Last Updated on Wednesday, 25 October, 2023 at 1:16 pm by Andre Camilleri
Almost half (49%) of foreign direct investment companies described Malta’s planning and preparedness for population growth in terms of infrastructure as ‘very inadequate,’ while a further 37% said that it was ‘inadequate,’ for a total of 86%, the 2023 survey run by EY has revealed.
The findings from the 2023 EY Malta’s attractiveness survey – an annual study conducted among existing FDI companies in Malta – were revealed on Wednesday with investors providing their views on what makes Malta an attractive location to invest in or the areas for improvement. The pool of respondents this year included 130 FDI companies.
The survey asked respondents to say what attracts them to Malta, or otherwise, as a location where to expand, develop or retain investment activities in their company’s interests.
73% of respondents found Malta attractive due to its corporate taxation, as Malta has a competitive corporation tax rate of 35%, which may be lowered to as little as 5% through different tax advantages and credits.
62% of companies find Malta attractive for its telecommunications infrastructure, whilst 61% find the stability of social climate in the country as attractive.
The results also showed that 44% of companies find the flexibility of labour legislation attractive in Malta, while 42% believe that they have potential in productivity increase for the company.
However, almost half of the respondents (49%) said that they consider Malta’s transport and logistics infrastructure as unattractive, and a further 39% feel that the stability and transparency of the political, legal and regulatory environment in Malta is unattractive.
In this regard, 31% believe that the stability and transparency of the political, legal and regulatory environment in the country is neither attractive nor unattractive, and 30% believe it is attractive for their company’s interests.
The survey showed that 59% of foreign direct investors currently find Malta attractive, a slight increase from the 58% recorded last year, and quite a substantial increase from the 37% recorded in 2021.
However, this year’s rating still falls short of the very high confidence levels achieved prior to 2020, as Malta was most attractive for FDI in 2016, (87%). Malta’s attractiveness has dropped over the years, from 77% in 2019, prior to the pandemic, to 59% in 2023.
External factors
The survey looked into the external factors which have impacted the companies’ financial performance. 68% said that increased costs as a result of inflation has impacted their company’s financial performance to some extent, while a further 24% have said that it has had an impact to a very large extent.
38% have said that increased logistic costs as a result of ongoing global supply chain challenges has impacted their company’s financial performance to some extent, and 12% have said that it has had an impact to a very large extent.
The survey also showed that 45% of respondents felt that the increased costs due to cost of capital/borrowing has not had an impact on their financial performance, and 45% said that the loss of revenue from source markets as a direct result of war in Ukraine has not had an impact.
In this regard, 32% of respondents have had an impact on their company’s financial performance due to loss of revenue resulting from the war in Ukraine, the survey showed.
Respondents were asked to say how certain external factors have impacted their company’s operations or geographical footprint in Malta, to which 83% of those surveyed felt that there was no change experienced as a result of the war in Ukraine. 7% said that they experienced a decrease in operations/footprint in Malta. Only 6% said that they experienced an increase in operations.
82% then said that they experienced no change as a result of ongoing global supply chain challenges, with 8% experiencing a decrease in operations in the country, the survey showed. 7% said that they experienced an increase in operations.
Costs and inflation
Moreover, 71% said that there was no change in impact on their company’s operations as a result of increase in costs and inflation. However, 17% experienced a decrease, and only 9% experienced an increase in operations/footprint in Malta.
Very small percentages of respondents said that they have in fact experienced an increase/significant increase in their company’s operations or geographical footprint in Malta across the external factors mentioned.
The survey asked companies what kind of people and recruitment actions had they taken lately, and in 2023, 48% said that they have increased their recruitment.
38% of respondents said that they have moved to a hybrid approach, and 32% focused on technical upskilling and re-skilling for their staff, the survey showed.
13% of respondents said that they froze recruitment, with 11% saying that they have in fact reduce recruitment altogether. 8% of companies said that they have laid off employees.
In 2023, 69% of respondents said that they have not been able to find or recruit the required specialised skills they needed in the local labour market. This figure stood at 66% in 2022. Meanwhile, 31% said that they have been able to find the required specialised skills in the local labour market, a decrease from the 34% recorded in 2022.
