Malta Country Report 2017

CountryProfiler Global Edition | 2017

Malta

www.countryprofiler.com

country REPORT 2O17

Small Country, Big Ambitions:

Malta plans historical infrastructural investments

The Best and the Brightest:

More international talent needed to continue Malta’s economic expansion Rising Costs and Capacity Constraints: A fly in the growth ointment

The Giga-Nation

Drive to attract the next generation of digital pioneers From the Dark Web to Mainstream: Bringing blockchain and cryptocurrencies into the light

Financial Services facing a changing global landscape

Superyachts and supertankers charter a course to Malta

Economy • Trade • Foreign Direct Investment • Industry • Banking • Insurance • Capital Markets • Business Directory

Economy Bucking the EU trend: Malta turns deficit into surplus

Who’s Who Malta’s CEOs and political leaders share essential insights on the business landscape

9 789995 706739 >

Foreign Investment Sectors to watch: ICT, aviation, energy, logistics, health and education

Why Malta?

A land of inspiring potential and great business opportunities.

Throughout its rich and cultured history, Malta has distinguished itself across a range of industries, including financial services, knowledge-based sectors, highend manufacturing, maritime and aircraft maintenance. High levels of education and a skilled workforce have helped Malta develop into a centre of excellence, positioning itself as a perfect international hub for business.

Meantime, as Malta increasingly becomes a globally recognised player in the logistics sector, we at HSBC appreciate that international connections will be vital to Malta’s future economic growth. Through initiatives such as Malta Trade for Growth, global connectivity and invaluable market insight across continents, HSBC Malta is best placed to help Maltese businesses to access opportunities across the globe that previously were out of reach.

As we look to encourage overseas companies to invest in Malta and take advantage of its unique, strategic location, HSBC has developed an in-depth video that highlights the benefits of doing business in Malta. The video demonstrates the island`s business attributes and why Malta is a great place to live and work.

HSBC has a wealth of financial sector expertise that provides a one-stop solution for those seeking to locate their business in Malta. HSBC can provide you with a real local insight and understanding to help you set up orexpand your business in Malta.

The ‘Why Malta?’ production is available on USB or online through business.hsbc.com. mt. Speak to us now for more information.

Call 2380 8000 Click business.hsbc.com.mt Approved and issued by HSBC Bank Malta plc 116, Archbishop Street, Valletta VLT1444 which is regulated by the Malta Financial Services Authority.

THE RIGHT

time

TO GROW

DD Consultus is based in Malta and it specialises in the online gaming industry, online payment processing and the related services thereto.

We offer senior international gaming consultancy to all sectors of the gaming industry. DD Consultus professional services also extend to the provision of services in the field of online payments and the acquisition of financial institutions and electronic money licences in Malta, as well as consultancy to online payment processors.

Villa Ichang, Triq Mons. Alfredo Mifsud, Ta› Xbiex XBX 1063, Malta (+356) 2137 0333 | info@ddconsultus.com

www.ddconsultus.com

REMOTE GAMING LICENCES Malta 5% corporate tax | Low licensing fee | Competitive gaming tax Reputable ICT Jurisdiction | High anti-money laundering standards Curaรงao 0% gaming tax | No VAT and no Sales Tax | One type of licence International private IP compliance network | 2% corporate tax for e-zone companies No restrictions on dividend withdrawals

Other Jurisdictions: UK, Austria, Italy, Romania, Bulgaria & more

PAYMENT SERVICES PROVIDERS (PSP) LICENCES Financial Institution (FI), Electronic Money (e-Money), Payment Institution (PI)

Incorporation of Company, Fiduciary Services, Licensing, Key Official, Legal and Technical Consultancy, Corporate and Financial Compliance, Post-Licensing Support, System and Compliance Audit, Business Plan Drafting, Acquisitions and Mergers

Publisher Information

CountryProfiler Global Edition | 2017

www.countryprofiler.com

MALTA

COUNTRY REPORT 2O17

Small Country, Big Ambitions:

Meet the

Malta plans historical infrastructural investments The Giga-Nation

The Best and the Brightest:

More international talent needed to continue Malta’s economic expansion

Drive to attract the next generation of digital pioneers

Rising Costs and Capacity Constraints: A fly in the growth ointment

From the Dark Web to Mainstream: Bringing blockchain and cryptocurrencies into the light

Financial Services facing a changing global landscape

Superyachts and supertankers charter a course to Malta

Team

ECONOMY • TRADE • FOREIGN DIRECT INVESTMENT • INDUSTRY • BANKING • INSURANCE • CAPITAL MARKETS • BUSINESS DIRECTORY

Economy Bucking the EU trend: Malta turns deficit into surplus

Who’s Who Malta’s CEOs and political leaders share essential insights on the business landscape

9 789995 706739 >

Foreign Investment Sectors to watch: ICT, aviation, energy, logistics, health and education

CountryProfiler Ltd is a specialist publisher of country information that assists corporations managing operations across national borders with trade, investment and relocation decisions. CountryProfiler is recognised by senior business executives, government representatives, institutions and global organisations as a leading provider of informative, insightful and actionable country intelligence.

Garvan Keating Regional Director keating@countryprofiler.com

Europe

64, St Anne Court, Flat 2, Bisazza Street, Sliema SLM 1642 - Malta T: +356 2034 2034 North America

Suite 21-2123, Walkers Line, Burlington, Ontario L7M 42Z9 - Canada Tel: +1 905 645 1130 Fax: +1 905 963 7968

Sonja Lindenberg Editor lindenberg@countryprofiler.com

Email: info@countryprofiler.com Website: www.countryprofiler.com Research and Contributions

CountryProfiler staff Photography

Mark Cassar, Fritz Grimm, Ian Noel Pace, Lee Fardoe, Armand Sciberras, Department of Information, Viewingmalta, Shutterstock, iStockphoto, Air Malta, Trelleborg, Malta Freeport, Playmobil & Methode Electronics

Melissa Puglisevich Office Manager puglisevich@countryprofiler.com

Cover Photograph

Mark Cassar Printing

Gutenberg Press, Malta Publication Date

July 2017

All rights reserved. Reproduction in whole or part is strictly prohibited without the written permission of the publisher. Opinions expressed in Country Report Malta are not necessarily those of the editor or publisher. All reasonable care is taken to ensure truth and accuracy, but the editor and publisher cannot be held responsible for errors or omissions in articles, advertising, photographs, or illustrations.

4

Country Report MALTA 2017

Ramon Micallef Art Director ram@box-design.net

Servicing a gaming industry that comes in different shapes and sizes

REMOTE GAMING LICENSING • GAMING COMPLIANCE • PCI DSS • ISO 27001 • ASSURANCE & CORPORATE SERVICES TAX ADVICE • MANAGEMENT CONSULTANCY • ACCOUNTING & PAYROLL • FIDUCIARY SERVICES • IT AUDIT INTERNAL AUDIT • DATA PROTECTION • FINANCIAL INSTITUTION LICENSES

Contact Advisory Services is the company that you can depend on for professional, across-the-board consultancy services in Malta. Specialised in the remote gaming sector, we are dedicated to providing you with an efficient and dependable service that ensures all of your needs are met - no matter how challenging or complex.

170, Pater House, Psaila Street, B’Kara BKR 9077 • T: +356 2759 5000, +356 2757 7000 • E: info@contact.com.mt W W W. C O N TA C T. C O M . M T

Contents

Contents Malta: Key Facts and Figures.....................................................................8

iGaming.............................................................................................................. 98

Country Overview........................................................................................ 14

Film..................................................................................................................... 102

Interview with the Prime Minister of Malta.................................. 22

Media & Advertising................................................................................ 106

Economy............................................................................................................ 27

Retail ................................................................................................................. 109

Blue Economy................................................................................................. 32

Tourism............................................................................................................ 112

Government & Politics............................................................................... 34

Health............................................................................................................... 120

International Relations & Foreign Affairs........................................ 38

Education....................................................................................................... 124

EU Presidency................................................................................................. 41

Energy & Environment........................................................................... 128

Foreign Direct Investment...................................................................... 44

Water................................................................................................................. 134

Infrastructure................................................................................................... 48

Agriculture & Food.................................................................................... 136

Startup Malta................................................................................................... 52

Oil & Gas.......................................................................................................... 141

Gozo...................................................................................................................... 55

Transport......................................................................................................... 144

Manufacturing & Industry....................................................................... 58

Freeport & Logistics.................................................................................. 152

Life Sciences & Biotech............................................................................. 64

Shipping & Yachting................................................................................ 156

Banking............................................................................................................... 69

Maritime Repair and Services Centre............................................ 160

Insurance........................................................................................................... 73

Aviation............................................................................................................ 162

Capital Markets.............................................................................................. 78

Construction & Real Estate.................................................................. 166

International Financial Services........................................................... 84

Business Operating Environment.................................................... 170

Telecoms............................................................................................................ 88

Conference & Incentive Travel........................................................... 180

IT & Software Development................................................................... 92

Travel & Living.............................................................................................. 184

Shared Services & Outsourcing........................................................... 96

Who’s Who in Malta.................................................................................. 193

6

Country Report MALTA 2017

Malta at a Glance

Key Facts & Figures Located in the centre of the Mediterranean, between Europe and North Africa, Malta is the European Union’s smallest member state.

Famous for its 7,000-year history and 300 days of sunshine, Malta has emerged as one of the most remarkable success stories in the Eurozone.

Country Location: Southern Europe Official Name: Republic of Malta Area: 316 km2 Shoreline Malta: 200 km Shoreline Gozo and Comino: 71.2 km

Population: 434,403 Maltese: 94%

300

days of sunshine/year

8

Temperature average: Winter 12ºC Summer 31ºC

Country Report MALTA 2017

Annual rainfall:

600mm

Languages:

Maltese & English

Time:

GMT+1

Currency:

Euro

Foreign: 6%

International Dialling Code:

+356

Religion:

Roman Catholic

Malta at a Glance

The Maltese Islands were, just a decade ago, best known as a holiday destination. However, over recent years, the country has sought to diversify its economy beyond tourism by promoting a range of sectors and activities.

Financial Services 13%

Industry

23% Agriculture

2%

Services

Malta’s economy in 2016

+5%

Total GDP:

€9.9bn

Unemployment rate:

Inflation:

Surplus:

Debt to GDP:

GDP Growth: Tourism 25%

GDP Composition

Transport 12%

Source: National Statistic Office, CountryProfiler

75%

0.9%

iGaming 10%

1.0%

FDI Stock:

4.7%

59.6%

€156.7 billion (June 2016)

Malta’s Top Trading Partners: Italy, Canada, Germany, UK, US, France, Netherlands, China

Selected Sector Rankings

16th Soundness of banks

21st

FDI and Technology Transfer

15th Strength of auditing & reporting standards

21st

Country capacity to attract talent

19th

Quality of the education system

30th Affordability of financial services

30th

Transparency of government policymaking

World Economic Forum, Global Competitiveness Index 2016-2017

Double Taxation Treaties:

70+

Accounting Standards:

IFRS

Corporate Tax: 35%.

However, through Malta’s full imputation system, shareholders can claim a tax credit for the tax paid by the company.

Fiscal Year: Calendar Year

Sovereign Ratings: A/F1 (Fitch, 2016) A3 (Moody’s, 2016) A-/A-2 (Standard & Poor’s, 2017)

Country Report MALTA 2017

9

Malta at a Glance

GOZO

COMINO

Main towns by population: Birkirkara: 21,889 Mosta: 19,795 St Paul’s Bay: 17,443 Qormi: 16,443 Zabbar: 14,844

Mellieha

St. Julians

MALTA

Sliema

Valletta

Other major towns: Valletta (Capital): 5,700 Sliema: 14,189

Mdina

Marsa

Major airlines flying to the country

Luqa Birzebbugia

Airport Malta International Airport is the island’s only airport and is located between the villages of Luqa and Gudja, some 10 kilometres away from Valletta.

10

Valletta

Sliema / St. Julian’s

Gozo

Valletta is Malta’s capital city, which was built by the Knights of St John in the 16th century. While it has long been the country’s political centre and a must-see destination for history lovers, many new bars, restaurants and boutique hotels have brought a hip vibe to the city that is set to lure more visitors when Valletta takes over the role of European Capital of Culture in 2018.

Sliema and St Julian’s were once just small fishing villages, but now host many five-star hotels, apartment complexes and shopping outlets. Both villages are connected via a long and winding coastal promenade overlooking rocky beaches, play grounds and gardens. While St Julian’s adjoins the small nightlife enclave of Paceville, Sliema is a also a popular place to live for the island’s expat community.

Gozo is Malta’s smaller sister island and is home to some 37,000 people. It only takes a short ferry ride of 15 minutes to reach Gozo from Malta. Gozo is more rural and known for its scenic hills, it is also rated as one of the best scuba diving holiday spots in the Mediterranean.

Country Report MALTA 2017

Global strength, local delivery Our local and worldwide based professionals offer a cross-border, holistic approach to issues related to tax, audit, financial advisory, enterprise risk, consulting and information technology. We make an impact that matters on our clients by offering world class capabilities and deep expertise to help them succeed wherever they operate in the world. Find out more about Deloitte Malta at www.deloitte.com/mt

Š 2016. For information, contact Deloitte Malta.

Malta at a Glance

Ever since the dawn of history Malta has been a coveted possession of the dominant nations of the region, and the island’s chequered past is evident in the wealth of historical sites and monuments that have survived hundreds, and in some cases, thousands of years.

A Chronology of Key Events

5000BC

60AD

395

870

1800

1814

1940-1942

1942

1979

1984

1987

1989

2001

2003

2003

2004

2010

2011

2011

2013

First human settlers.

Following the expulsion of the French by the local population with the assistance of the British, Malta came under British rule.

Links with Britain are reduced further with the closure of the British military base.

Pope John Paul II visits Malta for the second time during his papacy.

The Pope beatifies three Maltese clerics at an openair ceremony.

Pope Benedict XVI visits Malta in connection with the 1950th anniversary of the Shipwreck of St Paul on the Maltese Islands.

12

Country Report MALTA 2017

St Paul gets shipwrecked on the Maltese Islands on the way to Rome. He spends some time on the island, in the process converting the local pagan population to Christianity.

Malta officially becomes a crown colony of the British Empire.

Mintoff resigns, he is succeeded

by Karmenu Mifsud Bonnici.

Just over 53% of voters say yes to EU membership in the March referendum.

Malta votes yes in a non-binding referendum on legalising divorce.

Malta was one of only three countries in the world (along with the Philippines and the Vatican City) in which divorce was not permitted.

Malta falls under the control of the Byzantine Empire. There is evidence that the Goths and Vandals briefly took control of the islands before the Byzantines launch a counterattack and regain Malta.

Heavy bombing by German and Italian air forces targeting Allied bases during World War II.

Victory of Nationalist Party marks move toward European integration.

Eddie Fenech Adami becomes Prime Minister.

Fenech Adami’s ruling Nationalist party claims victory in a general election in April.

Malta coordinates the evacuation of tens of thousands of foreign workers from Libya in the first Libyan Civil War.

Arab Rule. The Arabs leave their mark on the Maltese language, introduce new crops to Malta and extend the old Roman fortifications.

Mqaret - Traditional sweets are a clear and direct inheritance of Arab influence

King George VI awards Malta the George Cross – Britain’s highest civilian decoration – for heroism.

Malta hosts summit between Soviet President Mikhail Gorbachev and US President George Bush.

Lawrence Gonzi is sworn in a Prime Minister following retirement of Edward Fenech Adami.

The Labour Party wins a majority of seats in the general election, thus defeating the Nationalist Party which had been in power for 25 years. Dr Joseph Muscat becomes Prime Minister.

Malta at a Glance

Today, Malta is an EU nation that forms part of the Schengen area and the eurozone, and it is one of the most densely populated countries in the world.

With great weather all year round, Malta offers its residents the unique opportunity to enjoy the highest living standards at a reasonable cost.

1091

1530

1565

1798

1964

1964-71

1971

1974

1990

1995

1996

1998

2004

2005

2008

2008

2014

2015

2017

2018

Norman Rule.

Arab rule on Malta comes to an end after a long battle with the Normans who crossed from Sicily.

On 21st September, after centuries of foreign rule, Malta gains independence with Prime Minister Dr George Borg Olivier at the helm.

Malta submits application to full membership of the EU.

In May, Malta is one of 10 new states to join the EU.

The Maltese parliament approves a law to recognise same-sex partnerships on a legal par with marriage, including allowing gay couples to adopt.

The Knights of Malta arrive in Malta.

The Nationalist Party pursues proWestern alignment.

Malta joins NATO’s Partnership for Peace programme in April, only to leave in October 1996 to maintain its neutrality.

The Commonwealth Heads of Government Meeting held in Malta.

Malta hosts the Commonwealth Heads of Government Meeting and the Valletta Summit on Migration, in which European and African leaders discuss the European migrant crisis.

The Knights of Malta together with the local population manage, against all odds, to defeat an invading Ottoman army and keep Malta a Christian bastion against Ottoman expansion.

Dom Mintoff’s Labour Party takes power, an era of non-alignment and special friendship with Libya and Communist states begins.

The Labour Party, led

by Alfred Sant, regains power and shelves application for EU membership.

Malta adopts the euro.

Malta holds the presidency of the Council of the European Union for the first six months of 2017.

French Rule.

Napoleon Bonaparte takes Malta from the Knights.

Malta becomes a republic, replacing the Queen as head of state with a president appointed by parliament.

Eddie Fenech Adami’s Nationalist Party returns to power, revives application to enter the EU.

The governing Nationalist Party wins a narrow victory in the general election over the Labour Party, re-electing Prime Minister Lawrence Gonzi.

Valletta is Europe’s Capital of Culture.

Country Report MALTA 2017 13

Country Overview

Country Overview

Star of the Mediterranean Distinguished in the region by its strong economic performance, Malta’s pro-business attitude, state-of-the-art infrastructure and modest operating costs have helped it become the go-to country for growth-minded entrepreneurs.

14

Country Report MALTA 2017

Country Overview

Country Report MALTA 2017 15

Country Overview

N

othing speaks more convincingly than the facts, and there is no denying that tiny Malta has emerged as one of Europe’s best performing economies, with high GDP growth and record-low unemployment. Its well-diversified economy proves alluring to international companies and foreign professionals pursuing dynamic careers in sectors such as finance, maritime, aviation and the digital industries. Malta has never been as wealthy in its entire history as it is today, and has grown both in influence and confidence. The country’s resounding economic success is widely regarded as a key reason for the second consecutive victory of Malta’s Labour Party in the June 2017 general election, which confirmed Joseph Muscat as Prime Minister.

The island has not only transformed itself economically in recent years, but the once-conservative country has also introduced a series of liberal bills, including civil unions to equal adoption rights for same-sex couples, which have given Malta a striking new look. Modern Malta today views itself as a European Union success story and a place where progressive economic and social policies are implemented. However, the fast pace of development in recent years has presented Malta with a new set of challenges. The country, home to a population of some 430,000 people, now needs to invest in infrastructure and the attractiveness of its built environment to transform itself in a world-class destination complete with the best amenities, green parks and places for recreation and entertainment.

Mediterranean Island

Located at the southern tip of Italy and just over 316 square kilometres in area, the Maltese Islands lie virtually midway between Europe and North Africa, some 90 kilometres south of Sicily and 290 kilometres north of Libya. The archipelago comprises Malta, Gozo and Comino. The main island, Malta, is 27 kilometres long and measures 14.5 kilometres at its widest point. It takes just 45 minutes to cross Malta, reducing commuting times and increasing leisure time. The official languages are Maltese and English, with 90% of Maltese being completely bilingual.

A rocky island with dry and often windy weather, Malta enjoys a typical Mediterranean climate, with the average temperature ranging from 12 degrees in winter to 30 degrees in summer. The capital city Valletta is both the administrative and business centre of the country. Other main towns include: the popular seaside towns of Sliema and St. Julian’s on the west coast; the inland towns of Mosta and Birkirkara, situated in the centre of the island; and Paola in the south. There are also numerous small villages that still evoke the traditional Mediterranean rural way of life, although some 90% of Maltese live in urban settings and the overall vibe of Malta is modern.

16

Country Report MALTA 2017

Colourful History

Malta’s strategic location at the commercial crossroads linking Europe, Africa and the Middle East has attracted the interest of the various dominant cultures for millennia. The Phoenicians, the Carthaginians, the Romans, the Arabs, the Spanish, the Knights of St John, the French and the British all ruled the island at one time and have contributed to the mosaic that is modern Malta. Not surprisingly, Britain’s legacy has lasted the longest as 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 believed to have developed during the Arab occupation of the islands (870-1090) and is the only Semitic language to be written in Latin script.

International People

Descendants of ancient Carthaginians and Phoenicians, with strong elements of Italian and other Mediterranean stock, the Maltese are truly an international people. With a history that has seen a succession of foreign rulers, the islanders have acquired an ability to adapt to new ideas and adopt them to their advantage. Generally welleducated and qualified, 90% of Maltese are bilingual in English and Maltese, and many also speak a third language, usually Italian, German or French.

Religion – an estimated 97% of the population are Roman Catholic – is also considered an important part of Maltese culture. But despite being a predominantly Catholic country that only began allowing divorce in 2011, Malta today is home to some of the most progressive LGBTQ-related laws in the world. Accounting for 6% of the population, Malta is also home to a growing expat population, attracted by strong economic growth and career prospects.

Second Term in Office

The country’s population is also one of the most politically active in Europe, with elections seeing voter turnout regularly exceeding 90%. Malta is a parliamentary representative democratic republic, in which executive powers rest with the Prime Minister while the President fulfils the ceremonial function of Head of State. In the last general election, in June 2017, Malta’s Labour built on their 2013 electoral victory and won once again, at the expense of the centre-right Nationalist Party.

Joseph Muscat was re-confirmed Prime Minister after its Labour Party received some 36,000 votes more than the Nationalist Party. For the first time in Malta’s more recent history, 2017 saw two representatives from a third party – the Democratic Party – entering parliament. The Democratic Party

Our economy has advanced and our nation has become richer. While a few years ago, people were worried about the cost of utilities, they are today concerned about a better environment and the cleanliness of the country.

Dr Joseph Muscat Prime Minister of Malta

An integral part of Malta’s success as an international business centre is our familiar and strong legal system, which is achieving important results on the EU justice scoreboard.

Apart from making the court system more efficient, we are also investing in developing Malta’s capabilities as an international arbitration centre.

Owen Bonnici Minister for Justice, Culture and Local Government

Country Overview

Malta is also on the fast track to becoming a hub for education, healthcare and energy – sectors that are poised to become the country’s next success stories. With the help of foreign investment, Malta is seeking to add those economic activities to its list of exportable services.

Figures for 2016 showed that Malta’s economy grew by

5%

making it the fastest growing economy in the EU

formed in 2016 and had contested the general election in coalition with the Nationalist Party. The current president of Malta is Marie-Louise Coleiro Preca, Malta’s second female president, who was appointed in April 2014.

diversified economy has helped preserve stability.

GDP growth is projected to reach 4.6% in 2017 and 4.4% in 2018, which places it again among Europe’s strongest economies according to the European Commission’s spring 2017 forecast.

Fastest Growing Economy

Driven by Service Exports

Gaining independence from Britain in 1964, the country’s decision to join the EU in 2004 and the Eurozone in 2008, was integral to the expansion of its horizons and bolstered its status as a key business hub in the Euro-Mediterranean region. There is no doubt that Malta leads the region in many economic indicators. Its small, open economy has proven to be remarkably resilient. Malta has posted positive growth figures over the past six years and has regularly been among the best-performing economies in the EU. In 2015, the economy grew by an impressive 6.2%, while unemployment remained below the 5% mark. Figures for 2016 showed that Malta’s economy grew by 5%, making it the fastest growing economy in the EU. The International Monetary Fund recently said that Malta’s outlook is strong and that growth is expected to remain solid in 2017, highlighting that Malta’s

Tourism is among Malta’s top performing sectors.

In 2017, the island expects to welcome two million tourists – more than ever before. Tourism today accounts for some 25% of the country’s GDP. Rivalling tourism’s importance and growing in tandem over the last few years has been Malta’s financial services sector, which now accounts for 13% of GDP. Life sciences and digital media are joining the traditional economic generators and creating a solid base of diverse operations from which Malta is competing on an international level. The maritime industry is one of the oldest, and today Malta is home to the largest ship register in Europe and is one of the major logistics providers in the Mediterranean.

The country now aims to replicate this success in the aviation sector and has introduced new legislation to help achieve this. Malta is also on the fast track to becoming a hub for education, healthcare Country Report MALTA 2017 17

Country Overview

and energy – sectors that are poised to become the country’s next success stories. With the help of foreign investment, Malta is seeking to add those economic activities to its list of exportable services.

High-Profile Investment

The decision by high-profile companies to invest in and to move operations to the island is a strong indicator of the extent to which Malta is being regarded as a profitable table business hub. Some prominent companies which have invested in Malta include HSBC and Banif in banking; French line CMA-CGM in the port sector; Microsoft, Huawei and Vodafone in IT and telecoms; and Lufthansa Technik and Playmobil in manufacturing. Foreign investment has helped to push Malta’s economic performance throughout the years. Providing access to the EU’s single market, Malta’s proximity to and cultural links with North African and Middle Eastern countries are particularly attractive to companies that use the country as a stepping stone for trading, distribution and marketing of their international operations in Southern Europe and North Africa. In June 2016, the stock position of FDI in Malta amounted to €156.7 billion, an increase of €10 billion over the corresponding month a year before. With 98.1% of FDI stocks, Malta’s International Finance Centre is the dominant recipient of foreign investment.

18

Country Report MALTA 2017

In addition to the historical and strong commercial links with Italy and the UK, Malta also enjoys healthy trade with France, Germany and the Netherlands. Malta’s exposure to international commerce is one of the highest worldwide, and the country’s leaders are constantly working on developing new ties with foreign governments in order to facilitate worldwide market access for all industries. For instance, trade with Asia, mainly China and India, is increasing.

A Place to Grow a Company

Malta offers investors a secure and transparent environment in which to start 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 built up modern telecommunications and international transport links, while a full package of incentives that range from fiscal benefits to the provision of custom-built production facilities are available to investors. Start-ups also play an increasingly important role in Malta’s economy and find support in the form of seed financing schemes and incubators. This trend has not gone unnoticed by investors, venture capital firms, and more recently global investment banks, who are competing to fill the funding needs of promising early-stage businesses.

Human capital investment is also on the government’s priority list.

Malta not only remains open and welcoming towards foreign professionals, but also actively encourages them to come and work on the island.

“It’s complicated. That’s why we’re bringing in BDO”

People who know, know BDO

At BDO, nothing matters to us more than our clients.

Our profound dedication to client services is matched only by our in depth knowledge of the issues that affect both individual businesses and entire industries.

Established in 1978, BDO Malta continues to grow successfully allowing us the ability to fully service our foreign and Maltese clients with all their financial services needs.

We offer the following services: Audit and Assurance Tax Compliance and Consulting VAT Compliance and Consulting Full Outsourcing Services Legal and Consulting Services Fiduciary Services Banking

Incorporation/Formation of Companies Correspondence and Administrative Services Directorship and Company Secretarial Licensed agents for Individual Investor Programme (IIP) Yachting and Marine Services Formation of Trusts and Foundations Securitisation Vehicle and Funds Setup

www.bdo.com.mt Tower Gate Place, Tal-Qroqq Street, Msida, MSD 1703 Telephone: 2131 3060 Email: info@bdo.com.mt BDO Malta, a Maltese civil partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO Consult Limited and BDO Services Limited are companies registered in Malta and form part of the BDO Malta group.

BDO is the brand name for the BDO network and for each of the BDO member firms.

Country Overview

With great attention being paid to the next generation of its workforce, the country continues to invest heavily in education, and each year Malta sees a steady stream of new students entering higher education. 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.

An Impetus on Infrastructure

Malta has attracted admirers for its success in transforming itself from a British military outpost into a well-functioning economy. The country now pushes itself towards a more innovationdriven economy, as there is increasing awareness that raising productivity and increasing efficiency are critical if growth is to be sustained. Businesses often cite a lack of human resources and the country’s ageing infrastructure as major impediments to growth. Human capital investment is high on the government’s priority list. Malta not only remains open and welcoming towards foreign professionals, but also actively encourages them to come and work on the island. However, the influx of companies and people is particularly putting pressure on the road network that has failed to keep pace with this growth. Keen to see the sector heading in a new direction and addressing any shortcomings, the Maltese authorities are willing to collaborate with global innovators to create a better connected and more efficient transport system. A €700 million programme to resurface the island’s roads has already been launched, while the government is also considering proposals for a mass transportation system. In the government’s vision, economic and social progress should also go hand in hand.

While the country has achieved impressive economic results, there are other issues that still need to be tackled in areas such as education, health and a more inclusive society.

20

Country Report MALTA 2017

Confident Malta

Strong economic growth has transformed Malta into a confident nation, which is now seeking to strengthen its position on the global stage. Malta’s EU Presidency, which ran January through June 2017, has been shaped and influenced by Brexit given that the UK triggered Article 50 of the Lisbon Treaty in March. Despite this challenge, Malta, as head of the 28-nation bloc, insisted that Europe needs to keep a positive outlook and ensure that the European project moves ahead. However, Brexit is as much about politics as it is about business, and although Malta is not pitching as aggressively as other nations for UK business, it is quietly positioning itself as an attractive alternative for companies seeking an address in the European Union.

Concurrently though, Malta has to defend its economic model given the increased focus on tax competition in Europe. The island stresses that its tax regime has withstood the tough scrutiny of the European Commission and that the country is supporting all EU and OECD initiatives to combat tax evasion. While Malta’s ability to maintain its tax base will define its economic future to a certain extent, taxes are also widely seen as just one factor driving commercial decisions, and the country is paying attention towards increasing the overall ease of doing business.

Moving Forward

Investment, across all sectors, will remain a key driver of future growth and is important for raising the living standards even further. There is also a lot of enthusiasm to develop a more efficient infrastructure that can cater to the needs of modern Malta, mirroring and supporting the country’s strong economy. When it comes to attracting new businesses, keeping costs in check and maintaining Malta’s competitive tax and regulatory frameworks will be important. Malta’s unique Mediterranean appeal, which at times combines a big city vibe with rural village charm, is also playing a role in making Malta an attractive place to work and live. There is a desire to further strengthen Malta’s cosmopolitan island flair in the years ahead. The country will launch a new wave of regeneration initiatives, although, in the short-term, Malta will see small, incremental changes rather than a holistic overview of its infrastructure and built-environment. However, as the country wants to widen its development for the next 10 to 15 years, it seems likely that it will move into the direction of global business locations such as Singapore and Dubai.

Mimicking other places though is not an option.

To remain successful, Malta will need to draw on its own strengths to define and create its own 21st century identity. n

I would like the EU to view us as a good representation of what an EU state can be and become. We have strong finances, good education and healthcare, and we have raised the bar significantly when it comes to equality initiatives.

Due to our size, we are often being overlooked but Malta can be a showcase in many areas.

Helena Dalli Minister for European Affairs and Equality

Our priority was to stimulate growth.

Economics and finance can be very complicated, but essentially they are quite simple. It is like baking a cake. If you want your cake to be big, you need to increase your ingredients, for instance human capital, skills and investment. So we widened our labour pool, started offering incentives to women and foreign professionals to join Malta’s labour market, in addition to embarking on a dual strategy of controlling expenditure while assisting the business community to expand.

Prof Edward Scicluna Minister for Finance

Malta is a progressive country, which in the past four years was among the leading nations when it comes to civil rights. This is the way we want to move on. We have just introduced a marriage equality bill and are also about to start a discussion whether or not we want to legalise cannabis for recreational use.

Julia Farrugia Portelli Parliamentary Secretary for Reforms, Citizenship and Simplification of Administrative Processes

Country Overview

MALTA

in PICTURES

Country Report MALTA 2017 21

Interview

Interview with the Prime Minister of Malta, Dr Joseph Muscat

Record Growth in Record Time

Malta’s economy grew faster and more comprehensively than many had expected.

Recently re-elected Prime Minister Joseph Muscat is now focused on turning the country into a cosmopolitan hub and one of the world’s best places to live.

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Country Report MALTA 2017

Interview

Your party has just been re-elected to lead the country for a second term. What do you believe were the main reasons that led to this consecutive win?

Maltese families from all factions of society have benefited from an improved quality of life and increased disposable income. It cannot be denied that this was a consequence of the strong economy that we have built. The key to our economic success was to give families more of their own money, which in turn will continue to be injected into the local economy. I would say that this is the main reason, but of course I believe my administration did a lot of good for the country – not merely in economic terms, but for families by pushing forward on civil liberties; for students through widening opportunities for the younger generation; and for the environment mainly by closing the tap on use of heavy fuel oil for energy production.

In 2013, you had set your sights on making Malta the most competitive economy in the EU. How much of this ambitious target do you think you have achieved and what are your plans and priorities for the new legislature?

Malta experienced unprecedented economic growth over the past years. In the past four years Malta reached the lowest rate of unemployment in its history. Real GDP growth turned out at 5% in 2016 – the second highest in the EU. We have put forward ideas like universal free childcare, which has unleashed the tremendous, previously untapped potential of the female labour force. We have lowered energy bills by 25%, increased pensions for the first time in 25 years, while we are also taking people off benefits and putting them into work through in-work benefits. We have created enough job opportunities not only for the Maltese, but also for 30,000 foreigners. We have developed from a place where there were not enough jobs, into a place that needs more workers to fill all the jobs.

In the first quarter of this year, growth was at 4.2% – one of the highest in the Eurozone. This, as well as the surplus Malta registered in 2016, the first one in 35 years, are evidence that we have met our target, and I am confident that the new administration will continue to meet it. The aim of the new legislature is that the benefits of this growth are reaching those that need it most.

Many, including the international rating agencies, were surprised that Malta’s small economy was able to outperform the majority of other EU states. How do you explain this?

All sectors of the economy are contributing to our growth. In 2016, we received a record of almost 2

million tourists. We are seeing growth in financial services and iGaming, and even in manufacturing, which many had predicted to be obsolete by now.

New companies are setting up, and order books are healthy. The driving force behind Malta’s past and current success is that we worked on turning Malta into the ultimate destination for investment and left our doors wide open for businesses. We have a skilled workforce, first-class technology and communications, and we continue to foster a probusiness environment. Investors also comment favourably on our ‘can-do attitude’. This is perhaps what differentiates us. There is a spirit in Malta to always do better. This also means that we are aware that past success is not a guarantee for the future.

So we need to diversify further.

Over the past months, Malta has been in the international media spotlight more than once and not always for the right reasons.

What is your answer to the so-called ‘Malta Files’ revelations and to the recent criticism of Malta’s management of its tax affairs?

There is nothing secret about the Malta Files. The information released was public on an open public register that can be accessed by anyone. If you look into it, it is evident that none of the allegations are true and that these companies have been investing in Malta for years. Our systems are OECD compliant and have been vetted by the European Commission. Malta is also ranking positively in the Tax Justice Network’s Financial Secrecy Index as well as on the Financial Secrecy Index, outranking other EU member states. These rankings and the highly regulated financial sector are confirming that Malta is very much on top of its tax affairs.

What sectors of the economy do you feel offer foreign investors the greatest opportunities going forward?

Our next big projects will be related to logistics and the maritime economy with the construction of a dedicated maritime services hub. We have also invested heavily in education and health, in particular with a view to make them exportable services industries. We want Malta to become a leading medical hub in the region, and the interest received by foreign investors, for instance for the opening of a new private hospital and a medical school on Malta’s sister island Gozo, confirms that Malta has the right credentials in this regard. When it comes to education, we want to build on our reputation as a teaching and training centre. Malta is already a top location for teaching and learning English.

In the autumn of 2017, the American University of Malta (AUM) – a private university – will open its doors. Our intention is to position Malta as an Country Report MALTA 2017 23

Interview

education destination for students from all over the region and beyond. We also want to consolidate the results we achieved so far in other sectors, and current and potential investors believe that Malta is extremely attractive for FDI. Malta endeavours to pursue its promise of an environment conducive to business that offers investors stability and transparency in terms of corporate taxation and regulatory processes.

What would you highlight as your government’s legacy on Maltese society?

I think we have achieved tremendous progress with regards to social rights and civil liberties. Not long ago, the international media looked at us as a country that was lagging behind in these areas because we did not even have divorce. Today they consider Malta as one of the most advanced nations when it comes to gay rights amongst other things.

We can also observe a change in Maltese society in general. Our economy has advanced and our nation has become richer. While a few years ago, people were worried about the cost of utilities, they are today concerned about a better environment and the cleanliness of the country. This gives us satisfaction because it means that our families are no longer plagued by the uncertainty that prevailed previously. We are aware that we need to up the ante in terms of environmental protection and that this is something that we need to look at seriously if we want the country to stay at the top. Our long-term vision is to transform Malta into a cosmopolitan country, offering its people the highest quality of life.

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Country Report MALTA 2017

What are your views on Malta’s growing infrastructure deficit?

We have grown too much and too quickly, and our infrastructure has not been able to keep up with this growth. But we don’t need any more wake up calls, infrastructure investment and development are high on our agenda. Our current infrastructure was built for a country of 400,000, but due to tourism and population growth, there are many more people on the island today. Traffic is also a big problem, and we have already started to address the situation by creating alternative routes, employing systems such as tidal lines, and building new flyovers. Our public transport system is also showing signs of improvement under a new operator, and the number of public transport users has increased.

However, the long-term solution to traffic consists of two main ways: introducing alternative means of transport – like underground tunnels – and increased sea connectivity. Such a vision also includes addressing new construction projects in a holistic way that factor in traffic and traffic flows.

Malta just held its first EU Council Presidency. How would you describe your experience at the helm of the EU?

The Maltese Presidency of the Council came at a time when the very existence of the Union was being put to test. The economic crisis, Brexit, migration issues, security threats and terrorism have traumatised the European project. However, we were deeply committed to ensuring that the

There is nothing secret about the Malta Files. The information released was public on an open public register that can be accessed by anyone. If you look into it, it is evident that none of the allegations are true and that these companies have been investing in Malta for years.

Interview

European project continues. The EU Council Presidency was both a challenge and an opportunity for us as a nation. We showed that even the smallest member state of the Union can contribute to prosperity, peace and security. We brought tangible results in areas that truly make a difference to European citizens. On the issue of migration, we struck a deal to avoid a humanitarian crisis in the central Mediterranean. We agreed to further assist the Libyan coast guard in their efforts to counter human trafficking while also engaging with wouldbe migrants to explain the perils of the dangerous trip.

Malta’s leadership also helped to strengthen the single market, in particular the single digital market, by addressing the issue of unjustified geo-blocking and by removing roaming charges in Europe, a measure which brought about a real change in peoples’ lives. We also pushed for the development of the European Social Pillar by addressing the ever-changing issues of the job market and for women’s full access to employment. Malta also promoted the better governance of our oceans, in particular that of the Southern Mediterranean basin.

How do you see Malta’s relationship with the UK developing in the future?

We, like our fellow EU member states, want a fair deal for the UK, but – and I have said this very clearly – this cannot translate into a better deal than membership. As a country, Malta is keen to continue to have excellent bilateral relations on many fronts with the UK, although it is still too early to define what this would look like. But I think we need to consider the UK’s exit from the European Union as an opportunity. British companies wanting to remain within the EU could see us as a gateway to the European Union.

Can you give us insight into Malta’s foreign policy and the role Malta can play within the Mediterranean region?

Our vision is that of a safe Mediterranean region, which offers peace, wealth, stability and work for people on all sides. Malta has always been an advocate for diplomacy and dialogue, and we have always highly regarded the proactive approach to resolve international issues and address threats to global security. The situation in the Middle East has a huge bearing on that of our region and the whole world. With a clear view on the rights of the Israelis and Palestinians, my country continues to back initiatives aimed at rekindling the prospects of peace talks and to keep the two-state solution alive.

Malta also has an innate vocation to serve as

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Country Report MALTA 2017

a natural bridge between the European Union and North Africa. Our country is considered a key ally by many North African countries because we have a genuine interest in these countries. We want stability in the region, and we believe stability brings prosperity. With Libya, we have a close relationship and President Fayez Serraj visited Malta recently.

We will continue to assist because stability in Libya impinges directly on the stability of the whole region.

Over the last years we have also improved relations with the Gulf countries including Jordan, Lebanon and Iran. In fact, we were one of the first delegations to visit Tehran after the scaling back of the sanctions. With Russia, we have followed the EU line while still looking after our own interests.

Our relationship with China dates back some 45 years, and has strengthened significantly in the past four years.

Valletta has been chosen as the European Capital of Culture in 2018. What opportunities does this title present to Malta?

It is a brilliant opportunity for us to showcase Maltese culture. The truth is Valletta is a gem that many people have yet to discover. It is a wonderful place to wander around and absorb. The European Capital of Culture gives us the opportunity to show the other side of Malta: our history, culture and arts. It’s also an opportunity for Malta to not only strengthen its cultural infrastructure through the development of its local sector, but also to open new avenues of dialogue and knowledge-sharing with various international partners from within the fields of culture, the arts, academia and diplomacy.

What are your expectations for Malta in the coming five to ten years?

Our country’s best days. This is the commitment the Labour Party’s campaign made to Maltese families and this will be my expectation for the next five years. We spent four years building the foundations and implementing changes that were the first in our country’s history. Now the focus will switch to sustaining this growth and these changes, and maintaining positive relationships with the public and stakeholders to turn Malta from one of the best in Europe to one of the best in the world. We also need to give proper importance to urbanisation, infrastructure development and long-term planning. In a few years’ time, I hope that Malta will not only be an economic success story, but also a country that offers one of the best qualities of life to its people. Our people must gain confidence in our nation, and start believing that although we are a small nation, we are not inferior. n

We have grown too much and too quickly, and our infrastructure has not been able to keep up with this growth. But we don’t need any more wake up calls, infrastructure investment and development are high on our agenda.

Economy

Economy

Gearing up for the Next Transformation On the up and up: Malta wants to ensure the progress of recent years continues, but without a massive investment in infrastructure, economic growth will likely be affected.

Country Report MALTA 2017 27

Economy

A balanced budget will remain one of our priorities.

We don’t want to go back to negative territory. We also have sufficient investment in the pipeline to maintain the current level of growth of around 4% for the next two to three years.

Prof Edward Scicluna Minister for Finance

M

alta’s economy is at a historic inflection point.

Steady GDP growth and record-low unemployment have helped the island emerge as one of Europe’s best performers in recent years, and Malta has long traded on its growth pattern of economic diversification and foreign investment. Financial services, iGaming, tourism, maritime services, and high-value manufacturing are among the sectors that today form the basis of the economy.

However, there are signs that Malta needs to pay greater attention to other powerful ingredients to safeguard macroeconomic stability and ensure future economic growth. Capacity constraints in the infrastructure sector and a shortage of talent in certain industries are putting upward pressure on the island’s cost competitiveness. Forging a path for future prosperity therefore requires capacityenhancing investment in areas such as transport, energy and the environment that are capable of genuinely transforming Malta from a European success story into a truly open, global economy that attracts the best and the brightest.

Economic History

Malta has come a long way in a short time, and there is every reason to believe that it can continue growing and developing. With virtually no natural resources, a location at the periphery of Europe and a domestic market of just 435,000 people, the country has always had to be versatile in adapting to the changing realities of the global economy. Until it gained independence in 1964, after 150 years of British rule, Malta was described as having a ‘fortress economy’. The majority of the 28

Country Report MALTA 2017

Maltese workforce was either employed directly by the British forces or in industries servicing the military machine. After the departure of the British, the newly independent nation was confronted with the challenge of building up an economy practically from scratch. The industries it chose to develop, tourism and manufacturing, were labour-intensive, enabling local companies and foreign investors to gain maximum benefit from the flexible workforce and the low wages prevalent at the time. In the face of rising labour costs in the 1980s, Malta focused on high-value activities in areas such as electronics manufacturing and precision engineering, thus laying the foundations for the development of a world-class knowledge-based economy.

A Focus on Services

Financial services, science and technology, highvalue manufacturing, health, tourism, education, maritime services and creative industries are now the dominant features of the economic landscape.

In particular, Malta’s EU and Eurozone membership helped the country to strengthen its services sector, and the export of services across the EU member states is today a prime driver of economic growth. Malta’s economy is almost entirely made up of small businesses, of which some 95% are microenterprises employing fewer than 10 people.

There are only a few large enterprises in Malta, including chip manufacturer ST Microelectronics and toy manufacturer Playmobil.

While the importance of traditional sectors such as agriculture and manufacturing has shrunk over the past few years, new ones have emerged to

Malta scores high when it comes to economic stability. This is really of importance because it is a key criterion for many investors when choosing a country over another. As a country, we are aware that nothing comes easy and you have to work for it. We have a high standard of education, while we do our best to create a proactive business environment and to make Malta a location of choice for foreign direct investment and international trade.

Dr Christian Cardona Minister for the Economy, Investment and Small Business

Economy

The Maltese economy is going through an unprecedented period of strong growth, low unemployment, restrained inflation, a positive external balance and diminishing budget deficit and debt ratios. (…) The challenge is to ensure that the economy continues to expand at a sustainable pace, without overheating. It is vital that we avoid the formation of asset price bubbles.

Dr Mario Vella Governor of the Central Bank of Malta

While of course we need to navigate the immediate challenges right in front of us, we equally need to position ourselves to thrive in a new economic world order driven by the growth of emerging markets and an ever more integrated global economy. This is a transformational and permanent structural change, and I think here in Malta we are extraordinarily well positioned to capitalise upon this.

Andrew C. Beane CEO of HSBC Malta

take their place, and Malta has become a leader in the export of services. International financial services account for 13% of GDP, while ICT, iGaming, games development, aviation, life sciences and the manufacture of pharmaceuticals, are joining the traditional economic generators to create a solid base of diverse operations, enabling Malta to compete at an international level. Tourism remains a key pillar of the economy, contributing more than 25% of GDP. The internationalisation of sectors such as education and health is currently high on the agenda.

Last year, more than 76,000 foreign students attended English language courses at local specialised schools, while the island managed to attract investment from various private companies setting up tertiary educational institutions on the island.

Meanwhile, Gozo, Malta’s sister island, has received foreign investment for the opening of a new private hospital and a medical school seeking to attract students from across the world.

From Deficit to Surplus

In 2016, Malta’s government balance turned positive, registering a surplus of 1% of GDP, up from a deficit of 1.3% in 2015. Higher tax revenues, which benefited from rising wages, strong corporate profits and increased investment activity are being seen as the key drivers of this better-than-expected outcome. High employment growth aided by the government’s introduction of special incentives for women to join and elderly people to stay in the labour force; as well as income from Malta’s citizenship by investment programme; have also contributed to the fiscal surplus. Looking ahead to 2017 and 2018, the fiscal surplus is expected to remain positive but to decline marginally due to lower proceeds from the citizenship scheme. Malta’s national debt has decreased to 58.3% of GDP in 2016, and it is projected to decrease further to reach 55.8% by the end of 2017.

Nearing Full Employment

GDP Performance

The country has recorded positive economic growth figures in the past six years, with GDP growth hitting a historic high of 7.4% in 2015 and 5% in 2016. While investment in Malta’s energy infrastructure has given GDP growth an additional boost, most of the country’s key economic sectors have contributed to the expansion of the economy. The tourism industry enjoyed a record year in 2016, almost breaking through the 2 million tourist mark, while financial services and iGaming grew at a healthy rate. Malta’s construction sector has also rebounded strongly after a period of subdued activity. Growth is projected to moderate somewhat, but to remain robust at 4.6% in 2017 and 4.4% in 2018. Consumer spending, as well as government consumption, on the back of several large projects in healthcare and education, are expected to remain stable.

The expansion of Malta’s logistics sector is currently high on the agenda, and if treated in the right way, it could be as transformational as the island’s decision to position itself as a centre for financial services.

Malta’s labour market has performed exceptionally well in recent years, and in 2016 the country’s unemployment rate fell to 4.7%. To ensure continued growth of the economy, it has been a key priority of recent years to widen the labour pool by promoting immigration in certain sectors of the economy, while also removing structural barriers that impede women from working. Fiscal benefits and free childcare have been introduced and seen the female participation rate in the labour force climb by 13% between 2008 and 2015. Nonetheless, Malta remains the EU country with the biggest gap in the percentage of working men and women. While 81.4% of men in Malta aged 20-64 are employed, a mere 53.6% of women are – a difference of 27.8%.

Italy has the second-widest gap, with a 20% difference. Inflation averaged 0.9% in the past year – one of the highest in the Europe, with EU annual inflation being 0.3% in 2016. Commentators cite the higher costs of tourist services, including restaurants and cafés, as the main reason for the higher level in Malta.

Trade and Investment

Trade and investment are of vital importance to Malta’s economy and, according to the 2015 Open Market Index published by the International Chamber of Commerce, Malta has the 13th most open economy in its league table of 75 nations.

Most of Malta’s trade is with the European Union, however the US and China are also among the country’s top commercial partners. In 2016, Malta registered imports of €6,04 billion compared to €6.1 billion in 2015. Exports reached €3,64 billion, also a slight increase compared to the €3.52 billion Country Report MALTA 2017 29

Economy

Economic Forecast (Source: NSO, European Commission, Spring 2017 Economic Forecast )

GDP

7%

Unemployment

7%

Debt

70%

6%

6%

60%

0.8

5%

5%

50%

0.6

4%

4%

40%

0.4

3%

3%

30%

0.2

2%

2%

20%

0

1%

1%

10%

-0.2

0

7.4%

5.0%

4.6%

4.4%

2015

2016

2017

2018

0

5.4%

4.7%

4.9%

4.9%

2015

2016

2017

2018

registered in 2015. Thus far, the import of oil has been weighing heavy on Malta’s trade balance, however, going forward, investments in the energy sector, including a shift to gas, are expected to have a positive effect on the country’s import bill.

Malta’s reputation as a safe investment location has also been boosted, in contrast to other countries in Southern Europe, which have seen their economies stall amidst the debt crisis. Over recent years, Malta has secured foreign direct investment (FDI) in a wide range of areas including: financial services, digital gaming, high-end manufacturing and aircraft maintenance. However, finance and insurance are the dominant sectors for FDI, accounting for 98.1% of FDI stocks at the end of June 2016.

The total stock position of FDI in Malta stood at €156.7 billion at the same date, an increase of €10 billion over the corresponding period in 2015. The stock position of direct investment abroad stood at €61.8 billion in June 2016, up by €676 million over the stock position in June 2015.

Addressing the Labour Shortage

Across the board, Malta’s commercial credentials are impressive: a stable economic environment, a well-educated workforce and an attractive business climate. But there is broad consensus that a substantial reform agenda still lies ahead. A severe shortage in workers is currently one of Malta’s greatest challenges, and the country needs to find ways to mobilise higher amounts of women joining the labour force. While Malta has already introduced a flat tax rate for foreign professionals to work in Malta, it

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Country Report MALTA 2017

0

60.8% 58.3% 55.8% 52.5% 2015

2016

2017

Surplus

1.0

1.3%

1.0%

0.5%

0.8%

2015

2016

2017

2018

-0.4

2018

might be an opportune moment to introduce incentives for Maltese nationals working abroad to return home in an effort to pull in much-needed extra talent. Companies in Malta could also make better use of the skills and competencies of refugees and migrants living in Malta. Other European countries have already made it a priority to integrate these people in the labour market, and specialist HR companies have emerged that purely focus on recruiting refugee talent.

-0.6

1.3%

-0.8

-1.0

-1.2

-1.4

Emerging and Expanding Sectors

Another, perhaps more complex, challenge for Malta is how to maintain its attractiveness for foreign investment in the wake of initiatives calling for greater tax harmonisation by the European Commission and the OECD. However, Malta has always emphasised that it wants its sectors to have economic substance on the island with high value added and job creation. In this scenario, the development of new economic opportunities is also among the country’s priorities. The expansion of Malta’s logistics sector is currently high on the agenda, and if treated in the right way, it could be as transformational as the island’s decision to position itself as a centre for financial services. The maritime sector is also expected to receive a boost, with renewed interested in developing the blue economy. While the modernisation of the energy sector – once the island’s Achilles heel – is almost completed, there is also a need to invest in related sectors such as water, waste and renewable energies, where Malta is lacking behind. Privatisation

Fiscal benefits and free childcare have been introduced and seen the female participation rate in the labour force climb by 13% between 2008 and 2015.

Deficit

Economy

The secret behind Malta’s meteoric growth over the past quarter of a century has been the creation of new sectors in which we have excelled. It is therefore crucial that the country continues to develop new areas of activity.

Ann Fenech Managing Partner of Fenech & Fenech Advocates

If you look at the OECD’s report on capital flows, you will see that key flows are occurring outside of the EU - including Africa, South America and Asia. I think Malta needs to align itself more with the flow of capital to take full advantage of global market opportunities.

Besides our existing trade relationships, we need to foster links with non-traditional partners.

Kevin Valenzia Territory Senior Partner of PwC

has already played a major role in Malta’s economy.

Greater involvement of private sector firms is also seen as a way of encouraging technological innovation and investment in research and development.

Infrastructure: The Missing Link

The adoption of new technologies needs to go hand in hand with general infrastructure investment as Malta’s public infrastructure hasn’t kept up with the island’s growth. This is particularly noticeable in areas such as transport and housing, which are sectors that might come under more pressure in the next years. Malta’s expanding economy will continue to attract more companies and capital, and the island might see its population grow at a steady rate. While demand for residential and office space is pushing prices up, traffic-congestion is affecting economic growth and quality of life. Economists are calling for long-term economic planning and for the development of a vision that outlines Malta’s goals and priorities for the next 20 years.

Aiming for the Best

Much of Malta’s past economic growth can be linked to a formula of offering value for money and attractive regulatory frameworks for a large number of sectors. While regulatory convergence is levelling the playing field among EU countries, the fact that demand and supply are out of balance in many areas has eroded Malta’s cost-competitiveness. Structural changes and greater efforts are needed to up the ante in the quality of the island’s offering – in terms of real estate, entertainment and leisure facilities, as well as transport networks.

Looking to the future, Malta’s aspiration should not be to offer the cheapest services, but the best. n

In their Words “Malta’s recent economic reforms have sought to counter structural challenges, enhancing the economy’s resilience to future shocks.

For example, reforms aimed at alleviating constraints in the labour market have led to significant improvements in the female participation rate (….) Furthermore, progress has been made in reducing Malta’s reliance on oil imports as a primary energy source, notably through the recent electricity connection with Italy, which is already playing an important role in energy supply, supported by additional large-scale energy investments.”

Moody’s, September 2016 “Malta is in the midst of one of the strongest medium-term economic expansions in the Eurozone, with the second-highest average GDP growth rate in 2010-2015 (after Ireland) and the third-highest expected real GDP growth in 2016-2019. By the end of this year, we anticipate that Malta’s economy will exceed pre-2009 levels by more than 25%.”

Standard & Poor’s, October 2016 “Fitch expects growth to remain buoyant although moderating over 2016-2018 at 3.6%, driven by strong domestic demand.

Real disposable income will be supported by rising employment, subdued inflation and wage appreciation. Residential construction and health and education projects will boost investment. The impact of Brexit is likely to be negative but limited, as the decrease in tourist arrivals from the UK will likely be offset by those from elsewhere.”

Fitch, August 2016

95%

of Maltese businesses are microenterprises

Country Report MALTA 2017 31

Blue Economy

Blue Economy

Catching the Next Wave Malta is working on developing a sustainable blue economy by further harnessing the Mediterranean Sea – a source of untapped wealth and potential.

M

alta’s marine and maritime sector has long played an important role for the wellbeing of the Maltese population, but the blue economy is likely to become an even greater economic force.

With territorial waters that are almost 14 times bigger than the country’s land area, and a coastline almost 300 kilometres long, it comes as no surprise that Malta has set its sights on to harnessing the Mediterranean Sea. Long considered the traditional domain of shipping, ship repair and fishing, Malta is keen to position itself as a leader in new emerging activities that are reshaping the sector such as aquaculture, marine biotechnology and blue pharma, renewable energy, as well as technological research, ICT and e-maritime services that make it feasible and economically viable to tap into blue resources.

The New Blue

Malta’s maritime industry dates back centuries – evidence of naval activity can even be found in the island’s ancient temples that feature walls embellished with carvings of ships. The sea has long been Malta’s greatest resource and often made up for the lack of arable land to support the needs of the island’s population. The Phoenicians, the Carthaginians, the Romans and the British all used Malta as a trading hub. In more modern times, the country also capitalised on the crystal-clear waters surrounding the island by pitching itself as a travel and tourism hotspot in the Mediterranean.

Malta’s Blue Economy Clusters

1

2

3

4

Maritime Commercial Cluster

Logistics Cluster

Marine Engineering Cluster

Fisheries and Aquaculture Cluster

Legal, Financial, Insurance, Broking, Chartering, Ship Owners, Surveyors, Adjusters, Crew Management

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Country Report MALTA 2017

Freight Forwarders, Terminal Operators, Ship agents, Warehouse Operators, Bunkering

Marine Engineering, ICT, Ship Repair, Technical Services Mechanical and Electrical, Sailing and Motorboat clubs, Marinas, Boat Sales/Chartering

Fishing Boat Owners, Fishing Coops, Fish farming, Aquaculture, Fish Processing, Fisheries Management and Biotechnology

Blue Economy

I consider the Integrated Maritime Policy as the tool that would potentially establish Malta as a leading nation in the Mediterranean sea-basin to uncover innovative ideas to promote sustainable practices and create opportunities for the private sector to invest in maritime technologies and expertise.

Dr Daniel Aquilina Chairman of Malta Marittima Agency

Studies determine that some 15% of Malta’s economy depends on the marine environment.

During the past few decades, there was a decline in certain maritime activities especially in ship building and repair, however new segments have emerged, for instance ship registration and support services for the offshore oil and gas industry, that have become primary drivers of growth within the sector. While the traditional service-based activities are still at the heart of Malta’s ambitions for blue growth, the country’s desire to develop a blue economy goes beyond tourism, trade and transport. It is expected that by investing in and building upon new opportunities that beckon from the sea, Malta could generate some 6,000 new jobs in the coming years, as well as a 3% increase in GDP. The Science of Sea Farming

Fisheries have long had their fair share of Malta’s maritime activities. Going forward greater attention will also be paid to the development of the fish processing industry as well as to aquaculture. Malta currently has five fish farms operating nine sites, with one farm producing only closed cycle species (CCS) such as sea bream, sea bass and meagre, one both CCS and tuna, and the others only tuna.

Today, more than half the fish consumed around the world is farm-grown, and globally the aquaculture industry is growing an average of 6% annually. To cater to this rising demand, Malta is also keen to become a respected leader in aquaculture research. A focal point here is the development of ‘new species’ for aquaculture, with particular emphasis on the hatchery and cage rearing of amberjack and bluefin tuna. The pharma and biotechnology sectors could too play a key role in driving blue growth. While Malta has been very successful in the manufacture of generic pharmaceuticals, future opportunities could arise in marine biotechnology and ‘blue pharma’ by using molecules and substances of marine origin for drugs, cosmetics and dietary supplements – areas that are still largely unexplored today.

Power from the Sea

5 Energy Cluster

Oil & Gas exploitation and servicing, Offshore renewable, Emissions

Blue energy is also high on the agenda. While Malta thus far has been unsuccessful in finding hydrocarbons, the Mediterranean Sea offers vast potential for renewable “blue energy” production from wind, wave, tidal, thermal and biomass sources. Efforts are underway to identify the most suitable energy source for the Maltese Islands. Meanwhile, the country has made notable progress in positioning itself as the Mediterranean’s top service hub for the oil and gas industry. Malta offers deep natural harbours as well as an infrastructure geared to servicing the growing oil and gas sector. The island also

offers a state-of-the-art transshipment terminal, as well as storage and warehousing facilities. In addition, it boasts expertise in the repair and maintenance of ships and oil rigs, and a large pool of specialised workers offering a high level of support is available on the island. Capitalising on its expertise in this sector, Malta is currently transforming an area of 170,000 square metres into a maritime hub, which will see the area becoming a premier operations support facility strategically placed to deliver services such as pre-stacking and reactivation, certification, upgrades, modifications and maintenance alongside on-going operational support.

Maritime Logistics

Logistics are currently one of the largest segments of Malta’s blue economy. While the Malta Freeport has developed into the Mediterranean’s third-largest transshipment hub, the government is working to increase capacity and space for logistics and warehousing operations. This would enable Malta to capitalise further on its strategic location on the main international shipping lanes and build up a cluster of companies offering supplementary valueadding services such as packaging and labelling.

The bunkering business has also been growing in recent years, and Malta’s government is keen to facilitate new business linkages and relationships for this segment to grow and thrive, including the development of LNG bunkering operations for LNGfuelled ships.

A Blue Strategy

As many countries around the world are currently formulating strategies to mainstream the blue economy in their national development plans, Malta is also developing its roadmap for blue growth and blue jobs. To strengthen the sector, the government has created a new agency, Malta Marittima, which is set to become the main point of contact for sector companies wishing to explore opportunities.

If Malta has one infinite resource, it is the sea.

However, investing in the blue economy also means investing in a sustainable economy, and Malta’s ultimate aim must be to preserve the quality and diversity of ecosystems, habitats and species. If managed properly, the Mediterranean Sea can account for significant economic growth in the years ahead.

It is forecasted that the global economic value of maritime-related activities will reach €2.5 trillion per year by 2020, while the International Energy Agency estimates that renewable energy from the sea has a power potential sufficient to provide up to 400% of current global energy demand. If these predications are anything to go by, the blue economy is an opportunity not to be missed. n Country Report MALTA 2017 33

Government & Politics

Government & Politics

Muscat’s Second Movement

Malta’s Labour Party just rode to another landslide victory and Prime Minister Joseph Muscat is back on top although analysts had not ruled out a surprise change of government.

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any in Malta had expected a tight race between the governing Labour Party and the rivalling Nationalist Party when Prime Minister Joseph Muscat called a snap election almost a year before the end of his first term. However, with a massive 35,280 vote majority, Muscat secured a second five-year term in office in the general election on 3 June 2017. The Labour Party won 55.2% of the vote, while the Nationalist Party obtained around 43.6% – the highest ever majority achieved by a party in government and Labour’s second consecutive landslide win after their success in 2013.

During the past four years, Malta experienced an unprecedented economic boom with record-high GDP growth and record-low unemployment, which for most of Muscat’s time in office made his re-election very likely. But in the spring of 2017, a series of corruption allegations, some directly linked to the Prime Minister’s family and close associates, started to weaken Muscat’s position. The Prime Minister denied the allegations but called an election. Once reconfirmed in office, Muscat echoed his party’s campaign theme “best time” and promised that the best days for Malta are yet to come.

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Country Report MALTA 2017

Malta’s Political Journey

For more than 150 years Malta was part of the British Empire, a legacy which still influences the country’s political and economic systems. The colonial authorities first granted Malta internal selfgovernment in 1849, but independence did not come until 1964 when Malta became a member of the British Commonwealth, with Queen Elizabeth II as the titular head of state. In 1974, Malta declared itself a republic and replaced the queen with a president. In the 1950s and 1960s a number of smaller parties secured a substantial number of votes and some seats in the legislature, however since 1971 the two major parties – the Nationalists (PN, Maltese: Partit Nazzjonalista) and the Labour Party (PL, Maltese: Partit Laburista) – have dominated the island’s politics.

A Parliamentary Republic

Malta is a parliamentary republic. The head of government is the prime minister who leads the administration for five-year terms. The head of state, however, is a parliament-elected president

Government & Politics

who serves a more ceremonial role. The country is divided into a proportional representation system.

The national government is the responsibility of the prime minister and the cabinet, which is made up of elected members from the general election’s winning party. The role of the president is largely ceremonial, although he or she has the duty of safeguarding the constitution, as well as chairing the Commission for the Administration of Justice. The president also assists in solving political deadlocks in time of need. The island is subdivided into 68 local councils, which form the basis of local government. While responsible for issues such as waste collection and the upkeep of roads, local councils are not responsible for taxation policies. There are no intermediate levels between local and national administration.

Main Parties

The two main political parties, Labour and Nationalist, have alternated in one-party governments in the 12 general elections that Malta has held since its independence. The Nationalist Party adheres to traditional European Christian Democratic ideals, very much along the lines of the German CDU; the Labour Party has roughly followed the trends of its British counterpart, shifting more towards the centre of the political spectrum and adopting a more managerial approach to running the country. Divisions between the two parties have been deep, and most of the electorate has traditionally been closely affiliated to one party or the other.

