With a total GDP of over $10 trillion and 17,110 foreign direct investment (FDI) projects in the past five years, the greater Mediterranean region is already one of the most attractive FDI destinations worldwide, according to the new EY BaroMed 2015: The Next Opportunity.
The report charts the pattern of FDI across 27 countries in the region, including Malta, the features that shape it, the perceptions of investors and the forces that will shape them tomorrow.
According to the survey of 156 top executives from 20 countries, the Mediterranean area is deemed to be more attractive than Europe (51 per cent), Asia (52 per cent) and Africa (60 per cent). When asked to compare it to Europe, investors note its faster economic growth and multiple business opportunities, with sizeable, growing markets; high skills and low costs creating a competitive advantage.
According to EY BaroMed 2015, the Med region promises greenfield opportunities in business services (15.4 per cent), digital industries (10.8 per cent) and financial services (10.6 per cent) – the top three greenfield FDI sectors across the region (2009-2013).
This augurs well for Malta, given the country’s focus on generating foreign investment in these areas, both in recent years and going forward, Ronald Attard, EY country leader for Malta, noted.
The report identifies eight FDI growth drivers for the region: digital demand; entrepreneurship; urbanisation; economic competitiveness; industrial diversification; renewable energy; social development; and transparency.
Despite a general positive outlook, many respondents of the BaroMed 2015 pointed out risks present in the region: instability (53 per cent on average in the five sub-regions) and lack of transparency (29 per cent) are the main roadblocks to investment and sustainable growth.
While the EU Med area fares much better than other areas in this area, this is still a key concern among investors.
On the other hand, respondents to EY’s Malta attractiveness survey and EY’s European attractiveness survey ranked the stability and transparency of political, legal and regulatory environment as the most important parameter when deciding on where to establish operations. In all, 77 per cent of respondents to EY’s 2014 Malta attractiveness survey indicated that Malta is attractive in this area.
“Our research shows that Malta consistently scores highly on the stability stakes and the country should capitalise on this competitive advantage when trying to attract foreign investment.
“In addition, respondents to EY’s BaroMed 2015 are apprehensive about the lagging infrastructure in some countries.
“Malta’s recent drive towards PPPs and the focus on attracting infrastructural investment from outside the region appears to be helping the country to overcome these challenges,” Mr Attard said.