Almost half of the participants (46 per cent) in the Ernst & Young Malta 2010 Attractiveness Survey consider the corporate tax rate as the most important criterion for companies to expand, develop, or retain their activities in Malta.

This was followed by the availability of local human resources (42 per cent), fiscal incentives and support measures from the government (37 per cent), local human resources skills (34 per cent), the euro as the national currency (28 per cent), the cost of local human resources (26 per cent), the political environment (26 per cent) and energy supply (24 per cent). The survey was launched yesterday during a conference at the Westin Dragonara.

Top executives of 173 foreign-owned companies based in Malta were invited to participate in the survey and 90 accepted to do so. The companies were selected from a database of companies registered in Malta which are at least 50 per cent owned by non-Maltese shareholders. The companies participating in the survey, which employ around 14,000 people, were selec­ted to reflect different sizes and industries

These criteria were relevant to almost all companies. Respondents who regarded these criteria as attractive for investment were as follows: corporate tax rate (64 per cent of respondents who viewed such criterion as relevant), availability of local human resources (54 per cent), fiscal incentives and support measures from the government (65 per cent), local human resources skills (69 per cent), the euro as the national currency (87 per cent), local human resources cost (69 per cent), the political environment (72 per cent) and energy supply (seven per cent).

The criteria that were perceived as having improved over the last year included the following: domestic market (21 per cent of respondents who viewed such criterion as relevant), local human resources availability (17 per cent), cultural entertainment (16 per cent), fiscal incentives and support measures from the government, air transport cost, and leisure activities (all at 15 per cent).

The criteria that were considered as having deteriorated over the last year included energy cost (67 per cent of respondents who viewed such a criterion as relevant), energy supply (60 per cent) and local human resources cost (23 per cent).

A reliable and economically viable power supply is a major challenge the country has to face, according to the survey. The energy supply and its cost were a matter of concern for companies. A low seven per cent of all respondents regarded the energy supply as attractive. Almost no respondent viewed the energy cost as attractive. However, renewable energy technologies are still not widely taken up. Only 20 per cent of companies installed renewable energy technologies on their premises compared to 72 per cent that installed energy-efficient devices. The main reasons mentioned for not installing such technologies or devices were insufficient financial feasibility, lack of funds and the fact that premises were not owned by the companies themselves.

Most companies surveyed are still awaiting an improved international economic environment. The international recession has affected 82 per cent of companies surveyed. Most experienced a decrease in business activity while a third witnessed a decrease in investment value, interest rates and investment income. The next most important negative effects were reduced liquidity/financing and unfavourable rates of exchange.

Only a third of respondents regarded the international economic environment as already being supportive or becoming supportive of their company’s growth by September. Controlling and cutting costs across the board was resorted to by 42 per cent of the surveyed companies in order to cushion the effects of the recession. A further 21 per cent carried out cost control and reduction measures with respect to human resources. Such measures comprised outright lay-offs, reduction in the working week and overtime and refraining from recruiting new employees when others retired.

Malta’s attractiveness as an investment location is perceived more positively for the next three years than the last one. Over the last year, Malta as a location for the development or expansion of companies’ activities improved, according to 40 per cent of respondents. Specific actions by the government as well as growth and market resilience were the most mentioned reasons for such positive perceptions. Negative perceptions were expressed by 23 per cent of respondents and the main reasons included competition from other countries, increased costs and government bureaucracy.

Respondents had better perceptions of Malta’s location attractiveness for the next three years with half of them stating that this will improve. The reasons given included growth prospects, specific actions by the government, measures resulting from corporate strategies and the skills of local human resources. Those who could not provide an opinion amounted to 22 per cent, the main reason being uncertainty at an international level.

Companies that considered expanding in the future (74 per cent) were almost at the same level as those who did expand in the last three years (76 per cent).

Reshaping bureaucracy is the main suggestion to the government to improve competitiveness. Respondents suggested various measures for the government to adopt in order to make Malta more competitive. These mainly dealt with reshaping bureaucracy, fiscal incentives, energy supply and costs, transport, education and training.

Suggestions that respondents made in order for the private sector to improve competitiveness focused mainly on transport issues followed by others dealing with telecommunications, real estate, accommodation and customer service.

Data for the survey was gathered through fieldwork that was carried out over a period of six weeks ending in mid-May. A questionnaire was administered to participants in face-to-face interviews. Only in a very few cases, participants completed the questionnaire themselves.

Mario Galea, managing partner of Ernst & Young Malta said in his introduction to the survey: “The survey deals with perceptions which may not equate to reality. However, perceptions are a key factor in decision- making.”

He adds: “Winning foreign investment does not just happen. It is a daily game with active players. I trust that the sixth edition of the Malta Attractiveness Survey proves useful in contributing to Malta’s increased efforts and energy to win the game.”

Investment criteria that were rated as attractive by two-thirds or more of all respondents were the following: the level of English of human resources (90 per cent), the productivity of local human resources (86 per cent), the euro as the national currency (86 per cent), the social environment (85 per cent), leisure activities (78 per cent), local human resources skills and costs (both at 69 per cent), cultural entertainment and the legislative environment (both at 68 per cent) and the political environment (66 per cent).

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