Key people in the financial services industry are concerned that the international media is interpreting the citizenship sale as a scheme to fend off economic crisis and fear this will have negative repercussions on the industry.
The news that Malta is putting its citizenship up for sale has made news all over the world.
Some of the headlines clearly linked the scheme to economic trouble, even though this is not the case: ‘Malta sells its citizenship to get out of the crisis’ (24 Horas, Chile); ‘Special offer: become Maltese at a bargain price’ (L’Opinion, France); Cash-strapped EU Countries hawk their passports’ (Die Welt, Germany); and ‘With its cash-box empty, Malta puts its citizenship up for sale’ (La Notizia, Italy).
Financial services operators who spoke to The Sunday Times of Malta expressed concern that this negative perception would have an adverse impact on the industry.
Francis Vassallo, former Governor of the Central Bank, said: “We’ve opened up a Pandora’s Box. The Government has been warned by several entities – now we have to face the music.”
He said the sale of citizenship was normally related to economic difficulties, hence the media reaction. Mr Vassallo said he was at a financial services conference in Boston, US, the day the citizenship scheme was unveiled in October. “Immediately one of the panel members turned to me and asked me if Malta was going through a financial crisis.”
Perception in the financial industry was very important, he said. “And as a former government official I can say perception affects the economy.
“Malta is financially and economically very sound. But if the contrary is the perception, it will definitely impact negatively,” he said, noting that the Government had a lot of work to do “to dispel the myths”.
Mr Vassallo recalled the time when the economic crisis hit Cyprus and a comment was made in the media that Malta would follow suit. “We had to step in very quickly to quash the rumours. And we overcame it very quickly because we had the IMF and the EU immediately behind us.”
According to John Huber, a specialist in tax advice, the negative international media reports could also impact the property market. “That would in turn impact our banks, so on and so forth – and all for the wrong reasons because fundamentally it’s not even true.”
“The international headlines are saying Malta is in crisis and that we’re doing this to cover up our deficit – but we are a country that has never asked for a bailout. It’s unfair, it’s journalistic sensation – and that can be bad for Malta, of course,” Mr Huber said.
David Grixti, who leads one of the largest financial services firms on the island, said reports in the international press were the result of “lack of foresight” and “lack of consensus”.
Making it clear that this was not about politics, nor about the Nationalist Party’s opposition to the scheme, he said the business community and the financial services community had warned the Government the scheme would be interpreted negatively by the international media. “Now we face the music,” Dr Grixti said.
He said the industry in Malta was “a tiny little speck” in Europe but over the past 15 years it had been growing steadily. However, the citizenship scheme was “a golden opportunity” for Malta’s competitors, namely Luxembourg, Ireland and the UK, “to crush” Malta’s financial services industry.
The scheme was a golden opportunity for Malta’s competitors to crush our financial services industry
“You can see from the media reports that competing jurisdictions are using the international media to throw bad light on Malta. It’s shocking that a Government elected with that majority would choose to act in this manner.
“For the Government not to have understood this and for it not to try to engage with the financial industry on this matter shows a lack of knowledge of how you build credibility and reputation in the international market,” he said.
He said the perception that Malta was not doing well economically – “even though this is false news” – would put off investors. “How is Malta going to combat that? Do we have the resources?”
His main concern, he said, was that this could affect high-end employment in the financial services.
“The citizenship scheme is a one-time payment but I’m thinking of the families whose livelihood depends on the financial services,” Dr Grixti said.
Tonio Fenech, an operator in the financial industry, said the negative public perception could put people off the scheme.
“But it depends a lot on whether the negative messages are protracted in time, and on how we counter it from here.
So we have to be a bit more active in Malta to ensure that the proper messages go out.”