Infrastructure, domestic market and innovation ‘least attractive’ FDI parameters

Transport and logistics infrastructure, domestic or regional market and R&D and innovation environment are considered to be the least attractive foreign direct investment (FDI) parameters in Malta.

The results emerge from the 11th edition of the EY attractiveness survey, launched today at the Westin Dragonara. This year’s theme is ‘Malta: open for business’.

The survey’s two-step methodology analyses both the reality and perception of FDI in Malta.

84% of executives surveyed think that Malta is attractive for FDI. This is an increase of five points over the findings from our 2014 survey.

Respondents from the financial service sectors tend to be more optimistic about Malta’s current attractiveness, with manufacturing respondents having the lowest rating among different sectors.

Stability of social climate and stability and transparency of the political, legal and regulatory environment
are the top two ranked Malta FDI parameters for respondents.

59% of respondents ranked the stability and transparency of the legal, political and regulatory environment as one of the top three parameters their companies took into account when deciding on a location in which to establish operations. This was followed by corporate taxation (50%) and local labor skill levels (48%).

The flexibility of labor legislation and the level of protection of intellectual property rights (IPR) were among the least important factors that decision-makers considered.

Respondents to EY’s European attractiveness survey seek transparency of the legal, political and regulatory environment (46%) and the country’s or region’s domestic market (37%).

The quality of transportation and logistics infrastructure has become the third most important factor in choosing a location (30%), up five points and two places in the ranking.

55% of companies surveyed have some form of expansion plans in Malta over the next year.

60% believe that iGaming will be the business sector driving Malta’s growth in the next five years. This was followed by the fund administration and asset management sectors (at 43% and 41%).

The entities that are considered to be most open to business include the central government (65%) as well as the regulatory authorities (61%).

The country’s legislative framework is also looked at relatively positively from this point of view.

Companies are investing in knowledge transfer through experience, training or both. 82% of the companies surveyed are willing to invest in training to develop skills, needed either through offering internships and vocational training or through financial help and sponsorship.

It seems that the demand for skilled labor is outstripping supply. 47% of the companies surveyed report that they are able to find the required specialized skills in the local labor market. Filling these skills gaps is a necessary prerequisite for around 52% of those considering expansion plans.

It is reassuring to note that the Maltese legislative framework
 is seen to create a strong competitive advantage in both the European and global markets, with this proportion increasing by a full 8% to 59% in this survey. However, it must be noted that the “no” replies also increased by 3% to 32%.

The reforms required for sectors to become leaders in innovation included reducing bureaucracy (67%), improving education and training in new technologies (49%) and the development of a culture of innovation and creativity (47%).

Respondents were asked if Malta’s standing as a regional hub
is being affected by developments in the Mediterranean basin. 28% believe that Malta’s standing as a regional hub in their sectors is gaining ground by ongoing developments; nearly 17% believe that it is losing ground and just under 40% believe that it is staying the same.

Encouraging policy maker, Ronald Attard, country managing partner at EY malta, said Malta could take a lead in regulating online financial services (FinTech). These can take the form of crowdfunding, peer-to-peer lending and similar platforms.

At present there is no pan-European legislation on these services. “Malta can do what it did with online gaming a decade ago and take a lead in regulation in Europe. If we are serious about this, we need to think and act quickly,” Attard said.

Listing a total of six concrete suggestions for discussions, Attard also said there was one untapped source of labour that risked becoming a drain on finances, when it could be contributing to further economic growth.

“Irregular immigrants arriving to our shores are either languishing in detention centers or being employed illegally in the underground economy. Malta could take a path-breaking step by surveying their skills, imparting new ones to them and turning them into productive employees with dignity, rights and obligations. Simultaneously, the ban on irregular employment of immigrants should be strictly enforced.”