Malta’s attractiveness to foreign investors plummets after grey-listing

Last Updated on Tuesday, 19 October, 2021 at 2:49 pm by Andre Camilleri

Malta’s attractiveness to foreign investors has plummeted after the country’s grey listing by the Financial Action Task Force, a new survey run by Ernst & Young (EY) has revealed.

The findings from EY Malta’s attractiveness survey – the 17th edition of an annual study conducted among existing FDI companies in Malta – were revealed today with investors providing their views on what makes Malta an attractive location to invest in or the areas for improvement.  

The results indicate that attracting foreign investment now that the country has been grey-listed will prove to be a tougher task than in recent years, with the number of investors who find the country attractive from a business viewpoint down by a whopping 25% compared to last year.

In fact, more investors are finding Malta unattractive for business and or investment than there are investors finding the country attractive.

Still however, over three-fourths of the respondents still think that in the long-term, Malta is the place to be in the future – indicating perhaps that the bulk of the damage of the country’s grey listing can be averted if the country gets back into the FATF’s good books sooner rather than later.

Attractiveness index

The percentage of respondents viewing Malta as attractive has declined for a second year in a row. Malta is now viewed as attractive for FDI by 37% of investors, while 46% believe it is not attractive.

This is a significant decrease compared to 2020, when 62% of investors viewed Malta as attractive, and 25% believe that the country was not attractive.

This year’s Malta Attractiveness Survey was carried out just after the country was put on the FATF grey list of jurisdictions under increased monitoring and many respondents highlighted this as a major concern.

Respondents provided insight into how Malta can increase its attractiveness for FDI, with many mentioning reputation, governance, improving the skills base and tackling the grey listing as priorities. Positives for Malta as an FDI destination continue to include an attractive corporate tax regime, an English-speaking workforce and competitive labour costs.

The clearest impact of the grey listing, according to respondents, will be on Malta’s ability to be seen as a reputable destination to conduct business (84%). This is followed by the ease of doing business in Malta for their companies (55%) and their future investment decisions (42%).

Notwithstanding the challenges, 77% of companies still believe their long-term future is in Malta, although there is a slight increase in “no” responses. The last two years have seen only a marginal decline of 3% (from 80% in 2019) in positive responses, although the number of negative responses has increased from 2% in 2019 to 8% in 2020 and 15% this year.

FDI Attractiveness Scoreboard

As in previous years, corporate taxation remained top of the attractiveness scoreboard; however, it has witnessed a 15% decline in one year. The attractiveness of Malta’s stability of social climate (58%) has decreased by 6% and remains in third place, while the telecommunications infrastructure (64%) has retained the second place.

For the second year running, the stability and transparency of the legal, political and regulatory environment is in last place on the FDI attractiveness scoreboard, with only 17% of current foreign investors deeming this parameter to be currently attractive and 64% not attractive.

Malta’s research and development and innovation environment also scored poorly: only 20% of respondents believed that the current environment is attractive.

Priorities to remain globally competitive

Respondents continue to believe that to remain globally competitive Malta’s utmost priority should be a focus on reputation and brand, as well as education and skills. The strengthening of the country’s’ institutions, enforcement and monitoring is also important for many respondents, ranking in third place, followed closely by the development of new economic sectors.

 Skill challenges

With recruitment increasing, companies’ challenge to find the required skills has resurfaced. Only 31% of investors are finding the required specialised skills, down from 38% in 2020 – although still up from 27% in 2019.

Retention levels have also gone back to pre-pandemic levels with 78% managing to retain their specialised personnel – down from 96% during 2020.

View from EY

In his foreword, Ronald Attard, EY Malta Country Managing Partner, stated: “For the first time since we have been conducting our survey, a significant part of the investors interviewed are telling us that Malta is currently unattractive for FDI. This might not be easy to digest as we are accustomed to better results. This outcome is not necessarily only due to the grey listing, but it has certainly played a big part. It would be foolish to bury our heads in the sand and not act immediately.”

He highlighted that since a large majority, eight out of ten, still believe their future is here in Malta, there is still time to act and the FATF grey listing needs to be tackled in the shortest timeframe possible. “Other countries, most notably Iceland, have passed through the same process and come out the other side in a timely and effective fashion, and Malta can too. It is imperative though to look beyond short-sighted gains and shift the focus towards building future-proof framework, legislation, and enforcement to underpin long-term economic prosperity.”

Looking at Malta’ FDI attractiveness parameters he highlighted that although some features were on the decline, these can be addressed. “Our tax regime remains our topmost attractive feature for FDI investors, but its attractiveness has declined by 15% in one year. Developments internationally will certainly have had a bearing. The stability of the political, legal and regulatory environment has placed last for the second year running. Some years back this parameter ranked at the very top. With consistent effort from all interested parties, improvements can be registered once more.”

