88% of businesses feel FATF greylisting will negatively impact Malta’s economy – survey
The vast majority of employers fear that Malta’s greylisting by the Financial Action Task Force (FATF) will have a negative impact on Malta’s economy, a new survey by the Malta Employers’ Association (MEA) has found.
In the survey, which looked at employers’ perceptions on the FATF’s decision, 88% of all respondents said that the greylisting will have a negative impact – with 64% believing that the impact will be significant.
Asked about what they thought were the primary factors behind the FATF’s decision, the majority of respondents pinned Malta’s issues with money laundering and corruption scandals as one of the main reasons.
The survey, presented in a press conference by MEA Director General Joseph Farrugia, saw 190 respondents who represent a total of 230 companies take part. Most respondents were medium-sized businesses; however major companies and small companies were represented as well.
It was carried out between 24 June and 1 July.
The sectors most represented were the professional services sector (20% of respondents), wholesale and retail (18%) and manufacturing (16%), however there were a multitude of other sectors represented as well.
Out of the respondents, 47% said that they are geared for the domestic economy only, 18% said that they are geared for export only, while 35% said that they are geared for both.
88% of all the respondents said that they anticipate that the greylisting will have an impact on Malta’s economy, with 64% saying that the impact will be a strong one.
Only 2% said that they believed that the greylisting will have no impact on Malta’s economy, with the remaining 10% saying that they didn’t know.
71% of the respondents said that they believe that the greylisting will affect their business, with 18% saying that they don’t know whether their business will be impacted, and the remaining 11% believing that they will face no ill-effects.
There is a sectorial discrepancy in terms of which businesses expect to be affected by the greylisting: 89% of those in the gaming, financial, insurance, and professional services said that they expect their business to be affected, compared to 62% of those who work in the hospitality, tourism, manufacturing, and wholesale and retail sectors.
Of those who said that their business will be impacted, 46% said that they anticipate that the impact will be felt in between three to six months’ time, while another 38% felt that the impact will only be felt after six months. 17% had more short-term fears, saying that they expect the impact to be felt within three months.
Asked what they envision the challenges which they think they will experience due to greylisting, the top three challenges mentioned were facing more bureaucratic processes and higher compliance costs; a fall in investment and exports; and reputational issues.
Other challenges mentioned were a fall in consumer confidence, the relocation of companies, and a drop in overall economic activity.
Asked about whether they had faced an increase in compliancerelated costs, 72% said that they had, while 28% said that they hadn’t.
From those who said that they had faced an increase in costs: 46% said that the increase was substantial, 44% said it was mild, 10% said that it was minimal.
The brunt of these costs were, it seems, borne by the gaming, insurance, finance, and professional services sectors: 69% of those in these sectors said that the costs were substantial, while 23% said that they were mild and only 8% said that they were minimal.
This can be compared to the hospitality, tourism, manufacturing and wholesale and retail sectors, where only 24% said that the compliance costs were substantial, while 65% said that they were mild. The remaining 11% felt that the costs were minimal.
Respondents were asked – in an open ended question – to mention three factors that they believed played a critical part in the decision to greylist Malta.
When all the responses were categorised and tabulated, it emerged that over 100 out of the 190 respondents felt that money laundering issues, institutional corruption, bad governance and a lack of transparency were among the key factors.
Over 80 respondents said that ineffective justice, selective enforcement, and weak institutions were a key factor in the decision as well
The existence of the IIP scheme, the assassination of Daphne Caruana Galizia, the Panama Papers scandal, tax evasion including by top government officials, and a shift towards risky businesses such as Crypto and Blockchain were also mentioned as factors.
“There is a sentiment amongst the employers that part of the problems that the country is facing are not economic,” Farrugia said. “We have certain structural weaknesses, mostly tied to our judicial system, which can have negative effects on the economy and the country’s businesses if they are left unaddressed,” he added.
Asked to list three recommendations to the government in order to get off the greylist, most employers listed having a trustworthy justice system and more willingness to prosecute wrongdoing as recommendations.
Increased transparency and increased accountability through resignations of top officials were also mentioned, such as the scrapping or radical change of the IIP scheme.
In its final remarks, the MEA said that while the survey is based on the early perceptions of employers, it is highly indicative of the situation.
“The longer we remain greylisted, the more severe the damage and the longer the recovery,” the MEA commented.
The MEA said that it had been flagging governance issues for years, and that it had spoken out against things like the IIP scheme and when shady deals involving politicians were exposed, while also calling for better governance systems and parliamentary reforms.
“The first step is to come to our senses and acknowledge that there is actually a very serious threat to the social and economic fabric of our society. The biggest threat is not the greylisting itself, but the conditions which caused it,” the association said.