In 1987 Malta had a change of government. This was followed by a revolution not only in our way of life and our democratic credentials but also in our economy.
That year witnessed the first steps in the restructuring of Malta’s infrastructure through the construction of a new power station in Delimara, new desalination plants, a state-of-the-art communication system, advanced distribution systems for electricity and water, a new air terminal, a freeport terminal and new and better roads.
Malta’s greatest revolution was in our economy. During 16 years of socialist administration half of Malta’s employees were in the public service going up from close to 20 per cent in 1971 to about 50 per cent in 1987. Only between 1980 and 1987, 11,000 jobs were lost in the private sector – from 76,000 to 65,000. At the same time 9,000 workers were added to the public sector – from 37,000 to 46,000. To these should be added 8,900 employees enlisted with Id-Dejma, putting up the increase in the public sector to 17,900.
If our economy were to progress this trend had to be reversed. From day one the Nationalist government led by Eddie Fenech Adami, was committed to maximising the manufacturing potential through a number of initiatives foremost among them the Industrial Development Act offering a highly competitive package of incentives. Malta already had another law dating from the mid-1960s which provided for incentives in the manufacturing industry. This was reviewed on the basis of a comparative exercise which was done independently. In the tourism sector the aim was to go upmarket, shifting from quantity to quality.
Up to 1987 Malta’s economy was built around the twin pillars of manufacturing and tourism. In 1987 Malta embarked on a third pillar: financial services. This was to give our country a new lease of life in its endeavours to have a fully fledged economy which relies on the private sector for the creation of wealth.
In July 1987 the Offshore Investment Development Advisory Committee was set up. Following the publication of a White Paper about offshore activities in September of that year, legislation was passed by Parliament in November to regulate offshore business.
The financial services sector has never looked back. It went from strength to strength even in the difficult years
This legislation included the Malta International Business Activities Act which provided for the setting up of an authority responsible for the supervision of offshore banks, insurance companies and trading companies; the Offshore Trust Act which regulated and recognised offshore trusts and the Merchant Shipping (Amendment) Act, which revised the arrangements for the registration of ships under the Maltese flag.
In January 1988 Chase Manhattan Bank N.A. of New York was appointed as the government’s consultant in this field complementing the work of the Offshore Investment Development Advisory Committee.
The Wall Street Journal of April 11, 1989, quoted Joseph Fenech, parliamentary secretary for offshore activities and maritime affairs, as saying that “Malta, as distinct from other offshore centres, has drafted and passed its legislation before anyone has set up business here. Everywhere else they legislated afterwards as a reaction to evolving situations”.
The legislation passed set up the legal framework for the development of an international offshore centre. Fenech also said Malta had chosen Luxembourg as the principle role model. Accordingly, it looks to be in a good position to combine a successful offshore services industry with full EU membership. It should be noted that there was concensus between government and the Opposition about offshore development.
Subsequently the Malta International Business Authority (MIBA) was established.
Before Malta’s accession to the European Union our financial services went ‘onshore’ from ‘offshore’. Today this third pillar of our economy is worth a double digit figure in our gross domestic product. Financial and insurance activities employ about 9,000 people. The World Economic Forum Global Competitiveness Report places Malta well within the top 50 most competitive countries in the world.
The financial services sector never looked back. It went from strength to strength even in the difficult years following the 2008 worst international economic crisis in 70 years. If nothing is done to harm this sector, I am sure that financial services in Malta will continue to grow.
Malta turned the corner in 1987. It’s good to remember that as from that year the Nationalist government restored full democracy to our country and changed our economic dimension. Hitherto we were accepted as a country with a social market economy.
Times change. But the PN in government remains the party that delivers. Nationalist governments attained independence for Malta; membership of the EU; membership of the euro area.
Successive Nationalist administrations transformed our economy from one based on the expenditure of the British Services departments to one built around the triple pillars of manufacturing, tourism and financial services. Thanks to their foresight we have today a booming economy. And full-employment.
Joe Zahra is former editor of In-Nazzjon.