Both parties have strongly influenced the island’s economic development. A Labour administration governed uninterrupted between 1971 and 1987, during which time government played a central role in the economy, greatly expanding the public sector and social services. When the Nationalist Party was elected in 1987, a process of economic liberalisation began. The country’s infrastructure was overhauled and the state’s role in the economy was reduced. Today, both parties adopt pro-business stances and stress the importance of the private sector in creating economic growth and employment.

led by Marlene Farrugia. She is a former member of the Nationalist Party, with whom she was elected in 2008 and 2013, before resigning in 2015 and forming the Democratic Party in 2016. She won a seat in parliament in the 2017 election and for the first time since Malta gained independence, there is now an elected third-party representative in Malta’s parliament. Due to Malta’s electoral system, which makes it difficult for small parties to achieve the necessary quota to get elected on their own, the PD had formed a coalition with the PN and both parties campaigned together. Previous attempts of third parties to enter the political arena, mostly by the Democratic Alternative (an environmentalist party established in 1989), were unsuccessful. The Democratic Alternative managed to secure only 0.83% of the vote and failed to win a seat in parliament. Malta’s current president, Marie-Louise Coleiro Preca, is a former minister who took office on 4 April 2014. She is the second woman appointed for the Presidential post, preceded only by Agatha Barbara (1982–1987).

Early Elections

Elections weren’t scheduled until 2018, but Muscat called the snap election in May as political pressure grew on his family and associates due to a number of alleged corruption cases revealed from the Panama Papers leak. While Muscat has received recognition as a successful social democrat and an advocate of public and private sector cooperation that has fuelled Malta’s recent economic boom, the PM’s critics argue that he has failed to deliver substantial improvement on transparency and accountability. Corruption allegations reached their climax when Muscat’s wife was accused of being the beneficial owner of a secret Panamanian shell company that received unexplained payments from Azerbaijan’s ruling family. Both Muscat and his wife deny the allegations and the magisterial enquiry is still underway. While rumours of an early election had been going around since spring 2017, Muscat’s decision to call the election in May 2017 meant that Malta experienced one of the shortest, however most fiercely fought, election campaigns in its entire history.

New Political Reality

Electoral Promises

The Labour Party, led by Joseph Muscat, returned to power in 2013 after 15 years of Nationalist leadership. Labour gained 30,000 more votes over the Nationalist Party, and has confirmed its dominance in the 2017 election. Simon Busuttil, then leader of the Nationalist Party, resigned after the defeat in June 2017. Last year also saw the creation of a new party, the Democratic Party (PD, Maltese Partit Demokratiku), a centre-left political party

During the election campaign, Muscat promised tax cuts and pension increases, as well as investment in a mass rapid transport system and a €700 million programme to resurface all roads. These were part of a set of proposals devised to support the country’s economic boom. The electoral programme of the coalition of PN and PD focused on good governance and the consolidation of the economy and the creation of new economic sectors. The coalition Country Report MALTA 2017 35

Government & Politics

also promised to offer free childcare to all children, not only those whose parents are in employment, while also promising to cut income tax bands to a maximum of 10% for those earning up to €20,000.

Opinion polls gave the 43-year-old Muscat and his Labour party a 5% lead but also showed many voters were undecided until the vote. Political observers said that it was not the defeat that took the Nationalist Party by surprise but the margin of Labour’s victory. Distrust in the Nationalist Party, a disconnect from the popular mood and a lack of time for the party to renew itself are being seen as reasons for the party’s second defeat. The result also indicates that 2013 Labour voters who switched to the Nationalist Party were compensated by an equal number of people who did the opposite. The fact that Muscat managed to bring home another victory has shaken the Nationalist Party to the core.

Together with Simon Busuttil, the party’s deputy leaders and the entire party administration stepped down to pave the way for fresh faces and a thorough party renewal.

contest another election. This means Muscat will have to start building up a new leader in the not so distant future. With a new Nationalist Party leader to be elected in the coming weeks too, Maltese politics will be shaped and influenced by a number of new faces in the coming years. It also remains to be seen what role the new Democratic Party (PD) will play in forming a credible opposition. What seems certain is that Malta’s economic performance will continue to be the real litmus test to gauge the country’s overall advancement or stalling. The country will also need to monitor its international reputation to ensure that businesses in Malta continue finding the right conditions to grow their operations. n

Leading with More Experience

Muscat said that he believes he will lead the country with more experience in this legislature, seeking to learn from mistakes he committed during his first mandate. He has also announced that he will not 36

Country Report MALTA 2017

President

JOSEPH MUSCAT: born on 22 January 1974, is the prime minister of Malta and the leader of the Labour Party. Muscat worked as a journalist with the Labour Party’s media outlets before entering politics. In 2004, he was elected to the European Parliament. In March 2008, Muscat announced his candidacy for leadership of the Labour Party to replace Alfred Sant, who had resigned after the party’s third consecutive defeat in March 2008. Muscat was elected as party leader on 6 June 2008. After the Labour Party’s victory in the 2013 general election, he took office as prime minister and was re-elected in June 2017.

First Priorities

Despite their victory, the Labour Party also faces some challenges ahead. The corruption allegations are still being investigated and have also tarnished Malta’s international image. Shortly after being elected Muscat said he wants to unite the country and that he would be extending a hand of friendship to those willing to work for the good of the country. Malta has been under heavy scrutiny since the publication of the Panama Papers and more recently the Malta Files, another whistleblowing investigation. Muscat said the government will continue to defend Malta’s financial industry and its tax system, and many in Malta and abroad will follow closely how the government will handle the strong media accusations and how it will address the matter with the European Commission. Many in Malta also say that it is crucial that the new government does not repeat the same mistakes and failures when it comes to transparency, meritocracy and political accountability. There are also a number of outstanding issues that need to be addressed, such as traffic congestion. Expanding economic opportunities and a cosmopolitan lifestyle do not come without their own risks and challenges, and themes such as sustainability and the environment are expected to receive more attention in the future.

Marie-Louise Coleiro Preca

GOVERNING REPUBLICS Government Nationalist Party Labour Party

Nationalist Party Labour Party Nationalist Party

Labour Party

Start 1962-1971 1971-1984 1984-1987 1987-1996 1996-1998 1998-2004 2004-2013 2013-Present

Prime Minister(s) Giorgio Borg Olivier Dom Mintoff Karmenu Mifsud Bonnici Eddie Fenech Adami Alfred Sant Eddie Fenech Adami Lawrence Gonzi Joseph Muscat

Government & Politics

Government Structure

Dr Joseph Muscat Prime Minister

Dr JosĂŠ Herrera

Dr Chris Fearne

Minister for Health and Deputy Prime Minister

Joe Mizzi

Minister for the Environment, Sustainable Development and Climate Change

Minister for Energy and Water Management

Dr Christian Cardona

Dr Michael Farrugia

Minister for the Economy, Investment and Small Business

Silvio Schembri

Parliamentary Secretary for Financial Services, Digital Economy and Innovation

Dr Deo Debattista

Parliamentary Secretary for Consumer Protection and Valletta 2018

Minister for Home Affairs and National Security

Julia Farrugia Portelli

Parliamentary Secretary for Reforms, Citizenship and Simplification of Administrative Processes

Clint Camilleri

Parliamentary Secretary for Agriculture, Fisheries and Animal Rights

Carmelo Abela

Dr Konrad Mizzi

Dr Owen Bonnici

Dr Justyne Caruana Minister for Gozo

Minister for European Affairs and Equality

Dr Ian Borg

Prof. Edward Scicluna

Dr Michael Falzon

Minister for Foreign Affairs and Trade Promotion

Minister for Justice, Culture and Local Government

Minister for Transport, Infrastructure and Capital Projects

Dr Clifton Grima

Parliamentary Secretary for Youth, Sport and Voluntary Organisation

Roderick Galdes

Parliamentary Secretary for Social Accommodation

Minister for Tourism

Minister for Finance

Dr Aaron Farrugia

Evarist Bartolo

Minister for Education and Employment

Dr Helena Dalli

Minister for the Family, Children’s Rights and Social Solidarity

Silvio Parnis

Parliamentary Secretary for European Funds and Social Dialogue

Parliamentary Secretary for Local Government and Communities

Chris Agius

Anthony Agius Decelis

Parliamentary Secretary for Planning and the Property Market

Parliamentary Secretary for Persons with Disability and Active Ageing

Country Report MALTA 2017 37

International Relations & Foreign Affairs

International Relations & Foreign Affairs

Bringing the Mediterranean Together Malta has significantly enhanced its credentials in the international political arena and is positioning itself as a greater force in the region.

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alta has begun an exciting new chapter in its diplomatic history and has presented itself more confident than ever before. As the EU’s smallest member state, the country has rarely been in the global spotlight. However, a number of high-profile political events have put Malta on the map. The island hosted the Commonwealth Heads of Government Meeting (CHOGM), the Valletta Summit Conference on Migration in 2015 and in the first six months of 2017, it held its first presidency of the European Union. Britain’s exit negotiations with the EU were high on the agenda during the presidency, while the country was also using its influence at the EU’s top table to revive the EU’s relationship with its Mediterranean neighbours. Malta has long maintained close political and economic relations with many non-EU nations, in particular those of North Africa. The island believes it can bridge the ‘diplomatic gap’ between the European Union and Arab states and assist in resolving the Israeli-Palestinian conflict. Malta also plans to further cement its relations with BRIC countries (Brazil, Russia, India and China). Unlike many other EU countries, Malta particularly attaches great importance to its relationship with China and recent years have seen deeper commercial ties being developed.

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Establishing Relations

Despite being a small island, Malta has a history of involvement in international conflict resolution. It hosted the famous Bush-Gorbachev summit in 1989 that ended the Cold War. As a neutral country – a status that the island adopted after gaining independence from the UK – Malta was seen as an ideal venue for talks on building a new world order. But Malta not only hosted the diplomatic gatherings involving world powers, it also pursued the objectives of its own foreign policy agenda. Independence was won under a Nationalist government; but in the early 1970s the Labour Party, under Dom Mintoff, took office and governed until 1987 – a period in which the island established economic and cultural ties with the Arab world, the socialist countries of the Eastern Bloc and China. Malta, in 1972, was one of the first countries to establish diplomatic relations with the People’s Republic of China. At the same time, relations with Western Europe became cooler.

With the election of the Nationalist Party, led by Eddie FenechAdami, in 1987, Malta’s relations with Europe and the West improved greatly. The island officially applied for membership of the EU in 1990.

However, following a change of government in October 1996, Malta’s

International Relations & Foreign Affairs

application was suspended. It was reactivated when the Nationalist Party was re-elected in 1998 after a snap general election. A referendum on Malta’s EU membership was held in March 2003. The ‘Yes’ camp, led by the governing Nationalist Party, won by a comfortable 54%; and in May 2004, Malta became a member of the European Union.

As a member state of the European Union, we will continue working with our partner countries to strengthen the prosperity, stability and security in Europe.

Owing to our location we have, of course, a special interest in the southern Mediterranean region.

Furthermore, now that Trade Promotion has been added to the Foreign Affairs Ministry’s portfolio, we will endeavour to tap new opportunities to encourage Maltabased companies and entrepreneurs to reach international markets with their products and services.

the same way the island supports the Middle East peace process, arguing that Malta could make valuable contributions, as it is small enough not to be considered a threat to any one party.

Mediterranean Mediator

In recent years, Malta’s voice was one of the loudest to call for concerted action on migration. The country has long recognised the need for dialogue and cooperation with countries of origin, transit The cornerstone of Malta’s foreign policy today is and destination. On an EU level, Malta has been its EU membership. Despite divisions within the a proponent of burden-sharing and has frequently country and among political leaders over joining called for solidarity among member states. Hence, Europe, Malta has subsequently achieved crossit was no coincidence that in November 2015 the party consensus on EU matters. Now, almost island hosted the Valletta Summit Conference on 13 years after joining the Union, membership is Migration, which focused attention on emigraregarded as mostly beneficial to Malta, for it has tion and brought together the Heads of State and opened up new business opportunities and pro- Carmelo Abela Government of EU member states and the counvided access to EU funds. In December 2007, Minister for Foreign Affairs tries party to the Khartoum Process and the Rabat Malta became part of the Schengen area, enabling and Trade Promotion Process, as well as a considerable number of Heads passport-free travel across national borders, and in January 2008 it joined the Eurozone. The island is also a member of State of Government from African States. One of the key outcomes of the Council of Europe, the United Nations, the Commonwealth of the summit was the signing of an agreement for the creation of an and the Partnership for Peace, as well as being a keen participant in Emergency Trust Fund to assist African countries in their developthe Euro-Med process. On defence matters Malta usually allies itself ment and encourage them to take back nationals who migrated to with its fellow neutral EU member states such as Ireland, Sweden, Europe.

The Valletta Summit was followed by the Commonwealth Heads Finland and Austria.

The country has also begun to orientate itself towards the of Government Meeting (CHOGM), which attracted representatives world’s new rising giants in Asia and Latin America, complement- of the 53 Commonwealth nations. It was already the second time that ing its long history of co-operation and trade with the Arab world Malta hosted this gathering, with another meeting held in Malta in and North Africa. In order to strengthen relations with non-EU 2005. Global security challenges, development values, climate change, countries such as the US, India, Brazil and China, along with and the relevance and impact of the Commonwealth were among the Malta’s non-EU Mediterranean neighbours, the government has issues being discussed. established two separate ministries: an EU Affairs Ministry; and a Malta’s role as a mediator for dialogue was further strengthForeign Ministry which is exclusively responsible for maintaining ened when in October 2016 the country hosted the Anna Lindh Foundation Mediterranean Forum, which contributed to putting inrelations with non-EU states, as well as for trade promotion. tercultural dialogue and people-to-people cooperation at the heart of the reviewed European Neighbourhood Policy. On an on-going basis, Southern Neighbours Malta also participates in a number of other Mediterranean forums, Malta’s location at the centre of the Mediterranean has for centuries such as the 5+5 Dialogue and the MED 7 Group, which further accorded it geopolitical and strategic importance. Throughout its support stability in the Mediterranean. history, Malta has paid special attention to the countries of North Africa. Perhaps no other single crisis has tested Malta’s foreign Economic Diplomacy policy as much as the Arab Spring, and in particular the Libyan revolution in 2011 and the war that followed. Initial fears were Malta also places emphasis on commercial diplomacy. Its very own that Malta would be swamped by military units and turned into history has taught the island that commerce lies at the roots of dia virtual aircraft carrier when NATO established its No-Fly Zone; plomacy. While Malta’s special relationship with China actually prebut the country preserved its neutrality admirably while maintain- dates the emergence of China as a global economic player, it took ing friendly relations with the emerging Arab democracies. Having on another dimension in recent years when Chinese firms started always been an advocate of Mediterranean unity, Malta acted as a to invest significantly in sectors such as energy and telecoms. The mediator between parties during the Libyan conflict, supporting country is keen to also enhance political, economic and cultural coefforts to find a peaceful solution and assisting in evacuating civil- operation with other countries in Asia, Latin America and, of course, ians. While the circumstances on the ground were more complex in the Mediterranean region, where efforts to take trade and interthan expected and the search for stability in the region continues to national business a step further are also seen as a way to enhance this day, Malta continues to present its credentials as a trusted in- prosperity. Experience has shown that economic issues often lie just terlocutor. Keen to see the region prosper, Malta offers these coun- beneath the surface of many political disputes and weave the fabric tries assistance in bringing them closer to the European Union. In for many political solutions. n EU Membership

Country Report MALTA 2017 39

Playmobil

Hutchinson

Lufthansa Technik

ST Microelectronics

Baxter

Actavis

SR Technics

Microsoft

Carlo Gavazzi Cardinal Health Trelleborg

De La Rue

Find out what these companies have in common.

Gwardamangia Hill, Pieta’ MEC 0001 - Malta T: +356 2542 0000 F: +356 2542 3401 W: www.maltaenterprise.com

EU Presidency

EU Presidency

New Leadership for the Old Continent Malta took over the EU’s rotating Presidency in January 2017 – for the first time since it joined the European club in 2004. This giant task for the small archipelago came at a time when the very core of the EU project is itself under threat.

A

European rEUnion is the theme under which Malta’s EU Presidency took off on January 1, 2017. This was a huge aspiration given that the Presidency of the smallest member state is shaped and defined by a number of issues, including Brexit and rising euro-scepticism across Europe. Leading the EU boat through these challenging times was not an easy task for Malta. Migration, the single market, security, social inclusion, Europe’s neighbourhood policy and the maritime industry were identified as key priorities for the Maltese presidency. While Malta admitted that the goal of reuniting member states and EU citizens cannot be achieved in just six months, the island’s leaders pledged that they would work hard to inject fresh confidence in the European project. Many saw that Malta’s own EU success story could serve as an inspiration to others and that it had the potential to usher new hope into the Mediterranean region and the EU as a whole.

On the Road to EU Membership

Malta’s road to the EU was long and not an easy one. Having won independence from the United Kingdom in 1964, the island signed an association agreement with the European Economic Community in 1970. Full EU membership was viewed with a mixture of excitement and fear, and it was not until 1990 that the island officially applied for membership under a Nationalist government.

Initially, the Maltese Labour party was sceptical over the impact of joining the EU, and after gaining power in 1996 it withdrew Malta’s application. The government at that time preferred to negotiate a free trade agreement with the EU. But Malta’s EU application was reactivated when the Nationalist Party was re-elected in 1998 after a snap general election. A referendum was held in March 2003, putting the EU membership issue in the hands of the Maltese people. The pro-side, led by the govCountry Report MALTA 2017 41

EU Presidency

erning Nationalist Party, won by 54% and in May 2004, Malta became a member of the European Union. Respecting the democratic will of the majority of the population, the Labour Party changed its historic anti-EU policy in the years that followed, and Malta has subsequently achieved crossparty consensus on EU matters. Malta’s EU journey has come its full course as the country took over the leadership of the Council of the European Union, which is one of the EU’s three main institutions.

Common Programme

The structure of the rotating presidency of the Council provided that Malta collaborates with two other countries – the Netherlands and Slovakia – over an 18-month period. At the beginning of the trio’s tenure in January 2016 the parties agreed on a set of over-arching priorities and drew up a common political programme. In the field of economy, the trio prioritised delivering strong economic growth across the Union through increased investment, reforms and quality job creation. Improvement in public health, as well as fighting poverty and social exclusion were also identified as key objectives. Likewise, energy ranked high on the agenda.

Slovakia, the Netherlands and Malta vowed to cut fossil fuel imports and to increase the utilisation of indigenous energy sources. The completion of the EU’s energy market and the fostering of environmental sustainability constituted another priority.

On the international relations front, the trio prioritised forging stronger partnerships with neighbour-

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Country Report MALTA 2017

ing countries, while the programme also drew attention to external border management and the fight against organised crime, corruption and terrorism.

These aims do not exist in a vacuum, and many a time unplanned events can effect, if not derail, such work programmes. In fact, the Dutch presidency was marked by an unprecedented migration crisis as well as terrorist attacks taking place in the heart of Europe. The Dutch also had to work hard to stabilise the Eurozone. However, the Netherlands has registered a number of successes.

Amongst other achievements, they managed to establish compact agreements with African countries to tackle the root causes of migration, while also reaching an arrangement between member states to jointly ratify the Paris Climate Agreement.

The Slovak presidency had several wins as well, including the agreement on the 2017 EU budget and the opening of two chapters in the accession negotiations with Serbia. However, these and other advancements were overshadowed by the Brexit vote – seven days before Slovakia took the leadership role. During Malta’s presidency, the UK then triggered Article 50 of the Lisbon Treaty, which set the stage for two years of Brexit negotiations.

Malta’s Six Months

Apart from the trio’s work-programme, Malta developed its own singular vision and plan for its six-months stint at the helm of the EU. Malta said it would do its utmost to attain legislative and tangible progress on the issue of migration flows

We choose rEUnion as our EU Presidency theme, and for us it was all about reconnecting people with the European project.

We wanted to make a difference in people’s lives, and I think we achieved that. The final agreement on the end of roaming charges for mobile use and the ratification of the Istanbul Convention were just two great examples that were reached during our Presidency.

Helena Dalli Minister for European Affairs and Equality

EU Presidency

Malta’s leadership was also being sought to reengage the European citizen to the EU project and combat the perception of Brussels being run by an elitist establishment.

and internal relocation within the EU. At the EU summit in Malta in February, a Libya-specific agreement was reached as a first step, and Malta is determined to continue employing what it believes is its call to be an honest broker for stability in the Mediterranean. This shall be pursued both by promoting political stability in troubled countries, namely Libya and Syria; and by re-positioning the region from one associated with failing economies to one that projects positivity, economical rejuvenation and opportunity.

As a maritime nation, Malta also pushed the maritime sector up a notch on the EU political agenda, thus giving the EU’s Blue Growth agenda further impetus. Malta maintains the overarching guiding principle that shipping is a global industry and must be regulated at a global level. The completion of the internal market, as well as initiatives addressing social inclusion and poverty, which are very much in line with the social democratic politics employed by the Maltese Labour Government, were also given attention. Under Malta’s leadership, the European Union has reached a deal that will allow people to use their mobile phones across the EU without paying roaming fees from June 2017 onwards, while the island pushed for the development of the European Social Pillar by addressing the ever-changing issues of the job market and for women’s full access to employment.

In health matters, Malta sought to address issues such as obesity and promote its successes on dementia-readiness for example. On the downside Malta’s tax-computation system and its thriving iGaming sector came under attack as big debates about tax-certainty and the updated anti-money laundering directive came to the fore.

However, Malta stressed many times that it supports coordinated efforts in the fight against tax fraud and tax evasion, but will withstand tax harmonisation.

The Brexit Challenge

One of the greatest challenges Malta faced during its presidency emerges from the negative result of the UK’s referendum. The Brexit vote meant that Malta had to address this new overarching dynamic in its stewardship period; especially by co-ordinating work between member states and the EU’s sole negotiator Michel Barnier. Malta’s leadership was also being sought to re-engage the European citizen to the EU project and combat the perception of Brussels being run by an elitist establishment.

Mastering the Task

Malta had been preparing for this major political appointment for several years. It was an interesting time for Europe’s smallest state to take the driving seat, with observers highlighting that some negotiations that had to be closed

by June where already finalised in February and March. While some attempted to discredit Malta based on its inexperience and stature, the country’s Government used Malta’s internal EU non-alignment and economic success to turn an assiduous challenge into a memorable success.

The European Union needed a success story, and Malta proved to be one. The small Mediterranean island has made incredible strides in transforming itself into a modern, competitive economy since it joined the European club. Rather than losing its influence, EU membership has strengthened Malta’s role in the Mediterranean. Bucking the EU trend of economic crisis, Malta has clearly shown that even a small country, at the periphery of Europe, can prosper in the EU. It can serve as an example not only to the neighbouring countries in the Mediterranean, but also to larger EU states that may require an uplifting inspiration. n Country Report MALTA 2017 43

Foreign Direct Investment

Foreign Direct Investment (FDI)

Investors Eye Malta’s Growth As Malta seeks to diversify its FDI landscape, global investors and multinationals are keen to take advantage of the island’s economic boom.

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alta’s economic diversity strategy of recent years has paid off in spades but analysts and international institutions all agree that the island’s investment appeal has been the key in unlocking its full potential. The country’s world-class business environment, cutting-edge technology, competitive labour costs, highly educated workforce and gateway position to European and African markets have helped Malta attract companies and capital from Europe, Asia and the US. Today, Malta has a global reputation for being a highquality hub for the maritime, manufacturing, ICT and financial services industries, but investors

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are also becoming increasingly upbeat about the opportunities that the island offers in emerging areas such as education, health, life sciences and research and development. Acknowledging that Malta’s infrastructure sector is lagging behind, many in Malta’s public and private sector believe that modernisation and upgrading of the transport, waste and water networks have the potential to become key drivers of future growth and attract significant investment. Gozo is also being pitched as a location for foreign investment as Malta’s sister island is addressing its connectivity challenges.

We are blessed with an excellent geographic location. Malta can act as a strong conduit to the North African market and vice versa to the European market. We are an ideal entry point to Europe for companies based in the south and south-east fascia of the Mediterranean.

Dr Christian Cardona Minister for the Economy, Investment and Small Business

Foreign Direct Investment

Malta offers a competitive base that enables companies to be profitable. It is as simple as that, and we are doing our utmost to ensure that this remains the case.

Electricity tariffs for businesses have been reduced and administrative charges have been lowered, while our social costs are contained at 10%. Our cost base is very stable and predictable, which gives investors long-term certainty.

Mario Galea CEO of Malta Enterprise

We act diligently, but promptly, in providing space to reputable investors. Malta can offer good quality premises at reasonable rates through which we create economic value and growth.

Karl Azzopardi CEO of Malta Industrial Parks

Foreign direct investment has been welcomed to Malta for the past 50 years and companies who came in the very beginning are still important players in Malta’s economy. The durability of such investment shows that Malta is a location the investor can trust and that our sustainable environment offers companies the opportunity to flourish and succeed.

William Wait Chairman of Malta Enterprise

A Vision for FDI

Finance and ICT

Malta recognised early on that for a small open economy with few natural resources, FDI could be an important engine of economic development.

Faced with the challenge of building up a private sector in the 1960s to keep the economy afloat after 150 years of reliance on the British forces stationed on the island, Malta began setting up labour-intensive manufacturing businesses in the textile and clothing industries and marketing itself for mass tourism. Two decades ago, the country took a strategic decision to transform its economy by shifting the focus away from low-cost manufacturing and package tourism and instead towards knowledgebased industries and high-end manufacturing in order to keep up with global developments and remain competitive as an investment location.

With a growing financial sector, it comes as no surprise that international banks such as HSBC and insurance companies like Munich Re, Aon and Marsh have set up operations in the country. Fund administrators Amicorp, Citco and Custom House are also present on the island, as well as a selection of Fortune 100 companies that have structured financial operations in the country. Malta’s IT sector has probably attracted the largest number of companies. In addition to software developers, many iGaming companies have chosen Malta because it was the first EU country to regulate online gaming. The island is also increasingly ranked on decision makers’ shortlists when it comes to choosing the location of their international and regional headquarters. Konica Minolta, FimBank and HeidelbergCement are just some of the corporations that have located corporate management functions on the island.

FDI Diversity

The island’s visionary strategy proved successful and today some 250 FDI companies operate in Malta. The country scores high in terms of FDI diversity and has been ranked third, after Sri Lanka and New Zealand, as one of the most economically diverse islands in the 2016 Diversification Index by fDi intelligence. According to this study, Malta has been able to attract 114 projects across 22 different sectors.

During the first six months of 2016, FDI flows in Malta went up by €1.9 billion. This is equivalent to an increase of €455.6 million over the corresponding flows in 2015. The main contributors to total FDI flows were financial and insurance activities with a total contribution of 98.1%. The total stock position of FDI in Malta stood at €156.7 billion at the same date, an increase of €10 billion over the corresponding month in 2015. The stock position of direct investment abroad stood at €61.8 billion in June 2016, up by €676 million over the stock position in June 2015.

Welcoming New Investors

Leading the way in attracting foreign investment to the island is Malta Enterprise. The agency is armed with an attractive package of incentives, which includes soft loans, investment allowances, training grants, tax incentives and the provision of ready built specialised factory space. Over the past two and a half years Malta Enterprise – true to its vocation to think outside of the box – has ventured into the promotion of foreign direct investment in the field of education and health.

The decision by one of the UK’s finest medical schools, Barts and the London School of Medicine and Dentistry, to set up a fully fledged medical college on the island of Gozo, is certainly a major success for the island. In addition, Jordanian group Sadeen has been granted a licence to set up a private university in Malta.

A Base for R&D

High-end Manufacturing

Manufacturing continues to be a crucial part of Malta’s FDI fabric, with high value added quality engineering enjoying a dominant position. German toy manufacturer Playmobil and French-Italian electronics manufacturer ST Microelectronics were among the first to arrive in the 1970s and 1980s. In more recent times, German heavyweight Lufthansa Technik chose the island as a location for a multi-million euro aircraft maintenance centre, and was followed by Swiss-based aircraft maintenance company SR Technics. In the pharma sector, Malta has also attracted many of the global leaders, while a new life sciences park is set to help develop the biotech industry further.

Providing research and development incentives, information security and intellectual property rights, Malta has also begun to exploit its advantages as a base for science and technology companies, aiming to attract a diverse range of biotech firms, IT start-ups and corporations engaged in other knowledge-intensive activities. Malta is particularly attractive to companies seeking a test bed for research and innovation, and the government is encouraging research activities and development, as well as product and process (re)-design. Malta has already succeeded in attracting Chinese telecoms giant Huawei Technologies to its shores. In 2015, the company committed to start testing 5G technologies in Malta.

Country Report MALTA 2017 45

Foreign Direct Investment

Growth in Real Estate

As a small country, Malta has long considered wealth migration vehicles as an important economic tool to attract foreign investment and highcalibre people to its shores. Recently, Malta also introduced a citizenship-by-investment programme, the so-called Individual Investment Programme, to achieve increased FDI levels and attract highnet-worth investors to the island. In particular Malta’s real estate sector has benefited from this programme as investors are required to purchase or lease property of a certain value on the island in addition to fulfilling a number of other conditions.

Servicing World Markets

The underlying strengths of Malta are its location and the ease of access that it offers into surrounding markets. Situated two to three hours by air from Europe’s major cities and well connected to other parts of the world, Malta’s EU membership provides companies with access to the Union’s massive internal market of over 500 million people. At the same time, the country has sought to promote itself actively in overseas and developing markets and is an ideal jumping-off point for accessing the growing markets of the region. The island’s proximity to, and cultural links with, Libya, Egypt and Tunisia, and with the Middle East in general, enhance Malta’s role as a hub for trading, distribution and marketing for international operations in Southern Europe and North Africa.

Foreign companies based in Malta comment favourably on their experiences with the local employees in terms of productivity, profitability, dependability and rapid response times. Indeed, Malta’s flexible, highly trained and multilingual workforce is the country’s most valuable asset, with wages below the Western European average.

Maltese workers are well educated and qualified, as a result of recognition on the part of the Maltese authorities that higher value-added products require better and more flexible workforce skills.

Creating Space

Malta has long been focused on creating tailormade space in order to host some of the world’s biggest companies. However, as investors’ interest continues to grow there is a strong desire to take the island’s industrial parks to the next level.

There are currently 11 industrial parks in Malta and Gozo, designed to make starting a business easy and reducing the time it takes for an investor to get up and running. The parks are administered

by Malta Industrial Parks (MIP), Malta Enterprise’s right arm which is responsible for the allocation of factories for new economic investment projects, as

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Foreign Direct Investment

Technological advances are disrupting the way we work and live.

Malta needs to position itself on the cutting edge of innovation. The island has the potential to become a test bed for new technologies.

Given the size of our population, human capital is limited but companies as well as the country in general can grow by embracing new tools that improve efficiency.

Tonio Zarb Senior Partner of KPMG Malta

What we lack in size, we make up for by offering a solid and comprehensive European package, which is so crucial to attracting investment. Being a small country only allows a high degree of nimbleness. In an increasingly digital and connected world, Malta may well offer an ideal test bed location for implementation of new technologies. I would really love to see more of this in the future.

Ronald Attard Country Managing Partner of EY Malta

We are actively promoting a number of important sectors beyond our shores. These are Information Communication Technology (ICT), Training and Education, Advanced Manufacturing and Food & Beverages (Manufacturing), Medical Tourism, Maritime and Aviation.

There are businesses who have developed products and services within these sectors which are attracting significant interest from international buyers.

well as the management of all government-owned industrial estates in Malta and Gozo.

Malta’s approach also places a strong emphasis on the creation of sector-specific infrastructure.

A cluster development dedicated to the aerospace industry, the Safi Aviation Park, has been completed, while some €35 million has been invested in a Life Sciences Park providing laboratory space to biotech companies. Malta is now seeking to up the ante in what these zones offer in terms of amenities and support services, ranging from childcare centres to recreational areas. As industrial parks around the world increasingly draw in foreign investment, MIP is also considering strategic alliances and partnerships with specialised industrial park firms to help develop the next generation of economic zones

FDI Stock Position (June 2016)

1.

2.

3.

4.

5.

6.

Financial and insurance activities

Manufacturing

In the future, areas such as greentech and clean-tech could provide a boost to Malta’s economy. After securing a large project in the health arena, Malta’s government is focused on further strengthening Gozo’s economy, along with the island’s attractiveness as a location for FDI. Government is also committed to improving the island’s physical accessibility through the construction of a tunnel and its digital connectivity through the laying of a second fibre optic cable.

Adaptable Islands

Traditionally, Europe has been Malta’s core market for FDI, and the majority of investors and capital are still being sourced in Europe.

However, in recent years, Malta has made progress in attracting FDI Other activities from non-EU countries, with US investment in Malta’s healthcare sector and Jordanian investment Growth Prospects for in the education sector being two Malta… and Gozo examples. Going forward, publicFor the future, the island is keen to Professional, scientific and private-partnerships (PPPs) are technical activities seen as essential for encouraging direct foreign capital into more inFDI. The government has already frastructure-related projects. Sectors announced its intention to extend such as energy, waste and transport the PPP concept to a host of new may be developed on a public-prisectors, including infrastructure vate-partnership-basis. Malta’s road Information and and tourism. Malta believes that infrastructure is in desperate need of communication flexibility and adaptability are esupgrading, while investment could sential in further diversifying its also be channelled into intelligent transport systems, along with making renewable investment landscape – both geographically and energy, waste and water projects a priority. 2017 sectorial. Moving forward with confidence, the will see the introduction of Malta’s solar farm policy, country is reaching out to key innovative players as well as the increased treatment of wastewater. in Europe and beyond to help realise this vision. n Transport, accommodation and real estate activities

SELECTED FDI COMPANIES IN MALTA

Anton Buttigieg Chief Executive Officer of Trade Malta Limited

Country Report MALTA 2017 47

Infrastructure

Infrastructure

The Need to Think Big Malta needs to be imaginative and sensitive in its urban renewal programme to retrofit and upgrade the island’s environment and key infrastructural assets.

S

trong economic growth has overtaken infrastructure development in Europe’s smallest member state. While Malta has the infrastructure that anyone would expect to find in a prosperous city-state, an influx of companies and foreign professionals has put pressure on roads, telecoms and energy networks and many other facets of urban living. Transport upgrades are an urgent priority, while recent plans for a number of high-rise buildings have quickly turned into a debate on overdevelopment and capacity limits. Infrastructure construction has been forced back on the political agenda and has become a prominent theme for both government and the opposition.

Malta’s government has been focused on successfully balancing the country’s budget in recent years. Economic analysts are now calling on the government to plan and build for the future. Malta, they say, needs to consider a major infrastructural overhaul and develop visionary projects that will deliver social impact and economic value. The recent establishment of a national development bank is seen as a very promising move in terms of financing the next stage of infrastructure construction. The island’s government would also like to see the private sector take a crucial role in driving this development. There are numerous opportunities for private players to build and operate infrastructure that can generate an acceptable rate of return for investors.

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Economic Development

Infrastructure has played a leading role in Malta’s economic development, from the roads and aqueducts created by the Knights of St John to the ports built by the British colonisers. However, it was Malta’s independence in 1964 that stimulated the first real major infrastructure investments.

To kick-start economic activity, shipbuilding and ship repair facilities, as well as tourism infrastructure, were constructed. Malta also developed its first industrial estates, while an extensive programme of road and school building followed.

A second wave of infrastructure investment followed in the 1980s and 1990s when government began a process of privatisation of state-owned assets in sectors such as telecommunications and port operations, which in the process saw significant upgrades.

Malta’s decision to join the EU in 2004 has influenced developments in the infrastructural space in more recent times. The island undertook wideranging, and often painful, reforms such as the public transport liberalisation, the privatisation of the shipyards as well as an overhaul of the energy sector and the tariff structure. However, a defining feature of Malta’s infrastructure story is that investment has been largely focused on economic assets, at the cost of neglecting social and urban infrastructure.

We wish to develop a more visionary approach to infrastructure development.

We are currently evaluating options for a mass transport system, including underground and monorail systems. We know that we need to come up with sustainable financing models for this proposal as well as for other projects, and we see the private sector as a strong partner in delivering unique infrastructure solutions.

Ian Borg Minister for Transport, Infrastructure and Capital Projects

Infrastructure

Partnership with the Private Sector

International Connectivity

The Ministry for Transport, Infrastructure and Capital Projects is responsible for infrastructure construction and delivery. Malta’s government has always seen the private sector as a strong partner in infrastructure delivery and has developed a mixed model approach to funding and finance. In many areas, private investors have been mobilised to finance and participate in infrastructure maintenance and development, with the state only intervening where infrastructure projects are financially not viable or offer little commercial opportunities.

Since joining the EU, Malta has also benefited from around €1.5 billion in EU funding, which were primarily invested in infrastructure and development projects.

The quality of Malta’s transport infrastructure ranges from world-class to sub-standard. The island has a relatively sophisticated infrastructure for international transport compared to an underdeveloped local road network and public transport system. Throughout the years, Malta has seen constant investment in port infrastructure.

Malta Freeport Terminals were privatised in 2004 and are today owned and managed by French line CMA CGM and the Yildirim Group, a Turkish container port operator. The Mata Freeport ranks as one of the leading transshipment centres in the Mediterranean region. While the port’s operators are keen to expand their capital investment programme in the years ahead, space constraints in the area are limiting the Freeport’s ability to grow. Malta International Airport (MIA) is facing similar challenges. The airport, which has Vienna International Airport as a major shareholder, is operating close to its capacity limitations, handling more than 5 million passengers in 2016. While MIA offers a fast and efficient service and is currently investing some €28 million to refurbish the terminal and create additional check-in desks, in the longer term, Malta might need to look at building a competing terminal. The island aspires to host as much as three million visitors in a few years’ time, and there is no doubt that the number of locals flying for business and leisure will increase rather than decrease in the future.

Construction & Development

Malta lacks specialist infrastructure engineering and construction companies. The country’s small and medium-sized construction firms usually form local consortia to deliver infrastructure projects, or if more specialist and technical expertise is required, they join forces with a foreign partner. Malta’s construction firms benefit from healthy order books in terms of residential and civil construction. In many cases, they have reached full capacity and, thus, are not able to take on any new business. This means that, now more than ever, Malta needs to look to the international construction industry in order to contract firms boasting project management and engineering expertise required to implement large infrastructure projects.

Scaling Up

It is predicted that Malta’s population will reach the half-a-million-mark in a few years’ time. While population growth will most likely increase the productive capacity of the economy, it will put further pressure on the existing infrastructure. In a country of 430,000 people, there are already some 350,000 cars registered. One study has warned that cars will seriously threaten economic production in 10 years’ time as major arterial thoroughfares are stretched beyond the breaking point, while other researchers even point out that by 2050, the amount of productive work-time lost because of traffic will cost the country €1.28 billion each year.

While congestion and local transport networks are at the heart of current issues, a shortage of affordable housing and educational facilities, declining air quality as well as a lack of greenery and recreational areas are mentioned too. There is also a need to accelerate maintenance and modernisation programmes in fields such as telecoms and energy distribution.

Urban Mobility

Traffic congestion is often singled out as the most pressing infrastructural challenge. While the island has a road network of some 3,000 kilometres, most roads are small, and there are not many dual carriageways. Population growth and rising vehicle ownership have become concerns, while a booming tourism sector is placing an additional strain on the bus system, which is operated by Spanish transport company ALESA. To address the situation, the island is in the process of building new flyovers and tunnels to remove bottlenecks, while also introducing initiatives to reduce the number of cars on Malta’s roads such as bike-sharing systems and free public transport for certain age groups. While passenger numbers have been on the rise, the majority of Maltese say a lack of priority bus lanes means public transport is neither more convenient nor faster than travelling by car.

Proposals to build a monorail or light rail system involving over-ground and underground lines are forming part of a list of potential future projects, and Malta’s Government has already announced its intention to identify a suitable mass transportation system by the end of the legislature. Traffic could Country Report MALTA 2017 49

Infrastructure

also be optimised with intelligent solutions, and works on a more intelligent transport system have already begun. The idea is to make better and more efficient use of Malta’s existing road network and transform transportation into a smart service.

Digital Networks

Malta’s telecoms sector has received significant attention and interest in recent years. UK’s Vodafone Group was one of the first companies to enter the island’s telecoms market, which in subsequent years attracted further foreign investment. While in March 2017 Vodafone Malta and Melita announced their intention to merge, Tunisia’s national telecom company, Tunisie Telecom (TT), recently became GO’s majority shareholder. Malta’s telcos have been instrumental in ensuring that the sector is one of the most advanced in Europe.

Mobile and broadband penetration are both relatively high, while ongoing investments in networks have helped attract strong internet-relying industries such as iGaming and financial services. The island has also attracted Chinese telecommunication giant Huawei, who started testing the new standard of 5G in Malta. Concurrently, the Malta Communication Authority (MCA) aims to make the island the first wifi-state and already operates some 300 wifi-hotspots across the island. Five submarine cables, owned by the telecoms operators, link Malta with Italy. With the help of EU funds, Malta’s government plans to invest in a new fibre optic cable to France to reduce the reliance on the existing links. The task for the future will be to improve so-called ‘last mile’ connectivity, as well as reducing the cost for both voice and data services which are still higher in Malta than in other EU countries.

The next stage in the sector’s evolution could include developing the infrastructure for an emerging gigabit economy. Services need to be fast enough to handle massive amounts of data and fuel previously impossible growth in industries such as health care, education and manufacturing. While this would mean a major investment, and Malta only has a small population to reclaim that investment from, the bottom line is that there are huge opportunities in this space.

Energy & Green Transition

Malta’s energy sector is in the midst of a radical transformation. An interconnector cable to Sicily has been laid, which allows for the import of electricity. Shanghai Electric Power of China has brought a stake in Enemalta, Malta’s main power generation and distribution company, which was previously struggling under heavy debts and is now running a surplus. The island also made the 50

Country Report MALTA 2017

decision to shift electricity generation from oil to gas. Germany’s Siemens and Azerbaijan’s Socar are among the shareholders of a new company called ElectroGas Malta, which built a new gasfired power station and a liquefied natural gas terminal. Enemalta is now buying electricity from ElectroGas’ power plant. In addition, Enemalta is in the process of converting its older oil-fired power plants to gas. In recent years, EneMalta has also channelled some €100 million into Malta’s distribution network; however more needs to be done as the island’s aged above-ground power lines need to be replaced. There is also the need to realise and finance the green transition. Malta’s Water Services Corporation already implemented a project to recycle water in an effort to address water scarcity, while a network of underground tunnels, canals and bridges has been built to address the issue of flooding when heavy rain occurs.

Holistic Planning

Going forward, sewage pipes, waterlines, the electrical system and telecoms cables have to be equipped to meet the requirements of a new Malta. Network expansion generally requires wires to be run underground or on poles. Crucial to Malta’s future will be the island’s ability to plan infrastructure holistically, with many pointing to ‘big dig’-projects that would see much of the island’s infrastructure go underground. Going underground is often seen as an opportunity when land is scarce. Experts believe that subsurface Malta offers tremendous potential. Malta’s Enemed, which is responsible for the importation, distribution and wholesale of petroleum products for the Maltese market, for instance is currently constructing subterranean fuel storage facilities, and this is an area that could probably be expanded in the years ahead. Singapore, which faces similar land constraints, is pioneering subterranean urban development, starting with storage and transportation systems but with a possible expansion to power plants, sports stadiums, libraries and more.

The Social Dimension

Infrastructure investment is considered more than an engineering prospect, and the need for renewal extends beyond the most obvious economic assets. The country is also looking at the soft elements as it needs more housing, educational and healthcare facilities as well as other urban infrastructure to support more people. There are plans for a number of high-rise buildings to be used as offices and residences, as well as for new international schools. Malta’s healthcare sector has already seen a major injection when parts of the public

We are committed to making good, efficient and full use of EU funds, with a special focus on upgrading our infrastructure so that it reflects our economic growth.

Economic and social aspects must also go hand in hand. Prosperity with a purpose is our theme, and we want to take the country forward not just for the few but for many.

Aaron Farrugia Parliamentary Secretary for European Funds and Social Dialogue

Malta is open for business, we are interested in more PPP ideas with local and foreign investors.

Education, health and energy are all areas of interest. We are looking at opening new schools to cater for the needs of the ever-increasing expat community. Government is also interested in the construction of new sports facilities for several disciplines, and the improvement of landscaping at existing beaches as well as the creation of new ones.

William Wait Executive Chairman of Projects Malta Ltd.

Infrastructure

Public-private partnerships have long played an important role in terms of building and operating infrastructure, however, the sheer volume of required upgrades meant that Malta had to rethink the way infrastructure projects are being financed.

One major initiative was the recent launch of the Malta Development Bank. Its main aim will be to promote socio-economic development by offering finance to SMEs and large infrastructural projects, without distorting market competitiveness. The Development Bank will serve as a second-tier financial institution when private commercial banks fail to make appropriate financing available or when normal market terms are not given.

Closing the Gap

Traffic congestion is often singled out as the most pressing infrastructural challenge. While the island has a road network of some 3,000 kilometres, most roads are small, and there are not many dual carriageways.

healthcare system were privatised. Vitals Global Healthcare took over three hospitals in 2016 with government buying a percentage of the medical care provided. However, various surveys show that demand for medical services will likely increase in the coming years. The goal is for infrastructure to help propel Malta into the next stages of growth.

Constant physical renewal is being seen as crucial in attracting highly qualified people and highprofile companies to the island. Yet, many on the island emphasise that this also needs to include a stronger focus on green areas and recreational opportunities, which would add to Malta’s emerging status as a magnet for talented professionals who are seeking dynamic careers outside of the world’s typical centres.

Welcoming Infrastructure Investors

The desire and will to upgrade the country’s infrastructure are expected to make private investment in infrastructure popular for years to come. Malta’s small, open economy has been among the best performing economies in the EU in recent years and as such presents a secure investment environment.

The island’s attractiveness as an infrastructure investment destination has also been boosted by recent high-profile investors such as Vitals Global Healthcare in the health sector, French line CMA CGM in the port sector and France-based Apax Partners in telecoms. This should go a long way towards widening the island’s appeal to institutional investors including pension funds, sovereign wealth funds, insurance companies and global asset managers.

To improve Malta’s infrastructure in quality and functionality, the Government of Malta has set up Projects Malta, an agency responsible for promoting, developing and facilitating sustainable private/public sector joint venture initiatives. The challenge for Malta will be to make all infrastructure updates concurrently, as well as to find the personnel resources to manage these projects. Given the variety of projects, and the size and scale of the infrastructure overhaul required, keeping costs in check will need to be a priority. Malta’s economy is also heavily reliant on services, and particularly on sectors such as financial services, iGaming and tourism. Should any of these industries experience an economic shock, it could derail planned infrastructure projects significantly. However, taking no action and not addressing the infrastructure deficit is not an option.

The island is already exporting jobs due to capacity constraints, and this trend could accelerate if Malta does not unlock its full potential.

Looking Ahead

Quality of infrastructure is a decisive factor when businesses plan investments, and Malta’s future prosperity is linked to the way infrastructure will be deployed. A thorough infrastructural overhaul will place Malta in a better position to compete and challenge other countries for the highest value investment. Malta has never been so wealthy in its entire history as it is today, which means many believe that now is the ideal moment to develop and finance infrastructure works. The sector is poised for significant near-term growth, with private investment set to rise on the back of a bold agenda.

The island’s leaders will be required to make tough decisions about infrastructure that will affect generations to come. Their choices will determine whether Malta can position itself as truly global hub for business as well as a very liveable place to work and raise a family. n Country Report MALTA 2017 51

Startup Malta

Startup Malta

Startup Island As global economies are battling for the start-up community and the next generation of tech leaders, Malta is taking steps to spur the growth of earlystage businesses and to attract new talent from around the world.

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Startup Malta

Malta’s ecosystem holds many evident advantages for digital companies: it is highly business friendly, cost efficient, English speaking, and offers a perfect work/life balance that easily attracts young talent.

However, I believe that the most important advantage is a hidden one. The Maltese spirit is absolutely unique because everyone believes in the future.

Valéry Bollier Co-founder and Board Member of Silicon Valletta

As Malta’s only crowd-funding platform, we believe good ideas should get funded.

Zaar perfectly complements other Maltese initiatives that assist start-ups to get of the ground, and provides a support structure to make this happen. Zaar currently operates reward-based crowdfunding campaigns, although we are lobbying for the introduction of a legislative framework to operate equity and lending-based crowd-funding in the future.

Matthew Caruana Manager of Zaar Crowdfunding

T

he Facebook, AirBnB and Uber bug has landed in Malta where a start-up ecosystem is starting to take shape, and the first home-grown kick-starters are garnering the first real successes. In the past months, the country has seen the creation of incubators, the introduction of seed-financing schemes, as well as the set up of lobby groups organising informal get-togethers to share good practice and to pave the way for further governmental support.

However, there is no shortage of cities and regions pitching themselves as the next Silicon Valley, and Malta needs to find its own voice in the choir of start-up nations. Recognising that some products do not scale as quickly as others, Malta is positioning itself as a partner for early-stage ventures that require time to build traction and revenues on their road to success.

The Backstory

As an island nation with no natural resources, Malta has a long and storied history of entrepreneurship. During both pre and post-independence, starting a business was seen as the only way for economic advancement as employees were often poorly paid. Throughout the years, some of Malta’s leading family businesses, building on the success of their inspiring founders, have grown onto the international stage. Prime examples are the Corinthia Group, which developed into an international hotel chain; furniture and interior designer Francis Sultana, who from his humble beginnings on Malta’s rural sister island Gozo went on to become one of the most sought-after designers in the world; as well as food and beverage company Foster Clark, which developed into a global brand exporting 300 products to 80 countries. But while the Maltese were always an entrepreneurial bunch, until recently the country lacked the infrastructure to support ventures in need of a flying start.

Nurturing Potential

Malta’s start-up community has been neglected over the last decades, although the island has quietly nurtured its digital economy. Traditionally, Malta focused on luring large foreign-owned corporations with special privileges, however there is

a new desire to support smaller business ventures of a domestic and international nature particularly in sectors such as gaming and financial technology, also known as fintech. Economic analysts believe that if start-ups are harnessed in the right way, they will inject a much-needed level of innovation into Malta’s economy. Targeting start-ups with global ambitions is also seen as an important way to attract new forms of foreign direct investment, which would make Malta’s economy more competitive in the global market place.

Start-up Community

Malta has already picked up some promising startups. Gaming is the biggest field due to the country’s reputation as Europe’s iGaming hub, with exemployees of gaming operators establishing their own companies. Some used Malta to develop new products, for instance the fantasy football platform Oulala; while others found productive partnerships, as the case of website-analysts Hotjar shows, or were just inspired by the entrepreneurial spirit in the country, with virtual-agents-letting-crowd Quicklets being one example. While the main success stories are related to tech-oriented companies, there have also been breakthroughs in other realms, for example through board games; the likes of Politicks or New York Best, whose burger joints are mushrooming around the island, not to mention Malta’s customer-centred cab service e-Cabs that has disrupted the market once and for all. These numbers might not sound like much compared to Silicon Valley’s unicorns, but for Malta and its population of around 430,000, they are important.

Pool of Patrons

Malta has also launched its first technology business incubator, TAKEOFF, which is based at the University of Malta. TAKEOFF helps young entrepreneurs create successful science, technology, engineering, creative, media and knowledge-based start-up businesses. A similar initiative is the Microsoft Innovation Centre set up in cooperation with the government of Malta and the University of Malta. The centre provides support for start-ups through its facilities, software and Country Report MALTA 2017 53

Startup Malta

hardware devices and courses in development, cloud and gaming. All this is coupled with business education including accounting and marketing. The Malta Information Technology Agency (MITA), Malta’s national IT agency, also operates an Innovation Hub at SmartCity Malta. Its acceleration programme runs twice a year, offering a pre-seed investment of €22,000 and taking in between three to six startups. In addition to working space found in incubators, hot-desking and shared facilities are available in different localities on the island.

Start-up conferences are another indicator of Malta’s emerging start-up scene, with Startup weekend, ZEST, The Big Data Summit and Dream Big Malta having been organised recently.

Concurrently, Malta is also witnessing the creation of lobby groups or conglomeration initiatives by successful entrepreneurs in order to help rally the authorities towards the needed developments in supporting start-ups. The prime example of this network is the Silicon Valletta initiative, a private organisation bringing together the most influential CEOs in the young Maltese digital ecosystem with the aim of raising awareness of the digital sector.

Accessing Finance

One of the main challenges for any organic startup is the proverbial initial capital injection. Maltese start-ups have been successful in raising finance on global crowdfunding platforms, but Malta also launched its first local crowdfunding platform, named Zaar, a corruption of the Maltese word for small, thus hoping to represent the spirit of small new projects. While the platform went through a rough start, it has now started to achieve its first successes.

The concept of alternative funding in Malta is complemented by the presence of Go Beyond Investing (GBI), which is based in six EU countries and the US. GBI mixes elements of crowdfunding and traditional angel investing and represents more than 180 investors who have invested in more than 25 early-stage companies. The Malta Investment Management Company Limited (MIMCOL) has recently introduced a Seed Investment Scheme to help start-ups raise equity finance. The scheme, capped at €5 million, grants tax credits to individual investors resident in, or operating in, Malta investing in start-up businesses. The next building block to reinforce Malta’s credentials as a startup hub is to attract an International Accelerator, and MIMCOL is currently establishing links with foreign accelerator programmes to lure a big-hitter to the island. In addition, there are incentives for start-ups that are mainly co-ordinated by the government trade agency, Malta Enterprise.

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The Way Forward

Notwithstanding all this, it is amply evident that more needs to be done to give visibility to young companies. A more concerted effort, as well as streamlining the different initiatives, would surely be beneficial. To this end, other countries have set up specialised start-up agencies that seek to strengthen the institutional base for new companies. The task for the future is to make Malta the location of choice for start-ups in certain sectors.

Due to its small size, Malta is an ideal research and innovation test bed, and there are numerous areas of opportunity for industry players to get involved, either through research and development projects or innovative ideas that could help Malta address some of its very own challenges in sectors such as energy, transport and health.

When it comes to attracting foreign start-ups and early stage companies, Malta could further refine its unique selling points. Not all companies can succeed in the fast-moving start-up environments and short-term intense programmes offered in the more established start-up hubs in continental Europe and the US. Slowing down can give many start-ups an opportunity to review growth strategies, and Malta offers growing companies a calmer environment that allows them to focus on the quality and sustainability of their products and services. This effectively gives them more time for product development and commercialisation than incubators and accelerators elsewhere would.

Other initiatives that could be pursued to bolster Malta’s startup credentials include joining so-called start-up exchanges, where incubators from different countries cooperate to give young companies the opportunity to explore markets abroad. Start-ups, which are part of a participating incubator, could benefit from free office space for a certain period of time, as well as from introductions to key players in the local ecosystem. Malta is great for entrepreneurs on a budget as the cost of living in Malta, albeit on the rise, is still cheaper than in most European capitals.

Talent attracts Talent

Malta’s start-up scene looks promising and full of potential but it would be naive to believe that Malta can ever compete with Silicon Valley & Co. However, the environment is evolving through a mixture of new public and private initiatives. This bodes well for the future of the start-up hub as these actors create dynamics that foster dialogue, knowledge and best-practice sharing. Meanwhile, Malta is pushing on, realising that talent attracts talent and that every successful start-up hub needs to provide a high quality talent pool, or to be able to attract the best to its shores. n

While for startups the money they can get is important, they are looking for other things too, such as the network they can be supplied with and the office space. Unfortunately Malta is not London, but we are seeing new initiatives, including the creation of a lobby group. We do not need more thinkers; we need more doers.

Carla Maree Vella CEO/COO of Optimizer Invest

We see ourselves as facilitators, easing the life of start-ups and providing support to entrepreneurs at their most critical time.

Stanley Mifsud CEO of the Malta Investment Management Co. Ltd

Malta offers growing companies a calmer environment that allows them to focus on the quality and sustainability of their products and services, effectively giving them more time for product development and commercialisation than incubators and accelerators elsewhere would.

Gozo

Gozo

Gozo Blossoms: More than a Sister Island

Malta’s second island is paving the way to reverse its economic fortunes with the clustering of high-value activities in areas such as health, ICT and tourism.

Tourism is still our main industry, but Gozo has huge FDI potential, and we want to build on our recent achievements. We brought Barts Medical School to Gozo, and I believe this opens us up to similar investment, for instance from the pharma industry and medical tourism.

Gozo is also known for its quality of life, idyllic lifestyle, which has seen it become a popular destination among expats and increasingly creative industries, start-ups, iGaming and financial services companies who are choosing to locate to Gozo.

Justyne Caruana Minister for Gozo

M

alta’s positive economic turn has had its effects on Gozo, the archipelagos’ second island. However, Gozo is not just relying on big sister Malta to fuel its advancement. It has found ways and means by which to offset its connectivity issues to develop into a flourishing business centre. To unlock its full economic potential, Gozo seeks to reinforce its traditional strength as a holiday hotspot by boosting tourist arrivals in the winter months, while also building the required infrastructure to attract high-quality and technology-related Foreign Direct Investment (FDI). Furthermore, plans for a public-private partnership that aims to turn the island into a medical tourism hub have emerged, bringing along a sense of anticipation about what Gozo could really become.

Myths of Blue and Green

Measuring about one third the size of Malta, Gozo is the second-largest island of the Maltese archipelago. It is home to around 28,000 people.

The island’s capital city is Victoria, which is also referred to as Rabat, the towns’ original Arabic name before the British renamed it. Gozo is more rural and greener than Malta, and it is known for its scenic hills, which are featured on its coat of arms. The island has long been associated with Ogygia, the island of Calypso in Homer’s Odyssey. In the story Calypso, a nymph with great supernatural powers, falls in love with Odysseus and holds him captive for a number of years, until finally releasing him to continue his journey home. Gozo’s countryside is dotted with old-stone farmhouses and baroque churches, and the island also comes complete with historic locations such as the temples in Ggantija, which alongside the remainder of the other Megalithic Temples of Malta, are the world’s oldest freestanding buildings.

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Gozo

Economy in Transit

Because of its beauty, tourism has always been Gozo’s main economic pillar. In previous centuries, Gozo has also had its fair share of FDI in the manufacturing sector; however, these operations have been downsized considerably in recent years.

Today, some 50% of Gozo’s GDP depends on the tourism sector, and the numbers are on the rise.

2016 was a record year in terms of tourism arrivals, with one million bed nights registered. Tourism will remain a key player in Gozo’s economy; however, the development of other services industries and more specialised niches has been gaining momentum. The island is looking to attract serviceoriented companies in areas such as ICT, financial services and education to name but a few. Through Malta Enterprise, the country’s investment promotion agency, companies and entrepreneurs investing in Gozo can benefit from tax credits and other incentive schemes. The island has already attracted RS2, a global payment software and managed service provider. In 2015, the company invested €1 million in a new office in Gozo, which will serve as an extension of the services currently provided from Malta.

Medical Tourism Hub

In the next months further change will reach Gozo through a major FDI project that saw the Maltese Government enter into a public-private partnership with Vitals Global Healthcare to develop the necessary infrastructure to turn Malta and Gozo into a fully-fledged health-tourism hub. A revamped Gozo hospital will not only offer better quality of care to Gozitans, but also to foreign patients. There will also be openings towards developments in areas such as rehabilitation services and even in the specialised medical manufacturing industry.

In addition, Barts Medical School, which is part of Queen Mary University of London, is setting up a campus on the island – its first one outside the UK. Some 300 students from Europe and beyond are projected to populate the highly reputable courses in the first five years of the operation.

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New Niches in Tourism

While health tourism might be the new kid on the block, Gozo has already been venturing into other niche tourism segments. Preserving the aura of an idyllic island in the Mediterranean, Gozo has embraced sports tourism, religious tourism and most recently even marriage and LGBT tourism, with the latter being a special form of niche tourism marketed to lesbian, gay, bisexual and transgender people, mainly concerned with cultural and safety issues. In addition, a variety of events are held every month, which are steadily transforming Gozo into an all-year-round destination. Not to mention the 60,000 tourists who visit the island every year to be able to dive in some of the clearest and cleanest waters in the Mediterranean.

Another element is the development of amenities to facilitate cruise liners to include Gozo in their Central Mediterranean routes. While Gozo’s harbour currently does not offer berthing facilities for cruise ships, works are underway on a new buoy that would allow boutique cruise liners of the smaller and medium sizes to anchor off the island.

The construction of a dedicated cruise liner terminal is not being excluded for the future. Other avenues being pursued touch upon the Meetings, Incentives, Conference and Exhibitions (MICE) sector, encouraging directors and executives from major international brands to travel to Gozo for team-building workshops or training.

The completion of restorations at the old walled-capital Cittadella can now also boost Gozo’s appeal for visitors interested in archaeology. The beautiful medieval fortifications and the Bronze Age remains discovered here can be coupled with a visit to the magnificent free-standing Ggantija temples for an ideal combination of century-old structures to savour.

Gozo

Film & Real Estate

Connecting Gozo

Film has also become a new vocation for the Gozitans. A-list stars have made Gozo their playground; the most visible of which were Hollywood’s prominent power couple Brad Pitt and Angelina Jolie who chose Gozo as the backdrop to their intimate independent flick By The Sea in 2014. The Ministry of Gozo is keen to invest more solidly in this sector by developing and building film-servicing infrastructure. Gozo’s real estate sector also offers promising prospects. Much like Brad Pitt and Angelina Jolie, increasing numbers of foreigners fall in love with the island while on holiday and many decide to purchase property. In particular retirees and freelance professionals who are able to work remotely are moving to Gozo, some from as far away as Hong Kong and South Africa. Property in Gozo is between 20 and 30% cheaper than real estate on the main island Malta. Foreign nationals can also take advantage of one of Malta’s visa, residency and citizenship programmes. Purchasing real estate is one of the criteria to obtain residency status, and lower investment thresholds apply to Gozo than to other parts of Malta.

Gozo’s transformation is also based on the realisation of key infrastructure projects that seek to address connectivity and accessibility issues, which are often highlighted as drawbacks to doing business in Gozo. Thus far, the only link between Malta and Gozo is a ferry service. However, planning work for a tunnel across the channel is advancing, and a regional airport connecting Gozo to Malta and Sicily might also be on the cards.

Funding a second submarine fibre-optic cable to Gozo is another priority of the current administration in order to provide companies investing on the island with a back-up to the existing fibre-optic link.

An alternative route in case of failure of the cable currently in operation is seen as crucial to attract businesses that rely heavily on international connectivity in areas such as ICT and financial services.

The completion of restorations at the old walled-capital Cittadella can now also boost Gozo’s appeal for visitors interested in archaeology.

A Younger Gozo

Developments such as these suggest that, with the right investment, Gozo will take off. The challenge for the island will be to strike a balance between preserving its natural beauty while readying itself to support an ever-diversified economy. The future of Gozo is also very much about helping young people believe in their island, say government officials and entrepreneurs alike. Gozo needs to beat the brain-drain it has been experiencing in past decades, which saw its best talent move to the larger island of Malta which offered better work opportunities. With new tech and finance companies opening offices and the development of additional economic pillars, many islanders’ are confident in Gozo’s future success. They argue that the change Gozo is witnessing will make leaving the island for career purposes an option rather than a must. It will also ensure that companies investing on the island face no problems finding employees with the education, training and skills needed to fill their jobs. n

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Manufacturing & Industry

Manufacturing & Industry

The Power of Niche Positioning Switching from mass-production to high-end manufacturing has proven a successful move for Malta, whose skilled factory workers offer a vital source of innovation and competitiveness.

A

n island at the centre of the Mediterranean Sea is not the first place one would expect global investors to build state-of-the-art manufacturing plants. But the quest for cost-competitive and high-quality production has drawn manufacturers’ attention to the Maltese Islands for many decades.

World-leading companies from the US, Germany, UK, France, Italy, Spain and India have set up operations on the island. While the number of manufacturing jobs has diminished over the years, coinciding with the emergence of other sectors; what defines Maltese manufacturing more than anything else is its attitude to change. Over the past years, the sector has undergone a strategic transformation from large-scale production for mass markets to exclusiveness, added value and a focus on welltargeted niche markets.

Today, the island offers a prime location for companies specialising in high-technology products in areas such as electronics or precision engineering, as well as capital-intensive activities such as life sciences and aircraft maintenance. There is no question that the sector is moving forward as new and established companies are preparing to invest millions of euro in facilities on the island.

However, the future of manufacturing could completely reinvent paradigms for cost and profitability and require Malta to reposition itself as a manage-

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ment hub of an industry that is increasingly influenced by material sciences, as well as technological breakthroughs in robotics, sensors and high-performance computing. The challenge is to attract sufficient talent to fill these novel and demanding job positions that are opening up in the sector.

