Insight

A Growing Global Appeal

Boasting one of the strongest European economies, Malta is developing its international network for trade and investment, Dr Christian Cardona, Minister for the Economy, Investment and Small Business, tells MaltaProfile.

Malta is attracting ever-increasing attention as centre for international business. The country is now seeing investment being channelled into sectors such as life sciences, education, maritime, logistics and the creative industries. 

Could you kindly give us an overview of Malta’s investment landscape? What is the depth and breadth of activities carried out from Malta?

The investment landscape in Malta is very diverse, ranging from what traditionally has been known as manufacturing to digital technology and research and development. Such diversity is the result of a long history: Malta’s industrial heritage spans over a more than 50-year period. Since the 1960s we have seen a stream of FDIs making it to our shores. There have been industries that have thrived and then phased-out in different periods; others have been consistently present. High-end engineering for instance has been a constant source of employment and investment. In many cases we do not manufacture entire products but rather components of a particular product due to the constraints of our size. This means that most of our exports are from industry to industry. We are now widening our reach by exploring new or emerging sectors, such as biotechnology and education. We are also directing our attention towards the creative industries, striving to create more quality jobs and delivering higher value added products.

What have been the most noteworthy investments in recent years, and what is the extent of those operations?

I might venture to say that the most noteworthy investment that has been made – not just recently, but throughout the years – has been to keep that investment here. Companies might have changed hands, merged with other companies, or changed name, but their operations have remained in Malta. Not only have they stayed, many of them have expanded further to incorporate new lines of production. In attracting Greenfield FDIs, we also had some notorious successes lately. In digital gaming and software development we have seen some of the top players settling in Malta. Furthermore, we have also seen an increase in interest from companies wanting to base their R&D in Malta. With our Life Sciences Park, where the first tenants will soon be settling in, we want to capitalise on this fact. It also follows the success we have been having in the pharmaceutical industry, including in the manufacturing of medical equipment, where Baxter would be one very successful example of a company that has been here a long time, has thrived and lately continued to expand its operations.

What have been key developments that have influenced Malta’s economy over the past few years, and how is it performing at the moment?

Last year was another successful year for the Maltese economy, which continued to be among the top performers in the Eurozone and the European Union, both in terms of economic growth as well as labour market outcomes. Malta’s real GDP growth stood at 3.5 per cent in 2014, up from 2.7 per cent recorded a year earlier. The main drivers for this growth were increases in domestic demand, supported by strong investment and a spur in private consumption. Total employment grew by 3.1 per cent in 2014, which is well above the 0.6 per cent and 1.1 per cent recorded for the Eurozone and EU average, respectively. In addition, Malta has for the second consecutive year managed to attain its fiscal targets. Government took effective action to bring down the deficit below the 3 per cent threshold by the end of 2013. Malta reached a deficit of 2.1 per cent of GDP in 2014. 

What kind of growth do you expect the Maltese economy to show this year, and how do you seek to sustain the positive performance of the past?

We expect growth to be in the region of 3.8 per cent in 2015. We are fully committed towards furthering Malta’s economic growth by sustaining macro-economic stability, enhancing our competitiveness, raising potential output and putting public finances back on track. In fact, the government put in place a reform programme addressing various challenges with respect to the sustainability of public finances, labour market and education, resource efficiency and the business environment. Let me give you a few examples. The government is addressing challenges faced by working and studying parents by providing free childcare facilities, opening schools earlier, providing after-school care services, and extending the tax deduction for parents sending their children to private childcare centres. Another area that is on the agenda is the sustainability and adequacy of pensions, and it has been recently announced that the pension reform process shall be prioritised in the second half of 2015. In the area of infrastructure development, we are analysing the potential of other modes of mass passenger transport systems with a view towards easing traffic congestion. 

Which particular sectors do you see as being most interesting in terms of potential future growth?

This government is working to consolidate those sectors that already have a sound presence in Malta, like engineering and pharmaceuticals, while trying to explore new opportunities, for instance in bio-technology and education services. The Life Sciences Park in San Gwann, for example, will provide a number of opportunities for the life sciences sector to grow. But there is also aviation, which is doing very well, and aviation services companies in Malta have been expanding during the last year. Other interesting opportunities might arise in the near future in the maritime sector, especially with the development of the maritime hub, and the logistics sector. There is still a lot of work in progress but the signs are very positive. Logistics, waste management and energy are also sectors that in the near future might yield some very good news. We are also encouraging smaller businesses to set up in Malta, for instance in the growing area of robotics. 

Which specific measures are you implementing to support small enterprises and start-ups?

We launched Venture Capital Malta. Its main aim is to develop Malta’s credentials as a start-up location, welcoming new ventures with the support of finance in the guise of private equity or venture capital. Banks have become more risk averse and many start-ups are not able to access the kind of financing they require. They need to look into alternative ways of funding, including Venture Capital and crowdfunding. The Maltese Government is also looking into the possibility of launching a Sukuk, an Islamic Finance bond. 

International trade represents Malta's economic lifeline. How do you seek to strengthen export activities and which markets are you looking at in terms of developing closer relationships?

Our main trading partner is the European Union, but we are also reaching out to markets beyond the 28-nation bloc, including China and the Gulf countries. We are actively seeking alternatives to Libya, which was for a long time an important trading partner, and the country’s political crisis presented a real shock to our export activities. This just emphasized our responsibility to develop new trade partnership. In fact, a new entity, Trade Malta, has just been launched to assist Malta-based companies tap the international market. Trade Malta is a joint initiative of the government and the Chamber of Commerce and offers guidance to all locally based companies who want to make the most of broader possibilities overseas, such as forming part of international franchises, increasing exports and forming joint ventures.

How do you envision Malta’s investment landscape evolving over the next years, in particular with a view towards economic growth and the environment?

We have a long history of FDI in Malta, and our experience is an asset that we can transform to attract more foreign investment. We need to create a healthy balance between economic growth and development on the one side and sustainability and environmental concerns on the other. But we cannot afford not to attract investment. There is a lot of competition out there, and we are aware of our competitive advantages. Malta’s economically stable environment remains conducive towards doing business, particularly due to our competitive cost structure with relatively low social and labour costs and the availability of an attractive incentives package. There is also the geo-political aspect. We like to think of Malta as a bridge between Europe and other continents, particularly North Africa and the Middle East, but the recent interest shown in Malta by China and the United States is very encouraging. Our size also plays in our favour in terms of attracting new investment if you consider how easy it is for an investor to get in touch with the authorities and other stakeholders in such a small community. Even the Minister is just a phone call away.

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