EY Attractiveness Survey: Malta suffers in social climate, political environment index

EY’s Virtual Future Realised Week begins with the annual Attractiveness Survey’s results on what current investors think about Malta

EY Attractiveness Survey: Malta suffers in social climate, political environment index

The findings from EY Malta’s attractiveness survey – the 16th edition of an annual study conducted among existing FDI companies in Malta – were launched today with investors sounding a note of caution on Malta’s attractiveness for foreign investment.

While the majority of respondents said they find Malta to be an attractive destination for FDI. Yet, at 62%, this figure is the lowest the survey has ever registered.

The number of investors who said Malta is not attractive now comprises a quarter of total respondents.

80% expect their company to still be present in Malta in 10 years’ time, the same as 2019, while the number who do not increased by 6%. Prior to COVID, 53% of companies surveyed had plans to expand their operations in Malta over the following year. However, following the outbreak, only two-thirds expected to see them through across this period, while 15% did not and 19% were unsure.

The EY report was presented at Future Realised, a week-long virtual event by EY, examining where should Malta focus now, next and beyond.

FDI Attractiveness Scoreboard

Corporate taxation comes out on top of the FDI attractiveness scoreboard yet again.

But while still favourable, the attractiveness of Malta’s stability of social climate decreased by 11% and is now in third place, with Malta’s telecommunications infrastructure in second place for the first time.

On the other end of the scoreboard, the stability and transparency of the political, legal and regulatory environment, which was Malta’s second most attractive parameter five years ago, is now bottom. This result reflects the sentiments shared by many FDI investors on the need to tackle governance and reputational issues. A forthcoming Moneyval evaluation also concerned many investors.

As in previous years, Malta’s R&D and innovation environment and its transport and logistics infrastructure continued to score poorly.

Priorities to remain globally competitive Supporting what many highlighted as one of the main reasons for a decrease in Malta’s overall attractiveness index in 2020, FDI investors ranked a new inclusion, reputation and brand, as the number one priority for Malta to remain globally competitive.

Malta’s long-standing priority, education and skills, is now in second place after several years ranking first. Another new inclusion, strengthening institutions, enforcement and monitoring, is in third place. Almost all FDI investors indicated that, as part of its COVID-19 reboot strategy, the Maltese Government should prioritize environmentally sustainable practices (94%).

View from EY

In his address to the conference, Ronald Attard, EY Malta managing partner stated that foreign investors have clearly underlined the country’s need to prioritise tangible reforms that lead to increased trust based on good governance.

“This year’s findings are crucial as we overcome the short-term COVID-19 challenges and begin our strategic quest to look beyond. Our weaknesses are not set in stone. If reputation and governance deficiencies are robustly addressed, the stability of our political, legal and regulatory environment can once again move up our attractiveness scoreboard.”

He highlighted that investors still appreciate Malta’s social fabric, its strong telecoms infrastructure and talent pool, and that COVID-19 has highlighted that the island may be more connected – digitally – than ever before.

He asked: “Is it time to reflect and consider a new economic model? One less based on numbers – not just GDP, which EY first raised two years back, but others too – number of cars, tourists, permits, or property sales. A model that focuses more on well-being and the quality of life of our residents. An economic model where the benefits of an attractive tax system are eclipsed by the strength of our talent pool, digital infrastructure, innovation, environment, quality of life and social fabric.”

Attard said COVID-19 has reshaped the global economic landscape, with many companies looking to bring back operations and production closer to home. He suggested that there may be an opportunity for Malta to act as a niche nearshoring hub for western Europe and that Malta should exploit the presence of a strong gaming hub to nurture innovative and an entrepreneurial spirit in other industries.

“Malta should look towards growing digital technology sectors such as health (MedTech), education (EdTech), e-commerce and digital logistics solutions when considering where to focus. There may also be an opportunity to develop a plan for Gozo that is centred around sustainability and eco- tourism, while the blue (marine) economy could be a focal point for research activities, given that we are an island nation.”

In concluding, Attard stressed the importance of expanding safety nets where gaps exist to ensure the most vulnerable are protected and that companies hard hit by the pandemic can remain afloat in the near-term. He noted that investments in health, digital infrastructure, green infrastructure, and education can help Malta achieve productive, inclusive, and sustainable growth.

EY’s Future Realised Week

EY’s fast-paced virtual event, Future Realised Week, is intended to trigger new ideas, challenge perspectives and explore different possibilities for Malta post-COVID-19. Discussions centre around a new economic model for Malta, which places long-term value creation, sustainable growth, the environment and the happiness of citizens top of the agenda.

Following the release of EY’s Attractiveness Survey today, the firm will outline the results of the EY Generate Survey on Thursday 22nd October, setting out how Malta’s youth view the crisis, the economy and their future in Malta. On Friday, EY will be publish their latest research on Future Consumer trends in Malta, which shows how COVID-19 has altered local consumer spending behaviour.

Future Realised Week is taking place between 20 to 23 October 2020, with four 90-minute sessions lined-up. Three former European Prime Ministers and Presidents and speakers from the World Bank, World Economic Forum, United Nations and the European Commission, together with global technology and artificial intelligence gurus from Microsoft, Nvidia, SAP and senior global leaders from EY offices in London and New York will address the virtual conference. They will be joined by local business leaders, academics and NGOs to drive home a discussion on how to build back better as the country emerges from the crisis.

For more information and to book your free place, click here // Download the Attractiveness Survey