Manufacturing Evolution

Malta’s manufacturing sector offers a fine case study of systematic change. In its early days most of the activity was locally oriented and primarily revolved around the food, beverage and furniture sectors.

Immediately after gaining independence from Britain, Malta sold itself as a low-cost manufacturing base for foreign firms with easy access to export markets. Cheap labour and tax incentives attracted international investors. German toy manufacturer Playmobil and UK packaging specialist Toly were among the first companies to open plants on the island. Textile, leather, plastic and tobacco producers followed, and together over the subsequent three decades they employed thousands of people.

While the 1990s saw electronic and engineering companies expanding their operations into Malta, it became slowly apparent that the challenges of globalisation and the rise of lower-cost locations in Asia required a complete rethink of the island’s

While salaries are more competitive in Malta than in some other destinations, labour costs make up only part of our total product costs, and when everything is factored in, Malta ranks very well.

Malta also offers an attractive living environment, which makes it easy for us to attract talent from abroad.

Mathias Ridal Customer Service Director, International Currency, of Crane Currency

Manufacturing & Industry

Malta has a small population with quasi full employment which causes a demand-supply problem for all skill levels. The demand-supply chain generates wage inflation, and adds to the cost of attracting and employing people from overseas. Opportunities remain for businesses that can take advantage of tax incentives, investment incentives and that can manage revenues / business from a distance. Hence, the cost of doing business, a reliable and dedicated English-speaking workforce and quality of life are among Malta’s main attractions.

Joseph E. Khoury Vice President Europe of Methode Electronics

manufacturing industry. In order to maintain its competitive edge, Malta moved away from labourintensive industries and encouraged companies to focus on high-value-added activities.

A New Reality

The shifted manufacturing focus has allowed Malta’s manufacturing workers to ‘trade up’ to more challenging and better-paying work, while Maltese goods increasingly compete with sophisticated products in international markets. The island has attracted businesses from higher-value-added and knowledge-based industries that include pharmaceuticals, mechanical engineering, electronics, maritime products, biomedical equipment, as well as packaging and security systems. Malta’s manufacturing sector contributes some 10% to the country’s GDP, and it employs approximately 24,000 people – around 15% of the island’s labour force.

The two strongest segments of the manufacturing sector are electronics and the food and beverage industry, followed by activities such as precision engineering and pharmaceuticals – the latter, in particular, has blossomed in recent years. Companies are mainly producing generics and taking advantage of the Bolar Exemption that allows development work of pharmaceuticals before patent expiry.

International Investors

There are some 3,000 manufacturing and distribution companies in Malta, most of them small and medium-sized enterprises (SMEs). The sector predominantly consists of locally owned firms operating alongside a small number of relatively

large foreign-owned export-oriented subsidiaries of multinationals. Many small manufacturers also work as sub-contractors and produce parts and components for the island’s larger players. The French-Italian multinational electronics and semiconductor producer ST Microelectronics is the country’s largest manufacturer. Other important players include the engineering group Trelleborg, packaging specialists Toly Products and toy manufacturer Playmobil. Generics manufacturer Actavis and the Medichem Group are some of the key names in the pharma sector. Aircraft maintenance is headed by Lufthansa Technik and SR Technics, which have established operations on the island.

Indigenous companies producing for local and export markets are mainly found in the food and beverage industry, where the largest enterprises are Magro Brothers, Farsons and Foster Clark.

Expansion Mode

There is widespread agreement that Malta’s manufacturing industry will continue to play a significant role in the economy, and it is encouraging to see that new companies are setting up. The latest addition to Malta’s manufacturing industry is Crane Currency, a banknote printing company from the US, that has chosen Malta for its latest US$100 million investment in a new plant that will create up to 300 jobs. De La Rue, another currency printing company that has been based in Malta for some 40 years, had announced in December 2015 that it was to reduce its workforce by 300 over a period of three years, however the firm revoked its decision and will continue operating from its Malta base.

Toy-maker Playmobil is to invest a further

Malta’s manufacturing sector contributes some

10%

to the country’s GDP, and it employs approximately

24,000 people, around 15% of the island’s labour force.

Country Report MALTA 2017 59

Manufacturing & Industry

Manufacturing

Achievers

Methode

De La Rue

ST

US-company Methode Electronics opened its operations on the island in 1966. In Malta, the company manufactures electronic equipment for a number of sectors, including sports vehicles and advanced machinery, and employs more than 1,200 people.

De La Rue has been operating in Malta for over 40 years and has just created a Centre of Excellence for Identity and Security Print in Malta, as part of a global investment of â‚Ź33 million in equipment, factory upgrades and skills.

STMicroelectronics, a FrenchItalian multinational electronics and semiconductor manufacturer headquartered in Switzerland, employs some 1,500 people in Malta, making it one of the largest private sector employers on the island.

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Country Report MALTA 2017

Manufacturing & Industry

Playmobil

Toly

Trelleborg

Established in Malta since 1974, Playmobil Malta employs more than 1,000 people and has an annual production capacity of 100 million figures.

Toly, a supplier of packaging solutions for the beauty industry, first started operating in Malta in the 1960s.

Today, besides manufacturing on the island, Toly’s corporate headquarters, as well as an integrated innovation centre, are located on the island.

Trelleborg first opened its doors in Malta in 1961, and at the time it was known as Malta Rubber. Today, the company produces approximately one billion O-rings every year.

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Manufacturing & Industry

As an industry, we need to focus on making working in manufacturing more attractive. As a result of significant and ongoing investments over the years, the sector has changed from being labour intensive to technology driven. Manufacturing today offers many opportunities for skilled workers and career progression.

Norman Aquilina Chairman of the Manufacturers Economic Group with the Malta Chamber of Commerce, Enterprise & Industry

€30 million in its Malta plant and add 200 people to its workforce of 1,000. Methode Electronics, a leading developer of custom-engineered and application-specific products and solutions, is investing €5 million to expand its factory in Mriehel with an addition 1,250 square metres of space, while Lufthansa Technik has signed a five-year deal with easyJet for the servicing of more than 100 of its planes in Malta.

Package of Incentives

Manufacturing is seen as critical to the island’s ability to build a balanced economy. The government has introduced business-friendly policies and invested heavily in infrastructure to support the high-performance industries locating to Malta.

A full package of incentives, ranging from fiscal benefits to the provision of custom-built specialised factory space, is offered by Malta Enterprise, the agency responsible for attracting foreign investment. The government has also intervened repeatedly to help the sector weather economic difficulties. Rapid and non-bureaucratic assistance for struggling companies during the last recession helped to avoid worker lay-offs and paved the way for fresh investment after the crisis. Malta’s credentials as a manufacturing base have been further strengthened by the island’s excellent transport and logistics links. Parts manufactured in other, cheaper locations can easily be imported, assembled or processed in Malta and then exported to the nearby markets of Europe and Africa.

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Addressing the Image Problem

To target investment from niche market leaders and high-tech specialist producers, Malta has consistently invested in education. Top quality manpower is today the hard currency of its modern, streamlined, manufacturing industry. The University of Malta offers degree programmes through the faculties of science, engineering and medicine, and the island’s vocational college MCAST offers training in electrical and electronic engineering, among other courses. While the wage bill has been rising in recent years, salaries in Malta are still below the EU average. Investors also cite productivity, dependability and the ability to innovate and assimilate new skills as the island’s most valuable asset.

However, companies report that finding qualified workers is becoming increasingly difficult, as Malta’s economy has approached nearly full employment. Today’s smart factories need skilled labour, and the number of ‘upskilled’ workers is not keeping pace with demand. Manufacturing has an image problem, suffering from the stereotypical perception of dirty jobs that require little skill and offer little opportunity for career advancement. To address this issue, Malta’s companies are increasingly showcasing their products and plants. As manufacturing has become more technology-driven, its share of managers and professionals, as well as middle skill positions, has risen, offering Malta’s young a host of interesting career choices.

Playmobil is a brand that is played with by children practically worldwide.

Operations in Malta have steadily increased over the past decades, thanks to our Head Office and the German Board of Directors that keep on investing in our existing plant, machinery and tools, so much so that a new building extension is currently under way.

Matthias Fauser CEO of Playmobil Malta

Manufacturing & Industry

The success of Malta’s economy has seen the country lose its European Union objective 1 status. This has had a knock-on effect on providing manufacturing companies with tax credits, which within Malta’s industrial base are viewed as a key component in the economics of manufacturing on the island given its logistical challenges.

Growing Pains

Management Hub

Malta’s manufacturing companies benefit greatly from being part of a manufacturing cluster. Most manufacturing plants are located in Malta’s 10 industrial parks, which are administered by Malta Industrial Parks (MIP), Malta Enterprise’s right arm responsible for the allocation of factories for new economic investment projects, as well as the management of all government-owned industrial estates in Malta and Gozo. The country has also constructed a €35-million biotechnology park aimed at attracting life sciences companies. A cluster development dedicated to the aviation industry, the Safi Aviation Park, hosts several companies involved in the maintenance, repair and overhaul of aircraft, engines and components. However, companies say that industrial space is limited and that there is very little room for expansion. In addition, plans for high-rise buildings and regeneration efforts in some areas might require the country to rethink the location of its industrial zones. Logistics is the buzzword here given that companies do not only require manufacturing space, but also warehousing and transportation facilities. As companies are starting to favour a ‘build-it-here, sell-it-here’ model that enables them to respond with speed and agility to customers’ increasing demands for customised products and streamlined finish, logistics facilities are becoming all the more important.

One of the factors that has traditionally compensated Malta’s geographical disadvantage is the island’s competitive cost base. Malta offers lower costs than continental Europe, but an equally skilled and educated workforce; and it does not only compete with Asia, but increasingly also with manufacturing bases in Eastern Europe. However, the success of Malta’s economy has seen the country lose its European Union objective 1 status. This has had a knock-on effect on providing manufacturing companies with tax credits, which within Malta’s industrial base are viewed as a key component in the economics of manufacturing on the island given its logistical challenges. Government, industry and agencies are currently looking to establish solutions to this issue.

On the positive side, Malta has also identified new areas of opportunity to strengthen the sector’s competitiveness. The island’s authorities believe in the potential to form new clusters in high-tech and clean-tech industries. The main sectors are energy efficiency, renewable energy and water treatment, as well as waste and recycling. There are also opportunities in the related fields of life sciences and materials sciences. Plant managers envision Malta as developing into a management and support centre that would bring new products and services to the market. In this scenario, companies would locate mature production lines to lower cost countries, while building capabilities in managing processes and new technologies in Malta.

A Focus on Innovation

The long-term goal is to reinforce and widen Malta’s high-value manufacturing cluster by developing an international standing, not only as a production base, but also as a test-bed for innovation.

To achieve this, the government is encouraging research, development and innovation activities, while ensuring that the right skills are in place to keep up with the breakneck pace of change in the development of global manufacturing processes and technologies. By marrying a still relatively inexpensive and business-friendly environment with close proximity to major European and North African markets and a skilled workforce, Malta is luring foreign companies with a unique set of advantages. n

Country Report MALTA 2017 63

Life Sciences & Biotech

Life Sciences & Biotech

Sources of Innovation The last years have been somewhat of an incubation period for Malta’s life sciences sector, but the island is now positioning itself at the intersection of big pharma, start-ups and academia.

M

alta has long been promoted as a country with great potential in the life science field.

Having attracted some of the world’s leading pharmaceutical companies to establish plants on the island, Malta has invested heavily in infrastructure and lab facilities to position itself as a hub for life sciences. While the global biotech world has still to feel the pull of Malta, there are signs that the sector is finally advancing and growing. Companies are moving into a new life sciences park, while home-grown researchers and scientists are bringing made-in-Malta healthcare products to market.

In addition, the arrival of Partners International Healthcare, a group affiliated to Harvard Medical School, as part of Malta’s efforts to reform its healthcare system could actually lead to a major breakthrough in the development of Malta’s life sciences cluster. The idea is to bring a significant percentage of Harvard’s research budget to the island, and in combination with EU funding, establish Malta as a medical R&D location, which would attract pharma firms at the cutting-edge of scientific thought and laboratory research.

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Life Sciences & Biotech

Known for Generic Medicines

Industry Pool

Malta’s biotech roots go back to 1905 when Sir Temi Zammit found out that a bacterium in goat’s milk was the source for a highly contagious disease, today known as brucellosis or Malta fever. His discovery led to the almost total eradication of the disease in the developed world. In modern times, the generics pharmaceutical sector has been one of the island’s major success stories. Pharmaceuticals were classified as a priority sector for the economy as part of Malta’s plan to move manufacturing into higher-value-added activities. The industry quickly became one of the fastest-growing productive business sectors and has attracted many global leaders.

They came initially to take advantage of the country’s legal framework that allows the development of generic drugs in advanced-patent expiry, known as the Bolar Exemption. Because of this legislation, generic manufacturers can conduct research and trials on drugs before the patents expire. While the generics manufacturing industry has provided the bedrock for Malta’s research and development capabilities, the industry recognised that for the sector to grow and prosper it needed to move further up the value chain where it could carve out a niche as a location for specialist drug developers, manufacturers of medical devices and start-up biotech companies.

Pharma companies with significant operations on the island currently include Actavis Generics which, in the summer of 2016, was acquired by Teva Pharmaceutical Industries – one of Israel’s largest pharma companies, Siegfried Holdings from Switzerland, the Spanish Medichem Group, Amino Chemicals of Italy and the Indian generics manufacturer Aurobindo. But generic producers have not remained the only protagonists of the sector. US firm Baxter and German company Metallform produce medical equipment on the island. Cardinal Health provides the industry with a broad set of healthcare products and services, while Univenter specialises in the design and production of pre-clinical research instruments.

Malta’s research base is also under development: having already registered some 40 patents, the Institute of Cellular Pharmacology is regarded as a trailblazer in cellular and molecular biology, producing vegetal extracts for human and animal use for the pharmaceutical, cosmetics and veterinary industries. One of Malta’s latest success stories is AAT Research, which was founded by neuroscientist Adrian Attard Trevisan, who developed the world’s first neurofeedback device for home use by children with autism. The firm is also one of a number of sector players that have set up shop in Malta’s new life sciences park.

Biotech meets Big Data

Research & Testing Centre

The sector currently supports some 1,500 jobs and produces exports worth some €300 million, up from €56 million euro in 2005. With the establishment of a life sciences park, Malta has made a longterm commitment to support the growth and development of start-ups and smaller biotech firms. It typically takes about 15 years and costs up to €600 million to bring a new drug discovery to market.

While big pharma increasingly outsource development functions and invest in promising start-ups, rather than performing studies and drug development of their own, Malta sees an opportunity to cooperate with industry leaders and accelerate the growth of young life science companies. The island also counts on a data-driven future of biotech and seeks to attract technology companies as life sciences companies are looking for ways to speed up drug discovery and analytics.

The €35-million centre Life Sciences Centre, co-financed through the European Regional Development Fund and strategically positioned close to key stakeholders in the industry, the state hospital and university, occupies 11,000 square metres and hosts research laboratories in medicine, genetics and biotechnology. It also includes an incubation centre to support start-up companies and encompasses the whole innovation life-cycle and supply-chain process for companies specialising in life sciences. The objective of the centre is to attract foreign direct investment and sustain the further development of Malta’s homegrown life sciences community, providing a base for research institutes, technological firms, and educational and medical training institutes.

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Life Sciences & Biotech

The island’s cost base, which is lower than in biotech hubs in Switzerland, Ireland or the UK, makes it more affordable to pursue a new idea. In addition, Malta is ideally suited for non-EU firms and scientists as an entry point to the EU, offering them the possibility of operating in a stateof-the-art environment with reduced up-front investments. The island also emphasises that the Life Sciences Centre provides a functional environment both for research companies and for firms that offer inspection and verification. This includes testing and certification services, such as checking the condition and weight of traded goods at transshipment, as well as confirming the quality and compliance of products with regulatory standards.

A digital hub adjacent to the life sciences facilities has also been established and promises exciting synergies.

Harvard Collaboration

The sector also looks to the transformation of Malta’s healthcare infrastructure, where new players could make a big difference for life sciences too.

Part of Malta’s public health sector has been privatised, and the country has signed a deal with Vitals Global Healthcare (VGH) and their partners Barts and The London School of Medicine and Partners HealthCare International. Partners HealthCare is one of the leading integrated academic healthcare

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systems in the US and was founded in 1994 by Brigham and Women’s Hospital and Massachusetts General Hospital, the two oldest and largest teaching hospitals of Harvard Medical School. Research collaboration between Harvard and Malta’s academic institutions has already been discussed, and there are plans to draw on research grants of the EU, as well as Harvard, to develop innovative solutions to global problems.

A Focus on Clinical Trials

Malta’s government is also throwing its doors wide open to increase the amount of medical research undertaken in the country. The island believes it can be a centre for clinical trials, with a large public hospital serving most of the population. For some products, clinical trials can take up to a decade and are a money pit for pharma companies. Malta offers an opportunity for pharma companies requiring a partner that is flexible and nimble. The Malta Biobank – a national archive of DNA and blood samples, and the Maltese genome project which is searching for genes responsible for causing diseases in the Maltese population, are just two examples of how Malta is seeking to position itself as a centre for medical research. The government is also considering bringing a cyclotrone to Malta, which would allow research on cancer drugs and dermatology drugs on the island.

Life Sciences & Biotech

There is scope for pharmaceutical companies and clinical institutions to invest in Malta and as a base to perform clinical research and trials.

Chris Fearne Minister for Health & Deputy Prime Minister

There is huge potential for biotech in Malta, with some firms already established on the island. The country is able to create the right environment to develop interesting ideas. However, more grants and incentives could help biotech companies to train their staff and to take their technologies to the next level.

Manuele Biazzo Director of Science at Institute of Cellular Pharmacology (ICP)

every year specialise in sciences.

Students are now being encourMalta Enterprise is the governaged to take up sector-related ment agency charged with estabsubjects at both the university and lishing and managing the develthe island’s vocational college, opment of Malta’s life sciences MCAST, where strong efforts are industry, as well as overseeing the being made to ensure collaborafurther development of the Life tion between the institutes and Sciences Park. Offering players the industry in order to develop that come to the island financial specific training programmes. support and loan guarantees, Retaining skilled personnel is It is the as well as logistical and workone of the challenges the sector force training assistance, Malta government’s aim to faces: higher wages, a more deEnterprise is instrumental in veloped commercialisation inincrease its spending frastructure and research opporthe success in attracting foreign companies to the island. Malta tunities abroad have kept Malta’s on research and also offers biotech firms support brightest away from the island in innovation to 2% in managing their patent portforecent years. However, a research lios, including assistance in filing community is beginning to by 2020 up from patent applications in multiple emerge in Malta and the recent 0.72% today. jurisdictions as well as tax exinfrastructural investments are emptions on patent income. shaping a unique ecosystem While many in Malta had hoped that the life that will allow it to compete on a higher level. It is sciences centre would be an immediate success, it the government’s aim to increase its spending on has proven to be more difficult to attract biotech research and innovation to 2% by 2020, up from companies and start-ups. Malta does boast lab space 0.72% today. There are also plans to allocate income and governmental support, young companies and from Malta’s Individual Investor Programme, a citentrepreneurs; however, many may be turned off by izenship-by-investment programme, for research issues with accessing finance and a lack of venture and development. capitalists. Attracting angel investors would be another key component of building the life sciences Global Network of Discoveries industry in Malta. To further support the growing life sciences sector, and sciences in general, there There is tremendous growth potential for the sector are also proposals for the introduction of the posi- globally as a result of an ageing population and an tion of Chief Science Officer reporting to the gov- increase in chronic illnesses. Malta also provides ernment, a role that is not without precedent on the an excellent gateway position to the Middle East world stage. Until recently, Ireland and the Czech and North African (MENA) region, whose healthRepublic had chief scientists, and both the UK and care sector is estimated to reach US$60 billion by Australia still do.

2025 as the need for facilities, services, medicines and equipment continues to increase. The regional Nurturing Innovation population is growing at 3-5% per annum, but is also ageing, leading to an increased need to manage The growth of this sector would not have been pos- chronic conditions such as cardiovascular disease, sible if the island had not built up a workforce with obesity, osteoporosis and cancer. an ideal mix of technical and managerial skills to By creating modern facilities for researchers support it. University-educated chemistry graduates, and a supportive environment that offers assisas well as a selection of highly trained personnel ex- tance in commercialising ideas, Malta is seeking perienced in operating sophisticated, high-precision to establish itself as a significant player on the machinery, are available to the industry. In addi- life science stage and a regional centre of exceltion, the fact that the Maltese are bilingual (Maltese lence. Malta is striving to follow in the footsteps of and English) means that local personnel are able to countries such as Ireland, South Korea, Israel and prepare scientific documents and laboratory reports Singapore, which have made huge gains in pharto the standards required by the industry. Malta maceutical manufacturing and R&D thanks to the also aims to further leverage its human capacity to implementation of government-led initiatives. become a centre for higher-value-added production The key to success in biotech is starting small and and research. Growth in the number of R&D per- then catching the attention of big players. While sonnel has so far remained below the average seen in this is a model Malta has already proven it can other EU economies and only a fraction of the 2,000 deliver in a host of sectors, the same cannot be students graduating from the University of Malta said about biotech – at least, not yet. n Science Advocacy

Country Report MALTA 2017 67

your financial services provider in Malta Bank of Valletta has contributed to the economic development of Malta for the past two centuries. Today we actively endorse the nation’s drive and ambition to transform itself into a centre for financial excellence.

Being firm believers that economic achievement does not subsist on its own, we have pledged our commitment to our country to aim towards success while acting responsibly towards the society within which we operate.

With a well-developed network of correspondent banks and representative offices, we have the infrastructure and expertise to manage corporate banking for companies registered across international jurisdictions.

At Bank of Valletta we aspire to exceed customer expectations by offering a trusted, genuine and truly caring service, adding value every time we connect.

Your success is our goal.

CORPORATE FINANCE WEALTH MANAGEMENT PAYMENT SOLUTIONS +356 2131 2020 I bov.com

Bank of Valletta p.l.c. is licensed to conduct investment services business by the Malta Financial Services Authority.

Issued by Bank of Valletta p.l.c., 58, Triq San Ĺťakkarija, il-Belt Valletta VLT 1130 - Malta

Banking

Banking

Powering Through Malta’s banking industry has recently seen mergers and acquisitions and the exit and entry of players. With a development bank being the latest addition, Malta’s banking sector remains strong in a challenging global environment.

A

s technology and regulation are reshaping the global banking industry, Malta is emerging as a forward-looking banking centre that has attracted international and regional players as well as smaller, innovative institutions who have established operations in the country. Maltese banks are ranked among the safest and best-run credit institutions in the EU, and the sector has suffered no systemic shocks or banking failures. There is a clear divide between the local retail banks; and the internationally focused, specialised foreign banks that have set up in Malta, which have almost no interaction with the domestic economy. Structural

separation aside, Malta is feeling the effects of the new global banking landscape currently in the making. While the industry has recently been witnessing various foreign banks consolidating and scaling down their operations in the country, Malta is receiving a boom in interest from specialist and niche institutions disrupting traditional business models and penetrating new markets with highly targeted products and services. The island has also received the green light from the European Commission to establish a development bank, which will finance small businesses and infrastructure projects.

Country Report MALTA 2017 69

Banking

T

he banking sector is facing a number of headwinds after years of relative calm. While Maltese banks are ranked among the safest and best-run credit institutions in the EU, the sector is feeling the effects of the new global banking landscape currently in the making. More stringent regulations around the world are forcing banks to reassess their correspondent banking relationships, and international financial institutions are increasingly restricting business relationships with smaller local banks in certain regions of the world, including Malta. Some foreign banks, which had been present in Malta for many years, have also been consolidating and scaling down their operations in the country. The local banks are reporting healthy profits and are adequately capitalised and liquid. However, they are taking a vigiliant approach to servicing certain economic sectors in an effort to maintain balanced exposure. This has led to a problem for some companies, which find it challenging to meet their demand for banking services. On the positive side, Malta is receiving a boom in interest from specialist institutions and payment companies disrupting traditional business models and penetrating new markets with highly targeted products and services. A development bank, which will finance small businesses and infrastructure projects, is also being set up to focus on gaps in the market.

Financial Backbone

Malta has a small domestic market, and its banks’ strategies have traditionally been tied to the local economy. The two largest retail banks, Bank of Valletta (BOV) and HSBC Malta, can trace their origins back to the 19th century. In 1809, English merchants founded the Banco Anglo-Maltese, while the Banco di Malta was established three years later in 1812. In the second half of the 19th century, the Anglo-Egyptian Bank started operating in Malta, and through a series of mergers and acquisitions this became Barclay’s Bank DCO (Dominion, Colonial and Overseas). A number of smaller Maltese-owned banks were also established, and some of these eventually merged to become the National Bank of Malta. In the 1970s Barclay’s and the National Bank were nationalised.

Barclay’s was renamed Mid-Med Bank, which later became HSBC, while Bank of Valletta took over the assets of the National Bank.

The desire to establish Malta as a centre for financial services in the late 1980s and 1990s brought extra dynamism, ambition and pace to the sector’s development. The banking sector changed significantly, transforming from a tightly controlled publicly owned sector into one of liberalisation and foreign ownership. Malta also garnered attention when it joined the EU in 2004 and the Eurozone 70

Country Report MALTA 2017

in 2008, as more banks discovered the country as a platform for business. Today, 27 credit institutions have a presence in Malta, offering a full set of banking services that range from retail and investment banking to trade finance and custody services. There is a clear divide between the local retail banks and the internationally focused, specialised foreign banks that have set up in Malta, which have almost no interaction with the domestic economy.

The entire sector employs some 4,500 people. The World Economic Forum’s Competitiveness Index 2016-2017 rates it as the 16th soundest banking system in the world, while institutions such as the International Monetary Fund, the European Commission, and credit rating agencies confirmed the sector’s robustness and resilience. BOV and the parent banks of domestic subsidiaries – such as HSBC – have successfully passed the EU-wide stress tests of recent years.

Banking Clusters

The total assets of the banking sector contracted from 648% in 2014 to 532% of GDP in June 2016, mainly owing to group consolidation by a number of international banks. Nonetheless, Malta’s financial system seems large when compared to its economy. However, the defining factor of the banking sector is that it is sharply segmented and essentially divided into three clusters. The assets of the core banks, which have strong links with Malta’s economy, amount to 237.6% at the end of 2016, which is below the EU average of around 350% of GDP. These banks have extensive links with the Maltese economy and are thus systemically relevant. The remaining assets are held by banks with limited links to the domestic market, as well as by international banks with no links to the domestic economy. They do not take local deposits, but rather focus on business with non-residents or intragroup transactions supporting their parent banks, or concentrate their activities on areas such as trade and project finance, syndicated loans and investment banking. In fact, many of them hold executive responsibility for specialised areas of their group’s global operations.

A Dynamic Sector BOV and HSBC are the largest players in the local retail sector. APS Bank, Lombard Bank and Banif Bank are also considered as core domestic banks as are Mediterranean Bank and its subsidiary, Mediterranean Corporate Bank. The local banks are retail-deposit funded, and their loan portfolios are diversified in different sectors of the economy.

Some of the longest established international banks in Malta are branches of Turkey’s Akbank and Garanti Bank. They use Malta as a booking centre for foreign-exchange loans. Malta has also proved to be fertile ground for specialised banks, niche

There is no escaping the wave of regulatory reform and harmonisation which applies across Europe. This is somewhat mitigated locally by the ease of accessibility to our regulator, and the latter’s policy of adopting a firm but flexible approach to the extent possible.

James Bonello Secretary General of the Malta Bankers’ Association (MBA)

Banking

The Maltese economy continued to grow at a far stronger rate than the rest of the Euro area; consumer and investor confidence remained strong, while unemployment fell to record lows.

We experienced solid demand for personal finance, especially for home loans and investment properties.

Investment services, bancassurance and credit cards also turned in particularly strong performances.

Mario Mallia CEO of BOV

players or institutions targeting regional markets.

Trade-finance specialist FIMBank, which grew from its base in Malta to become an international banking brand, is one of Malta’s greatest success stories. The bank was founded in Malta in 1994 and has set up offices in major cities across the world.

For many years, Malta has also been playing host to a number of Austrian banks, however, these banks have recently seen changes in their ownership structure. Bawag Malta Bank has been acquired by a Canadian finance and supply chain group and has been renamed as MFC Merchant Bank Ltd. Austrian Volksbank has been acquired by Mediterranean Bank who established Mediterranean Corporate Bank. The Al Faisal Group, one of Qatar’s largest private diversified industry groups, has become the majority shareholder of Banif Bank Malta.

Other leading banking groups with a presence in Malta are IIG Bank, NBG Bank and CommBank. Deutsche Bank also had a presence in Malta, however, the bank closed its operations on the island as part of a decision to cut down overseas activities. Malta has traditionally sought to attract larger players, however, there was a period in which Malta saw smaller, start-up banks coming to the island. While many of these banks are operating successfully, there were two particular cases, Nemea Bank and Pilatus Bank, which courted controversy.

Healthy Ratios

Malta’s domestic banks have adopted a conservative approach to banking, and this has served the island well. Bank funding depends on retail deposits rather than wholesale borrowing, and over the years, the banks have stuck to this conventional banking approach. The country’s banks maintain substantial liquidity, adequate capital and prudent lending policies. The total capital ratio stood at around 15.8% for core domestic banks, 15.9% for non-core domestic banks and 66.8% for international banks in June 2016. These levels were significantly above the minimum regulatory requirements.

In the first six months of 2016, deposits financed almost 80% of the core domestic bank’s total liabilities, and thus remained their prime funding source. However, growth in customer deposits slowed down slightly, while customer lending increased. In fact, the average loan-todeposit ratio decreased from 66% in 2014 to reach 58.6% in June 2016, which is substantially lower than the EU average of about 100%. Recourse to other sources, such as interbank and eurosystem funding, remained marginal during this period.

In January 2017, Malta’s banks held deposits of about €40.6 billion, with resident deposits account-

ing for €17.5 billion and foreign deposits for some €23 billion. There is no evidence of an aggressive search-for-yield behaviour, despite the context of low yields and ample liquidity.

While the low interest environment presents an on-going challenge for banks abroad and in Malta, the profitability of Malta’s banking sector is still above the euro area average. Credit institutions benefit from Malta’s growing international finance centre and the high demand for specialised, sector-specific banking solutions that come with it. Figures for the core domestic banks show that the return on assets and return on equity of the banking sector in Malta stood at 1% and 12.8% respectively, substantially above the average ratios of small institutions in the euro area.

The Effects of De-Risking

Despite their positive performance, Maltese banks, as banks in other countries, are currently reviewing their business models and de-risking their portfolios by limiting their exposure to certain sectors of the economy, while also building up their capital buffers in accordance with European banking regulation. This, the industry says, will most likely lead to safer, albeit less profitable, banks in future, but in the short term it provides a number of challenges.

Malta’s iGaming industry is reporting that there are only a handful of banks servicing this sector, while more stringent regulations and compliance requirements increased transaction costs for both banks and their customers.

Many of Malta’s banks are also finding it increasingly challenging to clear US dollar transactions after global banks started cutting correspondent banking ties with their respondent banks, especially in emerging markets but also in small and medium-sized economies such as Malta.

Due to the small size of the market, the island is of limited interest to international institutions, and global banks are weighing their rising compliance costs against potential profits from this activity.

However, the authorities are hopeful that initiatives driven by the G-20, the IMF and Financial Action Task Force (FATF) will help addressing the global correspondent banking crisis.

A New Financial Institution

While Malta is often praised for its prudent banking system, Malta’s Central Bank has called for a more competitive, efficient and modern sector. Some countries have seen a significant rise in e-payments, while cash and cheque prevail as payment methods in Malta, which means the system is more expensive to maintain and creates higher bank charges.

The Central Bank has also pushed for the establishment of a national development bank to provide Country Report MALTA 2017 71

Banking

finance for SMEs and infrastructure-related projects after having identified a number of sectors that lack funding, such as tourism services, renewable energy, transport and telecommunications.

Maltese firms rely heavily on bank financing as there are few other alternatives available. Capital markets are not a popular way to finance Maltese SMEs. Business angels, venture capital funds, mezzanine finance and other sources of finance are scarce in Malta. The Malta Development Bank (MDB), which has recently been set up after receiving approval from the European Commission, will operate as a non-profit making institution and will be fully owned by the Maltese government. The bank will mainly operate when private commercial banks fail to make appropriate financing available, or if financing is not being offered at normal market rates.

Accessible Regulator

Strong financial sector oversight is a critical pillar in Malta’s success as a financial centre and supports the robustness of its banking sector. Banking legislation is founded on European Union legislation and is compliant with the Basel Core Principles.

The presence of a single regulator, the Malta Financial Services Authority (MFSA), which has built a reputation for being a meticulous, yet accessible, supervisory body, ensures that banks are closely monitored and fully compliant with regulations. Changes introduced by the EU’s Single Supervisory Mechanism (SSM) came into effect in November 2014, transferring the supervision of the Eurozone’s largest banks to the European Central Bank (ECB) in Frankfurt. In Malta, HSBC Bank Malta, BOV and the Mediterranean Bank Group fall into this category.

While the MFSA is cautiously selecting and screening new applicants, Malta is keen to attract more banks. Malta’s constantly expanding international finance sector offers plenty of growth opportunities in areas such as ship finance, investment banking and custody services and demand for banking solutions is high. The island is also a land of opportunity for credit institutions looking for an EU-compliant, yet flexible, domicile that provides access to the EU market and the neighbouring countries of North Africa. The emerging economies of the region are in need of infrastructure development, offering opportunities in the area of project finance. Malta’s professionals also believe that there is strong potential to attract more eCommerce payment business and fintech companies to the island and promote Malta as a prime location from which to service customers across the globe.

72

Country Report MALTA 2017

E-Banking as an Opportunity

With technology playing a key role in banking these days, Malta has already attracted a significant number of financial institutions focusing on digital services and is home to more than 40 financial institutions.

Credit card companies, payment service providers, payment gateways, card issuers and eWallets are licensed as financial institutions in Malta. Analysts agree that financial innovation will rise in importance in the coming years and that it may not be long before fintech companies enter the banking sector in a more decisive way. While most start-ups have business models that do not require them to hold a banking licence and follow the strict rules of deposit-taking institutions, a fully-fledged banking licence has the potential to strengthen their operations once they evolve and outgrow the start-up stage. The industry believes there is scope to attract more online banks and digital solution providers to the island in times when traditional banking models are challenged like never before and the global banking industry seeks to catch up with the digital age.

Welcoming Environment

Banking and finance institutions operating in, or from Malta benefit from a high quality of staff and a comprehensive support network. A large number of accounting and auditing practitioners, ranging from small boutique practices to the global ‘Big Four’ accountancy firms and numerous legal firms, support the sector. Operating, training, retention and recruitment costs are up to one-third less than in other EU countries, and highly educated staff such as branch and treasury managers are easily sourced. Malta also has a state-of-the-art telecoms infrastructure, a crucial factor for companies offering or developing digital banking solutions.

Banking is experiencing a more challenging environment driven by negative interest rates, increased regulatory expectations for higher levels of capital adequacy and for compliance with the highest global standards of financial crime risk management and the need to concurrently fund investment into new digital technology. In the context of these challenges I believe HSBC is uniquely well positioned; we continue to exceed our end-point capital adequacy requirements; we have made transformational investments in financial crime risk management and we are well on the path to bring new digital innovation to Malta.

Andrew C. Beane CEO of HSBC Malta

Something Malta could develop is a physical business centre, a City if you like, a financial hub where you could congregate all the business sectors, banks and administrators. This would be good for business, as long as it is in the right location and makes logistical sense, especially for foreign clients who could easily meet with all their advisors without running across the island for a day or two.

Paul Mifsud Managing Director of Sparkasse Bank Malta

Reimagining Banking

As technology and regulation are reshaping the global banking industry, Malta is emerging as a forward-looking banking centre that has attracted international and regional players as well as smaller, innovative institutions who have established operations in the country. However, key industry figures comment that the pace and extent of regulatory change will continue to prove demanding for the sector for the foreseeable future, as does the continuation of a negative interest rate environment.

The trend for banks to consolidate and streamline their operations is likely to prevail for some time to come. At the same time, banks will also increasingly look at alternative ways to generate revenue by offering new digital and added value services to their customer base. Client profiling and data analytics are expected to play a bigger role and help banks in Malta to seize new opportunities. n

The Maltese banks continue to embrace a prudent approach while adopting the more stringent directives aimed at an even more controlled environment within which the sector must comply.

While such increased regulation dampens profitability, it gives the sector a more robust model that can withstand economic shocks.

Raymond Busuttil Managing Director & CEO at IIG Bank (Malta) Ltd

Insurance

Insurance 2.0: Covering New Risks As the European insurance sector is getting to grips with the new solvency regime, Malta’s up-to-date legislation and its ability to provide cost-effective and tailor-made solutions have made the country a top domicile option.

I

ntense competition among domestic insurers versus record-growth in the provision of international insurance services continues to characterise Malta’s insurance sector. Although the local market has seen some form of consolidation in the past two years, insurers claim that market rates need to improve for the industry to remain profitable. Meanwhile, Malta has established a foothold in the European insurance market, and is poised to take market share from its on- and offshore rivals. The country’s proven and tested cell company legislation offers struggling small

and medium insurers, reinsurers and captives a strategy for survival in the post-Solvency II regulatory landscape, while new business is also expected to be driven by insurance-linked securities. US and Asian market players, keen to sell insurance to European clients, have shown increased interest in what the country has to offer and are set to join the list of international companies and ‘blue-chip’ corporations that have already turned to Malta to insure traditional, but also emerging risks such as cyber, environmental and employee benefit risks.

Country Report MALTA 2017 73

Insurance

Insurance Market Growth

Malta’s insurance sector has long been open to foreign investment. Private and commercial insurance was first developed between the two World Wars when a number of underwriting agencies representing British insurance companies set up on the island. Following major consolidation in the UK market during the 1990s, many of the British insurers exited Malta’s small market, creating the opportunity for local agencies to convert into independent insurance companies. But it was Malta’s entry into the EU in 2004 that truly transformed the insurance landscape, with EU regulations enabling foreign companies to insure assets and risks anywhere within the Union. This attracted insurers seeking a more cost-effective jurisdiction, as well as non-EU insurance companies or intermediaries seeking to tap into the EU insurance market.

They are allowed to write directly into Europe, thus avoiding the need to engage additional, and often expensive, fronting insurers.

A Diverse Industry

Today, Malta’s insurance sector boasts a workforce of more than 1,200 people, and at the end of 2016, 60 insurance companies were based in the finance centre. These were made up of 45 licensed non-life insurance companies, seven life insurance firms, two composite and six reinsurance enterprises. Most of these companies sell insurance to clients outside of Malta. The insurance management community, consisting of 11 insurance managers, has greatly helped the sector to grow and develop. Global corporations such as BMW, Peugeot, Citroën, Nissan, Liberty Global, Volkswagen, Vodafone and RWE have set up insurance companies or captives in

Malta, while reinsurance providers Munich Re, Axeria Re and Argo Global, as well as international insurance managers such as AON, Marsh, Willis, JLT, Artex Risk Solutions and USA Risk Group have established operations on the island. In fact, corporations from across the world are being serviced from Malta, including businesses from other sectors that are using Malta’s protected cell company legislation to offer insurance to third parties to cover risks in areas such as travel and property. Companies that are primarily active on the local market include Mapfre Middlesea Insurance, Atlas Insurance, GasanMamo Insurance, Citadel Insurance, Elmo Insurance and HSBC Life Assurance. These companies service some 85% of the local personal and commercial market, while the two major life insurance companies, Mapfre MSV Life and HSBC, handle some 90% of the life market.

GROWTH IN Written Premiums

The combination of a local and an international market has led to record growth. In 2015, companies wrote €3.84 billion in gross premiums, up from €2.83 billion in 2014 and €2.58 billion in 2013. Premiums relating to risks or commitments based outside Malta rocketed from €1.2 billion in 2010 to close to €3.4 billion by the end of 2015.

International insurance business now accounts for some 90% of the total gross written premium. Local premiums also increased, albeit on a smaller scale.

In the general business sector, gross written premiums in relation to risks situated in Malta reached €0.12 billion in 2015. In the long-term insurance sector, gross written premiums reached €0.3 billion in 2015. Malta’s insurance penetration rate stands at 5%, below the EU average of 7.6%, with spending significantly lower than the EU average.

Malta’s cost base is increasing and the supply of top flight human resources is not keeping up with the growing demand. This inevitably has an inflationary effect as well as being a limitation to growth.

However, as an economy the fundamentals are sound, and there is real productivity and growth. This said, I feel it is important that we keep our eye on the ball and avoid a situation where things can overheat and thus require a correction.

Julian J Mamo Managing Director of GasanMamo Insurance Ltd Now that Solvency II has gone live, we are seeing increased enquiries from leading insurance management companies and various entities seeking cost and capital savings, preferring the more efficient cellular route to underwrite insurance. While in the early days most enquiries used to be from UK parent companies, most recent enquiries and cell formations emanate from continental Europe.

Michael Gatt Managing Director of Atlas Insurance PCC

Total Gross Premium Written 2015

3.84 bn

2014

2.82 bn

2013

2.58 bn

2012

2.31 bn

2011

2.20 bn

2010

1.50 bn

2004

0.21 bn

0.0 bn

74

0.5 bn

Country Report MALTA 2017

1.0 bn

1.5 bn

2.0 bn

2.5 bn

3.0 bn

3.5 bn

4.0 bn

Insurance

The introduction of the Reinsurance Special Purpose Vehicle Securitisation Cell Company has made Malta one of the first European Union jurisdictions to make cell structures available for insurance linked securities transactions, and came soon after the introduction of the Securitisation Cell Companies Regulations, which provided the legal framework for the establishment of Maltese SCC structures.

John Tortell Chairman of the Malta Insurance Management Association (MIMA)

The regulator and the government should ensure that the level of regulation is fair and reasonable, while ensuring a very good level of consumer protection, so that any regulations do not put our market in any disadvantageous position when compared to other European markets and other international financial sectors.

Mark Spiteri Chairman of the Association of Insurance Brokers (AIB)

Being based in Malta has many advantages including; a professional and well-established insurance sector, an accessible and experienced regulator, the ability to passport into all EEA countries on a freedom of services basis and a strong presence of industry professionals.

Karl DeGiovanni Managing Director at Aon Risk Solutions

Regulatory Efficiency & Cost Effectiveness

Insurance business is licensed and regulated by the Malta Financial Services Authority (MFSA).

The MFSA stresses that it is committed to prudent regulatory oversight but also to innovation, efficiency and cost effectiveness that allows companies to flourish and meet changing consumer needs.

The country has enacted legislation that allows the set-up of captives, while Malta has also championed the introduction of Protected Cell Companies (PCC) and Incorporated Cell Companies (ICC) in the European Union. Both structures allow firms to write risks through cells within a core company and provide businesses with a cost-effective alternative to setting up a stand-alone insurance company.

Malta has also recognised the growing importance of insurance-linked securities (ILS) and catastrophe bonds, as well as the convergence of reinsurance and capital markets. The island has enacted legislation allowing for the formation of reinsurance special purpose vehicles (RSPVs) and securitisation cell companies (SCCs). These new regulations will strengthen Malta’s role as an alternative risk transfer domicile as they link the insurance industry with the capital markets. They also allow Malta to attract reinsurance sidecars and hedge funds interested in entering the reinsurance business.

Competitive Pressures

Expansion remains a major challenge for domestic insurance companies, especially in the non-life segment. Competition is forcing insurers to cut underwriting rates, while claims are reported to be rising, putting insurers’ margins under pressure. This challenging environment has already resulted in a few overseas insurers withdrawing from the motor market during 2015, while Mapfre Middleasea has acquired the business of Allcare Insurance after the company got into financial difficulties. Insurers claim that rates need to be adjusted upwards for the sector to grow in a profitable and sustainable way. Meanwhile, insurers are looking at two avenues for growth. The first is bringing in new insurance products, such as pet insurance and products for bicycles. Insurers can also grow their businesses by tapping into the expanding economy and offering innovative and creative policies addressing other niche-market demands. There are some sectors, too, which have yet to be fully exploited by insurance firms, including oil and gas. The other is growth outside of Malta, with some companies having entered foreign markets by offering specialised products. There is also room for growth in the life insurance segment as coverage in Malta is currently around 38% of the EU average. However,

companies report that the sector is picking up on the back of low interest rates. Insurance products are considered as low-risk investment and saving products offered by insurers are becoming more popular with the Maltese population.

Onshore Cell Success

Malta’s international insurance sector is set for a period of growth – Solvency II has finally been implemented and the uncertainty surrounding its introduction has vanished. In this new reality, Malta’s insurance professionals agree that Malta’s legal framework – and specifically the PCC structure – is the island’s main selling point. Malta already hosts 12 insurance PCCs with more than 30 cells, which are owned by companies such as Swarovski, Amplifon, Travelodge, Ocado and TUI. The PCC regime is well placed to provide insurers with a cost-effective way to manage the higher capital and compliance requirements under Solvency II. The structure offers economies of scale, cost burden sharing and provides the cell with access to knowledge and management expertise pooled within the core of the PCC. It is seen as the ideal structure for start-ups, which otherwise might struggle to comply with the new requirements. Insurance Managers and Brokers can also benefit from this structure. For instance, foreign consultants, brokers or managers could create their own cells in local insurance broker or management PCCs, through which they can service their clients across the EU, with less capital and cost than setting up stand-alone licensed companies.

Future growth is also expected to be driven by securitisation, either through the use of RSPVs or SCCs. An SCC is a single legal entity that can establish one or more segregated cells for the purpose of entering into securitisation transactions, including insurance-linked securities transactions such as catastrophe bond issuances, longevity risk transfer transactions, collateralised reinsurance transactions and cell sidecars. The main benefit of SCCs lies in their application as programme or platform structures, for instance if repeat transactions are envisaged, offering lower costs and quicker set-up time for each transaction. Exchange Re has become the EU’s first securitisation cell company platform for cell-based insurance linked-securities (ILS) and collateralised reinsurance transactions after having been granted approval by the MFSA. A Competitive Domicile

Foreign companies often chose Malta because it is an EU member state with dedicated cell legislation; however, they soon realise that there are several other advantages such as highly qualified insurance professionals and a business-friendly Country Report MALTA 2017 75

Your trusted insurance partner on Maltese shores

People you can trust

Providing a full spectrum of solutions • Local leaders in commercial, health and personal insurance • Our protected cell facilities offer the opportunity to create captive insurance or management cells with less capital and cost

Call us on 23 43 53 63 or visit atlas.com.mt

The Malta Financial Services Authority has authorised Atlas Insurance PCC Limited, a cell company, to carry on general insurance business (the non-cellular assets of the company may be used to meet losses incurred by the cells in excess of their assets); Atlas Healthcare Insurance Agency Limited to act as agents for AXA PPP healthcare limited; and Ark Insurance Management PCC Limited, a cell company, to act as an insurance manager.

Insurance

Solvency ratios (2013 – 2015)

500%

400%

300%

200%

100%

0% 2013

2014

2015

n General Business n Long-term Business n Pure Reinsurers n All Insurance undertakings

environment. This makes the country an attractive outsourcing destination for foreign insurance companies, managers, brokers and other intermediaries. Functions such as claims administration, analytics, customer care, policy administration, sales and distribution can be outsourced to Malta with a view to reducing costs. With its innovative legislation and operational advantages, Malta is possibly top of the list for companies that seek to relocate to another jurisdiction and require vehicles for specific needs, such as third-party business, solutions to reinsurance issues or want to tap into capital markets. Malta’s re-domiciliation legislation allows for a seamless transfer of structures in and out of the island, without the need to wind up operations. In addition, insurance companies are exempt from paying duty on documents on the insurance of risks situated outside Malta and from paying contributions to the Protection and Compensation Fund with respect to the same risks.

Support Network

Insurance companies in Malta can rely on a wide support network, including three associations: the Malta Insurance Association (MIA), the Malta Insurance Management Association (MIMA), the Association of Insurance Brokers (AIB) as well as the newly setup Malta Association of Risk Management (MARM). The sector is also backed by a large number of legal firms, as well as accounting and auditing practitioners that range from local practices to the global ‘Big Four’. Furthermore, over the past years, Malta’s lawyers and accountants

also acquired the specialist insurance knowledge needed for more complex services, like the redomiciliation of captives from another jurisdiction to Malta.

Growth Potential

While the low interest environment will continue to pose a challenge to the sector as it affects the way insurance companies reserve and invest their funds, product innovation is seen as one measure to cope with this environment. Sector professionals highlight that Malta’s domestic insurance sector is on the right track when developing new policies and services.

On the international front, Malta has become an important player in the insurance market, and the fact that the island has opened up to the insurance-linked securities market bodes well for the future. There is widespread agreement that other European domiciles considering introducing similar concepts are not a threat to Malta, but rather will help promote the PCC concept across Continental Europe. By offering EU passporting rights, a fiscally beneficial environment and competitive operating costs, the island is expected to remain a hotspot for EU and non-EU direct insurers seeking a cost-effective location. It will be a magnet, too, for multinationals looking for reinsurance solutions and service providers with an international client base eager to enter the EU insurance market. To exploit its full growth potential, Malta only needs to ensure that it continues to offer innovative solutions, sustains a low cost base and maintains an efficient operating environment. n

Industry Growth 2005-2016 Insurance CompanY TYPES

Number of insurance companies

60

6 Reinsurance 7 Life

50

2 - Composite 40

45 Non-Life

30

20

10

0

16

22

30

41

45

50

54

58

60

60

58

60

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Country Report MALTA 2017 77

Capital Markets

Capital Markets

The Global SME Finance Centre The Malta Stock Exchange is targeting international small cap companies with growth potential to drive its expansion plans.

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Capital Markets

T

he Malta Stock Exchange (MSE) has developed a detailed road map to take its operations to the next level. Celebrating its 25th anniversary since the beginning of trading, the Exchange is seeking to position itself as the preferred international market of choice for smaller, growing companies as well as for well-established, mature businesses seeking to expand. Internationally recognised technologies have been adopted in order to improve the MSE’s appeal as a listing venue. In addition, a new SME and start-up oriented market, as well as a Sharia equity index, are set to increase international market access and help the MSE compete with other European exchanges, including those of Luxembourg and Ireland. Exchangetraded funds (ETFs), real estate investment funds (REITs) and Islamic finance have been identified as future growth areas. Like other exchanges around the world, the MSE is also exploring applications for blockchain technology, which, it has been estimated, could save the global financial industry over $100 billion annually in back office costs. The overarching goal is that by the end of 2018 Malta’s capital markets maximise their potential and visibility – locally and internationally.

A Highly Networked Bourse

While critics may say this is too ambitious a plan to realise in less than two years, the Exchange points to its proven track record of achievements. Despite being a relatively young bourse, the Malta Stock Exchange has grown swiftly to secure its place in the island’s financial sector. The Exchange has undergone many changes in its short history and has come a long way from its modest beginnings, when trading took place only in government stocks, to the fully-fledged regulated market it offers today.

Traditionally, the Exchange mainly serves the Maltese market: local companies tap the market for equity, and investors tend to be domestic institutions or the general public. Many of Malta’s largest corporations are third- or fourth-generation family businesses, and they have come to appreciate the possibilities that a listing opens up for them, such as providing an exit route for dormant family shareholders.

However, significant investments in infrastructure over the past years have paved the way for the MSE to realise its international ambitions. The Exchange now uses Deutsche Börse’s Xetra trading platform, currently connecting over 4,000 traders in 16 different countries. On the settlement and custodial side, linking up with Clearstream, Deutsche Börse’s liquidity provider, has removed barriers between Malta and the world’s trading centres. The Central Securities Depository (CSD) has also continued to expand its range of services that are on offer for listed and unlisted companies across Europe.

Country Report MALTA 2017 79

Capital Markets

Recent Performance

Although the MSE is small by global comparisons, the last 25 years have witnessed a very successful growth phase that has seen the listing of over 40 companies, and the issuance of over €15 billion in equity, corporate and government bonds and treasury bills. In 2016, the MSE index finished at 4,631, an increase of 4% compared to the previous year.

Bond trading volumes improved by 14%, while the number of trades in equities decreased by 9% and the number of trades in government stocks decreased by 4% when compared to 2015. Overall, a 3% decline in the total number of trades was registered; this was also accompanied by a 25% loss in the value of these trades. However, total market capitalisation increased from €11.6 in 2015 to €12.1 billion in 2016. While there were no new additional equities admitted to listing on the MSE in 2016, 13 corporate bonds, nine government stocks and 90 treasury bills were admitted during the year.

A Recognised Exchange

The investment in technology has continued over the past year as the MSE was among the first group of exchanges that moved towards integration with Target 2-Securities, the pan-European Security Settlement System developed by the European Central Bank, to which the Exchange migrated in June 2015. Once all the migration waves are rolled out, Target 2 will encompass all euro settlement volumes in a seamless and cost-effective manner, and will be fundamental in creating a truly single capital market in Europe. The Exchange’s credible track record has enabled it to obtain recognition from other leading stock exchanges, and since 2010 Malta’s equity market has been included in the FTSE’s Global Equity Index Series (GEIS). The MSE has also achieved recognition from the UK tax authorities and recently was granted recognised exchange status by the Securities and Exchange Commission in the US. Listing Solution

The MSE presents itself as an ideal place to accommodate specialist services and small and mediumcap companies, and is aiming to become one of the top three European stock exchanges catering for SMEs by the end of the decade. The MSE currently operates three markets; the Main List consists of equities, corporate bonds, government bonds and treasury bills. Companies with a trading history of three years and over are admitted to the MSE’s Main List, while a secondary Alternative Companies List offers firms with little or no trading history the op-

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portunity to access capital markets. These firms can benefit from EU passporting rights and besides the MSE’s trading platform, they also have the option to have their instruments traded on another EU market of their choice.

To expand its services, the MSE has created a new SME-oriented market called Prospects that provides an opportunity for SMEs from Malta and elsewhere to raise capital. Prospects’ rules have been designed to offer a lighter regulatory regime compared to the Exchange’s other markets, while providing robust investor protection and transparency through the requirement to appoint a corporate advisor. The MSE is convinced that this new market has the potential to become a major pillar in the provision of capital financing to SMEs and will help Malta attract international business from countries such as China, Turkey, Italy, Spain, Eastern Europe and the Middle East.

The ambitions of the MSE also go beyond small cap companies, and the Exchange is marketing itself to larger cap companies as a gateway to European investors. These companies can look to Malta as a first step towards an eventual listing on the main European exchanges.

A Professional Environment

What differentiates the Malta Stock Exchange is its very high standard of personal service, which provides a lot more support in the preparation for an initial public offering (IPO) than on a larger exchange. In addition, costs and fees remain competitive while those making primary and secondary applications can expect a swift, well-organised process. Both local and foreign companies can also benefit from ancillary services ranging from admission and trading to depository and custodial services. Furthermore, the MSE highlights that support services provided by accountants, audit firms and lawyers are priced at up to 40% less in Malta than in other EU countries, while offering the same high level of service that market participants expect.

A Market for Debt Securities

Following its vision of becoming an international player, the MSE has also created a market for debt securities in cooperation with the Irish Stock Exchange. The European Wholesale Securities Market (EWSM) is aimed at a global client base, targeting issuers who desire a European listing for distribution to European investors. While primary market infrastructure, listing, promotion and other corporate services are provided by the Irish Stock Exchange, the MSE functions as the market opera-

INTERNATIONAL AFFILIATIONS Malta Stock Exchange is a member of:

Federation of European Securities Exchanges (FESE)

European Central Securities Depository Association (ECSDA)

World federation of exchanges (WFE)

International Organisation of Securities Commissions (IOSCO)

Association of national numbering agencies.

The exchange is also a signatory to the EU Code of Conduct for Clearing and Settlement.

Capital Markets

We are looking outside our shores to identify companies within the emerging markets to list in Malta. The island offers a listing solution that appeals to costconscious companies, and I see no reason why the Malta Stock Exchange should not flourish in the same way as other segments of Malta’s finance centre do.

Joseph Portelli Chairman of the Malta Stock Exchange

tor and offers secondary market services. In 2013, the market welcomed its first listing when Grand Harbour, an issuer registered in the Netherlands, listed seven classes of securities, while in July 2014 Argentarius ETI Management issued the first Exchange Traded Instrument (ETI) under the Malta Securitisation Act on the EWSM. Up till April 2016, there have been 15 issues on the EWSM. Tapping into Islamic Finance

Another strategic move by the Exchange was the introduction of a Sharia Equity Index in January 2016. This new index has been certified Sharia compliant by Dubai’s Islamic finance consultancy firm Dar Al Sharia. Every quarter, Dar Al Sharia screens the equities traded on the MSE for possible inclusion with the index, while ensuring that the equities listed continuously comply with Sharia principles. This new MSE Sharia Equity Index is seen as the first step towards establishing Malta as a centre for Islamic finance products, with a view to attracting the Sharia-compliant equities and Sukuk instruments that could be listed and traded on the MSE. The MSE hopes that the index will generate interest from Sharia-compliant fund managers in addition to Muslim investor communities all over the world and increase business for the Exchange, as well as raise awareness amongst Muslim companies interested in accessing the European capital markets through the MSE.

Reaching Out

The Exchange has always been at the forefront of initiatives to help develop Malta into an international financial centre. Despite its size, the MSE offers all the benefits of a well-regulated, transparent marketplace, with the added advantage of providing a personalised and swift service. Malta’s stable economic and political climate provides potential issuers and investors with peace of mind when conducting business with the MSE. Despite its international ambition, the MSE stays committed to the continued development of the domestic market. In 2016, the Exchange established the Malta Stock Exchange Institute (MSEI), which is focused on enhancing financial education aimed at a broad-spectrum target audience, ranging from individual investors to industry practitioners.

Future

The coming two years will be defined by the Exchange’s ambition to implement its strategic plan consisting of some 20 initiatives aimed at strengthening the MSE. By June 2017, the MSE aims to change the listing rules to include exchange-traded funds and real estate investment funds. The Exchange is also exploring options for the creation of a wholesale market for securities in addition to the EWSM, as well as for the possible privatisation of the Exchange. The Malta Stock Exchange (MSE) has also set up a blockchain Think Tank to ascertain how this emerging technology could work in the capital markets infrastructure.

Going forward, co-opetition will also be a major theme for the Exchange, which is looking to develop its relationships with major global stock exchanges outside of Europe. The aim is to provide foreign exchanges with a white label solution, which they could offer to companies within their home markets who wish to have a listing in the European Union. n

Country Report MALTA 2017 81

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International Financial Services

International Financial Services

Standing Tall

The finance sector is rising to the challenge of sustaining the growth of recent years while sending the clear message that Malta is no place for financial secrecy.

A

sset, wealth and insurance management have become the power bases of Malta’s financial services sector, which has not only expanded in recent years but also internationalised like never before. Malta today can stand tall among Europe’s financial hubs and is developing new credentials in a range of sectors such as fintech, securitisation and payments. Viewed as a particularly businessfriendly location, the Mediterranean island is a favoured entry point to the European Union because of its robust, EU-compliant regulatory framework, diverse financial ecosystem and deep talent pool.

Yet, despite its past successes, the island is taking a fresh look at its finance sector, which has felt the spotlight of international attention in recent months. Media reports accused a few foreign subsidiaries of not having sufficient substance and economic activity on the island to claim tax treaty benefits. The island is also facing the task of maintaining its reputation as a robust jurisdiction that has nothing to hide as data leaks and journalistic investigations are shaking finance sectors around the world, including those in Ireland, Luxembourg, Switzerland and, more recently, Malta.

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Country Report MALTA 2017

Fully Onshore

Malta’s development as an International Financial Centre has its foundations in sound economic principles, a pro-business environment and responsive regulations. In 1988, Malta passed legislation to facilitate the establishment of an offshore financial framework. However, the government soon recognised that the future lay in the provision of a wellregulated, transparent financial sector and decided to move its financial services onshore. At this time Malta was also seeking membership of the EU and began to harmonise its legislation, incorporating best practices from comparable centres. EU membership provided Malta with the spur it needed to catapult it from relative obscurity to one of Europe’s most dynamic and fastest growing finance centres.

By introducing a strong supervisory framework as well as a competitive, transparent regime approved by both the EU and the Organisation for Economic Co-operation and Development (OECD), Malta sought to distance itself from secrecy jurisdictions, tax havens and shell company structures. The island has continuously ensured that its laws, including

We are pushing hard to become a leader in the blockchain space, and we want Malta to be among the first countries to implement blockchain technology.

We are also aiming to create one of the world’s best environments for the commercialisation of Fintech models. Start-ups in this sector should definitely look at Malta.

Silvio Schembri Parliamentary Secretary for Financial Services, Digital Economy and Innovation

International Financial Services

anti-money laundering rules, are fully aligned with European rules and best global practices.

Over the years, Malta has accelerated its efforts to increase the depth and breadth of its finance industry. The finance sector has expanded by around 25% annually in recent years and accounts for 13% of the country’s GDP, providing almost 10,000 jobs.

The scale of this transformation has been enough

investment funds, known as Professional Investor Funds (PIFs), in addition to EU-certified UCITS funds and more recently Alternative Investment Funds (AIFs). There are currently almost 600 funds domiciled in Malta, and the country is also increasingly attracting larger fund platforms, best-in-class service providers and sophisticated asset management activities. Corporate formation is another

Over the years, Malta has accelerated its efforts to increase the depth and breadth of its finance industry. The finance sector has expanded by around 25% annually in recent years and accounts for 13% of the country’s GDP, providing almost 10,000 jobs.

Malta, I must say, has a lot of potential and a very entrepreneurial spirit that allows you to establish strong relationships with key decision-makers who in other countries would be difficult to meet with and discuss your business.

The attitude and friendliness of the authorities very much helped our banking group launch our fund custody business in Malta.

Natacha Ebener COO of REYL & Cie (Malta) Ltd

to help Malta become an alternative to established European finance hubs such as Dublin, London and Luxembourg. The government believes there is still scope for expansion and has made sustainable growth of the sector a top priority.

Specialist Services

From the onset, Malta has positioned its financial services sector to serve as a European hub for many specialised services. For an island nation of just 430,000 people, Malta has built up a remarkably diverse financial services portfolio. The country’s banking sector was one of the first to embrace an international approach. Today, 27 banks have established operations in Malta, although only a handful of these are active in the local market. Most use the island as a platform from which to conduct specialised asset financing, corporate banking and trade finance services. The insurance sector has experienced an upsurge due to the presence of expert insurance management services and EU passporting rights, and Malta is now regarded as one of the leading captive insurance domiciles.

The fund sector began to expand soon after the introduction of a specialist regime for alternative

important area of activity, and the island’s open and publicly available company register today lists around 70,000 companies. Malta has also developed into an important wealth management location. High-net-worth individuals, wealth managers and family offices increasingly avail of the country’s wide range of investment vehicles, including trusts and foundations.

Key Players

Traditionally, Malta had been chosen as a base by smaller financial services companies and start-ups, which offer clients more personalised services than those provided by the bigger firms. However, as Malta’s status as a financial centre has grown, the island has also attracted international credit institutions such as HSBC, Banif Bank and trade finance specialist FIMBank. Today, Malta hosts some 30 fund administrators and 60 insurance companies, ranging from well-known international names to smaller, niche establishments. Fund administrators such as Apex, TMF and Citco all have a presence in Malta, along with insurance specialists such as Munich Re, Aon and Marsh. In addition, multinationals such as BMW, Peugeot, Citroën and Country Report MALTA 2017 85

International Financial Services

Vodafone have set up captives on the island. Malta also boasts considerable expertise in the field of trusts and foundations, including many legal firms with in-house trust companies, along with international organisations.

While financial services legislation is drawn up by the Ministry for Finance, all financial services are overseen by the Malta Financial Services Authority (MFSA). The MFSA is open-minded and approachable and offers face-to-face meetings with international companies seeking to operate from Malta – a level of access that is rare in other finance centres.

Over the years, the MFSA has also worked together with the industry in developing the required capabilities, capacity and regulatory frameworks to move into new areas of business. The country has gained a reputation for striking a good commercial balance by providing an appropriate legal framework without over-regulating in a way that might inhibit growth and innovation. However, in light of the growing size of the financial sector, international institutions such as the European Commission and the IMF have called the regulator’s ability to effectively supervise internationally oriented businesses into question.

and investment fund sectors and the country’s carefully crafted, and continuously developed, regulatory frameworks. Insurance premiums have reached a new high in recent years, with €3.8 billion written in gross premiums. It is argued that Malta’s Protected Cell Company (PCC) regime offers a cost-effective way of managing the higher capital and compliance requirements of Solvency II. In the past two years, Malta has also experienced an influx of asset managers and fund service providers following the introduction of the EU’s Alternative Investment Fund Management Directive (AIFMD) that regulates both managers and promotion of alternative funds. To cement its position as a top domicile for the industry, Malta recently launched a new framework for the notification of Alternative Investment Funds (AIFs), known as Notified AIFs, as well as rules for the establishment of loan funds.

