Insight

Logistics cluster to adopt global best practices - Freeport Corporation CEO

Malta is seeking to establish itself as a major logistics, warehousing and distribution hub to capitalise on regional trade and business opportunities and spur economic growth, Aaron Farrugia, CEO of the Malta Freeport Corporation, says.

Malta has always regarded its maritime sector as a key pillar of its economy, but has now set out on developing the country into a significant player in the global logistics industry. Responsible for regulatory compliance as well as the management and the security of the customs free zone and warehouses, the Malta Freeport Corporation is leading the charge when it comes to developing Malta into an international trade and logistics base.

The Malta Freeport is today ranked as the third largest transshipment port in the Mediterranean. What have been the key milestones in the port’s development?

Since its establishment in 1988, the Malta Freeport has experienced remarkable growth. While in the early days, the Government of Malta was heavily involved in the activities, the operational side was privatised throughout the years. Malta Freeport Terminals are today responsible for the container handling. An oil terminal operated by Oiltanking Malta and a logistics base for the offshore oil and gas industry operated by Medserv are also located in the Freeport.

The regulatory and administrative side is still in government hands, and we, the Malta Freeport Corporation, are responsible for regulatory compliance and security, and manage the customs-free zone and warehouses. All players together have undertaken an ambitious expansion and modernisation programme targeting the port’s infrastructure and equipment. For example, we just spent  US$ 15 million for the dredging of our seas to some 17 metres. The Malta Freeport can now host the biggest container ships in the world.

How has the Freeport performed in recent years?

The Freeport is a success story for Malta as it was the first transshipment hub in the Mediterranean region. In the 1990s the Freeport handled around 1 million twenty-foot equivalent units (TEUs) per year, while nowadays it is handling more than 3 million TEUs. Malta is the first European port of call for many major shipping lines, and 95% of the containers are for transshipment. The transshipment business is based on the ‘hub’ concept whereby cargo is discharged from large mother vessels and relayed to a network of regional ports by regular and frequent feeder vessels. The oil and gas business is also doing well. With Libya being in a difficult situation, a lot of work has been moved to Malta.

What is government’s vision for the sector?

The vision is for Malta to become an international trade and commerce centre by being a leading logistical, warehousing and distribution hub that can serve Europe, North Africa and beyond. Malta has the right credentials to become a leading player in this area and can leverage best practice and expertise from other countries and organisations, which are already enjoying the success of their investment. The ultimate aim is to increase Malta’s international connectivity by growing trade beyond our shores, so that trade becomes a key driver that contributes to the sustainable economic development of the country. 

What are the key activities that can be carried out in Malta?

eCommerce is a major growth area nowadays, and Malta has the potential to become a major European distribution centre. There are opportunities in just-in-time inventory management and cargo consolidation, as well as in processing such as packaging and labelling. Most companies targeting the North African market have their labels in English, but countries like Egypt, Morocco and Algeria require them to be in Arabic. This re-labelling can be done in Malta. Certification of Halal food would be another area. While Malta is not a ‘Halal country’, we could cater for the certification. We can also pre-customs clear the goods. For instance, goods travelling from China to Spain can be customs-cleared in Malta while in transit, resulting in time and efficiency gains for the producer. We are also looking into establishing an exhibition centre in Malta, including ancillary infrastructure such as a hotel. For instance, Chinese manufacturers targeting the European markets could bring their products to Malta, and European buyers would only need to travel to Malta, rather than to China, to see, test and buy the products. 

What are the key challenges that you are facing at the moment, and what are Malta’s key selling points as logistics centre?

Our key challenge is capacity. Malta is a small island and space is limited. Demand for warehousing facilities within the Freeport’s free trade zone is growing, however the space is very limited and fully taken up. But we are currently seeking to expand the free trade zone, obviously taking into account environmental concerns. The current situation in North Africa creates concern as well, because many companies that had storage facilities there lost everything. They are ready to look at Malta as an alternative, but it is again an issue of space. Once we have truly positioned ourselves as an international logistics hub, we will be able to accommodate many more companies in Malta. Another challenge – but we cannot do much about it – is the fact that Malta is an island and is not connected to mainland Europe, whereby competing ports in the Mediterranean can make use of intermodal freight transport.

On the other hand, Malta is well positioned in terms of foreign direct investment. It has become widely acknowledged as an EU jurisdiction where things can get done efficiently and with the right balance between prudential supervision and pragmatic regulation, enabling businesses to develop lasting and meaningful relationships with their regulators, while also offering a quality Mediterranean lifestyle with a strong Anglo-Saxon work ethic.

How important is the sector to the Maltese economy?

Malta currently ranks 43rd in ‘The Logistics Performance Index’ conducted by the World Bank. However, there is the firm belief that Malta has the capability of achieving a much higher ranking. Through our vision of Malta becoming an international trade and commerce centre, we believe that this industry will flourish. With proper focus, investment and acting in a coordinated manner, Malta can attain a distinct competitive advantage that will increase the amount of value added operations, contribute to a higher GDP and ultimately make Malta one of the fastest-growing economies in the developed world. Logistics will also give Malta an economic boost in terms of jobs. The field needs expertise, not just at PhD level, but also at mechanical and operational level, and we are currently studying how we can improve teaching and training in the sector. 

What are your priorities for the future of the Malta Freeport Corporation?

The Malta Freeport Corporation is working on establishing itself as a point of contact for all requirements related to logistical trade and Free Trade Zones to cut down on unnecessary bureaucracy. We are also looking at best practices from successful trade centres such as China, Dubai and Singapore. Meanwhile we are reviewing the port regime to drive down costs. We are also holding discussions with audit firms, port operators and regulators, research and consulting companies, airlines, logistics operators, law firms specialising in the maritime industry and various other private operators within the sector, including regional distributors and franchisees of internationally renowned brands. Promoting Malta’s geostrategic position as the gateway to Southern Europe, North Africa and the Middle East remains our top priority.

Dr Aaron Farrugia is the Chief Executive Officer of the Malta Freeport Corporation, the sole administrative, licensing and regulatory authority at the Malta Freeport. Having successfully completed his legal studies at the University of Malta, he is also an Economics and Financial Services graduate from the Faculty of Economics, Management and Accountancy and obtained an MA in European Studies from the Institute of European Studies at the University of Malta. Aaron is a Visiting Lecturer in the Public Policy Department at the University of Malta. He teaches Politics, Policies and Governance and is an alumnus of the US International Visitor Leadership Programme (2012). 

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