Malta’s attractiveness for foreign direct investment is on the rise

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A resounding majority of investors (84%) believe that Malta is currently attractive for foreign direct investment (FDI), up 5% from the 2014 survey. According to EY’s 2015 attractiveness survey, Malta: open for business, only 5% believe otherwise, with the remaining 11% being uncertain. The report is based on the views of over 100 top executives from foreign owned companies operating in Malta.

Like respondents to EY’s 2015 European attractiveness survey, foreign investors in Malta ranked the stability and transparency of political, legal and regulatory environment as the most important parameter when deciding on location in which to establish operations. 85% believe that the country is attractive in this area, and 71% believe that its legislative framework encourages key sectoral players to set up in Malta.

Ninety-percent of respondents agree that the stability of Malta’s social climate has a pull on FDI. The ease of access and openness to business of the central government and regulatory authorities continue to make the country more business-friendly.

Near term confidence is also on the increase, although a significant amount of uncertainty is still present. 56% believe that Malta will be an attractive FDI destination in 3 years’ time, up 4% from last year. 41% were uncertain, while 3% felt it would not be.

Investors expanding and staying

Malta’s economy has regularly outperformed the Eurozone since 2007 and existing investors appear to be optimistic about their business prospects in the country. Fifty-five percent of companies surveyed have some sort of expansion plans in Malta over the next year. The number of companies predicting to be present in Malta in 10 years’ time has risen to 71%, a 12% increase from last year.

It is reassuring to note that the Maltese legislative framework is seen to create a strong competitive advantage in both the European and global markets, with this proportion increasing by a full 8% to 59% in this survey. Clearly, Malta is on the right track.

Ronald Attard, Country Leader for EY in Malta commented: “Malta has been doing well and there is every reason to be optimistic about the future. However the country cannot stand still and needs to look at new ways of doing business, new sources of investment and more innovative ways of enhancing our labor supply. We, at EY, are glad to be spearheading this drive with six concrete and realistic suggestions to do so”.

The survey also sought to gather information on whether Malta’s efforts to become a regional trading and business hub in the Mediterranean for both European and non-European shores, is being affected by geopolitical developments around the region. The results are mixed. Whereas 28% of respondents believe that Malta as a regional hub in their sectors is gaining ground, nearly 17% believe that it is losing ground and just under 40% believe that it is staying the same.

Sectors and investments of the future

Malta has been witnessing a shift from long-standing ‘traditional’ industries, such as manufacturing, to new and emerging, primarily service-based, industries. A majority of current investors (60%) believe that igaming will drive Malta’s growth in the next five years. It is followed by fund administration and asset management, which score 43% and 41% respectively.

The business functions predicted to draw the most investment in the next five years are back office investments (63%) and investments in headquarters (40%). These functions also relate primarily to service-based industries. Having said this, many respondents still believe in the continuing importance of manufacturing, both as a source of employment and as a contributor to the country’s GDP.

Reforms wanted

Respondents were asked to rate which reforms are needed for Malta to become an innovation leader in different sectors. Sixty-seven percent believe that one of the key reforms is to reduce bureaucracy. Other reforms needed include the improvement in education and training in new technologies (49%). 

Results also highlight Malta’s need to improve its transport and logistics infrastructure, especially if it wants to further exploit its commercial position in the Mediterranean. Other areas calling for improvement are R&D, the innovation environment in general and the availability of more specialized workforce skills. With respect to the latter, as demand surpasses supply in various areas, businesses are finding it hard to find them locally. Eliminating such skills gaps is increasingly important to retain existing investors and attract new ones. In fact, 52% of those enterprises with some sort of expansion plans in Malta believe that it might be a challenge to source the required skills.

The cost of labor remains an important FDI plus for Malta, ranking 4th in the list of priorities of investors seeking a location where to operate. Fifty-eight percent of existing investors indicate that Malta is attractive in this area. Significantly however, they now rate the availability of skills to be more important than the cost of labor.

Certain national entities – such as the courts, and civil service scored relatively low on the openness for business rating. On the contrary, the national government and regulatory authorities are seen to be open for business.