Foreign Investment Levels Indicate That Malta Is Still A Good Investment Destination

Martina Said - 4th November 2018

However, if major cost drivers are left unchecked, it will lead to higher cost with no corresponding increase in productivity, says Maria Micallef, Managing Partner at RSM.

“Real economic activity in 2018 is robust and currently at around 5.4 per cent, making it one of the higher ones in the EU. This has had a positive effect on public debt that continues to decrease as a percentage of GDP, with Government also managing to contain inflation that at present stands at around 1.7 per cent,” says Maria Micallef, Managing Partner at RSM. “As a result of fast economic growth, however, the current pressure on labour resources across the board is likely to continue.”

Going forward, Ms Micallef asserts that the fiscal priorities of Government mainly revolve around four areas: redistribution of wealth towards the lower earners; improvement of infrastructure to support strong growth; innovation to harness new niches such as blockchain technology and AI; and a move towards a greener economy, all within an overall context of retaining a Budget surplus.

Looking at the bigger picture, Ms Micallef considers that most businesses should be better off with the Budget measures announced for 2019. However, certain measures, such as the granting of an additional day of leave and the increase in the statutory minimum wage, may be regarded as increasing the financial burden of businesses. “These, however, have to be seen in the context of a strong economic performance that in itself is a major positive contributor to growth and improved results.”

Zeroing in on the persistent problem pertaining to a shortage of labour supply, Ms Micallef says that measures to simplify the work permit process in the 2019 budget are welcome, although it has yet to be seen how they’ll work out in practice. “The probability is that Malta has to continue to import labour resources to enable economic growth. Increased foreign labour in these past years was a major contributor to the mismatch between demand and supply of accommodation which in turn has had a material effect on the rental prices paid by both foreign labour resources and Maltese people,” she asserts. “The Budget initiatives to expand the rent subsidy programme, build housing units and provide social loan programmes should help to reduce the rental burden, mainly on the locals. The launch of the White Paper on the rental market should go some way to deal with ever-increasing rent prices, which if left unchecked, will increase the risk of uncompetitiveness.”

Rising costs across the board, in fact, are increasingly being touted as a concern that may make Malta uncompetitive. Is the country at risk of this? “The foreign investment levels indicate that Malta is still a good destination to invest in. This does not mean that we need not be vigilant on our cost levels – if certain major cost drivers are left unchecked, it will lead to higher cost with no corresponding increase in productivity,” Ms Micallef asserts.

“However, costs are not the only issue that can make Malta a less than ideal destination for foreign investment. Another crucial factor is reputation, which is relevant not only for the financial services sector but across the board. This is an area where all stakeholders, be they politicians, policy-makers, regulators, journalists, businesses and service providers need to act responsibly and transparently with full respect towards the facts and the law.”

This interview is part of a four-part feature originally published in The Commercial Courier

9th November 2018

The Chamber said that it was clear from the data published that the industry requires more attention.

Martina Said - 4th November 2018

There was no mention of putting more national funds towards R&D initiatives in the Budget, says Marisa Xuereb, Managing Director of Raesch Quarz (Malta).

Martina Said - 3rd November 2018

The Maltese economy is managing to grow without the need of massive new interventions from Government and from the fiscal budget in particular, says economist Gordon Cordina.

Martina Said - 3rd November 2018

Budget 2019’s impact on local businesses was largely positive, but failed to address the country’s main challenges, says Chamber President Frank V. Farrugia.