Ernst & Young recently published the report of a survey conducted among top executives of foreign-owned companies operating in Malta on the reasons for a foreign company to retain, expand or develop its investment in Malta. It branded this survey Malta Attractiveness Survey 2005 - hence the title of this week's contribution.
This survey was carried out in parallel with Ernst & Young's European Attractiveness Survey 2005.
We often hear comments about the need to maintain the competitiveness of firms operating in Malta. We also very often hear comments that Malta is not capable of attracting foreign direct investment as it once did.
Therefore this survey is a very important contribution to help us understand what makes Malta attractive to foreign investors - if it still is. The point is that Malta is seen to add value to companies that operate here, be it in the services or the manufacturing sector. I feel that very often we tend to underestimate the value that Malta brings to such firms, because we refuse to accept that none of them owes us a living.
If we accept the premise that investment can flow freely between countries (as in fact it does) and if Malta were to stop being attractive, such companies would move elsewhere.
Today there are many other locations where such firms could locate their investment, especially since Malta is definitely not the flavour of the month. Therefore looking at the European Attractiveness Survey 2005, one is able to place Malta's attractiveness into a wider perspective. This week's contribution brings out some points on the Europe-wide survey, while next week's contribution will focus more specifically on the Malta survey.
Malta does not feature in this survey as such and this is perfectly understandable given the size of Malta's internal market, the lack of Maltese-owned firms that are significant players in the global field, and the lack of a global institution that facilitates foreign investment such as a highly liquid stock exchange.
However, the fact that we were - and will remain - small players means that we do not require a globally significant level of foreign direct investment to satisfy our requirements for job creation and economic growth. On the other hand, the fact that Malta does not feature at all in a European survey on the attractiveness of locations for investment would indicate that Malta still needs to sharpen its business identity. It still needs to identify what is its real competitive advantage and make that known. One example worth mentioning is India, which has identified a market niche in back office operations and is seeking to exploit that niche fully to the extent that back office operations are becoming synonymous with India.
The high level of openness of our economy (hence the dependence of our economy on our ability to export goods and services) and the high level of stock of foreign direct investment present in the country (a company investing in Malta in the manufacturing sector way back in 1961 is still around, very much alive and strong, together with a number of others that came here in the 1960s, 1970s, 1980s, 1990s and this decade) would make one think that the country has a clear business identity. It probably does, as otherwise we would not have achieved the economic results that we have achieved in the last 40 years, in the absence of any natural resources. However, it still remains hidden for most, and that would include business decision makers.
The European Attractiveness Survey shows that Western Europe is still the world's most attractive economic area and central and eastern Europe are increasingly being seen as competitors to China. The increased importance being given to central and eastern Europe is undoubtedly attributable to these countries' accession to the European Union. Thus we should never underestimate the positive impact of Malta's own accession on the perceptions that business leaders have of our country.
Western Europe is a strong contender in an investment decision searching for skills in a reduced business environment. Central and eastern Europe become important if a low cost workforce and a competitive rate of production is required. This is a pointer for Malta as it is neither one type of location nor the other. It is probably an interesting cocktail or a murky hotch-potch of both, depending on one's own viewpoint.
The survey also identifies a number of criteria on which investment decisions are based. These range from quality of life, to size of domestic market, to the level of wage costs, availability of labour skills, the political, legal and regulatory environment, the social climate, to local language, culture and values among others. The wide range of criteria is an indication of the complexity of the decision on where to locate an investment.
These criteria also start to give an indication as to where Malta's specific attractiveness lies, which will be discussed next week. What we need to appreciate, however, is that Western Europe is definitely not a waning force in terms of its ability to attract investment and that Malta can still play its part within this scenario.