They say that beauty is in the eye of the beholder. And it is: finding someone attractive is a very subjective experience and depends on your singular and individual tastes. The same applies to many other things in life, from travel and food to the car you drive and the house you live in.

But business is a whole different ball game, especially foreign direct investment, which is based on a country’s attractiveness.

The attractiveness of a country depends on various factors. Seeing how other countries are faring provides plenty of answers. According to a report by the United Nations Conference on Trade and Development, foreign direct investment grew year-on-year to $1.45tn in 2013. It is expected to rise to $1.6tn this year, $1.75tn in 2015 and $1.85tn in 2016.

In world rankings, the Asian region is the one with the most foreign direct investment: in 2013, it attracted $426bn, which amounts to almost 30 per cent of worldwide investment. Most of this investment was made in China, the Republic of Korea and Taiwan.

Let’s take China as an example. Think of the country that attracts foreign direct investment as a good host. The influx of foreign investment to China is due to the country’s business confidence, capital availability and geopolitical climate. The infrastructure – such as roads, highways and bridges that are essential for the transportation of goods and commuting of workforce – is well developed, resources are available, and the workforce is skilled, productive and relatively low cost.

China’s qualities are mature enough to sustain long-term investments by institutional, corporate and individual investors. Moreover, low transaction costs – a result of the maturity of these attractive elements – enables investors to reap generous profits.

Now let’s turn to Malta. What makes it attractive to foreign investors?

What makes Malta attractive to us, as locals, is mostly aesthetic. We admire Valletta’s baroque beauty, the stunning stretches of countryside up north and the undiscovered southern belles. We relish the fact that the island is safe and we enjoy the kind of weather that is repeatedly voted as among the best in the world.

But is that enough to convince other countries to invest in Malta? It helps, but beautiful architecture and a varied history alone will not attract foreigndirect investment.

According to Malta Enterprise, in 2013, its board of directors approved a total of 51 foreign direct investment projects – this amounts to more than the total number of foreign direct investment projects approved in the previous four years. In total, these projects translate into an investment of more than €108m and over 1,610 new jobs.

In terms of the number of projects, the UK was the major source of foreign direct investment with 12 projects, followed by Germany and Italy with eight projects each and Spain with seven projects. The sectors involved were varied, including aviation services, electronics, environment and waste management, equipment, ICT and digital game development.

However, foreign direct investment suffered last year when Deutsche Bank withdrew more than €2bn from Malta. This caused the stock of foreign direct investment to drop by almost 25 per cent, from €12.6bn to €9.6bn.

Ongoing efforts to simplify and reduce the administrative burden and bureaucracy should be maintained

Still, Malta is doing fairly well, especially within the context of the EU. In fact, even though foreign direct investment to the EU began to grow again last year, with EU member countries receiving $246bn, the EU still received less than 30 per cent of what it was getting in its peak year 2007.

So, is Malta attractive enough to foreign direct investment? And if yes, what are the qualities that make Malta attractive?

For the EY’s Malta Attractiveness Survey 2013, 91 respondents from a variety of sectors submitted their views through an electronic questionnaire. Findings show that 79 per cent of investors believe that Malta is currently attractive to foreign direct investment, and more than half think that it will remain so in the next three years. This leads to a promise of growth: in fact, 56 per cent of the foreign owned companies surveyed indicated that they have plans to expand operations in Malta in the next 12 months. A larger percentage – 59 per cent – said that they expect to remain in Malta in the next decade.

Regarding the attractiveness criteria, social climate stability scores highest, with 89 per cent, followed by the stability and transparency of political, legal and regulatory environment at 86 per cent. Corporate taxation stands at 82 per cent. The least attractive investment criterion is transport and the logistics environment.

Respondents to the same survey also made their suggestions as to how Malta could transform its existing challenges into opportunities. Ongoing efforts to simplify and reduce the administrative burden and bureaucracy should be maintained, while at the same time reducing certain operating costs and improving institutional services, such as the law courts.

Malta should also promote additional specialised training programmes in traditional and emerging sectors. While one of Malta’s most attractive features is its multilingual and flexible workforce, EY’s Malta Attractiveness Survey 2013 shows that gaps in certain sectors, including ICT, iGaming and certain specialised financial services still exist. Another suggestion is to enhance capital incentives, or remove any disincentives, to support sectors such as manufacturing, which have been committed to Malta for many years.

Innovation, of course, is key to attracting foreign direct investment. Therefore, measures to further stimulate research and development and innovation need to be adopted, while increasing support for SMEs. Better use of EU funds would also help in this regard.

Last but not least are strong marketing efforts. It’s good to strengthen Malta’s attractiveness, but we need to tell foreign investors about it. Respondents to the EY’s Malta Attractiveness Survey 2013 suggest that Malta should use investment delivery partners to drive reach and tap existing market knowledge. Malta could also benefit from the setting-up of a single national brand supported by all promotion agencies.

All this within a context of reputation and integrity. To launch its Malta Attractiveness Survey 2013, EY organised a national conference which also looked at 50 years of foreign direct investment in Malta and how the scenario has changed in these decades. And that is key because what also makes Malta attractive is its longevity, which then inspires reputation and integrity. Historically, from the Great Siege to World War II, Malta has drawn strength from its commitment and resilience. And it is these same qualities that strengthen our reputation and, in turn, attract investment.

Key findings from EY’s 2014 Malta attractiveness survey

• Malta’s most attractive features are stability and transparency of social, political, legal, corporate taxation and regulatory environment.

• 56 per cent of foreign investors have expansion plans in the next three years.

• Over half of all respondents believe that iGaming will be the business sector driving Malta’s growth in the next five years.

• 55 per cent of respondents plan to stay in Malta in the next 10 years, while 39 per cent are uncertain about their long-term plans.

• 79 per cent of foreign investors find Malta attractive for foreign direct investment.

• Malta’s marketing efforts as a foreign direct investment destination are considered effective by 40 per cent of respondents.

• 57 per cent consider the local labor market is providing the needed specialised skills

• 51 per cent of respondents think that the Maltese legislative framework creates a competitive advantage within European and global markets.

Inspiring confidence

According to the 2014 A.T. Kearney Foreign Direct Investment Confidence Index:

• The US tops the FDI Confidence Index for the second year in a row, showing sustained investor confidence in its ongoing economic recovery.

• China is in second place. Foreign investors are especially drawn to its huge internal market.

• Europe has made an important comeback. The top 25 on the A.T. Kearney Foreign Direct Investment Confidence Index includes the UK (fourth), Germany (sixth), France (10th) and Italy (20th).

• Spain, despite its ongoing economic struggles, ranks 18th.

• A core group of developing economies continue to enjoy investor confidence. Apart from China in second place, this core group includes Brazil in fifth place and India in seventh place. Other emerging markets feature: United Arab Emirates in 11th place, Mexico in 12th place, South Africa in 13th place and Malaysia in 15th place.

• 18 per cent of respondents to the A.T. Kearney Foreign Direct Investment Confidence survey say that they are much more optimistic that the global economy had improved from a year earlier. Furthermore, 12 per cent expect the global economy to recover within the year.