Nothing speaks more convincingly than the facts, and there is no denying that tiny Malta has emerged as one of Europe’s best performing economies, with high GDP growth and record-low unemployment. Its well-diversified economy proves alluring to international companies and foreign professionals pursuing dynamic careers in sectors such as finance, maritime, aviation and the digital industries. Malta has never been as wealthy in its entire history as it is today, and has grown both in influence and confidence. The country’s resounding economic success is widely regarded as a key reason for the second consecutive victory of Malta’s Labour Party in the June 2017 general election, which confirmed Joseph Muscat as Prime Minister.
The island has not only transformed itself economically in recent years, but the once-conservative country has also introduced a series of liberal bills, including civil unions to equal adoption rights for same-sex couples, which have given Malta a striking new look. Modern Malta today views itself as a European Union success story and a place where progressive economic and social policies are implemented. However, the fast pace of development in recent years has presented Malta with a new set of challenges. The country, home to a population of some 430,000 people, now needs to invest in infrastructure and the attractiveness of its built environment to transform itself in a world-class destination complete with the best amenities, green parks and places for recreation and entertainment.
"Our economy has advanced and our nation has become richer. While a few years ago, people were worried about the cost of utilities, they are today concerned about a better environment and the cleanliness of the country."
Dr Joseph Muscat, Prime Minister of Malta
Located at the southern tip of Italy and just over 316 square kilometres in area, the Maltese Islands lie virtually midway between Europe and North Africa, some 90 kilometres south of Sicily and 290 kilometres north of Libya. The archipelago comprises Malta, Gozo and Comino. The main island, Malta, is 27 kilometres long and measures 14.5 kilometres at its widest point. It takes just 45 minutes to cross Malta, reducing commuting times and increasing leisure time. The official languages are Maltese and English, with 90% of Maltese being completely bilingual.
A rocky island with dry and often windy weather, Malta enjoys a typical Mediterranean climate, with the average temperature ranging from 12 degrees in winter to 30 degrees in summer. The capital city Valletta is both the administrative and business centre of the country. Other main towns include: the popular seaside towns of Sliema and St. Julian’s on the west coast; the inland towns of Mosta and Birkirkara, situated in the centre of the island; and Paola in the south. There are also numerous small villages that still evoke the traditional Mediterranean rural way of life, although some 90% of Maltese live in urban settings and the overall vibe of Malta is modern.
Malta’s strategic location at the commercial crossroads linking Europe, Africa and the Middle East has attracted the interest of the various dominant cultures for millennia. The Phoenicians, the Carthaginians, the Romans, the Arabs, the Spanish, the Knights of St John, the French and the British all ruled the island at one time and have contributed to the mosaic that is modern Malta. Not surprisingly, Britain’s legacy has lasted the longest as Malta was part of the British Empire for over 150 years: business, law and education retain British characteristics, while English, alongside Maltese, is an official language. Maltese is believed to have developed during the Arab occupation of the islands (870-1090) and is the only Semitic language to be written in Latin script.
Descendants of ancient Carthaginians and Phoenicians, with strong elements of Italian and other Mediterranean stock, the Maltese are truly an international people. With a history that has seen a succession of foreign rulers, the islanders have acquired an ability to adapt to new ideas and adopt them to their advantage. Generally well educated and qualified, 90% of Maltese are bilingual in English and Maltese, and many also speak a third language, usually Italian, German or French. Religion – an estimated 97% of the population are Roman Catholic – is also considered an important part of Maltese culture. But despite being a predominantly Catholic country that only began allowing divorce in 2011, Malta today is home to some of the most progressive LGBTQ - related laws in the world. Accounting for 6% of the population, Malta is also home to a growing expat population, attracted by strong economic growth and career prospects.
Second Term in Office
The country’s population is also one of the most politically active in Europe, with elections seeing voter turnout regularly exceeding 90%. Malta is a parliamentary representative democratic republic, in which executive powers rest with the Prime Minister while the President fulfils the ceremonial function of Head of State. In the last general election, in June 2017, Malta’s Labour built on their 2013 electoral victory and won once again, at the expense of the centre-right Nationalist Party. Joseph Muscat was re-confirmed Prime Minister after its Labour Party received some 36,000 votes more than the Nationalist Party. For the first time in Malta’s more recent history, 2017 saw two representatives from a third party – the Democratic Party – entering parliament. The Democratic Party formed in 2016 and had contested the general election in coalition with the Nationalist Party. The current president of Malta is Marie-Louise Coleiro Preca, Malta’s second female president, who was appointed in April 2014.
