Brussels highlights need to address corruption to preserve Malta’s business model

Istvan Szekely, director of the European Commission's economic affairs Directorate General has highlighted the issue of corruption in Malta as something which could reduce the country’s potential, emphasising that it was essential to have a “systematic response to this systematic issue.”

Szekely was speaking today at a conference presenting the Commission’s 2018 Country Report on Malta, which indicated the country has had unprecedented success in its economic growth, but sustaining this in the long-term as well as addressing the issue of corruption, would be a challenge.

“The most visible type of corruption is corruption in politics. But corruption in the private sector is a way bigger problem,” he said, “Corruption is a way of thinking and of what is considered acceptable.”

"A big challenge in the business environment in Malta is corruption... the perception of corruption in Malta is higher than the EU average. You have a fantastic business model and this needs to be preserved by showing Malta is a place for good businesses, where there are rules."

“Politics is scrutinised by the media, NGOs, and so on, but who scrutinises private companies? This type of corruption is just as damaging, or even more. There are businesses which damage the name of Malta for a few bucks.”

Calling Malta “a small country but a big star”, Szekely remarked that Malta’s potential growth was above those of every other EU country, but that it would need to improve its institutions if this was to be maintained.

“The closer you get to the top, the more the quality of your institutions and the investment you attracts matters,” he said.

Szekely said that due to the growth in employment, Malta was also having challenges related to housing and where to locate businesses.

Another issue was Malta’s strong reliance on foreign labour to meet its supply demands and make up for skills shortages, he said, and the island had a huge supply of local labour, in the form of female and old-participation in the workforce, which was not being tapped.

Finance Minister Edward Scicluna, also addressing the conference, said that Malta’s success was key to the fact that the government always took on board the commission’s country recommendations.

“Does anybody believe corruption did not occur before, or was a blind eye being turned?” Scicluna said, “I think we should head the advice of experts . They say that our two most important sectors - financial services and igaming - are big for the size of the country. You cannot have such big sectors with nothing to show for in terms of charges [for corruption].”

“It is normal that a certain percentage of business dealings will involve corruption. We have to admit that, in order to be normal, we have to have cases before our courts, and the Financial Intelligence Analysis Unit investigating.”

The way forward for Malta is to have to a four or five percent growth level, the minister said. “The infrastructure has to grow along with the economy. Malta deserves better so far as the roads are concerned,” he said, as he announced that an agency was going to be set up with its priority being road infrastructure.

“There is also a problem of residential housing. Tourism is having a cost as it is also taking up residence. Demand is currently bigger than supply, but we hope supply will react. All the cranes show the supply is increasing.”

Weighing in on the corruption issue, economist Philip von Brockdorff said that businesses taking advantage of corruption was something which happened everywhere and which needed to be addressed in terms of government structures and the appointment of the right people.

“Issues of corruption have to be tackled in the legal system, but saying we are some sort of jungle is nowhere close to reality,” he said.