Mario Vella is not exactly ‘new’ to Malta Enterprise. He had, after all, spent time as the chief executive officer of the Malta Development Corporation, which together with the Institute for the Promotion of Small Enterprise and the Malta External Trade Corporation were put into a blender in 2004 to form the new agency.
He was assigned the role very soon after the Labour Party come back to power in 2013 and his past role as a president of the party made it all too easy for critics to write his appointment off as a political one with no substance.
We did best in terms of investment promotion when we microtargeted. It is pointless blanket bombing. It is pointless doing generic promotion about how great Malta is. No one gives a damn about that
He was faced with the opposing pressures of getting the agency back on track – at least, the track he believed it should be on – without creating traumas...
“This place has gone through too many dramatic traumas. And the trauma in the past did not come from changes in governments or ministers but from the changes in chairmen who had each had a different vision.
“I did not want to create trauma. We are not just talking about an organigram but about people,” the normally media-shy chairman said.
However, whether traumatic or not, Mr Vella has made several changes, all based on one simple premise: taking Malta Enterprise back to its roots.
“We needed to redistribute resources towards attracting investment promotion. In a way that gets results,” he told The Business Observer.
“It was clear from the outset that Malta Enterprise was not focused on what it was meant to be doing. There is an accumulated institutional memory that has enormous value.”
To understand his point, it might be pertinent to trace the roots of Malta Enterprise back to their origins in 1959, when the Aid to Industry ordnance was introduced to incentivise industrial investment.
“Even then, observers realised that the country would need to become less dependent on military spending and that we would need to concentrate on selling goods and services out of the country. The notion that we need to export was fundamental,” he said.
“There was already the Industrial Development Board in London too. One of its members was Sir George Dowty who then brought Malta Rubber here – now Trelleborg after several changes in ownerships.”
Mr Vella believes that not much has changed since then, in spite of different political seasons. The basic reality is that the country can develop only if it exports and for that it badly needs foreign direct investment.
“That is not to say that local investment is not important. But FDI is always tied to exports. No one comes here to invest in the local market as it is simply too small,” he said.
When he got there last year, he shook his head in disbelief as he felt that Malta Enterprise was doing “everything except what we were traditionally best at doing”.
“For example, why did we get involved with the Corporate Village idea at Mrieħel? This is nothing to do with the validity of the project. But why would Malta Enterprise want to get involved in an office project which would compete with the private sector? Especially since there was an escape clause which meant the government would very likely have ended up taking most of the space if the private sector did not take it up!” he said.
Over the years, each chairman had his own idea of how to attract investment, ranging from having external offices or foreign multipliers to attending conferences and bring trade delegations here.
Mr Vella preferred to go for something he believes had been tried and tested, noting that only a handful of people were involved with investment promotion out of the140 employees.
“We did best in terms of investment promotion when we microtargeted. It is pointless blanket bombing. It is pointless doing generic promotion about how great Malta is. No one gives a damn about that.
“But microtargeting means doing loads of homework before as you are not talking about targeting a country or even a city but about specific companies on the basis of concrete opportunities.”
The concept is simple: identify companies which have issues linked to their location, and offer them a very specific argument for why they should move to Malta, telling them what the costs would be and so on.
“If you have done your homework well, the chances of failure are much more contained. And you know exactly what you have spent,” he said.
“It is much more cost-effective than shooting wildly in the hope that something hits a target.”
However, this approach requires a very powerful research capacity – which was absent when he first went there.
“It was not considered to be important as it was assumed that investors would come of their own accord. That is not the way it works. You have to go and look for them. You also need people with the right skills to do this. And I found them here but they were simply not being used.
“Let us not beat around the bush. There were a lot of people that were not being used and not only people of one political colour. We needed to bring back on board not the non-blues but the good! We were not using our accumulated institutional experience...” he said.
So far, so good. But is this approach working?
The usual way to judge Malta Enterprise’s performance is by the number of projects approved. Mr Vella rather bucks this trend as he has tried to – if anything – deflate the figures. For example, he has tightened up the definition of an ‘expansion’ to be one that really represents an increase in productive capacity.
But in spite of this, the numbers are what he described as “impressive”. This is in part due to the fact that the board now meets monthly – whereas before, the schedule was a bit more “erratic”,he said.
This means Malta Enterprise can now give applicants a reply within a month, as long as all necessary documentation has been provided.
• The 132 FDI and local projects approved by ME in 2013 will carry a total investment of €166.3 million and are envisaged to create 2,611 new jobs.
The result is 182 projects of which 32 were new greenfield ones – that is projects started from scratch. Another change is the type of investment being courted: Malta Enterprise is also looking for investment that does not require industrial factory space – around 30 per cent of applications at present.
“It is not clear that we have as much space as we need. But Malta Industrial Parks has our confidence and solidarity and we think it can solve the issues involved. The demand for logistical space is also an issue. There is space but we need to apportion it wisely and administer it wisely. I think we have made giant leaps forward,” he said.
Thinking outside the box has resulted in Malta Enterprise now at an advanced stage of negotiations with reputable universities to set up campuses, aiming not only at North Africa but also at the Mediterranean region.
He also had to ensure that the Life Sciences Park did not turn into an iconic – but empty – building.
“The project sounded great and the building sounded greater. But although there were words aplenty, nothing was done to fill the place,” the chairman scoffed with another shake of the head.
To make matters worse, in his eyes, the €40 million tag meant that the rent Malta Enterprise would have had to charge tenants would have been so high that it would have been wildly uncompetitive.
He wanted to tweak the project in a way to make it affordable to investors – but he was frustrated by the onerous and inflexible conditions of the grant agreement.
“Any deviation from the agreement puts at risk the original sum promised through the European Regional Development Fund – €20 million of the total – and might actually incur a fine, which is not normally peanuts,” he said.
He started going through the plans, furious to see how much space was not being maximised.
“Was it necessary to have a conference hall there? And was it essential to spend €5 million on plastic cladding – even if it is iconic and attractive!” he growled.
He found that there was not that much he could change. The plastic cladding had to stay but he “thought out of the box” and cut from other areas without major changes to the original cost-benefit analysis. One significant change was to dedicate one building to information technology, creating a ‘digital creativity hub’ which would complement and support the other activities in the park.
“We are now in a position to say that we are well ahead in allocating space there and we are talking to major players in very, very innovative fields,” he enthused.
“I wish I could tell you more about them as I am sure you would be as excited about it as we are... But there are very few players in these areas and it would be very easy to identify them.
“The most important thing is that we are attracting them on the basis of the good reasons why they should be in this particular building, in this country and in this region. We could not rely on cost structure – so we had to be innovative and offer something that others could not do...”
Changes to the focus. Changes to the structure. Changes to the existing projects. Will it work? How will his tenure as chairman be judged?
“The proof of the pudding is in the eating,” he shrugged.
“Let’s wait and see how it all works out in practice.”