From left to right: 1) Dr Joseph Muscat, Prime Minister of Malta; 2) Prof Edward Scicluna, Minister for Finance; 3) Owen Bonnici, Minister for Justice, Culture and Local Government; 4) Julia Farrugia Portelli, Parliamentary Secretary for Reforms, Citizenship and Simplification of Administrative Processes; 5) Helena Dalli, Minister for European Affairs and Equality.
"Malta is a progressive country, which in the past four years was among the leading nations when it comes to civil rights. This is the way we want to move on. We have just introduced a marriage equality bill and are also about to start a discussion whether or not we want to legalise cannabis for recreational use."
Julia Farrugia Portelli, Parliamentary Secretary for Reforms, Citizenship and Simplification of Administrative Processes
Fastest Growing Economy
Gaining independence from Britain in 1964, the country’s decision to join the EU in 2004 and the Eurozone in 2008, was integral to the expansion of its horizons and bolstered its status as a key business hub in the Euro-Mediterranean region. There is no doubt that Malta leads the region in many economic indicators. Its small, open economy has proven to be remarkably resilient. Malta has posted positive growth figures over the past six years and has regularly been among the best-performing economies in the EU. In 2015, the economy grew by an impressive 6.2%, while unemployment remained below the 5% mark. Figures for 2016 showed that Malta’s economy grew by 5%, making it the fastest growing economy in the EU. The International Monetary Fund recently said that Malta’s outlook is strong and that growth is expected to remain solid in 2017, highlighting that Malta’s diversified economy has helped preserve stability. GDP growth is projected to reach 4.6% in 2017 and 4.4% in 2018, which places it again among Europe’s strongest economies according to the European Commission’s spring 2017 forecast.
Driven by Service Exports
Tourism is among Malta’s top performing sectors. In 2017, the island expects to welcome two million tourists – more than ever before. Tourism today accounts for some 25% of the country’s GDP. Rivalling tourism’s importance and growing in tandem over the last few years has been Malta’s financial services sector, which now accounts for 13% of GDP. Life sciences and digital media are joining the traditional economic generators and creating a solid base of diverse operations from which Malta is competing on an international level. The maritime industry is one of the oldest, and today Malta is home to the largest ship register in Europe and is one of the major logistics providers in the Mediterranean. The country now aims to replicate this success in the aviation sector and has introduced new legislation to help achieve this. Malta is also on the fast track to becoming a hub for education, healthcare and energy – sectors that are poised to become the country’s next success stories. With the help of foreign investment, Malta is seeking to add those economic activities to its list of exportable services.
The decision by high-profile companies to invest in and to move operations to the island is a strong indicator of the extent to which Malta is being regarded as a profitable table business hub. Some prominent companies which have invested in Malta include HSBC and Banif in banking; French line CMA-CGM in the port sector; Microsoft, Huawei and Vodafone in IT and telecoms; and Lufthansa Technik and Playmobil in manufacturing. Foreign investment has helped to push Malta’s economic performance throughout the years. Providing access to the EU’s single market, Malta’s proximity to and cultural links with North African and Middle Eastern countries are particularly attractive to companies that use the country as a stepping stone for trading, distribution and marketing of their international operations in Southern Europe and North Africa. In June 2016, the stock position of FDI in Malta amounted to €156.7 billion, an increase of €10 billion over the corresponding month a year before. With 98.1% of FDI stocks, Malta’s International Finance Centre is the dominant recipient of foreign investment.
In addition to the historical and strong commercial links with Italy and the UK, Malta also enjoys healthy trade with France, Germany and the Netherlands. Malta’s exposure to international commerce is one of the highest worldwide, and the country’s leaders are constantly working on developing new ties with foreign governments in order to facilitate worldwide market access for all industries. For instance, trade with Asia, mainly China and India, is increasing.
"Our priority was to stimulate growth. Economics and finance can be very complicated, but essentially they are quite simple. It is like baking a cake. If you want your cake to be big, you need to increase your ingredients, for instance human capital, skills and investment. So we widened our labour pool, started offering incentives to women and foreign professionals to join Malta’s labour market, in addition to embarking on a dual strategy of controlling expenditure while assisting the business community to expand."
