With outstanding growth rate and low unemployment, Malta’s healthy and diverse economy is going through a very strong period. The country has averaged an annual growth rate of 6.9% in the past three years, i.e. between 2014 and 2016. The momentum has kept going, and in the first quarter of 2017 the economy registered a strong growth of 4.2% when compared to the corresponding period in the previous year which, according to Eurostat, is almost double compared to the EU28 average of 2.4%. Unemployment levels are very low at 4.1%, which contrasts with the 7.8% average rate of the EU28. Ray Azzopardi, Malta’s Ambassador to Belgium, discusses the country’s economy, investment opportunities and development projects.
European Times: Could you please elaborate on Malta’s investment opportunities?
Ray Azzopardi: The strong performance referenced above has been registered throughout the key pillars of the local economy, namely advanced manufacturing, healthcare and life sciences, logistics, aviation, maritime, international education services, ICT, tourism, and financial services. These sectors have excellent potential for further growth and thus present various investment opportunities. Our efforts are aimed at building on our expertise within these sectors, in order to develop specific sub-sectors or niche industries that have a higher added value, including product R&D, digital applications, cybersecurity, fintech services, bioinformatics and medical services. Typically, Malta is an ideal venue for companies manufacturing products with a high added value and requiring skilled input.
European Times: What are some of the main challenges the country faces?
Ray Azzopardi: The other side of the coin of Malta’s economic success is that it faces the challenge of continuously requiring additional human resources to sustain the growth. The country has invested heavily in education in order to ensure that a trained workforce is always available, amongst others by supporting the educational institutions to tailor-make courses in accordance with the needs of industry. Despite all of this, there is still a mismatch between the needs of the industry and the technologies taught at educational institutions. It also has a growing expat community that is attracted to Malta not only by the opportunities it offers, but also by the pleasant lifestyle that people living on the Mediterranean islands enjoy.
The small domestic market has also posed a challenge on certain occasions. However, thanks to its excellent logistics facilities as well as frequent and reliable air and sea connections, Malta can nonetheless provide easy access to the nearby markets in the EU, North Africa and beyond. Indeed, the absolute majority of companies setting up in Malta do so with the aim of servicing overseas markets.
Malta’s size also poses unique challenges in the tourism sector. Environmental consciousness both among the Maltese as the host population and our visitors themselves, will give rise to the demand for sustainable destinations in which nature and population will play an increasingly prominent role. Another important goal is to provide quality during the entire year. Furthermore, air connectivity remains one of the main strategic priorities for Malta. Air connectivity must support the further growth of the tourism sector – not only in terms of quantity but also quality.
In terms of financial services, the main challenges result from our success achieved over a relatively short period of time. Thanks to our sound legislative and regulatory framework, the number of financial and credit institutions that have set up in Malta over the years has increased from 40 players in 2011 to 67 by the end of 2016. Nevertheless, due to this expansion over a relatively short period, a demand for qualified employees in this sector both from a stakeholder as well as regulatory perspective has been created.
One of the main challenges facing the banking sector today is the sheer amount of regulation that governs the banking sector, which had been introduced in the aftermath of the 2008 financial crisis. Regulators possibly need to understand that there should not be a one-size-fits-all, as this could have a detrimental effect on the smaller operators.
Other challenges include the competition that the ICT sector faces with other sectors, such as Gaming and Finance which, due to higher salaries offered, are recruiting the best human resources. In addition, the rapidly changing technologies require accelerated implementation and fast and agile adoption by public and private administrations and end users. Meanwhile, the small size of Malta translates in a limited market for local ICT companies and limited resources (financial and/or human) to invest in new technologies and innovative technological trends. Consequently, this requires a shift in mentality so that both the government and the private sector would invest more in applied research and innovation and modern ICT eco-systems.
European Times: What are some of the most recent projects in the development of tourism, banking and ICT sectors?
Ray Azzopardi: Public and private investment in the tourism industry continuous on various levels, ranging from the upgrading of the general infrastructure in the touristic zones, to the construction or redevelopment of accommodation establishments, restaurants and other facilities catering for the tourism industry. Among others, various investments have been made to upgrade the airport terminal and associated services, the port terminal facilities including services for the cruise liner industry, as well as various international hotel chains that have established themselves and grown in Malta over the years. The latest investment in this regards is being made by the Marriott chain, which has purchased an existing five-star hotel in Malta and will be further upgrading its facilities.
The banking sector in Malta has witnessed a radical transformation in recent years, rapidly growing from one having four retail banks serving the local population into a dynamic and reputable international banking sector, with Malta-based banks currently holding over €30 billion in deposits, according to Finance Malta. A major investment within this sector was recently made by Al Faisal International for Investment (AFII), the financial investment company of Al Faisal Holding Company, one of Qatar’s largest private diversified industry groups, which acquired a 78.46% shareholding in Banif Bank (Malta) plc.
Being increasingly perceived as an attractive alternative to other established European finance centres, Malta boasts some of the safest and most liquid banks in the Eurozone and has recently been ranked in 16th place in terms of “soundness of the banks” by the Global Competitiveness Index 2016 – 2017.
Malta has been at the forefront to launch a solid regime for stand-alone e-money institutions. This exciting new growth area constitutes the next step in the development of Malta’s financial services industry. E-Money institutions can benefit from a reduced capital requirement when compared to credit institutions. With its investment in state-of-the-art telecoms infrastructure, Malta is attracting a wider range of eCommerce companies.
With regard to the ICT industry, investment in the infrastructure has seen Malta become the first country in the EU to have availability of fast broadband connection of more than 30MBPS for all households and businesses, while it is also targeting to become the first Wi-Fi state in the world. Backed by this infrastructure, the ICT industry has grown to encompass a cluster of activities, including the development of software and digital games, iGaming, payment gateway and other eBusiness services, cloud-based applications, as well as a strong contribution within other sectors of the economy, such as life sciences, advanced manufacturing, aviation, etc.Recent developments include the end of roaming charges, achieved during Malta’s Presidency of the Council of the EU.
The government has launched the Mobile Government Strategy as well as several mobile government services. Linked to this, the government is working to instil an enterprise data approach towards the implementation of IT solutions, which will lead to important concepts such as Once-only principle, sharing of data within government and making public sector data available for re-use and for economic growth. An innovation hub has also been set up at MITA with an aim to support young entrepreneurs to implement their ideas. Another project is the Converge project which is a €40 million investment in the government underlying technical and data infrastructure and a number of vertical business-specific information systems. There are also various projects to increase the awareness and the proper use of digital technologies and online systems by various sectors of the population.
European Times: What is the country undertaking to attract new foreign investments?
Ray Azzopardi: Investors are attracted to Malta for a variety of reasons; yet all those who have already established a presence here seem to agree that Malta offers a holistic package that makes it easier for them to ensure their business is successful. The country strives to ensure that it retains a competitive cost structure with a transparent taxation system and an attractive incentives package, while it also invests heavily in infrastructure as well as in education to ensure a trained workforce is always available. Furthermore, Malta continually strives to minimise the bureaucratic burden upon businesses in order to allow them to focus on their core activities. Efforts are also made to ensure that the legal framework remains up to date with fast changing technologies and allows for the growth of new niches.
These factors complement Malta’s other advantages, such as the strategic geographic location and the easy access to nearby markets; the economic and social stability; the membership in the EU and Eurozone; English as the language of business; as well as an excellent quality of life and safe environment. Through its various initiatives, Malta Enterprise, which is tasked with attracting foreign investment to Malta, works to highlight the aforementioned advantages