Is Malta’s competitiveness sliding?
Today’s front page story which reports that Malta is the most difficult country in the whole of the European Union in which to do business does not make for pretty reading, coming as it has as Malta is in the throes of the yearly debates over a budget cooked up by a government that prides itself on its pro-business attitude. The World Bank, however, has once again labelled Malta as not only the least business-friendly country in the EU, but it also placed Malta in a global 76th place on a global level in terms of its business friendliness. The main sore points about doing business in Malta, according to the World Bank’s authoritative study, remain in the areas of registering property, getting credit starting a business, resolving insolvency, dealing with construction permits and getting electricity. On the other hand, Malta performed somewhat better in the areas of enforcing contracts, trading across borders, paying taxes, and protecting minority investors. Not only are the findings somewhat more than concerning from the point of view of local businesses, but the authoritative annual report is also used by countless corporations and business when taking the very delicate decision about expanding overseas. The Ease of Doing Business report sheds
light on how easy or difficult it is for a local entrepreneur to open and run a business when complying with relevant regulations. It measures and tracks changes in regulations affecting areas in the life cycle of a business and out of the economies of 190 countries analysed by the World Bank in terms of the ease of doing business in them, Malta is ranked rather dismally. Greece, in a far better 61st place, was the second-most difficult place in which to do business in Europe. Denmark, in global third place, was the EU’s easiest. There are myriad accounts from businesses about such difficulties which cannot be denied, nor can the government deny that such hurdles exist. Just ask anyone who has applied for credit or for any of the necessities for opening and running a business.
There is, however, positive news in that these latest findings should spur the government into more action along such lines. Last June the government took action. At the time, the Prime Minister had expressed shock over the dismal findings and pledged to address the issue immediately, and he did, in the form of a commitment signed by representatives of government departments and entities stipulating new deadlines and methods with the final aim of reducing bureaucracy and increasing accountability when it comes to businesses’ bureaucratic red tape.
In fact, the World Bank noted in the annual report that was published this week that Malta made some improvements in the areas of starting a business and of getting credit. In terms of the red tape involved in starting a business, the World Bank observed that Malta over the last year made starting a business easier by offering automatic registration with the Inland Revenue Department following the receipt of the company registration number. As for access to credit, the World Bank pointed out that Malta improved access to credit information by launching a new credit registry.
But, on the other hand, the report observed that over the last year Malta made paying taxes more costly by replacing the capital gains tax with a property transfer tax, and increasing the maximum social security contribution paid by employers. As such – and although its rankings have not improved very much over the last year, with no movement in terms of its EU-wide ranking and by only climbing four spots on a global level – the government appears to be taking some tangible action. Much more action along such line, however, will be needed if Malta’s competitiveness levels are to compete with its main competitors – its EU counterparts.