Malta’s attractiveness for FDI takes a boost

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Foreign investors’ confidence in Malta’s attractiveness for FDI continues to rise. According to EY’s 2016 Malta Attractiveness Survey: the future is today, 87% of current foreign investors surveyed believe that the country is currently attractive, a slight increase over last year’s figures. The report is based on the views of over 100 top executives of foreign-owned companies.

Corporate taxation and Malta’s social climate were the features ranked as attractive by most respondents. The stability and transparency of Malta’s legal, political and regulatory environment are local labour skills levels, telecommunications infrastructure, and labour costs are also considered to be attractive by a majority of respondents, each of these registering well over the 60% mark. Malta’s FDI shortcomings in 2016 remain the transport and logistics infrastructure, and the R&D and innovation environment.

The current business environment

66% of respondents believe that Malta is an attractive start-up location, with 81% believing that incubators and accelerators can help to stimulate local entrepreneurship. The sectors believed to be attractive for start-ups include financial services (88%), iGaming (81%) and ICT and Telecoms (55%).

71% believe that Malta is keeping pace with regulatory changes in competing jurisdictions and 51% believe that the current legislative framework creates a competitive advantage in European and global markets. This index, however, is down 8% from 2015.

Focusing on the education and skill levels required to attract and retain FDI in Malta, 79% believe that we need robust progress in this area to remain attractive in the face of global competition.  In addition, more than half of the respondents’ expansion plans are dependent on the availability of personnel with the required know how.

The demand for skilled labour continues to outstrip supply in a number of sectors. Indeed, less than half (45%) of existing foreign investors say that they are able to source the required specialised skills locally. Specialized personnel retention is quite high, standing at 87%. Making this challenge more acute is the fact that the level of education required by investors is on the rise, with 63% now requiring graduates with tertiary level education.

In order to address such current and future skills shortages, respondents overwhelmingly believe that a mix of education and international work placements are key.  95% believe that Malta should introduce skill sets for the ‘new’ economy, such as coding and robotics in schools. 87% believe that international work placements for Maltese nationals need to be encouraged.

iGaming continues to top the list of sectors that respondents believe will drive Malta’s growth into the future. Although the sector’s future attractiveness is partly contingent upon the international regulatory environment, Malta’s competitive legislative framework, skilled labour force and strong inter-linkages with locally-based companies servicing iGaming operators make it attractive for companies to retain operations and continue to invest in Malta. Similarly, ICT and telecoms are seen by existing investors to be important for Malta in the future, as are areas in the wider financial services field. Malta’s experience in these areas needs to be emulated in the new sectors which have been on the radar for the last few years, including FinTech, commodities trading, logistics, other ancillary offerings for Asian e-commerce, and sustainable transport solutions.

The future is today

This year respondents were asked to rate a list of international events and developments in order of concern for their business.  BREXIT came out on top, followed by the Base erosion and profit shifting (BEPS) initiative and thirdly oil price fluctuations. It must be noted that this survey was undertaken prior to the Brexit referendum.  The Transatlantic Trade and Investment Partnership (TTIP) was considered to be of least concern to respondents. The migrant crisis and Libyan conflict ranked in the middle of the list.

53% of the companies surveyed are considering expanding their operations in Malta, with more than half embarking on back office work. Sales and marketing projects are also becoming increasingly popular, with one out of every three respondents (31%) looking into this type of expansion.

One of the most positive results of this year’s survey is that 79% of the companies predict that they will still be operating in Malta in 10 years time, an increase of 8% over last year. Asked which sectors will be driving Malta’s growth in the future, iGaming remains at the top (71%) followed by ICT and Telecoms (50%), Fund Administration (46%), and Asset Management (46%).

Finally, 58% of respondents believe that Malta will be attractive in the next 3 years, an increase of 2% over last year.