Weaker investment attractiveness

Weaker investment attractiveness

The success of a country’s management of its strategic objectives is assessed by its ability to balance financial results, the quality of life of its people, the way public and business institutions serve the community and the skills base of its human resources. It is only when these four elements are in harmony that future prosperity can be achieved.

The annual EY attractiveness survey relayed mixed messages about Malta’s attractiveness to potential investors. The headline news is that Malta’s overall attractiveness score in 2017 stands at 78 per cent, down from 87 per cent last year.

The element that is of greatest concern is that of the political, legal and regulatory environment. Investors’ rating of Malta on this criterion fell from 85 per cent in 2015 to 70 per cent in 2016 and 58 per cent this year. It is a worrying trend because investors give great importance to this critical success factor when planning where to invest.

During the annual conference, when the survey was launched, the business community expressed concerns about aspects of the education system. Kevin Borg, director general of the Malta Chamber of Commerce, Enterprise and Industry, sounded an alarm bell when he argued that the education system is propagating a widening skills gap that is ill-preparing younger generations for tomorrow’s economy.

He went further and challenged the sacred cow of both major political parties – students’ stipends. A tweaked stipends system should be considered, encouraging students to take up careers the country needs, he said.

There is also a significant drop in how respondents to the survey view the future investment attractiveness of Malta. While 58 per cent of those interviewed last year said they considered that Malta would still be attractive in three years’ time, the figure has dropped to 54 per cent.

A long-term threat to Malta’s competiveness is the skills limitations of the labour market. While investors generally have plans for expanding their business in Malta, 62 per cent said their expansion plans depend on their ability to fill vacancies.

International political developments that have a direct impact on Malta are another important competitiveness factor. This year’s EY survey ranked corporate taxation as the most important factor that defines Malta’s attractiveness. The European Commission is more determined than ever to deprive the smaller EU states, including Malta, of their right to veto tax reforms. If this becomes a reality, Malta’s attractiveness for iGaming and financial services may suffer.

It is also evident that Malta needs to keep up with changes being made by other countries in the regulatory and legislative framework.

The competitiveness survey identified Malta’s strengths but also exposed our weaknesses. It is now essential that the country’s strategic objectives are defined clearly so that the necessary tactics to them are understood by all. Unrestricted growth in a very limited number of economic activities could expose the country to concentration risks and also bring about a deterioration in the quality of life of people.

The reaction to the recent tragic event of a journalist’s murder showed how fragile investors’ trust in our country could be if we do not show the ability to strengthen our institutions.

GDP growth and low unemployment rates are always desirable but are not the only criteria that gauge the prosperity of our society.

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