Malta's attractiveness - (I)

Ernst & Young have just published the results of the Malta Attractiveness Survey 2006. This survey has investigated the perceptions held by top executives of foreign-owned companies located in Malta. Thus it provides opinions of persons who have already savoured the opportunities provided by Malta.

Having had the opportunity to discuss investment issues with such persons as a former chairman of the Malta Development Corporation, my feeling is that respondents have not minced words and gave their honest opinions. They have savoured the opportunities provided by Malta but also know all our warts.

The results of the survey show the ratings that these executives have given to a number of criteria that are judged to feature highly in investment decisions taken by companies, their views on the effects of EU membership and the planned adoption of the euro, and their perceptions of Malta as an investment location. The publication of the results of this survey coincided with the publication of the results of the European Attractiveness Survey, which analyses the perceptions and expectations of over 1,000 international senior executives.

Malta does not feature in the European Attractiveness Survey and this is understandable. Our economy is too small for it to play a significant role in the market for foreign direct investment. However, some generic comments made do point to some positive indications. This week's contribution focuses on some of the results obtained from the European Attractiveness Survey, with the results of the Malta Survey being featured next week. At a global level, the European zone is placed first among the principal world zones in terms of its attractiveness. Europe's image in the eyes of the investors is even improving.

Thus, being a member of the EU is bound to contribute to a more positive image for Malta.

The threats faced by Western Europe are the level of labour costs, flexibility at the workplace and the level of productivity.

The competitive advantages of Europe are seen to be transport and logistics infrastructure, telecommunications, labour skills, transparency and the social climate. Added benefits are the quality of life and language and culture. Our geographical location forces any exporter to use air or sea transport. However, over the last 15 years extensive investment has been made by Malta in each of the areas listed as Europe's competitive advantages.

These results also indicate that decision makers show a preference for traditionally low-risk locations, even if the possibility of cost reductions remains a key factor. Malta has consistently been known to be a low-risk location for foreign direct investment. In certain areas, this is even coupled with a low-cost advantage.

Thus, it becomes evident that Malta, in its own way, does meet the requirements of investment decision makers. However, it does not enjoy the popularity of certain countries, especially those that are emerging as important investment locations only in the last years.

Another set of results show the level of importance attached to a number of factors by respondents. These factors are all deemed to play a role in determining where investment is to be located. These factors number 19, and as such some may be of more relevance to Malta than others. Transport and logistics infrastructures leads the way with 89 per cent of respondents expressing "very" or "some" importance for this factor.

With the development of Malta Freeport and the expected reform at the Valletta port, this issue may be seen to have been addressed. There are other areas where one may rightly feel that Malta has taken the right steps, such as corporate taxation, social stability, the stability of the political and legal environment, aid, subsidies and support measures from public authorities and specific treatment for expatriate executives.

More critical are the issues of labour costs and potential productivity increase. In this regard, I think the social partners are on a different wavelength and therefore do not speak the same language. Thus, Malta's attractiveness to foreign investors may risk being lost unless drastic steps are taken to address these two issues effectively and consistently.

This does not mean reducing wages; it means rather that there should be a concerted effort across the board to ensure that people are indeed producing at a maximum level, with idle or unproductive time being eliminated.