A fall in the stock of foreign direct investment that was recorded following the withdrawal by a German bank of more than €2 billion it held in Malta to put it to better use could have given an unnecessary shock. However, it would have been worse had the drop been caused, for instance, by the winding up of a foreign-owned firm in industry or tourism.

Fluctuations of this nature are par for the course because banks or transnational corporations convert idle holdings into new investments. Yet, the fall in the stock and flow of foreign investment shines a light on a subject that is of direct interest to all countries as they seek to recover from slowdowns or recessions or, if they are doing well, strive to further expand their economies.

The fall, last year, in the stock of direct foreign investment held in Malta was of €3 billion, attributable mainly to drops in equity capital held by financial and insurance firms. The largest slice, €2 billion, is said to have represented equity held by Deutsche Bank. There were other foreign banks that did the same. At the end of the year, the stock stood at €9.6 billion.

What is somewhat worrying is that the investment climate is still unsettled, with the United Nations Conference On Trade and Development recording a drop of 18 per cent in global foreign direct investment in 2012. In its view, the road to recovery in foreign direct investment is proving bumpy and could take longer than expected as economic fragility and policy uncertainty in a number of major economies give rise to caution among investors.

This means that Malta has to work harder to ensure it will get its share, not just in financial and insurance sectors, but, particularly so, in sectors that pump blood into the economy and provide employment.

Malta may have not done all that bad over the years in attracting foreign investment as its resilience, performance and state of its economic set-up shows. New business lines have given a fresh dimension to the economy. The Chinese investment in power generation and the string of new projects announced recently by Malta Enterprise, and which were approved in the first half of this year, also indicate a degree of activity that will do the economy well if they all come to fruition

However, Malta badly needs to pull up its socks if it wants to do even better. Forget all the stereotyped selling points, such as, for example, that all Maltese are bilingual, which some would challenge. The situation on the ground, as seen by outsiders, has to improve if the island is to get better rankings.

A World Bank ‘Doing business’ report for last year places Malta down in the overall ‘ease of doing business’ index for local firms – 103 out of 189, well behind Iceland (13), Ireland (15), Estonia (22), Latvia (24), Botswana (56), Bulgaria (58), St Lucia (64), Ghana (67) and even Rumania (73).

Malta’s ranking in the index for ‘starting a business’ is 161 and that for dealing with construction permits, 163. These rankings ought to bring the island to its senses.

But there is also a political angle. Investors would also check out a country’s regulatory structures for their efficiency and, even more so, for their fairness.

They would investigate, too, a government’s ethical behaviour, transparency and the degree of political patronage in the country.

There is a price to pay for shortcomings in all these and other vital areas.