Malta’s location at the junction of the Mediterranean’s most important shipping routes has given it a significant advantage in its ambitions to become a leading maritime hub. Indeed, the island now hosts Europe’s largest flag register and is fast gaining a reputation 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. The island is now also determined to grow its mark in ship finance and maritime litigation
The sea has long been Malta’s lifeline and link to the world. The island’s strategic location midway between Europe, the Middle East and North Africa has seen it used as a shipping 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. There are also a number of ship repair facilities and yacht marinas. 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.
“It is no secret that the maritime sector is amongst Malta’s greatest success stories. If we want to continue building on this success, it is imperative that we make sure we are putting to use all our talents and all our human resources. It is my great pleasure to announce the appointment of a new taskforce aimed at working towards objectives with the aim of giving women more opportunities in the maritime sector. The taskforce will be engaging with the private sector to develop a roadmap with practical outcomes in order to support a more diverse workforce.”
Ian Borg, Minister for Transport, Infrastructure and Capital Projects
Ship registration has become the number one activity of Malta’s maritime centre as global ship owners increasingly turn to the Malta flag. At the end of 2018, there was a registered increase of 2.2 million gross tonnes, representing a growth rate of over 3% over the previous year, which was also one that had record-breaking figures. Malta has over 78 million gross tonnes with over 3,000 merchant vessels flying the Maltese flag, a fleet that has doubled in the last 5 years. This means that Malta continues 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. In 2018 we also witnessed growth in the superyacht sector, with a growth of almost 10% over the previous year and more than 750 superyachts registered in Malta.
Ian Borg at the announcement of a new taskforce aimed at working towards objectives with the aim of giving women more opportunities in the maritime sector
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.
The most compelling reasons so many vessels choose to fly the Maltese flag are related to the island’s favourable legislation and regulations, offering ship owners substantial cost-savings. Registration costs and the fees of service providers have remained affordable, while the Maltese flag also offers an advantageous tonnage tax system, which has just been approved for a period of 10 years by the European Commission under EU state aid rules.
Another key reason for the flag’s success is that Maltese law offers a huge degree of protection to the financier, giving operators significant advantages when dealing with banks.
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 old 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 2017 was of 11 years, thus decreasing the average age of all the registered merchant fleet to 12 years.
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, similar to those of Italy, France, Cyprus and Greece. 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.
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.
Developing Maritime Story
The next chapter in Malta’s maritime story will be written around 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.
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