Prof Edward Scicluna, Minister for Finance
A Place to Grow a Company
Malta offers investors a secure and transparent environment in which to start or expand a business. The country has introduced business-friendly policies underpinned by a legal and regulatory framework that is fully harmonised with EU legislation. Malta has also built up modern telecommunications and international transport links, while a full package of incentives that range from fiscal benefits to the provision of custom-built production facilities are available to investors. Start-ups also play an increasingly important role in Malta’s economy and find support in the form of seed financing schemes and incubators. This trend has not gone unnoticed by investors, venture capital firms, and more recently global investment banks, who are competing to fill the funding needs of promising early-stage businesses.
With great attention being paid to the next generation of its workforce, the country continues to invest heavily in education, and each year Malta sees a steady stream of new students entering higher education. Surveys have found that the flexibility of the local workforce is one of the country’s greatest assets: the Maltese are quick to adapt to changing technological and market needs, sustaining and enhancing Malta’s appeal as a world-class investment and business centre.
"An integral part of Malta’s success as an international business centre is our familiar and strong legal system, which is achieving important results on the EU justice scoreboard. Apart from making the court system more efficient, we are also investing in developing Malta’s capabilities as an international arbitration centre."
Owen Bonnici, Minister for Justice, Culture and Local Government
An Impetus on Infrastructure
Malta has attracted admirers for its success in transforming itself from a British military outpost into a well-functioning economy. The country now pushes itself towards a more innovation driven economy, as there is increasing awareness that raising productivity and increasing efficiency are critical if growth is to be sustained. Businesses often cite a lack of human resources and the country’s ageing infrastructure as major impediments to growth. Human capital investment is high on the government’s priority list. Malta not only remains open and welcoming towards foreign professionals, but also actively encourages them to come and work on the island. However, the influx of companies and people is particularly putting pressure on the road network that has failed to keep pace with this growth. Keen to see the sector heading in a new direction and addressing any shortcomings, the Maltese authorities are willing to collaborate with global innovators to create a better connected and more efficient transport system. A €700 million programme to resurface the island’s roads has already been launched, while the government is also considering proposals for a mass transportation system. In the government’s vision, economic and social progress should also go hand in hand. While the country has achieved impressive economic results, there are other issues that still need to be tackled in areas such as education, health and a more inclusive society.
Strong economic growth has transformed Malta into a confident nation, which is now seeking to strengthen its position on the global stage. Malta’s EU Presidency, which ran January through June 2017, has been shaped and influenced by Brexit given that the UK triggered Article 50 of the Lisbon Treaty in March. Despite this challenge, Malta, as head of the 28-nation bloc, insisted that Europe needs to keep a positive outlook and ensure that the European project moves ahead. However, Brexit is as much about politics as it is about business, and although Malta is not pitching as aggressively as other nations for UK business, it is quietly positioning itself as an attractive alternative for companies seeking an address in the European Union.
Concurrently though, Malta has to defend its economic model given the increased focus on tax competition in Europe. The island stresses that its tax regime has withstood the tough scrutiny of the European Commission and that the country is supporting all EU and OECD initiatives to combat tax evasion. While Malta’s ability to maintain its tax base will define its economic future to a certain extent, taxes are also widely seen as just one factor driving commercial decisions, and the country is paying attention towards increasing the overall ease of doing business.
"I would like the EU to view us as a good representation of what an EU state can be and become. We have strong finances, good education and healthcare, and we have raised the bar significantly when it comes to equality initiatives. Due to our size, we are often being overlooked but Malta can be a showcase in many areas."
Helena Dalli, Minister for European Affairs and Equality
Investment, across all sectors, will remain a key driver of future growth and is important for raising the living standards even further. There is also a lot of enthusiasm to develop a more efficient infrastructure that can cater to the needs of modern Malta, mirroring and supporting the country’s strong economy. When it comes to attracting new businesses, keeping costs in check and maintaining Malta’s competitive tax and regulatory frameworks will be important. Malta’s unique Mediterranean appeal, which at times combines a big city vibe with rural village charm, is also playing a role in making Malta an attractive place to work and live. There is a desire to further strengthen Malta’s cosmopolitan island flair in the years ahead. The country will launch a new wave of regeneration initiatives, although, in the short-term, Malta will see small, incremental changes rather than a holistic overview of its infrastructure and built-environment. However, as the country wants to widen its development for the next 10 to 15 years, it seems likely that it will move into the direction of global business locations such as Singapore and Dubai. Mimicking other places though is not an option. To remain successful, Malta will need to draw on its own strengths to define and create its own 21st century identity.