Last week's contribution was the first part of a series of two focusing on what makes Malta attractive as an investment location. What spurred this was a survey entitled Malta Attractiveness Survey 2005 undertaken by Ernst & Young. This survey was carried out in parallel with the European Attractiveness Survey 2005, also carried out by Ernst & Young. Last week we looked at the results of the Europe-wide survey.
This survey, among other things, identified a number of criteria on which investment decisions are based. These range from quality of life to the size of domestic market, the level of wage costs, availability of labour skills, the political, legal and regulatory environment, the social climate, the 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. The very pertinent question that needs to be asked is where does Malta's attractiveness lie in this scenario and what role can it play in the field of foreign direct investment, considering that our economic growth depends greatly on our ability to attract such investment.
It is more than evident that the inexistence of a sizeable domestic market and the lack of natural resources that are used as inputs into a production process put Malta at a distinct disadvantage when compared to a number of other countries. Moreover, Malta is not identified with a world-class brand such as Finland is with Nokia. In addition, the services sector has only been developed to a significant extent in the last 17 years, making us lose out on a number of opportunities.
To this one must also add the point that Malta can never be a low-cost mass production location, given that the availability of additional human resources is hampered by the presence of a number of significant economic activities in our economy. In any case, the level of labour costs militate against such grand projects. All this would mean that the basis of Malta's attractiveness has to be found in aspects that are far less tangible as we are neither a "low-cost workshop" nor a "market with a huge potential".
On the other hand, among the advantages mentioned by companies that have already located in Malta, one would find aspects like stability, the social climate, the political, legal and administrative environment and quality of life. These are highly intangible aspects as one cannot quantify the benefits of Malta's social climate and what it is exactly that makes Malta's social climate better than that of other investment locations.
Equally, our political squabbles may lead one to think that the country is not stable enough. It is evident that foreign investors think otherwise. The same needs to be said about our administrative environment, which we may feel is too bureaucratic, while foreign investors would not think so. We also complain about our quality of life, but foreign investors feel that it is an asset. In effect all these aspects give a very positive value to Malta, that some of us may never have thought existed in the first place.
What all this indicates is that the environment within which foreign investors have to operate in Malta is very positive and is comparable to that in their own country. The knowledge of the English language and our values continue to make the island look more like home. And this is where the issue of labour costs and the skills of our labour force become relevant.
Foreign investors are likely to feel that Malta is attractive to them because they can enjoy a quality of life and have to cope with an economic, political, legal and social environment that is not dissimilar to what they are used to, but at a lower cost. They can also find a supply of skilled labour (albeit a rather small supply) at a cost that is much lower than that in their own country. The downside of all this is that since Malta looks like home for foreign investors, it is very often overlooked because it is not exotic enough.
Up to a great extent Malta's attractiveness to foreign investors is unique. And this uniqueness is due to the fact that such attractiveness is attributable to several factors, which are in themselves difficult to quantify. This is a problem the scope of which goes well beyond political games or public holidays falling on a weekend - hence it requires everyone's input.