It is hard to believe, but even Greece, riven by financial difficulties and wallowing in debt, is better than Malta when it comes to “the ease of doing business”.
With the government boasting about the work it is doing to make Malta more attractive for foreign investment, one would have thought the island would be classified among the top countries in the ease-of-doing-business ranking.
As the finance minister basks in the glow of the latest credit rating agency’s report confirming earlier European Commission analysis about the progress being made in the economy, a World Bank report has thrown the spotlight on a matter that should perhaps make the government less exuberant.
In other words, while no one doubts the advances being made by the economy – fruit of years and years of hard work put in by successive administrations, entrepreneurs and workers – it would be more prudent to take stock of problems that could bring about difficulties in the drive to keep raising the rhythm of economic growth.
It must have come as a shock to the government that, according to the World Bank’s Doing Business report, Malta is becoming less, not more, business friendly. In the report for 2015, Malta has slipped four places, to 94th out of 189 economies. The top two countries are Singapore and New Zealand.
On a regional level, Malta is classified as having the least friendly business environment among the 28 EU members, worse than even that of Greece and Cyprus, which both required bailouts, and Croatia. This is far from being a certificate of excellence for Malta and more so for the government that prides itself on being so forward-looking and efficient.
What exactly is the Doing Business report? The World Bank describes it as its flagship publication. In its own words, it measures the regulations that enhance business activity and those that constrain it. It presents quantitative indicators on business regulations and the protection of property rights that can be compared across no fewer than 189 countries.
Areas included in this year’s global ranking include ease of doing business; starting a business; dealing with construction permits; getting electricity; registering property; getting credit; protecting minority investors; paying taxes; trading across borders; enforcing contracts; and resolving insolvency. The worst ranking for Malta is for getting credit.
It is therefore a very comprehensive report, surely one that prospective investors are likely to leaf through before even thinking of coming to Malta to test the ground.
Of course, this is not to say all is negative when it comes to doing business in Malta. This can hardly be the case, for had this been so the island would not have attracted so much investment in so many lines of economic activity, from manufacturing to the services sector.
However, this is not the point. If the island had a more efficient administrative infrastructure it might be in a better position to attract a greater flow of foreign direct investment, which is what generates new activity in the economy.
Portugal, Spain, Italy, Greece, Cyprus, and San Marino have a better ranking than Malta when it comes to the ease of doing business.
Take another key ranking that figures prominently in a country’s efforts to generate new economic activity: easy of starting business. Malta ranks in 136th place.
There are some good rankings, such as those on the ease of trading across borders and payment of taxes but, ultimately, it is the overall placing that counts most.