Renewed focus on the wealth management sector has also paid off. Malta has updated its trust law, bringing it in-line with the latest international developments, while the introduction of citizenship-by-investment and new residency programmes have helped promote Malta as a holistic lifestyle and wealth management location. Other sectors are also gaining importance; Malta has the largest shipping registry in Europe and is in the process of building up a diversified aviation cluster.

A Question of Substance

Financial Talent Pool

Malta’s finance community unanimously refuses to be labelled as a tax haven in the wake of recent media reports. However, many acknowledge that articles published in Germany’s Der Spiegel, Spain’s El Mundo and other news outlets highlighted certain shortcomings of international companies in fulfilling their substance requirements. The reports describe companies with offices and employees but question whether their physical presence truly reflects the size and scale of their operations on the island. Questions of substance, coupled with the moral and ethical dimension of corporate structuring, are high on the agenda of finance professionals worldwide, and the Maltese authorities are certain that the recent incidents will force a positive evolution of Malta’s product and service delivery over the longer term. Malta has always insisted that companies have more than ‘brass-plate’ operations, and the island is also fully committed to the efforts undertaken by the OECD in combatting base erosion and profit shifting in international tax structures.

To guarantee a pipeline of talent and labour certainty for corporations, Malta has invested heavily in building up the competencies of its financial sector workforce. From home-grown talent to experienced international financial sector professionals, Malta today offers a diverse talent pool. About 60% of Maltese students continue to third-level education, with law, accountancy and management among the most popular subjects. In addition, a number of institutes offer industry-specific training. While the surge of growth in business has left a shortage of specialised skills in certain segments, the country has introduced tax incentives for highly qualified foreign professionals working in the finance centre, who can benefit from a flat income tax rate of just 15%. Its Mediterranean island flair, coupled with opportunities for career progression, mean Malta is becoming an exciting destination for people considering a move abroad.

Proven Concepts

Much of Malta’s success can be credited to its central location. EU membership has provided firms with access to the union’s massive internal market of over 500 million people, and unsurprisingly, Malta’s most important commercial relationship is with the European Union. However, the island has

Supervising International Business

Malta’s finance community has long been emphasising that regulation and innovation aren’t opposites. Practitioners regularly point to the link between the strong performance of the insurance 86

Country Report MALTA 2017

A Global View

We should differentiate between tax rates and the abuse of tax regimes. We are committed to addressing tax evasion as well as identifying loopholes in our own system and closing them. We are supporting all EU and OECD initiatives, and we will looking into further defining substance requirements, which would provide guidance to companies and service providers alike.

Edward Scicluna Minister for Finance

We seek to continue identifying niches for growth – whether its new products or services, for which we can develop the necessary regulation to attract business. While banking, investment and insurance services are well established, over the past years we have seen developments such as the setting up of occupational pensions and pension fund administrators. Creating a diversified sector is healthy for Malta, and we will keep moving forward on this path.

Joe Bannister Chairman of the Malta Financial Services Authority

There is a positive outlook for the industry overall, and through speaking with various practitioners and operators in the industry, it is apparent that there is a healthy conduit of business across the key financial sectors.

Kenneth Farrugia Chairman of FinanceMalta We believe that 2018 will be the breakthrough year for blockchain technology. We set up BitMalta to foster dialogue between industry players as Malta seeks to put itself on the global blockchain map.

Jonathan Galea Founder and President of BitMalta

International Financial Services

Malta’s sound and robust financial services industry speaks for itself, being one of the very few financial services centres which did not enter into recession during the 2008 financial crisis. In terms of financial services and products, investors are faced with a large spectrum of options from trusts, a variety of collective investment scheme structures and listing options.

Jean-Philippe Chetcuti Chairman of the Society of Trust and Estate Practitioners (STEP) Malta

We surveyed institutional investors around the world last November and 73% of them said Malta was in a ‘strong’ or ‘extremely strong’ position to become a leading financial services centre.

Malta’s geographic location and trading history means it is well positioned to benefit from growing demand for financial services internationally. This is one of the key reasons why we are here.

Jeremy Leach Chief Executive Officer of Managing Partners Group

Malta is currently experiencing a prolonged period of low unemployment and high GDP growth rates. This is brought about by the fact that the Maltese economy is diversified and is supported by business confidence and high consumer spending.

Malta needs to continue to be nimble and efficient if it is to remain at the forefront of the market in Financial Services.

Malcolm Booker CEO of Deloitte Malta

also sought to promote itself in overseas and developing markets, with special attention being paid to other financial hubs such as New York and Dubai.

In addition, Malta has negotiated favourable tax treaties with powerhouse growth markets such as China, India, Hong Kong and the US, with some 70 tax treaties in total. Its geographic position in the middle of the Mediterranean, and its close proximity to North Africa, also make it a good stepping stone for financial companies wishing to target the Arab world.

Support Network

Companies setting up in Malta find many helping hands. FinanceMalta, a non-profit public-private initiative set up to promote the financial sector, is the first point of contact for investors and financers who soon find that the island’s professional services firms offer a wealth of knowledge and experience.

Most law firms are affiliated with international networks, and many lawyers have post-graduate degrees in finance. In addition, all of the ‘Big Four’ accountancy firms have a presence in Malta and, together with the smaller accountancy and auditing practices, service international clients. Clients can rest assured that they are dealing with professional firms. Trust and fiduciary providers need to be licensed by the MFSA, and under new legislation companies offering administrative and management services are also obliged to register with the authorities.

Pensions, Payments and Securitisation

Malta has ambitious plans for the future. The country is expanding its portfolio into profitable niche areas such as pensions and payments. The island is emerging as a base for international retirement operators, and there some 50 pension schemes licensed on the island. Concerning payments, Malta is attracting a growing number of e-money institutions and payment processors.

Securitisation has also been singled out as a future growth area, and Malta has developed platform structures for securitisation transactions, introducing the Securitisation Cell Company (SCC). By the end of March 2017, there were already a dozen SCCs set up. As a politically stable and neutral country, Malta also has potential to become a centre for international arbitration, while its longstanding connections to North Africa and the Middle East make it a suitable jurisdiction from which to establish Sharia-compliant structures.

Malta’s capital markets are also eyeing growth in Islamic finance, and the country’s stock exchange has launched a Sharia-compliant equity index, in addition to offering opportunities for small and medium cap companies from Europe and beyond.

A Focus on Innovation

Going forward, service innovation has become the new mantra of Malta’s finance industry. All stakeholders, financial service companies, support service providers and regulators are aware that speed to market is crucial these days. Traditionally, Malta has also enjoyed strong cost advantages.

However, additional regulatory and compliance requirements are driving up service providers’ fees and Malta is becoming more expensive.

Nevertheless, the country’s cost base is still very competitive, with operational costs and salaries being 20 to 30% cheaper than in more established centres. Malta is also keen on finding new niches for which it can develop the necessary regulation to attract business. The island is also positioning itself as a base for finance companies seeking an EU address after Brexit. Malta, besides Ireland, is the only other English-speaking EU country, and coupled with its other advantages as a financial centre, this provides Maltese financial firms with an interesting opportunity.

Reputational Ranking

Malta’s success in attracting new companies will depend on the island’s ability to communicate and demonstrate the high standards that the finance sector applies. The industry does not deny that it has felt the effects of recent media reports. While there is widespread agreement that the financial services regulator could do well with additional resources to oversee the growing sector, many in Malta and abroad believe that the recent accusations served as a wake-up call. Tax planning and corporate structuring have ethical dimensions these days, and even though certain business models are perfectly legal, they might fall foul of public opinion. Going forward, affected companies will certainly pay greater attention that they do not only conform to the letter of the law but also to the spirit of the law.

Future Outlook

Pragmatic regulation, creative innovation and service diversification are just some of the strings in Malta’s bow which have helped financial services become one of the country’s most important economic generators. These features will help Malta to reinforce its position in the years ahead. The country is also determined to provide leadership in ongoing international discussions on financial regulation. Malta’s government emphasises that it strives to achieve a balance between enhanced financial stability and a competitive tax and regulatory framework that will make the finance centre’s future ever brighter. n Country Report MALTA 2017 87

Telecoms

The 1-Gig Opp

Telecoms

Malta could radically transform itself by implementing high-speed broadband nationwide and joining the gigabit movement.

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alta’s telecoms market could face a shake-up and a massive push to expand into next-generation services. While some of the country’s major telcos are seeing changes in their ownership structure, the island’s government announced plans for an additional fibre-optic cable to France to reduce the country’s reliance on its existing links to Italy.

These developments could shift the balance of power in Europe’s smallest telecoms market.

In addition, the country has forged a partnership with Chinese telecoms giant Huawei who will be testing new mobile technologies on the island that could pave the path to 5G. Investment in fast networks and connections have long been a priority for the country as it has laid the foundation for a range of industries such as financial services and iGaming, which are reliant on strong and resilient international connectivity. As markets around the world are now investing in 1 gigabit networks, Malta’s telecoms sector needs to advance if it wants to continue playing a key role in the country’s economic expansions.

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Opening Up

Malta’s economic success could not have been achieved without the support of an advanced communications infrastructure, and the country has always been a frontrunner in telecommunications.

As early as the 1850s, the island was connected to Sardinia, Corfu and Sicily by submarine telegraph cables, among the very first of their kind to be laid on the seabed. During the past 20 years, the sector has gone through a period of rapid change brought about by privatisation and de-regulation.

Maltacom – later rebranded as GO – was once the sole telecommunications provider on the island, but the liberalisation of the market in the 1990s has provided competition. The country became Vodafone’s first venture outside the UK, making Vodafone Malta both the smallest and the oldest foreign subsidiary within the Vodafone Group.

In subsequent years the sector has attracted further foreign investment from the UAE, the US and the UK. The most recent wave of acquisitions

Telecoms

ortunity has seen Melita plc being bought by Apax Partners, a French private equity firm that manages funds in excess of €2.4 billion, and Fortino Capital, a Belgian venture capital company. In the spring of 2017, Melita and Vodafone revealed plans to join forces, and the merger is currently awaiting regulatory approval. Under the merger, the current shareholders of Melita will own 51% of the combined company and Vodafone Europe B.V., the current shareholder of Vodafone Malta, will own the remaining 49%. In 2016, telecoms operator GO’s majority shareholder, Dubai’s Emirates International Telecommunications (ETI), sold all its shares to Tunisia’s national telecom company, Tunisie Telecom (TT).

A Competitive Market

The telecoms sector is a key driver of Malta’s economic growth. It underpins the success of other sectors since it is a crucial enabler of the knowledge-based economy. On its own, the sector contributes close to 2% to the economy and provides jobs for some 2,000 people. GO, Melita and Vodafone, each capable of offering quadruple or triple play, are the three largest players. Then there are a number of smaller players, including mobile virtual network operators and three companies, Ozone, SiS and Vanilla Telecoms, offering internet and/or fixed telephony services. Malta has also developed a growing cluster of service providers offering hosting and co-location services on the island.

Bandwidth is slightly more expensive in Malta than in most other European countries due to the fact that Malta is an island, but increased competition from multiple market players is expected to drive prices further down in the near future.

With 65% of the market share, GO is the dominant operator in the fixed telephony market, followed by Melita with 34% at the end of 2016. In the mobile sector, Vodafone accounts for 44% of the market, followed by GO Mobile with 38% and Melita Mobile with 17%. Other operators, which include mobile services offered by Malta’s Labour Party under the brand Redtouch Fone, and VFC Mobile operated by the capital’s football club, have a small market share. Fixed broadband access is provided by a number of service providers over DSL, Country Report MALTA 2017 89

Telecoms

FTTH, cable and fixed wireless. Cable technology accounts for the majority of the subscriber base with 47.2%, followed by DSL with 44.2%, FTTH with 5.5% and fixed wireless with 3%. In terms of market share by operator, the fixed broadband internet market is almost equally split between Melita and its cable services (47%) and GO Mobile (50%) which besides DSL also offers FTTH in some localities in Malta.

Mobile drives Growth

Developments in the Maltese telecoms markets in recent years have been consistent with trends observed in previous years. In 2016, mobile telephony registered notable gains in terms of subscriber numbers and traffic volumes in contrast to falling traffic volumes for fixed telephony, albeit a growing subscriber base. The number of fixed line subscriptions totalled 234,383 at the end of last year, up by 4,157 from 230,226 a year earlier. This shows that the large-scale replacement of landlines with mobiles that has happened in other countries has not been recorded in Malta. Some 90% of Maltese households still have a fixed line. While the Maltese still value their home line, traffic volumes in the second half of 2016 were weaker than recorded during the same period a year earlier. The number of outgoing voice calls was down by 7.4 million (or by 9.9%), which can be attributed to an increase in mobile phone use. The number of mobile subscriptions was up by some 35,340 and reached 592,923 at the end of 2016. This means that Malta’s mobile penetration stood at 135.1%, up from 128.4% a year earlier.

While SMS are on a steady decline in Malta in line with international trends due to the rise of instant messaging services such as WhatsApp and Viber; mobile data navigated on a solid growth path, both in terms of take-up and activity. The number of users actively accessing mobile broadband services totalled 308,829, up from 270,055 at the end of 2015. Meanwhile, the fixed broadband market saw a 5% increase, with the number of subscriptions climbing from 163,205 at the end of 2015 to 171,293 at the end of 2016. At the end of 2016, the number of fixed broadband subscriptions with access to download speeds of 100Mbps more than quadrupled, from 2,270 to 10,561.

The mobile and fixed broadband market offers the greatest growth potential and revenue opportunity for Malta’s telcos. Consumers are increasingly expecting to access information and use services while on the move, and smart cities, smart homes, connected cars, and the like are slowly but surely becoming a reality.

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Fibre-Optic Links

To meet current and future demand from domestic and business consumers, all stakeholders have heavily invested in infrastructure. Today, Malta is one of the few countries where mobile data access can be guaranteed everywhere. International connectivity is provided via five submarine cables. GO has two fibre-optic submarine cables linking the island to Sicily, while Vodafone and Melita have one each. In addition, Melita has teamed up with US-based provider Level 3, one of only six tier-one operators in the world, and a new fibre link connects Malta to Milan. Electricity company Enemalta has installed an additional fibre-optic cable to Sicily as part of the electricity interconnector. Enemalta is using part of this capacity to transmit the data required in the operation of the interconnector, while the remaining fibres are being made available to interested parties for commercial operation in partnership with Enemalta.

However, the fact that all links end in Sicily means that traffic has to pass through a number of hops, resulting in latency, until it arrives to ‘more connected’ internet points. While this latency has no implications to most internet users, it jeopardises the sustainability and further development of the iGaming, financial and other knowledge and ICTbased service industries. To reduce Malta’s reliance on the existing links, Malta’s government plans to invest in a new fibre optic cable to Marseille with the support of EU funds. There is also demand for a second cable connecting Malta and Gozo to ensure connectivity of Malta’s sister island and to attract foreign investment. International link operators in Malta are obliged to cooperate in case of connectivity problems on their own link, thereby ensuring companies that internet access is guaranteed at all times.

Government’s Role

Since 2002, the Maltese telecoms market has come under the authority of the Malta Communications Authority (MCA). The MCA grants licences, resolves disputes relating to communications, and monitors the telecoms market and reports to the Ministry for Competitiveness and Digital, Maritime and Services Economy. The Malta Information Technology Agency (MITA) is the prime government agency managing government’s own IT programmes and is also responsible for the promotion of ICT initiatives within the Maltese society. Initiatives aimed at raising the level of technology skills within the population have produced significant results. The is-

The local industry has successfully transitioned from a monopolistic, to a liberalised, competitive environment with all the regulatory obligations incumbent on it; has faced, head on, one of the world’s worst financial crises; has had to face some serious commercial decisions and yet, has marched on strongly.

Edward Woods Chairman of the Malta Communications Authority

Innovation and disruptive technology pose both a challenge and an opportunity for telecoms. On one side it is a challenge to keep up the huge investment that adoption of new technologies bring about as well as their effect of cannibalisation of traditional revenues. On the other hand it is an opportunity as both innovation and new technology have a significant and exponential increase in the demand for telecom services.

Amanda Nelson CEO of Vodafone Malta Malta will shortly become the country with the most powerful telecoms network in Europe. We are currently investing in technology that can provide one gigabit speed over our fixed internet infrastructure, while moving towards 5G in mobile communications. Should the planned merger between Melita and Vodafone Malta be approved, these infrastructure upgrades could be in place by end of 2018 rather than 2020 if they had to be carried out solely by Melita.

Harald Roesch CEO of Melita

Telecoms

land’s strong educational offering in ICT, as well as in engineering, attracts large numbers of young people into the sector, satisfying its demand for technical consultants, telecoms engineers and network technicians. Malta’s government is committed to taking the successful sector further and is seeking to facilitate the roll-out of next-generation networks (NGNs). Wi-Fi hotspots have also been a priority, and the MCA, in collaboration with other entities, now manages a total of 300 free Wi-Fi spots across Malta and Gozo.

Joining the 1-Gig Club

Given the ever-increasing data volumes being transferred online by companies and consumers, Melita and GO are focusing on upgrading their networks to allow faster internet speeds. The fastest download speed currently on offer is 500 Megabits.

However, data volumes, particularly among corporations, are expected to increase further and could feasibly trigger a demand for resilient, direct internet connections. This makes investment in NGNs a priority if operators are to sustain their revenue growth and the country wants to continue hosting those industries that are reliant on fast and reliable international connectivity. There are already a number of places in the world that offer speeds of 1 gigabit per second and that have attracted companies and industries requiring super-fast connections. While some sector experts say ‘gigabit speeds’ are an overkill, unnecessary and not worth the costs, the proponents of this technology believe that having one of the fastest broadband networks gives localities a decisive economic advantage, paving the way for the development of next generation internet applications. While the return on investment would have to be carefully weighted, there is an opportunity to turn Malta into one of the first 1-Gig countries in the world. The island is eyeing infrastructural expansion across all sectors, and policy planners should ensure that Malta has vital links for the future and for the emerging Internet of Things (IoT) market.

A key challenge will be maintaining fair competition in the transition to next generation access.

In this respect, the authorities are committed to playing a key part in facilitating the roll-out in whatever way is feasible and ensuring the necessary regulatory clarity in the new environment. In the long term, companies will also need to embrace new revenue streams, through the offering of highvalue services and machine-to-machine technologies in the fields of billing, security and identity to private and business consumers.

Testbed for New Technologies

With its central location in the Mediterranean acting as a bridge between Europe and North Africa, the island also seeks to establish itself as a preferred base for global network operation centres or cloud-data centres servicing the neighbouring markets. Equally, cloud technologies offer opportunities for growth in the island’s domestic market as the large numbers of small and medium-sized business are expected to be early recipients of cloudbased services. Malta’s size, geographic location and population density mean that it is also an ideal location to act as a test-bed for new telecommunication services such as city management and intelligent transport systems. In fact, in early 2017 the MCA published its revised licensing framework for the grant of spectrum rights for test and trial licensing purposes. The country has also signed a memorandum of understanding with Chinese telecoms company Huawei to test new mobile technologies in Malta, as well as to establish an innovation centre in collaboration with the University of Malta for the development of Safe City solutions, including IT applications for alarm reporting, data transmission, video surveillance, transport management, police scheduling, wired-wireless communications and voice and video conferencing technologies.

Advancing in the Gigabit Economy

Around the world, telecoms companies are battling for relevance as they face competition from technology brands such as Apple, Google and Facebook through free text-messaging apps and the like. Growth opportunities for Malta’s telecoms providers will most likely develop in the corporate segment. Efforts to attract more telecoms-reliant businesses to Malta are expected to trigger demand for more resilient bandwidth and might make gigabit deployment a feasible opportunity to ensure economic progress. Cities already offering superfast internet report above-average growth in hightech jobs, as well as salaries. They say some companies don’t even need high-speed connectivity to help in the development process but are attracted by the talent pool that these gigabit economies have created. In this scenario, the government’s role will be that of an enabler and a facilitator, working with the private sector to drive ICT innovation.

Telecoms companies around the world emphasise that a healthy gigabit economy does not only require deployment of technologies, but also proinvestment policies, a thriving ecosystem of suppliers and regulatory frameworks that support strong competition. Advancing in the gigabit economy is not easy, but it is good news for Malta that the multiplier effect may be stronger than expected – and may justify the investment. n Country Report MALTA 2017 91

IT & Software Development

IT & Software Development

A New Wave of Tech Acquisitions As the digital economy blurs the boundaries between the technology sector and other sectors, deal-making in the global tech industry is back with a bang and Malta is no exception.

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IT & Software Development

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here is a clear appetite for mergers and acquisitions in Malta’s information, communication and technology (ICT) sector. In recent years, the industry has seen both tech and non-tech and global and local companies buying Malta-founded software specialists and industry experts believe this trend will continue, along with growing demand for outsourced software solutions. Malta’s ICT firms realised early on that growth can be achieved by specialisation and moved away from generalised product and service portfolios. Many of them offer specific solutions and tailor-made products and have become market leaders in their respective niches. Big data and high-tech applications today influence almost all economic sectors. While companies involved in fintech and biotech are the more prominent examples of this trend, other sectors are also transitioning to new software-based tools to analyse data and improve operational performance such as healthcare, manufacturing and even agriculture. In this climate, Malta is keen to capitalise on its rich technology ecosystem and is reaching out to global tech innovators. The island’s small size and low costs make it an ideal start-up location – a place to form ideas; programme and design.

Kick-starting an Industry

Government spending helped spur the initial growth of Malta’s IT sector in the 1990s when the island understood that ICT was crucial to an innovative, diversified economy. ICT was seen both as an enabler in all economic sectors and as an economic pillar in itself. The island’s government at that time became a heavy consumer of ICT products and services and developed an ambitious eGovernment strategy that propelled IT spending across various government departments. Today, the country is a leader in Europe with 100% of government services being available online. The fact that Malta’s government outsourced many of its needs to local companies accelerated the development of the ICT industry as it gave the sector the critical mass to grow. The deployment of stateof-the-art telecoms infrastructure has engendered further confidence and encouraged private companies to compete in new markets and attract new business.

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IT & Software Development

From iGaming to Fintech

The first companies to take advantage of what Malta offers, such as fiscal benefits, a strategic location in the centre of the Mediterranean and proximity to continental Europe, were iGaming and eCommerce companies. The sector has expanded considerably beyond its humble beginnings, now contributing some 10% to GDP, employing around 10,000 people and boasting a vibrant and dynamic software development industry. Today, several hundred ICT companies operate in Malta.

The majority of these are micro-enterprises, but many high-profile names have also been attracted, including HP, Microsoft and Cisco. On the back of its thriving International Finance Centre, Malta has also positioned itself as a safe space for fintech.

There are already fintech companies based in Malta tackling regulatory and compliance issues, platform and API-driven propositions in areas such as payments and risk management. The island has set out to emulate the success of other globally recognised ICT hubs. Often referred to as a ‘Mediterranean Silicon Valley’, Malta is building up a reputation as a paradise for emerging tech firms, coders and programmers. Nor is it shy to dub itself the Dubai of the Mediterranean, and the construction of SmartCity Malta, an IT and media city developed on the Dubai model, is expected to help drive a very forward-thinking IT business class.

Sector Specialists

Malta has become one of Europe’s favoured destinations for foreign direct investment within the ICT industry. The island has attracted not only the large global brands, but also smaller, more specialised software developers from the UK, Sweden and Germany to name but a few. Malta’s homegrown ICT companies have also registered notable success. While many started off as service companies, over the past decade they have specialised, diversified and in many cases won contracts abroad.

For instance, software developer Megabyte Limited has secured prestigious deals to supply major international airlines with its ARPS route profitability software. Shireburn Software has developed solutions that enable airports and shopping malls to manage and increase concession-based revenue and has won contracts the world over, while ICT company Computime serves international clients mainly from the oil and gas sector and the hospitality industry, and has been involved in infrastructure projects in Libya. Software developer GFI is another Maltese success story. Founded in 1992, the company was acquired by an international consortium and today has offices worldwide, but its headquarters are still in Malta. RS2, today a global

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provider of card payment solutions and IT consultancy, also operates from Malta besides having offices in many other locations around the world.

The company has also invested in offices on Gozo, Malta’s sister island.

Mergers & Acquisitions

M&A activity has been relatively high in Malta’s tech sector. UK company 6PM, a leader in health solutions with headquarters in Malta, acquired Compunet, while the Alert Group, an ICT services company, bought Enterprise Solutions, an IT consultancy and solutions provider specialising in business and commerce systems. Local firm 2X was acquired by international software company Parallels, but the two most notable transactions involved KPMG and Deloitte. Deloitte acquired the Alert Group, while KPMG purchased Crimsonwing, making it the largest professional services firm in Malta.

At the same time, opportunities are opening up to young people with high-tech skills as Malta is positioning itself as a hub for research and development in the IT sector. The island has partnered with Microsoft to create the Microsoft Innovation Centre which places Malta at the forefront of new technologies, such as cloud computing, and provides facilities that help tech start-ups to develop their products and overcome initial hurdles to commercialising ideas. Given the island’s strong presence in areas such as eCommerce and iGaming, many industry professionals believe that more innovative ideas can arise from collaborations and that Malta could become a centre for app development in the near future, attracting, in particular, early-stage companies.

Talent Development

Another notable trend is being seen in the outsourcing of IT services. For instance, manufacturing companies seem to favour contracting external providers in Malta and abroad for their ever-growing technology needs. One reason for this is a shortage of software developers and programmers on the Maltese islands. While Malta’s diverse ICT workforce has strongly supported the growth of this industry, the labour supply has not grown as fast as the many industries today relying on tech talent. However, specialist knowledge can easily be sourced from overseas. In addition, degree courses at the University of Malta and at the ICT Institute of the Malta College of Arts & Technology (MCAST) have been expanded considerably in recent years. A number of vendor-driven certifications can also be obtained locally: Microsoft, Oracle and Cisco have all set up IT academies on the island. Salaries are lower than in other Western European IT centres

We believe in an ICT and datadriven future and consider data as the key fundamental layer on which the success of the digital economy depends.

That’s why we are working on a national data strategy, a holistic plan for the management of data as an enterprise asset.

Silvio Schembri Parliamentary Secretary for Financial Services, Digital Economy and Innovation

Malta’s main assets are the continuous ICT investments in infrastructure and training which are supported by the government’s strategic economic policies, an English-speaking and skilled workforce as well as the country’s proximity to Central and Western Europe. Additionally, a variety of rapidly developing service industries allow vertical specialisation in areas such as finance, iGaming and other IT-enabled services industries.

Savas Manyasli Founder and Solution Architect of DAIS Software Limited

Due to limitations in the local market, IT companies need to internationalise to grow beyond a certain level. We believe that the best opportunity for success internationally is the development of software products aimed at niche markets, which one then takes globally.

John De Giorgio CEO of Shireburn Software Limited

IT & Software Development

Internationalising the IT sector has and will always be the main challenge.

Malta’s insular nature and small internal market remain limiting factors for both the development of the critical mass needed to internationalise, as well as the physical boundary of being away from target markets.

To further support the IT sectors’ opportunity growth, we need to create a greater cohesive national plan to increase our resource pool coming out of University, MCAST and other key institutions.

Peter Bugeja General Manager of PTL International Ltd

Malta has a very strong IT culture, however shortage of skilled IT people remains a challenge. The authorities are investing more in order to attract more students to the IT sector. In this regard, Microsoft has been one of the biggest partners to Malta’s Government in building a robust ecosystem that encourages more new IT-oriented companies. Microsoft looks at Malta as a country that has embraced technology and made it its driver for economic growth, stability and 21st century education.

Panayiotis Ioannou Country Manager of Microsoft Malta

Often referred to as a ‘Mediterranean Silicon Valley’, Malta is building up a reputation as a paradise for emerging tech firms, coders and programmers.

such as the UK or the Scandinavian countries, thus enabling small and medium-sized companies to develop new products at affordable HR costs.

Malta’s strong telecoms industry has also played a key role in the development of the industry. International connectivity is guaranteed by three operators providing international gateway services via fibre-optic cables to mainland Europe.

These services provide considerable security to economic sectors, such as iGaming and eCommerce, that rely heavily on 24-hour connections. The island’s telecoms operators offer high internet speeds and are developing next-generation networks. The technology park SmartCity Malta promises to further enhance the supportive environment for IT companies. It is funded by Dubai Holding’s Tecom Investments, which initially invested US$300 million in the project in 2009. The first building in this self-sustained township was inaugurated in October 2010, with completion scheduled for 2021.

A Testing Ground

Malta’s small size also makes it the ideal test environment for new technologies and ventures in need of a flying start. The island is promoting itself as a base for innovative entrepreneurs, technology-based companies at a start-up stage and firms seeking headquarters for their regional operations.

The public and private sectors are showing great interest in collaborating with new tech start-ups on pilot projects and the testing of software, hardware and applications, as well as the nationwide deploy-

ment of new technologies. Chinese telecoms giant Huawei has already recognised Malta’s credentials and announced plans to open a joint innovation centre with the University of Malta, as well as to test mobile technology on the island. Companies can also develop and test new products and services on the diverse, yet concentrated local market before exporting their services and solutions to Europe or North Africa. Concurrently, Malta’s close proximity to North Africa and its safe political environment make it a prime location for the establishment of cloud data centres which could service customers in the surrounding countries.

Start-up Attraction

Malta’s IT industry is a versatile and mature cluster that is experiencing an exciting period of consolidation, expansion and recognition. But the island’s leaders recognise that they will need to encourage more entrepreneurs if they are to provide the population with high-quality IT jobs. Investments in early-stage companies will prove invaluable as those organisations expand and grow, creating jobs and contributing to the economy. With Malta’s government as a partner, local, regional and international companies can be assured of a long-term commitment to the industry. A highly developed ICT infrastructure and affordable business costs within a Mediterranean island setting differentiate Malta from other locations competing to attract new IT talent and will help the country to develop a burgeoning start-up scene. n Country Report MALTA 2017 95

Shared Services & Outsourcing

Shared Services & Outsourcing

The New Face of Right-Shoring Evolving with the times, Malta is broadening its outsourcing offering for higher value functions.

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alta has established itself as a powerful outsourcing partner that is increasingly winning high-value deals and offering knowledge-based solutions. Once known only as a call centre location, Malta is becoming a hotspot for the outsourcing of back- and middle-office functions and is finding its role in financial services, IT and software development. The island has benefitted from recent ‘nearshoring’ and ‘rightshoring’ trends of businesses westwards from Asia – with the search for higher quality eroding the traditional global offshore dominance of India, the Philippines and China.

Companies are no longer looking only at the cost factor – quality services are equally important.

The question today is not simply whether to outsource or not, but rather which activities to place in which location. Banks, professional services companies and global conglomerates are currently rethinking their operating models to improve efficiency and their bottom lines, and are keen to move more tasks out of their head offices. As business process outsourcing is increasingly changing into business process management, companies are increasingly considering Malta as an outsourcing location because it offers high-end customer care and sophisticated services in an EU and Eurozone location.

A Journey to Quality

Malta’s emergence as an outsourcing location began in the call- and contact-centre market and was built upon some of the country’s most fundamental strengths: the fact that English is an official language, near-universal fluency in Italian and widespread knowledge of at least one other European language. Financial services companies were the first to take advantage of the development of the call-centre sector in Malta. One example was Malta’s 2006 success in edging out India in the bid to host HSBC’s global call centre for Englishlanguage calls.

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While a number of other international call centres were set up on the island, Malta soon recognised that the future lay in the provision of higher value-added services, and over a relatively short period the island’s outsourcing sector evolved.

The growth of Malta’s international business and finance centre has encouraged companies to offer their services as independent outsourcers. The island also proves fertile ground for shared services centres that are responsible for the handling of specific functions and supporting a group’s global operations in areas such as HR, finance and IT. The Right Location

The shift to higher-value services has greatly benefitted Malta. Many Maltese firms now offer socalled Knowledge Process Outsourcing (KPO) functions, in which more skilled professionals can assist in knowledge-based areas of work on behalf of finance, insurance or banking companies. While developing economies have struggled to acquire investments from client nations, Malta has continued to show signs of evolution and maturity. Today the sector employs thousands of people, and Malta is a top nearshoring centre for Europe. A large number of companies offer customer management, including sales, marketing and customer care, or enter-

Once known only as a call centre location, Malta is becoming a hotspot for the outsourcing of back- and middle-office functions and is finding its role in financial services, IT and software development.

Shared Services & Outsourcing

prise services such as HR, finance and accounting.

The key markets for Malta’s outsourcing firms are accounts based in the UK, France and Germany; though the next few years are expected to herald a period of worldwide interest in what the island has to offer. Research has revealed that the drivers motivating companies to outsource are changing fast: while cutting costs is still important, accessing new digital technology and improving the end-customer experience are becoming equally important.

Accounting & Administrative Services

The largest BPO providers in Malta today are the Swedish company Besedo (specialising in content moderation and media management) and Centrecom, an international call- and contact-centre. Boasting large numbers of accounting firms, including boutique practices and the ‘Big Four’, accountancy is the biggest outsourcing sector.

Companies are also offering foreign clients backoffice services, such as the processing and recording of invoices and sales transactions, accounts management and information reporting. In the area of shared services, Malta is differentiating itself from traditional outsourcing locations by viewing shared services as a high-performance business, and many entities are now expanding to deliver high-value services, including business analysis, risk management and decision support to their parent companies, in areas such as finance and accounting, IT, HR, customer service, procurement, payroll, real estate and marketing.

Delving Deeper

In recent years, Malta’s outsourcing industry has diversified, now delivering services in a wide range of sectors and industries, including transport, financial, and software services, as well as for investment, insurance and shipping firms. In the face of global competition, Maltese companies have focused on providing high-end analytical services as most organisations are today outsourcing not only business processes, but also knowledge ones, including market research and financial analysis.

In particular, its pool of professionals with degrees in finance, banking or insurance has made the island attractive for the outsourcing of activities that are analytical or skills-intensive.

With strong data protection legislation and riskmanagement frameworks, Malta is recognised as a safer location than other outsourcing destinations for the holding of customer information.

With the global outsourcing market expected to grow by 5 % annually and Malta’s status as a financial centre on the rise, the stage is set for the country to improve its already solid reputation as an outsourcing destination.

Competitive Skills & Costs

The island’s close cultural affinity with the UK and the rest of Europe, combined with its strong work ethic, give it a significant advantage across many sectors. While costs may be higher than in Asia, many European companies that outsource work to Malta comment that it offers better all-round value for money: the workforce is highly educated and wages are reasonable, and employee turnover is relatively low, resulting in reduced training costs and better quality of service. The island also boasts an excellent ICT infrastructure. The robustness of the IT and telecoms infrastructure, coupled with the good language skills of the Maltese workforce, as well as an attractive business and living environment, will further drive Malta’s outsourcing and shared services success.

Outsourcing 3.0

New opportunities for the outsourcing industry are emerging in tandem with the development of the economy. The outsourcing of R&D functions is a recent trend and, as this sector expands, Malta is seeking to attract large global players and independent niche firms to reassign particular roles to the island. Malta, too, is highlighting its ability to function as a test bed for new technologies and is developing sector-specific infrastructure in aviation, life sciences and IT in an effort to attract business. Outsourced services could range from the transcription of medical and patient information to data analysis or intellectual property searches.

Malta is also looking to focus on services related to social media, mobile technology and the wider creative industries.

In particular, the international finance centre is expected to create further growth for the industry, which could undertake routine or administrative tasks, such as filling in online data entry forms and processing insurance claims, or repetitive administrative work involved in fund administration.

For international companies looking at setting up shared services centres, Malta offers a gateway to the European Union and is equipped to provide both basic business support and best-of- breed services for knowledge-intensive functions.

Malta’s task for the future is to continue to increase efficiency and proficiency in order to compete with other European destinations and to create broader awareness of what Malta has to offer. As the outsourcing market matures, Malta will offer clients an attractive package: industry expertise and insight, analytics and innovation – at a competitive price. Any company looking at outsourcing mission-critical functions or projects that involve sensitive data can rest assured that they will receive service of the highest quality. n Country Report MALTA 2017 97

iGaming

iGaming

Global Domination As the gaming industry goes virtual, Malta’s global gaming ambitions become more of a reality.

Yggdrasil Gaming

M

alta is on the move and is going global in its ambitions. Long viewed as Europe’s iGaming capital, the island is increasingly the destination of choice for the world’s largest operators and a bridge to Europe for Asian and Latin American companies. The presence of some 250 plus iGaming companies is proving an irresistible draw for platform providers, game developers, payment services, support firms and start-ups, who are flocking to the island in droves to join Malta’s thriving iGaming ecosystem. This trend has not gone unnoticed by tech investors, venture capital firms, hedge funds and more recently global investment banks, who are competing to fill the funding needs of the industry as the pace of consolidation is accelerating and transforming the marketplace. Meanwhile, the Malta Gaming Authority (MGA) is also rising to the challenge of untangling the ever-growing web of regulatory, legislative and compliance challenges that iGaming companies have to deal with by rewriting the rulebook to provide a more business friendly environment.

98

Country Report MALTA 2017

iVision Pays Off

As the first EU country to license online gaming, Malta can now look back at almost two decades of uninterrupted growth in the iGaming sector.

Over this time Malta has gained possibly the best understanding of the environment iGaming companies need to flourish and be successful. The first online gaming businesses arrived on the island in the late 1990s, well before the online boom. Blazing a new trail, Malta, unlike many other countries that sought to protect their monopolies, allowed commercial operators to set up and enter the gaming market, with the first online betting businesses established under the Public Lotto Ordinance in 2000. The government quickly recognised the need for a dedicated regulatory framework, set up a regulatory authority for this young industry and released the Remote Gaming Regulations in 2004, just before Malta joined the European Union. This move gave licensees the added benefit of being located in and regulated by a jurisdiction

iGaming

iGaming companies can take full advantage of numerous benefits including: the continued strength of the ever-growing ecosystem; a Maltese Gaming Authority that embraces innovation; a general business ‘can-do’ attitude; the Maltese lifestyle coupled with great all round weather and excellent education and health systems. On the other hand, the industry needs to continue embracing innovation on all fronts while managing its corporate reputation, especially with key financial stakeholders.

Ivan Filletti Head of Operations & Business Development of GamingMalta

The industry is on a healthy growth trajectory. Malta is the place to be for any start-up, as well as fullyfledged and operational gaming set ups. We have the know-how, the experience and the necessary regulatory logic to supervise, monitor and service such set ups.

Joseph Cuschieri Executive Chairman of the Malta Gaming Authority

that forms part of the largest single market in the world. In spite of its modest size and numbers – the island is just over 316 square kilometres in area and is home to 435,000 people – Malta has emerged as a leading iGaming hub. The gaming industry contributes around 10% to Malta’s GDP and employs more than 6,000 people directly, with an additional 3,000 to 4,000 providing ancillary services such as web hosting, security auditing or legal work.

Industry Heavyweights and Start-ups Converge

Malta is now widely regarded as the most prestigious address for gaming operators. The list of new companies joining Malta’s thriving iGaming sector is growing by the year. Industry heavyweights, such as Betsson, Paddy Power Betfair, Interwetten, Unibet, bet-at-home and Tipico to name but a few, have long understood Malta’s unique advantages as a gaming jurisdiction. In more recent times, industry leaders such as Pinnacle Sports and bet365, as well as US fantasy sports giant DraftKings, have received licences from the MGA. In total, some 250 operators are now based in Malta holding 490 licences for online offerings such as casino-style games, lotteries or sportsbooks. With consolidation in the iGaming industry now moving at a faster and more discernable pace, much of which is being driven by Maltese licensed operators, the island is quietly becoming home to the largest and most powerful operators in the business. Over the past 10 years, many of Malta’s first arrivals have grown from small start-ups to global giants, who are now acquiring the innovative brands of their smaller, faster growing rivals. Freshly minted, having sold their companies, this next generation of gaming executives and founders are themselves funding promising start-ups whose market strategies, products and technologies have the potential to disrupt the global gaming scene. There is also a new army of start-ups emerging from the gaming giants, having cut their teeth working for the bigger companies. These start-ups are hoping to make a big splash, and some are already being looked to as acquisition targets by the more established outfits.

specific infrastructure have cemented the island’s position as the leading EU jurisdiction for iGaming operators. The presence of data centres, online payment processors, security auditors, gaming software developers, and platform providers contributes to a tailor-made environment that is conducive to growing a successful business. The island also boasts technical expertise to support critical operations in areas such as search engine optimisation and affiliate management companies, with experienced consultants always on hand. Equally, the island’s lawyers and accountants have a wealth of experience, thus ensuring that a vibrant and creative cluster of talent and know-how is in place to help companies manage their operations. This is unique in Europe and goes a long way towards explaining Malta’s identity as a gaming location.

Global Recognition

A recent survey ranked the iGaming sector as the most attractive sector for foreign direct investment in Malta. Service providers report that many companies are currently analysing the option of setting up in Malta as they finalise their contingency plans to deal with Brexit. The island has also emerged as one of the big winners of the global M&A frenzy as newly combined companies are injecting fresh capital on the island and hiring more people for their Malta offices. In addition, legal uncertainty in many European countries and a fragmented regulatory landscape have led to a surge in interest from both EU multi-licensed operators and non-EU companies that are looking at Europe as the next frontier for growth. The Maltese licence is the only licence in the EU that does not restrict the licensees to the particular jurisdiction of the licence, which gives iGaming companies the opportunity to exploit white and grey areas in the rest of the world.

On an international level, Malta’s service providers are regarded as being among the most competent and experienced experts in the iGaming sphere.

Many of them service licence applications in other countries than Malta and offer multi-jurisdictional support on a wide range of issues.

MGA Makeover

Gaming Ecosystem

The country’s main draw card is the ease of doing business and a very supportive regulatory environment. Malta’s gaming industry is incredibly international and diverse, attracting people from all corners of the world and offering companies the benefit of being physically close to a critical mass of gaming companies and network of professionals. A deep talent pool, strong business support services such as experienced gaming law firms, accountants, corporate service providers, and industry-

Excitement and anticipation are currently rising in the iGaming sector as a new regulatory framework is expected to come into force in the first quarter of 2018. The increasingly maturing industry demands smoother processes, as well as better regulation for new forms of gaming. This has encouraged the MGA to initiate a complete regulatory overhaul to streamline, consolidate and future-proof all gaming sectors under one legislative umbrella. The new Gaming Act promises to be as revolutionary and innovative as the Remote Gaming Regulations were Country Report MALTA 2017 99

iGaming

started to move positions out of Malta, mostly to Eastern Europe. Malta must produce more homegrown talent fit for employment in the sector to ensure companies do not need to fight tooth and nail for talent. As a short-term measure, upskilling initiatives are being put in place. A new gaming academy – the European Gaming Institute of Malta (EGIM) – seeks to provide training and development opportunities for non-experienced personnel wanting to join the gaming industry.

Banks Remain Cautious

in 2004. Eliminating unnecessary bureaucracy, simplifying pre- and post-licensing processes, and speeding up time to market for operators are some of the key changes to be envisioned. A new licensing framework has also been designed, which will introduce only two different licences: a Business-toBusiness and a Business-to-Consumer licence.

The MGA is also proving to be a dynamic, onthe-ball-player: a new skill games licence for fantasy sports operators was singled out as a top priority and introduced in January 2017, ahead of the new regulatory package. The hopes are high that this will lead to an explosion in demand in skill games comparable to what the industry experienced when online poker came to the fore in the early 2000s. By July 2017 the MGA had already handed out more than a dozen skill game licences.

The Best and the Brightest

Having attracted a large pool of talent, which has evolved over the years, Malta offers a strong skill base with a wide range of specialisations that companies can tap into. Yet for all the positives, Malta faces some challenges. There are signs of strain in the talent pool given that the industry often requires specialist knowledge that cannot be sourced locally. Demand for top talent outstrips supply, which inevitably creates an upward pressure on wages. iGaming companies have long turned to foreign labour markets to fill gaps in the local workforce. Today, two thirds of those employed in the sector are foreign expats. Efforts to attract the best and the brightest include a 15% tax cap on the salaries of highly qualified foreign professionals in the gaming sector, and a fast-track service for work permits of highly specialised third-country nationals employed in Malta, which was introduced in 2016. This was welcome news given that many companies have extended their search for talent beyond Europe’s borders.

However, more must be done to address the talent shortage. Due to difficulties finding the right people and fierce competition for the best graduates on the island, companies have already 100 Country Report MALTA 2017

The negative outlook of the international banking sector on gaming is currently presenting one of the biggest challenges to gaming companies in Malta.

There are only a handful of banks servicing the sector, however, in 2016 a new bank – Catella – moved into Malta with the intention of building up a portfolio of iGaming clients. Paradoxically, while the industry is experiencing difficulties with basic banking services, iGaming companies are coming into view of the global investment banks due to the sector’s increased funding needs to support their M&A activity. Many companies have grown significantly in size and scope, and iGaming has become a market far too big to be ignored. The same can be said about the future of cryptocurrencies. Convergence between digital currencies and mainstream financial products has the potential to transform the entire payments system in the coming years. While Malta is currently assessing whether or not to accept, and possibly regulate cryptocurrencies, many within the industry believe that Malta could reap multiple first-mover advantages by paving the way for digital currencies, crypto-banks and blockchain technology in general. These have moved on from their bitcoin past and are being seen as a key tool for information and business process sharing in a wide range of industries.

Innovation Drivers

The power of rapid scaling is a huge competitive advantage for companies setting up in Malta, which is positioning itself as a key innovation hub for the sector. The start-up and creative culture is being channelled into a vast array of products and services such as analytical tools, games development, fantasy sports and eSports. Meanwhile others are developing products in areas such as virtual and augmented reality, cloud platforms based on artificial intelligence, as well as new and innovative payment forms. Technology and service innovation go hand in hand, and the island is carving out a niche for services that are not on offer in other iGaming jurisdictions: Malta can be a disaster recovery site, a base for payment companies and

Our firm receives enquiries from operators based in several European countries, but also from other jurisdictions as far a field as the US, the Philippines and Australia. We have also experienced an increase in requests from operators in Gibraltar that are considering a back-up plan to hedge against the consequences of Brexit.

Andrew J. Zammit Managing Partner of GVZH Advocates

We welcome regulation, it is always easier to play a game when you know the rules. Regulation takes away the uncertainty that the referee would suddenly decide that you are not allowed to play any longer. The reason why all the iGaming companies are in Malta is that it allows us to enter European markets with the protection of EU legislation.

Jesper Kärrbrink CEO of Mr Green

The new legal framework must be dynamic and future-proof to allow for the use of cryptocurrency in the remote gaming sector. This is at the top of government’s agenda especially in view of our blockchain strategy, which will be implemented in the coming months. It is imperative that the gaming reform leads us to a new policy that encourages further innovation and development within the sector.

Whilst doing so, we have to make sure that Malta’s reputation as a gaming jurisdiction is strengthened further on an international level.

Silvio Schembri Parliamentary Secretary for Financial Services, Digital Economy and Innovation

iGaming

On the marketing side, it is not an issue to find local talent. But on the game development side, it is hard to find people with knowledge in areas such as 2D, 3D, concept art, and illustrations.

Fredrik Elmqvist CEO of Yggdrasil Gaming

It is refreshing to see that the Maltese government, which is responsible for regulating the sector in terms of Malta’s laws, followed advice put to it by the MGA on the regulation of skill-based games. What I mean by this is that when we looked at legislation in other markets across Europe, we found that nobody had considered our category at the time laws in those markets were being drafted, whereas Malta has crafted something that safeguards consumers, which is obviously critical.”

Jeffrey Haas Chief International Officer of DraftKings

back office activities. The competitive pressures of recent years have seen the customer service function become more important when it comes to player acquisition and retention. There is a strong case this trend will continue, and Malta is expected to benefit. Big data is also playing a key role in back office support, and Malta has the opportunity to become a leader in this fast-emerging field. With the right investment and a stronger focus on big data applications from an educational perspective, Malta could become a key hub for data scientists and analysts.

The Malta Package

When it comes to taxation of gaming companies, Malta’s approach is widely seen as to be within the acceptable range and can be as low as 0.5% on the gross amount of bets accepted for a sportsbook. In addition, tax is capped at €466,000 per year, whereas taxation under other licensing regimes makes it difficult for operators to generate profit. It is not only Malta’s gaming tax that is attracting operators; the island’s corporate tax regime is also doing its bit.

While companies are taxed at 35%, a refund system brings down the effective tax rate to around 5%.

Making Malta Great

Ultimately, the aim is to make Malta a centre of excellence for iGaming-related companies, where executive decisions are made that drive global gaming businesses and where start-ups and innovative ideas are nurtured. However, the sector’s fast expansion, in tandem with many other sectors that are experiencing similar growth rates; the influx of companies and capital, as well as an inflow of expat

workers, are also putting pressure on Malta’s infrastructure. To enable the iGaming sector to attract the best talent to the island, Malta urgently needs to address certain capacity constraints in terms of schooling and kindergarten facilities, which reduce the island’s competitiveness. iGaming professionals report that there had been cases in which foreign professionals had not taken up positions being offered because they could not find schooling for their children. Most iGaming companies choose to locate in Sliema and St. Julian’s, which thus have become popular residential areas for iGaming executives. The high demand has driven up rent for both offices and apartments. Investment in highquality office space in other localities, coupled with improvements in transport and road infrastructure, would enable the sector to grow out of its traditional hotspots and spread across the island.

Future Outlook

BtoBet

Malta is in the enviable position of being the author of its own destiny, but this defining moment will not last forever. The island saw strong growth on the back of its regulatory framework, which was revolutionary at that time and lured the sector’s strongest companies to the island. However, the future will be written by the level of regulatory, financial and technology innovation prevalent in Malta’s iGaming industry. The island’s success will also be built on its ability to constantly attract new entrepreneurs; Malta needs to accommodate global players while acting as a magnet for start-ups. However, to fit into the business plans of these companies, Malta needs to continuously make sure it has all the right elements in place: the availability of cross-sectorial talent, the depth and breadth of industry clusters, good air transport links and ICT infrastructure, as well as a reputation as a good place to live. Malta has the opportunity to be a truly global centre for the iGaming industry, similar to what New York, Hong Kong and London are to the finance industry.

The gaming industry in global terms is still in its infancy and expected to expand significantly in the coming years. Malta understands the current and future value of the iGaming industry and is truly embracing it to unleash the sect o r ’s full potential. n Country Report MALTA 2017 101

Film

Film

The Mini-Hollywood in the Med Movies shot in Malta move audiences around the world, and the island is looking forward to strengthen relationships between local and foreign filmmakers for both big and small screen productions.

M

alta renewed its position as a top Mediterranean film location after managing to draw a large volume of foreign films and series in the past two years. Crews from Hollywood and Bollywood as well as marketing agencies and production companies frequently visit the island.

Among the biggest productions that chose Malta in 2016 were Entebbe, a film based on the 1976 hijacking of an Air France plane, as well as the Netflix series Sense8, marking the first time that the powerful cable TV network filmed in Malta.

Attracted by the versatile location, the film servicing facilities and infrastructure, English-speaking film professionals and the fiscal incentives offered by the government, Malta has become many movie-makers’ first choice. To raise its profile even further, this Mediterranean Mini-Hollywood aims to develop top-notch studio infrastructure as well as fresh financial incentives. Malta is also keen to write itself more into the picture and is inviting script and screenwriters to develop Maltese

stories that have the potential to appeal to an international audience.

Nine Decades of Experience

Malta has a proven track record with 90 years of history as a film location. The first feature film shot on the island was Sons of the Seas in 1925.

To date, almost 150 films have been shot in Malta, either entirely or partially. Steven Spielberg, Ridley Scott and Ron Howard are just a few of the awardwinning directors who have chosen to film in Malta. The list of major box-office hits under the island’s belt is impressive and includes The Da Vinci Code, Troy, Gladiator, The Count of Monte Cristo, Munich, Popeye, Captain Philips, and many more. Campaigns for companies such as Bacardi, Range-Rover, Coca-Cola and Hugo Boss, as well as sequences for television series such as Game of Thrones and Netfix’ Sense8, have been realised on the island.

A Selection of Major Films Shot in Malta (by release date)

Government will continue to develop the film industry with investment in the facilities at the Malta Film Studios.

Konrad Mizzi Minister for Tourism

By the Sea

2015

The Promise

2016

The Cut

Assasin’s Creed

2014

2016

Munich

Eichmann

2005

2007

U-900

2008 102 Country Report MALTA 2017

The Da Vinci Code

2006

Film

Te MFC is back on the drawing board to sharpen its competitive edge and, in particular, to attract more TV productions.

Filmmakers can look forward to a new package of production incentives that is expected to be launched later this year.

Economic Benefit

2015 was a record-breaking year for the Maltese film industry, which generated over €100 million, up from €29 million in 2014 and just €5 million in 2013. Malta saw a somewhat quieter year in 2016, albeit still managing to attract a few names and productions of significant size. Aside from the direct revenue and investment in film crews and other services directly related to the shooting of films, film productions also handle considerable budgets which include ancillary services, such as hotel accommodation, transport and logistics, thereby delivering a remarkable multiplier effect on the Maltese economy. While Malta’s movie sector is still mainly focused on film servicing, the country’s long-term vision includes the creation of a vibrant film production industry that would encourage filmmakers to carry out post-production work in Malta. This could attract creative professionals from abroad and further leverage talent and expertise developed in Malta’s iGaming, ICT and media industries.

Productions and Releases

In 2016, Oscar-winning director Gabriele Salvatores shot scenes for his new film The Invisible Boy 2 in Malta, while British powerhouse Working Title Films partly filmed a movie recounting the drama surrounding the hijacking of an Air France plane that was forced to land at Entebbe Airport in Uganda. The most recent high-profile films shot in Malta that were released last year include the his-

torical drama The Promise, starring Christian Bale, Assassin’s Creed starring Michael Fassbender and Marion Cotillard, as well as 13 Hours – The Secret Soldiers of Benghazi with John Krasinski. Malta is also increasingly attracting producers of documentaries, short films and music videos from as faraway as Japan and India. 2016 also saw a number of television series filming in Malta, including British, German and American productions.

Production Incentives

The ability to double-up for multiple locations is one of the country’s greatest selling points. Over the years the island has been transformed into ancient Rome, Marseilles, Tel Aviv, North Africa and the South of France. Producers are further attracted by the island’s natural beauty and the diverse architecture of Malta’s towns and villages, castles, palazzos, towers and farmhouses. Mother Nature also plays her role; with 300 days of sunshine a year, directors can rest assured that filming will not be unexpectedly interrupted.

Filmmakers are given a warm welcome by the Malta Film Commission (MFC), which is responsible for the promotion and development of the industry. It offers assistance and guidance and is usually the first point of contact for any filmmaker considering Malta as a location. The MFC runs an incentive scheme, which offers a 25% rebate on costs for accommodation, transport and location hire. Film is also being seen as a great tool to promote Malta and Gozo across the globe, and productions that portray Malta in a cultural way

Captain Phillips

2013

World War Z

The Devil’s Double

2013

2011

Agora

2009

Gladiator

2000

Troy

2004

The League of Extraordinary Gentlemen

2003

The Count of Montekristo

2002

Country Report MALTA 2017 103

Film

can benefit from an additional 2% rebate. Screen tourism is a growing phenomenon worldwide, and Malta‘s film and tourism sectors have responded to this trend by offering dedicated tours that take visitors to the sites where movies were filmed.

The Malta Film Studios

In addition, Malta is home to the Malta Film Studios offering shallow water tanks that allow the shooting of water scenes in a controlled environment with an unlimited ocean backdrop. The island is currently sharpening its focus on developing further film infrastructure as it has been recognised that despite the appeal of Malta’s great outdoors, the lack of indoor facilities, could stunt the industry’s growth. The government is currently looking for a strategic partner to redevelop, renovate and operate the film studios, and world-renowned companies have expressed their interest in the project. There are plans for the building of one or two sound-stages to allow producers to work in a fully controlled environment so that filming can flourish 365 days a year.

From Malta to the World

The government has also been quick to acknowledge the potential of a growing local film industry.

Simshar, a fiction story inspired by a fishing boat tragedy in 2008, was Malta first home-grown, fulllength feature film for an international audience.

The film was released in 2014 and won several awards at international film festivals after being broadcast in theatres abroad. Limestone Cowboy, a Maltese production set to be released in 2017, is hoping to be equally successful. However, to fully develop Malta’s creative industry, original content that appeals to a larger market and has the potential to reach beyond Malta’s shores needs to be produced in higher frequency.

To fund the development of content with high production values, the Malta Film Commission has launched a film fund to broaden access to financing for low-budget filmmakers. The objective is to nurture and back the development and production of Maltese films and scripts, documentaries and high-quality international TV series, which in turn contribute towards building an indigenous film industry. Another initiative to nurture this segment was the launch of a Co-Production Equity Fund to encourage collaboration between Maltese and foreign companies. The MFC is also back on the drawing board to sharpen its competitive edge and, in particular, to attract more TV productions.

Filmmakers can look forward to a new package of production incentives that is expected to be launched later this year.

104 Country Report MALTA 2017

Film Crew and Production Support

Local and international production companies can call upon a wealth of local talent and an army of enthusiastic extras. Productions have already employed up to 2,000 extras in one day. The cost of an extra in Malta ranges between €60 and €75 per day, including food allowances. The MFC has invested over €1 million in the past two years towards training people for the industry to ensure the highest quality crews are available. The availability of English-speaking location scouts, camera operators, sound technicians and assistant directors helps greatly in attracting international productions to Malta. The island has also developed specialised film infrastructure that includes everything from the renting of trailers to costume-making and special effects, while producers can tap into expertise in 3D production and animation found in Malta’s highly developed games and digital media industry. Furthermore, Malta has retained a high level of craftsmanship when it comes to the construction of large sets. This skill, which has all but disappeared in many other Western countries, remains an important point of interest to creative decision-makers. Nonetheless, when there is more than one production filming in Malta, crews report difficulties finding sufficient resources. To futureproof the industry, the MFC is offering training to those who wish to work in film.

A Creative Hub

Malta is not the only country that aims to garner a larger share of the potential boon from expanding film production. Although competition among creative hubs is fierce, Malta believes it can continue to compete because of its strong combination of attractions. While cost tops the list these days when production companies select locations, Malta also sells itself as a convenient and increasingly creative location. The island is set to raise its profile as a production and post-production location for a wide variety of audio-visual and digital content, envisaging growth in services that range from film editing, visual effects and animation, to sound design and everything in between.

The envisaged re-development of the Malta Film Studios, including the construction of studio facilities that meet international standards, is seen as a game changer in this regard. An increasing appetite for domestic content should also help sustain growth in the industry. While international productions often grab the headlines, Malta’s local film industry is becoming an increasingly important economic contributor that will help the island to fully exploit its potential as a destination for movie making. n

Film is one of our fastest growing economic niches.

The cash rebates, the extraordinary filming locations, the climate, the English-speaking crews, and the skilled resources make Malta an attractive location.”

Engelbert Grech Film Commissioner

The island has also developed specialised film infrastructure that includes everything from the renting of trailers to costume-making and special effects, while producers can tap into expertise in 3D production and animation found in Malta’s highly developed games and digital media industry.

Media & Advertising

Media & Advertising

Content for a New Age While traditional media organisations are seeking out new strategies in order to thrive in the digital world, Malta is pitching itself as a hub for high-quality English-language content.

M

alta’s media industry is trying to turn a new page as it looks for growth by exporting the written word and media services around the globe.

The island has one of the most competitive media markets in Europe. A large number of local media organisations – often tied to political parties, the unions or the Church – are feeding a population hungry for content. Local media houses are now developing new revenue streams to sustain growth and profitability. Backed by a strong telecoms infrastructure and the English-language skills of the Maltese, the island is well positioned to emerge as a main production hub selling content internationally. Given current trends in content marketing, corporate blogging and social media, Malta’s media sector is eyeing exciting growth opportunities. In some ways, Malta is already succeeding as a content hub. Specialist content production houses for the iGaming sector have already moved into Malta, driving traffic and managing websites for 106 Country Report MALTA 2017

the large number of iGaming companies operating from the island.

Colonial and Cultural Heritage

No other sector reflects Malta’s colourful history and development as a cultural melting pot as much as the media one. While the island’s first newspaper was published in French during the French occupation, it was under the rule of the British, in 1839, that press freedom was introduced. The newspaper market took off in the 1920s and 1930s with the publication of Maltese and English-language newspapers.

The first radio stations were established in the 1930s to counteract fascist propaganda from Italian radio broadcasts. Italian television channels have been received since 1957, while the first Maltese television station was founded five years later. It remained the only TV station until the early 1990s when Malta opened up the broadcast sector to competition.

Media & Advertising

A Competitive Local Market

Today, the Maltese have the luxury of choice: 13 newspapers, 8 television stations and almost 50 radio stations, the majority of these being community stations, offer news and entertainment. For a population of some 425,000, this media density is impressive: there is a national TV and radio station for every 16 square kilometres and a daily or weekly newspaper for every 33,000 persons. In addition to newspapers, there are a number of locally owned magazines covering diverse topics such as the economy, fashion and style and cooking.

Franchises of international magazines have not been established in Malta. As a reflection of the country’s bilingualism, approximately half of the papers are published in English and half in Maltese.

TV and radio programmes are for the most part in Maltese. Ad agencies are small or medium-sized and mostly affiliated to international networks, servicing the marketing and communications needs of national and international clients in the country.

Many agencies also perform work such as design or concept development for other European affiliates which outsource specific tasks to the island due to its lower cost base.

The entire sector is estimated to employ around 3,500 people and accounts for some 1.4% of GDP. Print publications are an important vehicle for publicity for the island’s businesses. The economy mainly consists of small-to-medium-sized compa-

nies with insufficient budgets to afford TV commercials. The top advertisers in print and broadcast are the big telecoms companies, banks and insurance companies, as well as the leading retailers; however iGaming companies have also started venturing into TV campaigns either to attract customers or for CSR purposes.

Local News Leaders

Published by Allied Newspapers and with some 77,000 readers, The Times is the unchallenged market leader and the strongest newspaper financially. The bi-weekly MaltaToday of Media Today has made significant inroads into the market, and its Sunday edition reaches some 12,000 readers.

The Malta Independent also went through a major restructuring exercise, which has provided it with a larger reader-base and a stronger public influence.

The country’s English-language newspapers are commercial in nature, in contrast to the Malteselanguage papers which – with one exception – are owned by political parties, unions or the Church. A newcomer to Malta’s media scene is Lovin Malta, part of the Lovin Group that runs websites in five cities offering a mix of news and entertainment pieces.

Radio and TV stations are regulated by the Broadcasting Authority, and Malta is the only European country where regulations allow political parties to own television stations directly. Today the public television station Television Malta (TVM) operated by the Public Broadcasting Services (PBS) One TV of the Labour Party, and Net TV of Malta’s Nationalist Party dominate the audio-visual sector.

Private television stations have a market share of less than 5%. Because of its public-service obligation, TVM is funded by a government grant as well as by advertising and sponsorships. TVM’s news portal has also made major inroads over the past 12 months. Private-sector broadcasters derive their revenue exclusively from advertising and, in the case of One TV and Net TV, from sponsorship. The Church plays an important role in the radio sector, operating two stations, in addition to Churchoriented community radio stations. Telecoms companies Melita Cable and GO both offer digital TV relaying all the major UK and US channels and programmes. In early 2016, the arrival of Netflix on the island resulted in ripples of uncertainty; however after the initial furore, the market has now normalised.

Digital Trends

Although competition for readers and audiences is high, the market has remained relatively static in recent years, without any game-changing new entrants. Studies show that 49% of the population Country Report MALTA 2017 107

Media & Advertising

aged 12 years and over listen to radio at least once in a 30-day-period while an average of 62% follow at least one TV station in a month. Social media represents the fastest-growing media segment: almost 90% of the Maltese population are active Facebook users.

Local broadband penetration currently stands at 79% of all households, ranking 3% higher than the EU average. Broadcast outlets have companion websites and while until some years ago they used to consider digital as complementary rather than intrinsic to their business model, things have now started to change as more and more advertisers are resorting to using news portals. In May 2013, The Times became the first newspaper to experiment with paid specialised digital content. However, the paid content model is still relatively unpopular and possibly unsustainable for Malta.

language content hub. There is a need to introduce high-quality writing programmes and modules at the island’s educational institutions. On the other hand there is a certain level of anticipation around a recently launched Bachelor’s Degree in Journalism, which will be offered at the Malta College of Arts, Science and Technology (MCAST). Focusing the aspirations of Malta’s young towards the creative industries as early as possible and encouraging students to pursue qualifications in areas such as film, interactive media and television, Malta needs to make audio-visual production a viable and promising career choice. The island’s ability of attracting expats also means that marketing and communications companies can tap into a supply of native English-speakers from the UK and the US.

