Malta's current attractiveness
Malta has attracted significant levels of FDI over the years. The country’s attractive fiscal regime, access to the EU market (including the ability to passport financial services into Europe), a strong legal framework, political and economic stability, and a skilled, English-speaking labor force have been the key drivers for this investment.
However, the country cannot rest on its laurels as it looks ahead. Malta must find ways to increase the size of the labor market by attracting more workers from EU and non-EU countries. Schools and universities must also strive to produce more multilingual workers that are skilled for the new digital global economy: developers, coders, engineers, scientists and digital marketers among many others.
A new infrastructure will be needed to address capacity constraints, especially in transport related areas. The country must also push innovation to the forefront. It has to be quick to implement regulatory-policy in which disruptive new technologies and business models can thrive. Stimulus should also be provided to ensure that more companies can have their R&D needs met on the island and pursue innovation-linked activities.
Malta’s appeal as a Start-up location
The shifting economic landscape toward digital has had a profound impact on the Maltese economy. iGaming, for instance, has attracted hundreds of young foreign entrepreneurs to set up shop here. This, in turn, has upskilled the local economy with new digital skill sets in areas such as programing, business intelligence and data analytics, digital marketing and design. In the process, it has also driven investment into other digital sectors.
As a country and as a nation Malta has a lot to offer: located at the heart of the beautiful Mediterranean, an excellent climate, a rich cultural history dating back seven millennia and a skilled English-speaking workforce drive Malta’s appeal among foreign start-ups. The accessibility of regulators, key Government officials and entrepreneurs is also indispensable in this respect.
While these features all help to attract start-ups, the cost advantages that Malta continues to offer are deemed much more important for most. A company’s seed capital may last three to five times longer in Malta compared with London or San Francisco, providing companies with more time to test and refine their products, build their customer bases and find investors.
Top foreign tech talent is attracted to Malta by the Highly Qualified Persons Rules through which expatriate employees occupying certain posts in key economic sectors benefit from a 15% flat rate of personal income tax.
Recent measures to enhance access to capital are also boosting the country’s appeal. An example would be the Seed Investment Programme introduced by the Government earlier this year, which provides tax credits to investors in start-ups.
The Malta Stock Exchange is also offering a number of attractive schemes, including a new cost-effective scheme for small and medium sized enterprises (SMEs) to access the capital markets. The fact that there is no capital gains tax on profits made from the sale of shares listed on the Malta Stock Exchange is another important factor.
The impact of disruption
Disruption is fundamentally changing the way the world works. Today’s businesses, government and individuals are responding to shifts that would have seemed unimaginable even a few years ago.
We used to live in a world where firms added new products to displace existing ones. Now platforms that connect diverse participants with one another, powered by the internet and a generation of connected users, are displacing entire markets. It is therefore no surprise that many firms are now more focused on channeling investment into ecosystems capable of building new technologies and capabilities rather than those only capable of delivering labor and other cost savings.
How does Malta fit into all this? The country must capitalize on its ability to be a testing bed for new technologies, providing companies with access to a small English-speaking market with European regulations that would deliver an excellent test-case to their investors.
Government can play a central role in drawing such investment by incubating a healthy entrepreneurial ecosystem with liberal approaches toward regulation.
Take blockchain technology as an example. It has the potential to streamline and accelerate business processes, increase cybersecurity and reduce or eliminate the roles of trusted intermediaries (or centralized authorities) across multiple industries.
Many governments are adopting a wait-and-see attitude toward its application, while companies are crying out to showcase success stories with their technologies. It is therefore likely that many organizations would jump at the chance to run blockchain applications for a governmental function across an entire country, and, given Malta’s small size, could easily fund the disruption and transition costs to a new system.
Government could insist on collaborative partners carrying out their research functions on the island to drive greater added-value for the country.
Skill sets for the new economy
A highly skilled workforce is fundamental to achieving tomorrow’s growth. The next waves of disruptive technology — blockchain, artificial intelligence, robotics, the internet of things (IoT) and the sharing economy platforms — will reshape global economies around high-value, high-skilled activities.
While technology may entirely replace a number of job roles, it is more likely to just replace some specific job tasks, freeing up workers to focus on new tasks that can deliver added productivity for companies. These changes will rapidly require employees to develop new core skill sets and there is a risk of large-scale labor displacement if businesses, governments and educational providers don’t take immediate action to re-skill and upskill the current workforce.
Educational curricula will also need to adapt to deliver the technical knowledge, plus soft and practical skills, that tomorrow’s economy requires. The unprecedented levels of data being created can be utilized to quickly assist in identifying emerging industries, job roles and changing skills requirements.
Policymakers would be wise to embrace innovation and collaborate openly with a network of strategic partners to help identify these needs. Online talent and social media platforms enable millions of users to tag skill sets to their profiles. Close monitoring of skill sets against various job categories can help identify new skills as these roles evolve. These can be correlated with information sourced from online job postings and surveys.
Better cross-functional skills will also be in higher demand as will problem solving, critical thinking, social, presentation and language, and cross-cultural skills suited to a new global economy.
Malta’s future attractiveness
The rate of economic change is increasing at a relentless pace. It is therefore vital to spot opportunities, which can help Malta’s economy flourish in the future and help the island take quick and decisive actions, which lay the foundations for these sectors to succeed.
Malta’s small size brings with it a number of distinct advantages that can help it act nimbly and quickly adapt to change — short “decision lines” and the ability to make direct contact with all levels of Government in a very short time frame.
Last October, EY identified a number of areas the country should focus on. We have since consulted with a wide range of public and private sector industry stakeholders and proposed a series of concrete policy measures in five of these areas: FinTech, next generation logistics, a hub for Asian e-commerce, commodities training and imparting skills to regular immigrants. The in-depth proposals, built upon some of Malta’s inherent strengths, are presented in the publication Beyond This Economic Horizon, is available to download from the opposite side of the page.
The ability to develop innovative legislation in highly regulated industries (as the country has already done with iGaming, payments, asset management and insurance) will drive Malta’s appeal in the FinTech and commodities trading areas.
Best-in-class legal frameworks, streamlined processes and customs clearances, investments in next generation technology, and Government’s intention to develop new free zone areas have the potential to take Malta’s logistics sector to the next level. This will build on our strategic position and globally unique close proximity of the airport and freeport.