Investors’ trust in political stability drops 15% but Malta remains attractive
They annual EY attractiveness survey has found that an overwhelming majority of foreign direct investors view Malta favourably (87 per cent), notwithstanding a collective drop of confidence in the stability and transparency of the political, legal and regulatory environment. This is the highest score registered since 2011.
EY Malta conducts an annual ‘attractiveness’ survey as part of an ongoing global EY initiative, “which gathers the views of foreign direct investors in various countries and regions.” The survey was led by Simon Lee Barberi, senior manager of EU advisory and the Malta Attractiveness Survey and was presented yesterday.
It must be noted that the survey was conducted prior to the Brexit referendum – therefore significant changes could possibly be registered during next year’s EY survey. Attractiveness refers to a number of factors which would attract foreign investors to set up shop in a particular country.
In the case of Malta, 91 per cent of the foreign direct investors surveyed found corporate taxation favourable and 88 per cent found the stability of social climate to be attractive.
A proportion of 70 per cent found the stability and transparency of political, legal and
regulatory environment to be amongst the most attractive features – down 15 percentage points from the previous year.
The three weakest areas in which foreign direct investors found that there is room for improvement are domestic or regional market – registering only 39 per cent approval (an increase of a significant 18 per cent from the previous year), R&D and innovation environment at 31 per cent – an increase of 10 per cent over the previous year and lastly just 29 per cent found transport and logistics infrastructure to be favourable – down 3 per cent from the previous year.
Currently, just over half of the foreign direct investors surveyed believe they will expand operations in Malta in a year’s time.
A slightly higher proportion – at 58 per cent – believe that Malta will remain attractive in three years’ time. An upcoming general election as well as unfavourable economic conditions within the EU could contribute to this.
A sizeable 79 per cent of those surveyed believe that they will be present in Malta in ten years’ time – contributing towards a stable and secure economy.
Crucial to Malta’s attractiveness, 71 per cent of respondents believe that Malta is keeping pace with regulatory changes in competing jurisdictions, with 11 per cent believing that this is not the case.
A recurring issue for the Maltese labour market, what this government has called ‘the skills gap’ continues to persist, with 55 per cent of respondents saying that they are unable to find and recruit the required specialised skills in the local labour market.
“Malta’s perceived FDI attractiveness has increased for the second year running with 87% of the 2016 survey respondents believing Malta is an attractive investment destination. Sectoral differences continue to be observed.
“As in previous years, the manufacturing industry continues to show the lowest scores in the attractiveness stakes, although there has been a marginal improvement in sectoral perceptions since last year’s survey.”
Asked about what policy actions investors believe will address the current and future skills shortages, respondents chose: Introducing skill sets for the “new” economy in schools (coding, programming), developing national frameworks to encourage international internships or work placements for Maltese nationals, widen opportunities for relevant work placements as part of higher education syllabi, the introduction of a skills gap monitoring board and targeting international marketing campaigns highlighting Malta as a great place to work.
“Malta’s access to the EU market, the relative stability of its political and economic environment, its skilled, English-speaking labour force and its attractive fiscal regime are key features that continue to be highlighted by many respondents,” Mr Barberi said.
The top five focus areas identified for Malta to remain globally competitive are that of developing education and skills (79 per cent of respondents), supporting high-tech industries and innovation (71 per cent), supporting small and mediumsized enterprises (62 per cent) and lastly an increase in incentives for FDI investors (60 per cent).
Unsurprisingly, the leading business sectors in the next five years have been identified by investors as iGaming (71 per cent), ICT and telecoms (50 per cent), other financial services (47 per cent), asset management (46 per cent) and lastly fund administration (46 per cent).
According to National Statistics Office data for 2015, the iGaming sector accounted for a total of 8 per cent of gross value added.
A total of 111 current FDI companies or investors responded to EY’s e-survey, conducted between April and May (before the Brexit referendum).
The respondents’ cohort profile was very similar to last years’ survey – reflecting a range of sectors and sizes.
Launching the annual conference, Mr Attard, EY Country Managing Partner, announced the launch of a think-tank spearheaded by EY, with the core purpose of seeing what action should be taken for economic growth in Malta. He believes that the research should be grounded in solid research.
“We welcome the Chamber of Commerce on this, political parties, academics and all relevant stakeholders to provide input,” said Mr Attard.
The English broadcaster, journalist and author Jeremy Paxman was one of the principal speakers at the EY conference that took place yesterday.