An island nation of just over 421,000 inhabitants, Malta has a fabled history as a seafarers’ haven of striking beauty. Throughout the centuries, it has been a coveted possession of the dominant nations in the region. Today, the economic performance of this tiny island is the envy of fellow European Union members, and the country is one of the few examples of a eurozone state with low unemployment and economic growth. Since gaining independence from Britain in 1964, this bilingual country has established itself as one of the most remarkable economic success stories in southern Europe. With tourism as a key foundation for its growth, in recent years Malta has begun branching out into many new sectors in order to create a viable and powerful marketplace, making it a fascinating destination for investors and tourists alike.
Malta’s accession to the EU in 2004 and the eurozone in 2008 bolstered its status within the corporate world as a gateway for trade to and from the Euro-Mediterranean region and beyond. Malta now looks optimistically towards the future, with a new government, elected in March 2013, putting the management of Europe’s smallest economy at the centre of its manifesto. Its priorities include energy planning, higher female labour participation, enhancing educational attainment and overall economic diversification. With tourism and investment continuing to grow, Malta looks set to receive a further boost to its economy: its capital city, Valletta, has been chosen as the 2018 European Capital of Culture.
Located at the southern tip of Italy and just over 316 square kilometres in area, the Maltese Islands lie between Europe and North Africa, some 90 kilometres south of Sicily and 300 kilometres north of Libya. The archipelago comprises Malta, Gozo and Comino. The main island, Malta, is one-fifth the size of London; it is 27 kilometres long and 14.5 kilometres at its widest point. It takes just 45 minutes to cross the island, and this compactness serves to cut commuting times and increase leisure time. Malta’s sister island, Gozo, is smaller still at 67 square kilometres, and Comino covers only 3.5 square kilometres.
One of the most beautiful islands in the Mediterranean, Malta’s strategic location at the commercial crossroads linking Europe, Africa and the Middle East has attracted the interest of the various dominant cultures down the ages: the Phoenicians, the Romans, the Carthaginians, the Arabs, the Ottomans, the Knights of St John, the French and the British. All ruled the island at one time and contributed to the mosaic of modern Malta. Not surprisingly, Britain’s legacy has lasted longest because Malta was part of the British Empire for over 150 years: business, law and education retain British characteristics, while English, alongside Maltese, is an official language. Maltese is a Semitic language believed to have developed during the Arab occupation of the islands (870- 1090), and it is still the only Semitic-based one to be written in the Latin script.
Malta enjoys a typically Mediterranean climate similar to that of southern Greece with the average temperature ranging from 12°C in January to 30°C in July and August. It experiences around 300 days of sunshine a year and the best weather in the world, according to the 2011 ranking of the magazine International Living. A relatively flat country, Malta rises to a series of low hills and limestone cliffs in the northwest and falls to low-lying land in the southeast. The majority of the main towns are dotted along the eastern coast, including the capital and administrative centre, Valletta, and the lively beachside towns of St Julian’s and Sliema. These are situated around what is known as the inner and outer harbour areas and provide much of the tourism and shopping revenue. Other main towns lie further inland: Mosta and Birkirkara in the centre of the island and Paola in the south. While some 90 per cent of Maltese live in towns, there are numerous small villages that still evoke the traditional, rural character of Mediterranean life. The Maltese Islands also present a seductive contrast of colours: surrounded by some of the clearest and cleanest waters in the Mediterranean, the countryside is characterised by tiny terraced fields with honey-coloured rubble walls.
Descendants of ancient Carthaginians and Phoenicians, with strong elements of Italian and other Mediterranean stock, the Maltese are said to be among the most international of people. Despite a history that has seen a succession of foreign rulers, Malta has managed to develop its own unique character. The islanders have acquired an ability to adapt to new ideas, and adopt and improve the best of them to their ultimate advantage. Malta’s population grows by a small amount each year, and the majority of Maltese are of working age. The majority, too, are Roman Catholic, and the church plays an active role in most communities on the island – a fact that is reflected in the large number (365) of churches. Generally well educated and qualified, 90 per cent of the Maltese are bilingual in English and Maltese, and many also speak a third language, usually Italian, German or French.
A New Direction
Malta’s population is also one of the most politically active in Europe, with elections seeing voter turnout regularly exceeding 90 per cent. The island is a parliamentary representative democratic republic, in which executive powers rest with the prime minister while the president fulfils the function of Head of State. Elections are contested, for the most part, by the two main parties: the Labour Party led by current Prime Minister Joseph Muscat, and the Nationalist Party headed by Simon Busuttil. The last general elections, in March 2013, resulted in a landslide victory for Labour, at the expense of the centre-right Nationalist Party which had been in power for 15 years. Having won 55 per cent of the vote, Prime Minister Muscat is determined to shape the country’s fortunes in the coming years. Recently, the island also elected a new president, and Marie-Louise Coleiro Preca has become Malta’s second female president in April 2014.
The island’s small, open economy has proven to be remarkably resilient in the face of the global economic downturn. Malta has posted positive growth figures over the past four years and has regularly been among the best-performing economies in the EU. In 2014, it registered annual real GDP growth of 3.5 per cent. The island’s economic performance is projected to remain stable in 2015 and 2016, which means that Malta will continue to outperform the eurozone average. Malta attracts 1.6 million visitors each year, and tourism contributes some 25 per cent to the island’s GDP. Another high-growth sector is financial services, now accounting for 13 per cent of GDP. The banking sector remains healthy, with no exposure to foreign sovereign debt. Life sciences, digital media, shipping and aviation are joining the traditional economic generators and creating a solid base of diverse operations from which Malta is competing on an international level.
FDI and Trade
Malta attracts steady inflows of foreign direct investment (FDI), with the finance sector accounting for over 90 per cent. Malta’s FDI stock stood at €136.8 billion at the end of June 2014. Providing access to the EU’s single market, Malta’s proximity to, and cultural links with, North African and Middle East countries are particularly attractive to companies that use the island as a stepping stone for trading, distribution and marketing of their international operations in Southern Europe and North Africa. Some prominent companies which have invested in Malta are HSBC, Microsoft, Playmobil, Uniblue, Betfair, Cardinal Health and Lufthansa Technik. In addition to the historical and strong commercial links with Italy and the UK, Malta also enjoys healthy trade with France, Germany and Greece. With an average trade-to-GDP ratio of 82 per cent, trade is of vital importance to the economy, and the country’s exposure to international commerce is one of the highest worldwide. Malta’s leaders are constantly working on developing new ties with foreign governments in order to facilitate world-wide market access for all industries. Trade with Asia (mainly China and Singapore), Russia and the US is increasing.
Strengths Support Success
Malta offers investors a secure and transparent environment in which to build or expand a business. The country has introduced business-friendly policies underpinned by a legal and regulatory framework that is fully harmonised with EU legislation. Malta has also invested heavily in modern telecommunications and transport infrastructure, with a full package of incentives that range from fiscal benefits to the provision of custom-built production facilities. Malta’s unique selling point is the availability of a highly skilled and highly qualified workforce, contractable at competitive rates, for all areas of the expanding economy. Surveys have found that the flexibility of the local workforce is one of the country’s greatest assets: the Maltese are quick to adapt to changing technological and market needs, sustaining and enhancing Malta’s appeal as a world-class investment and business centre.
The island now faces the challenge of protecting its economic stability in an uncertain macroeconomic environment. Based on the positive experience of recent years, the island’s leaders are optimistic that the ambition and flexibility of its people, qualities that are a direct result of the colourful history that makes the country so fascinating, will guarantee Malta’s status as a centre for international business in the years ahead.