Report shows sharp rise in FDI flows to Malta

Malta has been ranked 81st in the inward foreign direct investment (FDI) performance index 2001-2003 compiled as part of the Unctad world investment report, just behind Austria, Australia and Papua New Guinea and ahead of Tajikistan, the United Kingdom and Jordan.

Malta was 44th in the previous index among 140 economies.

The island is also placed 53rd in the outward FDI performance index, just behind Greece and Libya and ahead of Kazakhstan and Mexico, one step ahead from the previous index.

The FDI performance index is the ratio of a country's share in global FDI flows to its share in global GDP.

The country fact sheet on Malta, published with the report, estimated FDI flows to Malta last year as having reached an inward investment of $380 million, a sharp increase from -$428 million in the previous year. Outward flows rose to $24 million from -$4 million in 2002.

FDI flows as a percentage of gross fixed capital formation reached 34.2 per cent last year, from -53 per cent in 2002.

Malta was ranked ahead of Greece and Portugal and just behind Russia in the FDI potential index.

The report shows that global inflows of foreign direct investment (FDI) declined in 2003 for the third year in a row, to $560 billion.

The UN agency said FDI flows to developed countries reached $367 billion, some 25 per cent lower than in 2002.

Worldwide, 111 countries saw a rise in flows and 82 saw a decline. The fall in flows to the United States, by 53 per cent to $30 billion, was particularly dramatic. FDI flows to Central and Eastern Europe (CEE) also slumped, from $31 billion to $21 billion. It was only developing countries as a group which experienced a recovery, with FDI inflows rising by nine per cent to $172 billion overall. But in this group, the picture was mixed. Africa and Asia and the Pacific saw an increase while Latin America and the Caribbean experienced a continuing decline.

The report points out that far from diverting FDI flows from the old members of the EU, the eight accession countries in central and eastern Europe (the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia) actually saw their FDI inflows shrink, from $23 billion in 2002 to $11 billion in 2003.

"As part of their efforts to enhance their attractiveness to investors (domestic and foreign) several new EU members have lowered their corporate taxes to levels comparable to those in locations such as Ireland. The combination of relatively low wages, low corporate tax rates and access to EU subsidies - enhanced by a favourable investment climate, a highly skilled workforce and free access to the rest of the EU market - makes the accession countries attractive locations for FDI, both from other EU countries and from third countries.

"Not surprisingly, therefore, prospects for FDI into central and eastern Europe are promising; more than two-thirds of the top trans-national corporations and location experts surveyed by Unctad expected an upturn in FDI inflows during 2004-2005, the highest proportion of such responses among all regions."