to gas”

He also spoke about Chinese investment and negotiations with Malta. “Investments from China are very important for countries like Malta.”He does not see any political implications with China investing in Europe. 

When describing how his negations with China as a former EU Commissioner, he said “they are difficult, demanding, ego-centric......and yes nice. They mean business and very focused.”

“They mean business and they are very focused on what they need and want. Don’t let them get away with the idea that we need them more than they need us. We [UK] welcome Chinese investment but you also have to think why they need to do it properly with us. They need to access other markets but can’t do that if they fail or are inefficient in Europe.

Mandelson’s  message to the audience was to keep focused and open to business and competitiveness and never to be intimidated.