In light of this, 72% of respondents have said that their company was looking to recruit people with specialised skills, and 28% said that they were not, a slight decrease from the 30% recorded in 2022, the survey showed.
81% of companies said that they are managing to retain their current specialised personnel, while 19% said that they were not managing to keep their specialised personnel. Last year, 24% said that they could not manage to retain their specialised personnel.
Respondents were asked to say to what extent do Malta’s HR costs influence their company’s plans to remain in Malta or otherwise, to which 43% said that it has impacted to some extent. There was an increase in this regard from the figures recorded last year. (31%)
8% of companies said that this has impacted their plans to a large extent, a decrease from last year’s recorded 11%. The survey also showed that 28% chose “to a little extent” in reply to whether HR costs is influencing companies’ plans to remain in Malta, a 10% decrease from the 2022’s figure (38%)
19% said that this was not applicable to their business, the survey showed.
44% of respondents found that Malta’s skills-base makes the country an attractive place to invest to some extent. 27% responded “to a little extent,” an increase from the 23% recorded in 2022.
Meanwhile, 23% of respondents in 2023 said that Malta’s skill-base makes the country attractive for investment to a large extent, a decrease from last year’s 27%, the survey showed.
Recruiting talent from overseas
Respondents were asked to rank, in order of importance, which factors Malta should prioritise to enhance its ability to recruit and retain talent from overseas.
34% of respondents said that more efficient work-permit and residence entry procedures should be prioritised, followed by 18% who said that increased marketing efforts to promote Malta as a place to work should be prioritised.
The survey showed that 16% feel that a greater focus on integration and the combatting of xenophobia should be prioritised.
Only 9% thought that ability and ease of non-EU nationals to obtain naturalisation/citizenship after a defined period of time to build a long-term future in the country should be prioritised, while faster and simpler work-permit renewal procedures stood at 7% of respondents, and 5% think that first priority should be given to the ability and ease of non-EU nationals to bring family members in Malta.
The survey listed factors which may impact the company’s ability to recruit and retain talent from overseas. To a large extent, 50% said that the cost of housing and living has an impact, and to some extent, 32% of respondents said that this has an impact on their company, the survey showed.
Additionally, 39% said that the salary competition in Malta from companies in the same sector or otherwise has a large impact on the company’s ability to recruit and retain talent from abroad. 36% said that this has had an impact to some extent.
38% of respondents felt that the ease-of-process and cost of bringing non-EU nationals to Malta has impacted their company’s ability to recruit and retain employees from overseas to a large extent, with 28% responding that this has had an impact to some extent.
The 2023 survey included a series of new questions for companies, one of which asked about the importance of Malta’s state of environment and sustainability to their company’s investment strategy.
52% of respondents said that this was somewhat important, while 25% said that the importance of Malta’s state of environment and sustainability was critical to their company’s investment strategy.
19% voted that this was of minor importance, while 5% said that this was not at all important for their company’s investment strategy.
ESG skills
The survey also asked to what extent will employees in their company need to possess ESG (environment, social and governance) skills in three years’ time, to which 22% responded with “to a large extent.”
40% said that their employees will need to possess ESG skills within three years’ time to a medium extent, and 32% responded with “to a small extent.” Only 7% responded with “not at all.”
Another new question put forth was for companies to say how important ESG is to their company’s investment strategy.
27% of respondents believe this is important to a large extent, and 39% said that this was important to some extent, the survey showed. 24% said that this was important to a little extent.
The survey asked respondents to say to what extend does their organisation possess the skills needed to progress on its ESG agenda, to which 22% of companies said that they possessed the skills needed to a large extent.
38% responded with “to a medium extent,” whilst 33% said that their company possessed the needed ESG skills to a small extent.
Companies were asked to rank Malta on several sustainability factors, where 52% said that green support measures (policies, incentives to support sustainable investments and business transformation) and green investment incentives (private sector incentives for green infrastructure) were developing in Malta.
The majority of respondents believe that many sustainability factors are at a developing stage in Malta, with the second-most popular opinion being that these factors are progressing.