Attard went on to reiterate some key messages that were mentioned in the same report just one year ago. “In last year’s report we asked whether this was the time to pause and reflect. We asked whether we should take the opportunity to reframe our future. Potentially, a new economic model that is less based on numbers – be it number of cars, tourists, permits, or property sales – may be needed. One that focuses more on well-being and the quality of life of our residents. An economic model where the benefits of an attractive tax system are eclipsed by the strength of our talent pool, digital infrastructure, innovation environment, quality of life and social fabric.”

Finally, he closed with a positive message that if acted upon these challenges can be overcome. “These are all priority areas going forward but it’s worth keeping in mind that our weaknesses are not permanent. Far from it. We have the capability and resources to turn our fortunes around and harness our strengths to compete with the very best.”

 EY’s Future Realised Week

EY’s fast-paced virtual event, Future Realised Week, is intended to trigger new ideas, challenge perspectives, and explore different possibilities for Malta.

Following the release of EY’s Attractiveness Survey today, the firm will outline the results of the 4th EY Generate Survey on Thursday 21st October, setting out how Malta’s youth view the economy and their future in Malta. On Thursday EY also announce the results of a survey held on the Future of Work and how it can be reimagined.

Future Realised Week is taking place between 19 – 22 October 2021, with four 2-hour sessions lined-up each day. Three former European Prime Ministers and speakers from the IMF, World Economic Forum, and the European Commission, together with global technology and artificial intelligence gurus from Microsoft, SAP, WHO and senior global leaders from EY will address the virtual conference. They will be joined by the Prime Minister and Leader of the Opposition as well as local business leaders, academics, and NGOs.

For more information and to book your free place visit:

Download the Malta Attractiveness Survey:

In today’s session, a number of local and international speakers took part.

Reacting directly to the survey, Marisa Xuereb, President of the Malta Chamber of Commerce, Enterprise and Industry, said that “the message investors are sending is clear. Malta is a viable location for business, as many are saying that they will still be here in 10 years’ time. However, the FATF grey listing greatly jeopardises our ability to attract new investment.”

She spoke of the importance placed on Malta’s quick exit from the grey list in order to prove the country’s capabilities. Another major concern she highlighted was the skills shortage. “Addressing both of these challenges is important.”

Norman Aquilina, CEO of Simonds Farsons Cisk said that logistics is an issue and it is not considered as an attractive factor by many. He said that it might become a growing issue, and that it is having a particular impact on the manufacturing industry, especially when considering that Malta is an island.

Alfred Vella, the University of Malta Rector, spoke about education. He said that the university is likely to continue with its probationary enrolment programme, which saw students who had not quite achieved their matriculation grades admitted to university.

Gordon Cordina, Chairperson of the Board of Directors of the Bank of Valletta, said that the tax regime, which was previously a predictable element, is now facing more uncertainty. He also said that likely, immigration will remain a key element in growth, and spoke of the need to focus on higher-skilled migrant workers.

Jan Peter Balkenende, Former Prime Minister of the Netherlands, spoke of the future in terms of sustainable development and the environment. He said that the future could be great for Malta, but there must be a clear defined innovation strategy, in line with sustainable development goals. He also stressed the importance of speaking to young people.

Kotaro Ishi, Deputy Unit Chief in the European Department and Mission Chief for Malta, from the International Monetary Fund, gave an overview of the situation in Malta. “Malta’s economy boomed in the years prior to the pandemic,” he said, adding that government debt had fell from 60% GDP in 2010s to below 40% GDP in 2019.

He said the pandemic shock hit Malta hard, especially the tourism sector. Tourism GDP had fallen by nearly 40% during first half of 2020, he said. Most tourism dependant countries in Europe, he said, like Spain, Portugal and Greece, were hit equally hard by the pandemic last year. He said that the good news is that growth is recovering, but the threat of new variants remains.

“In Malta, the easing of containment measures, the vaccine rollout, the reopening of economy for tourism season, means that the economy is recovering. We expect GDP growth to gain momentum in 2022.”

Ben Butters, CEO of Eurochambres, spoke about seasonal skills shortages that Malta faces, and mentioned the hospitality industry. “This creates consequences and problems and we need to find ways to help countries with fluctuating skills demands meet those demands.” He said that the EU is key in terms of mobility. “It’s about enabling people with an established set of skills and young people who are new to the job market, or not yet in the job market, to test different job and career opportunities and contribute to the needs of businesses.”

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