Economic overview of Malta

A smart economy with no fear of globalisation

Kevin Borg

Based on interview with Kevin J. Borg, Director General of the Maltese Chamber of Commerce and Enterprise
By Hegel Goutier

Malta gained its independence in 1964. From 1964 -1979 it still had a lot of support from UK which had military bases on the island. From 1979, Malta became economically self-sufficient. In the private sector, the government identified two up-and-coming sector; manufacturing and tourism.

Building a dynamic manufacturing industry

The government created the Malta Development Cooperation whose role was to attract foreign investment. At that time, wages and the standard of living were low. Institutions such as the Chamber of Commerce were on the Board of MDC but it was the government that took a prominent role. Companies interested in diverse sectors: clothing, textile, spare parts for car, etc., came from the UK, Germany and the US.

The government has also given incentives (subsidies, rent facilities, and other kinds of support) to encourage investment. In the tourism sector, the government subsided the building of hotels and resorts by investors and gave concessions of land and beaches. In the 70’s, the government set up ‘Air Malta’ whose primary purpose was to promote tourism.

Malta also relied on its people. We were hard working, spoke English, and could be trained by foreigners. By the late 90’s, Malta’s standard of living had considerably increased. In the beginning, jobs were not created very quickly in the private sector, but by the public sector; police, land revenue, etc. There were many national monopolies at the time: electricity, telephone, TV stations and Air Malta. They all belong to the government. Unemployment was never high in Malta. You either worked with the government or services or were self-employed. By the late 90’s, we reached today’s level and the standard of living and and salaries went up. At the same time competition for investment from Eastern Europe China surfaced. We were always prepared for this. In 2004, Malta joined the EU and was eligible for certain funding. With this aid, Malta was able to train its people, especially in IT, and we were able to build infrastructure, roads, develop fibre-optics, establish internet connections and modernise the airport. The economy has changed, becoming less dependant on manufacturing and more so on services.

Some factories have uprooted to Tunisia and elsewhere but they still belong to the Maltese. Many marketing, design, research and development businesses remain in Malta. Tomato processing is amongst those that have moved to Tunisia. This used to be done in Gozo. As for the Maltese clothing industry, the tailoring is done in Tunisia and design, marketing and business negotiation in Malta.

Malta is part of the globalised world even if Maltese people do not travel outide the country very much. In the tourism sector, Corinthia (Corinthia Group of Companies) is a big business. It has a chain of hotels and is soon to open a big hotel in London. It has already launched in Gabon, Libya, Turkey, Portugal, Czech Republic, and Hungary.

Our Chamber is encouraging our enterprises to branch out overseas. What we are saying is, if you can sell here to Maltese people and to tourists, why not in Casablanca and Prague? They have to do that. In the Chamber we have an expert to assist small and medium size business. Big concerns like Corinthia, are big enough to do it alone.

Smart City

Our country is orienting itself towards IT. Smart City is akin to Dubai’s Internet City. The government has given the go ahead for it to be built here in the neighbourhood of Ricasoli. This project will create 5600 jobs for IT programmers and others. Maltese people will work there. Development of the area started six months ago. Smart City will be finished in five or six years. We currently have one computer for six students. In six months time we will have one computer for four students, the highest rate in the world. All classes will have web classes.

Malta in the movies

The film industry is another growing area of the economy. Famous films have already been made in Malta: Gladiators, Troy, Munich and very soon, a big Spanish film whose title is still under wraps.

We also have cruise liner tourism. In the winter, 15 cruise ships dock every week. Some of them come in 12 months of the year. Even if they come for just one day, tourists spend money. The average tourist stays six to seven days. When it’s too cold in the North, pensioners from UK or Germany stay two, three weeks, sometimes five weeks or more.

I am very optimistic about the economy. The Government can afford to lower taxes. Salaries are increasing and profits are increasing. The overall revenue from taxes has increased but the rates have decreased, from 35 per cent to 32 per cent. The Prime Minister has announced that the economy is strong enough to cut the top rate of income tax from 35 per cent to 25 per cent. And if you currently earn €12,000 a year, you don’t pay any income tax. Unemployment is currently 6 per cent which is very low. This has gone down over the last five years.The government deficit has decreased as well as the national debt. All these factors opened the way for Malta to join the Euro zone.We believe that our entry into the euro zone will allow our economy to prosper; GDP will grow and debt will go down.

Many jobs for foreigners

Malta has very high numbers of migrant workers. As a small country, it is not always easy to find the right skill sets. Computer specialists, for example, usually come from Europe and especially the UK. The hotel industry attracts workers from Italy and France. Building industry workers come from African and Mediterranean.Without such workers, salaries would go up and companies would be less competitive.

Housing

Malta has a housing problem because during the First and Second World Wars, a lot of houses were destroyed in air attacks. The government voted a law to make it very easy to rent a house if your building had been destroyed. This law has not changed since and is very favourabale for tenants. You, your children and even your childrens’ children can stay in a house at the original rental price and the owner is responsible for all the maintenance. People still live in nice houses and pay just €100 per month. The law changed in 1994, but only for new tenants, not for previous ones. If you are an owner, you often prefer to leave the house empty. The Chamber of Commerce is lobbying the Government for a change of this law but it is hesitating. It is afraid some people might not be able to pay more. All factors have to be carefully studied before the government makes any move.

Hegel Goutier

Boat people in Malta

For about the past five years, Malta has been confronted with the regular arrival of boat people from African countries who either land on its coastline or are intercepted by Maltese coastguards. On average, 1,500 arrive every year, many having crossed the Sahara before embarking on a flimsy craft in Libya. They are all initially housed at the Hal Far Open closed centre that has about 600 people in residence at any one time. Located close to the international airport, the camp consists of tents and offers minimal comfort at best, provoking protests from some NGOs.

Following transfer to a second open centre, those who are granted asylum face the problem of a lack of work. Despite its prosperous economy, Malta has a population of just 400,000 and is only able to offer between 1,000 and 1,500 jobs a year to foreigners. Few, if any, of these jobs are accessible to boat people. They either lack the required skills or are simply rejected, say the local media, for the very fact of being boat people.

 

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