47% of respondents said that business attitude towards sustainability is at a developing stage in Malta.
Sustainability ecosystem
The survey also asked FDI companies where the country should put focus on to enhance its sustainability ecosystem for investment purposes. First in rank was government financial support and incentives through tax credits and grants (23%).
21% said that the focus should be on environmentally friendly systems and infrastructure (including transport, waste, energy and water supply), an increase from the 19% recorded last year.
Another new question asked FDI companies how they would rate Malta’s planning and preparedness for population growth in terms of infrastructure development.
Almost half of respondents (49%) said that Malta’s planning and preparedness for population growth in terms of infrastructure is very inadequate, followed by 37% who said that it was inadequate.
An additional new question asked FDI companies to say what sectors or areas of infrastructure would they want the country to invest in to ensure that Malta remains competitive and ready for the future.
56% of FDI companies said that Malta should invest in the state of natural environment, and 56% said that the country should invest in the state of built environment.
Additionally, 53% said that mass transportation requires further investment for the country to remain competitive, and 52% said that the education system needs more investment.
42% of FDI companies also want more investment in the country’s road infrastructure, while electricity security and health service stood at 39% and 37% respectively.
Technology-related factors
The survey showed that 41% of respondents find Malta’s technology-related factors to be as attractive when compared with other European countries, in line with 2022 results. In 2023, 26% said that the country’s technological related factors were less attractive compared to other European countries for their company’s investments.
48% of respondents consider the availability of a workforce with technological skills (scientists, engineers, data analysts etc) as the most important technology-related factor when choosing a country to invest in.
The survey asked respondents for their level of satisfaction with regards to the reliability of their telecommunications services, to which 57% of FDI companies said that they were satisfied with their mobile data service, and 55% were satisfied with their fixed broadband.
Almost half (48%) of FDI companies said that they were considering investing in Artificial Intelligence to deliver a greater value to their business, quite an increase from the 31% recorded in 2022.
44% also said that they are considering investing in intelligent automation, another sharp increase from the recorded 36% in 2022.
76% of companies said that they no longer use services or devices which depend on legacy 2G or 3G networks when asked if they have adopted 4G and 5G.
Respondents were asked to say what are the three biggest risks facing Malta’s attractiveness for FDI over the next three years, to which 61% said that the biggest risk is the OECD/EU tax reform.
Another one of the biggest risks affecting Malta’s attractiveness is the skills shortages (48%) which saw a decrease from the 54% recorded last year.
37% of FDI companies consider reputational concerns as one of the biggest risks facing Malta’s attractiveness for foreign investment.
Quality of life
Quality of life factors posed a bigger risk in 2023 than in 2022, where 24% of FDI companies said that this was a big risk, while 11% considered this a risk in 2022.
Tourism and leisure, (58%) Gaming (49%) and Artificial Intelligence (45%) are the business sectors FDI companies believe will drive Malta’s growth in the next five years, the survey showed.
77% of FDI companies said that they expect the focus on sustainability and climate change to accelerate the most in the next three years, an increase from the 65% recorded in 2022. 72% said that they expected the adoption of technology that automates manual human processes to accelerate the most in the next years.
35% of FDI companies expect the geopolitical tension trend to accelerate in the coming three years, a decrease from the 51% recorded last year.
Respondents were asked if their company plans to expand operations over the coming year in Malta, to which 36% replied with “Yes” and 37% replied with “No.”
In comparison with the percentages recorded last year, there was a drop in companies planning to expand operations in Malta. In 2022, 46% said that they would expand their operations in the country, and 30% said that they would not expand their operations.
FDI companies consider the development of new economic sectors as the first priority for Malta to remain globally competitive in the next decade. The development of new economic sectors ranked third in 2022.
Education and skills, as well as infrastructure, transportation and planning ranked second in priority.
Environmental, social and governance matters was ranked third among FDI companies in 2023 which Malta should prioritise, while reputation and brand ranked fourth.
The survey asked respondents if their company will still be present in Malta 10 years from now, to which 68% said that their company remain in Malta a decade from now, in line with the 69% recorded in 2022.
