Mixed messages on Brexit

Either we are doubtful that Brexit will happen, or we are poised to take maximum benefit from a Brexit that will certainly happen

Cartoon by Mikiel Galea
Cartoon by Mikiel Galea

There appear to be contradictions in the Maltese government’s statements regarding Brexit.

On the surface, Malta – like other EU countries such as Germany and France – is positioning itself to capitalise on a predicted exodus of non-EU business interests currently located in the UK. 

Last week, Prime Minister Joseph Muscat announced a national taskforce, to be launched in the coming weeks, aimed at attracting businesses looking to relocate to Europe following Britain’s exit from the 28-country bloc. “Business giants like insurance company Starr have chosen to come to Malta after Brexit. I assure you we had harsh competition from other European countries, but we managed to convince them to come to Malta,” the Prime Minister said.

Beyond individual companies such as Starr, however, there is to date little evidence of interest in Malta as a potential post-Brexit relocation destination. Malta has already missed out on some of the big names, such as insurers Lloyds of London, despite these companies initially expressing interest.

Meanwhile, just a day before the Prime Minister’s announcement, parliamentary secretary Silvio Schembri blamed Malta’s ‘poor infrastructure’ for our ‘failure’ – as he put it – to so far attract large companies. 

Mr Schembri said that Malta lacked high-quality office space and international schools, which puts it at a disadvantage compared to competing jurisdictions. 

“Cities like Dublin, Frankfurt and Luxembourg are already geared to such services, but the upside for a country like Malta that is still developing its infrastructure is it can still develop it to be ahead of times and future ready,” Mr Schembri said.

This in itself suggests a contradiction. Schembri admits that Malta, at present, lacks the basic infrastructure to compete with destinations such as Paris and Frankfurt. Apart from HSBC, the lack of any ‘significant tier 1 banks of international repute’ is viewed as a stumbling block within financial circles. 

Christopher Orchard, CEO of UK-based business advisory firm WGP Global, told a local newspaper that Malta “would not be seen as a serious relocation point” for names within the global financial services sector. He also hinted that Malta’s social and cultural infrastructure may also be a problem: “Malta would struggle to attract talent to relocate depending on the schools, shops, theatres and other lifestyle offerings available, apart from the need to have domestic talent to fill positions.”

Yet countries which are, on paper, already better positioned than Malta are in the process of reforming their legal and commercial infrastructure to make themselves more attractive ahead of the Brexit exodus. This week, French finance minister Bruno Le Maire argued that France would ‘win the race’ against Germany (significantly, Malta was not named as a competitor) to attract British companies. 

“We will take the structural reforms and the structural decisions that are needed. For instance, we will simplify the labour market,” he told Bloomberg. “Many banks, many investors should be aware that France is changing...”

The question arises spontaneously: is Malta undertaking the necessary reforms in the same direction? From this perspective, Muscat’s ‘taskforce’ may already be a case of ‘too little, too late.’ Nor does it help that Malta has received so much negative publicity, particularly in connection with its financial services sector, in the weeks before the June election.

Without going into the issue of who was responsible for this bad press, and whether or not the accusations were justified... it remains a fact that Malta must work harder than other countries to restore its global reputation. Beyond the establishment of a taskforce, we have not been told exactly how Malta intends to reform its structures to make us more competitive. 

Such reforms are, of course, needed not just to cater for British firms relocating here after Brexit. In a globalised economy, Malta is permanently in competition with other countries to attract foreign investment. Brexit may have spotlighted particular areas that require urgent attention... but attention is needed all the same, across the full spectrum of infrastructural issues.

The only distinctive feature offered by the Brexit scenario is that the UK has not finalised its negotiations yet: this creates a limited window of opportunity to get our act in order, before it becomes too late.

One must therefore question why we have been so slow to get off the starting line after the starting pistol was fired. Until some weeks ago it was possible to argue that Malta’s position as President of the European Council may have given rise to certain conflicts. One cannot be involved in Brexit negotiations, while also having such a clear stake in the outcome. But no such obstacle exists today.

Perhaps the most perplexing contradiction, however, concerns the Prime Minister’s outspoken view that Brexit may not even happen at all. Both the timing and the substance of this statement are questionable. Muscat seems to be the only European prime minister floating this possibility at the moment. It is also a position that undermines his country’s ability to compete, in a race Muscat himself has committed us to running.

Either we are doubtful that Brexit will happen, or we are poised to take maximum benefit from a Brexit that will certainly happen. We cannot be both those things at once.

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