EY Survey: Malta’s attractiveness at an all-time low as investors flag grey listing concerns

Updated at 2:56pm with Opposition statement

For the first time ever, more foreign investors consider Malta to be currently unattractive for foreign direct investment (FDI) than attractive, according to the EY Malta Attractiveness Index.

Only 37% of foreign investors deem Malta to be attractive for FDI, while 46% find Malta unattractive. The recent FATF grey listing was highlighted as a major concern by many respondents.  

In the report, EY point out that 40% of respondents shifted from a “yes” response to a “no” or “don’t know” over the last two years.

Malta’s FDI attractiveness appears to have been on the decline since 2016, but the trend started spiralling downwards after 2019. At this point, 77% of respondents felt that Malta was an attractive jurisdiction for FDI. Now, the figure stands at 37%.

The EY Attractiveness Survey was carried out just after Malta was placed on the FATF grey list of juridictions. When respondents were asked how Malta can increase its attractiveness, many mentioned reputation, governance, improving the skills base and tackling the grey listing as soon as possible.

However, Malta’s attractive corporate tax regime, English-speaking workforce and competitive labour costs remain positive factors for foreign investors. In fact, corporate taxation tops Malta’s scoreboard of parameters that are attractive for FDI.

Despite challenges, 77% of existing FDI companies still believe that their long-term future is in Malta, although there has been an increase in “no” responses.

A large 84% majority of investors believe that the grey listing impacts Malta’s ability to be seen as a reputable destination to conduct business. This while 55% feel that doing business in Malta will be more difficult as a result of the grey listing.

With regards to COVID-19, half of respondents felt that their companies have been impacted positively or neutrally by the pandemic. Naturally, the sectors that saw the highest positive impact include ICT and telecommunications, and other financial services. Manufacturing and hospitality were the hardest hit.

On top of this, half of companies estimate that they will achieve full recovery in less than a year.

An interesting impact from the pandemic is that several companies have reported moving additional functions to Malta or having icnreased operations locally. Only 4% of companies indicated a willingness to relocate outside of Malta due to COVID-19.

According to EY, the future of Malta’s private sector will see tourism and leisure lead the game.  68% of investors believe that the tourism and leisure industry will be Malta’s leading business sector over the next five years, while 46% said that iGaming will rank high.  Artificial intelligence is third, chosen by 39% of respondents.

The key factors that are set to influence future investment location choices include the skills and availability of the workforce, and the stability of the political and regulatory regime.

Opposition leader Bernard Grech lamented Malta's poor standing in the EY Attractiveness Survey on Tuesday, claiming that the Prime Minister is more focused on the electoral interests of the Labour Party than on the national interest. 

"Today we have seen in practice how responsible leadership translates into bad reputation. Our country depends on foreign investment," he remarked.

"Robert Abela and Clyde Caruana said that there would be no drastic effects from the grey listing, yet since Robert Abela became Prime Minister there has been a 40% increase in those who when asked if Malta is attractive for investment, answered "no" or "I don't know".