Growing Creatively

The future success of Malta’s extensive stable of publications will depend on their ability to adapt and innovate in the online and mobile spheres. Thus, the development of content for mobile-specific products is an area with significant potential given the exponential growth in smartphone penetration and the corresponding uptake in mobile internet usage worldwide. Nonetheless, because of Malta’s high media density, it is unlikely that all outlets will survive in the long term, with some consolidation inevitable. Like other developed markets, the sector must address how best to monetise new platforms and bolster audience bases. Past experience shows, however, that Malta’s young, tech-savvy population is fast in adapting to new technologies. With a rich talent pool and the island’s reputation as an international business and finance hub, there are many opportunities for Maltese media professionals to assist foreign companies in their media, public relations and marketing needs.

Advertising and marketing companies are also looking at ways to grow their market share in the field of content creation and are offering the production of corporate newsletters or content for websites and social media channels. With a lower cost base than media hubs such as London or Berlin, and with English-speaking professionals on hand, they believe Malta can act as the ideal outsourcing base for international companies.

Online lead generation companies operating mainly within the iGaming eco-system are a latest addition to the extended media landscape in Malta.

Catena Media, which is one of the more prominent examples of such outfits, can be described as the largest newsroom on the island with a staggering total of over 200 employees. There is also great potential for Malta to become known for other specialist areas of expertise, for instance in financial services. Malta has already built up a strong financial services workforce, and today’s financial services companies need partners who understand their products and know what it takes to deliver relevant content to their customers.

Developing Talent

This ambition is supported by the availability of first-class print media and production specialists, graphic designers and other professionals such as SEO specialists, social media managers, and video and audio production specialists. Several training institutions are constantly working to improve human capital in the industry. Analysts however speak of a crisis within the journalistic profession, as it seems that content-driven and investigative journalism are becoming ever so rare. Malta also still has work to do to establish itself as an English-

108 Country Report MALTA 2017

Profitable Innovation

Making Malta’s voice heard

Today’s corporate communication strategies demand that online, social and traditional media, and marketing channels are interlinked. This level of integration requires consultants, web developers, copywriters, graphic designers, videographers, photographers and content marketers working as a team to implement a media strategy. While Malta already boasts a relatively sophisticated talent pool in these areas, the island needs to raise the bar on quality if it wants to become a leader in the production of quality content for export. The reality needs to match the rhetoric. Promoting Malta’s advantages in the international content arena, and marketing their own capabilities, also need to be priorities for media companies seeking to win foreign contracts. n

With a lower cost base than media hubs such as London or Berlin, and with English-speaking professionals on hand, they believe Malta can act as the ideal outsourcing base for international companies.

Retail

Retail

From Bricks to Clicks and Back Again: Reinventing Retail in the Digital Age While Malta’s retailers are thus far losing out to their online rivals, the opportunities have never been greater for high street shops that improve the in-store experience and provide a personal service to their customers.

M

alta’s bricks-and-mortar stores are increasingly competing with global online retailers. The country has the second highest number of e-shoppers in the European Union when it comes to purchasing clothes. While the retail landscape has been transformed in recent years from one of family-run small shops with a limited product range into that of larger outlets satisfying the more sophisticated and cosmopolitan tastes of modern Malta, the sector is still underdeveloped compared with most Western European countries. This actually presents the largest threat and the biggest opportunity for Malta’s retailers. The emergence of a new breed of shoppers looking for deals on the internet 24/7 is forcing offline retailers to provide a greater in-store experience and better service to distinguish it from the transaction-type flair of eCommerce. However, without significant investment it will be difficult to battle the might of Amazon, eBay and Alibaba. Malta’s retailers also have an opportunity in positioning themselves as a partner for the global payments industry. Due to the island size, contactless infrastructure could easily be rolled out nationwide.

Swiftly Evolving

Malta’s retail sector has undergone a gradual metamorphosis of late. Not long ago, it was highly fragmented, with many family-owned small businesses and a limited number of importers, wholesalers and distributors. The absence of international brands prompted the Maltese to head off to Italy or the UK for shopping sprees. Malta’s entry into the EU in 2004 changed all this: the liberalisation of the market encouraged more foreign chains to set up shop, forcing local traders to rethink their distribution strategies. As part of this makeover, the ‘all-under-one-roof ’ concept has been gaining ground in combination with a substantial increase in retail square metres. Rising consumer expectations also mean that today many shops stay open all day instead of closing for lunch, as happens in most other Mediterranean countries.

Country Report MALTA 2017 109

Retail

Economic Importance

Malta’s retail sector accounts for more than 20% of gross value added and employs some 30,000 people. Most products are imported and distributed by a limited number of business families. This factor, combined with the small size of the market and the lack of economies of scale, means that shoppers generally face higher prices than consumers elsewhere in Europe. Despite these challenges, the retail market represents an attractive proposition, borne out by the fact that although Malta is a small country, it is a major tourist destination with over 1.8 million visitors per year. The retail sector is also regarded as important as it offers a convenient route into employment for school leavers, semiskilled personnel and women returning to work, as well as providing them with promotion opportunities.

Diverse Market

For a country that measures just 316 square kilometres, Malta boasts an array of shopping opportunities: street markets, fashion boutiques and shopping complexes. Most retailers are small companies, although some have several branches despite the small size of the island. The main shopping centres are the capital Valletta and Sliema, but tourist resorts such as St. Julian’s and inland towns including Birkirkara and Hamrun also host a number of outlets. There are only about 20 shopping malls in the country, with one of the longestestablished players being Sliema’s Plaza Centre.

‘The Point’ shopping mall, also in Sliema, is one of the newest.

In recent years, several European retailers have started collaborating with Maltese partners, and franchises of fashion and food stores have opened across the island. The country has attracted German discount supermarket chain LIDL, as well as UK retailers Marks & Spencer, Debenhams and very recently Matalan. Some local operators have invested in modern distribution facilities, working directly with European retailers, while others have contracts to represent brands in North African countries. However, demographics play a substantial role in the development of the sector. Because of the small size of the Maltese market, many global chains are reluctant to enter, among them popular brands such as Sweden’s fashion store H&M and furniture giant Ikea.

Footfall and Footprint

While the tradition of morning street markets is still alive in most localities, the retail sector has seen a vast expansion in modern shopping space in recent years. In general, large retail outlets owned 110 Country Report MALTA 2017

by local distributors do not exceed 3,000 square metres, while foreign retailers in some cases reach 5,000 square metres. ‘The Point’ in Sliema, opened in 2010, is Malta’s largest shopping complex with a total retail area of 14,000 square metres, hosting some 55 shops and located adjacent to a high-end apartment complex. The island has been successful with the construction of mixed-use developments, with retail facilities part of a broader offering that includes entertainment facilities, hotels and residential units.

Registering high occupancy levels, Sliema is the most popular retail and leisure centre. The town’s main shopping street, Bisazza Street, has been turned into a fully pedestrianised commercial zone. Shop owners in Valletta are benefiting from the buzz created by the city’s nomination as 2017 Capital of Culture, which has given the city a new lease of life. Regeneration efforts are attracting both locals and tourists for shopping and dining experiences. In addition to Sliema and Valletta, wellpositioned operators are finding other opportunities to develop or enhance assets. One example is the expansion of the retail zone at Malta’s airport.

Shopping complexes in secondary locations are also being established, hoping to attract customers with better parking and good public transport connections.

The Virtual Market

According to a Eurostat report, 51% of the total Maltese population shop online, with the highest share of 83% of e-buyers being within the 16-24 years age group followed by 79% e-buyers within the 25-34 years age group. Malta ranked as the second member state having the highest share of e-shoppers (72%) to purchase clothes online fol-

Retail

lowing the United Kingdom (74%). This also had a knock-on effect on Malta’s logistics sector.

DHL, for instance, says that the business to consumer segment accounts for 30% of imports in most European countries, while in Malta it now represents 75% due to a booming eCommerce market. Lower prices abroad do not seem to be the main attraction for e-shoppers, with many actually citing product selection, speed of delivery and delivery options as reasons for online shopping. Traditionally, the Maltese have used foreign eCommerce portals, but the local online shopping market is also growing. With a population already familiar with online shopping, local eCommerce websites are encouraging small-scale businesses and individuals to trade.

Not just a Product Showcase

51%

of the total Maltese population shop online

Retailers around the world are now combatting eCommerce by making their shops more fun and the experience more social. Retailers need to better engage customers by combining shopping with leisure and entertainment activities. Nike, for instance, has redesigned some of its stores to look more like a museum than a regular store. While those massive investments are usually out of reach for Maltese retailers, they can catch up with their online rivals by creating spaces where people want to spend their downtime. Today’s shops also need to incorporate the latest technologies, along with excellent customer services. For many, the answer is value-added services, and customers still crave a face-to-face interaction with a helpful, experienced member of staff. However, customer service is one of the issues that shoppers complain about most in Malta. Sales staffs frequently possess meagre qualifications or are students working part-time, all with little or no customer service training. However, more retailers seem to recognise that training and development of their staff can become critical components in improving a customer’s in-store experience. Most retailers are now offering formal training in sales techniques in an effort to increase service quality and to pave the way for a more customer-friendly environment.

The Luxury Opportunity

Some segments of the retail sector have better growth prospects than others. The industry believes that the market is close to saturation in the price-sensitive segment. However, increasing numbers of consumers are becoming more branddemanding, refined and service-conscious. While salaries in Malta are still lower than the EU average, Maltese consumers benefit from both competitive tax rates and social security contributions, giving them more purchasing power than other higher-

earning Europeans. In addition, rapid economic growth over the past decade and an influx of foreign firms, often with highly paid managers and executives, has resulted in a growing percentage of wealthy consumers. But possibilities for spending their wealth are limited. As this group continues to expand, the demand for international brands and luxury items will continue to rise. Any new entrant could take advantage of this gap in the market. In addition, the presence of a range of four- and fivestar hotels augurs well for any retailer bringing in the big brands and catering to high-end shoppers.

Partnering Up

Opportunities are also emerging in the retail ecosystem as a plethora of new payment options are currently being developed such as contactless, biometric, wearable and mobile phone payments.

However, these innovations are not propelled by customers demanding new ways to pay, but by technology companies creating new products.

Therefore, it is imperative that retailers explain and market the advantages of new payment options to their customers. Due to the small size of the market, payments companies can also use the island as a test case in bringing new payments methods to market and in encouraging customers to adopt these technologies. Retailers that upgrade to the latest point of sale (PoS) technologies can benefit from increased productivity and shorter queues at the cash desk. Opportunities for growth are also emerging in the logistics and warehousing sector. The island’s central location and the facilities at the Malta Freeport are making Malta an attractive retail gateway and distribution centre for the growing economies of North Africa and Europe.

Chinese retail giant Alibaba has already shown interest in Malta.

The Way to Go

Globally, there is also a trend of internet-native businesses creating physical stores, and this goes to prove that high street retailing is not dead. Local retailers agree that the potential for growth outweighs the current challenges. Malta’s affluent middle and upper classes are growing steadily, as is their appetite for international brands, shopping environments and products. As in most countries, there is a direct connection between the health of the economy, consumer confidence and retail spending. The retail sector benefits from low unemployment and moderate economic growth. This renders it a potentially lucrative one for investors, especially in niche markets. This augurs well for Malta’s retail landscape to continue developing in both size and sophistication for the foreseeable future, which will ultimately result in greater consumer choice. n Country Report MALTA 2017 111

Tourism

112 Country Report MALTA 2017

Tourism

Tourism

Setting Sights on Another Bumper Year Malta’s hospitality industry is on a growth course as the country draws a diverse crowd of travellers seeking out all manner of business and leisure opportunities.

G

ermany’s ‘Die Welt’ recently described Malta as ‘the island of culture’. Listed second in the newspaper’s top places to visit in 2017, Malta is becoming an increasingly popular tourist hotspot.

Moving beyond its traditional image as a sun and sea destination, Malta has successfully repositioned its tourism sector by offering a broader range of tourism products, including cultural tourism, English-language training and conference and incentive travel. A significant expansion of flight connections combined with efforts to develop Malta as a city-break destination and investment in allyear-round leisure facilities are complementing this strategy and have helped in attracting nearly two million tourists in 2016 – a record-high for the seventh consecutive year.

Initiatives to further brand Malta as a holistic destination will drive developments in the tourism sector in 2017 and beyond. The industry is upbeat on prospects for the sector in areas such as medical and sports tourism, while plans have been announced for the development of the first six-star establishments. A stronger focus on the promotion of Malta’s smaller sister island, Gozo, means the mix is getting even better. These initiatives will surely help the country to attract a diverse range of visitors – from backpackers and honeymooners to travellers seeking the most luxurious experience.

Building up an Industry

While tourism has grown into one of the country’s most sustainable economic generators, Malta first recognised the potential of a tourism industry in the 1960s. Following independence from the UK, the country was faced with the challenge of creating a new revenue source for an economy that long relied on servicing British military needs. Soon after the first investments in infrastructure had been made, tourism became the fastest-growing industry. As one of the first destinations to offer low-cost package holidays, the island attracted almost exclusively British visitors. Serious efforts to upgrade and diversify Malta’s tourism product began around the turn of the millennium as part of a long-term strategy to switch the focus from lower-priced summer package holidays to higher revenue year-round tourism. Low-end accommodation was subsequently converted into high-quality hotels, with new niche sectors introduced.

Country Report MALTA 2017 113

Tourism

In Figures

Tourism is still Malta’s most important single industry, both in terms of revenue and employment.

The sector employs around 20,000 people and accounts for some 25% of Malta’s GDP. Visitor figures started going through the roof some ten years ago, and the sector has enjoyed phenomenal growth in recent years – while in 2005 Malta recorded 808,000 tourist arrivals, in 2016 the island counted 1.99 million guests. Given the close relationship between Malta and Britain over the past 200 years, the UK is the island’s most important market, but Italy, Germany and France are also key markets.

Additionally, Malta has made significant progress in opening new markets. Visitors from the US and Asia are becoming increasingly more common these days. Tourism expenditure is also on the up, reaching €1.71 billion- 4.3% more than in 2015.

Per capita expenditure however decreased to €869 in 2016 from €918 in 2015.

Comprehensive Travel Destination

While Malta is said to have felt a small tourist spillover effect due to the unstable political and security situation in North African destinations, the higher arrival and expenditure figures mainly reflect the success that Malta has had in marketing its increasingly diversified product and expanding portfolio of attractions. Malta prides itself on being all things to all people. The island offers a plethora of cultural, leisure, sporting and lifestyle activities that are fast making it a leading destination for both leisure and business visitors. For visitors interested in sports, it offers practically any activity, from golf and tennis, to horse riding or hiking through Malta’s rural landscape. The seas around Malta and Gozo are clean and clear and offer an unlimited variety of water sports. Sailing, snorkelling and windsurfing are superb, and as a scuba diving location Malta ranks among the best in the world. Yachting and sailing holidays are also on offer.

Additionally, Malta has developed unique strengths in the special interest travel segment.

Meetings, Incentives, Conferences and Events (MICE) tourism has been on a steady growth path in recent years due to the many suitable facilities that are widely available. With some of Malta’s temples being over 7,000 years old and 365 churches – one for each day of the year – the island is equally tapping into the growing market for cultural and religious travel. Easter processions and Christmas festivities, as well as the traditional Maltese ‘festas’ complete with fireworks and band marches are a spectacular sight for foreigners to enjoy and participate in. The island is also becoming a popular wedding destination, with many couples opting for open-air ceremonies against 114 Country Report MALTA 2017

Growth in Tourist Arrivals

2010

1.3 million

2011

1.4 million

2012

1.4 million

2013

1.6 million

stunning backdrops. Another successful niche is English-language training, and Malta attracts on average 75,000 students per year. Furthermore, the island promotes itself as a destination for LGBT tourism (a special form of niche tourism marketed to gay, lesbian, bisexual and transgender people), who are mainly concerned with cultural and safety issues.

Expansion Course

The tourism sector relies to a large extent on small enterprises, especially in the restaurant and tour operator segment. Larger players are found in the hotel industry. In total, the island has an accommodation capacity of some 50,000 beds, but there are plans to build additional hotels in various locations, including the south of Malta, where bed stock is low. Malta’s move into the up-market segment has also encouraged the arrival of international hotel chains. Global brands such as Hilton, Intercontinental, Radisson and Kempinski all have a presence, operating as franchises with local partners. In the coming months, Le Méridien will be rebranding to Mariott Hotel and Spa following the acquisition of its parent company, Starwood Hotels & Resorts, by international chain Mariott. Further complimenting the accommodation offerings are a number of family-run Maltese and boutique hotels.

The most successful local company is the Corinthia Group. The first Corinthia Hotel was opened in Malta in 1962. Today, the group owns and operates a number of upmarket hotels and resorts in Europe and Africa. In 2015, the Corinthia Group also took over the Island Hotels Group, which previously operated two Radisson Blu hotels in Malta.

Malta’s hotels and restaurants expect the positive trends of the past to continue and are on an expansion course, with some hotels adding additional floor space and others undergoing refurbishments.

Although the average length of a tourist’s stay has

2014

1.7 million

2015

1.8 million

2016

1.99 million

It is essential for Malta to increase the number of tourism attractions.

More attractions would lead to tourists increasing the length of their stay. While family holidays remain central to the sector, there is significant private sector interest in investment in active holidays, sports holidays, diving and underwater activities, movie trails and LGBTI packages.

Konrad Mizzi Minister for Tourism

2017 promises to be another good year. We are proud to be the homeport of choice for P&O Oceana with Malta–to-Malta cruises, throughout seasons 2017 and 2018. It is primarily thanks to such initiatives that Malta’s cruise sector has been successfully evolving and growing from one which was exclusively a port-of-call, to one which includes home-porting.

Stephen Xuereb CEO of Valletta Cruise Port

Tourism

Investment in sports facilities is high on our agenda. This goes hand in hand with our ambition to position Malta as a sports tourism destination.

Malta’s great weather, particularly in the winter months, makes the island an ideal destination for training camps and competitive sports events of all sorts.

Clifton Grima Parliamentary Secretary for Youths, Sports and Voluntary Organisations

Whenever you would like to come to Malta, there is something going on. There are around 250 different events taking place every year, including the Malta Marathon, the carnival, the music festival ‘Isle of MTV’, and many Maltese cultural festivities that our foreign guests like to attend.

Paul Bugeja CEO of the Malta Tourism Authority

decreased in recent years and stood at 7.6 nights in 2016, this merely serves as a testament to Malta’s ability to reap benefits from travel trends in favour of shorter breaks. The best occupancy rates can be found in five and four-star hotels, the lowest rates these days are in guesthouses, two-star hotels and hostels.

Connecting Malta

It is not just Malta’s hotels that are seeking to expand. Malta’s only airport, Malta International Airport (MIA), has seen huge investments over the past decades. 2016 ended on an exceptional note for the airport, with a record 5 million passenger movements registered. The airport has just unveiled a €78 million investment, including a €28 million terminal expansion, which will ensure that the airport’s capacity adequately matches the increasing number of passengers. Growing demand has also lead to an increase in carriers seeking to serve the Maltese Islands. Currently, more than 35 airlines connect the Maltese Islands to 95 airports in 86 cities. Legacy carriers such as Air Malta, Lufthansa, Turkish Airlines, Emirates and British Airways, as well as various low-cost carriers such as RyanAir, EasyJet, Wizz Air and Vueling are among the airport’s main users.

Bon Voyage

The cruise tourism segment is showing itself to be increasingly capable of boosting Malta’s status as a must-visit destination. In 2016, more than 682,000 cruise passengers were recorded, representing a

rise of 2% compared to 2015. For 2017, the Valletta Cruise Port forecasts over 700,000 passenger movements and 330 port calls. Valletta Cruise Port has a long list of clients, including AIDA Cruises, Royal Caribbean Cruise Lines and MSC Crociere to name but a few. The port has also built up a strong relationship with TUI Cruises, which has made Malta its homeport for its Mediterranean cruises.

Further improvements to the quay infrastructure, as well as a proposed extension of the cruise port, are seen as critical for the continued growth of this segment. Expansion plans are also in the pipeline for Gozo, which seeks to develop amenities to facilitate cruise liners to include the island in their Central Mediterranean routes. While Gozo’s harbour currently does not offer berthing facilities for cruise ships, works are underway on a new buoy that would allow boutique cruise liners of the smaller and medium sizes to anchor off the island.

The construction of a dedicated cruise liner terminal is not being excluded for the future.

Government Vision

Due to the sector’s importance to Malta’s economic wellbeing, the government accords tourism a high priority. Tourism policy is drawn up by the Ministry of Tourism and the sector is overseen by the Malta Tourism Authority (MTA). The MTA remains focused on positioning Malta not only as a summer destination with fabulous weather, but also as an exciting year-round destination for events, entertainment, the arts, culture and sports.

In reducing the effects of seasonality, Malta’s tourism sector has already achieved some remarkable results. Last year was the first year that hotels have reported profits in the first quarter of the year, which has traditionally been a loss-making period.

While independent travel is growing in Malta, package deals remain important for the sector, in particular in the off-peak season when cheaper offers make Malta an attractive travel option. The MTA is also putting increased emphasis on ensuring that services of restaurants and hotels are up to standard. The authority is incentivising hotels to upgrade and is working to ensure that all establishments remain top quality.

Longer Term Goals

Malta’s tourism industry also has exciting plans for the future. A €220 million-investment in health infrastructure in the form of a public-private partnership is set to transform Malta into a major health tourism hub, with specialisations in oncology, aged care, rehabilitation and the treatment of trauma; adding much needed extra capacity for patients seeking high-quality medical care and health facilities. To unlock the sector’s full economic poCountry Report MALTA 2017 115

Tourism

tential, the first six-star developments are also on the drawing board. They promise to help Malta to truly break into the upmarket segment and attract a new class of high-spending tourists. In addition, Gozo strongly features as an attraction in the future of the sector, and Malta’s smaller island seeks to reinforce its traditional strength as a holiday hotspot by boosting tourist arrivals in the winter months.

Preserving the aura of an idyllic island in the Mediterranean, Gozo is embracing niche segments such as sports tourism, religious tourism and in particular ecotourism.

A Focus on HR

As in many sectors of Malta’s economy, investment in human resources must be given priority if growth is to be sustained. Traditionally many Maltese have chosen a career in the sector. They are often an integral part of hotel management teams in local and foreign-owned hotels, unlike the case in many other tourism destinations where a high percentage of staff, especially in management, is foreign. However, despite the availability of graduates from the Institute of Tourism Studies and the University of Malta, hotels and restaurants report problems with recruitment and retention of employees, with the younger generation often preferring to work in other sectors of the economy.

Employee turnover also tends to be high because of the need to hire students and other part-time staff during the summer months. Hence, initiatives to attract more people into the industry are high on

the agenda. While Malta’s tourism school will be given a new campus in Smart City Malta, the island is also entering into partnerships with reputable hospitality schools to bring first-class expertise and knowledge to the country.

Infrastructure Pressure

Despite all its strengths, Malta’s tourism sector also faces some challenges. If all hotels were to be fully booked all year round, Malta’s maximum annual capacity would be 2.8 million tourists, government officials point out. While this indicates room for growth, many in Malta say that this would require further investment as such an influx of tourists would put a strain on the island’s infrastructure, including its road network. Increased competition from neighbouring markets will also become an issue in the coming years. Many of Malta’s main competitors have seen visitor numbers decrease sharply as a result of the challenging political situation they are facing at the moment. However, all are keen to regain a foothold in the Mediterranean tourism market once the security situation improves. In addition, the Malta Hotels & Restaurants Association (MHRA), which is the main industry body, comments that operators are currently facing unfair competition from unlicensed private accommodation listed on websites such as Airbnb.

They argue that these accommodation providers should be fully licensed, where this is not the case, so as to present a level playing field and fair competition with the legacy hoteliers.

The Valletta 2018 Foundation is spearheading a number of infrastructure projects, which will be leading to further investment opportunities in the island’s cultural sector. The projects include the regeneration and conservation of a number of Valletta’s forgotten architectural gems. The covered market – is-Suq l-Antik – is an example of the sort. This will return to its original concept of selling and celebrating food, and will be open by the end of 2017.

Jason Micallef Chairman V18 Foundation

Malta’s main source markets 2016 (Rounded figures, excluding overnight cruise passengers)

Italy

France

315,200

United Kingdom

560,000 116 Country Report MALTA 2017

144,800

Germany

156,800

Nordic Countries

124,000

Spain

55,000

Netherlands

52,600

Tourism

I think it is important to modernise and upgrade the island’s infrastructure and the transport links to make it easier to move around Malta. This is our weakest spot at the moment, and the fact that tourist arrivals continue to increase just adds to the pressure. I think we have to be very conscious that guests share their experiences, and we definitely have to make progress in this regard.

Matthew Mullan General Manager of Hilton Malta

Valletta is currently undergoing a holistic regeneration programme.

V18, the European capital of culture project, is having a positive impact on the city, but it is just the beginning. It gives us an idea of what our cultural gem can truly become with the right investment.

In a few years’ time the city’s cultural offering will be even more exciting, and Valletta will be even more attractive as a place to live and work.

We would also like to see another city in Malta or Gozo become capital of culture in the future.

Mapping the Future

Capital of Culture

Malta’s tourism industry expects 2017 to be another record-breaking year. Growth is expected to increase from Turkey and Eastern Europe thanks in large part to increasing airline capacity. The cruise segment is also on course to increase the number of Malta-bound passengers. The task at hand for the island’s tourism industry is to encourage repeat visits from cruise travellers who only had ‘a taste’ of Malta as part of their Mediterranean itinerary. With an increasing selection of cultural, sporting and entertainment attractions, Malta has shown itself fully capable of drawing in large numbers of visitors. The island is also looking further afield to attract new customers in a bid to reduce its dependence on the European market and stave off competition from other Mediterranean players. Malta sees opportunities in America, India and China, however, the main problems to date have been issues with visas for travellers coming from Asia.

In addition, Valletta’s successful bid for the European Capital of Culture in 2018 means that it will enjoy significant investment in the run-up to that year. The government is committed towards the regeneration of the capital in terms of its cultural, social and economic life. To mark its status as European Capital of Culture, numerous projects, activities and events are inviting visitors to explore the island and its cultural gem, Valletta.

While Malta has put Valletta forward as the capital of culture, the organisers are committed to making the project a success for all of Malta, and the renovation of cultural heritage buildings in all parts of the island has become an investment niche worth exploring.

Investment Potential

Looking ahead, it will be crucial for the sector to identify and adapt to rising trends and capture the opportunities they bring, such as ecotourism and adventure tourism. Malta’s tourism sector offers a wealth of advantages to investors. Potential for investment ranges from medical, agri- and sportstourism initiatives, upscale entertainment facilities and gourmet restaurants to capital-intensive infrastructure projects such as the construction of a large-scale conference and exhibition centre.

Visitor Draw

To reach its target of more than two million tourists by the end of 2017, the country will continue to upgrade product Malta in terms of quality and standards. There is a strong focus on creating a cleaner Malta, which will benefit both tourists and locals alike. In many ways, Malta has already succeeded in future-proofing its strong tourism sector. Once a hidden gem in the Mediterranean, Malta is now the word on everybody’s lips. The tourism industry is confident that Malta’s appeal will remain strong, while new investment will help the island maintain its status as a must-visit destination in the Mediterranean. n

Deo Debattista Parliamentary Secretary for Consumer Protection and Valletta 2018

Belgium

41,800

Ireland

33,200

Switzerland

USA

40,500

Libya

26,500

Austria

24,300

3,400

Russia

16,400

Other

371,500 Country Report MALTA 2017 117

Valletta2018

Capitalising on Culture Malta combines its fascinating history with modern culture. This has earned Valletta the honour of becoming the 2018 European Capital of Culture. The country is committed to ensuring that its success continues, and investing in culture is currently one of the biggest opportunities.

It is not exaggerated to say that Valletta’s nomination as 2018 capital of culture has had a knock-on effect: the culture and entertainment sector is rising to new heights as tourists and locals have a growing appetite for a wider range of experiences. While a variety of strategies are currently being implemented to push arts and creativity to the forefront, the expansion of conference and entertainment venues on the Maltese Islands could further boost Malta’s attractiveness as a travel and residency location.

Events & Attractions

Steeped in History

New Appreciation

Cultural Upkeeping

For a long time, and not only since its nomination as a capital of culture, Valletta has been the epicentre of Malta’s culture scene. It offers a treasure trove of cultural and historical experiences. It is a UNESCO World Heritage site, which hosts the Manoel Theatre, the country’s oldest theatre, as well as Europe’s third oldest working theatre built back in 1732. Today the Manoel stages everything from contemporary plays to opera and attracts performers from all around the world.

Malta also proudly exhibits paintings by the famous artist Caravaggio who fled to Malta in the early 17th century escaping a murder charge in Rome. One of the most keenly awaited festivities on the island is the lively and colourful Carnival, which was introduced to the islands by Grand Master Piero de Ponte in 1535. In the musical sphere, Malta has even scored a notable export success: Tenor Joseph Calleja regularly performs in world-famous operas and concerts in Malta and abroad.

Triggered by Valletta’s nomination as Europe’s Capital of Culture for 2018, Malta’s entertainment and culture industry has seen a rise in funding. For the first time in history, the sector that contributes around 5% to Malta’s GDP has received 1.4% of the government’s budget. The total budgeted government expenditure on the cultural & creative sector for 2016 amounted to €52.5 million, a 39% increase when compared to the year before. The growing industry is already making its presence felt – by employing 10,000 people within the heritage, arts, media and interdisciplinary fields. While the industry is predominantly made up of micro and small enterprises, the sector also has an important multiplier effect on jobs in other industries, with tourism and construction being the most prominent examples.

Falling under the Ministry of Justice, Cultural and Local Government, the Arts Council Malta is the main national agency for the development and investment of the cultural and creative sector. The council is in charge of local festivals and Public Cultural Organisations working in the field. The historical sites around the islands are supported

by Heritage Malta which is the island’s national agency for museums, conservation practice and cultural heritage.

Heritage Malta is aided by voluntary non-government organisations Wirt Artna and Din L-Art Helwa, both in charge of the upkeep of the large amount of heritage sites in Malta. Additionally, Malta boasts a variety of artistic and craft traditions that are still very much alive nowadays, such as the production of lace and silver filigree jewellery.

The Malta Crafts Council was set up in support of crafts and craftsmen as well as entrepreneurs dealing with craft products.

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Keeping true to its Mediterranean nature, Valletta’s events calendar is always full with events and festivals including the Malta Jazz Festival, Carnival and the annual music festival Isle of MTV taking place outside Valletta’s city gate. Notte Bianca is another huge success which just saw its 11th edition.

The event brings Valletta’s colourful history to life for one evening with free admissions to all museums and heritage sites, as well as hundreds of different performances happening all around the city. Valletta’s nomination as 2018’s European City of Culture has also prompted the city’s regeneration process under the custody of Valletta 2018 Foundation. From star designer Renzo Piano’s creation of a new parliament, to the revamp of other cultural sites such as the old opera house and the renovation of an old Victorian Market site, Valletta is undergoing a steady transformation. Malta’s Fine Arts Museum will also be given the importance it deserves when, in 2018, it will be transferred to Auberge d’Italie, which previously housed the tourism ministry.

Moreover, local feasts are also becoming big attractions, with processions and rituals dating back centuries, as well as the traditional use of fireworks. In fact, Malta’s love for fireworks brought forward the birth of the Malta International Fireworks Festival which has been running since 2010.

Many interesting concepts are also being imported to the island. One such example that was introduced to the island in the summer of 2016 is “Dinner

in the Sky” – a table suspended under a crane – offering a novel dining experience with breathtaking views.

The Next Level Culture lovers also have much to look forward to. Plans have been announced for the regeneration of Malta’s craft village in Ta Qali, while an exhibition of Pablo Picasso’s work will be exhibited at the Grandmaster’s Palace in Valletta in 2018. However, more could be done to expand the cultural offering.

Further importance could be given to the development of an arts-oriented incubator, as well as the promotion of intellectual property rights.

There is also potential when it comes to preservation projects of Malta’s many historical sites, whose upkeep has traditionally been a challenge for the government due to the sheer volume. Last but not least, investment in a large-scale venue, which could be converted for any type of event when the need arises, including sport competitions, conferences and concerts could be a game changer. Such a facility would allow Malta to attract and offer a variety of high-profile events 365 days of the year.

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Health

Health

Malta Cracks the Healthcare Problem

Operation transformation has seen Malta join forces with some of the world’s most respected healthcare providers to deliver world-class treatments with cutting-edge technologies in new state-of-the-art hospitals.

M

alta is shaking up its healthcare sector and has invited the private sector to play a greater role.

Long wait-lists for non-emergency surgeries and a shortage of hospital beds, coupled with a commitment to provide free health services, have prompted the Maltese government to make healthcare reform a priority. The turnaround is gathering pace as three hospitals have been privatised as part of a deal with Vitals Global Healthcare (VGH). In return for a 30 year concession, VGH has to inject €200 million in a total revamp of the three hospitals.

Together with their partners, Barts and The London School of Medicine from the UK and

Partners Healthcare International from the US, VGH is transforming the nation’s healthcare sector into a medical education and health tourism hub with specialisations in oncology, aged care, rehabilitation and the treatment of trauma, while adding much needed extra capacity for patients seeking high-quality medical care and health facilities.

The plan also incorporates a new medical school and teaching hospital capable of hosting 300 students, in addition to a nursing training college. All of these facilities will complement Malta’s current national health system, which has already recorded important efficiency gains in recent months.

One of the problems for any health minister is, of course, sustainability.

Our health system is free, and we want to keep its standard of excellence.

We are determined to keep it both free and excellent. The investment we are seeing in our health system by Government, VGH and Barts amongst others, consolidates this aim and further establishes Malta’s credentials as a centre for medical tourism. An exciting development is that Malta will be the first country worldwide to introduce wide ranging remote patient monitoring, which in our trials reduced hospital admissions by 40%.

Mr Chris Fearne Minister for Health & Deputy Prime Minister

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Health

The quality of Malta’s medical profession is a key asset in shaping the country as a health tourism destination.

A Health Vocation

Malta has a medical tradition that can be traced back to the Knights of St John when the country’s hospital gained fame across Europe for the quality of its care. During the First World War the island affectionately earned the name ‘Nurse of the Mediterranean’ when allied soldiers were evacuated to Malta for treatment and rehabilitation. At its peek, Malta had 25,000 beds filled with service men being treated at the island’s 27 hospitals, a role that was repeated in 2011 when evacuees from Libya received treatment in Malta.

Naturally, the island’s health sector primarily serves the local population. State-funded healthcare is available free to all citizens and long-term residents. Over the past few years, the level of public expenditure in the sector has amounted to around 6.5% of GDP, which is on a par with the EU member states’ average. Nevertheless, private healthcare has long been co-existing with the state system in the form of private doctors, clinics and even hospitals. However, it was only recently that Malta decided to encourage greater private sector participation and to build on the island’s centuryold role as a medical centre in the Mediterranean, which can cater both for local and international demands.

For medical tourism to really take off in Malta, we need not only several well-equipped hospitals, but also a greater level of specialisation that would attract foreign patients from abroad. At this stage, we can only achieve this by attracting specialist doctors, and we need incentives to encourage them to come to Malta.

Dr Josie Muscat Chairman of the St James Hospital Group

Thinking Outside the Box

The government has overall responsibility for the healthcare system, exercised through the Ministry of Health. The Ministry, like many of its European counterparts, has been facing the challenge of finding ways to keep health costs in check. With increasing demands, an ageing population and rising expectations, Malta has sought to find innovative ways to bolster the capacity of the health service and future-proof the country’s needs; while at the same time internationalising the sector to tap into the ever-growing market of patients seeking treatment outside their home countries.

To do this, the island’s political leaders have recognised that Malta would need to seek private

sector investment to construct new hospitals and attract globally renowned health providers with the experience and expertise to redesign and totally overhaul the country’s healthcare offerings.

With an extensive list of demands, Malta invited the private sector to play its part in delivering its vision of providing the best high-quality healthcare system in Europe. Following a full evaluation, Vitals Global Healthcare was chosen as the preferred bidder to deliver on the government’s vision for the sector. Their investment is currently altering Malta’s healthcare infrastructure.

High-Calibre Institutions

Vitals Global Healthcare is backed by a Singapore private equity fund and managed by the Oxley Group who has a strong track record in healthcare infrastructure investments. They were joined

by Partners HealthCare International who focus on the development of clinical quality and patient safety standards, benchmarks and systems, and the development of structures and systems for postgraduate medical education. Partners HealthCare is one of the leading integrated academic health care systems in the US and was founded in 1994 by Brigham and Women’s Hospital and Massachusetts General Hospital, the two oldest and largest teaching hospitals of Harvard Medical School. Partners’ five top hospitals are consistently ranked in the top 10 list of Best Hospitals.

Barts School of Medicine and Dentistry, a preeminent medical school located in the United Kingdom, will open its first offshore campus in Malta. One of the leading medical schools in the UK, Barts and The London School of Medicine and Dentistry bring together two venerable teaching institutions: St Bartholomew’s Hospital, which dates back to 1123, and The London Hospital Medical College, which was the first medical school in England and Wales, founded in 1785. Malta’s new vocation as a medical teaching hub has also attracted the Royal College of Surgeons of Ireland, which recently made Malta a centre for examinations for surgeons.

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Public-Private Care

A New Landscape

Malta’s primary hospital Mater Dei, which has 25 operating theatres and some 900 beds, will continue to be operated by the Maltese government. It also runs the new 113-bed Sir Anthony Mamo Oncology centre adjacent to Mater Dei Hospital, which was inaugurated in 2015 and saw the migration of services from Boffa Hospital in Floriana. Acknowledging the fact that some specialist services cannot be provided due to the country’s small size, the government sponsors trips for treatment abroad. In addition, the government runs some 40 clinics and nine health centres offering the full range of preventive, curative and rehabilitative services. Primary care is also available from private general practitioners (GPs).

Several private clinics and hospitals, the most renowned being the St James Hospital Group, complement Malta’s healthcare infrastructure. The Group owns and runs an 80-bed hospital in Sliema, a 6-bed clinic in Zabbar, and an outpatient clinic in Burmarrad and Zebbug, as well as a new eye clinic in Birkirkara. The Group also operates one hospital in Libya and another in Hungary. In addition, a privately run boutique hospital with 40 beds, the St Thomas Hospital, was opened in Qormi in 2016 with the intention to attract medical tourists.

However, the hospital has signed an agreement with the government to perform around 200 operations per year for the national health service to reduce the waiting list.

However, the most significant infrastructural project is being undertaken by VGH. The Group is currently building a state-of-the-art acute hospital on Malta’s sister island Gozo with 150 private beds for medical tourists and 125 beds contracted to Malta’s national health service. This means Maltese patients do not need to pay for treatment. Malta’s target is that once the first phase of the project is completed it would start attracting 5,000 medical tourists a year.

The Gozo hospital will have an additional 175 beds for long-term care to be used by the public health service for rehabilitation, geriatric and psychiatric services. Vitals is also building the medical school and campus to be used by Barts, which will receive the first students by September 2017.

In Malta, St Luke’s Hospital, which was Malta’s general hospital before the opening of a new hospital in 2007, is being refurbished and will have 220 private beds and specialise in orthopaedics, cardiovascular diseases and prosthetics. It will also include an 80-bed rehabilitation centre for use by the public health service. In addition, Malta’s Karin Grech Hospital, which had been used as a rehabilitation centre, is being transformed into a 320-bed geriatric public hospital. The new hospitals are expected to be ready for inauguration in 2018.

The government will be paying VGH some €55 million annually for medical services to the national health services. While this is said to be equivalent

One of our priorities is to cut the waiting list for residential homes for the elderly. While Government is operating a number of care homes, the elderly care sector has recently seen the entrance of new private investors, and we are looking at further strengthening our cooperation with the private sector to provide long-term bed space.

Michael Falzon Minister for the Family, Children’s Rights and Social Solidarity

Our main objective is to help deliver the highest standards of healthcare to Maltese citizens.

It is our goal to deliver the excellent, comprehensive services that will result in a better experience for patients, staff, family and friends.

To that end, we are confident in the experience and expertise that Partners HealthCare International brings to this important project, and look forward to working together.”

Armin Ernst CEO of Vitals Global Healthcare

Vitals’ primary focus is on health transformation and population health to improve the quality of care and not just running hospitals.

Ram Tumuluri President & Director of Vitals Global Healthcare

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Health

At Partners HealthCare International we continue to be approached by healthcare organisations and academic institutions around the world that possess greater expectations for quality healthcare. We will mobilise the vast expertise that is available across Partners HealthCare to address this transformative project. To work with Barts and Vitals Global Healthcare in this collaboration brings unique partners to healthcare innovation.

Gilbert H. Mudge, M.D. President and CEO of Partners HealthCare International

The collaboration with the Government of Malta is even more exciting because not only will we be doing this in the newly expanded state-of-the-art clinical facilities, but we will also be working with an academic partner of the standing of Partners HealthCare International.

Prof. Anthony Warrens Dean for Education of Barts & The London School of Medicine

Malta offers high quality care and we are encouraging further investment into this sector to meet the needs of our own ageing population and the increasing number of expat retirees who are choosing to live here. We believe the sector could be an important contributor to the Maltese economy.

The aged care industry provides a lot of opportunity for companies to deliver new care homes, develop new products, services and applications.

Anthony Agius Decelis Parliamentary Secretary for Persons with Disability and Active Ageing

to the sum that the government currently forks out for the running of the three hospitals, the expectation is that the quality of treatment and medical care will be higher.

Better Health Services

Waiting times in Malta’s main public hospital have already been reduced as a result of higher number of specialists in attendance as well as the government’s decision to buy services from the private sector. Maltese health outcomes have also seen improvement as a result of better quality care. Life expectancy climbed to 82 years in Malta in 2015, placing Malta among the top 20 highest life expectancy countries in the world.

The country has also been seeking to keep pace with the latest healthcare developments. For example, the new oncology centre has made possible newer diagnostic and treatment modalities for cancer patients. Healthcare services have also been extended, and a number of preventivetreatment programmes have been introduced, including free breast-cancer and cervical cancer screening. The government will now shift its focus on the provision of more modern drugs for the treatment of cancer.

Despite all the positive developments and a concerted effort to create sustainable healthcare, the sector still faces some challenges. While the new public-private partnership with VGH promises to provide Malta’s health sector with additional beds and medical professionals, the lack of a strong primary care system is widely seen as a key reason for capacity constraints at Malta’s main hospital, as it has made the hospital the first port-of-call for the Maltese, even when suffering only minor discomforts. More and better-equipped primary healthcare centres, including a regional clinic in Paola that can cater for 25,000 people, are now being introduced to strengthen the gatekeeper function of family doctors. Lifestyle screening, and in particular tackling issues such as childhood obesity, is also high on government’s health agenda. Additionally, the government is trialling a model that sees family doctors providing follow-up care for a number of chronic conditions, such as breast cancer and mental health issues.

Forging New Partnerships

Malta is seeking further private capital to supplement the public sector investment. Industry associations forecast that by 2050 the island will need no fewer than 18,000 more beds for the elderly. Such a figure indicates that there is ample scope for more private healthcare providers to enter the market.

The country is inviting international and local stakeholders from the public and private sectors

to discuss future healthcare solutions in the area of eHealth, medical technologies and other tools that can support healthcare workers. The island is also hoping to attract the UK-based European Medicines Agency (EMA) to Malta should the institution decide to relocate as a result of the Brexit vote. The Agency is responsible for the scientific evaluation, supervision and safety monitoring of medicines developed by pharmaceutical companies for use in the EU. Attracting Foreign Specialists

The quality of Malta’s medical profession is a key asset in shaping the country as a health tourism destination. Many medical practitioners have trained in the UK and the US. Traditionally, Malta has experienced a high outflow of qualified doctors, with many newly graduated doctors deciding to continue their studies abroad, but in an effort to attract and retain highly qualified medical professionals, the country has signed cooperation agreements with institutes abroad, allowing young doctors to specialise in Malta. This process has helped to reduce the exodus of medical graduates. As an English-speaking nation, Malta is also increasingly attracting foreign doctors, and Malta’s health ministry is keen to facilitate matters in particular for non-EEA medical professionals to work and live in Malta.

Looking Ahead

Malta’s vision for the future includes a fast and efficient healthcare sector. The public-private partnership between the government, VGH, Barts and Partners is expected to translate into better amenities and quality of service for the Maltese population while accomplishing a giant step forward into developing Malta and Gozo into a reputable health-tourism hub. There is widespread agreement that medical tourism will increase in importance worldwide in the coming years. One study estimates that the global medical tourism market will reach US$32.5 billion by the end of 2019. This bodes well for Malta’s ambition of becoming a centre of medical excellence. The experience and reputation of the international partners involved in this new set-up will also bring along an assurance of quality care and avant-garde methodology and equipment, and will help Malta’s health cluster grow and prosper. However, it remains to be seen how long the government can afford to subsidise the service and provide healthcare services free of charge. This may prove to be a particularly challenging undertaking in the long term, in view of an ageing population. Other sources of funding, such as national or private health insurance, may need to be explored. n Country Report MALTA 2017 123

Education

Education

Lessons to Learn While public attention is focused on translating new concepts into Maltese schools, the island is increasingly capturing a share of the global higher education market and is looking to establish a foothold in the online education sector.

E

ducation is rising up the ranks as one of Malta’s most important service exports. The island has become a top English-language teaching destination. Foreign educational entities are moving into Malta in ever-increasing numbers, establishing international campuses on the island in an effort to attract globally mobile students seeking education abroad. Malta’s English-speaking environment, its EU membership and multiple options for higher education, coupled with safety and high quality of life, are making it an attractive study destination.

Meanwhile, the island is also positioning itself in the booming e-learning industry by inviting global 124 Country Report MALTA 2017

online education providers to set up on the island, tapping into a market estimated to have reached US$51.5 billion in revenues by 2016, with a pool of over 2 billion potential learners.

Despite advances in the international educational sector, many people claim that other parts of Malta’s educational system are long overdue for reform. The island is looking to Finland as a model to emulate, where students consistently outperform the rest of the world in maths, science and reading grades. An emphasis on modern teaching methods and the selection of high-quality teachers are seen as crucial in ensuring Malta’s young have the think-

We believe that Malta’s tertiary education sector can become as internationally acclaimed as the island’s English as a foreign language market.

However, we will not lower standards to accommodate inferior institutions. At the same time, we are seeking to address the skills deficit by forecasting what skills will be needed in a few years’ time to ensure that our economic growth is not hampered by the lack of skilled persons.

Evarist Bartolo Minister for Education and Employment

Education

ing, creative and entrepreneurial skills required in today’s globalised world. The other challenge for the sector is to address the heightening skill shortage, with many companies reporting difficulties filling positions due to a lack of specialised talent.

Malta should aim to better adapt its educational systems to business needs in order to help locals qualify for the high-skill, high-paying jobs that the island’s economy is creating. Importing talent at the current level does not seem to be a sustainable model for the long term.

Foreign Influence

With the island’s history stretching back thousands of years, Malta’s educational system has been influenced from many directions. The University of Malta can trace its origins back to 1592 when it was set up as a Jesuit College under the name Collegium Melitense. After the expulsion of the Jesuits from the Maltese Islands, the University itself was founded by the Knights of St John in 1769. It is the oldest university in the Commonwealth outside the United Kingdom. Today it offers a broad range of degree courses across all disciplines, at bachelor, master and doctorate levels.

Under the control of the Knights, Malta’s education was the preserve of the wealthy elite.

Schooling only became universally available at the primary level with the arrival of the French in 1789 and was made compulsory in 1946. In the 19th century, schools were changed to the British model, thus English was introduced as the language of instruction and still remains so today. Children are taught mainly in English; only in the early years is the Maltese language used.

Government Priority

Public spending on education amounts to around 5.5% of GDP, which is slightly higher than the EU average of 5.2%. Parents can send their children to state, church or private schools. The entire sector accounts for some 14,000 full-time jobs. Church schools are either for boys or for girls, while state and most private schools are co-educational. The minimum curriculum to be followed in all schools is established by the government, with the Ministry of Education and Employment overseeing the sector.

In the primary and secondary sector, parents are offered a wide choice of educational options for their children. State school education is free of charge, financed by tax revenues. There are around 55 church schools for which parents make a donation. With some 20 institutions, private schools form part of the smallest, yet most vibrant sectors of the educational field. Leading schools are San Andrea School, San Anton School, Chiswick

House School and St Martin’s College. Having adopted an international curriculum, Verdala International School serves mainly, but not exclusively, the island’s expatriate community. Although all private schools are funded by tuition fees, some of them operate as non-profit-making organisations. Half of Malta’s children attend either private or church schools. Due to population growth, there is a demand for more schools, in particular independent institutions, and most private schools have children on waiting lists.

Further and higher education is provided by the University of Malta, the Malta College of Arts, Science and Technology (MCAST), the Institute of Tourism Studies (ITS) and a number of smaller non-state educational institutes providing training in such areas as IT, management or marketing.

They have been joined by foreign institutes setting up in Malta such as Middlesex University and Global College Malta which offer different degrees delivered by UK universities in key sectors such as oil and gas, IT and management.

Another segment, the English-language teaching sector, consists of some 40 schools, including many locally founded ones, such as AM Language Studio and Easy School of Languages, as well as international players that include Education First (EF). The Maltese-owned English Language Centre school (EC) has reached one of the biggest achievements. Founded in 1991 on the island, EC now also runs successful schools in the US, Canada, the UK and South Africa.

A New Push to Nurture Talent

In the past years, Malta’s government has rolled out a programme of free childcare for working parents, which has led to a rapid rise in day care centres and women entering the job market. The government has also committed to improving educational standards and results. A move from an exam-oriented curriculum to one that gives more emphasis on critical thinking, analytical and communication skills, creativity and problem solving is one of 26 recommendations included in a recent report on the future of post-secondary education in Malta.

Encouraging progress is being made in achieving Malta’s ambition to become a regional hub for higher education. Malta has long been a magnet for English-language students, welcoming some 80,000 students annually, and the country has now successfully widened the net by attracting Jordanian group Sadeen, which is setting up the American University of Malta. The university will focus on business, information, architecture, engineering, as well as arts and sciences and is expected to welcome its first students in the autumn of 2017. In addition, on Gozo, Malta’s sister island, a UK medical school, Barts School of Medicine and Country Report MALTA 2017 125

Education

Dentistry, will open its first offshore campus later this year. Some 200 doctors have already expressed interest in lecturing at the new medical school at the Gozo Hospital, which is run by Vitals Global Healthcare. Malta’s commitment to establish itself as a hub for medical training and education has also attracted the Royal College of Surgeons of Ireland, which recently made Malta a centre for examinations for surgeons.

The opening of additional foreign institutes and international branch campuses are part of the long-term strategy for the sector. A national body has recently been established in Malta to promote the internationalisation of education and entice foreign institutions to set up a presence in the country. Education Malta is a non-profit foundation created as a public private partnership, working closely with the Ministry of Education and Employment, and the Malta Chamber of Commerce, Enterprise and Industry.

A Move to International Qualifications

Educational levels in Malta have been significantly enhanced in recent years, and the number of university students has risen from just 7,300 in 2007 to 11,500 today. More than 3,000 students graduate annually. A number of international masters programmes are being offered on a dual-degree basis, with each degree accredited by the University of Malta and at least one other American or European university. Efforts to internationalise courses and programmes have also attracted more than 1,000 foreign students from 92 different countries. This figure is expected to rise in the coming years with the opening of the new academic institutions.

The vocational college, MCAST, is one of the island’s success stories. Some 6,500 students are enrolled in one of the school’s 120 full-time and 300 part-time courses. Many programmes were developed in response to the needs of specific industries.

One such example is the introduction of courses for aviation technicians following the arrival of Lufthansa Technik in 2003. Among MCAST’s more recent additions to its course list is a nursing degree course in collaboration with Vitals Global Healthcare and Northumbria University. Malta is also reporting increased interest from UK universities who are looking into the possibility of opening satellite campuses on the island in order to continue receiving EU research funding after Brexit.

Learning Differently

Despite its past and present efforts, Malta today faces a number of HR and education related challenges. More than 20% of students in Malta decide to end their education at age 16 with just five or fewer ‘O’ Levels – this percentage is double that of 126 Country Report MALTA 2017

the early school leaving average across the rest of Europe. These high rates of early school leavers and exam failures have long made Malta’s educational system the subject of discussion. Many industry professionals are seeking a shift from an emphasis on factual academic knowledge to an approach focused on developing thinking and problem-solving skills. Schools – secondary schools in particular – also need to do more to incorporate vocational education into their curricula.

Parents are also requesting alternatives to the traditional conservative transmission model, which sees the teacher at the front of the class imparting knowledge, while students absorb and consume the information passively. Instead they repeatedly point to Finland, where children have little homework yet always score near the top in international rankings. Possible alternative concepts for the future that have been suggested include the introduction of a non-prescriptive national curriculum that can be modified by teachers in order to better suit the learning needs of their students, as well as the end of standardised testing methods. In addition to Finland, other high-performing countries such as Japan, Shanghai and Hong Kong, have been placing an emphasis on teacher education and teaching quality in relation to student success.

These countries have found that when they raised the standards and salaries for new teachers, they increased the status of the profession and attracted the best and the brightest.

Experts argue that in particular the high rate of early school leavers in Malta is unsustainable and that more people need to be equipped with skills that matter to Malta’s economy today and in the future. Companies are already confronted with a skills shortage in certain sectors such as financial services and the creative industries. Malta’s desire to attract investment from companies in information and communications technology, high-end manufacturing and life sciences means that there

We are currently analysing requests from even more foreign universities wanting to set up a presence in Malta. We are positive that a number of these opportunities will come to fruition.

We are also looking to re-enforce our offering at a primary school and college level in order to respond to demand driven by third-country nationals relocating to Malta for work, with their children.

Charles Zammit Chairman Education Malta

We work closely with different industry players, including Malta Enterprise, which helps us operate our Aviation Training Centre. In the field of gaming we have teamed up with the industry to launch a top-up course focusing on mobile apps and games. For the pharmaceutical industry, we launched a unit in our applied science course being taught entirely at the workplace.

Stephen Cachia Principal and CEO of MCAST

Education

Malta’s economy has transformed itself over the last two decades. Most of today’s top jobs did not exist a short while ago, hence the need for workers to boost their knowledge is becoming all the more important in today’s fast paced world.

Marvin Cuschieri CEO of the Foundation for Human Resources Development

In the last 25 years, the English as a Foreign Language (EFL) industry has come a long way, today contributing a significant number of tourism bed nights to the island. The vastly improved quality of teaching, Schengen membership, very good value for money and great quality of life have all contributed to the success of the EFL industry in Malta.

Andrew Mangion Executive Chairman of EC

We intend to be the best American-style university in the Mediterranean region and beyond. The founders of the University see this institution as a legacy and their contribution to education in Malta. Students will come from several regions, but what will define the whole cohort is the desire to study at and graduate from an American-style university. The American University of Malta will be a convenient, affordable alternative for those who are seeking American-style education without relocating to the United States.

John Ryder Provost of the American University of Malta (AUM)

is also a need to channel more students into science and technology-related areas. Businesses often turn to recruiting foreign labour to fill gaps in the local labour market, and a recent survey has shown that over the past three years 48% of employers recruited foreigners.

Infrastructure Expansion

This influx of professionals, who often come with their families, has also resulted in growing demand for international school places. Both Maltese and expatriates are reporting that it has become increasingly difficult to secure places for their children in private and more internationally oriented schools.

Acknowledging this situation, the government has already announced its intention to issue an expression of interest for the opening of a new independent school offering an International Baccalaureate (IB) programme by March 2017.

Malta’s government is also allocating funds to enhance the educational infrastructure. Various new schools have been built in recent years, while the MCAST campus just got a makeover with the construction of new buildings. A new Post Doctoral Centre will be built on campus at the University of Malta with the aim of housing post-doctoral researchers as well as providing an interim space for business incubation facilities. The University of Malta also committed to investing €25 million in the construction of an eight block student village with 600 beds. With this investment, the University of Malta seeks to develop the competitive edge required to attract more foreign students.

The Institute of Tourism Studies, however, will receive by far the largest investment in the years ahead as there are plans for the relocation of the school from St Julian’s to SmartCity Malta.

Estimated costs for the new campus, which includes a new faculty, practice facilities, a high-end teaching hotel with 280 beds, dormitories for students, office space and all supporting infrastructure, currently stand at some €75 million. It is projected that the new campus will be operational in 2019.

A Focus on e-Learning

Meanwhile, Malta has identified a new growth sector. E-learning courses, which teach students via the web or tablet apps, are today widely credited with having brought about an educational revolution that challenges the traditional higher education’s business model. However, e-learning courses and their providers face a crucial disadvantage when it comes to the accreditation of their courses. Certificates for such courses are often not accepted as proof of an acceptable entry qualification to a traditional degree course, or when applying for a job. Malta is now considering applications

to open digital tertiary institutions on the island who offer online degrees and other higher education courses. By attempting to become an important player in the online education market, Malta can potentially offer e-educators the possibility to certify their courses. This would provide them with a quality seal and a competitive advantage when marketing their courses to students in Europe and elsewhere. With hundreds of gaming and IT companies already established on the island, as well as a tech-savvy workforce, Malta is also providing fertile ground for developing new, and managing existing e-learning courses.

Global Recognition

There are some 4.5 million international students globally, and that figure is expected to swell to 7 to 8 million by 2025, driven by population and income growth in developing countries where local provision is poor. However, it is one thing to invite foreign institutes to open campuses on the island, and another to recruit and retain international students. To make it onto the radar of the brightest foreign minds, Malta needs to bolster the international ranking of its institutions. The University of Malta, for instance, has not yet been included in the global league table of the world’s top 500 universities published by The Times Higher Education.

Clear visa rules and the right to work while studying are also being seen as key factors to successfully establishing Malta as an education hub in the Mediterranean with growing international enrolment.

Continuous Upskilling

Today’s global economies face the challenge of continuous education. In many professions, it has become crucial to acquire new skills as established ones become obsolete. Malta is no exception in this regard. To remain competitive, the island needs to better connect education and employment.

Monitoring of skill sets against various occupations can help identify new skills as roles and job categories evolve. This also means there is scope for many new players as more adult learners will require training and re-training in the future.

Public-private partnerships are seen as an important tool to establish more education facilities that would enable people to learn new skills throughout their careers. Educational curricula also need to adapt to deliver stronger technical knowledge given the rise of disruptive technologies such as blockchain, artificial intelligence and the internet of things. Recognising these trends, Malta’s public and private institutions are currently identifying new strategic partners to import best practice and future-proof the island’s approach to education. n Country Report MALTA 2017 127

Energy & Environment

Energy & Environment

Energising

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Energy & Environment

change

Private investment and a multi-pronged approach to electricity generation have accelerated Malta’s energy turnaround.

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Energy & Environment

The long-term vision for Malta’s energy sector also includes a gas pipeline to Italy. While the main purpose of the pipeline will be the import of gas, it also offers Malta the opportunity to establish itself as an energy hub in the Mediterranean.

M

alta is at the forefront of countries that have carried out sweeping power sector reforms.

The island had long relied on the import of oil for electricity generation and the then state-owned power generation company was on the brink of bankruptcy. However, the sector has now been completely re-engineered. Electricity production has been shifted away from fuel oil generation towards a cheaper, cleaner, gas-powered energy matrix, which has helped persuade the private sector to invest. A new power station – including a floating storage unit and a regasification facility – has been constructed, while private investment has helped to steer the sector on a more sustainable path. In addition, a sub-sea interconnector between Malta and Sicily for the import of electricity has linked Malta’s once small and isolated power market to the European grid. But this is just part of

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the solution and plans for the future include a gas pipeline, which would allow the country to import and export gas from and to European markets. The power of the future also looks increasingly green, with government being confident that Malta will hit its 2020 EU renewable energy targets.

Time to Break from the Past

Throughout its history Malta had no domestic energy sources to fall back on. The first coal-fired power station was built in 1864. In tandem with rapid economic growth after the country gained independence in 1964, energy demand skyrocketed. The opening of industrial estates as well as the building of hotels and tourist zones required the continuous development of the country’s generation facilities. In the late 1980s the island took the

Energy & Environment

A Model for Energy Investment

decision to phase out coal-use and introduce oil for electricity generation. Throughout the years Malta made several attempts at oil exploration to reduce its dependency on oil imports. The most active period for oil exploration was in the 1970s and 1980s. Even today, commercially viable reserves have still not been found. The import of oil has put significant pressure on the energy sector and the country in general, and after the hike in oil prices in 2008, the government stopped subsiding the sector. Many believed that Malta was heading straight into an energy crisis. Maltese consumers were faced with some of the highest electricity tariffs in Europe, while the financial situation of the then state-owned electricity company Enemalta continued to worsen due to inefficiencies and a lack of tariff adjustments. In addition, Malta’s ailing generation infrastructure caused frequent power cuts.

In 2012, Enemalta’s total debt reached more than €830 million, accounting for 12% of GDP. While a restructuring plan was put in place to prevent the company from default, which included the sale of assets to a Special Purpose Vehicle and the refinancing of loans, it became clear that this would not resolve Enemalta’s longer-term solvency issues.

However, it paved the way for private investment.

Malta’s Labour Government, which came into power in March 2013, decided to open the market to third parties. Efforts began to reach out to potential investors, and an agreement was eventually signed with Shanghai Electric Power of China for the sale of a 33% minority stake in Enemalta, as well as one of Malta’s power plants for a total of €320 million. Another key part of the reforms was a deal with a consortium of foreign and local investors known as ElectroGas Malta, to not only build and operate a new gas-fired power station, but also to ensure the supply of LNG, including the construction and operation of storage and regasification facilities. This was the result of an open and competitive process.

International bodies such as the European Commission and the International Monetary Fund, as well as the main credit rating agencies, who have often pointed to Malta’s energy sector as a threat to the island’s competitiveness, have already acknowledged the government’s efforts to reform the sector and the progress achieved. Various credit rating agencies have upgraded both Enemalta and Malta’s credit rating. Significant investment activity due to the construction of new energy infrastructure has also supported the country’s record GDP growth in 2015. For many, Malta serves as an example of what strong political will to transform the energy sector can achieve. The island has not only tackled energy supply and production, but also developed a financing and structuring plan for a holistic gas to power cycle, which could well become a model for future energy investment elsewhere. The vision for the years ahead centres around the further internationalisation of the sector by turning it into an exportable services industry.

Power Players

While Enemalta previously had a monopoly on electricity generation, a number of experienced and high-profile companies have now entered the Maltese market. ElectroGas Malta shareholders (each with 33.333%) are Germany’s Siemens, Azerbaijan state-owned Socar Trading, and privately owned joint venture GEM Holdings, owned by Maltese companies Gasan and Tumas. ElectroGas, however, is not operating the power station it built, but has instead contracted out that service Country Report MALTA 2017 131

Energy & Environment

to the international arm of the Irish Electricity Supply Board (ESB). The Electricity Supply Board International (ESBI) has been working in the international power sector for 40 years and employs over 700 staff across its operations in Europe, the Middle East, Africa and Asia. It operates in 20 countries and has completed projects in over 120.

Malaysian company Bumi Armada has been contracted to build the LNG tanker, which holds a storage unit. The Armada LNG Mediterrana is still owned by its Malaysian builders, with ElectroGas chartering the vessel. While the gas is supplied by Shell, a Spanish company, Reganosa has been contracted to operate the LNG terminal.

Enemalta has also moved forward on its internationalisation journey. As part of the strategic alliance established between Enemalta and Shanghai Electric Power, the two companies have set up a new company: International Renewable Energy Development Limited. The company seeks to realise renewable energy projects across the European region and has already won a contract for the development of a 46 Megawatt wind farm in Montenegro.

From an environmental perspective, the sector is regulated by the Environment & Resources Authority (ERA), while energy policy is developed within the Ministry for Energy and Water Management. Oil exploration, however, falls under the Office of the Prime Minister.

