As a small island nation, Malta is not necessarily known for world records and global leadership – its maritime sector though is an exception. The country has built up Europe’s largest flag register and is making waves as a top location for the yacht and superyacht industry. Key to this success has been Malta’s well-run international maritime register where high service and safety standards are attracting clients from as far away as Asia and Latin America. Malta also boasts the third-largest transshipment port and has cultivated world-class support services to provide the best possible facilities and expertise to ship owners, financers and operators who choose to become a part of Malta’s rich maritime industry. Business streams such as ship finance are also being explored, while Malta seeks to become a centre for maritime litigation, with the setting up of a maritime court and the strengthening of dedicated arbitration services.
A Maritime Nation
Marine and maritime activities have long provided great economic value to the country’s well being. The island’s strategic location midway between Europe, the Middle East and North Africa has seen it used as a transshipment hub for thousands of years by everyone from the Phoenicians to the Order of Saint John and the British who turned Malta’s Grand Harbour into a major naval base. It is estimated that Malta’s maritime cluster contributes to the employment of more than 20,000 people. Supported by growth in a number of traditional and emerging sectors, it is expected that maritime activities will soon account for some 14% of Malta’s GDP.
Malta’s maritime community caters for practically all maritime requirements, and over the years its service providers have become renowned for their knowledge, commitment and attention. The Malta Freeport, which accounts for most of the container traffic on the island, is one of the largest players. It is operated by CMA CGM, with the Yildirim Group of Turkey being a major shareholder. Ship repair facilities are provided by Italian shipyard group Palumbo, Manoel Island Yacht Yard, Bezzina Ship Repair Yard and Cassar Ship Repair Yard. Malta also boasts a wide network of maritime lawyers, agents, brokers and insurers. In terms of shipping services, the only segment not being fully developed is ship management: Turkish company Palmali and Norwegian shipping company Wilhelmsen are among the few with a presence on the island. On the other hand, almost every shipping line and company today has ships on Malta’s register. The island also hosts the Regional Marine Pollution Emergency Response Centre for the Mediterranean Sea; the IMO International Maritime Law Institute and the International Ocean Institute.
2015 and 2016 Performance
Ship registration has become the number one activity of Malta’s maritime centre as global ship owners increasingly turn to the Malta flag. In 2015, Malta’s shipping register grew by some 14% over the previous year, with the registered gross tonnage reaching 66.2 million gross tons at the end of last year. Over 900 ships have been registered during the year. This was a new record for the Malta Flag. Figures for 2016 show some 840 new registrations, and the registered gross tonnage increased further to 69.9 million gross tons. This meant that Malta continued to maintain its position as the leading European ship register, ahead of Greece and Cyprus, and the 6th largest in the world. Malta’s register ranges from LNG carriers to cruise ships, from bulk carriers to RORO ships and from oil tankers to superyachts (yachts of over 24 metres in length).
In particular, the number of high-end vessels on Malta’s register is constantly on the increase. Over the past ten years, the global luxury superyacht market has expanded beyond all expectations, and the development of a new yacht code has made the registration of commercial and pleasure yachts, including superyachts, in Malta very attractive. Despite the financial situation worldwide, 2015 and 2016 were also exceptional years with regard to superyacht registrations. There are now more than 575 superyachts registered on the island. However, there is much more to the country’s shipping industry than its registered merchant fleet: Malta is also home to a premier maritime cluster, including excellent yacht marinas, cargo port facilities, and shipbuilding and repair services. This is in addition to a wide range of finance, law, insurance and management facilities.
A Practical Approach
Malta has successfully attracted professional companies to its shipping sector because it has struck the balance between serious regulation and an industry-friendly approach. Dedicated legislation and tight registration criteria, all in line with EU Directives and International Maritime Organisation conventions, as well as a high-level 24/7 administrative service are among the driving forces behind the success of Malta’s shipping industry. Transport Malta, the regulator of the industry, goes to great lengths to emphasise that Malta is a flag of confidence and not one of convenience. The island’s status as an EU member state, its state of-the-art maritime framework and the excellent safety records of Malta-flagged ships helped the island to be officially classified as a low-risk flag. Ship owners appreciate that Transport Malta is on call 24-hours a day to deal with problems from managers or ships’ staff. The authority has technical staff on hand to guide ship owners through whatever issues might arise. In addition, documentation can be lodged outside normal Central European working hours – a service which is important for ship owners and financiers coming from the Americas or the Far East.
As one of only two open registers in the EU, registration is available to vessels owned by Maltese and non-Maltese persons, and in practice any kind of vessel may be registered, including one under construction. However, Transport Malta has put a premium on quality by introducing regulations which require ships aged 15 years and over to pass additional inspections, and ships over 25 years are not accepted on the register. The island now has one of the youngest fleets in the world. The average age of merchant ships registered under the Merchant Shipping Act during 2016 was of 9 years, thus decreasing the average age of all the registered merchant fleet to 12 years. A key reason for the flag’s success is also that Maltese law offers a huge degree of protection to the financier, giving operators significant advantages when dealing with banks.
Incentives for Yacht Owners
Malta’s regulatory framework is also attractive to yacht owners. For example, yachts registered as commercial vessels can benefit by paying an annual tax on the tonnage, rather than an income tax on earnings. For yachts which are not commercially registered, Malta operates an attractive system for purchasing and leasing. This enables yacht owners to pay VAT on their yachts calculated on the percentage of the time that vessels are deemed to have sailed in EU waters – based on the assumption that the larger the yacht, the less time it stays in those waters and vice-versa. Recently, the island has also adopted a reduced VAT rate on short-term yacht charters commencing in Malta. While such charters will continue to be subject to a rate of 18% on the cost of the charter, this will only be applied proportionally, based on the amount of time the charter is in EU waters. Malta’s proximity to North. African and Eastern Mediterranean destinations means that a superyacht charter could be undertaken where a significant portion of the time is spent beyond the realms of the EU and its tax rules.
New Growth Areas
While the international shipping community is still facing some headwinds with reduced trade volumes and freight rates near historically low levels, Malta’s shipping sector is expanding. The development of the international ship register has also encouraged owners and management companies to locate their operations in Malta and tap into the island’s professional services. Malta’s lawyers and corporate service providers are among the most experienced in international circles and can advise on all aspects of registration and operation of vessels. Specialist lawyers from the island today handle a wide selection of maritime disputes in both the so-called wet and dry sectors.
Maritime litigation is also a key growth area for the future. The Maltese government has announced its intention to set up a maritime court and to overhaul the maritime legal framework with a vice-admiralty court and a revamped International Arbitration Centre. Initiatives such as these are aimed at positioning Malta as a maritime hub providing all-embracing maritime legal and corporate services. With a growing international finance sector, the country is also destined to see future opportunities arising in banking and insurance, while Malta’s maritime community is convinced that it can compete with European ship management jurisdictions by developing and offering a greater level of sophisticated ship management activities.
The Next Level
The task at hand for Malta now is to build on cluster dynamics. The island hosts various specialist companies, including IT companies focusing on marine software engineering and electrical engineering companies who develop and install vessel-management systems. A number of maritime security companies have also set up shop in Malta. There are six marinas on the island catering for luxury, private and charter vessels. A maritime services park spanning 172,000 square metres is being constructed which seeks to transform Malta into a major hub for the offshore oil and gas industry. The sheer volume of facilities makes for a competitive and productive environment. Industry analysts keeping track of Malta’s maritime sector are certain that a promising future lies ahead if the island continues on its path of making consistent, steady progress.