Eighty-seven per cent of foreign director investors surveyed by EY find Malta attractive and this percentage continues to rise, with factors such as corporate taxation, Malta’s stability and the transparency of the political, legal and regulatory environment and, lastly, Malta’s social climate continuing to reign as top pulling factors.
The three areas in which foreign direct investors found there was room for improvement are the domestic or regional market, the research and development and innovation environment and transport, logistics and infrastructure.
The Malta Independent on Sunday sat down with EY Malta’s managing partner Ronald Attard to discuss the results of the survey and what Malta can do to retain its competitive edge.
What does Malta need to strategically work on in order to maintain its attractive position?
The overall message is positive but we always try to look at what can be done better. I would say that if you look at our survey there are two key messages, because there are some things you cannot do much about – for example, the domestic market is what it is. But I think the key message is people. Our people have historically been a strong point but this is no longer the case. More business is coming to the island but new businesses are having difficulty finding the right level of human resources: there is a skills gap. This is particularly true in respect of the more specialised industries that are coming here. The second thing is the infrastructure: it’s been a weak point every time we have carried out these surveys. Malta is a nice country to live in, a nice country to do business in, and historically our people have been a strong point which is no longer the case”.
Are you more concerned about external or internal factors having an impact on Malta’s the attractiveness to foreign investors?
We are trying to instil a sense of urgency. We are doing well but in this changing world you always need to keep abreast with what is happening out there. I would be concerned with both factors. Internal developments are probably more in our control. If there is a challenge in certain factors when it comes to finding people, this is something we can counteract by saying that you are not taking jobs off anyone: people from EU countries can come in anyway, so bringing in people from outside the EU is more in your control. Some aspects – such as infrastructure – take more time to tackle but, again, this is more within your control.
Externally you have to be extremely careful. The world is changing and some countries are changing very quickly in certain directions. Malta needs to keep abreast of what is happening; we need to really promote our strong points, make ourselves more visible and make ourselves aware of global challenges so that we can respond quickly.
Is there a concern that Brexit, and the UK’s new-found freedom away from the EU, could attract foreign investment away from Malta?
I would not be too worried. My main concern is that, although we are Mediterranean, we are Anglo-Saxon in our way of thinking, so having the UK within the EU was good for us and their leaving is a big loss. We are a country of 400,000 people so there is a limit to the business we can take and probably the business to which we can appeal. I really do not see Brexit as a threat: in some aspects there might be some opportunities because, for smaller players looking for a European jurisdiction, Malta might neatly fit the bill.
“What we need to protect is the fact that we are still fast and nimble – we can act quickly for the right players and carry out the due diligence quickly.
We always need to bear in mind our size – we are doing well and let’s continue to.
We noticed a sense of urgency in your speech at the recent launch EY’s Attractiveness Survey, with your theme being that the future is changing, and it was as if you were saying that if we do not act now, the world will pass Malta by. Am I correct?
Yes, in the sense that it is a fast-paced world. If you look at what we spoke about last year at FINTECH, which is finance and technology, you’ll see that we’ve been saying this for about 18 months. There’s a lot of good already in Malta, but other countries are moving more quickly to adapt their business models to the changing technology. I think Malta could be faster in terms of adapting its regulations to suit companies in the technology sector. I think we can act faster and that there is a lot of opportunity out there.
I think size is less important in the technology industry compared to others. If you are looking at manufacturing plants, which require a lot of people, then Malta might not be the first option – unless it is a highly specialised operation. If you look at the technology industry, however, size seems to be less important on the ground, but you do need to act faster.
The three areas are technology, education and infrastructure. It will take time, but we need to adapt our education system to meet the new opportunities that are now available and as far as the infrastructure is concerned, you’re not going to snap your fingers and change things.
What kind of educational changes are needed?
I am not an education expert myself. What we are saying is that people are not finding the right human resources for what they need. I firmly believe in work-placement programmes. The Maltese labour force is good, but from my personal experience I have noticed that we just need to learn to communicate better. In schools, maybe we need to get people more open and confident and this needs to be done quickly, as the world will not wait for us.
Even when it comes to technology, we can invest more in getting people used to the 21st century. It’s all about upgrading.
At the EY attractiveness conference you announced a think-tank that would focus on economic strategy. Can you tell me more about this?
This is all an evolution. Last year we identified five areas on which we said Malta should focus. There was FINTECH – logistics, commodities, etc., and in order to gain more insight we organised focus groups. So for logistics, a number of operators met four or five times at the office as a result of which we drew up a report. We eventually did this for each section. For logistics, we submitted our proposals to the Malta Chamber of Commerce, Enterprise and Industry, and it set up a new Logistics Section. We said that this was basically an informal ‘think-tank’, so this year let’s organise it properly from the start. The three sections this year were technology, education and infrastructure.
We were concerned about feedback and participation because those involved do not get anything out of it – it was more for the greater good, so-to-speak. However, I was surprised by the high level of participation – they are not getting paid for it: people come and share ideas and participate.
I can’t avoid mentioning the 15 per cent plunge in the belief on the part of foreign direct investors in Malta’s political, legal and regulatory environment. Is this down to the Panama Papers scandal? How would you explain it?
I don’t know. We carried out the survey, and it gave us the picture that Malta remained attractive and that this had increased over the past three years. When we rated the factors, there was a decline in this area.
Well, historically this was the case, and what I want to emphasise is that it is still a strong factor. The rating is still high but I think we should keep it close to 100 per cent. We pride ourselves on consensus – even when we market ourselves to foreign investors, we say that consensus is a strong point. That went down by 15 percentage points in one year, which is not a little and we want to see this come back up immediately. One thing we can contribute to, even going back to these think-tanks, is that if we foster positive ideas which everyone agrees to, I think it would be a move towards people coming to work together for a better Malta.
When the Prime Minister was asked about this 15 per cent plunge, he said that the government needed to “do better” and that the Opposition cannot continue slandering Malta in the international arena. Does EY want both the government and the Opposition to clean up their acts?
For a successful country, I think it is important that everyone is clear on the strong points of the country. It’s important – and one of the reasons why we ask people to rate this factor – how people stability is perceived. To put everything into context, Malta’s score is still very high. People like investing in a stable, safe economy. We are used to scoring 85-95 per cent, and although it has fallen, it is still high. This is one thing I want to emphasise.
Is EY concerned about the EU and the OECD’s attempted clampdown on preferential tax agreements?
Taxation came across as a very positive attribute in the survey. I think it is right to have an attractive corporate tax regime. We always need to look at ways of ensuring that businesses are not over-taxed and ways of attracting more business to the island.
However, we need to go beyond taxation: it is people and the ease of doing business on which we should focus. One factor that I have not mentioned before is the ease of starting up a business. Are we taking advantage of our size and the ease with which we can adapt? We have the disadvantage of not being large, but being small also gives us advantages. We must ensure that we have the right people on the ground: if we cannot find the right people in the EU and we are not taking jobs from anyone, let’s make it easier to bring people to Malta. Let’s tackle bureaucracy and the lack of digitisation.