Generation Infrastructure

Malta’s electricity requirements are currently met by three different sources. Electricity is generated at the Delimara Power Station, operated by Enemalta plc and its strategic partner Shanghai Electric Power. It is situated at Marsaxlokk Harbour in the south-east of the island. The total generation capacity of this station stands at 444MW. While several other small-scale domestic and industrial renewable energy installations also provide electricity, Malta has laid an interconnector cable to Sicily to import electricity. The MaltaItaly Interconnector, inaugurated in April 2015, is capable of transferring an additional 200MW of electricity to Malta. The electricity generation plants and the interconnector are linked to the national electricity grid, which is also managed and maintained by Enemalta plc. Until recently, the island also had a back-up capacity of 155MW from the Marsa Power Station, which was disconnected in March 2017.

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Plugging the Energy Gap

Once the new 200MW gas-fired power plant and related LNG storage and regasification facilities within the Delimara Power Station that are currently being developed by ElectroGas Malta are fully operational, the country will be able to stop using its older oil-fired plants. A newer, more modern section of the plant, which was being constructed in 2012 by Danish company BWSC, has been converted to run on natural gas. When all these projects are completed, Malta will have a capacity of some 550MW, while the older oil-fired parts will remain on standby as backup run on gasoil.

Consumption and Tariffs

Another element in the government’s power plan was a 25% reduction in electricity bills for both households and businesses. Tariffs, which for many years were among the highest in the EU, are now third cheapest according to Eurostat. Over the past years, Maltese consumers had cut down significantly on their energy consumption as a result of the high cost. In 2015 though, the average maximum electricity demand reached 351MW – the highest since 2008.

Approximately one third of electricity generated in a year is used between July and September, when switching on the air-conditioning unit to beat the summer heat is a must. In 2015, August registered the highest peak demand at 426MW, while May saw the lowest peak demand at 295MW. However, cold weather meant that on 9th January 2017, Enemalta registered a new all-time seasonal high of 410 MW. The previous peak of this season, 402 MW, was registered in February 2005. The winter peak is now nearing the overall all-time peak of 438 MW, reached in July 2015. Despite a rise in demand, carbon dioxide emissions from power station operations were reduced because the Marsa Power station was switched off, the interconnector was introduced and the shift to gas was initiated. Once the ElectroGas plant will be fully operational, emissions will be reduced by a further 50% and particulate matter by 90%.

A GreenER MALTA

The need to reach EU targets on the contribution of alternative energy technologies required an expansion of renewable energy sources. The island is committed to ensuring that 10% of energy is generated from renewable energy sources (RES) and to cut down its CO2 emissions. Malta had achieved a 5% renewables share, half of its 2020 goal. Grant schemes are being given out to residents installing photovoltaic panels on their homes, while the first solar farm will be set up shortly, in which people

We completely overhauled our generation infrastructure and shifted generation from oil to gas. We are now focused on producing more energy from renewables; we want to make sure that we reach our EU targets. Our biggest challenge is that we only have limited land for photovoltaic systems. We are also looking at LNG bunkering as the shipping and maritime sector is gearing up for stricter environmental regulations.

Joe Mizzi Minister for Energy and Water Management

There have been more than 32,000 LNG deliveries in the past 50 years with no major incidents. These tankers are used all over the world and this industry has all the necessary experience in keeping such operations safe. The tanker itself is designed for maximum safety and security, even in storm conditions.

Catherine Halpin Commercial Director at Electrogas Malta

The implementation of our long-term plan for Enemalta to achieve financial sustainability is not only a matter of cutting down long-standing debts and reducing dependency on government guarantees. This transformation is about establishing a self-sufficient company capable of maintaining an efficient and reliable electricity distribution system that meets customers’ service level expectations.

Ing. Fredrick Azzopardi Executive Chairman of Enemalta plc

There are a number of initiatives promoting Malta as a test bed for green technologies, such as renewable energy sources, which we feel have tremendous potential. This is particularly relevant and applicable in the transport sector.

Malta can be an ideal location for the mass promotion of electric cars.

James Bonello Managing Director at KPMG Crimsonwing

Energy & Environment

We will give priority to the upkeep of Malta’s and Gozo’s rural environment and launch a new organisation ‘Environment Malta’ to champion our efforts. Waste separation, reduction and recycling are also high on our agenda.

Jose Herrera Minister for the Environment, Sustainable Development and Climate Change

who do not have access to roof space to install panels can invest. There are plans for more solar farms, which could be installed on factories as well as in disused quarries. Malta also operates three small-scale waste to energy sites. The European Commission has adopted proposals to boost recycling of waste and reduce the percentage of household waste that can go to landfills by 2030. This means this area could see significant investment in the years ahead.

Pipeline Project

A sub-sea interconnector between Malta and Sicily for the import of electricity has linked Malta’s once small and isolated power market to the European grid.

The long-term vision for Malta’s energy sector also includes a gas pipeline to Italy. Studies are currently being undertaken on the best route between Delimara and Gela, Sicily. Once this project is completed, the pipeline will replace the floating storage unit in the Marsaxlok harbour. While the main purpose of the pipeline will be the import of gas, it also offers Malta the opportunity to establish itself as an energy hub in the Mediterranean. The reverse flow mechanism of the pipeline comes as an add-on cost, but the island will continue tapping into EU funds. Malta’s energy hub ambitions in the future also include physical links between North Africa and Europe.

The next Level

While Malta’s energy sector has seen significant investment in generation infrastructure, the island’s distribution network is also in need of modernisation. Enemalta is already working on the final

stages of a €100 million five-year investment to upgrade and expand major nodes of the national electricity network and improve the quality of service to its customers. This was only possible after Enemalta’s financial turnaround. Efforts should also be concentrated on so-called last mile projects and the burying of above-ground power lines. The abundance of overhead power lines is something that most visitors to Malta notice, with thick, black cables crisscrossing streets and buildings. The industry rule of thumb is that it costs about 10 times as much to bury wire as to string wire overhead.

However, Malta is densely populated and denser areas require less wiring; if this investment is undertaken as part of a larger infrastructure overhaul, which includes water, sewage and telecoms, it would become a much more attractive option.

Predicting the Future

While the recent performance of the energy sector is impressive, a few worries remain. Malta’s population is growing; high-rise buildings are being planned. Even if one factors in that many devices will become more energy-efficient, there is little doubt that in the future, more energy, not less, will be needed. The island estimates that the modernised generation capacity will serve it for the coming 10 years. It might not be long until a new round of new big energy projects will have to be realised. A long-term plan for supply, generation and distribution is required to bring more clarity for the next decades. n

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Water

Water

Meeting Malta’s Water Challenge Malta is investing in the water sector by leveraging new technologies as increasingly uncertain weather patterns underscore the urgency of boosting the country’s water security.

F

resh thinking is being poured into Malta’s water as population growth and uncertain weather patterns are placing increasing demands on the island’s scarce freshwater resources. The country has deployed new technology to reduce the cost of running its reverse osmosis plants, while so-called new water, recycled waste water, is being used for agricultural purposes. The island has also gathered expertise in fixing leakages in distribution networks and is exporting this knowledge to other countries. Going forward, Malta can learn lessons from other water-scarce countries, while cuttingedge water-tech and innovative water management could further support the country’s efforts to overcome the challenges brought about by climate change.

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Ancient Water-Tech Ever since pre-historic times, Malta has recognised the need to preserve water. Going all the way back to the stone age and the building of the Hagar Qim and Mnajdra Temples, the primitive builders felt the need to dig down cisterns into the limestone which were used as a storage for rainwater. In the 1600s, the Knights of St John built aqueducts that transported water by gravity from one village to another. Since water was such a scarce resource, the Knights also made it a requirement by law that each house had its own cistern. The 19th century then brought with it the need to venture into the exploitation of the sea level aquifer through bore holes, while the first thermal distillation plant was constructed in Malta as early as 1881.

Water

Water Infrastructure

Water is a scarce resource in Malta. ‘New water’, which is highly treated wastewater to be used for agricultural and industrial purposes is now available and will help mitigate the demand on ground water abstraction. Our Water Services Corporation is also at the forefront of leakage detection and has already won contracts abroad.

Joe Mizzi Minister for Energy and Water Management

We are really making a big push to introduce innovative solutions and sophisticated technology. We have made significant progress in recovering wastewater for agricultural purposes. This water was once considered permanently lost.

We believe that collaboration and joint thinking can bring about further change.

Mario Zammit Chairman of the Water Services Corporation

As Malta’s economy grew, in particular after the island gained independence from the UK, Malta’s water needs became more critical. In the 1980s, Malta’s government made its first investment in Reverse Osmosis (RO) Desalination. Today, Malta’s Water Services Corporation (WSC) operates three RO plants. Desalination is an energy-intensive and expensive technology, and the country has invested in membrane technology to make the process more energy-efficient and more cost-effective.

Desalination has proven to be valuable in lessening the amount of groundwater extractions. However, it does not hide the fact that overexploitation of aquifers is a reality. According to environmentalists, only 23 million cubic metres of groundwater are sustainably available for extraction, but it is estimated that some 34 million cubic metres are being extracted. This over-extraction is of serious concern as it lowers the quality of the remaining groundwater.

Water Recycling Currently, RO desalinations plants contribute some 60% and groundwater sources some 40% to Malta’s water supply. Additionally, Malta has started to use water reclamation as a way to recycle water. Three Sewage Treatment Plants (STPs) are currently operating on the Maltese islands, two of which are in Malta and another in Gozo. STP plants treat sewage water by removing solids and impurities and produce treated sewage effluent, which meets the requirements of the Urban Wastewater Directive and is therefore safe to dispose into the sea. While this water has traditionally been released into the Mediterranean, Malta is in the process of reaping the benefits of a €22 million investment in three polishing plants. These plants are treating wastewater to so-called ‘NEW water’ for agricultural and industrial purposes. However, this water can also be treated further and be used to replenish Malta’s ground-water sources. It is estimated that more than seven million cubic metres of NEW water could be produced annually. Moreover, the government is keen to strengthen efforts to harvest rainwater on the island. Taking Malta’s ancient houses as an example, the government has made it a point to enforce the requirement of a reservoir for rainwater in all newly built properties.

Exporting & Importing Knowledge The extensive work on the national networks helped curb leakages substantially. The corporation is now exporting this know-how to other countries and was chosen by the World Bank to carry out a water leakage management project in Lebanon. The project consisted of working on a three-kilometreszone in Beirut, Lebanon’s capital, by arranging and controlling water pressure, repairing damage and providing a 24-hour water supply. WSC’s monitoring technology could also be replicated for application in other industries, for instance in the oil and gas sector. While hopes are high that many international contracts will follow, including other World Bank projects in North Africa and the Middle East, the island is also aware that it needs to find ways to make more efficient use of water to support its growing economy.

There are a number of successful models around the world that Malta could emulate. Countries like Israel, Singapore and Saudi Arabia have been investing in new technologies to improve their water supply system. Israel in particular is today home to water-tech companies offering a whole suite of solutions for desalination, water reclamation, water engineering, water safety and water quality. They have helped the country, which for a long time had to import water, to become fully self-reliant for its water needs and even be able to sell any excess to their neighbours. Saudi Arabia has become a leader in desalination with their latest technology being a desalination plant powered by solar energy. Plans underway in Saudi Arabia are that by 2019 all desalination plants will start making use of solar technology. Singapore, which consumes 400 million gallons of water daily, has adopted one of the world’s most successful strategies by utilising four national taps flowing from desalinated sea water, recycled wastewater, water collected from rainfall as well as the imported supply from Malaysia.

Future Opportunities Global Water Intelligence has estimated the global water market to be worth US$862 billion.

Investors from around the world are now paying more attention to the water-tech sector as new companies and start-ups are experimenting and developing new solutions at a rapid pace.

Recognising the complex and evolving challenges to its water supply and system, Malta is looking to adopt innovative technologies in partnership with the private sector in a number of areas, including water reclamation, water engineering, water safety and water quality. n Country Report MALTA 2017 135

Agriculture & Food

Agriculture & Food

Smart Seeds for a Sustainable Future Malta’s agri-food sector is embracing innovation and diversification to market its high quality, niche products.

M

alta’s agricultural sector is on the edge of a new green revolution as serious attention is being paid towards tackling the many challenges facing the sector. With just 13,000 hectares of agricultural land, Malta’s food producers have struggled to maintain their relevance in the consumer age of mass-produced and processed ready meals.

However, the seeds for change are currently being planted. Discussions are underway on how Maltese farmers could make the most of the innovation boom in agriculture. Farmland consolidation, the use of treated waste water and the reversal of the rural skill drain are some of the measures that have been singled out to make farming smarter and the sector more competitive. While the overwhelming majority of Maltese food is consumed locally, the island could build on its expertise in food processing for export markets.

Efforts to carve out new niche markets are also beginning to yield results. Speciality food for gourmet consumers in Europe and Asia is being marketed as a way to preserve and promote Malta’s artisan food producers. Spring crop potatoes are being exported at a premium to Northern Europe, and the famed Mediterranean diet is exploited by targeting the speciality sector with delicacies like olive oil, sun-dried tomatoes, fig jam, goat cheese and sea salt. Despite being one of the world’s small136 Country Report MALTA 2017

est winemaking countries, Malta’s wine industry is rapidly gaining attention with consumers, and some wineries are exporting across Europe and beyond. Future growth potential exists in aquaculture, and the aim is to emulate the successful Norwegian and Scottish seafood farming industries by cultivating a range of species.

A Rich Heritage

Agriculture in Malta is as old as man’s presence on the island. The Phoenicians initiated the olive oil industry in Malta, while the tradition of bee-keeping dates back to the ancient Greeks and Romans, who considered Maltese honey to be a prized delicacy. In fact, the Greeks knew the island as Melite, deriving from ‘meli’, their word for honey. Later, under Arabic rule, the Maltese were introduced to new crops, such as carob, figs, citrus fruits and cotton. Centuries later the British attempted to develop Malta’s small cotton industry, with an eye on exports, but the initiative proved commercially unsustainable. Under British rule the importance of agriculture as a whole began to decline as a range of new sectors, such as light manufacturing and ship building, were introduced, attracting a large proportion of the rural population.

Agriculture & Food

Remaining Significant

The Phoenicians initiated the olive oil industry in Malta, while the tradition of bee-keeping dates back to the ancient Greeks and Romans, who considered Maltese honey to be a prized delicacy

Today, the Maltese agro-food industry is tiny in comparison to its European neighbours.

Agricultural production and fisheries account for a little less than 2% of Malta’s GDP and 2.9% of total employment, but the industry remains culturally important to the economy. Although around 80% of the island’s food requirements are imported, agriculture remains an important sector of the economy employing 18,500 people. However, over 90% are part-time farmers, and in the fishing industry only a minority of Malta’s 2,000 registered fishermen earn their livelihood solely from the sea.

Farms have an average size of 1.2 hectares, and are significantly smaller than the average agricultural holding in the European Union with a size of 14.4 hectares. The main crops are vegetables and fruits.

The country does have a small livestock sector that is skewed towards dairy farming to produce milk for local consumption.

While mass-markets are firmly out of reach, the island’s micro-producers have managed to score some notable export successes in a number of speciality niche areas including: bluefin tuna to the Japanese market, early season potatoes to Holland; and beverages, desserts, baking products, confectionery, sauces, dressings, wines and spirits to Europe, Africa and Asia. Companies such as Foster Clarks, Magro Brothers, Consolidated Biscuit Company and the Farsons Group have been the country’s main export success stories. The value of Malta’s food exports last year testifies to the success of the niche market strategy. Exports increased to €255 million in 2016 from 246 million in 2015.

Food imports totalled €555 million compared to €521 in 2015.

Promoting Mediterranean Delicacies

With consumers increasingly favouring organic and traditional foods, Malta’s agricultural sector intends to capitalise on its natural food heritage by supplying premium products to international markets. This involves the promotion of traditional delicacies such as goat’s cheese, sun-ripened tomatoes, pasta sauces, herbs and spices, olive oils, honey and fruits; all prepared using ancient recipes found in Maltese kitchens. Marketing of this kind Country Report MALTA 2017 137

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is essential to distinguish Malta’s local, small-scale producers from their big-brand competitors and enable them to successfully compete internationally.

The olive oil industry, for which Malta was so famous, has also been re-established by planting thousands of cuttings from 2,000-year-old indigenous olive trees. The oil has been applauded for its flavour, purity and health-enhancing qualities.

Maltese honey is also a sought-after and prized gourmet product. The island’s producers believe that it has great export potential and is destined for the shelves of high-end food emporiums for foodies around the globe to enjoy. Malta has also become an important supplier to the Dutch market, with the island’s floury-flavoured early season potatoes being exported almost exclusively to the Netherlands at premium prices.

Fishing & Seafood

Malta’s fishing sector covers both traditional methods and more modern aquaculture techniques. While the daily catch from traditional fishing boats mainly supplies local markets and restaurants, the introduction of fish farming and tuna penning has resulted in a marked increase in seafood exports. At its peak, Malta was estimated to have supplied around 30% of Japan’s frozen bluefin tuna imports; but EU-imposed quotas have seen industry output fall considerably. Today, Maltese fishermen are allowed to catch slightly more than 225 tons per season.

Passion in a Glass

Though winemaking in Malta is said to date back to the time of the Phoenicians, it is only recently that Malta’s wine industry has garnered international buzz. There are a total of 16 wineries in Malta and Gozo; with Marsovin, Delicata, Camilleri Wines, Meridiana, Montekristo and Ta` Mena (Gozo) being the main producers. There are two indigenous grape varieties, Girgentina and Ġellewża, being cultivated in Malta. Although blessed with suitable soil and a near perfect climate, Maltese winemakers are constrained by the shortage of available land, which they started to address by producing higher quality wines. In 2007, Malta introduced its own appellation system, the DOK, to ensure quality and origin. In recent years Malta’s winemakers have also invested heavily in modern equipment to improve the production and quality of their produce. Their wines have begun to slowly capture global attention, with market leaders winning international awards, and Maltese wines are now finding their way into wine sellers as far away as China.

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A New Source of Income

Agritourism is also a way of sustaining rural livelihoods and is increasingly becoming a vibrant part of Malta’s tourism product. Farmers living on Malta and in particular on its smaller sister island Gozo, offer visitors an alternative way of holidaymaking.

Tourists are invited to stay in restored farmhouses in small villages or in the countryside to experience a rural lifestyle. They can engage in hands-on activities such as milking sheep, making cheese pickled in salt, vinegar and pepper, picking and pickling capers, wine-making and fishing in the colourful traditional boats.

Farming as a Business

Malta’s government is actively supporting the agricultural sector. The Ministry for Sustainable Development, the Environment and Climate Change and the Parliamentary Secretariat for Agriculture, Fisheries and Animal Rights are introducing measures to increase the competitiveness and innovation within the sector. The primary focus is on modernising agricultural techniques and facilitating investment – since capital investment presents a major obstacle to a sector dominated by small producers. The rationale is that farmers should be able to attain a respectable income from their operations, making agribusiness also an attractive job prospect for the younger generation.

Agriculture is set to benefit from EU funds and in the period up to 2020, the Common Agricultural Policy (CAP) is going to invest €134 million in the Maltese farming sector and rural areas. In the agri-food sector, Malta is increasing its focus on research and investment to upgrade the existing production structure, introduce new technologies and modernise systems. The Institute of Agriculture at the University of Malta and the island’s vocational college MCAST both offer training in sustainable production and new technologies.

At its peak, Malta was estimated to have supplied around 30% of Japan’s frozen bluefin tuna imports

Agriculture & Food

Addressing Challenges

Innovative Niches

Despite the initial successes and promising potential, the road to sustainable agriculture in Malta is challenging. The quality of local produce has recently hit the headlines after it had been found to contain excessive pesticide residues. The over-exploitation of fresh water and excessive use of pesticides and fertilisers, leading to high concentrations of nitrates in water and soil, have created serious environmental problems. While groundwater and desalinated seawater are currently being used, there are initiatives promoting and facilitating the use of so-called new water – treated waste water – for irrigation purposes. Land fragmentation and the scale of agricultural holdings also pose pressing commercial challenges. Farmland is predominantly government-owned and is leased to farmers through agricultural leases, which are renewed yearly. However, these leases can only be passed on from parents to children, and hence cannot be transferred between siblings without the content of their parents and cannot be sold or sublet. This situation is restricting the consolidation of farmland by progressive farmers who seek to overcome difficulties related to economies of scale. There are also concerns over an aging farmer population, and investment in innovative technology and profitable niches is seen as important in improving the image of farming as a viable career path for the younger generation.

At the top of the agenda is the development of successful market niches. The demand for Maltese olive oil has increased in the last decade and could be exploited further. Another niche product for which demand exceeds the supply is honey. While the world’s bee population is declining due to pollinating habits, pesticides and intensive farming, there is an opportunity in the production of Maltese queen bees for export. Organic food production also offers significant potential for growth as Malta currently has the lowest level of organic farms at EU level. A promising export market has also been identified for herbs and spices grown on the island.

Increased cooperation is one possible route for developing the sector further. The island’s smallscale food producers could pool resources to sell their food products to foreign markets. By forming strategic alliances of producers, sharing investment and knowledge in product development and market access, the country’s agricultural sector has a good chance of carving out its own niche in the speciality sector. Wine tourism has been identified as another way to make Maltese wine known to international mainstream consumers, with wineries and special wine events and festivals attracting foreign visitors to the islands.

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Agriculture & Food

A Blueprint for Aquaculture

With the world’s oceans and seas at risk of overfishing and subject to catch quotas, the Maltese authorities are convinced that future growth can be made possible by the development of a thriving aquaculture industry, through which fish is farmed in controlled conditions. There are a handful of aquaculture farms operating from different sites, producing captured based species (CBSs) or tuna, as well closed cycle species (CCSs), such as sea bream, sea bass and meagre that are cultured from eggs produced in hatcheries. With the island’s close proximity to European and North African markets and significant sea acreage to host fish farms, the strategy highlights that the sector has the potential to contribute over €70 million to the Maltese economy by 2020. Species diversification is the target for the future and research is already being conducted into the farming of other fish.

Investment Opportunities

Malta also believes it can profit from its long trading tradition with Arab countries and the vast agricultural potential in North Africa. The island is ideally placed as a food processing and distribution hub for North African agricultural products, such as wheat, oats, olives and dates, targeting the European market. Malta also possesses the infrastructure to produce and export high-value nutritious foods that many African countries lack.

Facilities include one of the largest Mediterranean ports as well as a range of processing and warehousing facilities.

One such example is the Kordin Grain Terminal in the Port of Valletta, which handles the storage and transshipment of free-flowing grains such as wheat, maize, soya beans and sunflower seeds.

These products reach Malta from grain-producing nations and use the island as a gateway to the world.

140 Country Report MALTA 2017

While the terminal’s business has declined in recent years, Malta is currently conducting market studies to tap into new trends and opportunities. As an EU member state on the doorstep of the African continent, which possesses more than half of the world’s fertile land, Malta is keen to further exploit its location by encouraging global food processing companies to invest and develop facilities on the island.

In this regard, public-private partnerships are also being explored. Additionally, the government is highlighting the island’s potential as a management hub for international food companies with operations in Africa.

Smart Future

Malta’s agriculture sector could get a boost from technological advances. Precision agriculture – the use of digital tools and smart machines for remote sensing, data processing and automation – offers the opportunity to minimise inputs and maximise productivity, while also contributing to the struggle against environmental damage and climate change.

Smart technology is also being brought to the fish farming industry, a sector that is very promising in Malta. There are few limits on growth, given Malta’s vast offshore region and the increasing global demand for fish. The EU in particular is only 70% self-sufficient in its seafood needs and Malta is determined to capitalise on this tremendous opportunity.

The rising interest in alternative foods also offers opportunities for speciality food producers to tap into new markets and secure a premium for their products. The country already sells a number of high-quality products to the overseas customer but significant effort will be needed if these are to establish a firm foothold in the consumer market.

In order to target foreign markets and consumers willing to pay top prices, the sector needs to change current methods of production, marketing and sales. n

Despite the many challenges that the agriculture and fisheries sectors face, we are positive that the quality of our produce can find a competitive niche on both the local and international market.

I believe the food processing industry has great growth opportunities, and we would like to attract foreign companies to come and work alongside our local producers and manufacturers to develop this sector further.

Clint Camilleri Parliamentary Secretary for Agriculture, Fisheries and Animal Rights

Oil & Gas

Oil & Gas

A New Future in Energy Trading On the back of its thriving financial centre, Malta is gearing up to become a Mediterranean trading hub for the oil and gas industry.

Country Report MALTA 2017 141

Oil & Gas

D

espite the fact that Malta has to-date not found commercial quantities of hydrocarbons, the island has built up a formidable service centre for the oil and gas industry and is responding to new opportunities in regional and global markets. Major oil and gas discoveries in the Mediterranean are creating a demand for support services, positioning Malta as the ideal country from where key players and service providers are converging to set up and operate. A €55-million maritime services park, including a dedicated rig servicing centre and specialised training facilities, is currently under construction. Bouncing off its International Finance Centre, Malta is also positioning itself as a Mediterranean hub for oil and gas trading and investments. A joint venture between the Government of Malta and Singaporean company International Energy Group (IEG) kick-started this industry, and Malta is making efforts to attract more traders. There are also plans for the expansion of oil bunkering and blending operations on the island.

A Safe Harbour

Malta’s strategic location at the centre of the Mediterranean has long made it a key management 142 Country Report MALTA 2017

and service centre for the regional oil industry.

When exploration activities in North Africa started in the 1970s, Malta was considered as a safe location and many oil executives and their families were positioned on the island. In the past 10 to 15 years, Malta built up special expertise in providing logistical support to companies operating in the region.

Malta’s own oil exploration activities however have not yet yielded results. Drilling in Malta’s waters began in the early 1950s when BP was awarded the first exploration licence, but only 13 exploration wells were drilled over the past 60 years. Although oil majors such as Shell, Texaco, Amoco and ENI have explored on Malta’s continental shelf, they have failed to make significant discoveries.

Servicing the Oil & Gas Economy

However, local experts say Malta’s relevance in the oil and gas industry should not be pinned to exploration. Malta already serves as a base for major companies providing drilling, pipe-laying and other services to energy firms operating both onshore and offshore in the North African region.

Medserv for instance was established more than 40 years ago to service supply and specialist vessels

With a maritime services park focused on servicing the oil and gas industry, Malta is now making this sector a strong pillar of its economy.

Oil & Gas

sailing to and from exploration rigs and platforms.

The island offers a state-of-the-art transshipment terminal, as well as storage and warehousing facilities. It also boasts expertise in the manufacture, repair and conversion of ships and oil rigs.

Oiltanking Malta operates an oil bunkering facility with a storage capability of 562,450 cubic metres. It is operational around the clock and has an annual handling capacity of around two million metric tonnes of products.

Mediterranean Maritime Park

With a maritime services park focused on servicing the oil and gas industry, Malta is now making this sector a strong pillar of its economy. Maltese company Ablecare is currently rehabilitating the former Malta Shipbuilding facility in the Grand Harbour into a 170,000 square metre hub dedicated to the marine, oil and gas sectors, with all the facilities typically associated with such a hub. The initial investment is estimated to be in the region of €55 million and will see the area becoming a premier operations support facility strategically placed to deliver pre-stacking and reactivation services, certification, upgrades modifications and maintenance alongside on-going operational support. The site, which shall benefit from a free-zone status, will support the offshore oil & gas industry with marine and subsea support services for drilling rigs. It will offer quayside facilities including 1,200 linear metres with appropriate draft, accommodation for any Mobile Offshore Drilling Units, overhaul and inspection facilities, internal and external storage areas and 5,000 square metres of rental office space.

The developments that will see Malta starting to act as a regional maritime service centre will not only be centered around the hub in Marsa, but also include a newly set up €2.5 million maritime academy in San Gwann.

Oil Trading & Beyond

Malta is also eyeing exciting growth opportunities on the back of its successful financial services sector. The island has long been a base for investment holdings of oil companies. Azerbaijan’s Socar for instance opened an office in Malta in 2007. Malta’s newest ambition is to transform itself into an energy trading hub, and the Maltese Government has entered into a partnership with Singapore’s International Energy Group (IEG).

While for the time being the company is using Malta as an oil trading hub, there are plans to develop this into an oil blending and bunkering operation, including the management of its own storage facilities.

Malta’s Enemed, which was established in 2014 as a wholly-owned subsidiary of the state-owned

Petromal Company, is also set to modernise its storage facilities. The company is responsible for the importation, distribution and wholesale of petroleum products for the Maltese market, including the aviation sector. In addition, Enemed & Oiltanking lease out oil storage facilities to petroleum companies that store products for transshipment destined to other countries and for the local market. There is great potential to expand the oil bunkering business further. Industry professionals are also pointing to growing opportunities in LNG bunkering for use in the shipping industry.

The Search for Hydrocarbons

Oil exploration is still on Government’s agenda, and Government has recently set up a National Oil Corporation. Three companies currently hold licences for oil exploration in Maltese waters: Heritage Oil, Ratio Oil and Capricorn Malta (a subsidiary of Cairn Energy). The Mediterranean, until recently, was considered by many to have been extensively explored. However, the discoveries of gas fields off the coast of Israel and Cyprus have completely changed the industry’s view of the region and, along with it, Malta’s offshore potential. The most recent exploration well was drilled south of Malta in 2014 by Genel Energy and its partner Mediterranean Oil and Gas, but no discovery was made.

However, it is hopeful that hydrocarbons, which might be trapped in sedimentary basins offshore Malta, will be discovered in the future.

New technologies and greater analytic capabilities could identify prospects that in the past were very difficult to detect. The government is encouraging international oil companies to bid for the remaining open blocks on Malta’s continental shelf, which account for just over half of the total area designated for offshore exploration. In fact, Malta’s offshore area designated for exploration is over 230 times greater than Malta’s land territory and nearly three times larger than the island of Sicily.

Potential Power Hub

Malta’s vision for the future includes establishing itself as an energy hub in the Mediterranean. While Europe seeks to reduce its dependence on Russian gas, the Mediterranean region comes into sharp focus. The island is currently planning on building a gas pipeline to Sicily. In this scenario, Malta has already identified the Hurds Bank – a shallow area outside Malta’s 12-nautical-mile territorial waters which allows most ships to drop anchor and wait for orders – as a potential key asset. Offshore storage units could be established that are linked to the gas pipeline and would allow the transport of gas to European markets. n Country Report MALTA 2017 143

Transport

Transport

Mobilising Malta Malta’s transport system is undergoing a radical rethink, and the island is betting on intelligent traffic management systems and other innovations that have the potential to shake up its networks.

M

alta’s road transport sector is in the midst of a transformation as the island is seeking to upgrade and improve many facets of its infrastructure. While huge investments over past years have turned Malta into a major hub for international trade and transport with a flourishing freeport, the island’s expanding economy is putting pressure on its road network that has failed to keep pace with this growth. Keen to see the sector heading in a new direction, the Maltese authorities are implementing novel concepts and are willing to partner with global innovators to create a better connected and more efficient transport system. The island’s bus system has seen numerous reforms in recent years and is now experiencing a steady increase in passengers. However, experts say Malta also needs to consider alternative modes of public transport and propose the introduction of a light rail or trolleybus route.

Malta’s national airline, Air Malta is also departing into a new future. After years of financial struggle, the airline is now seeking a strategic partner.

144 Country Report MALTA 2017

Transport

The Changing Face of Transport

In a few years’ time, Malta’s road infrastructure will look significantly different. We have launched a programme to resurface the entire road network and are also committed to building a tunnel between Malta and Gozo. We are also aiming to identify a suitable mass transport system for the Maltese Islands by the end of this legislature.

Ian Borg Minister for Transport, Infrastructure & Capital Projects

As an island at the centre of the Mediterranean, Malta has been part of the global maritime network for centuries. The Phoenicians, the Carthaginians, the Normans, the Arabs and the Knights of St John used the island as a commerce and trade hub. The small nation experienced its first major upturn as a trading port when it became a British colony in the 19th century. The colonial masters also drew up a blue-print for a railway system, consisting of a single line from Valletta to Mdina. Opened in 1883, the service was discontinued in 1931 in favour of a bus service. Malta’s first commercial airport was built during the 1920s on the site of a military one.

A new facility was opened in 1958 to cope with the growing demand, with a new runway added in 1977. The current Malta International Airport (MIA) opened its doors in 1992 and is still considered to be among the best in Europe. The Malta Freeport was established at the end of the 1980s and has greatly expanded its capacity throughout the years. In the run-up to Malta’s EU membership in 2004, the Freeport’s terminal management was privatised, two years after the partial privatisation of the airport. EU membership has also provided Malta with access to funding programmes that have helped with upgrading the road network and that remain an essential source of finance.

Transport Economics

Malta’s transport sector as a whole has grown considerably in recent years. Malta is one of the most

densely populated countries in the world – an island nation of just 316 square metres and home to some 430,000 people. Car density is also one of the highest in the European Union, with some 330,000 cars registered despite the short distances on the island. Most passenger travel between the island and mainland Europe is by air, while most goods come and go by sea. The arrival of low-cost airlines, the expansion of the cargo business and Malta’s growing importance as a maritime hub have also influenced the sector’s performance.

Similar to other infrastructure-intensive economic activities, the sector is directly influencing and affecting Malta’s development and competitiveness. It is reported that commercial and private transport services account for 12% of Malta’s GDP, which is above the EU average of 7%.

The authorities are aware of the crucial importance of a functioning transport system for business and foreign investment, so they are keen to address structural issues that impede economic growth and competitiveness. The Ministry for Transport and Infrastructure has set as one of its priorities the development of an integrated transport policy, acknowledging that the local transport system has not always received the attention it deserves. The increased use of water taxis and sea links in the harbour area, as well as a tunnel connecting Malta and its sister island Gozo are some of the concepts currently being looked into. Proposals for the future also include moving commuters off the roads and onto a simple underground railway or a monorail system, which currently does not exist in Malta.

Country Report MALTA 2017 145

Transport

Foreign Investment

Record Figures

Foreign investment plays an important role in the transport sector. A consortium including Vienna International Airport holds 40% of MIA, while Vienna International Airport also holds another 10% directly. The government holds 20% and another 30% is traded on the Malta Stock Exchange. The Freeport at Marsaxlokk has long served as a strategic point on Malta’s coast and today is one of the largest transshipment and logistics centres in the Mediterranean. Yildirim Holding, a Turkish container port operator, holds 50% of Malta Freeport Terminals, with the other 50% of the shares being held by Terminal Link.

The shareholders of Terminal Link are CMA CGM, the third-largest shipping line in the world, and China Merchants Holdings International (CMHI).

Malta’s second port, the Port of Valletta, which handles roll-on/roll-off operations, trailers, containers, continental cargo and vehicles, is operated by Valletta Gateway Terminals (VGT), a joint venture between Portek International of Singapore, a subsidiary of the Japanese Mitsui Group, and the Maltese Tumas Group. The island’s bus system was taken over by Spanish transport group Autobuses Urbanos de León (ALESA) in 2015 after Germanowned Arriva Group exited the Maltese market.

2016 has been an exceptional year for Malta International Airport. Passenger movements have reached a new high of five million. Traffic at Malta International Airport grew by 10% over the previous year on the back of a 4.5% growth in aircraft movements and a 7.6% increase in seat capacity.

The seat load factor also increased from 81.1% in 2015 to 83.3% in 2016, signalling a marked efficiency by airlines to fill up available seats. More than 35 airlines connect the Maltese Islands to 95 airports in 86 cities. The top markets for 2016 were the United Kingdom, which saw an increase of 5.4%, Italy, which grew by 15%, Germany, which grew by 8%, France, registering a growth of 5.5%, and Spain, which registered a growth of 26.7%.

Enhanced winter operations by low-cost airlines such as Ryanair, SAS and Wizz Air, as well as further capacity being deployed by Air Malta, Lufthansa and EasyJet, are being seen as the main reasons for this performance. Due to the tourism sector’s efforts to establish Malta as a year-round destination, coupled with Malta’s increased attractiveness for city-break travel and a flourishing economy, MIA is expecting 2017 to be another record year with some 5.2 million passengers. To cater for this growth, the terminal building is currently being re-

146 Country Report MALTA 2017

Malta has established itself as an international centre of maritime excellence, and we have all the right elements in place for the aviation industry to prosper. Good transport connections and economic activity are also intertwined. In the area of land transport, we are considering new, alterative transport systems and technologies, to be used alongside our bus service, which could provide an alternative to vehicles on the road.

James Piscopo Chairman and CEO of Transport Malta

Transport

Air Malta is part of the country’s critical national infrastructure.

The number one priority for the airline is its turnaround.

I will be working to see that Air Malta is put back on its feet and that the necessary restructuring takes place to ensure a bright and successful future for the company.

Konrad Mizzi Minister for Tourism

furbished, including additional check-in desks and a security area that is double its current footprint.

Linking the island with other parts of the world such as Central Asia, the Middle East and the Far East, Emirates operates flights from Malta to Dubai, while Turkish Airlines began a MaltaIstanbul service in May 2013 and now operates 12 flights a week, offering connecting flights to many parts of the world. Air Malta, which operates a fleet of eight aircraft, has long been considered of crucial importance to the economy as a whole, providing a regular and vital link for tourists and business travellers. However, after years of loss-making and in spite of a restructuring programme, approved by the European Commission in 2012, the airline is now seeking a strategic partner.

Rapid growth has been recorded in the maritime sector. In 2015, the Malta Freeport reported a record year, breaking the 3 million TEU mark for the first time, handling 3.06 million TEU, an increase of 6.8% on 2014. In 2016, the Freeport built on this success and recorded 3.08 million TEU. Currently Malta Freeport Terminals has regular network connections with over 122 ports worldwide, over 60 of which are in the Mediterranean.

Cruise business has also become an important revenue source. In 2016, more than 625,000 cruise passengers were recorded, representing a rise of

4.3% compared to 2015. There were 316 cruise liner calls, with an average of 1,981 passengers per vessel. These results encouraged the government to announce the development of a second cruise liner terminal in Gozo in an effort to attract tourism to the sister island.

Capacity Constraints

Malta’s road system is currently the focus of much attention. Due to the island’s small size and the high rate of car ownership, it comes as no surprise that road congestion is a major problem at times and finding ways to ease the traffic flow has become a top priority. Malta’s road network spans some 2,000 kilometres and its road infrastructure is one of the densest in the EU, at approximately 617 km of road/1,000 square kilometres. Reconstruction and upgrading work is being carried out on a number of routes that are part of the Trans-European Transport Networks (TENT), and the recently re-elected government has launched a programme to resurface all of Malta’s roads in the coming seven years. EU funding has played a pivotal role in road building and maintenance and will continue to be an important source of financing. In an effort to address traffic congestion, the Maltese government is also in the process Country Report MALTA 2017 147

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Transport

We have seen recent investments in Malta, but there was a long period where nothing had been done in terms of implementing intelligent transport systems. Malta needs to catch up fast, especially if we want to move towards taller buildings and highrise developments. We have plans to create a centre of excellence on parking solutions in Malta. By making parking smarter, people spend less time looking for parking spots and driving around, which often causes more congestion.

Angelo Dalli CEO of Q-Free Trafiko

of installing an intelligent traffic management system. The system includes variable message and lane-changing signs and will provide motorists with real-time traffic updates. This is intended to effectively direct traffic and limit congestion.

In an effort to relieve pressure, the country upgraded its bus system in 2011 and the Arriva Group brought in a fleet of modern, environmentally friendly buses. However, the company struggled to get to grips with the Maltese market and the route network. In 2014, less than three years into its 10-year concession, Arriva bowed out by mutual consent with the government and the service was temporarily nationalised. A year later, Spanish operator Autobuses de Leon was chosen by the government to take over Malta Public Transport following a competitive call. In just over a year, Malta Public Transport has increased the fleet from 260 buses to 400 buses, while a travel card launched in July 2015 has been deemed a huge success, with over 240,000 individuals now holding a so-called Tallinja bus card. This means that more than half the population is in possession of a Tallinja bus card, which compares very well with the take-up of similar cards in other small European states or large European cities.

Going forward, it will remain a priority to encourage more people to use buses and to attract additional investment in public transport. In another attempt, Malta’s government has allowed car drivers to ride scooters of up to 125cc. They do not require an additional licence but need to complete a ten-hour driving training course. A number of short-term measures have also been introduced as part of the country’s 2017 budget, including free public transport for 18-year olds and tax reductions for companies who incentivise alternative transport for employees.

Fit for the Future

Malta’s small size and the fact that the island is densely populated create unique and challenging traffic situations. A lot of congestion is related to the layout of Malta’s road network, and there is increasing awareness that the island needs to use the available space better. Industry professionals say that Malta needs to introduce more flyovers and tidal lanes, as well as smart systems that can change speed limits, coordinate the timing of traffic lights and even suggest alternative roads. The upgrading of transport infrastructure is becoming increasingly important due to the island’s move towards taller buildings and high-rise developments. In addition to intelligent traffic management systems, in the longer term, Malta should also consider other modes of transport. A simple underground railway or a monorail system is an attractive prospect, but the economic case for it has yet to be made.

However, while monorails are expensive, experts say that a light rail or a trolleybus route could be an alternative. Meanwhile, bike sharing companies are moving into Malta, and the government has announced its support for car-sharing initiatives. Transport Malta, the authority overseeing all transport in Malta, already issued a call for the development of a national, app-based car-sharing programme.

Promoting Partnerships

Around the world, public-private partnerships have proven to be an effective way of expanding and maintaining transport infrastructure, and Malta believes the future lies in greater private sector participation for long-term projects. The island offers interesting prospects for engineering and construction firms and is willing to partner with companies that can introduce innovative technologies or materials. The long-term vision for the sector includes a greener and cleaner Malta. This also means encouraging innovation and further research, as well as the promotion of environmentally friendly technologies. Malta is keen to become a part of the transport sector’s journey into the future: its small market provides the right environment for companies looking at commercialising ideas, as well as testing new transport products and systems. With big data and the internet of things affecting traditional transport models like never before, Malta has recognised that it must continue to evolve and respond to changing transport demands and dynamics. n

Country Report MALTA 2017 149

Freeport & Logistics

Freeport & Logistics

A Bigger Vision: Moving from Cheap and Fast to Value Added A growing global eCommerce sector is driving Malta’s ambitions to become a major transport and logistics hub, though new and existing infrastructure will need to be better leveraged to achieve the country’s goals.

E

fforts to increase capacity and space for logistics and warehousing operations are aimed to enable Malta to capitalise on its strategic location on the main international shipping lanes. On the back of the record-breaking performance of the Malta Freeport, the country now aspires to strengthen its credentials as a logistics and distribution centre, in particular for Asian eCommerce companies. The Freeport – a top Mediterranean transshipment port – is keen to expand its extensive investment programme, and the Maltese government is considering measures such as the creation of free trade areas in the form of flexible warehouses located in various parts of the island. While some industry players call for wider reforms, highlighting that challenges such as outdated procedures as well as inflated charges are impediments to growth, it was welcome news when in March 2017 supermarket giant Lidl announced that they would set up an international regional distribution centre in Malta.

152 Country Report MALTA 2017

Warehouse of the Mediterranean

Throughout its history, Malta has been an important trading hub, and the island’s many foreign rulers from the Phoenicians to the British built storage wharves and shipping docks in Malta’s natural harbours. Trade flourished so much that Malta was referred to as ‘the warehouse of the Mediterranean’.

From the 1960s onwards, Malta also started to develop a thriving bunkering business when Shell built a storage facility on the island, which was later taken over by the Maltese government. The Malta Freeport was established in 1988 as the first transshipment facility in the Mediterranean. Supported by a free trade zone, it quickly became a leading player in the global supply chain. The management of the container terminal was privatised in 2004. Yildirim Holding, a Turkish container port operator, holds 50% of Malta Freeport Terminals, with the other 50% being owned by Terminal Link,

The changes undertaken since privatisation have been significant, and the company has managed not only to double its throughput level, which reached the 3 million TEU mark once again in 2016, but it has also optimised the usage of the facilities giving all parties better value and a better return. Such a scenario provides ample proof that Malta Freeport Terminals has in place the right mix of resources fully geared up to efficiently handle its clients’ business.

Alex Montebello CEO of Malta Freeport

Freeport & Logistics

Since the Freeport’s privatisation we invested €230 million. The port was numbered 6th in the Mediterranean port ranking, today Malta Freeport is number 2, which goes to show that we are putting the right investment to give Malta what it deserves, and now we are discussing with the Prime Minister and the transportation Minister to expand the Freeport to reach a capacity of 5 million TEUs. We are considering another €200 million investment in this port.

Robert Yuksel Yildirim Chief Executive Officer and President of Yildirim Holding A.S

whose shareholders are CMA CGM, the third-largest shipping line in the world, and China Merchants Holdings International (CMHI).

A Growing Sector

Much of Malta’s transport and logistics activity is concentrated in the south of the island. The Malta Freeport in Marsaxlokk today has a container handling capacity of 3.2 million twenty-foot equivalent units (TEUs) and spreads over 771,000 square metres of land. It prides itself on being the only hub in the Mediterranean with two berths capable of handling vessels of 18,000 TEUs. In the past years, the port has invested more than €230 million in the extension and expansion of its facilities. As modern deep-sea cargo ships are getting bigger and more powerful than ever before, the water depth has been dredged to 17 metres and new cranes have been purchased and installed while quays have been extended to accommodate post-panamax vessels. An oil terminal operated by Oiltanking Malta and a logistics base for the offshore oil and gas industry operated by Medserv are also located in the Freeport. The Malta Freeport Corporation is the authority responsible for regulatory compliance and security, as well as the management of the customs-free zone and warehouses.

While the Freeport alone accounts for 1,800 jobs, in total there are more than 5,000 people employed in warehousing, freight and logistics. Malta’s logistics companies make use of the island’s transshipment and air cargo facili-

Ship calls at Malta Freeport (2005-2016) 2,000

1,500

1,000 1,483

1,559

1,690

1,889

1,919

1,862

1,832

1,586

1,946

2,108

2,189

2,257

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

500

0

Container throughput at Malta Freeport (2005-2016) in TEUs 3.0 2.5 2.0 1.5 1.0

1.32

1.48

1.90

2.33

2.26

2.37

2.36

2.54

2.75

2.90

3.06

3.08

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

0.5 0

ties at Malta International Airport, in addition to providing land freight transportations, overseas removals and warehousing facilities. Many logistics providers offer a full suite of regular and customised services that range from simple duty-free storage of products to facilitating customs-cleared, last-minute ordering in European markets. Companies such as Salvo Grima and Carmelo Caruana are among the local leaders in this field. There are also many freight forwarders active in Malta, including Express Logigroup Ltd, Fahrenheit Freight Forwarders Co. Ltd, EuroBridge Shipping Services Ltd, Attrans Ltd, Jet services Ltd, and Express Group. Malta’s logistics firms are cautiously optimistic that they will see their business grow once the island unlocks its full potential as a gateway to the European Union and the markets of the region. The recent announcement that supermarket chain Lidl will use Malta as a distribution centre also augurs well for the sector’s future. Lidl’s investment is expected to create 120 jobs and boost local exports as the German chain would be buying €22 million worth of products from local manufacturers within three years.

Servicing the Mega Alliances

In 2015, the Malta Freeport reported a record year, breaking the 3 million TEU mark for the first time, handling 3.06 million TEU, an increase of 6.8% on 2014. Around 2,200 ships called at the Freeport, with 96% being transshipment business based on the ‘hub’ concept whereby cargo is discharged from large mother vessels and relayed to a network of regional ports by regular and frequent-feeder vessels. More than 130 ports can be reached from the Malta Freeport, and the large ocean carrier alliances regularly call at Malta Freeport, which helped the Freeport to further improve its performance in 2016, with 2,257 ships calls and 3,08 million TEU being handled. In 2017, after months of transformation in the form of mergers and acquisitions, eleven of the world’s largest container shipping lines have formed three new alliances - The Ocean Alliance, 2M and The Alliance. The Ocean Alliance (CMA-CGM, Evergreen, OOCL and COSCO Shipping) has chosen the Malta Freeport as their central Mediterranean transshipment hub, while the 2M Alliance (Maersk and MSC) has sustained its calls in Malta. Malta Freeport now offers regular connections to 115 ports worldwide, around 60 of which are in the Mediterranean and Black Sea. Malta has also become an important player in the oil and gas industry. Its oil terminal, the largest bunkering facility in the Mediterranean with a storage capacity of more than 560,000 cubic metres, is operational around the clock and can dispense annually around two million metric tonnes of products, including: gasoline, jet fuel, feedstocks, Country Report MALTA 2017 153

Freeport & Logistics

industrial alcohols, heavy fuels and crude oil. The terminal’s principle activity is tank rental but it also provides other services such as blending, storage, butanising, circulation, ship-to-ship transfer, leading and injecting of additives or dyes.

Hub Potential

A relatively new cargo area at Malta International Airport, together with future works on its expansion, also promises to increase the airport’s role as an important player in the Mediterranean logistics chain. In 2016, the cargo and mail handled in the country reached 15.7 tonnes, with most of it being so-called belly cargo – freight that is stored under the main deck of a passenger plane. MIA’s cargo area is being used as a main base for operations of top local, as well as international companies, including DHL, Serviceair, Ariaserv and Medavia.

Malta’s transport infrastructure also opens up excellent opportunities to exploit multimode sea and air logistics solutions. There are hopes that MIA can emulate the Freeport’s success in becoming a hub for air cargo traffic, especially between North and West Africa and Europe. Located just six kilometres from the Freeport, the sea-air option is an attractive one for companies with time-sensitive cargo. However, thus far, the airport lacks its own central warehouse, which despite the proximity to the airport, is seen as crucial in order to grow cargo volumes.

154 Country Report MALTA 2017

While business remains largely concentrated on the Freeport, Malta also boasts another port, the Port of Valletta, or Grand Harbour as it is also known. Management of the port, capable of handling roll-on/roll-off operations, trailers, containers, continental cargo and vehicles, has been in private hands since June 2006, when Valletta Gateway Terminals (VGT), a joint undertaking between Portek International of Singapore and the Maltese Tumas Group, was established. In August 2011, Mitsui, one of Japan’s leading general trading companies, acquired the Portek Group and effectively expanded into Malta. The Grimaldi Shipping Line is one of Grand Harbour’s main clients, bringing in hundreds of trailers and cars for transshipment per week.

Accessing Nearby Markets

Integrating all separate elements into a more holistic offering will need to be the priority in the future as the island seeks to take advantage of new opportunities. A surge in online shopping has established a flourishing eCommerce sector in the global economy which has brought with it a new type of logistics chain that caters for the transportation of products to both private households as well as distribution points. In this context, Malta could become a key hub for Asian suppliers who could store products in Malta that they seek to sell and

Freeport & Logistics

Technology is central to ensuring operational efficiency and a key enabler of products and services offered by MaltaPost. As a result of advances in technology, expectations of postal services consumers are continuously on the rise, particularly in tracking information related to mailed items. We performed a substantial systems upgrade to improve timeliness and clarity of reported tracking events.

Joseph Gafà CEO of MaltaPost

The Express service is a niche of logistics.

It is growing more than ever before as online shopping has exploded in Malta.

The business to consumer segment accounts for 30% of imports in most European countries, while in Malta it now represents 75% – a 23% increase on DHL’s last year’s figures.

Charles Schiavone Malta Country Manager of DHL

distribute to end-consumers and businesses all over Europe and North Africa. Malta could score its first success if an agreement with Chinese ecommerce company Alibaba to use Malta as their European distribution centre materialises. There are also opportunities for value-adding services such as just-in-time inventory management and cargo consolidation, as well as in processing such as packaging and labelling.

Most companies targeting the North African market have their labels in English, but countries like Egypt, Morocco and Algeria require them to be in Arabic. This re-labelling can be done in Malta.

Certification of Halal food has been identified as another possible growth area. While Malta is not a ‘Halal country’, service providers could cater for the certification. Companies can also pre-customs clear goods in Malta. For instance, goods travelling from China to Spain can be customs-cleared in Malta while in transit, resulting in time and efficiency gains for the producer.

The benefits of this centre aren’t limited to the more than 120 jobs that will be created,” said Cardona. ”It will also have a beneficial effect on exportation, where over a three year period Lidl will be increasing the value of products made locally from €3 million to €22 million.”

Putting it Right

There is certainly no shortage of opportunities and demand for warehousing facilities within the Freeport’s free trade zone is growing, but the space is very limited and fully taken up. However, the country has recognised the need to find alternative ways to support its growing cluster. The Maltese government favours an option that would see free trade zones established in existing warehouses in various parts of the island. This solution would require legislative changes, as well as enhanced security measures to ensure that goods stored in

these warehouses are not sold illegally. The country will also see the opening of a new logistics hub running over 8,000 square metres of land in Hal Far. Additionally, the Malta Freeport has recently indicated an interest in investing a further €200 million in port facilities and to increase its current capacity to 4.5 million TEUs in the coming years.

While the Freeport’s ability to handle large ships will continue to give Malta an edge, logistics firms highlight that some fundamental issues need to be addressed. They say Valletta Grand Harbour currently suffers from a number of bottlenecks, such as old practices, gate limitations and lack of quay space to organise professional cargo operations. In addition, costs are reported to be quite high, with port charges in Malta being double those in Spain.

Industry experts also propose the introduction of less complex procedures related to customs clearance, as well as work permits and immigration procedures.

Learning Logistics Lessons

Investment in equipment and operating systems also has to go hand-in-hand with investment in human resources. The government is looking into strengthening education and training as the sector needs expertise, not just at tertiary education level, but also at mechanical and operational level. The authorities are studying best practices from successful trade centres such as China, Dubai and Singapore, and the government’s commitment to address any bureaucratic obstacles and infrastructure challenges will be watched closely.

While the throughput at Malta Freeport is set to surpass the 3 million TEU mark once again in 2017, not all players are recording the same growth figures. The challenge for the future will be to develop a truly multi-modal logistics network and find ways to better connect sea freight to air freight, as well as global trade to local warehousing. n

The Malta Freeport Malta Freeport’s two container terminals are among the biggest in the Mediterranean. Terminal One has a mainline quay length of 1,000 metres with a water depth of 17 metres, a total area of 489,000 square metres, 10,270 container ground slots and 597 reefer points. Terminal Two has a total operational quay length of 1,173 metres, 4,866 ground slots, 344 reefer points and a total area of 224,000 square metres.

Country Report MALTA 2017 155

Shipping & Yachting

Shipping & Yachting

European Leader Sees Record Growth A significant percentage of the world’s shipping fleet is today controlled from Malta, while the island has successfully honed its image as a premium location for the wider maritime industry.

156 Country Report MALTA 2017

Shipping & Yachting

A

s a small island nation, Malta is not necessarily known for world records and global leadership – its maritime sector though is an exception.

The country has built up Europe’s largest flag register and is making waves as a top location for the yacht and superyacht industry. Key to this success has been Malta’s well-run international maritime register where high service and safety standards are attracting clients from as far away as Asia and Latin America. Malta also boasts the third-largest transshipment port and has cultivated world-class support services to provide the best possible facilities and expertise to ship owners, financers and operators who choose to become a part of Malta’s rich maritime industry. Business streams such as ship finance are also being explored, while Malta seeks to become a centre for maritime litigation, with the setting up of a maritime court and the strengthening of dedicated arbitration services.

A Maritime Nation

Marine and maritime activities have long provided great economic value to the country’s well being. The island’s strategic location midway between Europe, the Middle East and North Africa has seen it used as a transshipment hub for thousands of years by everyone from the Phoenicians to the Order of Saint John and the British who turned Malta’s Grand Harbour into a major naval base. It is estimated that Malta’s maritime cluster contributes to the employment of more than 20,000 people. Supported by growth in a number of traditional and emerging sectors, it is expected that maritime activities will soon account for some 14% of Malta’s GDP. Shipping Services

Malta’s maritime community caters for practically all maritime requirements, and over the years its service providers have become renowned for their knowledge, commitment and attention. The Malta Freeport, which accounts for most of the container traffic on the island, is one of the largest players. It is operated by CMA CGM, with the Yildirim Group of Turkey being a major shareholder. Ship repair facilities are provided by Italian shipyard group Palumbo, Manoel Island Yacht Yard, Bezzina Ship Repair Yard and Cassar Ship Repair Yard. Malta also boasts a wide network of maritime lawyers, agents, brokers and insurers. In terms of shipping services, the only segment not being fully developed is ship management: Turkish company Palmali and Norwegian shipping company Wilhelmsen are among the few with a presence on the island.

On the other hand, almost every shipping line and company today has ships on Malta’s register. The island also hosts the Regional Marine Pollution Emergency Response Centre for the Mediterranean Sea; the IMO International Maritime Law Institute and the International Ocean Institute.

2015 and 2016 Performance

Ship registration has become the number one activity of Malta’s maritime centre as global ship owners increasingly turn to the Malta flag. In 2015, Malta’s shipping register grew by some 14% over the previous year, with the registered gross tonnage reaching 66.2 million gross tons at the end of last year.

Over 900 ships have been registered during the year.

This was a new record for the Malta Flag. Figures for 2016 show some 840 new registrations, and the registered gross tonnage increased further to 69.9 million gross tons. This meant that Malta continued to maintain its position as the leading European ship register, ahead of Greece and Cyprus, and the 6th largest in the world. Malta’s register ranges from LNG carriers to cruise ships, from bulk carriers to RORO ships and from oil tankers to superyachts (yachts of over 24 metres in length).

In particular, the number of high-end vessels on Malta’s register is constantly on the increase.

Over the past ten years, the global luxury superyacht market has expanded beyond all expectations, and the development of a new yacht code has made the registration of commercial and pleasure yachts, including superyachts, in Malta very attractive.

Despite the financial situation worldwide, 2015 and 2016 were also exceptional years with regard to superyacht registrations. There are now more than 575 superyachts registered on the island. However, there is much more to the country’s shipping industry than its registered merchant fleet: Malta is also home to a premier maritime cluster, including excellent yacht marinas, cargo port facilities, and shipbuilding and repair services. This is in addition to a wide range of finance, law, insurance and management facilities.

A Practical Approach

Malta has successfully attracted professional companies to its shipping sector because it has struck the balance between serious regulation and an industry-friendly approach. Dedicated legislation and tight registration criteria, all in line with EU Directives and International Maritime Organisation conventions, as well as a high-level 24/7 administrative service are among the driving Country Report MALTA 2017 157

Shipping & Yachting

forces behind the success of Malta’s shipping industry. Transport Malta, the regulator of the industry, goes to great lengths to emphasise that Malta is a flag of confidence and not one of convenience. The island’s status as an EU member state, its stateof-the-art maritime framework and the excellent safety records of Malta-flagged ships helped the island to be officially classified as a low-risk flag.

Ship owners appreciate that Transport Malta is on call 24-hours a day to deal with problems from managers or ships’ staff. The authority has technical staff on hand to guide ship owners through whatever issues might arise. In addition, documentation can be lodged outside normal Central European working hours – a service which is important for ship owners and financiers coming from the Americas or the Far East.

African and Eastern Mediterranean destinations means that a superyacht charter could be undertaken where a significant portion of the time is spent beyond the realms of the EU and its tax rules.

New Growth Areas

As one of only two open registers in the EU, registration is available to vessels owned by Maltese and non-Maltese persons, and in practice any kind of vessel may be registered, including one under construction. However, Transport Malta has put a premium on quality by introducing regulations which require ships aged 15 years and over to pass additional inspections, and ships over 25 years are not accepted on the register. The island now has one of the youngest fleets in the world. The average age of merchant ships registered under the Merchant Shipping Act during 2016 was of 9 years, thus decreasing the average age of all the registered merchant fleet to 12 years. A key reason for the flag’s success is also that Maltese law offers a huge degree of protection to the financier, giving operators significant advantages when dealing with banks.

While the international shipping community is still facing some headwinds with reduced trade volumes and freight rates near historically low levels, Malta’s shipping sector is expanding. The development of the international ship register has also encouraged owners and management companies to locate their operations in Malta and tap into the island’s professional services. Malta’s lawyers and corporate service providers are among the most experienced in international circles and can advise on all aspects of registration and operation of vessels. Specialist lawyers from the island today handle a wide selection of maritime disputes in both the so-called wet and dry sectors.

Maritime litigation is also a key growth area for the future. The Maltese government has announced its intention to set up a maritime court and to overhaul the maritime legal framework with a vice-admiralty court and a revamped International Arbitration Centre. Initiatives such as these are aimed at positioning Malta as a maritime hub providing all-embracing maritime legal and corporate services. With a growing international finance sector, the country is also destined to see future opportunities arising in banking and insurance, while Malta’s maritime community is convinced that it can compete with European ship management jurisdictions by developing and offering a greater level of sophisticated ship management activities.

Incentives for Yacht Owners

The Next Level

Malta’s regulatory framework is also attractive to yacht owners. For example, yachts registered as commercial vessels can benefit by paying an annual tax on the tonnage, rather than an income tax on earnings. For yachts which are not commercially registered, Malta operates an attractive system for purchasing and leasing. This enables yacht owners to pay VAT on their yachts calculated on the percentage of the time that vessels are deemed to have sailed in EU waters – based on the assumption that the larger the yacht, the less time it stays in those waters and vice-versa. Recently, the island has also adopted a reduced VAT rate on short-term yacht charters commencing in Malta. While such charters will continue to be subject to a rate of 18% on the cost of the charter, this will only be applied proportionally, based on the amount of time the charter is in EU waters. Malta’s proximity to North

The task at hand for Malta now is to build on cluster dynamics. The island hosts various specialist companies, including IT companies focusing on marine software engineering and electrical engineering companies who develop and install vessel-management systems. A number of maritime security companies have also set up shop in Malta. There are six marinas on the island catering for luxury, private and charter vessels. A maritime services park spanning 172,000 square metres is being constructed which seeks to transform Malta into a major hub for the offshore oil and gas industry. The sheer volume of facilities makes for a competitive and productive environment. Industry analysts keeping track of Malta’s maritime sector are certain that a promising future lies ahead if the island continues on its path of making consistent, steady progress. n

Young Fleet

158 Country Report MALTA 2017

The Malta Flag in Figures (2016)

1st in Europe

6th in the World

69.9 million gross tons

9 12

years

average age of vessels at registration

years

average age of merchant fleet

575+ superyachts

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Maritime Repair & Services Centre

Maritime Repair and Services Centre

Discovering Malta: Europe’s Secret Superyacht Hotspot

In its quest to become the yachting playground of the super-rich, Malta has gone decidedly upmarket, luring the finest yachts with its historic harbours and excellent repair and refit services.

M

alta has cemented its place among the Mediterranean’s yachting hotspots. A record-number of yachts and superyachts have been registered in Malta, with some 10% of the world’s superyacht fleet now flying the Maltese flag.

Capitalising on the island’s natural and infrastructural assets that have long made it a sheltered and secure base for vessels, Malta’s marinas compete today with the established hubs in Spain, Italy and France. Yacht owners are attracted by the excellent reputation of Malta’s ship registry, the high level of personal service and the variety of maritime facilities. From its position close to the major arteries of shipping, Malta offers deep natural harbours and well-equipped marinas, as well as ship-repair yards which can take the largest ships afloat. A new €7.5 million marina is currently being constructed, inviting the world’s most luxurious superyachts and yacht owners to rendezvous in Malta. However, industry professionals warn, Malta needs to keep its rising costs in check if it wants to be in a prominent position on the internationals yachting map.

Magnet for the Yachting Fraternity

Above all it is the island’s shipping register that has raised Malta’s yachting profile. Being one of only two open registers in the European Union, Malta allows any kind of vessel to register under the Maltese flag. World-famous pleasure boats such as the luxury clipper the Maltese Falcon and the mega160 Country Report MALTA 2017

yacht the World is not Enough sail under it. Close to 600 superyachts are currently registered in Malta.

Superyachts, of which there are some 5,000 globally, are officially defined as boats whose hulls at the water line measure longer than 24 meters. A superyacht requires a professional crew to operate it and costs at least US$6 million. The most appealing aspect of the register is the lack of bureaucracy that surrounds it. Transport Malta, the regulator overseeing the industry, offers yacht owners the opportunity to speak directly with the decision-makers and is on call 24-hours a day to deal with problems from managers or the ships’ staff.

Regulating for the Industry

The island’s regulations are a big part of Malta’s attraction to yacht owners. They can have their yachts registered as commercial vessels, meaning they pay an annual tax on the tonnage, rather than income tax on earnings. For yachts which are not commercially registered, Malta operates an attractive system for purchasing and leasing. This enables yacht owners to pay VAT on their yachts calculated on the percentage of time that vessels are deemed to have sailed in EU waters – based on the assumption that the larger the yacht, the less time it stays in those waters and vice-versa. Malta also protects superyacht financiers from defaulters. The regulations enable any person with an executive title to obtain a court-approved sale. The Merchant

Maritime Repair & Services Centre

Shipping Act also entitles the mortgagee to take possession of the yacht and to sell it privately to a third party – usually for much more than he/she would get from a judicial sale.

The island has also adopted a reduced VAT rate on short-term yacht charters commencing in Malta.

