Just two months after the World Bank found Malta the most difficult place to do business in Europe, more than half the number of foreign-owned firms based on the island are planning to expand their business here.
Had the situation been as difficult as the World Bank made it out to be in its report, businesses would be resorting to retrenchment, not expansion.
In any case, the Bank’s assessment seems to run diametrically opposite to that of the European Commission, which has found that Malta performs best when it comes to creating a business-friendly environment.
News that the overwhelming majority of foreign-owned firms based in Malta plan to expand their operations comes at a time when it is becoming increasingly difficult to attract new foreign direct investment.
According to the latest figures coming from the National Office of Statistics, foreign direct investment in Malta last year was the lowest in seven years. Inflows were estimated at €371 million, with more than 80 per cent originating from the EU.
The World Bank report on Malta does no good for the island’s efforts to attract new investment, more so at a time when the flow of foreign direct investment generally may be shrinking.
Hopefully, therefore, the views of the foreign-owned firms operating here would go some way to redressing the situation. According to a survey on Malta’s attractiveness as an investment location, carried out among 90 chief executives by Ernst and Young, while 86 per cent of respondents said they saw the island as being able to attract more foreign investment, 58 per cent were planning further expansion.
Significantly, respondents in the banking, insurance and other financial services sectors consider the island to be more attractive for foreign directive investment than do the respondents in ICT, telecoms, iGaming, manufacturing and pharmaceutical sectors.
Although this does not mean that the island is not attractive for the other sectors, it is important to establish why this is the case and so remove any obstacles that may be standing in the way of attracting more investment in other fields, particularly manufacturing.
Just as it was disadvantageous in the past to concentrate, out of necessity, on particular lines of manufacture, it would be wrong now to concentrate on financial services to the exclusion of others. It is wise to have a balanced economy to avoid serious repercussions if factors beyond the island’s control were to hit a profitable business line.
Manufacturing has been found by respondents to be the least popular among investors. This may so but there are various lines of manufacture that suit Malta if these find the right conditions and, perhaps, incentives. Ideally, the island should keeping going for the right mix as it is doing now; new lines, such as aviation and pharmaceutical business, have generated new employment avenues in skills that were undreamt of in the past.
Respondents to the Ernst and Young survey found proficiency in English, living standards, quality of life and an attractive tax regime as being among the reasons for the attractiveness of Malta as an investment location.
Proficiency in English is not as good as it used to be, a matter that ought to raise some concern. Problems on the downside are the size of the domestic market and rising costs.
The constraints imposed by the domestic market are unlikely to change unless we build a bridge to mainland Europe. As to costs, outpricing ourselves will cost us dearly.