While such charters will continue to be subject to a rate of 18% on the cost of the charter, this will only be applied proportionally, based on the amount of time the charter is in EU waters. Malta’s proximity to North African and Eastern Mediterranean destinations means that a superyacht charter can be undertaken where a significant portion of the time is spent beyond the realms of the EU and its tax rules.

At the end of December 2016, Transport Malta also introduced guidelines allowing pleasure yachts to carry more than 12 persons.

Expanding Marine Infrastructure

Malta has the potential to become a leading yachting events destination. There is considerable interest in Malta – ranging from sailing regattas, to power racing and boat shows, as well as yachting awards and conferences.

Wilfried Buttigieg CEO of Yachting Malta

Already regarded as an ideal location for the winter months, Malta is experiencing growing numbers of yacht owners choosing the island as a home port, with five marinas catering for luxury private and charter vessels. Malta enjoys a mild climate all year round and a competitive cost structure, which help the island compete with other perhaps more fashionable, but often crowded and high-priced Mediterranean home ports. A sixth marina has just been completed in time for the 2017 yachting season. The Marina di Valletta, developed and operated by Italian company Azimut Benetti, provides an additional 274 berths and caters to yachts up to 28 metres. With the new investment, Malta can provide berthing for up to 2,200 yachts. Cafés, restaurants, shops, clubs, cinemas, theatres, sports clubs and gyms are almost always within walking distance of yacht marinas, offering a wide range of entertainment facilities for yacht owners, guests and crew.

Repair and Refit Centre

With a maritime history that dates back thousands of years to the Phoenicians, it is hardly surprising that Malta has built up an industry dedicated to the refitting and maintenance of yachts and boats.

The island boasts skilled boat builders, as well as shipyards, slipways and floating docks, catering for any vessel from a modest boat to the most luxurious superyacht. The Grand Harbour, at the centre of the island’s maritime activities, is also home to the main ship and yacht-repair facilities and includes Italian shipyard group Palumbo, Bezzina Ship Repair Yard and Cassar Ship Repair Yard.

Manoel Island Yacht Yard specialises in the refitting and repairing of vessels up to 40 metres, while Palumbo’s superyacht facility is regarded as one of the leading repair, maintenance and refit centres in the Mediterranean, capable of handling vessels up to 360 metres. It offers a fully comprehensive service to ship owners whose vessels are in need of repair and/or dry-docking. Some of the world’s best-known vessels regularly use the facilities for both scheduled maintenance and full refits. This segment is also poised for growth as construction of an entire maritime services park, spanning some 175,000 square metres, is currently underway.

All Aboard

Part of Malta’s attraction also lies in the fact that the island is steadily building a wider maritime cluster, including IT companies specialising in marine software engineering and electrical engineering companies developing and installing vessel-management systems. On hand, too, is a wide network of maritime lawyers, insurers and ship-finance banks. Yachting Malta, a joint venture between the Government of Malta and the Royal Malta Yacht Club, is the voice of the industry and its aim is to make Malta a better yachting base. Its primary role is to identify and attract high profile yachting events to the island. A maritime services park is also currently being built, and it is expected to consolidate an already vibrant sector and attract local and international companies.

Plain Sailing?

Offering a favourable framework for yacht registration and lease, Malta is becoming increasingly appealing to yacht owners looking for an unpretentious, beautiful and practical destination. The island intends to maintain and expand its footprint within this industry, and initiatives such as the development of the maritime park promise future growth.

Providing modern ship and yacht-repair facilities in combination with specialist facilities, Malta has created a dynamic international maritime service centre for the 21st century. However, although yachting is a lucrative sector, it is a sophisticated industry in which fair pricing, attention to detail and value for money are as important as in other sectors of the economy. If Malta wants to be a competitive contender, pricing for marinas and yacht services, as well as charges for water and electricity, need to be in line with comparable Mediterranean destinations. n Country Report MALTA 2017 161

Aviation

Aviation

Propelled to New Heights Malta’s aviation sector is buzzing with activity, as the country has built up a cluster of highly respected and well-recognised companies in a short space of time.

162 Country Report MALTA 2017

Aviation

T

he global aviation industry is touching down in Malta and is becoming an important contributor to the island’s growing investment pie. A legislative framework has turned Malta into a recognised address for the registration of both private and corporate jets, while maintenance, repair and overhaul (MRO) providers have long discovered Malta to be a profitable base. Lufthansa Technik, along with Vistajet, one of Europe’s largest private jet operators, are among the firms that have operations on the island. The country is also a leader in a broad range of other aviation services as it hosts firms catering for everything from crew training to engineering services and communication. Aviation is today one of the fastest growing industries in the country, and the government sees significant potential for further growth by attracting more aircraft leasing, finance and charter companies.

Creating an Industry

The history of Malta’s aviation cluster can be traced back to Malta’s strong position in the maintenance and repair field. Companies such as Medavia and Aeromaritime have been operating in the country for a long time, and upon the arrival of aircraft servicing company Lufthansa Technik in the early 2000s other companies chose to explore the opportunities available on the island. Malta’s growing International Finance Centre then triggered the desire to expand the industry and to update the country’s aircraft registration and finance laws.

Malta’s first aircraft register was established in the 1960s, but was populated only by aeroplanes operated by the country’s national carrier, Air Malta, in addition to a small number of business jets and light aircraft. The introduction of a new Aircraft Registration Act in 2010 changed all this and helped develop Malta into an aviation hub in the Mediterranean. Today, aviation contributes 2.5% to Malta’s GDP. By international standards, the local industry may be small, but it is growing at a modestly significant rate and the island’s vision is to build a sustainable, competitive industry base that encompasses a wide range of aviation services, including management, aircraft maintenance and financing, as well as training.

Record Interest

Malta’s aviation sector today aspires to follow in the successful footsteps of the country’s longestablished maritime industry, which still retains the largest shipping register in Europe. And the country’s expanding aviation register is generally regarded as a key driver behind the growth of the industry. 2015 has been a record year for Malta’s aviation register. Transport Malta, the regulator, registered a total of 61 new aircraft, with 2015 bringing a number of firsts. Amongst others, Transport Malta registered two Airbus A340s and a Sukhoi Superjet 100, the latter being the first ever model of its type to be registered in the European Union. In addition, six new air operators were certified, while the number of pilot and engineer licences also increased. 2016 also turned out to be a successful year, with new aircraft being registered.

There are now more than 240 aircraft and some 30 operators listed in the Maltese aviation registry.

Attracting Global Companies

While Luxembourg and Ireland have traditionally been Europe’s aviation hubs, key players in the global aviation industry are increasingly relocating to Malta. Corporate charter airlines such as Comlux, Orion Malta and Air X Charter have all registered aircraft in the country. Aircraft management companies DC Aviation and Hangar 8 also established operations on the island, while in 2016, Austrian private jet company VistaJet relocated its headquarters and registered 50 aircraft, adding to the increasing number of private jet companies choosing Malta as an ideal location for the management of their fleets. VistaJet’s move meant that the company registered business jet aircraft worth $1.8 billion on the Maltese registry, making it the biggest aircraft operator in the country. But it is not only European companies setting up shop in Malta; the country equally draws interest from companies in the US and Asia who are keen to access Europe and Africa.

Country Report MALTA 2017 163

Aviation

Regulatory Advantages

Finance Focus

This growth is due in no small part to the sector’s helpful legislation. Malta’s Aircraft Registration Act strives to do away with unnecessary red tape and regulatory burdens, while maintaining the added protection of being fully recognised by Maltese and EU law. The legislation allows the registration of an aircraft while it is still under construction, the recognition of fractional ownership and the regulation of trust agreements in relation to aircraft. Transport Malta offers fees that are amongst the lowest in the EU, as well as streamlined regulations that are in full compliance with the international safety standards set out by the European Aviation Safety Association (EASA). The Civil Aviation Directorate of Transport Malta also provides an attentive, personal service to companies setting up in Malta.

As well as developing cutting-edge legislation, Malta has recently sought to position itself at the forefront of aircraft finance transactions. The country has long ratified the Cape Town Convention, which is widely recognised as the market standard in aircraft finance. The Convention provides certainty to investors in the event of debtor defaults and details procedures that should be undertaken if this happens, such as taking possession or control of the aircraft, selling or granting a lease on the aircraft, and collecting or receiving any income or profits arising from the management or use of the aircraft. In 2016, the Aircraft Registration Act also underwent some fine-tuning and areas such as insolvency proceedings and mortgage enforcement have been tweaked.

Growth in Aircraft Registrations 2011-2016

2016

241 213 165 155 128

2015

2014 2013 2012

103

2011

164 Country Report MALTA 2017

We are operating a three-bay hangar at Malta International Airport delivering base and heavy maintenance services, as well as cabin modifications. We presently employ 180 people in Malta, and we are looking to further develop our local presence. Malta offers a convenient location, stable business environment and skilled workforce, that support companies in growing their business.

Jeremy Remacha CEO at SR Technics

Aviation

Our new contract to service the easyJet fleet is of major importance for our facility. It will allow us to increase the workforce by at least 50 new colleagues. We require skilled labour to work on the aircraft, and while Malta has put in place educational initiatives, there is currently a lot of competition for staff. This is something that needs to be looked at.

Malta is also well placed for the structuring of air finance deals through various methods, such as syndicated loans and securitisation. A wide variety of asset classes can be securitised under Malta’s Securitisation Act, including lease/charter payments for aircraft. The regulator has also developed a procedure for aircraft leasing which makes the purchase and subsequent lease of an aircraft more attractive, whereby VAT becomes due only for the time an aircraft operates in the European Union. In addition, Malta offers the aviation industry a competitive tax system and access to over 70 double taxation treaties worldwide.

Marcus Motschenbacher CEO of Lufthansa Technik Malta

Leasing Business

even greater share of top-tier talent and world-class firms by extending tax-friendly policies, originally drawn up for the finance industry, to the aviation sector. Foreign aircraft managers coming to Malta can now benefit from a reduced income tax rate.

These advantages, combined with EU membership and the fact that English – the global language of aviation – is one of Malta’s official languages, enhances the country’s proposition as a base for aviation operators.

Niche Opportunities

With 40% of the world’s aircraft being leased today, aircraft leasing proves to offer tremendous opportunities for Malta to position itself as a Mediterranean hub alongside established or emerging centres. The main challenge for Malta’s aviation finance and leasing industry in meeting its own growth targets is to develop the required expertise, but the industry is confident that with increased exposure to international transactions it will quickly develop a track record of high-quality work. To take full advantage of the growing aircraft leasing and financing markets, it will be important for Malta to further develop its tax treaty network, in particular with the large and developing economies in Asia that are increasingly on the radar of the industry.

As part of its aviation sector development strategy, Malta is supporting diverse activities, including, but not limited to, MRO operations, backoffice set-ups, R&D and the production of aircraft components. A number of smaller companies have already built up a reputation for quality and craftsmanship in fitting and refurbishing aircraft.

The sector offers a range of opportunities in profitable niches such as custom IT design or specialist airline reservation call centres. Major airlines also regard the country as a recruitment location due to the language abilities of the Maltese, and another market being developed is aircrew training. There is room for expansion in the area of pilot training due to lack of flight simulators, but it is already possible to enrol in a number of flight academies on the island. In addition, Malta invites companies to take advantage of its licence regime for airborne telecommunications.

Aviation Ecosystem

Growth Ahead

Emerging business streams in aircraft leasing and finance are strongly supported by investment in physical infrastructure, such as the €17 million, 200,000-square metre Safi Aviation Park, which hosts a number of business aircraft operators and MRO facilities. The government sees this development as instrumental in attracting larger aircraftleasing and charter companies, thus sustaining the industry’s upward trajectory. In addition, law and accountancy firms provide a growing number of ancillary services and are able to assist aircraft owners, managers, lessors and lessees, financiers and aircraft MRO facilities on a wide range of issues. They advise on sale and purchase deals, aircraft registration, chartering and leasing, and the drafting of aviation-related service agreements pertaining to maintenance and repair.

The growth of the industry has also allowed the establishment of flight academies, as well as permitting the Malta College of Arts, Science and Technology (MCAST) to begin offering aviationrelated training. Added to its very supportive environment, Malta has taken strides to attract an

With a rapidly growing aircraft register, appealing legislation and a strong support infrastructure, Malta’s aviation industry looks set to continue its extraordinary expansion. Although the global aviation industry is challenged for profitability, growth for the years ahead seems to be assured by an increasing demand for safe and efficient transport in nearly every corner of the world. Due to its lower cost-base and competitive fiscal framework, more and more companies are choosing to capitalise on the opportunities available on the island.

This implies that the aviation ecosystem will grow further and create more opportunities for service providers to expand in tandem with the sector.

The government has also announced its intention to invest heavily in the aviation industry’s research and development sector in order to retain its competitiveness on a global scale. Should Malta’s aviation sector maintain, or even improve, upon its recent performance, there is little doubt that it will achieve its goal of emulating the success of Malta’s maritime industry and build up the critical mass to reinforce its position. n

Country Report MALTA 2017 165

Construction & Real Estate

Construction & Real Estate

A Changing Skyline: Malta Builds for the Future Malta’s newest wave of construction is reflecting rapid economic growth and could lead to a radical transformation of the island in the coming years, including ambitious infrastructure projects and controversial high-rise developments.

W

ith a booming economy demanding commercial space and a desire to attract affluent property investors, many think the time is right for a 21st century makeover of certain areas on the island. There is a lot of enthusiasm to create iconic buildings with unique design features that can cater for the needs of modern Malta. However, proposals for high-rise developments have seen a mixed response and sparked a debate about building-height limitations, Malta’s unique island character, and most of all, what the country should look like a generation from now. There is widespread agreement that Malta is at a historic tipping point in its development due to a shortage of affordable housing, an influx of people moving to Malta for work and leisure and the perception that the small Mediterranean island is running out of space.

166 Country Report MALTA 2017

Construction & Real Estate

Our economy is growing, the property market is booming. Due to our limited land mass, more high-rise buildings will be constructed in the future. We are devising new building regulations that can better cater for health and safety issues in this new reality.

We also separated the Planning Authority and the Environment and Resources Authority, which were one entity previously. I believe this is the best way to safeguard the environment and protect Malta’s heritage for future generations.

Chris Agius Parliamentary Secretary for Planning and the Property Market

Malta’s economic growth has driven up rent prices.

Government is subsidising rents for lowincome earners but we realised that there isn’t sufficient affordable housing available. To address this situation, we already identified some 16 sites to construct over 680 new affordable housing units.

Michael Falzon Minister for the Family, Children’s Rights and Social Solidarity

A €53 million loan for social housing has been sealed, funding 680 housing units across Malta. The Malta Government will do its utmost to assist vulnerable families in need of affordable accommodation.

Roderick Galdes Parliamentary Secretary for Social Accommodation

We are ready to support innovative ideas that can take Malta’s built environment to the next level, while respecting our centuriesold heritage and environment.

Johann Buttigieg Executive Chairman of the Planning Authority

The Accidental Millionaires

Malta has no shortage of historically distinctive buildings, and much of the century-old architecture that dates back to the time of the Knights of St John and beyond has been preserved. In modern times, Malta experienced its first building boom soon after the island gained independence from Britain in the 1960s, with the start of tourism and industrial development. Home ownerships schemes, which provided land for families to develop their homes, were introduced in the years that followed. However, it was not until the 1990s that the residential market really took off, in parallel with the economy. Home prices started to climb steadily, and many homeowners who purchased real estate with the help of government schemes actually acquired a decent net worth on the back of their investment. It was Malta’s decision to join the EU in 2004 and the Eurozone in 2008 that injected further confidence into the market. Increasing numbers of foreign buyers and a basket of tax amnesties led to an inflow of foreign investment in the property market. Prices increased up to 20% annually, showcasing the powerful potential of housing investment.

population density, and the decent net worth one can acquire through real estate, Malta has developed a culture of home ownership, within owner-occupancy rate of around 75%. This compares well with the EU average of 73% but is much higher than the rate in larger countries such as Germany (42%).

In terms of residential property, the industry has seen a shift to high-value lifestyle developments, providing a mix of luxury apartments, commercial outlets and leisure amenities. Demand for commercial space has led to the construction of new office blocks and the modernisation of older ones. The upgrading of the road network as well as an €80-million project to transform the historic entrance to the capital, Valletta, including the building of a new parliament, have also provided many contract opportunities. Similar projects are expected to stimulate the industry in the years ahead as infrastructural expansion is high on the agenda. Malta’s infrastructure is no longer keeping up with demand; and there have been calls for the development of an infrastructure delivery plan to ensure that the country builds and maintains the infrastructure it needs to remain competitive in the long term.

Family-run Firms

A Short and Shallow Slowdown

While the onset of the global economic crisis witnessed a decline in the number of Europeans buying holiday homes, Malta’s construction and real estate sector has ridden out the economic storm better than most others in Europe. Property prices have remained largely stable, with the exception being the affordable and first-time-buyer segment. Inspired by rising prices and inflated expectations, developers overestimated the demand for this type of property. In the past two years, Malta’s economy expanded faster than many expected, and the construction and real estate sectors benefited from a growing number of foreign companies and expatriates living and working in Malta.

They have absorbed much of the over-capacity and helped Malta’s rental market thrive.

Another Building Boom

Construction cranes towering Malta’s skyline are currently the most visible symbol of the sector’s renewed upswing. Malta’s construction and real estate industry accounts for some 10% of GDP. The construction industry is also a major employment driver, accounting for some 7% of the workforce.

Because of the small size of the country, its high

Malta’s construction industry is mainly composed of small, independent, family-run operations, and dominated by a handful of large companies that often act as both developers and construction companies. Key examples of companies involved in this sector are the Tumas Group, GAP Developments and the Gasan Group. They are responsible for most signature projects on the island. The list of major construction companies includes Attard Bros, Bilom Group, Vasallo Group, AX Holdings, Rite Mix (Gatt Bros.), Blokrete and the Polidano Group.

These companies all focus on residential, commercial, industrial and infrastructure construction services. Most of the activity is focused on Malta itself, but the larger operators seek strategic partnerships on international projects as well, especially in North Africa and the Mediterranean region.

In the real estate segment, the sector is dominated by a number of major players, including FrankSalt Real Estate, Dhalia and Belair, as well as international networks such as Remax and Chestertons. Real estate agency Sara Grech has joined forces with Hamburg-based Engel & Völkers. Renowned international real estate brands Sotheby’s and John Taylor have also moved into Malta servicing high-net-worth individuals seeking property.

Country Report MALTA 2017 167

Construction & Real Estate

Price Rise

The success of the real estate industry in the late 1990s and early 2000s was once thought to be a thing of the past. However, the industry is flourishing once again, and properties are reported to be selling within 24 hours. Following a short slowdown, prices increased by almost 10% during 2015/2016 according to Knight Frank’s Global House Price Index. Malta’s rental market has also exploded in recent years. According to Malta’s national statistics office, rental costs for a two-bedroomed flat went up 29% between 2012 and 2015, with popular locations and properties experiencing even higher price rises. Depending on the type of property, sales prices for residential property range between €1,500 and €8,000 per square metre.

In the past, areas like Sliema and St. Julian’s were the most popular, however, real estate companies are also seeing huge potential in the South of the island as well as in Gozo. Valletta, which was once mainly the business and administrative centre of the island, has also experienced a reversal of fortunes. Recent regeneration efforts have attracted new and often affluent residents to move into Malta’s capital city. Its warm climate and relaxed Mediterranean atmosphere make Malta a top choice for people seeking to purchase property abroad. Some 5% of real estate is foreign-owned, mostly British, but Malta also attracts buyers from other European countries as well as the US and the Middle East. In recent years, the government also introduced a number of programmes, including a citizenship-by-investment and a residency-byinvestment programme, which have revitalised Malta’s second-home market.

A New Era

Since April 2016, the Planning Authority (PA) is responsible for development planning, while the protection of the environment is in the hand of the Environment and Resources Authority (ERA). The two authorities were previously operating as one entity, however they were separated for both departments to work more efficiently and to focus on their respective areas.

Both authorities are currently at the centre of proposals that would see a shift from low-rise to high-rise development. Following plans to construct several towers in different localities, including Sliema, St Julian’s and Mriehel, lobby groups are demanding the development of a nation-wide master plan, which regulates what should be built where as opposed to the current approach of approving or rejecting projects on a case by case basis. Meanwhile, the government has decided that high-rises can only be built in six specific areas.

Government has also launched a master plan for 168 Country Report MALTA 2017

the regeneration of St Julian’s main entertainment district, Paceville, however, the plan fuelled controversy and is currently being reviewed. If the decision is made to progress with these developments, the associated infrastructure surrounding it is vital, and any new plan should take into consideration how Malta’s community can absorb tall buildings in terms of transport and waste management.

Sector analysts point out that high-rise developments may appear to be an obvious answer to save further land from development in areas where land is finite and a growing economy puts pressure on the existing building stock. However, they also highlight that tall buildings typically cost two to three times more than low-rise buildings per square metre of development and require higher up-front costs.

Malta is a safe location, everything is close by and the weather is excellent.

Foreigners quickly feel comfortable because Malta is not as busy as the big city environments of London or Paris, and high-net-worth individuals enjoy a significantly higher level of anonymity than in other Mediterranean locations such as Monaco.

Providing Financing

Any developer who wants to embark on a project must make sure that project fits into the full picture. That way, it will not be discordant with the surroundings.

We have to be conscious and aware of the environment and the infrastructure, but we also have to be allowed to work.

Sandro Chetcuti President of the Malta Developers Association

Maltese developers have traditionally financed projects through the issuance of bonds and presales. It has also become common practice to build projects in phases and sell units in one phase to secure finance for the next development stage.

While in many cases the developers behind the current proposals are also owners of the land, there is awareness that it is one thing to plan high-rise buildings but another one to finance them. The main banks have started showing signs of a diminishing appetite for further exponential growth in real estate exposure. In recent years, developers have already found it difficult to borrow money from the banks after the European Commission and the International Monetary Fund had issued warnings about the banks’ large exposure to the property sector. Home loans for Maltese customers, however, have not been affected.

Sara Grech CEO/ President of ENGEL & VÖLKERS SARA GRECH

Construction & Real Estate

There is a lot of pressure on the housing market in the more popular areas, and we need to ensure that the affordability is retained. There is also a considerable shortage of quality, and I mean QUALITY property, for the more discerning buyer.

Douglas Salt Director at Frank Salt Real Estate

We are seeing a growing interest in Malta from all over the world, and our warm climate, seaside properties, and widespread use of English are having a positive impact on property prices as we think they will continue to increase. Today’s property prices could look like a bargain in a couple of years’ time.

Michael Hili Managing Director of John Taylor

The market for high-end real estate is actually larger than many people expect.

I would say around 25% of properties in Malta are worth more than €1 million.

Fabio Zuccaro COO of Zanzi Homes and Quicklets

Affordable Housing

A tax waiver scheme for first-time property buyers has also fed demand for property in the past two years. While this scheme has been extended in the 2017 Budget, it is becoming apparent that there is a shortage of affordable housing for lower-income earners, who have been priced out of the market in localities that are experiencing high demand. The government is determined to address this situation and has plans to build more social housing during this legislature, while also exploring possibilities to better regulate the rental market. Companies in Malta are also demanding more affordable office space, and there have been calls for government to get involved in this sector by developing and renting office space at favourable rates to control price inflation. While the government is already leasing out industrial space at subsidised rates and has developed a life sciences park offering laboratory space to biotech firms, particularly start-ups and microenterprises, government-owned property could become an economic tool to support the development of sustainable market rates.

An Opportunity to Innovate

With increased housing and office space demand, contractors are set to profit from a continuation of the robust upward trajectory of recent years. If high-rise projects go ahead, local developers will most likely bring in more foreign contractors with experience of larger-scale projects in areas such as construction methods, use of materials and site management. While Malta has some talented local architects, with many even boasting international experience, developers will inevitably need to form joint ventures to realise the projects that are currently on the drawing board. Greater exposure to foreign firms and their operations also presents an opportunity for Maltese construction firms to learn and develop. Globally, new materials, design approaches, health and safety standards, as well as advances in digital technology and big data, are creating a wave of innovation within the construction industry. Malta is also behind when it comes to the adoption of renewable energy systems and green roofs, and the coming years will see both domestic and foreign companies engage in an increasing number of projects.

Like most countries, Malta has been hit by the increasing costs of building materials over the past decades. Limestone is the only local mineral resource and is still frequently used on all types of buildings. Concrete blocks are produced locally, but most materials, such as gypsum, timber, steel, marble and granite, have to be imported, resulting in slightly higher prices. Labour costs in the industry, however, are lower than in most Western European countries. An ample pool of builders, engineers and surveyors is available, with Eastern Europe supplying many skilled and semi-skilled workers. North African and Syrian workers have also entered the labour pool in recent years.

Bubble Risks?

While Malta’s growing commercial and residential markets will be important contributors to the construction sector’s near to mid-term growth prospects, from a socio-economic perspective, there is fear the current development boom could lead to increased property speculation and to a bubble that can easily burst if demand falters. According to real estate agents, some 30 to 35% of tenants in Malta are working in the iGaming industry, and any regulatory changes that would make Malta less attractive could have a ripple effect on the real estate industry. Furthermore, much of the projected supply is at the higher end of the market, and, future growth will have to be driven by the highnet-worth segment. However, many believe the property market will maintain its current upward trend due to stable low-interest loans, a thriving economy and high demand as the number of foreigners coming to Malta to work and live is set to increase further in the future. Analysts also point to the rising income of the Maltese population and their desire for higher quality homes as an indicator of future demand.

National Vision

The country’s vision for the future entails developing a cosmopolitan and creative environment for businesses to grow and people to live and work in.

The construction and real estate sector has huge opportunities to capitalise on this vision by providing houses and offices that meet the demands of Malta’s new economy. The Maltese appear to be broadly divided about high-rise developments, and there is growing recognition that towers should not be constructed without serious consideration.

While the outcome of this debate is yet to be seen, it is becoming increasingly apparent that Malta needs to speed up its decision-making process on infrastructure projects if it wants economic growth to continue, and this alone, should ensure that the prospects for the sector remain firm. n Country Report MALTA 2017 169

Business Operating Environment

Business Operating Environment

Malta Director’s Guide Business Culture

Business Hours

Up until 1964 Malta was a colony of the United Kingdom, and British culture still underpins the Maltese way of doing business. At the same time, meetings are much less formal and business is conducted in a more leisurely manner than in Northern Europe. However, appointments are necessary and should be made one to two weeks in advance. As in most Mediterranean countries, the concept of time is a little more relaxed than in countries to the north. Nevertheless, punctuality is expected and appreciated.

There is no specific protocol for the exchange of business cards, but it typically happens when potential business partners meet for the first time.

Business attire should be smart, with conservative suits and ties for men, and suits or dresses for women. Work contacts are usually greeted with their title, if they have one, followed by the surname. However, once a relationship has been established, only first names are used.

Office hours are generally 8.30 am to 1pm, and 2pm to 5.30pm, Monday to Friday. Some government departments work half days in summer, but many have adapted to ensure offices are manned throughout normal business hours, and the private sector continues to operate normally throughout the year. Factories usually start at 8am and run to 5pm. Most banks open from 8.30am to 2pm Monday to Friday, and Saturday until 12.30pm. Most shops open from 9am to 7pm Monday to Saturday, while some close for lunch between 1 pm and 4pm. Most retail and commercial shops are closed on Sunday.

Language

Most business correspondence is carried out in English, which is one of the country’s two official languages, Maltese being the other. Laws and regulations are published in both languages. Many Maltese also have a good command of Italian and a sizeable proportion also speak either German or French.

170 Country Report MALTA 2017

FDI Attractions & Incentives

An open economy with a long-established history of trade, Malta has always actively sought foreign direct investment (FDI), both in existing companies and in new ventures. With a well-balanced mix of incentives that support and ensure longterm competitiveness and growth of companies setting up in Malta, the island attracts record levels of foreign investment, amid intensifying global competition. Companies need to apply to Malta Enterprise to determine eligibility, and to access assistance. Incentives include most of the internationally available investment incentives.

• Cash grants/incentives • Tax exemptions • Property assistance / other fiscal incentive • Training and labour market assistance • Loan guarantees, cheap loans or finance • Target sectors • Sector specific incentives

Business Operating Environment

Contact Agencies

Malta Enterprise (www.maltaentreprise.com) is the investment promotion agency and guides companies through the setting-up process, from coordinating incentives and organising premises, to facilitating contacts with other institutions. Malta also offers ‘Business First’ (www.businessfirst.com.mt), a one-stopshop for local businesses and foreign investors wishing to establish operations on the island.

Additionally, Malta has set up a number of sector-specific promotion agencies.

FinanceMalta

Trade Malta

Malta Marittima

Gaming Malta

financemalta.org

trademalta.org

gamingmalta.org

maltamarittima.org.mt

is a non-profit publicprivate foundation set up to promote Malta’s international Business & Financial Centre, both within, and outside of Malta.

It brings together and harnesses the resources of the industry and government, to ensure Malta maintains a modern and effective legal, regulatory and fiscal framework in which the financial services sector can continue to grow and prosper.

is a public-private partnership formed between the Government of Malta and the Malta Chamber of Commerce, Enterprise and Industry. The organisation is an executive agency dedicated to supporting Maltabased businesses to reach international markets with their products and services.

is an independent non-profit foundation set up by the Government of Malta and the Maltese Gaming Authority (MGA). Tasked with promoting Malta as a centre of excellence in the remote gaming sector globally, it is also responsible for liaising with the local relevant authorities to improve Malta’s attractiveness as a jurisdiction and enhance the ecosystem surrounding the gaming industry.

is a Government of Malta agency that brings industry and government stakeholders together in order to focus and promote the continued and enhanced development of the marine and maritime industries in the Maltese Islands.

In addition to the above, the following promotional bodies have also been established: Yachting Malta, Education Malta, Property Malta, ICT Malta and Conventions Malta.

Financial Support Services

Professional Services

Malta boasts a well-developed financial support infrastructure, and the country’s service providers offer access to a full range of banking, insurance and investment products. Some 30 retail, international, commercial and trade banks operate in or from the island. HSBC and Bank of Valletta are the leading retail banks. Internet- and telephonebanking are advanced and most banks offer foreign-currency accounts. Insurance companies provide all types of cover, ranging from personal, health, property, auto and travel to liability and employee protection. Investors can find a number of insurance management companies handling cover for large corporations and providing reinsurance solutions. With some 150 licensed investment services firms, corporations seeking assistance in the management of their assets are spoilt for choice. The country’s experienced wealth managers and stockbrokers are well connected and provide access to global capital markets.

Malta’s professional service providers attract growing numbers of international clients and are well positioned to offer support and strategic guidance to businesses planning to set up on the island. A large number of law firms operate on the island, most being part of international networks such as Lex Mundi and Lexis Nexis and are regularly ranked on Chambers, Martindale-Hubbell or similar. The international business community is strongly supported by an impressive selection of accounting and auditing practitioners, ranging from small boutique practices to the global ‘Big Four’ accountancy firms. Malta also boasts an array of corporate service providers offering business advisory and back-office support.

Professional fees, including legal and accountancy charges, are generally lower than in other Western European locations.

Country Report MALTA 2017 171

Business Operating Environment

Market Access

Airport & Air links

Malta’s internal market is relatively small and the real opportunity lies in using the country as a stepping stone to markets in Europe or North Africa. Strategically located in the centre of the Mediterranean, between Europe and North Africa, Malta has historically been the link between the two continents. As an EU member state, Malta offers instant access to the EU’s massive single market of over 500 million people. Companies can conduct business freely and sell their products in all EU member states and/or establish a business in another EU country. In addition to its close geographical position, Malta also has strong historical and cultural ties with North Africa, making it an attractive base for European, American or Asian companies wishing to enter the relatively untapped markets to the south. In addition, Malta is a signatory to some 70 double-taxation treaties.

Malta is connected by air to almost every major city in Europe and to key destinations in North Africa and the Middle East, most being just a few hours’ flight-time away. Cities such as Frankfurt, London and Paris can be reached in less than three hours, while a flight to Rome takes only one hour.

At present, Malta is connected to 95 airports in 86 cities. Malta is also being served by low-cost airlines, and carriers such as Ryanair and EasyJet are adding new routes. Malta International Airport (MIA), the island’s only airport, is centrally located and can be reached within 20 to 40 minutes from all towns and villages.

Short Travel Times: By air, main European hubs and North Africa can be reached in two to three hours Excellent ICT Connections: Satellite technology and high capacity fibre-optic submarine cables link Malta with Europe Major Transhipment Centre: Malta Freeport is a main regional hub EU Member State: Passporting rights for services and companies Regional Ties: Malta has cultural and historic connections to countries in North Africa and the Middle East CET Time Zone: One hour ahead of GMT Schengen Zone: Malta is part of the Schengen area, which allows travel between member states without internal border controls

Top 10 Passenger Airlines out of Malta International Airport (2016)

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

172 Country Report MALTA 2017

Business Operating Environment

Our economy has grown so much that finding staff in Malta can at times be a problem. We understand that corporates need to bring in employees from abroad and that this is difficult if it takes a number of months for a permit to be issued. We are currently reviewing all policies in this regard and want to make this process as smooth as possible, by improving timelines and curtailing bureaucracy.

Julia Farrugia Portelli Parliamentary Secretary for Reforms, Citizenship and Simplification of Administrative Processes

Overall, Malta is a safe country and is also regarded as a secure place to do business. In the coming years, we want to focus more on crime prevention and support measures and initiatives that reduce recidivism, including offering offenders new educational and employment perspectives.

Michael Farrugia Minister for Home Affairs and National Security

Ports & Shipping

Communications

Located uniquely on the main shipping routes, Malta has become a major Mediterranean transshipment hub. It has two main commercial ports: the Port of Valletta, traditionally known as Grand Harbour; and the Malta Freeport, situated at Marsaxlokk Harbour in the south of the island. The latter is one of the largest Freeports in the region, handling intercontinental cargo for distribution throughout the Mediterranean basin. Malta’s ports are serviced by many of the world’s major shipping lines, and the Freeport is connected to more than 100 ports worldwide. Regular passenger and cargo ferry services to Italy are also available. Malta’s logistics providers offer a full suite of regular and customised services that range from simple duty-free storage to facilitating customs-cleared, last-minute ordering in European markets.

Malta has seen huge public and private-sector investment in ICT over the past 15 years, and today boasts state-of-the-art infrastructure. GO, Melita and Vodafone are the three main telecoms service providers, while Malta hosts more than 200 IT companies, including international giants such as Microsoft, Oracle and Cisco. The island is internationally connected via five submarine fibreoptic links to mainland Europe, two of which are operated by GO and two by Vodafone and Melita respectively. This system is backed up by two satellite stations. Data centres are operated by the telecoms providers with their own fibre-optic cables, and also by other, smaller telecoms companies.

Fixed broadband is available via cable and ADSL, each with national coverage. MaltaPost is the main postal services provider. Delivery is efficient and reliable, with a three-day service to most mainland European cities. Local mail is delivered the following working day. All the main international courier services are represented on the island.

Local Transport

Daily commuting times within Malta are negligible compared to most similar urban-style areas in continental Europe. The island has a network of some 1,500 kilometres of roads, and an intensive programme of repair and upgrading is underway.

The public transport system offers connections to all localities in Malta and Gozo.

Utilities

Enemalta is the main provider of electricity generation and distribution services in the Maltese Islands. Electricity supply is at 240V, and is reliable. Malta has no natural domestic energy sources and thus far depends entirely on imported oil for electricity generation. However, Malta is planning to shift electricity generation from oil to gas.

The Water Services Corporation produces and distributes potable water throughout the Maltese Islands. Just over half of this is produced at the Corporation’s three reverse-osmosis plants, with the remainder coming from groundwater sources.

Petrol, diesel and kerosene are widely available. Malta has a network of independent petrol stations for transport fuels, but others – kerosene and light fuel oil – are delivered to the end-user by licensed distributors. WasteServ Malta is responsible for waste management. The collection of waste is the responsibility of local councils which engage private contractors to carry out the work – with somewhere between four and six collections a week. Recyclable waste such as plastic, paper and metal is usually collected once a week and can also be disposed of at Bring-in Sites found in every locality.

Workforce

Diligent, highly educated and multilingual, the Maltese workforce is the country’s most valuable asset. Most Maltese nationals speak at least three languages, Maltese, English and Italian, and some are even conversant in French and German.

Some 60% of students (18-24-year-olds) continue their education to the third level, with some 85 or more institutions to choose from, including the University of Malta and the Malta College of Arts, Science and Technology (MCAST).

Employment Regulation

The Employment & Industrial Relations Act governs the conditions of employment, termination of contracts and the organisation of workers and employers. Employment may be for a fixed or indefinite term, and on a full-time or part-time basis. The length of the probation period is normally six months. The standard working week is 40 hours. Employees in full-time employment are entitled to 24 days of vacation per year. Maternity leave for female employees in full-time employment is 18 weeks. The law also provides for up to four months’ unpaid parental leave in the case of birth, adoption or legal custody of a minor.

Country Report MALTA 2017 173

Business Operating Environment

The Employment and Training Corporation (ETC) is responsible for providing a public employment service and managing state-financed vocational training schemes, as well as for processing work permits for non-EU nationals. Malta’s laws on immigration are in line with the European Union’s visa obligations for foreign nationals. While EU and European Economic Areas (EEA) citizens are free to work and reside in Malta, non-EU nationals must apply for and obtain an Employment Permit, with the granting of the licence subject to a labour market test.

Recruitment

Malta has a good stock of specialist recruitment agencies. In addition, staff may be found through the Employment and Training Corporation. The country’s incredible climate and comfortable lifestyle also make it easy to attract foreigners to take up positions in Malta’s finance industry. The tax treatment of financial service professionals under the highly qualified persons scheme (see Taxation) is another incentive for professionals to relocate to Malta.

Indicative Range of Annual Gross Basic Salaries (€) CEO CFO CTO Financial Controller Part Qualified Accountant Warranted Accountant Junior Lawyer Lawyer Software Development Manager Software Developer Junior System Engineer – Intermediate IT Project Manager System Administrator Digital Marketing Manager Graphic Designer

€150,000 €120,000 €85,000 €57,000 €25,000 €36,500 €25,300 €35,000 €50,300 €22,500 €29,300 €39,000 €28,100 €38,200 €28,000

Source: Castille Resources 2016

Labour Costs

Malta ranks very favourably as a value-for-money location in which to do business. Salaries are on average 20 to 30% lower than those in the UK, Germany, France, Belgium, the Netherlands and Luxembourg. When social security costs and other employment taxes are factored in, total labour costs are even competitive when compared to the newer EU member states and significantly lower than those in other established members of the European Union.

Unions

Office Space

Two major trade unions, the General Workers Union (GWU) and the Malta Workers’ Union (UHM), dominate the labour landscape, alongside a number of smaller sector-specific unions.

Collective bargaining is common, and agreements reached between employers and unions are binding in law. Labour disputes are usually resolved quickly; strikes and stoppages are rare occurrences.

Built to the highest standards and often enjoying magnificent views, Malta offers a wide range of commercial property for rent or purchase. Office space is available in purpose-built office blocks, as well as in converted houses and flats, or within some of the new, large mixed-use developments.

Sliema and St. Julian’s are popular locations, with Tigné Point in Sliema and the Portomaso Business Tower in St Julian’s being prime venues. Valletta, the capital, is the administrative centre, offering office space in prestigious townhouses or centuries-old palazzos. A number of business centres in different parts of the island provide fully equipped offices that are available on flexible terms, with meeting rooms and a receptionist service as part of the package. A large number of local and international real-estate agents provide sales and letting services and can assist in locating suitable property.

174 Country Report MALTA 2017

€90,000 €70,000 €60,000 €42,000 €20,600 €29,800 €20,300 €28,000 €43,600 €18,700 €24,000 €31,000 €23,300 €32,000 €22,700

Business Operating Environment

Costs of Commercial Space

Type of Office Space

Prestigious

Approx. Rental Prices in €/m2 per annum

Approx. Sales Prices in €/m2

€380

€6,000+

Professional

€250 €4,000

Economical

€120 €2,000

Costs of Residential Space

Type of Residence Approx. Rental Prices

Monthly

Approx. Sale Prices in €/m2

Prestigious

€6,000

Professional

€2,500 €4,000

Economical

€800

€8,000+

€1,500/2,000

Source: ENGEL & VÖLKERS SARA GRECH

The country’s tax system was vetted by the European Commission upon Malta’s accession to the EU, and has since been approved as fully compliant with all EU requirements. This system has been in use in Malta since 1948 and has also been approved by the Organisation for Economic Cooperation and Development (OECD).

Companies incorporated in Malta are considered to be ordinarily resident in Malta and are subject to tax on their worldwide income and capital gains. Companies incorporated outside Malta are considered residents of Malta if their management and control is exercised in Malta, but as they are not domiciled in Malta, they are subject to tax on income arising in Malta and on foreign income (but not capital gains) that they receive in Malta.

Companies that are not incorporated, nor managed or controlled, in Malta are subject to income tax only on income and capital gains arising in Malta.

As part of the global fight against tax fraud, the importance of substance and the need for sound commercial drivers when structuring international operations has increased. Although the actual tax impact depends on the specific circumstances, companies are required to show that their Malta operations are genuine and being run from Malta.

In broad terms, this means companies must show that the management, control and day-to-day decisions concerning business activity are taken in the country.

Double Taxation Treaties

CORPORATE TAXATION The Maltese tax system is the only remaining full imputation system in the EU. This means that tax paid by a company will essentially remain a prepaid tax on behalf of the tax liability of shareholders. All companies resident in Malta are subject to income tax at a rate of 35%. There is no separate corporation tax.

Under Malta’s tax system, upon a distribution of profits, non-resident shareholders are entitled to claim a refund of tax paid at the corporate level to avoid any double taxation of corporate profits.

The refund may be equivalent to either 2/3 (when double taxation relief is claimed), 5/7 (in the case of passive interest and royalties) or 6/7 (in the case of trading income) of the tax paid at the corporate level. Income and gains from a participating holding (where a company holds directly at least 10% of the equity shares of a non-resident company, or meets certain other criteria set out in the law), are exempt from tax. Alternatively, instead of claiming this exemption, a company can choose to pay tax at the normal rate, and then receive a full refund of the tax paid upon a distribution of dividends.

Malta-based entities are also allowed to benefit from the country’s wide network of double-taxation treaties, with some 70 currently active and others pending. Malta has succeeded in brokering treaties with China, India, Singapore, the United Kingdom, Hong Kong, Luxembourg, South Africa and the United States of America, as well as most high tax countries. In addition to this, the Maltese tax system also includes Commonwealth relief, unilateral relief and the flat rate foreign tax credit, thereby ensuring that income arising from overseas is not subject to double taxation, even if there is no double taxation agreement in force.

OTHER TAXES Customs & Excise Duties

As an EU member state, Maltese customs regulations follow European Union Customs Procedures.

In general, goods from other EU member states are subject to VAT, while goods from outside the EU are subject to Customs and Excise rules. For full information visit the Malta Customs Portal at https:// customs.gov.mt/customs.

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Business Operating Environment

VAT

Value-added tax (VAT) applies to supplies of goods and services that take place in Malta, intra-community acquisitions and imports. The standard rate is 18%, and a 5% rate applies to the supply of electricity, printed matter, digital and confectionery. The VAT rate on holiday accommodation and sports activities is 7%. Zero rating applies to exports and intra-community supplies, international transport, domestic passenger transport, food, pharmaceuticals, and the supply and repair of ships and aircraft. Exemptions from VAT include the sale and leasing of immovable property, banking and insurance services, health, education and broadcasting.

VAT registration is mandatory for any person who carries out an economic activity (which may be a part-time activity), irrespective of the yearly turnover, unless such person’s income is generated from exempt without credit supplies. Under normal circumstances, a person is required to register for VAT under article 10 of the VAT Act. This means VAT-registrants are required to charge VAT on their taxable supplies made in Malta and have a right of input VAT recovery. On the other hand, persons whose annual turnover does not exceed certain prescribed thresholds, ranging from €14,000 to €35,000, depending on the type of activity undertaken by such persons, need to register under Article 11. Such persons do not charge VAT and cannot recover VAT on their expenses but are still required to have a VAT number (without the MT prefix), issue fiscal receipts and submit a declaration (simplified tax return) at the end of each calendar year which must be submitted by the 15th March of the following year.

Social Security

Malta has a comprehensive ‘cradle to grave’ social security system. This system is financed through social security contributions paid by each employee and employer. All employed and self-employed persons are required to pay Social Security Contributions (SSCs). The amount of SSCs payable by employees amounts to 10% of the basic wage, subject to a minimum linked to the national minimum wage and a maximum linked to the maximum pensionable income. An equivalent amount is payable by the employer in respect of each employee. The SSC amounts to 10% of the gross salary, with a minimum of €6.62 per week and a maximum of €42.57 euro per week, to be paid by both the employee and the employer. The employer must deduct the employee’s contributions from

176 Country Report MALTA 2017

the wages and must remit the amount due, including the employer’s share, to the Commissioner of Inland Revenue by the end of the month following the month in which the wages or salaries are paid. Self-employed persons pay contributions at 15% of their profits, subject to a minimum and a maximum. Payments by self-employed persons are made to the Commissioner of Inland Revenue every three months in arrears.

Maternity Fund Contributions

All employers are obliged to pay Maternity Fund Contributions for all their employees. By means of this fund, employers in the private sector are entitled to a reimbursement of the salary of the 14 weeks maternity leave paid to their employees.

Contributions are generally computed at 0.3% of the basic salary of each employee – subject to a maximum of €65 per annum per employee. Special rates of contribution apply in particular situations as set out in the Tenth Schedule to the Social Security Act. Personal Taxation

Individuals are charged on their income at progressive tax rates up to a maximum rate of 35%. A person who is ordinarily resident and domiciled in Malta is subject to tax on his worldwide income and capital gains. A person who is resident, but not domiciled, in Malta is taxed on income and capital gains arising in Malta and on foreign income (but not foreign capital gains) received in Malta. Nonresident individuals are subject to tax on income and capital gains arising in Malta. Residence will be based on where a person effectively lives and has a home. The Department of Inland Revenue will consider individuals who have spent in aggregate more than 183 days in a tax year in Malta as residents of Malta. Temporary residents, who are not ordinarily residents in Malta but have earned income from Malta, are subject to tax on this income but are not liable to tax on any income arising outside Malta.

The income of a married couple is treated as the income of a single person and is to be declared in one tax return. However, the tax is calculated either on the total income of the married couple’s rates or, if the married couple so elects, and subject to certain conditions, on the income of each spouse separately at the single persons’ rates. A separate tax band exists for working parents supporting children up to 18 years old who are not gainfully employed (or 21 year-olds if they continue their studies to tertiary education). These rates may be availed of if the parents do not declare their income jointly.

Business Operating Environment

Tax Rates (Basis Year 2016) Rate

0%

Single Joint Computation (€) Computation (€)

Parental Computation (€)

0-9,100 0-12,700 0-10,500

15%

9,101-14,500 12,701-21,200 10,501-15,800

25%

14,501-60,000 21,201-60,000 15,801-60,000

35%

60,001+ 60,001+ 60,001+

Expatriate Taxation

To attract highly qualified personnel from abroad, Malta has introduced an incentive scheme targeting foreign executives. Professionals in the financial services, gaming and aviation sectors can benefit from a flat personal income-tax rate of 15% on income up to €5 million. Any income over that figure is tax-free. To qualify for this tax incentive, the employee must earn a minimum of €81,457 per year (basis year 2015), among other criteria. EU nationals can benefit from the reduced tax rate for an unlimited period, EEA and Swiss nationals for a period of ten years and third-country nationals for four consecutive years.

Malta is also an attractive place for high-networth individuals and their families to relocate to. While Malta offers a unique lifestyle of unsurpassed quality that combines comfort with luxury, the modern and the traditional, and work with pleasure, the country has introduced a programme which offers foreigners favourable conditions if they purchase or rent property of a certain value in Malta or Gozo. The Global Residence Programme is designed to attract individuals who are not nationals of the EU, the EEA or Switzerland and

allows them to benefit from a 15% flat tax rate and a residence permit. A similar programme for EU nationals, the Residence Programme, was introduced in the summer of 2014.

Tax returns

The fiscal year aligns with the calendar year. Malta operates a self-assessment system. Taxpayers are required to declare their income and calculate their tax, taking into account payments in advance and any other tax credits. The tax payable must be settled at the time that the self-assessment is filed. For individuals, the deadline is 30th June.

For companies, the tax return date is nine months after the financial year end, but not earlier than the 31st March of each year. Tax returns of companies have to be accompanied by an auditor’s certificate.

Revenue assessments may be raised when a return is not filed, or where the Commissioner of Inland Revenue disagrees with the self-assessment.

Legal & Regulatory Environment

Malta has received international recognition for its stable and comprehensive regulatory framework in line with EU practice. Having joined the European Union in 2004, it adheres strictly to EU anti-money-laundering, insider-dealing and professional-secrecy laws, and its frameworks are aimed at attracting only international businesses of repute. Malta’s adoption of the euro on 1 January 2008 has added further stability and increased the ease of doing business across frontiers. The country’s legal system is rooted in both the Anglo Saxon common law tradition and the Continental European Napoleonic/ Justinian code. Maltese corporate law, however, is very firmly based on British models. It allows for a variety of structures, giving the investor considerable flexibility within a well-regulated framework.

Regulators & Authorities at a Glance Industry / Sector

Regulator / Authority

Website

Financial Services

Malta Financial Services Authority (MFSA)

www.mfsa.com.mt

Transport

Transport Malta

www.transport.gov.mt

Communications

Malta Communications Authority (MCA)

www.mca.org.mt

Tourism

Malta Tourism Authority (MTA)

www.mta.com.mt

Gaming

Malta Gaming Authority (MGA)

www.mga.org.mt

Development & Planning

Planning Authority (PA)

www.pa.org.mt

Environment

Environment & Resources Authority (ERA)

www.era.org.mt

Country Report MALTA 2017 177

Business Operating Environment

Corporate Business Structures

Malta’s comprehensive and accommodating regulatory framework makes corporate structuring available to prospective investors from all corners of the world. Business may be conducted in Malta in a variety of forms: as a sole proprietorship, a partnership, a limited liability company (private or public), a branch of a foreign company, a trust, a cooperative, an investment company with variable capital (SICAV), as well as in a number of cell company structures. Most entrepreneurs opt for the limited liability company. Partnerships are common in the professional services sector, SICAVs are the vehicle of choice for funds, and the protected cell company is common in the insurance sector.

The principal legislation covering companies and partnerships is the Companies Act (1995), modelled on the UK Companies Act and European law. Every company registered in Malta must have a registered office in the country. Companies and other forms of partnerships are required to submit a valid Memorandum and Articles of Association, or deed of association in the latter case, normally subscribed by at least two persons. Under certain conditions, it is also possible to register single member companies. Companies and partnerships are registered with the Registry of Companies based at the Malta Financial Services Authority (MFSA). Malta also excels in the speed and efficiency with which

178 Country Report MALTA 2017

investors can set up a company: once the Registrar of Companies has all necessary documentation and information in hand, registration may take as little as 24 hours.

A Limited Liability Company is formed by means of subscription to capital divided into shares. The liability of the shareholders is limited to the amount, if any, unpaid on the shares held.

The minimum share capital required to set up a private company is €1,164.69, with 20% paid up and subscribed to by at least two persons, except in the case of single member companies, with restricted objects. In the case of a public company however, the minimum share capital requirement is €46,587.47, with 25% paid up and subscribed for by at least two persons. Companies in Malta need to fulfil a number of statutory requirements.

A private company requires a company secretary and at least one director who can be either a corporate entity or an individual, Maltese resident or not. In addition, a Maltese company needs to have a registered office in Malta and a minimum of two shareholders. However, exemptions to this rule apply. Due to Malta’s fully-fledged trustee regime, shares may be held by licensed trustees in a fiduciary capacity for and on behalf of the ultimate beneficial owners. In order to apply for Malta’s tax refund system and achieve the intended tax results, a company may be required to have additional substance in Malta. n

ASSET MANAGEMENT GROUP

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resources to create their own financial products or encounter regulatory constraints that may compromise an in-house solution.

We specialise in managing alternative asset classes including arbitrage, property and insurance-linked securities which have the ability to offer investment solutions with low volatility and potential for regular income and or steady capital growth.

MPG’s performance during challenging times is the strongest possible endorsement of its unique investment approach. As a result, institutional and private investors around the world are increasingly turning to MPG to provide an alternative to traditional asset managers.

MPG also has a specialist division that is dedicated to creating and managing mutual funds, securitisations, bonds and other types of listed securities for other asset management firms that may not necessary have the internal

Investing is our passion – and it shows in our results.

We are able to deliver financial products that may be promoted throughout the European Union and European Economic Community as well as certain jurisdictions in Asia and are able to assist asset management groups in promoting their financial products in jurisdictions where they may have limited access through language, regulation or cultural divide.

www.managingpartnersgroup.com | info@managingpartnersgroup.com Cayman Islands Managing Partners Investment Management Limited Cayman Financial Centre Grand Cayman KY1-1104 Cayman Islands T: +1 345 769 0030

Malta MPL Asset Management Limited Level 6, The Hedge Business Centre Triq ir-Rampa ta’ San Giljan Balluta Bay, St. Julian’s STJ 1062 Malta T: +356 278 63 100 F: +356 278 63 101

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Conference & Incentive Travel

Conference & Incentive Travel

Putting Magic into M.I.C.E. Better than a theme park destination – Malta’s many unique venues and an abundance of attractions will turn any event into an unforgettable experience.

E

xcellent facilities, year-round good weather and convenient connections to Europe’s major airports make Malta a dream destination for incentive planners and conference organisers: Showcase your brand under medieval vaults, come together at the company’s retreat by the waters’ edge, flaunt your black-tie-look at a gala under the stars, and treat the travelling press to a scuba-diving session.

Conventions Malta, a new governmental entity, has adopted an ‘access-all-areas-strategy’, meaning any location can be transformed into a formidable event space. The organisation is also looking into the development of large-scale conference facilities as events are seeing increasingly larger number of participants.

Some 80,000 delegates visit the island each year. The EU, the Commonwealth, WHO, UNDP, Microsoft, IBM, Bayer, Roche, Cable & Wireless, Cadbury, Sony, Dell Computers, Eriksson, UPS, Opel, Deutsche Telecom and many others have already chosen Malta as their meeting place, and more are actively considering a Malta event.

With hundreds of years of experience as a meeting venue, Malta comprises everything you need and more. Historic venues, open-air locations and large, fully equipped conference rooms 180 Country Report MALTA 2017

are just some of the options available. Renowned for its high quality venues for seminars, workshops and conferences, Malta also offers some of the most luxurious, yet affordable accommodation.

The country’s compact size also allows for groups and delegates to enjoy leisure and team building activities, such as biking, rock climbing, diving or sailing, during a visit. All trips can be organised by one of the many destination management companies available on the island, to ensure a smooth, enjoyable and fun-packed stay.

Big & Boutique

As early as the 16th century Malta played host to the Knights of Malta, whose architectural legacy has provided the island with unique conference venues, helping the island to become a key destination for Meetings, Incentives, Conferences and Events (MICE). The island caters for anything from an eight-strong board of company directors seeking upscale accommodation and elegant entertainment, to a sales meeting for 1,000 company representatives or an annual general meeting of 2,500 people. Some of the most recent and notable events include the Commonwealth Heads of Government

Malta is an ideal location for professional associations and corporate clients alike, providing an authentic historical feel without the need of ‘Disneyfy’. In Malta, there is a space made just for you. You only need to come and discover it.

Edward Zammit Head of Conventions Malta

Conference & Incentive Travel

technology. The five-star hotel Xara Palace and Xara Lodge in Rabat, as well as the hotels of the Corinthia Group, are equally well suited for meetings and smaller conferences. The short distances between localities also mean that delegates can be accommodated in different hotels, as travel times between towns rarely exceed 15 minutes. Malta International Airport is located less than 30 minutes away from most hotels.

Well Connected

Many destinations attempt to mirror Malta’s welcoming attitude and great event flexibility, but not many can compete. The Eden Leisure Group has just invested in a new international conference arena, which will surely help Malta to grow the MICE sector further.

Martin van Kan Area General Manager InterContinental Hotels & Resorts

Meeting and the Valletta Summit, both held in 2015. Some of the biggest events include the 5th European Public Health Conference in 2012, which brought some 1,200 public health professionals from 60 countries to the island, while the Swedish natural cosmetic company Oriflame provided Malta with its biggest conference to date in 2010, hosting some 4,200 representatives.

Venues to Remember

Event organisers can make the most of Malta’s 7,000-year history with its scores of cultural and architectural venues, any of which would be ideal to turn a usually routine occasion into a truly memorable event. A particular favourite is the 16th century Mediterranean Conference Centre, which served as a hospital during the era of the Knights of St John and can host 1,500 guests at gala dinners or 4,000 visitors at standing receptions. Many of Malta’s magnificent castles, stunning palazzos and impressive forts, some of which have been used as film locations for movies such as ‘The Da Vinci Code’ and ‘Gladiator’, make it easy to add a luxurious atmosphere and special accent to any function.

For a more contemporary note, available venues include theme parks, marinas, luxury yachts and exclusive sea-front properties. Most public spaces can be used for events and launch parties; receptions and dinners have already taken place at beaches, museums and village squares. The Malta Fairs and Conventions Centre (MFCC), located near the ancient walls of Mdina, is by far the country’s largest venue with a capacity of 10,000 people.

Accommodating Delegates

Many four- and five-star hotels are able to offer the highest level of accommodation, facilities and services to visiting delegates. The country has some 4,000 rooms in five-star hotels alone. Major brands such as Hilton, Westin, Radisson and Intercontinental all have hotels in the beachfront city of St Julian’s, giving organisers a choice of modern amenities, including meeting rooms, conference facilities and up-to-date

Malta is also closer to your home base than you may think. National carrier Air Malta and many other airlines offer direct flights to the island. Just a three-hour plane ride from London and two to two-and-a-half hours from other major European destinations, Malta offers a Mediterranean climate and glorious scenery that allows plenty of outdoor activities. This means conference and meeting delegates will enjoy every moment of their time on the island. They can visit Malta’s several World Heritage Sites, such as megalithic temples, and the country’s capital, Valletta; dive in the crystalline waters surrounding the island or take a nature ramble across Malta’s countryside. Options for sport activities and team-building exercises are limitless and include tennis, golf and rock climbing, as well as a treasure hunts in the ancient city of Mdina, or a jeep safari on Gozo, Malta’s smaller sister island, which is just a 20-minute ferry trip away.

Fully Equipped

Conventions Malta offers a variety of services designed to help event organisers. www.conventionsmalta.com provides specific information on the 64 certified destination management companies (DMCs), hotels, facilities, service providers and venues, audio visual companies, exhibition stand designers and event organisers. Malta is also excellent value for money. Most smaller venues such as palazzos and hotel ballrooms can be rented for around €2,000 a day, while hotel rates in the offpeak season can be as low as €40 a night.

A Packed Programme

While thousands may flock to Malta for its ideal location and excellent conference facilities, they return for so much more. With 300 days of sunshine, limitless leisure opportunities and first-class dining, Malta offers an abundance of attractions that can form a pre- or post-conference programme. A rich historical and cultural environment and the reassurance of a modern infrastructure all combine to cement Malta’s reputation as a choice hub for conferences and seminars: the ideal MICE destination. n Country Report MALTA 2017 181

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Travel & Living

Travel & Living

The Essential Expat Guide

Malta: Always Looking on the Sunny Side of Life

Malta’s Mediterranean charms are fascinating the growing number of affluent foreigners, expats and globetrotting professionals looking for a permanent or temporary home. Living in Malta is a unique experience, especially for those used to a hectic city environment.

The island’s small size and wealth of entertainment options mean that in Malta it is possible to have it all: work hard, play hard and relax by the sea, all in one day.

184 Country Report MALTA 2017

Travel & Living

Country Report MALTA 2017 185

Travel & Living

W

hat makes Malta truly extraordinary is not only its idyllic beaches, magnificent architecture or enviable climate, but also its unique, inspiring people. Bursting at the seams with the best of all things, Malta encapsulates the heart of the Mediterranean. History and beauty can be found wherever you go on the island. Fast-paced city streets and office complexes are located within minutes of picturesque bays, medieval forts and tiny fishing villages. With its economy booming, low unemployment, a relaxed way of life and no shortages of things to do and see, the opportunities are endless. The chance to live in a climate that has been voted the best in the world, and at a reasonable price, is certainly one that should not be missed.

Country

Anchored in the crystal clear waters of the central Mediterranean, the Maltese archipelago is situated just 90 kilometres south of Sicily and 300 kilometres north of Africa. Just over 316 square kilometres in area, the Maltese Islands comprise Malta, Gozo and Comino. The main island, Malta, has an area of 246 square kilometres. Popular for decades with tourists, Malta’s proximity to Europe means it is relatively easy to reach. Just an hour away from Rome and three hours from London or Frankfurt, the island offers visitors the chance to get away from it all and experience for themselves the beauty of its languid Mediterranean lifestyle, the charm of its island landscape and the vibrancy of its multi-cultural, multilingual, young and energetic social scene.

winter temperatures ranging from 15 to 20 degrees Celsius, Malta’s mild warm climate is considered to be the best in the world. Even in winter Malta enjoys an average of five to six hours of sunshine – and more than 12 hours a day in summer. The annual average rainfall is as low as 600 millimetres, mostly falling between October and March.

History

Language

A modern nation with ancient roots, Malta has been home to a wide range of civilisations and people over its 7,000 years of history. The island’s strategic position between Europe and Africa made it a key possession for its many settlers and conquerors: from Neolithic man to the Ancient Romans, the Byzantines, the Arabs, the Normans, the Knights of St John, the French and the British, all of whom have left a wealth of architectural and cultural treasures. The country’s archaeological sites pre-date Stonehenge and the Egyptian pyramids by more than 1,000 years, and the Neolithic temples are the oldest free-standing constructions in the world. Modern Malta was founded in 1964 following independence from Great Britain. The island became a republic in 1974.

Despite many strong linguistic influences and the fact that English is one of the two official languages, Malta has kept its own language alive.

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 one to be written in the Latin script. English is the main language of business, while laws and regulations are published in both languages. Many Maltese are also fluent in Italian and some even speak a fourth language, usually German or French.

Climate

A rocky Mediterranean island with a dry and sometimes windy climate, Malta enjoys around 300 days of sunshine per year. With average summer temperatures around 30 degrees Celsius and 186 Country Report MALTA 2017

Time

Malta lies in a convenient time zone for doing business across the world: one hour ahead of GMT, meaning office hours coincide with Asia in the morning, Europe throughout the day and the US in the afternoon. The country observes daylight saving time in summer, with the time shifted forward by one hour on the last Sunday of March, making it two hours ahead of GMT. On the last Sunday of October, the time is shifted back by one hour.

Travel & Living

Hotels

Modern comforts are served up with impeccable style and welcoming hospitality in Malta’s many hotels. Visitors can choose between two and threestar hotels, or a large range of upmarket ones with four and five-star status. Sea views are never hard to find wherever you choose to stay. Global brands such as Hilton, Starwood, Radisson and Kempinski all have a presence. One of the largest local players is the Corinthia Group. There are also a number of family-run Maltese hotels such as the Hotel Fortina and the Fortina Spa Resort, in addition to boutique five-star hotels such as the Xara Palace Relais & Chateaux. The island offers something to suit the most discerning of tastes: modern, luxury seaside hotels equipped with spa, private beaches and marinas; magnificent period hotels set in sprawling landscaped gardens; elegant 16th century buildings on the waterfront; and even an exquisite boutique hotel situated within a medieval palace.

Culture

Malta has a rich and diverse cultural heritage.

Successive waves of traders, occupiers and colonisers have left their mark. The Maltese character is imbued with the British legacy of a strong work ethic and powerful ambition, softened by the natural southern Mediterranean temperament. Maltese are very hospitable and helpful people, exuding the traditional warmth and spontaneity of the Mediterranean region. With such an eclectic mix of culture and a diverse population, it does not take long to feel at home here. Christianity plays a major role in the Maltese culture with each town and village celebrating the feast day of its patron saint.

Leisure Activities

Getting There

Malta is positioned as a gateway to Europe, North Africa and the Middle East. From most major cities such as London, Frankfurt, Paris, Rome and Istanbul it takes just two-to-three hours’ flying time to reach Malta International Airport (MIA), the island’s only airport. Regular flights are provided by Air Malta, the national airline, as well as other carriers such as Lufthansa, Emirates, Turkish Airlines, Aerosvit, Alitalia, Air France, Austrian Airlines, Scandinavian Airlines, Ryanair, EasyJet, WizzAir and Spanair. Malta is also a short 90-minute trip by catamaran to Sicily, and car ferries operate on the sea routes between the main port of Valletta and mainland Italy and Sicily.

Sparkling blue seas, excellent food and a buzzing night life have made it one of Europe’s most popular destinations. The variety of daytime activities available in Malta compares favourably with many destinations around the world, despite the small size of the island. Most of the picture-postcard bays are found in the northern region. With warm temperatures and clear waters around the coast you will certainly enjoy a dip in the Mediterranean – to swim or to explore the thriving marine life. You can also test your endurance rock climbing high above the deep blue sea on the majestic Dingli Cliffs; or wind down with a leisurely round of golf and afternoon tea on the lawns of the Royal Malta Golf Club.

Other activities include horse riding, jeep safaris and even sky diving. From autumn to spring Malta turns itself into a green island. A walk through the countryside is perfect for recharging your energy levels. You can also head to Gozo, Malta’s smaller Country Report MALTA 2017 187

Travel & Living

sister island only 20 minutes away by ferry. Gozo is an island idyll of hills, valleys and cliffs, where time moves slower and life can be savoured, minute by minute, second by second.

Arts & Entertainment

Although Malta is a small country, it has a great variety of world-class attractions. Its stunning historical sites regularly provide the backdrop for events such as concerts, plays or art exhibitions.

Every year promises a colourful blend of local and international events, entertainment and exhibitions – from the Carnival to May’s celebration of a traditional music and song festival, to the Malta Jazz Festival, the Isle of MTV music event and Malta Arts Festival in summer-to-early-October, and the magic of Valletta’s Notte Bianca. The Malta Tourism Authority have compiled a calendar containing over 250 events taking place throughout the year, with something to suit everyone.

Shopping

Malta has a wide array of shops, catering for all tastes and budgets. Most international chains and brands have a presence in the country, as well as a number of exclusive boutiques – not forgetting the traditional markets. If you’re shopping for arts and crafts to take home with you, look out for the renowned Malta lace, delicate silver and gold filigree or the colourful and creative Malta hand-blown glass. The main shopping districts are Sliema and Valletta, and shops usually open from 10am to 7pm, although some close for lunch between 1pm and 4pm. Most are closed on Sundays, except for those located inside the BayStreet Shopping Centre in St Julian’s, as well as some outlets in busy tourist resorts like Bugibba.

Sports

Water sports are popular in Malta. The conditions for scuba diving and snorkelling are excellent, with great views of reefs, caves and fish shoals. Also, the sea temperature never drops below 13 degrees Celsius, even in winter. The best dive sites can be found around the northern coast of Malta and Gozo. Besides diving, the Maltese Islands have other forms of sports to offer such as horse riding, hiking, climbing or sailing. Malta has one golf course, located at the Royal Malta Golf Club. Gyms can be found all over the island, as well as football or water polo clubs. There are also a number of highly popular sports events, including national water polo competitions, horse racing, clay pigeon shooting and football. Once a year the Rolex Middle Sea Race, a highly rated offshore classic, starts and ends in Malta, attracting some 80 participating yachts.

188 Country Report MALTA 2017

Cuisine

Maltese cuisine features many of the typical ingredients of the region: aubergines, tomatoes, peppers, courgettes, onions and garlic, together with freshly caught fish and seafood. Mediterranean herbs such as basil, mint, thyme, oregano and bay leaves are used in abundance, and flavours are enhanced by virgin olive oil. Typical year-round dishes include rabbit and bragioli (beef olives), and every meal is served with the renowned local bread made with sourdough and baked in a traditional wood-burning stone oven.

Dining Out

Dining out in Malta can be a wonderful experience: there are many restaurants which stay open late to enable you to enjoy a pleasant Mediterranean evening: from smart city restaurants in Baroque palaces to family-run trattoria-style establishments or seafront fish restaurants, the choice is wide.

Maltese food is served in most restaurants offering Mediterranean cuisine, but in addition there are numerous ethnic restaurants: Italian, French, Chinese and Indian are the most numerous, but you will also find Greek, Turkish, Russian, Thai, Japanese and many others.

Travel & Living

APPROXIMATIVE Costs of Selected Goods and Services in Malta

Loaf of bread

€0.92 One bottle of table wine

€5.00 One litre petrol (unleaded)

€1.32 Local beer in a bar (pint)

€2

Cup of black coffee

€1.50 Cinema ticket

€7

Tipping

Gratuity is usually not included in a bill. As in most other European countries, tips in restaurants are usually around 10 to 15% of the total. Tipping at a bar is not expected unless you are served by a waiter/waitress. Tipping is not the norm in taxis; however, you could tip up to 10% of the fare.

Public Transport

Being small enough to walk from one side of the island to the other in a day, getting around in Malta is easy. The public transport system is safe and cheap. A network of routes and a fleet of modern buses provide an extensive service across Malta and Gozo. A train service does not exist in Malta.

One litre of fresh milk

€0.86 Bus day ticket (standard fare)

€1.50

Leading local daily newspaper (weekdays)

€0.90

Car Hire & Taxis

Cars can be hired at reasonable rates compared to those in other Western European countries. All the major car rental companies have a presence in Malta. Local firms also offer this service, with or without a chauffeur. There are different types of taxis: the white taxis are fitted with meters and charge government-controlled prices – you can flag these down in the street; alternatively, there

are taxis owned by private companies that charge a set price depending on the location. Taxis at the airport operate on a different system, with set fares which have to be paid at the taxi ticket booth in the arrivals lounge.

Driving

Malta has a road network of 1,500 kilometres – even though it only takes one hour to cross the island. EU nationals (aged 18 and over) are allowed to drive on their existing licences, or exchange them for a Maltese one after living in the country for more than six months. Non-EU nationals can drive on their existing valid licences for a maximum of 12 months from the date of their last arrival in Malta. As in the UK, cars drive on the left.

Standard of Living

Malta is also one of the easiest places to relocate to and residents enjoy an exceptional standard of living: 10 months of sunshine, an English-speaking population, and a Mediterranean island setting in which it is easy to find one’s way around. Although Malta is a small country, it offers a variety of lifestyle choices that range from urban, cosmopolitan and luxurious to relaxed and rural. Boasting a diverse range of shopping, cultural and leisure activities, all at affordable rates, Malta provides expatriates with a unique opportunity to live every aspect of life to the fullest.

Cost of Living

The cost of living in Malta is one of the lowest in Europe and ranks somewhere in the middle in terms of a global league table. On average, the cost is one third of that in the world’s most expensive cities. Every day groceries are on average more expensive in Malta than in Eastern European countries, however they are cheaper than in most Western countries and global and business finance centres. Average rent for a one-bedroom apartment in the more popular Sliema/St.Julian’s area is around €650 per month, while in other localities it can be as low as €450. Banking, taxation, insurance, social security, utilities and communications services are sophisticated, professional and reliable, offering exceptional value without compromising on quality.

One night in a five-star hotel

€150

Country Report MALTA 2017 189

Travel & Living

Housing

The island offers a wide range of housing from contemporary high-rise apartments to traditional country houses and villas with a pool, furnished and unfurnished, all at competitive prices – in city, urban or more rural environments, according to lifestyle preferences. Popular villa areas are Santa Maria Estate in Mellieha, as well as Madliena and High Ridge in the vicinity of St Julians/Sliema. A number of five-star developments have recently been built on the island, including Portomaso and Tigné Point, which offer luxury apartments surrounded by commercial, health, fitness and leisure facilities and command the highest prices and rents.

Rents are paid monthly in advance. Utility costs are not included in rental charges and are charged depending on usage. Alternatives to renting a flat are hotel-style serviced apartments. Malta’s small size and excellent public transport facilities mean short commutes to work – no matter where you live.

Removal / Shipping

There is no shortage of shipping and relocation companies to meet the demands of people intending to relocate to Malta. Sometimes the employer will have an in-house or preferred user who aims to make the move as smooth as possible. Relocation companies also offer assistance with every aspect of the move, ranging from furniture transportation to the sourcing of schools.

Education

Malta provides an excellent standard of education.

Children can be educated in one of the private international schools, or enrolled in the local state, church or independent schools. All schools use the British model of education, which is compulsory between the ages of five and 16. Third-level education is offered through the University of Malta and other institutes and private colleges.

Childcare

Childcare centres are run by the state, the church and private organisations. Kindergarten is not compulsory in Malta but English-speaking kindergarten and pre-school facilities are widely available.

Healthcare

Malta has one of the best health services in the world. The main general hospital is the stateof-the-art Mater Dei Hospital in Msida, while most towns and villages have their own state-run medical clinics. Malta also has several private clinics and hospitals, such as the renowned St 190 Country Report MALTA 2017

James Hospital in Sliema. EU nationals resident in Malta are eligible to receive free medical treatment at public hospitals and clinics, but foreign residents are still advised to take out private medical insurance. EU food and beverage standards are strictly monitored in Malta, but it is still recommended to drink bottled, rather than tap water.

Religion

Over 90% of Maltese are Roman Catholic, with Christianity being prevalent since 60 AD when St Paul was shipwrecked on Malta; converting the local population. The Church still plays an important role in most communities, and most Maltese attend Mass on Sundays – there are no fewer than 365 churches on the island. Other Christian denominations present include Anglican, Church of Scotland, Greek Orthodox and Methodist. Malta also hosts Jewish and Muslim communities.

Travel & Living

A host of insurance companies offer all levels of cover, such as home, motor and health insurance.

If you plan to stay in Malta, it is advisable to apply for a Maltese eResidence document before opening a local bank account as this will speed up the process. If you have not received the eResidence before opening a bank account, you can use your passport. It is absolutely necessary in this case to provide a bank statement indicating your previous foreign address. You can also use utility bills for this purpose. Although procedures vary depending on the bank, your banker will most likely also ask you for an employment contract, an initial deposit and a lease agreement for your accommodation. All banks also offer foreign-currency accounts. Banks in Malta are open in the mornings from Monday to Saturday, with some branches offering late opening hours on certain days such as Fridays.

Home Help

Domestic and home help is relatively common in Malta. Many expatriates find they can afford domestic help that they could not have afforded at home. Most choose to employ a helper for cleaning, cooking, general household chores and child minding.

Media & TV

Pets

If you want to bring your ‘best friend’, you need to ensure that your pet is micro-chipped, vaccinated against rabies and blood tested. Malta is a member of the Pet Travel Scheme which allows pets from any of the countries covered by the arrangement to enter Malta without quarantine six months after a satisfactory blood test. There is also a wide variety of private vets, kennels and catteries.

Personal Financial Services

Malta offers a wide choice of banking options, including local, international and private banks.

The banks operate a strong network of ATMs and branches across the islands. All major cards are issued and accepted. All banks offer 24-hour telephone and online banking services to conveniently and efficiently manage your financial affairs.

Malta’s bilingual culture is also reflected in the media landscape, with half the newspapers published in English. Foreign newspapers can also be easily purchased. In addition to satellite and cable TV, the high penetration of superfast broadband has resulted in the launch of IPTV services to subscribers of Melita and GO. The content is diverse and international, including Italian, French, British and Russian programming. Radio programmes are primarily in Maltese with a number of Englishlanguage music stations. The recent introduction of digital radio is now providing an even greater choice.

Utilities

Energy and water supplies are stable. Tariffs differ between domestic and residential, with residential being the lower rate. Energy and water requirements are catered for by Enemalta and the Water Services Corporation respectively. Bottled gas is used in most households and can be purchased from delivery vans (in most areas once a week) or from special distribution centres. The electricity is 240 volts AC, 50 Hz, and sockets accept the threepronged British plug model.

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Travel & Living

Crime & Corruption

Few locations in the world can offer the same high standard of transparency, security and stability that Malta does. Crime is very low when compared to other major cities, and there is a general level of allround safety.

Visas and Embassies

As an EU member state, Malta’s immigration laws are in line with EU policies. The country is part of the Schengen zone. EU nationals are free to live in Malta. Third-country nationals who are family members of EU nationals living in Malta can accompany them. Non-EU citizens can find details about visa-exempt countries and visa application procedures on the website of the Maltese Ministry for Home Affairs and National Security. Most major countries have an embassy or a consulate in Malta. The full list of foreign representations can also be accessed on the website of the Ministry of Foreign Affairs.

Residency and Citizenship

Malta welcomes foreigners and has launched a number of programmes to encourage foreign nationals to move to the island. One such programme is the Malta residency and visa programme. The programme offers non-EU, non-EEA and nonSwiss nationals and their dependents the opportu192 Country Report MALTA 2017

nity to reside in Malta indefinitely and travel within the Schengen area without the need for a visa.

Malta also offers foreigners the option to obtain Maltese citizenship through an Individual Investor Programme.

Employment

EU nationals can work in Malta without an employment licence. It is relatively easy to obtain everything you need to begin work as an EU national; social security numbers can now be obtained online. The social security number together with a promise of employment letter from your prospective employer is everything needed to retrieve a tax number.

After being issued a tax number, the employee needs to have an employment contract in original or copy, an ETC engagement form, and a passport to apply for a residence card. A short trip to Floriana will guarantee you have your tax number within one to two weeks. A second trip Valletta will be enough for obtaining the ETC engagement form, and then applying for a residence card during the same day. The Department for Citizenship and Expatriate Affairs where residence card applications are submitted is located in the Evans Building, Valletta. Thirdcountry nationals require work permits, and the granting of these is subject to a labour market test.

Permits will be given on a temporary basis and have to be renewed every one to three years. The applicant must possess a professional qualification or a high degree of skill or experience. n

Business Directory Who’s Who in Malta

CountryProfiler connects you with Malta’s major firms, executives and professional advisors

Country Report MALTA 2017 193

Who’s Who - Malta Business Profiles

Accounting & Auditing

Corporate Services

Baker Tilly Malta.......................................................................................... 197 Deloitte............................................................................................................ 199 Griffiths & Associates............................................................................... 202 KPMG................................................................................................................. 203 Mazars Malta................................................................................................. 204 Nexia BT........................................................................................................... 205 PwC (Malta)................................................................................................... 206 UHY Pace, Galea Musù & Co............................................................... 206

Amicorp Services Ltd.............................................................................. 196 Avanzia Taxand............................................................................................ 197 BDO Malta...................................................................................................... 197 Contact Advisory Services Ltd........................................................... 199 DD Consultus Limited............................................................................ 199 e-Management Limited........................................................................ 200 Fenlex Group................................................................................................ 200 Francis J. Vassallo & Associates Limited........................................ 201 HBM Malta Ltd............................................................................................. 202 UHY Pace, Galea Musù & Co............................................................... 206

Banking Services Bank of Valletta plc.................................................................................... 197 HSBC Bank Malta p.l.c. Commercial Banking............................ 202 IIG Bank (Malta) Ltd.................................................................................. 202 MFC Merchant Bank Ltd........................................................................ 204 NBG Bank Malta Limited....................................................................... 205 Pilatus Bank................................................................................................... 205 Sparkasse Bank Malta p.l.c.................................................................... 206

Capital Markets Argentarius ETI Management Ltd................................................... 196

Colleges Malta College of Arts, Science & Technology........................... 203

Film & Audio-Visual PowerHouse Ltd......................................................................................... 205

Fund Administration Amicorp Fund Services Malta Ltd................................................... 196 Apex Fund Services (Malta) Ltd........................................................ 196 BOV Fund Services Ltd........................................................................... 198

Government Organisations Malta Enterprise......................................................................................... 203

Industry Association FinanceMalta................................................................................................ 200 Foundation for Human Resources Development................. 201 GamingMalta............................................................................................... 201

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Who’s Who - Malta Business Profiles

Insurance Services

Postal & Courier Services

Abacus Risk Management Services PCC Ltd............................ 196 Atlas Group.................................................................................................... 197 Gasan Mamo Insurance Ltd................................................................ 201 Marsh Management Services Malta Ltd...................................... 204

DHL Malta....................................................................................................... 199 MaltaPost p.l.c.............................................................................................. 203

Investment Services Managing Partners Group .................................................................. 204

Legal Services Chetcuti Cauchi Advocates................................................................. 198 Fenech & Fenech Advocates.............................................................. 200 Gonzi and Associates, Advocates.................................................... 201

Office & Business Park

Real Estate MIDI plc............................................................................................................ 205

Risk & Compliance DAIS Software Limited........................................................................... 199

Software Development Q-Free Traffiko............................................................................................. 206

Telecom & Internet

Business Office Services International Malta............................ 198

BMIT LTD......................................................................................................... 198 Melita Ltd........................................................................................................ 204

Payment Solution

Travel & Leisure

Em@ney plc.................................................................................................. 200

La Valette Club............................................................................................. 203

Port Terminals

Trust Services

Valletta Cruise Port plc........................................................................... 206

Bentley Trust (Malta) Limited.............................................................. 198 HBM Trustees Ltd....................................................................................... 202

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Who’s Who - Malta Business Profiles

BAUDOUIN DESCHAMPS

ABACUS RISK MANAGEMENT SERVICES PCC LTD Abacus Risk Management Services PCC Ltd., an associate company of GasanMamo Insurance Ltd., provides the set up and efficient management of your captive, protected cell(s) or other insurance operation in Malta by a team of experienced professionals overseen by Abacus Executive Directors with more than 60 years combined experience in the complex world of captive and global insurance. Abacus’ protected cells also provide foreign insurance managers the opportunity to establish a presence in Malta at reasonable cost, hereby enabling their clients to benefit from Malta’s direct writing, tax-efficient and compliant European jurisdiction. Abacus, the Insurance Manager of choice for Malta, the domicile of choice.

DIRECTOR & INSURANCE MANAGER

AARON SAMMUT

AMICORP FUND SERVICES MALTA LIMITED Amicorp Fund Services is part of Amicorp Group. Working as a global team across 42 offices in over 30 countries, each of Amicorp’s 900 specialists contributes their individual talents to Amicorp’s broad range of expertise and experience. Amicorp Fund Services is recognised by the MFSA to provide administration services to investment funds, including alternative and traditional funds on a global scale. Our core business includes NAV calculation; investor and shareholder services; tax compliance and preparation of financial statements; and corporate management. Furthermore we offer a full range of FATCA and CRS compliance services and assist clients with AIFMD reporting.

We distinguish ourselves by ensuring the highest level of accuracy of our end product, and by committing to a timely delivery of our services.

DIRECTOR

CLINT CHETCUTI Managing Director

AMICORP SERVICES LIMITED Amicorp Services Limited is part of Amicorp Group. Working as a global team across 42 offices in over 30 countries, each of Amicorp’s 900 specialists contributes their individual talents to Amicorp’s broad range of expertise and experience. The company is a licensed corporate service provider assisting international clients with tailored cross-jurisdictional solutions including but not limited to company set-up and on-going maintenance, company secretarial services, accounting and financial reporting services, tax and regulatory compliance services. Amicorp is licensed to assist foreign nationals and their dependents with acquiring Maltese residence and/or with acquiring a certification of naturalisation as citizens of Malta. Its related entity, Amicorp Malta Limited is licensed to act as a trustee and administer trusts and foundations and provide fiduciary services. Additionally the group provides banking facilities to its international clients through its licensed bank.

APEX FUND SERVICES (MALTA) LIMITED Apex Fund Services (Malta) Limited is part of one of the world’s largest specialist fund administration and middle office solutions providers. Apex is dedicated to serving successful fund managers and has continually improved and evolved its product suite by surrounding these core services with additional value products; from information delivery and regulatory products to capital introductions. The globally distributed service model spanning 26 jurisdictions is delivered by over 600 staff and has been developed to meet the changing demands of managers across all asset classes. Apex now administers the investments of some of the largest funds and institutional investors in the world.

PAULIANNE NWOKO MANAGING DIRECTOR

ARGENTARIUS ETI MANAGEMENT LTD Argentarius is a management company for the set up and management of European securitisation companies as well as calculation agent and listing agent for structured financial instruments. Argentarius focuses on the securitisation of alternative investments into ETIs - Exchange Traded Instruments. Argentarius is one of the few European private label service providers for securitisations of alternative investments. In particular, managers of hedge funds, asset managers and managers of structured UCITS Funds are our customers.

ANDREAS WÖLFL CHIEF EXECUTIVE OFFICER

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Abacus Risk Management Services PCC Ltd.

LF3 GasanMamo Head Office, Msida Road, Gżira GZR 1405 - Malta T: (+32) 4754 60500 E: bdeschamps@abacus.com.mt W: www.abacus.com.mt Contact: Baudouin Deschamps Director & Insurance Manager

Level 1, Blue Harbour Business Centre, Ta’ Xbiex Yacht Marina, Ta’ Xbiex XBX1027 - Malta T: (+356) 2258 4700 E: a.sammut@amicorp.com W: www.amicorp-funds.com Contact: Aaron Sammut - Director

Level 1, Blue Harbour Business Centre, Ta’ Xbiex Yacht Marina, Ta’ Xbiex XBX1027 - Malta T: (+356) 2258 4700 E: c.chetcuti@amicorp.com W: www.amicorp.com Contact: Clint Chetcuti - Managing Director

Central North Business Centre, Level 1, Sqaq il-Fawwara, Sliema SLM1670 - Malta T: (+356) 2131 1330 E: paulianne@apexfunds.com.mt W: www.apexfundservices.com Contact: Paulianne Nwoko - Managing Director

66A, The Strand, Sliema - Malta T: (+356) 2016 7300 E: solutions@argentarius-group.com W: argentarius-group.com Contact: Andreas Wölfl Chief Executive Officer

Who’s Who - Malta Business Profiles

MICHAEL GATT

ATLAS GROUP Atlas Group, with its Maltese roots dating back to early last century, is an acknowledged market leader in commercial and health insurance, also including a significant personal insurance portfolio. Atlas Insurance PCC Ltd, the group’s flagship, converted to a Protected Cell Company in 2006, a first for Malta and the EU, giving promoters the opportunity to own their own EU insurance vehicle with less capital and cost. With a highly educated staff complement of over 170 people, the group includes Atlas Healthcare Insurance Agency Limited, local agency for AXA PPP healthcare, together with Jesmond Mizzi Financial Advisors Limited and Ark Insurance Management PCC Limited that provide additional investment and management services.

MANAGING DIRECTOR

AVANZIA TAXAND Avanzia Taxand is a member firm of Taxand, the global network of leading tax advisors. Avanzia Taxand is dedicated to delivering top quality, tailored and practical strategic tax advice and a range of corporate services to drive the performance of multinational businesses. Our partners lead every engagement from start to finish, and achieve excellence and efficiencies for our clients, globally. Avanzia Taxand is the leading tax firm in Malta and was named ‘Malta Tax Firm of the Year’ by the International Tax Review in 2009, 2013 and 2016, whilst in 2011, 2014 and 2015 it was named ‘Malta Tax Firm of the Year’ by Corporate International.

WALTER CUTAJAR MANAGING DIRECTOR

BAKER TILLY MALTA Baker Tilly Malta is a firm of accountants, auditors, taxation and business advisors providing services for businesses operating in all spheres of the economy, both locally and overseas. Baker Tilly Malta is an independent member of Baker Tilly International, a worldwide association of leading accountancy practices operating in 141 countries around the world, ensuring that our clients are able to draw on professional advice on any aspect of their international affairs. The philosophy of the firm is based on the concept of providing creative forward thinking and planning, and being able to offer an independent and innovative service in support of clients’ business goals.

DONALD SANT MANAGING PARTNER & HEAD OF AUDIT

MARIO MALLIA

BANK OF VALLETTA PLC Bank of Valletta is the leading financial services provider in Malta, offering the full spectrum of financial services, including investment banking, fund management, bancassurance and stockbroking. The Bank serves its clients via an extensive network of branches, an International Corporate Centre and Business Centres that cater for its business clients, as well as a fully-fledged Wealth Management arm and Investment Centres. Representative Offices in Brussels, Milan and Melbourne liaise with clients interested in growing their business in these countries. BOV issues bank cards under the VISA and MasterCard brands and distributes American Express cards. The Bank’s services are available on a 24/7 basis via internet and mobile.

CHIEF EXECUTIVE OFFICER

JOHN J. ATTARD SENIOR MANAGING PARTNER

BDO MALTA Established in 1978, BDO Malta continues to grow successfully allowing us the ability to fully service our foreign and Maltese clients with all their financial services needs. Our team evolved in its present form through the engagement of specialists who have excelled in their various fields, mainly being: Audit and Assurance, Tax and VAT Compliance and Consulting, Outsourcing Services, Legal and Consulting Services, Fiduciary Services, Banking, Incorporation/Formation of Companies, Correspondence and Administrative Services, Directorship and Company Secretarial, Yachting and Marine Services, Formation of Trusts and Foundations, Securitisation Vehicle and Funds Setup. We are also licensed agents for the Individual Investor Programme. Looking to the future, we will continue to strengthen our service keeping in mind five key components: client needs, communication, commitment, people and value.

47-50 Ta’ Xbiex Seafront Ta’ Xbiex XBX1021 - Malta T: (+356) 2343 5363 E: insure@atlas.com.mt W: www.atlas.com.mt Contact: Michael Gatt - Managing Director

Blue Harbour Business Centre, Level 1, Ta’ Xbiex Yacht Marina, Ta’ Xbiex XBX 1027 - Malta T: (+356) 2730 0045 E: walter.cutajar@avanzia.com.mt W: www.avanzia.com.mt Contact: Walter Cutajar - Managing Director

Level 5, Rosa Marina Building, 216 Marina Seafront Pieta PTA 9041 - Malta T: (+356) 2010 9500 E: info@bakertillymalta.com W: www.bakertillymalta.com Contact: Donald Sant - Managing Partner & Head of Audit

BOV Centre, Triq il-Kanun, Santa Venera SVR 9030 - Malta T: (+356) 2131 2020 E: romeo.cutajar@bov.com W: www.bov.com Contact: Romeo Cutajar Chief Officer Investment Services

Tower Gate Place, Tal-Qroqq Street, Msida MSD 1703 - Malta T: (+356) 2131 3060 E: info@bdo.com.mt W: www.bdo.com.mt Contact: Mark Attard - Chief Executive Officer

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Who’s Who - Malta Business Profiles

BENTLEY TRUST (MALTA) LIMITED Bentley Trust (Malta) Limited is part of the Bentley Reid Group providing trustee services, company formation and administration on an international, multijurisdictional basis. We specialise in meeting the varied requirements of wealthy individuals and their families, entrepreneurs, corporate executive and charities.

We can tailor solutions to address a broad range of client objectives. From our base in Malta and together with your chosen professional advisers, Bentley Trust (Malta) offers a highly personal, discrete service providing flexible, efficient administration of all client assets on a global basis. Bentley Trust (Malta) is regulated by the Malta Financial Services Authority.

MALCOLM BECKER CHIEF EXECUTIVE OFFICER

BMIT LIMITED BMIT is Malta’s leading multi-site data centre provider, providing secure facilities and reliable services to a wide range of highly sophisticated industries such as Telecommunications, Financial Services and Gaming operators. BMIT’s suite of solutions includes: Access to multiple data centres in Malta, Italy and Germany, an exclusive 40Gbps private network for clients with advanced multilayered DDoS protection, Public, Private and Hybrid Cloud Services, Managed IT Services & Disaster Recovery Solutions. All our services operate from ISO 27001 and PCI DSS certifed data centres, supported by an expert 24x7 team of dedicated professionals.

CHRISTIAN SAMMUT CHIEF EXECUTIVE OFFICER

JOSEPH M CAMILLERI CHIEF OFFICER

AMANDA BALZAN

BOV FUND SERVICES LTD BOV Fund Services Limited is a fully owned subsidiary of Bank of Valletta plc and a recognised fund administrator by the Malta Financial Services Authority.

BOV Fund Services Limited, Malta’s leading fund administrator, provides a comprehensive suite of services to fund managers and fund promoters comprising of turnkey fund formation solution, as well as a full suite of fund administration including fund accounting, shareholder registry services, regulatory reporting and corporate services. Other ancillary services comprise of; Company Secretarial Services, an Electronic Board Room, Provision of Registered Office, Portfolio Risk Reporting, Compliance Reporting, Prevention of Money Laundering Reporting, MLRO services, production of Fund Fact Sheets & KIIDs, regulatory reporting in relation to FATCA, AIFMD, CRS and other regulatory returns.

BUSINESS OFFICE SERVICES INTERNATIONAL (MALTA) Business Office Services International offers fully furnished, high quality, plugand-play offices at their Business Centre in Mrieħel. Besides office space, we offer our clients a full suite of associated business services tailored to their individual requirements. With over 2,000sqm of office space to choose from, organisations ranging from start-ups, requiring a minimal amount of space to larger companies requiring a larger footprint, now have the opportunity to relocate to Business Office Services International, conveniently located close to the Mrieħel bypass.

Our services allow you to focus on what is important to you – your business, whilst our team of highly trained professionals support your day-to-day operation. Onsite private parking facilities are also available.

OFFICE MANAGER, MALTA

CHETCUTI CAUCHI ADVOCATES Main jurisdictions: Malta, Cyprus • Representative Offices: London, Zurich Services: Investment Funds Licensing, Fintech Licensing, Investment Services Licensing, AML & Regulatory Compliance, Pensions, International Tax, Company Formation & Management, Trusts & Foundations, Online Gaming Licensing, Intellectual Property, European Residency & Citizenship, Aircraft & Yacht Ownership Structures.

DR JEAN-PHILIPPE CHETCUTI MANAGING PARTNER

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Level 7, Portomaso Business Tower, St Julians STJ 4011 - Malta T: (+356) 2137 8828 E: malta@bentleyreid.com.mt W: www.bentleygroup.com Contact: Malcolm Becker Chief Executive Officer

54/55, Triq Manuel Borg Gauci, Handaq, Qormi QRM 4000 - Malta T: (+356) 2258 8200 E: marketing@bmit.com.mt W: www.bmit.com.mt Contact: Jack Mizzi Chief Marketing & BD Officer

BOV

FUND SERVICES

TG Complex, Suite 2, Level 3, Triq il-Birrerija, L-Imriehel, Birkirkara BKR 3000 - Malta T: (+356) 2122 7148 E: infobovfs@bov.com W: www.bovfundservices.com Contact: Joseph M Camilleri - Chief Officer

Vision Exchange Building, Territorials Street, Mrieħel, Birkirkara BKR 3000 - Malta T: (+356 ) 2014 5300 E: Amanda.balzan@boservices.com.mt W: www.bos-international.com Contact: Amanda Balzan Office Manager, Malta

CHETCUTI CAUCHI ADVOCATES

120, St Ursula Street, Valletta VLT 1236 - Malta Offices: Malta, Cyprus, London, Zurich T: +356 22056200 E: info@ccmalta.com W: www.ccmalta.com Contact: Dr Jean-Philippe Chetcuti – Managing Partner

Who’s Who - Malta Business Profiles

ANGELO VELLA

CONTACT ADVISORY SERVICES LIMITED Contact Advisory Services is a licensed Corporate Services Provider that you can depend on for professional, across-the-board consultancy services in Malta and abroad. Contact Advisory Services synergises a team of key professionals with decades of experience in Information Systems Advisory, IT Audit and Assurance and Corporate services. We are dedicated to providing you with an efficient and dependable service that ensures all of your needs are met - no matter how challenging or complex. With years of valuable experience behind us, we are able to offer a vast range of bespoke services that include: assurance, corporate services, remote gaming consultancy, tax, internal auditing, information security, data protection, management consultancy and back office work.

DIRECTOR

DAIS SOFTWARE LIMITED DAIS Persona is a multi-function “customer acceptance” software that combines client document management and a compliance search tool for KYC/AML/CFT processes. Designed as a front-line screening and reporting tool to minimise regulatory risks, DAIS PERSONA enables you to automatically monitor, screen and search for an individual or a corporate entity against known sanction lists that include UN Sanction list, US Treasury OFAC and EU Sanctions lists. POWERED BY Dow Jones Risk & Compliance data solutions.

SAVAS MANYASLI FOUNDER, SOLUTION ARCHITECT

DENITZA DIMITROVA

DD CONSULTUS LIMITED DD Consultus is based in Malta and it specialises in the online gaming industry, online payment processing and related services thereto. DD Consultus provides senior international gaming consultancy to all sectors of the gaming industry, including but not limited to online gaming, land-based casinos and arcades, software and platform providers and gaming machine manufacturers. Our gaming practice encompasses all aspects of gaming law, including licensing, corporate, legal and financial compliance, acquisitions, mergers and development. Our consultants have previously occupied strategic posts in the Malta Gaming Authority (MGA) for a number of years and with their expertise in the gaming industry, provide tailor-made solutions and consultancy to our gaming clients, locally and internationally.

SENIOR CONSULTANT

DELOITTE Deloitte Malta is a multidisciplinary firm which offers a wide range of professional services. With a globally connected network of member firms in more than 150 countries and territories, Deloitte brings together world-class capabilities and high-quality service to clients. Deloitte has the largest international tax practice in Malta, a dedicated financial services practice, an experienced audit team, a financial advisory arm as well as a risk advisory function and a fast growing consulting practice - all servicing a vast range of national and international companies, together with private and high-net-worth individuals.

MALCOLM BOOKER CHIEF EXECUTIVE OFFICER

CHARLES SCHIAVONE COUNTRY MANAGER

DHL DHL is the global market leader in the industry and “The Logistics Company for the World”. Our popular International Express door-to-door delivery service is available when you’re sending document or non-document shipments anywhere around the world. DHL Express remains a pioneer, constantly providing new solutions for its customers, solutions that make it the market leader. While maintaining the largest market share, DHL sets very high levels of service and always seeks to serve the customer in the best possible way. Having a constant presence in the Maltese market since 1983, DHL has acquired a deep knowledge of critical shipments as well as unparalleled experience in the specialised handling of express deliveries for each industry sector.

68 Northfields No. 1, Independence Avenue, Mosta MST9026 - Malta T: (+356) 2757 7000 E: info@contact.com.mt W: www.contact.com.mt Contact: Angelo Vella - Director

64, St Anne Court, Suite 2, Bisazza Street, Sliema SLM 1642 - Malta T: (+356) 2034 2037 E: support@dais.com.mt W: www.dais.com.mt Contact: Savas Manyasli Founder, Solution Architect

Villa Ichang no. 16, Triq Mons. Alfredo Mifsud Ta’ Xbiex XBX 1063 - Malta T: (+356) 2137 0333 E: info@ddconsultus.com W: www.ddconsultus.com Contact: Denitza Dimitrova - Senior Consultant

Deloitte Place, Mriehel Bypass, Mriehel BKR3000 - Malta T: (+356) 2343 2000 E: info@deloitte.com.mt W: www.deloitte.com/mt Contact: Malcom Booker Chief Executive Officer

MIA Cargo Village, Luqa, LQA 3290 - Malta T: (+356) 2180 0148 E: Charles.schiavone@dhl.com W: www.dhl.com.mt Contact: Charles Schiavone - Country Manager

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SARAH BORG DIRECTOR

GERMANO ARNO’ CHIEF EXECUTIVE OFFICER

E-MANAGEMENT LIMITED e-Management, a dedicated business division of HBM Group is a leading specialised turnkey provider of Business Support & Corporate Services to the online gaming industry. We focus on establishing and managing internationally engaged e-Gaming companies based out of Curaçao and Malta. With almost two decades of experience in assisting major software providers and operators with their corporate and licensing requirements in both Curacao and Malta, we were amongst the first Corporate Services Providers in 1997 to enter the online gaming industry. e-Management offers innovative services by assisting all e-Gaming (related) businesses to efficiently and effectively structure their enterprise in an ever changing and challenging business environment without borders. e-Management, via HBM Group, provides its Business Support & Corporate Services in 13 jurisdictions worldwide.

EM@NEY PLC Founded in 2011, the Company is involved in issuing of electronic money, payment services, tools and circuits, innovative Internet banking solutions. Since 2013, Em@ney is fully licensed EU Financial Institution and authorized by MFSA (Malta Financial Services Authority), to operate in all SEPA countries. Em@ney customers count and rely on a highly professional team, specialized in both, financial and technological terms, which guarantees them the most advanced technology, fully customizable solutions and above all, secure and fast services.

The banking platform enable safe transactions and without risks of money laundering or terrorist financing threats, due to the absence of anonymous users and the engagement of very sophisticated security screening tools. That’s why Em@ney is your one stop partner for all your payments, recursive transactions and in addition offers low cost compliant customization and attractive co-branding solutions.

FENECH & FENECH ADVOCATES Established in 1891, Fenech & Fenech Advocates is a leading law firm in Malta, with a strong commercial, corporate, tax, maritime, ship registration, M&A and financial services practice, and is a recognised pioneer in Maritime, eGaming and ICT law. The firm’s largely international clientele is serviced by a team of over 95 people. The firm has advised blue-chip clients in various landmark transactions in Malta and overseas and remains at the forefront of legal developments. Our team’s legal insight and business instinct provide clients with value-driven solutions. The varied tax and aviation practices are also a mainstay of the firm’s international work.

DR ANN FENECH MANAGING PARTNER

FENLEX GROUP As a leading management and corporate services provider, the Fenlex group caters to a large international client base. Fenlex provides a wide range of services including company incorporation and maintenance, tax and VAT compliance, accountancy, payroll, bank account administration, directorship services, trusts & foundations, recruitment as well as operational assistance. The group has been active in servicing the international business sector since the 1980s and its clients are serviced by a multi-disciplinary team organised into the Corporate Services, Accounts, Tax Compliance, Banking and Operations departments. Fenlex is closely associated with Fenech & Fenech Advocates, a leading law firm.

KARL DIACONO CHIEF EXECUTIVE OFFICER

FINANCEMALTA FinanceMalta, a non-profit public-private initiative, was set up to promote Malta’s international Business & Financial Centre, both within, as well as outside Malta. It brings together, and harnesses, the resources of the industry and government, to ensure Malta maintains a modern and effective legal, regulatory and fiscal framework in which the financial services sector can continue to grow and prosper. The Board of Governors, together with the founding associations, its corporate and affiliate members and staff are committed to promoting Malta as a centre of excellence in financial services and international business.

KENNETH FARRUGIA CHAIRMAN

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28, Cathedral Street, Sliema SLM1525 - Malta T: (+356) 2132 3626 E: sarah.borg@emanagement-group.com W: www.emanagement-group.com Contact: Sarah Borg - Director

Regent House 4/45, Bisazza Street, Sliema SLM1640 - Malta T: (+356) 2733 9910 E: k.balassopulos@emoney.com.mt W: www.emoney.com.mt Contact: Konstantin Balassopulos Director of International Relations

198, Old Bakery Street, Valletta VLT 1455 - Malta Tel: (+356) 2124 1232 E: f.f@fenechlaw.com W: www.fenechlaw.com Contact: Dr Ann Fenech - Managing Partner

85, St. John Street, Valletta VLT 1165 - Malta Tel: (+356) 2124 1817 E: karl.diacono@fenlex.com W: www.fenlex.com Contact: Karl Diacono - Chief Executive Officer

Garrison Chapel, Castille Place, Valletta VLT1063 - Malta T: (+356) 2122 4525 E: chairman@financemalta.org W: www.financemalta.org Contact: Kenneth Farrugia - Chairman

Who’s Who - Malta Business Profiles

FOUNDATION FOR HUMAN RESOURCES DEVELOPMENT FHRD over the past 25 years has moulded its portfolio to cover a vast range of HR related ventures. The entity today offers exclusive services to its members, organises conferences and seminars related to business operations and people management, and acts as the representative of the HR community in Malta and internationally. The organisation is an accredited training institution and provides bespoke accredited training programmes tailor-made for Malta’s industry.

Through its partner, the University of Leicester, FHRD also offers courses ranging from Diploma level up to PHD level in the areas of Finance, Management, Marketing, MBA and HR. MARVIN CUSCHIERI CHIEF EXECUTIVE OFFICER

FRANCIS J. VASSALLO

FRANCIS J. VASSALLO & ASSOCIATES LIMITED Francis J. Vassallo & Associates Limited was established in 1998 by Francis J. Vassallo, a former Governor of the Central Bank of Malta. Its team of lawyers, accountants and support professionals delivers a broad spectrum of bespoke services to a global client portfolio. This one-stop-shop boutique firm provides a personalised and holistic approach to address its clients’ business requirements, going that extra mile to offer an efficient, professional and outstanding service.

The firm has a proven track record, and its core expertise lies in International Tax Planning and Related Advisory Services, Company Formation, Corporate & Fiduciary Services, Investment Funds, Shipping and Aviation, Trusts, VAT, Residency & Related services, and back-office Support Services.

PRESIDENT

GAMINGMALTA GamingMalta is an independent non-profit foundation set up by the Government of Malta and the Maltese Gaming Authority (MGA). Tasked with the remit of promoting Malta as a Centre of excellence in the remote gaming sector globally, it is also responsible for liaising with the local relevant authorities to improve Malta’s attractiveness as a jurisdiction and enhance the ecosystem surrounding the gaming industry.

IVAN FILLETTI HEAD OF OPERATIONS AND BUSINESS DEVELOPMENT

No 5, Clock Tower Building, Tigne Point, Sliema TP01 - Malta T: (+356) 2131 3550 E: mcuschieri@fhrd.org W: www.fhrd.org Contact: Marvin Cuschieri Chief Executive Officer

FJVA Business Centre, Industry Street, Qormi QRM 3000 - Malta T: (+356) 2299 3100 E: info@fjvassallo.com W: www.fjvassallo.com Contact: Adriana Camilleri Vassallo - Director

Building SCM 02-03, Level 3,Smart City, Ricasoli, SCM 1001 - Malta T: (+356) 22473000 E: ivan.filletti@gamingmalta.org W: www.gamingmalta.org Contact: Ivan Filletti - Head of Operations and Business Development

GASANMAMO INSURANCE LTD GasanMamo is one of Malta’s leading insurers, providing excellent value insurance products for both personal and commercial clients. We believe in lasting relationships built on trust and value. Our customers are at the very heart of all we strive to do. Our proven track record dating back to 1947 positions us confidently on our patch going forward. Professional, friendly and helpful service is how we like to be seen.

Head Office, Msida Road, Gżira GZR 1405 - Malta T: (+356) 2349 0501 E: jmamo@gasanmamo.com W: www.gasanmamo.com Contact: Julian J Mamo - Managing Director

JULIAN J MAMO MANAGING DIRECTOR

GONZI & ASSOCIATES ADVOCATES Gonzi and Associates, Advocates is an established Maltese law firm specialising in the financial services and corporate sector. We have assisted various companies with acquiring licenses in Malta for investment services, financial institutions, online forex/ binary options, emoney, payment services, funds and collective investment schemes. In addition, we provide a one stop shop for all legal, accounting and business consultancy services required including company incorporation in Malta and corporate services. Contact us for a free initial assessment as to how we can assist you better your business by setting up or licensing in Malta.

DR DAVID GONZI PARTNER

115B, Old Mint Street, Valletta VLT 1515 - Malta T: (+356) 2015 7000 E: info@gonzi.com.mt W: www.gonzi.com.mt Contact: Tiziana Calleja – Corporate Services Manager

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Who’s Who - Malta Business Profiles

GRIFFITHS + ASSOCIATES LTD Established in 1982 and located in Naxxar, our firm of Certified Public Accountants offers a one-stop shop assisting businesses in carrying out activities in, from or through Malta. The firm’s activities include company incorporations, backoffice services and international corporate structuring, especially within the context of Malta’s extensive tax treaty network and advantageous tax regime.

Being members of PrimeGlobal, an international association of accountants and advisers, adds value to the servicing of clients’ needs within an international perspective.

PETER GRIFFITHS MANAGING & TAX DIRECTOR

HBM MALTA LIMITED HBM Group (est. 1991) is the leading independent financial services provider.

We assist in the formation and management of international companies for businesses and individuals, ensuring compliance with international legislation.

Our team of professionals, with over a decade of experience, offers premier and personalised service to each client. We understand each client is unique. By building on our tradition of excellence, and protecting the integrity and reputation of our clients, we are committed to providing our clients with all the necessary services for economic success. HBM Group can guarantee the highest standard of business ethics, the utmost confidentiality, and state-of-the-art technology.

SARAH BORG DIRECTOR

SARAH BORG DIRECTOR

HBM TRUSTEES LIMITED HBM Trustees is a dedicated business division of HBM Group (est. 1991), with offices in reputable Trust Jurisdictions worldwide. We are a leading dedicated niche provider of Business Support & Corporate Services to HNW Individuals and Business Owners of successful closely held companies. As a professional, client-oriented service provider of fiduciary services, we focus on establishing, managing and administering Trusts and Private Foundations based out of Anguilla, Bahamas, Barbados, British Virgin Islands, Curaçao, Malta, Nevis, Panama, and St. Maarten. With more than two and a half decades of experience in assisting HNW Individuals and Business Owners with their wealth management and corporate structuring worldwide, HBM Trustees is your International Entrusted Solutions partner in business in today’s ever-changing and challenging regulatory environment.

HSBC BANK MALTA PLC - COMMERCIAL BANKING HSBC Commercial Banking is a leading provider of business financial services. A purpose-built Business Banking Centre in Qormi brings together under one roof a strong team of specialised Relationship Managers and business specialists, all trained to service businesses, thus making it a service centre of excellence. A wide range of specifically designed solutions are available to meet the diverse needs of the business community, including Loans & Overdrafts, Trade and Receivables Finance, Payments and Cash Management, Foreign Exchange as well as Internet Banking to meet the needs of business customers. We are an international bank with local expertise supporting all business segments in Malta.

MICHEL CORDINA HEAD OF COMMERCIAL BANKING

RAYMOND BUSUTTIL

IIG BANK (MALTA) LTD IIG Bank (Malta) Ltd is a specialist trade finance bank focused on international commodity trade and does this through a comprehensive range of services that are tailored to meet the needs of its international trading customers spread over Latin America, Europe, the Middle East, Africa and Asia. IIG Bank (Malta) Ltd is dynamic and innovative in providing structured solutions for trading companies, distributors, manufacturers and exporters, especially those trading in emerging markets. The bank’s approach to business is characterised by its desire to build long-lasting relationships and by being close to the customer to promote a better understanding of the complexities inherent in international trade flows.

MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER

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Level 1, Casal Naxaro, Labour Avenue, Naxxar NXR 9021 - Malta T: (+356) 2738 3631 E: peter@griffithsassoc.com W: www.griffithsassoc.com Contact: Peter Griffiths – Managing & Tax Director

28, Cathedral Street, Sliema SLM1525 - Malta T: (+356) 2132 3626 E: sarah.borg@hbmgroup.com W: www.hbmgroup.com Contact: Sarah Borg - Director

28, Cathedral Street, Sliema SLM1525 - Malta T: (+356) 2132 3626 E: sarah.borg@hbmgroup.com W: www.hbmgroup.com Contact: Sarah Borg - Director

Business Banking Centre, Mill Street, Qormi QRM3101 - Malta T: (+356) 2380 4832 E: michelcordina@hsbc.com W: www.hsbc.com.mt Contact: Michel Cordina Head of Commercial Banking

Level 20, Portomaso Business Tower, St. Julians STJ 4011 - Malta T: (+356) 2248 4510 E: raymond.busuttil@iigbank-malta.com W: www.iigbank-malta.com Contact: Raymond Busuttil - Managing Director & Chief Executive Officer

Who’s Who - Malta Business Profiles

TONIO ZARB

KPMG With a staff compliment of about 300, including 29 principals, KPMG in Malta is one of the leading providers of audit, tax and advisory services. Our vision is to be the clear choice for our clients, our people and our community. We are committed to working shoulder-to-shoulder with our clients by adopting a client-centric approach that integrates innovative approaches and deep expertise to deliver real results. This commitment translates into a high level of client satisfaction – 100% of our surveyed clients confirmed that we met or exceeded their expectations. Following the acquisition of Crimsonwing plc, rebranded KPMG Crimsonwing, by a joint venture between the UK, Malta and Dutch practices, KPMG is today the largest professional services provider in Malta with a staff compliment of over 500 professionals.

SENIOR PARTNER

GEORGE MALLIA

LA VALETTE CLUB La Valette Club at Malta International Airport has been perfecting its VIP services for the past 22 years, with an aim to provide exceptional value to its guests’ airport experience. La Valette Club offers a variety of membership options, giving members access to the airport lounges, privileges such as complimentary parking and chauffeur and porterage services. Whether a frequent flyer or a business traveller, La Valette Club services are tailored to help guests save precious time and unwind before proceeding with their journey. The La Valette Club also operates Malta International Airport’s VIP Terminal, which rolled out its red carpet just over a year ago for guests seeking a more exclusive travel experience.

HEAD RETAIL AND PROPERTY

JOSEPH GAFA’

MALTAPOST PLC MaltaPost is one of the country’s largest private employers. As the national postal operator, it collects and delivers mail to every address on the Islands, 6-days-a-week and operates through a comprehensive retail network of outlets spread around the Maltese Islands. Through this network, it offers a suite of traditional and non-traditional postal services which include financial services, courier services, 24/7 pick-up services, bill payment facilities, merchandise, as well as bureau services. MaltaPost has developed a state-of-the-art document management centre in Xewkija, Gozo, which is equipped to scan, archive and index information of both electronic or physical formats. The company is regulated by the Malta Communications Authority and is listed on the Malta Stock Exchange.

CHIEF EXECUTIVE OFFICER

STEPHEN CACHIA

MALTA COLLEGE OF ARTS, SCIENCE AND TECHNOLOGY (MCAST) MCAST is the country’s leading vocational education and training institution.

Through our three Colleges, namely Foundation, Technical and University Colleges and six Institutes in Malta and the Gozo Campus, we offer 180 full-time and over 300 part-time vocational courses ranging from introductory certificates to Master degree programmes (MQF Level 1 to Level 7). Over 10,000 full-time and part-time students attend MCAST, including a substantial number of foreign students. The MCAST institutes cover training programmes in Agribusiness, Creative Arts, Media, Maritime, Mechanical Engineering, Aviation Engineering, Electrical and Electronics Engineering, Building and Construction Engineering, Welding Technology, Business and Commerce, Applied Sciences, Community Services and Information and Communication Technology.

PRINCIPAL AND CEO

MALTA ENTERPRISE Malta Enterprise is the government agency responsible for investment promotion and supporting industrial development in Malta. Its mission is to sustain Malta’s overall competitiveness to create the right environment for successful enterprise on the Islands. The agency offers assistance and advice to those who seek to learn more about the multitude of business and investment opportunities available. Malta Enterprise develops and administers a number of incentive measures to support the development and growth of enterprises established here. These measures are designed to address general economic growth without causing any distortion to competition.

MARIO GALEA CHIEF OFFICER INVESTMENT PROMOTION

Portico Building, Marina Street, Pieta’, PTA 9044 - Malta T: (+356) 2563 1000 E: toniozarb@kpmg.com.mt W: www.kpmg.com.mt Contact: Tonio Zarb - Senior Partner

c/o Malta International Airport, Luqa LQA 4000 - Malta T: (+356) 2369 6516 E: george.mallia@maltairport. com W: www.lavaletteclub.com Contact: George Mallia Head Retail and Property

305, Qormi Road, Marsa MTP 1001 - Malta T: (+356) 2123 6782 E: jgafa@maltapost.com W: www.maltapost.com Contact: Joseph Gafa’ – Chief Executive Officer

Main Campus, Corradino Hill, Paola PLA 08 - Malta T: (+356) 2398 7100 E: caroline.balzan@mcast.edu.mt W: www.mcast.edu.mt Contact: Caroline Balzan

Gwardamangia Hill, Pieta, MEC 0001 - Malta T: (+356) 2542 0000 E: info@maltaenterprise.com W: www.maltaenterprise.com Contact: Mario Galea – Chief Officer Investment Promotion

Country Report MALTA 2017 203

Who’s Who - Malta Business Profiles

JEREMY LEACH

MANAGING PARTNERS GROUP Managing Partners Group (MPG) is an asset management group that specialises in structuring, managing and administering mutual funds, securitisations and collective investment schemes. We offer a wide range of investment vehicles that invest in specific asset classes, including property, life settlements and hedge funds. Our securitisations may be listed on a bourse to become transferable securities. At the core of MPG’s proposition is its shrewd and rigorous approach to managing money. The senior management team has over 100 years of collective experience in managing assets. This strength in depth has enabled MPG to give investors steady, incremental returns, despite some of the harshest conditions financial markets have experienced in recent years.

CHIEF EXECUTIVE OFFICER

MARSH MANAGEMENT SERVICES MALTA LIMITED Marsh Management Services Malta Limited is licensed as an insurance manager in Malta under the Insurance Intermediaries Act. Marsh is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC). We are a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. The Malta office was formed in July 2005 and is the market leader for Malta in the formation and management of affiliated (Captive) and non-affiliated insurance and reinsurance companies.

Clients under the Company’s management come from a wide range of industries and geographies from around the world.

STEPHEN PORTELLI HEAD OF OFFICE

MAZARS CONSULTING (MAZARS MALTA) Mazars Malta is one of Malta’s top ten multi-disciplinary audit and advisory firms. We are committed to giving our clients an efficient and value for money service, underlined by a high level of commitment and quality. Owing to our size, we can offer a wide range of specialised services whilst retaining a personalised approach in terms of delivery. Our service portfolio includes company formation, accounting, payroll services, VAT advisory and compliance, as well as corporate and personal tax planning and auditing. As an integrated member firm of Mazars Group, we are in a position to draw upon the experience and resources of Mazars worldwide.

ANTHONY ATTARD MANAGING PARTNER

MALCOLM BRIFFA

MELITA LTD Built to Tier III specifications, Melita Data Centre is Malta’s only purpose-built facility covering a fully-fenced footprint of 10,000m2. The facility has been designed with superior N+N redundancy on connectivity, power and cooling.

Apart from colocation services, Melita Data Centre is also a fully-fledged managed services provider offering infrastructure as a service (IaaS), hardware lifecycle management, virtual private servers and cloud. Using redundant submarine fibre cables connecting Malta to mainland Europe, Melita provides high quality connectivity to Malta’s growing financial, remote gaming and technology service provider sectors through its Milan based peering capabilities to the world’s leading connectivity providers.

DIRECTOR OF BUSINESS SERVICES

MFC MERCHANT BANK LTD MFC Merchant Bank is a 100% subsidiary of MFC Bancorp Ltd. The bank specialises in a range of structured finance solutions, including factoring, forfaiting, inventory finance, trade finance, bank guarantees and other services to international finance and supply chain customers and suppliers. These banking services strategically supplement the MFC Group’s core franchise in the international supply chain business, which includes structuring of cross-border transactions, logistics, risk management and strategic consulting.

DR OTTO KARASEK CHIEF EXECUTIVE OFFICER

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Level 6, The Hedge Business Centre, Triq ir-Rampa ta’ San Giljan, Balluta Bay, St. Julian’s STJ 1062 - Malta T: (+356) 2786 3100 E: info@managingpartnersgroup.com W: www.managingpartnersgroup.com Contact: Jeremy Leach – Chief Executive Officer

The Hedge Business Centre, Level 3, Triq ir-Rampa ta’ San Giljan, Balluta Bay, St Julians, STJ1062 - Malta T: (+356) 2342 3000 E: stephen.portelli@marsh.com W: www.marshcaptivesolutions.com Contact: Stephen Portelli – Head of Office

32, Sovereign Building, Zaghfran Road, Attard ATD 9012 - Malta T: (+356) 2134 5760 E: anthony.attard@mazars.com.mt W: www.mazars.com.mt Contact: Anthony Attard - Managing Partner

Birkirkara Bypass, Mriehel, BKR 3000 - Malta E: sales@meltiadatacentre.com W: www.melitadatacentre.com Contact: Malcolm Briffa Director of Business Services

The Plaza Commercial Centre, Level 4, Suite 7, Bisazza Street, Sliema SLM 1640 - Malta T: (+356) 2328 6000 E: info@mfc-bank.com W: www.mfcmerchantbank.com Contact: Dr Otto Karasek Chief Executive Officer

Who’s Who - Malta Business Profiles

LUKE COPPINI

MIDI PLC MIDI plc is a real estate development company set up in response to a development brief issued by the Maltese Government for the regeneration of Tigné Point and Manoel Island. The sites measure some 44 hectares in one of Malta’s busiest commercial and residential areas, just across the water from Valletta. Tigné Point includes over 300 homes, The Point shopping mall, health and leisure activities and substantial public spaces, including the largest piazza in Sliema. A new business centre will be commencing operations in 2017. The plans for Manoel Island include fully restored heritage buildings, a low rise Mediterranean style village, a hospitality offer and a yacht marina with a large public park.

CHIEF EXECUTIVE OFFICER

NBG BANK MALTA LTD NBG Bank Malta Limited (formerly Finansbank Malta Ltd) was established in 2005 and is a wholly-owned subsidiary of NBG Group. The Group is the oldest and largest bank in Greece and is present in a number of jurisdictions namely Greece, Cyprus, Bulgaria, Albania, Macedonia, UK, Serbia, Egypt, Malta and Romania. NBG Malta is designed to be a one stop shop for banking services for High-Net-Worth individuals and Corporations worldwide. Furthermore, the bank also specialises in the provision of risk management and treasury products/solutions for its clients (Ex. Foreign Exchange and Derivative products) GEORGE DERBENTLIS EXECUTIVE DIRECTOR

KARL CINI

NEXIA BT Nexia BT provides a wide range of services ranging from company incorporation and compliance, to specialised advisory services, audit and assurance, tax advisory and accounting, for particular sectors such as financial services, international trade, remote gaming, investment funds, maritime and aviation. We equally offer international support including back office operations and advisory services, in a responsive, proficient and professional manner. Our International Client Services Department specialises in offering tailor-made and holistic business solutions to individuals wishing to relocate to Malta under the various citizenship and residence programmes available. The firm is a member of Nexia International, a top worldwide network of independent accounting and consulting firms with offices in over 120 countries.

PARTNER – TAX AND INTERNATIONAL CLIENT SERVICES

CEO

PILATUS BANK Pilatus Bank is a European-regulated bank that provides private and commercial banking services to high-net-worth individuals and financial institutions mainly in Europe, Asia, and the Americas. The bank also provides its clients with customised private banking and wealth management services through advisory and discretionary mandates as part of Investment Services. Pilatus Bank utilises today’s modern software applications to bring its core banking system with its extensive capabilities to its clients’ place of choice. The bank’s dedicated team of professionals and its investment in technology help address clients’ financial aspirations by providing expertise through the consolidation of all their banking requirements, ranging from corporate facilities to personal wealth management.

As a modern private bank, Pilatus Bank distinguishes itself through enhanced customer service and modern banking solutions.

MARK VELLA

POWERHOUSE LTD Powerhouse Limited was established in 2009 as an audiovisual and event technology rental company, forming part of the Synergix Events Group. With a portfolio of products and services including digital conference systems, trussing & ground support, high resolution projections, intelligent stage lighting, lasers, sound systems, LED furniture and more. We are a leader in the design and manufacturing of stage sets, backdrops and bespoke trade show/exhibition booth creation. We are considered a leading supplier of high-quality equipment and are the sole member representing the Maltese Islands for ‘AV Alliance’, an invitationonly-association recognising the leaders in the industry. Entrusted with various high profile events both locally and internationally, catering to any style of event to a high standard.

HAMIDREZA GHANBARI

MANAGING DIRECTOR

North Shore, Manoel Island Gzira GZR 3016 - Malta T: (+356) 2065 5500 E: info@midimalta.com W: www.midimalta.com, www.tignepoint.com Contact: Luke Coppini - CEO

302/304, Townsquare, Qui-Si-Sana Place, Sliema SLM 3112 - Malta T: (+356) 2131 8969 E: george.derbentlis@nbg.com.mt W: www.nbg.com.mt Contact: George Derbentlis Executive Director

The Penthouse, Suite 2, Capital Business Centre, Entrance C, Triq taz-Zwejt, San Gwann SGN3000 - Malta T: (+356) 2163 7778 E: info@nexiabt.com W: www.nexiabt.com Contact: Karl Cini – Partner Tax and International Client Services

Whitehall Mansions, Level 2, Ta’ Xbiex Wharf, Ta’ Xbiex XBX1026 - Malta T: (+356) 2779 9999 E: info@pilatusbank.com W: www.pilatusbank.com Contact: Hamidreza Ghanbari - CEO

MRA049A, Marsa Industrial Estate, Marsa MRS3000 - Malta T: +356 2138 0488/9 E: mark@powerhousemalta.com W: www.powerhousemalta.com Contact: Mark Vella - Managing Director

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Who’s Who - Malta Business Profiles

PWC PwC is the leading and largest professional services organisation in Malta, providing industry-focused assurance, tax and advisory services to enhance value for their clients. The Malta firm forms part of the PwC network where more than 223,000 people in 157 countries share their thinking, experience and solutions to develop fresh perspectives and practical advice. The firm is responsible for serving a large and diverse client portfolio comprising some of Malta’s top organisations.

Its client list includes a number of public companies and institutions, private companies both large and small, foreign and local, and Government-related companies. The firm’s total full-time staff complement is around 530 people.

KEVIN VALENZIA TERRITORY SENIOR PARTNER

DR ANGELO DALLI CEO

Q-FREE TRAFFIKO Q-Free Traffiko has been offering car parking management solutions for over 10 years to big, small and medium enterprises alike. Clients such as APCOA Sweden, EDF Energy and Transport Malta are a great testimony to our services and solutions. With our state-of-the-art CPMS and our innovative solutions, no company is too big or too small to take advantage of our innovative Car Park Management Solutions.Building long-term relationships with our clients is something Q-Free Traffiko strongly believes in and we go to great lengths to ensure our valuable clients receive first rate service and products. All this is backed up by the comprehensive range of Intelligent Traffic Solutions provided by our parent company Q-Free, which operates in over 19 countries worldwide.

Our car parking solutions together with our consultancy will solve and address your parking needs.

78, Mill Street, Qormi QRM3101 - Malta T: (+356) 2124 7000 E: info@mt.pwc.com W: www.pwc.com/mt Contact: Kevin Valenzia Territory Senior Partner

Office 6, Level 4, Quantum House, Abate Rigord Street, Ta’ Xbiex XBX 1120 - Malta T: (+356) 2092 5400 • E: info.traffiko@q-free.com W: www.traffiko.com Contact: Vince Clark - Project Manager

SPARKASSE BANK MALTA PLC Sparkasse Bank Malta plc is a licensed credit institution in Malta licensed to provide private banking, wealth management, custody and depositary solutions.

Fund custody is a core business for the bank and its experience in the field allows for flexible and practical workable solutions. The bank provides custody services to UCITS, AIFs and PIFs offering a personal, tailored and seamless banking, execution and settlement solution.

101 Townsquare, Ix-Xatt ta’ Qui-si-Sana, Sliema SLM 3112 - Malta T: (+356) 2133 5705 E: Paul.mifsud@sparkasse-bank-malta.com W: www.sparkasse-bank-malta.com Contact: Paul A. Mifsud - Managing Director

PAUL A. MIFSUD MANAGING DIRECTOR

UHY PACE, GALEA MUSÙ & CO UHY Pace, Galea Musù & Co. provides quality professional services, comprising audit and assurance, business solutions, corporate finance, corporate governance, local and foreign tax planning, company formation and re-domiciliation, management consulting, payroll bureau, insolvency, accountancy and back office administration customised for its local and foreign clients, operating in a wide range of industries. UHY Pace, Galea Musù & Co. is a member firm of UHY, an international association of independent accounting and consulting firms offering specialist sector and country knowledge-based services from 320 offices in 90 countries located in all major international business centres across the globe.

DAVID PACE PARTNER

VALLETTA CRUISE PORT PLC Valletta Cruise Port plc is a private company established in 2001 and licensed

by Transport Malta to operate the Valletta sea terminals. Valletta Cruise Port is a renowned port of call and a growing homeport, with a strategic location in the middle of the Mediterranean. It offers a safe haven for ships and offers a variety of 24/7 support services. Valletta’s quays are ISPS-compliant and can handle the largest vessels. Valletta Waterfront is a key element of Valletta Cruise Port with various shops, cafes, restaurants, offices and other amenities in beautifully restored 18th century warehouses stretching along the water’s edge.

STEPHEN XUEREB CEO - VALLETTA CRUISE PORT COO - GLOBAL PORTS HOLDING

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Matilda Court, 35/2 Giuseppe Calì Street, Ta’ Xbiex XBX 1423 - Malta T: (+356) 2131 1814 E: pgm@uhymalta.com W: www.uhymalta.com Contact: Pierre Galea Musù - Partner

Vault 1, Upper Floor, Pinto Wharf, Floriana - Malta T: (+356) 2567 3000 E: info@vallettacruiseport.com W: www.vallettacruiseport.com Contact: Stephen Xuereb - CEO, Valletta Cruise Port and COO, Global Ports Holding

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